“IFP&A encompasses a dynamic, continuous approach to analytics that greatly increases the ‘Intelligence’ of an organisation and its ability to change fast.”
Traditional FP&A systems are typically focused on one aspect of the management process. For example, setting a budget, collecting a forecast, or delivering results in the form of a report pack. Over the past 20 years, there have been concerted efforts to combine these processes into a single system – after all, what’s the point of a budget if you can’t report against it or collect a forecast to see if year-end goals are going to be achieved? The trouble is that these systems often have a single view of the business, which is typically financially orientated and structured according to the organisational hierarchy. While this does have some value, it typically does not include the ‘real-world’ view which is far more complex.
To get around this, ‘satellite’ systems are developed for analyses such as sales, market share and even the impact on social media. These results are then bought together in the form or yet another system such as a dashboard that is tentatively linked to the organisation’s adopted strategy methodology. (Whatever happened to the Balanced Scorecard, Hoshin Planning, ...?). If all else fails then there is Excel which gives end-users free range for producing their own analyses but at a price that usually forsakes data integrity.
For the record, this is not an integrated solution and one that IFP&A seeks to distance itself from.
IFP&A System Components
The following components are essential in any modern IFP&A system:
1. Common platform: IFP&A solutions recognise that there is no single ‘off the shelf' application. Instead, they encompass a mixture of technologies that are built on a common platform that enables the sharing of data and metadata. This is a key point.
2. Model Builder: ‘Models’ are typically a collection of mathematically based variables/structures that reflect the way an organisation operates. They can include ‘adding up’ models that you typically find in a budget solution, or ‘driver-based’ where entering a number into a variable (e.g. sales volume) then generates a range of associated variables (e.g. Revenue, Cost of Sales, Delivery, etc.) by the application of pre-set formulae. To represent the complete organisation multiple models will be required that will typically include:
- Past sales by product, customer, region, size, etc.
- Financial resource allocation and funding
- Long-range plan and associated targets
- Detailed Forecasts
- Strategic initiatives and projects
These models are designed to answer specific questions and will have different content, structures and are used by different people at different times. They can include both structured and unstructured data including text.
3. Common Data and Metadata: An IFP&A system will allow these models to be built from common metadata (e.g. business structures, variable definitions) and allow common data to be entered once and automatically shared between models. Any changes to items that are common are automatically reflected wherever they are used.
4. Data Acquisition tools. All data within an IFP&A system is common but these tools allow external data and metadata to be accessed, summarised and transformed into the established models.
5. Data Analysis & Optimisation Tools: These are tools that can be applied to any model/data set to find trends, correlations and that can be used to generate data using these methods but without having to embed rules within the models.
6. Collaboration and Workflow: These capabilities control users as to what they need to do and by when. It will typically include the ability to ask questions, make comments and automation facilities that can trigger activities based on events and exceptions.
7. Reporting: The ability to ‘grab’ data from any model and any time period and display it in any format, whether that be a traditional report, dashboard or email alert.
8. End-user Analysis: Users tools that allow unfettered access for analysis providing they have the right security clearance. These analyses can be saved, shared and accessed by a variety of hardware devices.
9. Cloud-enabled. Today, more and more systems are cloud-based – this means that users can access them from any location and any device, security permitting. This frees users from having to be at a certain location or ‘own’ specific devices.
In many ways there is nothing new in these capabilities individually but what makes IFP&A different is that they are all tightly integrated without users having to know and learn different technologies.
Together, these components greatly speed up the collection and analysis of data and pave the way to continuous planning driven by exceptions and alerts.
The article was first published in the D!gitalist Magazine