How far can you go with improving your FP&A practices? This article reveals relationship between three...
Data-Driven FP&A: the Tip of the Iceberg
February 19, 2018
In Part 1 of the series ‘FP&A and the three-headed serpent‘, you got acquainted with the ‘data – business planning – tools & techniques’ model, which is the basis for FP&A practices. The combination of words ‘data-driven’ seems to imply that you should start with data, and to some extent this is true.
As an FP&A professional, you deal with data that is being delivered to you by various business stakeholders. Your data travels a long way from its source through applications to your reporting system.
The data you deal with is the tip of the iceberg. The major part of data processing is the part that is hidden beneath the water. And this is also the place of origin of all the data quality issues.
You do not have much influence on this hidden part. This part of the iceberg is out of your area of accountability. Unfortunately, this is the most important part of making a business data-driven. This dilemma is similar to the ‘chicken or the egg’ dilemma: which one was there first, and where do you start? You want to make data manageable and should become a sponsor of this idea within your company, but you know it cannot happen overnight. There is a long way to go before your company can achieve this goal.
There is still a lot what you can do now at the tip of the iceberg in order to move closer to ‘data-driven’ FP&A. These actions are not only data-related but can involve the business processes and techniques you are using.
Define who really needs which data
As an FP&A professional, you have probably built a strong business partnership with top and operational management.
Insight 2 from the global FP&A research stipulates that FP&A Teams aspire to be more strategic, quote: ‘Companies are wasting valuable analytical talent on low-value adding activities such as data reconciliation, data cleansing, reporting reconciliation etc.’.
Very often, FP&A staff simply delivers standard reports to their main stakeholders with a certain frequency. The first step for you is simply checking whether all reports you deliver are really necessary. Reports themselves are simply containers of information. The second step is specifying the data needs and requirements of your main stakeholders. These requirements may include critical information needed for decision making, the frequency of report delivery, or how they are to be delivered.
Optimize reports and information you deliver
It is possible that the actual needs of the stakeholders are quite different from the reports you have been delivering all this time. In this case, you should start by analyzing your current reporting practices. Review main reports first. Hopefully, you will find a way to optimize the number and content of these reports. You might find that different reports contain similar information. You should concentrate on the data which is critical for decision making. An effective technique used in report optimization is working out report flows. You mind find some closed loops in reports circulating even within your department.
Speak the ‘same language’ as your colleagues
After you optimized the number and content of your reports, you should have a look at the language you use in these reports. The terms that are clear to you and your FP&A colleagues, might be not that understandable for other stakeholders. In one of my earlier articles, I provided an example of the definition of the term ‘revenue’: ‘In accounting, revenue is the income that a business has from its normal business activities, usually from the sale of goods and services to customers. Revenue is also referred to as sales or turnover.’ If you have time for a spare project, spend it on creating a business glossary that will ease the communication between you and your colleagues.
Improve information delivery
As soon as you have refreshed the information needs and requirements, you might start thinking about the way to deliver the data. At this point, many of you deliver information in the form of reports, either on paper or in electronic form.
A while ago, I had an interesting conversation with a data manager from a large Dutch company. I was fascinated by the way he managed to organize the ‘tip of the iceberg’ in the company. They developed a system of KPIs to be used by stakeholders from different departments for decision making on different management levels. After that, they implemented dashboards across the whole company. Such an approach allowed them to reduce the production of a lot of unnecessary reports within the company. After cleaning up the ‘top’, they turned to start cleaning up the hidden part of the iceberg.
All the steps discussed above concern data and optimization of data-related processes at your level of accountability.
In our following blog we will be discussing what data is actually right for FP&A. Stay tuned!
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