The International Financial Planning & Analysis (FP&A) Board Maturity Model is a linear illustration of every stage of the journey, from basic planning to best in class. At one end of the model, there are no formal processes – it's manual data entry and disparate, siloed spreadsheets – while at the other end of the scale, processes extend beyond finance, data is AI and ML-driven, and technology is automated and integrated on a single collaborative platform.

So, where is your business on the scale?

Are the benefits worth the commitment required to move towards the more mature end of the model?

This question was at the core of the recent FP&A Trends Webinar "FP&A Integration: The Winning Formula of Harmonizing Top-Down and Bottom-Up Planning Processes." People from more than 70 countries attended this webinar. Hans Gobin of FP&A Trends Group moderated a discussion with Timo Rantala, Head of Integrated Business Planning at Tikkurila Oyj, Garrett Dennie, VP of Finance at Linde, and the author of the article.

Have You Already Embraced xP&A?

To put it in context, when asked the question: "Has your organisation adopted a cross-functional Extended Planning & Analysis (xP&A) strategy yet?", 34 per cent of FP&A professionals* said they had updated their FP&A structure and tools to move in this direction, and 42 per cent said they might adopt it in a few years.

Only a comparatively lowly 23 per cent had already made a move, and just 13 per cent said their FP&A transformation journey was in an advanced or leading state. Plenty of room for transformation, then, right?
Is FP&A Integration simple? Of course not. But technology means it is now doable systematically with the right approach.

Breaking Down Functional Silos Is Crucial for Integrated FP&A

According to fellow panellist Timo Rantala, the key is to break down the functional silos that stand in the way of proper cross-functional decision-making, which means planning is often disconnected from real decisions. As he put it, "just as the universe is made of atoms, so organisations are made of decisions." But according to McKinsey, only about 20 per cent of organisations excel at decision-making.

Maslow Meets Integrated FP&A

Panellist Garrett Dennie illustrated the journey to fully Integrated FP&A by applying Maslow's Hierarchy of Needs to the recommended steps for organisations to succeed.

It starts by better understanding your drivers and Key Performance Indicators (KPIs). These are the equivalent of the air we breathe and the food we eat in Maslow's original pyramid – the basic stuff of existence. Then comes data quality, followed by aligning the master calendar across all functions. At this point, you introduce a long-range continuous planning process, followed by a technologically enabled connection of functional reporting and planning. You are then poised to achieve the pinnacle of fully Integrated FP&A.

Garrett drew on his experience: "If you don't understand your drivers and KPIs, you can't plan adequately. Integrated planning is more than soliciting a plan from all different functions. You need to think about the data that supports the plans and the reporting required to turn that data into information. Any technology which can automate processes and help make those connections faster will put you ahead of the game."

So, where does it all begin? And who drives it?

It is not a one-and-done. It's a continuous process that needs to be revisited every month. 

It all starts in the C-suite with strategy. The whole point of FP&A Integration is to drive profitable growth and give greater visibility and insight – but it's also to understand any strategy's revenue and margin impacts on the business. That leads us to finance, where the strategy converts into executable financial plans.

Then we need to take the strategy and the financial plan from a revenue, cost and margin perspective and develop an operational plan harmonising and supporting the strategy while delivering the expected results. Increasing resilience and ensuring optimal execution rely heavily on collaboration between and across the functions within a business.

The CFO and head of the supply chain both have increasing responsibility within the organisation. Finance has not always had a seat at the supply chain table, and finance often only discovers supply chain decisions after the fact via the P&L. But get the connection between finance and operations right, and you align everyone around, making better decisions that drive to expected results.

The First Step

As Garrett indicated on the Maslow-applied FP&A hierarchy, integrating KPIs is the first aspect of making better decisions. You need unified performance measurements that align the strategy, the operational, and the financial plans. But as Garrett pointed out, companies don't always have this information at their fingertips. Different information is likely pocketed in various parts of the organisation and, perhaps, disparate systems. By pulling all of that together and sharing the information, everyone has a better-informed basis for optimal decision-making.

It goes beyond just supply chain and finance. Although these are important, Sales, Marketing, IT, and HR should all have input into aligning the strategic goals and decisions to satisfy customers most profitably. 

This conversation is happening now because the technology is now ready. Previously there wasn't a platform where everyone could easily share information. But technology is now available to connect financial and operational data.

With a single integrated platform, you have all the information at your fingertips to make quick decisions. You can react to changes in the market, plan for uncertainty across the supply chain, and build resilience in the organisation. It enables alignment and collaboration while still holding functional areas accountable.

The State of Play

So where are we? The reality is that only a handful of companies have mastered this, and technology has historically been a gap. Integration is challenging to do without a foundational platform that supports it. But we are now here to help from a technology-enablement perspective.

You need the technology to get to the top of that pyramid and the mature end of the scale. It's the wiring that connects all of your data. You don't need to create a new set of data structures. You do need a singular platform and connectivity so that as changes are made in one functional plan, they ricochet through the entirety of the plan so that everyone can see the impact on their functional area. It's all about aligning both the process and the data.

Conclusion

Integrated FP&A requires harmonising three key planning processes: strategic planning, business planning and forecasting, and operational planning and forecasting. But as the webinar title suggests, the key is to integrate from the top down, the bottom up, and across all functions. We now have access to one unified platform driving one plan and one set of numbers that together run your business.

And a hint from our moderator Hans Gobin: "Progress over perfection." Sure, we need to get it right, but you can only get it right if you get started. Here's to hoping you begin the journey.

*Source: FP&A Trends Webinars 2020-2021 (761 responses).
Thank you, Wolters Kluwer, for sponsoring this webinar.