The pressure of globalization and agile decision-making requires companies to improve their business modeling. They must integrate big data in real-time, synthesize that data to identify causal relationships and value-drivers, and ultimately use the findings to make high-impact business decisions.  

While many companies seek to move away from Excel in financial planning and analysis, it still plays a major role for most global corporations.  But so do integrated planning platforms such as EPM and ERP. Further, corporations are just beginning to explore the benefits of automated decision-making and AI. This article will address the positives and negatives or traditional Excel software, integrated planning platforms, and what the future of FP&A looks like with artificial intelligence and automation.
 
Among all the changes taking place within FP&A today, digital transformation is one of the most significant.  Never in the history of business has information been so accessible, so quickly, as it is today.  Digital transformation isn’t just a movement from institutional finance to cloud-based finance – it’s how digital information is created, stored, managed, and acted upon.
 
The quick and easy access of digital information poses new opportunities and challenges.  On one hand, the utilization of certain business data and analytics was never possible until recent years. As such, businesses will be able to make critical decisions very quickly based upon large sets of information.  On the other hand, the expanse of information makes it even more challenging to integrate end-to-end financial planning.  Without clear systematic processes in place and the technology to facilitate those processes, the benefit of digital transformation may be lost.
 
A recent study by Deloitte shared that nearly 40% of surveyed organizations still use spreadsheet software, such as Excel, as the primary tool for forecasting and budgeting^[1].  Another 24% rely mainly on spreadsheet software but use a vendor planning tool or ERP platforms to integrate activities.  Based upon these findings, over two-thirds of surveyed companies are likely to be constrained in planning and analysis and unable to perform dynamic forecasting.  Only one-quarter of respondents utilize rolling forecast, which is the modern dynamic forecasting tool ensuring future business cycles are always within view.  
 
Deloitte’s findings are not surprising.  Many large institutions utilize integrated platforms primarily for data collection, aggregation and reporting that feed spreadsheet software and are not optimally used for integrated planning.  More recently, however, businesses are depending on the usefulness of financial EPM (enterprise performance management) platforms to run all financial channels such as budgets, forecasts, and financial statement consolidation.  We can expect to see more utilization of integrated planning tools, working in-tandem with spreadsheet software for ad-hoc analysis.  
 
Excel is still the analysis gold-standard for many companies and is far more flexible than many integration platforms. Further, Excel exists on a majority of PCs and is familiar to many business professionals. Finally, most small and mid-sized businesses simply cannot afford more robust software packages that complex corporations so dependently rely upon.  All said, we can expect spreadsheet software such as Excel, to continue serving its niche as an ad-hoc analysis tool, but we’ll gradually see less reliance on it for integrated planning. Survey results imply that, even though many companies still rely heavily on spreadsheet software, their desire is to move beyond it.  
 
Technological advancement should invite the outsourcing of manually-intensive and routine transactional activities that don’t require high cognition.  Outsourcing in this manner means delegating the tasks to machines which can easily and cheaply complete them.  We can expect machine-learning and automated decision-making to become more common in traditional reporting and FP&A functions, freeing up human brainpower for more value-add activities.  Institutions with sufficient spending budgets will continue to trailblaze this new frontier in digital transformation.  As software vendors continue to tailor their offerings, middle-market companies and small business won’t be far behind.

Notes:

[1]  Deloitte LLP.  “Integrated Performance Management Plan. Budget. Forecast”  2014.

The article was first published in Unit 4 Prevero Blog