On July 6, 2021, the FP&A Trends Group organised the webinar “The Latest Trends and Developments in Financial Planning & Analysis: 2021 Global Survey Results” sponsored by SAP. The 2021 survey had approx. 350 participants from all major global regions North and South America, Europe, Middle East and Africa, and Asia and the Pacific.
The survey results revealed some interesting insights
According to the results, FP&A professionals use factual evidence “most if not all of the time” and that artificial intelligence (AI) and machine learning (ML) has not only been widely adopted but is “having a dramatic effect on forecast accuracy.” For 12.5% of surveyed organisations, FP&A executives are able to spend 40% or more of their time on high-value activities. As expected, scenario analysis is being used 51% of the time, a 19% increase from 2020.
The main challenge identified in the survey is that “there is not one single source of data that everyone trusts.” Inconsistencies in taxonomy and definitions continue to be an industry-wide challenge. Siloed workstreams in which teams work independently without understanding the bigger picture are a concern for 20% of survey respondents.
Managing the value of the company in 5 steps
Guillaume Rachline, Vice President - Finance at Walmart-Canada, continued the discussion of the latest FP&A trends. Rachline noted that FP&A professionals are most concerned about measuring their team’s ROI compared to sales and marketing. Their second greatest concern is that FP&A is not considered to be a strategic investment area in their companies.
The response to this is to continuously transform FP&A to create value through multiple channels, including:
- business partnering to find new business potential and insights,
- centring corporate FP&A around formulating consolidated reports with an emphasis on storytelling using data for internal decision-makers, and
- examining investments with a fresh eye – not only examining the NPV of an investment but looking at the delta of not investing in a solution.
Gerhard Lohmann, former CFO at Swiss Re, mentioned that the key to future FP&A success is in managing the value of the company. To do this, FP&A professionals must keep in mind five steps:
- Understand the business value
- Describe the situation using matrixes and models
- Steer strategic business decisions by supporting the decision-making process
- Extract key insights using storytelling
- Report accurately internally and to the market.
Supporting value-creating with technology
Pras Chatterjee, Senior Director at SAP, delved further into the survey results. Chatterjee noted that some of the highlights from the 2021 survey include the number of FP&A practitioners using scenario analyses, and also the increasing number of senior executives are receiving real-time reports.
Interestingly, 4% of companies contend that they can prepare a forecast in less than a day. Some of the key challenges the survey brought to light included that 40% of respondents contend that they struggle with poor data quality, 26% report no significant technology investments in the past 5 years, and surprisingly that only 7% of FP&A professionals are happy in their current situation.
Using an integrated ERP system goes a long way to alleviating these challenges. Data management strategy, scenario planning, and extended planning and analysis offer solutions that will benefit FP&A teams over the long term. Particularly interesting was that the survey found that FP&A professionals using AI and ML reported the quickest times to complete a forecast.
The survey also found that FP&A leaders at companies that invested in technology spent more time on high-value areas that drive the business rather than in the more mundane functions of data entry and report pulling. At the start of the 2020 pandemic quarantine, the companies utilising the best ERP and data warehouse solutions were able to respond the fastest and were better able to manage operations and make necessary pivots during a turbulent time.
Through the adoption of technology, FP&A teams are able to achieve complete visibility and help guide the company as a whole while assisting each team to optimise performance. Chatterjee argued, “Through proper extended planning and analysis, as corporate as finance, we help make strategic choices. We help deliver bottom-line results. We help sales drive the top-line growth and we help the supply chain optimise the cost of goods sold. Why? Because we, as finance, have visibility across the organisation. We’ve eliminated silos, brought it all together.”