The calendar: an outdated idea of the FP&A design

For more than 15 years, I have been working on FP&A reporting processes design in the industrial sector and in Financial Services. I travelled throughout Western Europe, working in various countries.

During this time, I designed solutions for Financial Services FP&A, HR Planning, Multi-Year Strategic Planning, Project Planning & Real Estate Planning. For at least a decade, irrespective of the country or the sector, FP&A design was centred on the idea of a calendar in which teams had to execute a sequence of rigid milestones, typically based on a handshake, more or less polite, at different levels of an organisation.

The current fast-paced business environment does not support this rigid approach anymore, and this article explores how technology changed the way FP&A teams’ organisations in order to meet a more challenging landscape.

The Classic FP&A approach: A Role-Based Scenario

I well remember my first-ever FP&A design workshop. The project team presented a calendar, in deployment announced for October, in which the traffic lights of the time-scheduled release were initially Proposed Budget, Validated Budget, Revised Version, etc.

We fulfilled these steps with top-down and bottom-up procedures, with validation steps and disclosure templates. An army of users played a role-based game; the main characters were Data Contributors, Validators and Analysts. The main action was matched with the role the user was supposed to execute with respect to data gathering, validating, and analysing. Communication consisted of intense emailing where the business titles of the people in the CC field defined the priority of the message. 

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Figure 1: Role-Based Approach to Budgeting

This approach leads to a set of figures that were mostly the result of the compromise between the interests of different departments rather than representing the outcome of a benchmark of assumptions based on an economic scenario. 

The Modern FP&A approach: A Fact-Based Scenario

The current pandemic has forevermore confirmed the importance of facts and fact-based decision-making. While some of us still enjoy reading the astrology section in the paper or online, I think we can safely say that no one can predict the future. The situation has singled out the importance of Data Science. 

What we do consists in testing the cause-and-effect link between a set of assumptions and a company's result. The more assumptions are tested, the more the results are challenged and, therefore, robust.

Testing assumptions, producing simulations, building restatements & benchmarking decisions require a lot of data. The predictive algorithms have unleashed the possibility of investigating the cause-and-effect relationship, which is less explicit. This requires even more data.

Modern software supports this redesign of processes. They provide a technological platform to host much more data, repeat a Budget execution several times in a more agile way, to represent results with more dynamic dashboards. As a result, a new generation of FP&A organisations is evolving.

From FP&A Team to FP&A Community

More data implies more communication, which means the team organisation requires enhanced interaction. If you look at an FP&A team today and the positions opened on Linkedin, the macroscopic effect for the FP&A team consists of discovering a list of new roles such as Data Scientists, Data Integration Managers, Artificial Intelligence Scientists. 

However, apart from this macroscopic effect, another transformation is taking place; the need for an agile process with a continuous capability to repeat and re-simulate and communicating these simulation exercises is key. 

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Figure 2: An FP&A Community-Based Approach.
 

The team organisation supporting this landscape is a transposition of what happens in social life. FP&A teams are organised as a community of users continuing to share not just words, like in emails of the previous era, but content, dashboards, and comments. 

In summary

Modern technology boosts communication and data sharing. A modern FP&A tool must define a structure over this apparent anarchy, as the goal of the reporting process is to assure a better understanding of the future with some stable results. 

Workflows or collaborative platforms are a way to leave behind the liturgy of a rigid calendar. The key to modern FP&A teams is through empowered organisational governance, underlying a rich collaborative exchange of words, data and information.