The First Digital North America FP&A Board meeting took place on September 17, 2020 to discuss the digital transformation and how FP&A is moving from a traditional to a leading stage. The event was sponsored by SAP and Robert Half.
At the beginning of the meeting, Larysa Melnychuk, CEO of the FP&A Trends Group, mentioned that digital transformation is more than the mere digitization of data. True digital transformation integrates technology, data, and new processes across the entire corporation. In the most optimized scenario, digital transformation allows the automation of duties and predictive and prescriptive models that allow for faster responses.
FP&A Analytics Maturity Model: Stages of the Digital Transformation Process
There are several stages of the digital transformation process:
1. Basic. At the basic stage, a company operates without business intelligence tools, planning models, collaboration or business partnering.
2. Developing. Companies in the developing stage has inconsistent processes and minimal cross team collaboration and business partnering. They have basic analytical drivers, a planning model and tools, basic BI tools, descriptive analytics, and highly manual processes.
3. Defined. Companies in this phase has defined processes, analytical drivers, planning models and tools, BI, and business partnering. Their analytics are descriptive and diagnostic. They rely heavily and are consistently dependent on Information Technology resources.
4. Advanced. An advanced company has enterprise-wide processes. Their analytical drivers are multidimensional. They have a driver base planning model and advanced BI. They plan collaboratively and have strong FP&A business partnering. They have self-service planning tools, predictive analytics, and easy scenario analysis.
5. Leading. Leading institutions fully integrate technology, automation, and collaborative processes to yield on-demand forecasting, multidimensional driver based models integrated with BI, predictive and prescriptive analytics, on-demand planning that leverages artificial intelligence and machine learning, and a quick multidimensional planning model.
Table 1. The FP&A Analytics Maturity Model
FP&A Analytical Transformation: Asking the right questions
The FP&A Analytics Maturity Model provides an outline of how digital transformation happens in theory. At the Digital FP&A Board, Sumit Dangi, CFO and Treasurer at Jewelers Mutual Insurance, presented a case study on how he is practically implementing digital transformation in his organization.
In practice, there are many unique variables one must consider. For example, managing the information that is being digitized becomes a task itself. Is the organization producing too much? Does it need more? Is the information being used, and if so, used correctly?
FP&A leaders must build teams that can solve the challenges digital transformation poses. What kind of value is the FP&A team creating? How can the FP&A team partner with other departments to convert threats into advantages? The COVID-19 crisis provided a unique opportunity for FP&A teams to create more value and prove their ability to respond quickly.
The Power of Integrated FP&A
At the meeting, Fernando Schreiner, FP&A Director at Gensler, provided another perspective. He noticed that his team lacked the technology and processes necessary to meet the needs and expectations of his company.
Using new technology, Fernando and his team were able to automate, effectively plan, provide data visualizations, and create a connected planning model that allowed FP&A to bridge gaps between treasury and tax.
The finance team was able to solve tasks without needing the assistance of information technology or other teams. Integrating artificial intelligence (AI) and machine learning into the process was the final step to automate the process and make his team’s work invaluable.
At the meeting, Chris Chan, an FP&A thought leader at SAP, also mentioned the importance of technology. By using AI allows forecasting and other tasks to move from being monthly activities to allowing for weekly, daily, and even on-demand assessments. Sales forecasting is notoriously difficult. Chris cited the example of a company he works with that shortened the sales forecasting cycle from 25 days to 5 using technology and AI!
Big Data in FP&A: From Descriptive to Prescriptive Analytics
In her presentation, Valerie Martin, Finance Director at Autodesk, explained how FP&A can use big data to move from predictive to prescriptive analytics.
There are four different analytic systems that require human judgement to assess them, come to a decision, and take action:
- Descriptive analytics describe what happened in the past.
- Diagnostic analytics describe the past and provide an explanation as to why something happened.
- Predictive analytics provide an idea of what will happen.
- Prescriptive analytics offers an idea of what should be done. The process can be automated or provide specific options for action. Implementing artificial intelligence (AI) speeds up the process and allows further optimization.
Skills of a Modern FP&A Professional
Paul McDonald, Senior Executive Director at Robert Half, emphasized the skills FP&A teams must have to successfully adjust to the digital era. These skills are both technical and personal.
There are several ways for FP&A professionals to build the skills that are in demand today and will be relevant in the future:
- Monitor trends
- Participate in industry events
- Volunteer for new projects
- Embrace change – try new systems, tools, apps (e.g., BlackLine, Trintech)
- Focus on analytics
- Be curious
A diverse team should be able to execute financial models and forecasts and interact with cloud-based systems while also displaying a commitment to continual learning, proactive communication, and maintain a constantly collaborative mentality.
Building strong FP&A teams is a core component particularly during these uniquely challenging times. There are several ways for FP&A to adjust to the “New Normal” but the attention should be paid to improving both soft and hard skills. Both of them are equally important for FP&A to successfully support their business leaders in the uncertain environment.