We gave a high-level overview of high impact areas for successful implementations in our previous article “Laying the foundation for continued success with FP&A product implementation.” But each key area — process harmonization, data rationalization, and change orchestration — demanded further elaboration. So in this article we dive deeper into process harmonization.
It is not uncommon to see each line of business or geography in a company carry out their planning process in a way that’s unique to them. And, to some extent, some unique processes are required by the company’s unique business needs, constraints of the data being analyzed, or region-specific needs. However, the crux of unraveling this dilemma in process harmonization is to start by categorizing every process for analyzing financial data as either “required” or “optional.”
In the “required” category, identify the commonalities and preserve uniqueness where necessary. And in the “optional” category, simply align them with the most common business practices for better insights and business value.
To see the “optional” category in action, take an example of an energy services company headquartered in the USA (say Company A), acquires Company B in California, USA to expand its land segment in the USA. After the acquisition, Company B’s performance and decisions are grouped under the USA > Land Segment (Business Segment), as this was the straightforward and only option available in the manual world. The opportunity here as part of process harmonization is to align Company B in line with the rest of the organization across different revenue models and streams e.g. align major customer segments like wholesale, distributors, industrial, etc with significant engagement models like direct delivery or through network and drive planning around those drivers. This will drive more valuable insights on the well aligned revenue stream and business model in Company B to the core strategy and growth of the whole group. This will also give an opportunity to add a new model as part of global company standard, if Company B has a unique business model that is significant to the group’s value.
For a scenario where a process is “required,” let’s look at a payroll planning process at the same Company A. Let’s say Company A has a distribution company in Brazil. If we take the employee payroll and benefits calculations, the USA region will need biweekly payroll calculations for each employee, whereas Brazil region will require 13-month salary calculations governed by country-specific guidelines. Salary calculations need to be unique for these two regions during the planning process. Even in this case, there is an opportunity to explore if other payroll expenses can be calculated uniformly e.g., determine payroll tax for all region as payroll amount x average payroll tax% applicable for each country rather than getting into details of payroll tax complexities of each country, as long as they are closer to the actuals.
If this article was helpful to you, stay tuned for our next deep dive into FP&A implementation: “Data Rationalization.”
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This article is contributed by Finance Transformation Specialist Ramya Krishnaganth, UVID Consulting.
