As a growing business, you must take all steps necessary to ensure that your business has a robust and scalable foundation. We can all agree that finance is one of the aspects that form the core of your business. As an area that continues to be in focus, FP&A, or financial planning and analysis, is a set of activities that helps plan, forecast, budget, and analyze activities. These activities support decision-making and the financial health of your business.
FP&A digital transformation is an automation process, in simple terms, that profoundly impacts all areas of finance. Moreover, the process of FP&A digital transformation displaces daily operations due to the changes in people, processes, and technology.
What does FP&A digital transformation cover?
The FP&A digital transformation should cover the following foundational processes.
| Creating budgets Plan a detailed budget for the upcoming year with projections for revenue streams, expected expenses, and projected profits. | Forecasting trends Predict the financial performance based on empirical data, the existing market conditions, and related aspects. |
| Analyzing variancesCompare the actual business results with your forecasted results and analyze the reasons for the deviations. | Reporting results The next aspect of FP&A involves creating financial reports, data insights, and callouts to various stakeholders. |
| Modeling financials This part involves the creation of detailed models to help assess different scenarios and the impact of various strategic decisions. | Tracking key performance indicators Set KPIs to track various metrics to evaluate the company’s fiscal performance against the goals. |
| Analyzing profitability This involves looking at different product lines, segments, and departments to track results and optimize resource allocation. | Planning long-term Look at how you want your business to grow and how you can attain and allocate funding accordingly. |
What does FP&A digital transformation involve?
The FP&A digital transformation process establishes practices for financial planning and analysis to improve decision-making using technology. It involves the following foundational elements to leverage technology for automation and driving business growth.
| Standardizing processes Standardize FP&A processes across business units for comparable and repeatable analysis. | Improving processes Continuous process assessment and improvement is another critical aspect of FP&A’s digital transformation. |
| Breaking data silos Break data silos and synchronize other departmental data that drives FP&A insights and decisions. One such example is the sales team’s data. | Expanding data scope Combine outward-looking data with inside data to improve predictions and scenario planning. |
| Emphasizing collaboration Enable cross-functional collaboration in FP&A processes to bring expertise and capture risk and opportunities. | Democratizing information Provide needed insights to all parties involved for better business judgments and actions on time. |
Now that we have a fair understanding of the FP&A digital transformation process, we will look at the dilemmas one faces while starting this journey. You can read the tips for avoiding the common pitfalls in vendor and product selection.
This article is contributed by our Finance Transformation Specialist, Ramya Krishnaganth, UVID Consulting.