Time is both flying and creeping along, especially for those of us who juggle dozens of home responsibilities along with work. We are in year three of a pandemic I thought would last three months.
The dictionary definition of resilience — the capacity to recover quickly from difficulties — is 100% appropriate to this situation. Every team inside the organization has been challenged to become more resilient to minimize impact the next time a disruptive event occurs. Not if, but when.
Finance teams are experiencing ever expanding responsibilities that include financial consolidation and close, treasury management, regulatory compliance, and financial planning and analysis (FP&A). In particular, and deservedly so, the profile of the FP&A professional has been elevated from their essential role in planning, budgeting and forecasting for the organization.
During the pandemic and now in this lingering phase, the FP&A team leveraged their expertise to develop complex financial models, assess trends, analyze variances, and also determine cash, liquidity and capital requirements.
The long hours spent by FP&A teams have not gone unnoticed. In a 2022 survey of 205 CFOs and senior finance leaders conducted by
The budget increases are especially good news as FP&A and corporate performance responsibilities continue to grow. Additional resources are needed to help FP&A teams partner with business unit leaders to develop models that include strategic and operational objectives, what-if scenarios, business drivers and key performance indicators.
Yet, even with an expanded and more visible role, in year three of the pandemic, 91% of the survey respondents have automated less than 75% of their FP&A processes. This is problematic for a number of reasons, including the challenges of manually managing data inputs from other teams from human capital management to product development, sales and more.
FP&A teams are acutely aware of what could go wrong in an environment of speed, economic uncertainty, geopolitical challenges and the most tragic public health crisis in recent history. Manual processes are inconsistent, subject to errors, and most likely offer different systems of truth.
Inside the organization, diversified business units require different assumptions, models and measures. To mitigate risk and require less staff hours, automation is a must.
Without the ability to conduct detailed what-if analyses on each respective business unit, FP&A team members are ill equipped to answer the “next question” from senior leaders and board directors. Fortunately, 29% of the respondents in
We have learned several critical lessons over the past years that we can use to further advance our resilience.
Lesson 1: The COVID-19 pandemic will linger, creating new challenges but also new opportunities.
We have now shifted to endemic thinking, where we must learn to live with COVID-19 all around us. This means reviewing business differentiation, competitiveness and performance management data inputs. “Speed to insight” is more than a fancy buzzword. Organizations that are agile are able to make mid-course corrections. The FP&A role will continue to both evolve and expand. Co-located within the business unit, FP&A professionals are critical members of the business unit team and help identify new growth opportunities while forecasting future performance. Of the 205 CFOs and senior finance leaders surveyed, 73% expanded their forecasting frequency during the pandemic and 77% focused more on scenario modeling. Monthly and quarterly reporting were not enough. Leaders needed weekly or daily scenario models.
Lesson 2: Eliminating, streamlining and automating FP&A processes are critical in a hybrid work environment.
Pre-pandemic manual processes were difficult enough when co-workers were sitting in the same office and could share information on formulas, scenarios, data inputs and assumptions. However, significant staff hours compensated for inefficient and duplicative processes. Seasoned team members used their knowledge of the organization, budgeting, planning and performance management processes, as well as pivot table expertise, to bridge the gap between manual processes and leading practices. However, what were inconveniences before became unrealistic barriers during the pandemic. The perfect storm of talent shortages, planned retirements and team members in multiple locations have given a much needed boost to FP&A automation initiatives. Thirty-one percent of executives in the survey say they plan to have greater than 75% of their FP&A processes automated by the end of the year.
Lesson 3: Cloud adoption enabled organizations to be more resilient.
The words “if only” were constant refrains for organizations that postponed modernization initiatives. Cloud-first initiatives were common but not pervasive in the pre-pandemic environment. Fast forward, in year three of the pandemic, cloud solutions are table stakes for organizations seeking resilient (or “tough”) technology environments with high availability, security and performance. Even more important is increasing the accuracy and integrity of spreadsheets that are routinely emailed or stored on a share drive. The opportunity for error is substantial. Formulas can inadvertently be modified, especially as multiple assumptions are evaluated like changing interest, inflation or currency percentages, business unit sales projections or revenue forecasts.
One error would cascade across all projections. A cloud solution helps reduce errors and promotes leading practices based on prior implementations. The power of ongoing research and development, new functionality and other implementations across industries enable greater security and integration with ERP, human resources and sales systems. Nearly a third of the respondents indicated they are now upgrading their FP&A technology.
Upskilling team members to fully leverage new technology capabilities and processes is non-negotiable.
Skills to effectively present and communicate the data through storytelling are just as important. People skills, an inclusive mindset, persuasiveness and great verbal communication come in handy when learning the mission, business and competitive environment. To offer maximum contributions, the FP&A team must be familiar with the strategic objectives, analyst reports, revenue history and forecasts to identify growth opportunities and mitigate challenges.
An overwhelming majority of the surveyed executives agree. They believe their finance team members’ skill sets need to evolve as their roles shift to continuous planning and forecasting that incorporates more data and analytics.
We can do better
These are hard-learned lessons. I am in awe of FP&A team members who analyzed past performance, collaborated with team members, partnered with business unit leaders and enabled planning, budgeting and forecasting capabilities — with manual processes, legacy systems and not enough people. But we can and must do better. The possibilities are dizzying to consider. Imagine what would happen if the FP&A team is fully empowered with automated processes, cloud technology and new competencies before, during and after a disruptive event — when every assumption is challenged and there is no precedence? Resilience.
