By Pras Chatterjee August 15, 2024
In today’s fast-paced and data-driven business environment, FP&A professionals are no longer just number crunchers. They’re also strategic partners who provide crucial insights that help steer the company’s direction. And as FP&A becomes increasingly pivotal in the office of the CFO, the latest trends driving FP&A’s success and importance as finance evolves are worth exploring.
This evolution is propelled by emerging FP&A trends that are reshaping the landscape of financial planning and analysis. How? By harnessing the power of big data and predictive analytics. By fostering stronger business partnerships. By leveraging AI-driven technologies. In these ways and more, the capabilities and impact of FP&A are being redefined.
Let's delve into the top 5 trends at the forefront of this transformation and explore how they’re enhancing the effectiveness and strategic value of FP&A teams.
Trend #1: Strategic Data Harvesting
Data has been the most powerful tool in the arsenal of finance. Yet for most organizations, data continues to cause much angst and restraint. Indisputably, though, volumes of data have been growing rapidly and exponentially every single moment—both internally and externally to the enterprise. The latest trend is re-positioning to finance the value of data warehouses and data marts to consume even more data. But this time through data fabrics and data meshes.
Before consuming mass data, however, finance faces a few pivotal challenges. The first being the cleanliness and latency of the data. Not all data needs to be consumed quickly and immediately. Instead of ongoing initiatives and projects exposing finance to data fabrics and data meshes that require harmonizing data, an alternative, more valuable approach exists: strategic data harvesting.
Such harvesting, through modern FP&A solutions, enables finance to consume data from non-FP&A applications at their business requirements. This ability can be illustrated by using FP&A systems with dimensions for planning and analysis that can instantly connect to an ERP, HRIS system, or CRM tool. Through that instance connection, finance can retrieve valuable insights and consume them in the context of a cube.
That ability also speaks to how modern FP&A tools aren’t designed just to be a facilitator of budgeting and forecasting. Rather, the tools heavily focus on the “A” in FP&A—analytics. To perform true analytics, these solutions have evolved to allow easy consumption of data from any (best-in-class solutions) platform. And the solutions do so in a way that makes it easier for finance to do broad analysis and gain a deeper understanding of variances.
For this reason, the trend for finance is not to adopt a data lake or data warehouse to complement existing FP&A tools and add to the technical debt. Instead, the trend involves adopting a single solution that enables all analysis. FP&A harvesting its own trusted data paves the way for clean data to be used in predictive and AI models to help generate better analysis and results.
Trend #2: Business Partnering
FP&A has shifted from traditional number-crunching to become strategic advisors internally in the enterprise. To accomplish this shift, establishing the influence of finance is better accomplished through business partnering.
As defined by the Association of Finance Professionals, “Business partnering is the collaboration between finance and other business units to enhance decision-making and optimize resource allocation. It enables FP&A to leverage its financial analysis, reporting and forecasting skills to drive the business forward.”
Where does this collaboration lead finance as a group? Here are some of the benefits:
- Better decision-making across the organization with closer collaboration between FP&A and other departments. The main driver of this benefit will be data- and finance-driven decision-making, where FP&A provides relevant financial data in making informed and data-driven decisions.
- Improved financial forecasting where FP&A and other teams gain a better understanding of the approach and goals of each. This understanding allows for more accurate and realistic forecasting through collaboration and goal alignment.
- Increased organizational agility as businesses are quicker at making decisions and thus respond quicker to changes in the market, opportunities, and the latest trends.
Trend #3: Analytics and Storytelling
Through data harvesting, the top trend, the use of analytics and the resulting storytelling from FP&A are rapidly improving. With modern FP&A tools, both enterprise/non-enterprise and financial/operational data can be consumed much easier, faster, and in context of the situation. Gone is the time spent on aggregating, formatting, and validating information—which now can be quickly accessed in a shared manner.
Modern analytics can visualize information in any format—from traditional Excel and PowerPoint to dashboards and mobile devices—that can easily be shared to understand the data. Additionally, FP&A can leverage these tools to drill right into the source to easily explain all variances and better understand not just the what and why, but also what may occur.
Naturally, that level of data will lead this generation of FP&A to be more adept and deliver results through storytelling. FP&A are ultimately becoming storytellers who can weave together the tapestry of data and financials through clear, compelling, and impactful data narratives.
Trend #4: AI-Enabled FP&A
AI-enabled FP&A is among the top FP&A trends due to the transformative impact on both predictive analytics and automation. By providing high-quality, trusted data leads, AI is revolutionizing the industry by allowing for more accurate predictive analytics and simulations. This accuracy enables FP&A teams to stress test various scenarios, providing a deeper understanding of potential risks and opportunities.
However, AI’s influence extends beyond just prediction. AI significantly enhances efficiency by automating routine tasks, such as data collection, report generation, and basic analysis. This automation frees up valuable time for FP&A professionals, allowing them to focus on more strategic activities like business partnering and scenario planning.
The integration of AI in finance thus not only improves forecasting accuracy but also streamlines operations. As a result, the finance function is more agile and responsive to the ever-changing business environment. This dual benefit of enhanced predictive capabilities and increased operational efficiency is precisely why AI-enabled finance is a leading industry trend.
Trend #5: Integrated Financial Planning and Analysis
A common theme in the first four FP&A trends—a cohesive, collaborative plan with organization-wide engagement—hints at the final trend: an integrated financial plan.
Over the years, this notion has gone through many definitions. Integrated business plan, extended planning and analysis (xP&A), and connected planning are three main iterations. But the term integrated financial planning and analysis qualifies the importance of FP&A as the lead advisor in the organizational planning process. In essence, FP&A helps drive all plans into one and create a cohesive, integrated strategy.
This trend is, by default, one of the top items for the office of CFO. Why? Integrated FP&A culminates in bringing together all data, all collaboration, and all planning activities into one central plan or forecast. Most importantly, central plans and forecasts are fully aligned across the organization with complete transparency and visibility. The advent of modern cloud-based solutions and the ability to acquire and integrate financial and operational data now removes any technical barriers to achieving this alignment.
Conclusion
Collectively, these five FP&A trends are shaping the evolving role of FP&A and enhancing its strategic value and operational efficiency. Strategic data harvesting, business partnering, advanced analytics, AI integration, and integrated financial planning are transforming how FP&A professionals contribute to their organizations. By staying ahead of these trends, FP&A teams can provide deeper insights, drive better decision-making, and increase organizational agility.
For more information and to explore how your organization can leverage these trends, visit our FP&A page.
