The FP&A Trends Webinar: Mastering Analytical Transformation with FP&A Trends Maturity Model
Click here to view details and register
The FP&A Trends Webinar: Mastering Analytical Transformation with FP&A Trends Maturity Model
Click here to view details and register
By Jawwad Rasheed, EY UK FP&A Lead for Financial Services
Key contributors:
Firms today exist in a world that is becoming more complex, interconnected and changing at an ever-faster rate. In all sectors, financial services businesses are recognising the need for accurate and timely insights to support decision-making in their rapidly changing environment.
This article explores how financial services businesses can guide investments in Financial Planning and Analysis (FP&A) design. It also provides recommendations on how to do so wisely and thoughtfully and not rush through projects, which may necessitate re-investment later and consume valuable resources at a critical time.
This pressure of responding to today’s challenges is exposing the limitations of outdated, ineffective planning and forecasting systems. Even before the COVID-19 pandemic, FP&A transformation was on the top of the CFO’s agenda:
As a result, sophisticated planning and forecasting alongside an agile and responsive Finance function are the most critical capabilities for CFOs over the next five years.
Additionally, re-evaluating FP&A systems enables CFOs to set the vision of moving to a business partnering Finance function that offers a strategically driven approach to planning and helps migrate the role of a CFO to a Chief Value Officer.
Many businesses underinvest in the design phase and instead push to implement a system in the hope of recognising benefits quickly. However, rushing the design phase introduces risk through the project lifecycle and beyond, notably:
All of these have the potential to require significant reinvestment of time and resources to fix and maintain the system later down the line.
On the other hand, a well-considered design approach helps to guide the investment in FP&A transformation. It offers the opportunity to create the right solution for the business that not only answers the current need but also supports the long-term vision and future growth. Investing in FP&A design will help to identify and prioritise user requirements, increase adoption across the business and ultimately develop a more sustainable and integrated solution, reducing the risk of future re-investment.
Below EY teams have set out ten principles for how a financial services organisation should approach the design process to maximise the return on investment in FP&A transformation.
1. Engage business users early and train throughout
It is critical that internal and external stakeholders are aligned on the agreed outcomes. Do this by engaging business users early, enabling them to understand the FP&A tool capabilities and to enhance their own capabilities. For example, when needing to modify FP&A models as business needs change.
A well-trained team will be key to successful design. Equip your workforce with the required skills throughout; early delivery of tailored training sessions will promote more involvement and reduce dependencies on specific individuals.
2. Go beyond current requirements
83% of CFOs see business analysis being a top priority in five years’ time [EY Banking CFO Survey; Jan 2020]. Further, they see the ability to quickly produce scenarios and profitability analysis as the highest value offering of their Finance functions.
FP&A transformation allows CFOs to develop the Finance function into a high value-add business partnering role. The design phase is an opportunity to set a clear and ambitious vision, well beyond overlaying new technology onto old processes and roles.
However, it is also important to consider an iterative delivery of the changes and define the minimum viable product for each iteration. This will help recognise the benefits quickly and deliver a smoother implementation over time.
3. Deploy a use case-based approach
When considering the new system, first focus on agreeing on use cases and consider starting small. Prioritising the use cases will also help define the minimum viable product for each development iteration.
FP&A tools can provide flexibility to model planning from strategic to operational levels. Some tools offer the integration of plans across multiple use cases, avoiding data transfer from point applications and spreadsheets, leading to a more efficient, effective solution.
4. Define the operating model
While it’s tempting to simply lift and shift spreadsheets, copying and pasting into FP&A tools, it would be wise to avoid doing this before you review surrounding processes. Identify the processes and integration touchpoints that the FP&A platform will support, then consider how they need to change. Importantly, also consider the organisational construct required to deliver the processes as well as the time and capabilities that would be required from the team.
5. Reconsider business performance measures
Use the opportunity of designing FP&A to review whether KPIs for business performance management are reflected in planning, scenario and reporting requirements, with driver trees aligned to strategic objectives. A more effective solution for the business may be to focus on forward-looking views, decision support and rapid course correction rather than traditional focus areas such as cost allocation and expense management.
6. Assess impacts of data design early
Senior management needs to consider the data-dimensionality required for planning and forecasting, where the increase in dimensions can impact model size and performance (e.g. dimensions needed to support planning management information rather than actual management information). Where there are inconsistent definitions of dimensions and hierarchies among source systems, it is vital to fix those inconsistencies using respective mappings before the beginning build of the first iteration.
7. Assess tool capabilities and limitations
Avoid using the FP&A solution that has been proposed to simply replicate the capabilities of your existing technologies in use. When assessing tool capabilities and limitations there are several considerations to be made, including:
All these will impact the implementation effort and lifecycle cost, so it is important to make an informed decision.
8. Consider solution performance and design
Even with cloud-based FP&A solutions, it is important to consider ‘sizing and performance’ design. The system's design should be considered in the context of the wider solution architecture (data lake, general ledger, reporting layer, etc.) It may be necessary to also review this in tandem with the FP&A solution design and consider whether loading granular data into planning cubes may hinder application performance.
9. Resource it appropriately
While having a set of principles to follow when considering the approach to design is necessary, it is not enough on its own. Equally as important is ensuring that the right resources are appropriately committed to the design, whether this is an internal or external team, and that they are supported in the activity. Not properly resourcing transformation projects risks a loss of focus on the design in favour of concentrating efforts on implementation or on Business as Usual responsibilities for the assigned resources.
10. Capacity analysis
During the design of each iteration, the technical lead and the build team should assign effort estimates against each building object based on the solution design and supporting documentation. This will help better assess the work required against the capacity of the team before the commencement of the next build. A contingency of 10%-20% of the effort estimates should also be factored into the plans, given unforeseen complexities during implementation.
COVID-19 has accelerated the need for FP&A transformation, presenting CFOs with a unique opportunity to align with their long-term business partnering goals.
Properly investing in the design phase of an FP&A transformation program can lead to a more effective solution and fewer problems in the implementation phase and beyond. It is also more likely to support the achievement of CFOs’ top priorities now and in the future.
In the following article, EY teams will discuss how a similarly well-considered approach to implementation can also help deliver success.
This publication contains information in summary form and is therefore intended for general guidance only. It is not intended to be a substitute for detailed research or the exercise of professional judgment. Member firms of the global EY organisation cannot accept responsibility for loss to any person relying on this article.
The challenges of running a modern business get tougher and tougher. Mainly externally driven challenges including...
FP&A teams have been growing in popularity because they have always known about one big thing...
The corporate planning process is a controversial subject on which opinions differ widely. But experience has...
The daily routine of FP&A professionals revolves around providing reports and analyses for senior and operational...
This is the second part of a three-part series that focuses on the business value that...
We will regularly update you on the latest trends and developments in FP&A. Take the opportunity to have articles written by finance thought leaders delivered directly to your inbox; watch compelling webinars; connect with like-minded professionals; and become a part of our global community.