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Moving beyond a fossilised and disconnected FP&A solution

May 7, 2018

 

Generally speaking, most large companies have increased maturity of their financial planning and analysis processes and technologies over the past 20 years.  When we look at a large company today, we typically see a central EPM solution enabling actual and planned data to be gathered, consolidated and reporting upon by a central finance function.  The hard yards of standardising data being pulled from the various parts of the organisation have been trodden, and analysis from both a statutory and management of the entire organisation’s performance is possible.  This has largely been enabled by the advances in multi-dimensional data warehousing techniques of the late 90s, along with the efforts of various EPM vendors to build upon that to provide means to enter plan data and perform business calculations like currency conversion, elimination and allocations to name but a few.

 

Whilst an achievement, this is just one step along the journey to full EPM maturity.  Let’s consider just two of the typical shortcomings we see in the central EPM solutions in place in large organisations today:

 

Fossilisation.  Central EPM solutions supporting financial consolidation are critical – outages or errors lead to late or wrong disclosures to the market, shareholders and regulators.  Understandably then, that risk is carefully managed, in part, by putting strict controls around any changes made to the solution.  It is typical now to see the same controls that are applied to ERP systems applied to their EPM counterparts.  Yet one of the key needs of an EPM solution are to provide quick, actionable analysis of future business performance.  FP&A teams are frequently asked to provide answers to questions that require new data capture, new calculations or new analysis reports.  The controls imposed on those solutions mean that this agility is not possible; the solution is fossilised, sending FP&A teams running back to spreadsheets with all the problems that entails.

 

Disconnection.   It is rare to find a central EPM solution that supports the needs of different business units or markets to create their plans.  Often projects started with high ambitions – to standardise across the organisation how, for example, revenue or overheads would be planned.  These ambitions were watered down as the genuine need to do this differently across business units and markets materialised during the project.  The end result is often a solution that simply enables the capture of divisional or market planning data in a standard format – those plans are still created in local spreadsheets.  Those organisations who have tried to extend their central EPM solution to provide dedicated planning models for specific markets or units, have realised the high cost of development and maintenance.  Again, those local systems become fossilised and redundant with time due to high costs imposed by strict governance, and the need for involving specialised IT skills.

 

Forward thinking organisations have realised this and are looking for solutions to provide agility to both central FP&A and business units or markets, whilst guaranteeing integrity of their central consolidation tool.  What they put in place to achieve this must have certain characteristics:

 

  • Some degree of separation from the central consolidation system is required, both technically and from a governance point of view.  FP&A and units/ markets should have the freedom to create their own planning and analysis models.

  • At the same time, those systems must integrate with a reconcile to the system of consolidation and there needs to be a flow of actual and planned figures between the systems.

  • Tools should be simple enough to be owned by FP&A or units’ or markets’  finance teams, without reliance on IT.

 

Clearly such a solution is dependent on the toolset, and an appropriate technical and governance framework to be in place.

 

In terms of toolset, a multi-tenant cloud-based planning platform like Anaplan ticks a lot of the boxes:

 

  • No reliance on IT to provision the platform and no desktop IT footprint other than the standard browser.

  • Tools are easy to use and can enable Finance to be independent in developing and maintaining planning and analysis models.

  • Pre-built planning applications are available, many of which are free

 

That’s not to say there’s no involvement from IT.  Key to making this work will be the provision of a framework within which FP&A, markets and units can operate.  At the very least this will take the form of standard interfaces for bringing in master data and actual figures from the consolidation EPM to the agile EPM and, conversely, bringing back plan figures into the consolidation EPM.

 

The prize for achieving this is truly connected planning – where detailed operational plans flow through seamlessly to predict their financial outcome, where finance teams spend their time testing different business scenarios rather than processing complex spreadsheet-based planning processes. 

 

As a final thought, it will be interesting to see whether the more traditional on-premise EPM providers develop an answer to this problem. 

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