From left: Larysa Melnychuk, Managing Director at FP&A Trends Group
Chris Ting, FP&A Solution Manager at Cubewise Hong Kong
Tat Seng Wong, Practice Manager at Cubewise Hong Kong
The second FP&A Board meeting was held in Hong Kong 25th July and more than 37 senior FP&A professionals attended and discussed the latest trends and common challenges in FP&A Analytical Transformation.
Apliqo – a Cubewise Company – is proud to be sponsoring such a high-quality forum where the most important challenges of FP&A related to people, culture, processes, technology, analytics and business partnering were debated.
A big thanks goes to Larysa Melnychuk, at FP&A Trends Group for creating such a unique community focused on FP&A and the opportunity for Apliqo to be associated with it.
We would like to share some of the insights from the event in a short-summarized form. The topic of this board was “FP&A Analytical Transformation”.
The biggest analytical challenge in FP&A
At the beginning all participant introduced themselves and explained their biggest analytical challenges in FP&A and the topics can be summarized in the following categories (not listed in order of importance).
- People and Culture
- Data (Silo, Granularity, Consistent, Quality, Massaging)
- Process (Standardization, Automation, Collaboration)
- Spreadsheet / Manual / Version Control / Consolidation / Time
- System / Integration / Tool
- Insight / Value Added
- What-if Scenario Analysis
Although FP&A Analytical Transformation can bring huge added value to better manage the business. The outcome from the group discussion is pretty much aligned with other FP&A professionals around the globe. It shows that many FP&A professionals still live from deadline to deadline without taking a break to reconsider and change. Only a limited number of companies have successfully implemented FP&A. Following the introduction, the following topics were discussed:
- Key challenge for FP&A Team
- Gartner Analytics Maturity Model and FP&A Board: FP&A Analytics Maturity Model
- Field Case Study
- Group Work (FP&A Analytical Transformation)
The key challenge for FP&A Team
The key challenge for FP&A Analytical Transformation is how to reduce the time to make decision to zero. The average corporation spends four months and 20-30% of senior executives’ and financial managers’ time on the budget (with some organizations taking six to nine months). Planning processes can be very tedious and require detail input and back and forth negotiation with many people throughout the organization. In the meantime, there are so many things can change, plan needs to update to reflect the new changes.
To making quick and right decision is critical for companies survive and growth. Without doubt, companies need to continue transform their traditional control and rigid planning to an integrated planning for productivity, speed and informed decisions by leveraging technologies innovation, process redesign and new capabilities.
Top 5 Trends and Challenges for FP&A Analytical Transformation are highlighted below:
Advanced Analytics for FP&A (Gartner and FP&A Board Maturity Model)
Many Advanced Analytics definitions come from the IT profession, however these need to be adjusted in order to better address the finance world. According to Thomas H. Davenport, analytics thought leader, Advanced Analytics is “extensive use of data, statistical and quantitative analysis, explanatory and predictive models and fact-based management to drive decisions and actions”.
The Gartner Analytics Maturity Model shown below, presents an overview of different kinds of analytics.
In Gartner’s model, traditional FP&A processes are still centred around Descriptive and Diagnostic Analytics: the backward-looking and reactive processes. FP&A advanced analytics start from the Insight stage and utilize predictive and prescriptive types of analytics: the proactive and forward-looking processes.
In the International FP&A Board model shown below, it presents an overview of the 3 states and 5 stages of the organizational analytical.
The outcome of the roundtable showed that, despite there are many benefits, many companies around the world still are facing challenges with their data, processes, struggling with their top-down and bottom-up planning integration. Only a limited number of companies reach the leading stage and therefore reap the full extent of their benefits.
A Field Case Study from Tom Whelan
This Hong Kong board meeting also featured an inspiring field case study presented by Tom Whelan, Director of Finance Asia from ITE Group. Mr. Whelan shared his experience and insights on his company’s FP&A Analytical Transformation Journey and Analytical Framework.
The key learnings from Mr. Whelan’s presentation are summarized below:
- Critical to have a clear objective and delivered outcomes
- Compare with leading practices and maturity models
- Identify improvement initiatives based on gaps to leading practices and future state maturity goals
- Prioritized improvement initiatives based on an agreed criterion (benefit, cost, complexity, timeline, etc.)
- Develop a Transformation Roadmap
- Intuitive UI and ease-of-use
- User owned and self-service
- Flexible and scalable to handle group and local requirements
Group Work: FP&A Analytical Transformation Through People, Process and Technology
The Board members value the opportunity to network with their peers from the leading organizations. This time they enjoyed the group work devoted to key stages in FP&A analytical transformation. The Board members actively discussed how to transform FP&A people and culture, processes, technology and analytics, and business partnering.
People and Culture
The FP&A transformation is a big challenge for many organizations. The relevant people need to be involved early and the project team needs to be empowered by management. People from both financial and operational roles also need to collaborate on the project.
Incentives were identified as needed to drive behavioural change including potentially rewarding forecast accuracy. Ideally initiative would start small with visible changes while empathizing with the end users. Adoption is made much easier by making analytics simple.
Finally, the presenter also spoke to include that data scientist into the FP&A team.
For process excellence in financial analytics, the organization must strike a balance between simple-to-understand and complex methods. The process also needs to BU focused, but need to align with central schedules and guidelines. It also needs to rely on historical data and ensuring data integrity and alignment is crucial. The team also talked about the pressure finance teams are under to produce insight and this can result in fatigue, shortcuts, rework, and mistakes in outputs. Driver-based forecasting was identified as critical to accurate predictive forecasting. Finally, an implementation team must encourage accountability in the company-wide business partnering for collaboration around methods and data.
Technology and Analytics
The presenters began with the need for executive sponsorship for FP&A transformation and investment. They also stressed that it is very important to define clear objectives and success, and creating a team that is interdisciplinary, cross-functional, and matrixed before buy software.
For the FP&A tools, they need to integrate financial and operational planning, and link then to the corporate strategy and execution. The next generation of FP&A tools will also need to leverage AI to model the impact of internal and external factors on future performance.
For the project implementation, it should start small and quick win.
Finally, educating the end users and selling the value are imperative to success.
Business partnering is all about collaboration, which creates closer ties between the finance department and the rest of the organization. The team emphasis on the ideas of speaking the language of the business, getting out in the business for rotations, embedding finance in the operational units, and building trusted relationships.
Improving FP&A’s business partnering practices is an evolutionary process, not a Big Bang singular event, and effective business partnering happens at the individual level.
Companies need to think through how to recognize business partnering excellence in the FP&A organization. What specific behaviours matter most? Are certain actions inadvertently discouraging people in FP&A from building relationships with their business partners, or taking a consultative approach in those relationships? Are there other steps that can be taken to move FP&A and the entire finance organization toward a fully integrated interaction model with the business?
Finally, finance should also support the FP&A transformation and helping the business in their budget requirements.
Apliqo Conclusions and Experience with Customers
To conclude the meeting, Apliqo shared its experience and tips on practical ways for FP&A analytical transformation.
In an increasingly fast-paced and ever-changing world, companies must learn to adapt to changes to win the fierce competition and to not merely survive but thrive. Similarly, the modern FP&A takes an exciting path of transformation to meet the demands of the modern business implementing more dynamic sophisticated tools allowing automation and online collaboration. However, many FP&A professionals still live from deadline to deadline without taking a break to reconsider and change. How many have already examined other analytical tools than good old Excel and looked for ways to reduce non-value adding processes?
The main conclusions of the second Hong Kong FP&A Board are as follows:
- Analytical transformation is an ongoing process. More transformation is already on the way: system implementations, restructuring of processes, re-defining and simplifications of the models, automation of the routine tasks and applying proactive advanced analytics.
- Now, most companies are stuck at the defined stage with some turning to the advanced. At the leading stage, all planning processes will be fully integrated, allowing for a multidimensional advanced analytical process. This is where FP&A will be able to use big data analytics and fully transform organizational corporate performance management and decision-making process.
- Certain challenges stand in the way of FP&A Analytical Transformation: lack of investment in analytics technology and professional development of the FP&A talents; time-consuming day-to-day accounting tasks that need automation; inability to turn insights into action.
- Finally, we suggest that organizations require an integrated FP&A framework to support their transformation journey to best practices for FP&A.
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