How do you know that your FP&A efforts are actually bearing fruit?
This might sound like a strange question, but even with a high-functioning FP&A system that is plugged into every nook and cranny of your business, it can still be difficult to monitor whether that investment is paying off for you because the truth can hide behind the millions of moving parts that make up your company. But it’s crucial to look for this answer because it opens the door for improvements, fine-tuning, and better outcomes if you can close the feedback loop and evaluate how your FP&A system is working for you.
Here are four high-level metrics that you can use to measure the success of your FP&A efforts:
Much of planning and analytics is creating forecasts for where the company is going to be over various timescales, as this information then informs the decisions that are made along the way. While no one has a crystal ball and forecasts are always going to be imperfect, their accuracy is a leading indicator of whether your FP&A tools, processes, and workflows are delivering the value that they should be.
By comparing actual results to forecasted results, you can see how your system has performed in the past and identify room for improvement depending on the insights that you draw.
Timeliness of reporting
Timely reporting is essential for effective decision making and it’s a key output of any robust FP&A system. Therefore, you can look at whether you are hitting your reporting deadlines and whether key stakeholders are getting information proactively, and use this as a measure of how effective your FP&A tools are working.
Of course, there are human elements here that can skew these results, so you need to undertake this analysis carefully so that you can fairly evaluate the outcomes of your reporting functionality.
Return on investment
This one is much more difficult to calculate, but ideally your investments in strong FP&A solutions should show results for the profitability and long-term sustainability of your organisation. By trying to piece apart the direct influence that FP&A workflows have had on specific parts of your business, you can evaluate its success, but it can also inform bigger-picture strategic decisions that need to be made going forward. If you take this seriously you can determine the key value-adding factors in your system, so you can double down on those while cutting down on the aspects that don’t seem to be adding much tangible value.
Business partner satisfaction
One of the key promises of the modern FP&A paradigm is that it will align all your different divisions so that they’re pulling in the same direction. As a result, the qualitative satisfaction (or lack thereof) reported by different teams within your organisation reflects whether your FP&A system is achieving what it should be. Often, if you can uncover any discontent within how various stakeholders are engaging with the tools, you’ll find that there is room for improvements and optimisations that go a long way to maximising the value that is possible with FP&A.
These metrics are not a panacea by any stretch, but if measured consistently, they can provide insight into the performance of your FP&A system and point to specific areas that might need to be improved.
If you’d like to explore what this looks like for your business, be sure to get in touch with us today.