FP&A ensures that businesses are utilizing their resources with the utmost capacity for growth – it is crucial to company strategy, execution, and performance. Your data has the power to improve budgeting, forecasting, reporting, and enable smarter decision-making. So, how do you make sure you’re milking the most out of your data? You follow these Ten FP&A Best Practices for Data Analytics:
Single Source Of Truth
As businesses increasingly rely on data to inform their decision-making, it is more important than ever to have efficient processes for gathering, cleansing, consolidating, and aggregating data. Having a single source of truth for all data is critical for maintaining governance and control over the data and ensuring compliance with regulations is our first FP&A best practice.
One of the challenges with collecting data is the data is stored in Excel. Extracting this data from excel can be time-consuming and error-prone, so it is essential to have a system that can efficiently collect data stored in Excel.
There are many ways to consolidate and aggregate data from Excel. One standard method is to use Pivot Tables. Pivot Tables allow you to quickly summarize large data sets by grouping them into categories. You can then create charts and graphs based on the summarized data.
Another popular method is to use the SUMIF function. This function allows you to sum data based on given criteria. For example, you could use the SUMIF function to total all sales made in a particular region. There are many other ways to consolidate and aggregate data from Excel, but Pivot Tables and the SUMIF function are two of the most commonly used methods.
Having clean data will help FP&A make more accurate forecasts, identify trends, and make sound recommendations to decision-makers. In the end, having an efficient process for gathering and consolidating data will save time and resources and help the company make better decisions about the future.
Commit to continuous monitoring and improvement
One of the essential roles of FP&A is to help an organization make informed decisions about where to allocate its resources. FP&A must have access to accurate, up-to-date data to do this effectively. This data can only be collected through continuous monitoring and improving business processes, and this is our next FP&A best practice.
By committing to continuous monitoring and improvement, FP&A can ensure that it uses the most efficient and effective methods possible to support decision-making within an organization. This, in turn, allows the organization to operate more efficiently and effectively.
Measure The Drivers Of Success
The drivers of success are the factors that have the most significant impact on an organization’s ability to achieve its strategic objectives. Developing measures for the drivers of success is our next FP&A best practice, and it can ensure resources are allocated to the areas that will significantly impact the bottom line. Measures for success drivers can help identify potential risk areas and allow for proactive mitigation strategies.
Ultimately, developing measures for the drivers of success is essential to ensuring that an organization’s FP&A implementation is successful.
Get the right people involved
Another FP&A best practice is betting the right team in place. FP&A covers various activities, from forecasting and budgeting to analyzing data and providing decision support. As such, it requires a diverse set of skills and knowledge.
FP&A must also align with the overall strategy of the organization. As a result, the FP&A team must be able to work closely with other departments, such as marketing and sales, to ensure that everyone is on the same page. By getting the right people involved from the start, organizations can set themselves up for FP&A success.
Move From Annual To Agile And Continuous Business Planning
In today’s business environment, annual planning cycles aren’t enough anymore, and companies need to be able to adapt quickly to changes in the market. Adaptability requires a different approach to planning and budgeting, one that is more agile and continuous. Moving from agile to continuous planning is our next FP&A best practice.
Agile planning is all about being able to respond quickly to change. Rather than setting rigid plans that may no longer be relevant a few months down the line, agile planners are always ready to adjust their course. Agility helps to ensure that resources are constantly being used in the most effective way possible.
Continuous planning takes this one step further by ensuring that there is always a plan for how the business will move forward. Continuous planning means there is no need to wait for an annual planning cycle to make decisions – instead, plans can be updated on an ongoing basis as new information arises.
Both of these approaches are essential for FP&A success. By moving away from annual planning cycles, companies can become more adaptive and responsive to change, leading to better decision-making and improved financial performance.
Take a phased approach.
A business seeking agility needs solid financial planning and analysis (FP&A) to achieve its goal. That’s because FP&A provides the data and insights that help organizations make informed decisions about allocating resources.
Making the transition to an agile FP&A function can be challenging. To better position the organization to work through these challenges, we recommend taking a phased approach as our next FP&A best practice. By first implementing data analytics to support FP&A, organizations can better understand their financial data and how to use it to inform decision-making. With this foundation in place, they can move towards an agile FP&A function that can rapidly adapt to changing business environments.
Taking a phased approach will help organizations make the most of their investment in data analytics and achieve their goal of becoming more agile.
Integrate Operations, Business, and Strategic Planning
The enterprise landscape is constantly evolving, and to be successful, businesses need to be able to adapt quickly. This is where financial planning and analysis, and our next FP&A best practice comes in. FP&A provides the insights and data that businesses need to make informed decisions about where to allocate resources. However, to be truly effective, FP&A must be integrated with operations, business, and strategic planning.
Operations planning ensures that the day-to-day operations of the business are aligned with its strategic goals. Business planning sets the direction for the enterprise as a whole, and ensures that all functions are working towards common objectives. And finally, strategic planning looks at the big picture and ensures that the business is positioned for long-term success. By integrating FP&A with these other key functions, businesses can make sure that they have the information they need to make decisions that will help them achieve their goals.
USE AI & ML to Support Data Analytics
Any financial professional worth their salt knows that data is essential when it comes to making informed decisions. But in today’s increasingly complex and ever-changing marketplace, simply relying on data from the past is no longer enough. To stay ahead of the competition, enterprises need to support data analytics with artificial intelligence (AI) and machine learning (ML) to gain insights into the future, which is an FP&A best practice.
With AI and ML, enterprises can take advantage of large amounts of data to identify patterns and trends that would be impossible to see with the naked eye. For example, AI can be used to predict customer behavior, while ML can be used to forecast demand for a particular product or service. By harnessing the power of these technologies, enterprises can gain a significant competitive advantage. AI and ML for FP&A can also help businesses save time and money by automating routine tasks such as data collection and analysis.
Enterprises need to support data analytics with AI and ML to be successful with FP&A. Doing so will give them a leg up on the competition, help them make better decisions about the future, and save them time and money.
Embrace Scenario Planning
Scenario planning is not new, and we hesitated to put it in our list of ten FP&A best practices. Still, scenario planning is an essential tool for effective FP&A. By considering a range of potential future outcomes, FP&A professionals can be better prepared to make decisions in the face of uncertainty.
Scenario planning also helps organizations identify and mitigate risks and capitalize on opportunities. In today’s volatile business environment, scenario planning has become increasingly important, and those organizations that embrace it are more likely to be successful.
Link Financial Goals To Incentives
Incentives are crucial to success in any business area, so linking them to FP&A is our final FP&A best practice. After all, financial goals are often some of the most important goals that a company can set. If these goals are not linked to incentives, achieving them can be very difficult.
There are a few reasons why incentives are so important when it comes to financial goals. First, they provide motivation, and employees will likely work harder when they know there is a reward for meeting or exceeding financial goals.
Incentives also help to focus attention on the right things. If employees know meeting specific financial targets will earn a reward, they will focus their efforts on those areas.
Finally, incentives help ensure everyone is working towards the same goal. When everyone knows something is at stake, they are more likely to work together towards a common goal.
Incentives are an essential part of any FP&A strategy because they help ensure financial goals are achieved.
Conclusion
These ten FP&A best practices for data analytics help establish guidelines that you can customize and align to your strategic objectives. Financial planning, budgeting, and forecasting can be made easier and more accurate by implementing these baseline standards to fulfill the potential of your data. The key takeaways are to build a single source of truth, have a [continuous and adaptable] plan, innovate to stay ahead of competition, measure your progress, but practice flexibility, and keep your eyes on the prize.
Related Resources:
https://www.ibm.com/topics/financial-planning-analysis
https://www.cfodive.com/news/how-fpa-evolved-into-a-top-finance-function/617523/
