FP&A

Navigating Economic Volatility: Insights from CFOs

August 18, 2023 by Revelwood

In today’s dynamic business landscape, economic volatility has become an ever-present challenge, impacting organizations across industries. Chief Financial Officers (CFOs) play a critical role in steering their companies through these uncertain times. McKinsey & Company’s newest survey of CFOs sheds light on how financial leaders are adapting and strategizing in the face of economic headwinds.

The Reality of Volatility

The survey finds that economic volatility and inflation are the top concerns among CFOs, posing significant threats to company growth. In a world characterized by unpredictability, a staggering 57% of CFOs reported high volatility in their businesses’ performance, with little expectation of stability in the near future. The rise in inflation has added to the complexity, becoming the top-cited threat to growth, with 58% of CFOs expressing concern.

Adapting, Not Hunkering Down

Despite the challenges, CFOs are not passively weathering the storm. They are taking proactive steps to tackle the uncertainties. The survey reveals that finance leaders are adjusting their priorities, focusing on performance, productivity, and managing operational value drivers and key performance indicators (KPIs). CFOs recognize the need to be agile and responsive to changing circumstances.

Strategies for Managing Volatility

To manage the volatile economic environment, CFOs are adopting specific strategies. The survey shows that raising prices to ensure margins is a top approach, even though passing on higher costs poses difficulties. Furthermore, CFOs are reallocating investments across their organization’s portfolio and reducing exposure to fixed costs to enhance flexibility.

Operational Practices for Success

CFOs are also engaging in operational practices to navigate volatility successfully. They are increasing their own participation in business decision-making, making it a top priority. Additionally, CFOs recognize the importance of frequent cash flow analysis and short-term budgeting to stay on top of financial performance. By proactively managing these areas, CFOs can make informed decisions amidst the uncertain economic landscape.

Shifting Priorities for Finance Organizations

The survey reveals changes in finance organizations’ priorities for the next year. CFOs are now placing a greater focus on operational value drivers, KPI management, cash management, and capital structure. These areas are deemed vital to actively drive value for their companies. In contrast, other priorities, such as strategic planning and risk management, have decreased in importance, reflecting the need for adaptability in today’s volatile market.

Economic volatility remains an ongoing challenge for organizations, but CFOs are leading the charge with resilience and adaptability. By adjusting priorities, adopting proactive strategies, and focusing on operational practices, these financial leaders are guiding their companies through uncertain times and positioning them for success in the face of volatility.

More from our FP&A Done Right Series:

No, Artificial Intelligence Will Not Replace Finance Jobs

Annual Planning Versus Continuous Planning

Professional Services Firms Need Future-Ready Forecasting

Leveraging IBM Planning Analytics for xP&A

May 12, 2023 by Revelwood

This is a guest post from our partner IBM. In this post, Michael McGeein, program director and product management leader – IBM Planning Analytics, showcases how organizations use IBM Planning Analytics for Extended Planning and Analysis (xP&A).

Extended Planning and Analysis (xP&A), is not a new concept for IBM clients who use IBM Planning Analytics with Watson, formerly known as Cognos TM1. For the past several years, clients have embraced the need to tie operational decisions to the financial impact from both planning and analysis perspectives. For instance, a Director of Operations may want to increase production for the upcoming selling season, but they must first understand the impact on the business overall.

There are many operational considerations, from labor, staffing and production capacity — such as machinery and warehousing — to ensuring the business has the capital needed. All these factors need to be considered, and fortunately, IBM Planning Analytics with Watson has helped clients do this for years.

Financial and supply planning for a national blood service organization

A national blood service, and long-time Planning Analytics client, has started implementing a financial planning solution to better plan, forecast and analyze the cash flow needs and improve reporting to the leadership team and Board of Directors. Once the team fully understood the capabilities of Planning Analytics, they saw an opportunity to improve salary planning, a key part of the financial planning process.

From that, the HR team expanded the salary plan to include the components of staff planning, including hiring and attrition.

Another way the team used Planning Analytics was to plan for the supplies needed for the collection of blood from donors. They created a planning application that schedules nurses and technicians who collect specimens and accounts for the supplies needed, from orange juice, bottled water, and cookies to medical supplies like tourniquets, blood bags, type testing kits and more.

As this company can attest, extending beyond the core finance function to plan for people, activities, and other areas has been part of Planning Analytics for years.

Financial and HR planning for a television production company

Another great example of Planning Analytics in action is with a television production company that, like many clients, was initially focused on financial planning. After the team had their financial planning and forecasting running well, they turned their focus on how to better run their business. As a ‘job shop,’ where each TV program is a job, one area of focus was cost planning by job. The team created a job planning application, starting with staff planning as one of the largest cost components. Then they extended to include overhead and expense allocations, and eventually created a weekly Show Cost planning module to understand the contribution of each show to the overall production company’s results.

Supply chain planning for a global contract specialty manufacturer

A global contract specialty manufacturer, with deep expertise in manufacturing know-how, supply chain insights, and product design, uses Planning Analytics for nearly every ‘non supply chain’ use case in their organization. From financial analysis and reporting, forecasting, reserves reporting, aged accounts receivables, and treasury cash balance and forecasting to working capital, HQ allocations, local tax adjustments, and income tax in interim periods, all of these Planning Analytics solutions are integrated to ensure changes in one area, like cash forecasting, can be reflected in the overall working capital analysis.

No matter the industry, Planning Analytics is a continuous, integrated business planning solution that helps run some of the best companies in the world. Those who use IBM Planning Analytics with Watson understand the benefits of integrated planning that are not realized when doing ‘connected’ planning in spreadsheets or other traditional tools.

Are you interested in expanding your use of IBM Planning Analytics? Let us know – we can help!

This blog post was originally published on the IBM Journey to AI blog.

Modern Accounting: Streamlining the Month-End Close

October 13, 2022 by Revelwood

This is a guest post from our partner BlackLine, explaining how to streamline and optimize the month-end close procedss.

What Is the Month-End Close Process?

The month-end close process is the series of activities accounting teams must monitor, perform, and review, on a monthly basis, to produce timely, accurate, and complete financial statements and related reporting. While the most important closing period comes at the end of the financial year, most businesses use month-end procedures to accurately track performance—a monthly closing process as part of regular accounting ensures that the numbers are reliable, stable, and accurate.

Why Is Optimizing the Month-End Close Important?

Extra time spent on the month-end close means less time spent on adding value through analysis and business partnering. Optimizing the month-end close will get financial numbers into the hands of leadership sooner to assist with timely analyses and smarter decision-making. Other reasons to optimize include better discipline, more structure, improved controls, more visibility, and reduced risk.

Flowchart for Month-End Close Process

Here is a month-end close process flowchart to visualize some of the key steps and processes.

What Are Month-End Procedures?

While traditionally a lot of the heavy lifting is done during a few peak days, the month-end close process is ongoing throughout the month as transactions are recorded in various systems.

Before reporting, accounting must capture, review, and make adjustments to data from disparate sources, which often include a primary ERP, other ERPs, sub-ledgers, banks, point-of-sale systems, and many others. When results are solidified and reviewed, accounting then reports results to stakeholders including internal management, external shareholders, regulatory bodies, and others.

When accountants think about the month-end close, they’re likely referring to the activities in the middle of the figure above, like substantiating balance sheet accounts, reconciling transactions, recording recurring journal entries, analyzing variances, monitoring critical tasks and controls, and supporting audits. These are the processes that require the most effort. These activities are traditionally performed manually in spreadsheets and stored in difficult to access emails or on shared drives.

How Long Does a Month-End Close Take?

Each company is different, so it’s impossible to say how long your month-end close should take. Surveys and research over the years show the month-end process generally takes between 5-10 days.

However, over the past decade, with help from technology, the close has been getting faster. According to Ventana Research in 2019, “63% of participants indicated their organization completes its monthly close within six business days, up from 53% in 2014, with nearly half (46%) now closing within four business days (the previous rate was 29%).”

Accounting teams face a lot of pressure to close the books fast because executives use the previous month’s financials to make business decisions for the upcoming months and quarters. Ventana Research notes, “Closing faster has value: 62% of those that close within six days say that the information they provide is timely, while only 39% of those that take longer say that.”

However, closing faster can mean a tradeoff between speed and accuracy. For example, using estimates rather than actuals can shave hours or days off your close, but that means your numbers may not be exact, and when it’s time to close the fiscal year, the actuals will still need to be determined. This may end up adding days to your year-end close.

What Are the Steps in the Closing Process?

Again, because all companies are different, there is no perfect month-end close checklist. For example, businesses that sell physical products will have the extra steps of tracking inventory while companies that are service-focused will not. Smaller companies may have fewer accounts while multinationals will have hundreds or thousands. But there are some key items most accounting teams will need and steps they’ll need to follow.

Some of the information accounting teams need to have on hand in order to close the monthly books:

Total revenue numbers
Bank account information
Inventory levels (if applicable)
Petty cash total
Financial statements
Balance sheets
Total fixed assets
Income and expense accounts
General ledger

Common steps in closing the month-end books:

Record all incoming cash and accounts receivable
Review expenses and accounts payable records
Reconcile accounts
Review fixed assets
Inventory count (if necessary)
Collect and review financial documents
Prepare financial statements
Review all information for accuracy

Best Practices for a Month-End Close Process

When thinking about best practices for the month-end close, you may want to ask yourself these three questions about your month-end close process:

1. Do I have sufficient visibility into the entire month-end close process?

2. Have we done all we can to mitigate risk?

3. Am I paying highly trained professionals to perform remedial tasks?

If you identify challenges based on those questions, you may want to implement some of these month-end close best practices.

Conduct Pre- and Post-close Team Meetings

During pre-close meetings, the team should discuss follow-up items from the previous month’s post-close meeting and determine the current month’s close schedule and timeline. This way everyone is clear on responsibilities and deadlines. You should also determine what staff should do if they run into barriers and how they should communicate any bottlenecks.

In post-close meetings, discuss what worked and what didn’t, and review assigned roles and responsibilities for the next month. Review any lessons learned, any variances or abnormalities, and entertain any proposed changes to the process.

Manage your Time, be Organized, and Communicate Efficiently

Understanding deadlines and schedules is critical so you can work toward an ideal close date. Being organized will help you stay on track. In addition, accountants must begin to cultivate strong written communication skills with the ability to think critically. They will also need strong oral communication skill and the ability to convey pertinent financial information to executive teams and stakeholders.

Build Relationships

Exceptional accountants know how to manage numbers and people. That requires cultivating a broader range of relationship skills today, such as how to work in a team and how to engage with other departments. If other departments are aware of what you are doing and what you’ll need for each month-end in advance, they may be more willing to contribute the financial data you need on time.

Take Advantage of Automation

Refocus your teams on analysis by replacing repetitive, spreadsheet-heavy work with leading-practice automation. Centralize data and close activities, automate journal entries and reconciliations, strengthen controls, and enhance visibility.

Common Challenges in a Month-End Close Process

Some challenges finance and accounting teams encounter when performing a manual close process include:

Team members don’t know what needs to be done and/or what is already completed
Inaccurate or incomplete data
Lack of standardization
Processes that are not clearly defined
Discrepancies between numbers
Delayed reconciliations due to errors, adjustments, and reclassifications
Lack of real-time data that results in little or no visibility and transparency

These challenges during the month-end close are likely why nearly 70% of CAOs recognize a need to change. The month-end close process relies on many people, technology, processes, and other inputs. As a result, accounting organizations are challenged by inconsistent data and processes and a lack of standardization across the enterprise—all while depending on spreadsheets, emails, phone calls, and in-person meetings to bring it all together.

As business leaders look for accounting to provide more real time insights, and while regulatory environments are increasingly complex, it becomes even more difficult for accounting to do it all on time without compromising compliance or control. Traditional manual accounting processes are simply not sustainable.

Transitioning away from manual workflows will give you access to one of the most efficient tools you’ll ever use: accounting automation.

How Financial Close Automation Technology Improves the Closing Process

In order to optimize the month-end close process, companies should embrace technology and innovation that enables transformation. Integrated solutions that address more than one aspect of the close process, and in particular, cloud solutions, are helping companies make the move to modern accounting—bit by bit. Let’s take a closer look at how automation technology improves the financial close process.

While there’s no one size fits all approach, many successful accounting organizations begin their optimization journey with close management by unifying data and processes and driving better accountability through visibility. Technology can be used to capture all tasks and embed workflow and segregation of duties. Leading solutions also help centralize supporting documents and provide dashboards for reporting on status and KPI’s.

Optimizing balance sheet substantiation and high-volume reconciliation processes is a natural next step, as preparing, reviewing, and retaining account reconciliations is a common pain point for accounting, and valuable resources spend a disproportionate amount of time on repetitive tasks like ticking and tying.

Technology not only standardizes account reconciliations using templates but improves continuity by embedding policies and procedures, reduces risk by importing general ledger account balances and other data directly from source systems, and drives efficiency by automating matching activities and up to 80% of certifications.

Another way to optimize the financial close is by addressing the journal entry process. Many organizations record hundreds, if not thousands of journal entries each month. Technology not only centralizes the journal entry process with workflow and integration to related balance sheet reconciliations but automates the creation, posting, and certification of a significant portion of a company’s entries. Harmonizing the process and supporting documentation in the cloud not only saves time during the close but also reduces audit testing and preparation.

Finally, intercompany accounting and governance is another area ripe for transformation, as it poses numerous challenges for accounting with complex regulatory requirements and cross-functional dependencies involving legal, tax, and other stakeholders. Accounting can use technology to proactively govern their intercompany process from transaction initiation through netting and settlement. End-to-end intercompany solutions facilitate the process with defined workflows, embedded controls, and automation.

This blog post was originally published on the BlackLine blog.

FP&A Done Right: Finance’s Role in ESG Reporting

August 12, 2022 by Revelwood

ESG (environmental, social, governance) reporting is a growing market. According to McKinsey, “ESG issues represent critical challenges for both boards and executive teams.” One question companies are facing is “who is responsible for ESG reporting?”

Some companies have – or will have – a Chief Sustainability Officer (CSO). Nike, Mastercard, P&G, Nissan and others have CSOs. As companies develop their ESG strategies, they need to find a “home” for ESG reporting. That “home” is often in the Office of Finance.

According to the CFO of a software company, “Sustainability is now a key consideration for the finance function. Sustainability work requires alignment with financial priorities such as ESG reporting, investor relations, capital management, carbon accounting, impact measurement, corporate development and even product development.”

Picture this: embedding sustainability metrics into the finance department. This approach brings the discipline and structure of financial management and reporting to those sustainability metrics. Companies can set key performance indicators (KPIs) for ESG scorecards, create ESG dashboards and more.

This approach makes a lot of sense. CFOs have a broad skill set. CFOs are experts at measuring, analyzing and reporting data. They understand the need to have a “single source of the truth,” accurate numbers, automation to reduce manual errors and the need for auditability and transparency.

More importantly, the SEC has proposed regulations that would require public companies to disclose extensive ESG information in SEC filings. CFOs, along with CEOs, will have to certify the accuracy of the data in the filing. This means that public companies will need to address ESG reporting with the same discipline they have with financial data. It needs to be accurate, complete and auditable.

According to EY, “There is increased pressure on corporates to improve their ESG reporting – from equity investors, insurers, lenders, bondholders and asset managers, as well as customers who all want more detail on ESG factors to assess the full impact of their decisions. Finance leaders should move quickly to meet stakeholders’ expectations and articulate a unique narrative of how they create long-term value.”

EY also states that enhanced ESG reporting is an opportunity for CFOs to “build the advanced analytics capability to extract insights from data and reboot the approach to FP&A to create more agile scenario planning capabilities.”

If you are a CFO of a public company, now is the time to develop an ESG reporting strategy.

Modern Accounting: Achieving Finance Transformation

May 26, 2022 by Revelwood Leave a Comment

This is a guest blog post from our partner BlackLine, explaining four essential steps for transformation success.

Making the Move to F&A Digital Transformation

For controllers, CFOs, CTOs, and business leaders in general, planning a move to digital finance transformation can be daunting—and it can raise some serious concerns. What if, for example, the transformation causes more problems than it solves in the intermediate term? What if it adds interim state technical complexities to an already challenging ecosystem further challenging the partnership between finance and IT?

Mike Polaha, BlackLine senior vice president finance solutions and technology, has seen these and other issues arise in his time working with global organizations. Digital transformation has been proven to deliver significant benefits, he notes, but the keys to success are in the preparation and being smart with the ways you organize and sequence the strategy and work plans.

4 Steps to Finance Transformation While Avoiding Common Pitfalls

Base Your Strategy on Diagnostics

Your strategy and corresponding business case should have a clear goal, and that goal should be informed by benchmarks of similar companies in the affected finance processes.

“You don’t want your strategy to be informed by hunches,” says Polaha. Instead, it’s good to use an outside consulting group—the Hackett Group, for example, or some other company with a benchmarking service—to see where you currently stand, then focus your strategy to gain the greatest competitive advantage at maximum efficiency.

Benchmarking can also be critical in selling the transformation to executive management.

“It can help you show executive leaders how, by making certain investments, you can not only improve your cost to serve, but likewise how the service can be differentiated in what it can now provide,” he says. “You’re more finitely tethering the functional investment to the overall business strategies.”

Adopt a Leading-Practice Orientation

Polaha notes, “every company is unique, of course, but all companies share certain fundamental characteristics. Once a company realizes this, it’s able to benefit by looking at, and emulating, industry leading practices.”

Here is where a relationship with a top-end system integrator like Deloitte or EY can pay dividends.

“These companies have lots of experience with finance transformation,” he says. “They can show you a well-documented way of adopting best-practice processes for your specific areas of concentration.

“Also, BlackLine can help implement leading practice solutions based on our own experiences with customer installations and our regular participation in customer advisory boards. In essence, our application is crowdsourced by enabling best practice inherent in the composition of our solution design.”

Admit You’re Not a Software Company & Embrace the Cloud

According to Polaha, “too many companies think that they can develop their own applications. The problem is they first have to build the applications, and then they have to maintain and upgrade them. Then typically at some point they start to fall behind and can’t catch up.”

An example is one company that tried to upgrade their intercompany reconciliations by customizing their ERP software. “It then became very difficult, and costly, for them to implement vendor upgrades without the fear of breaking everything they’d developed.”

Using the cloud can help speed application deployments and allow companies to digitize rapidly at scale. The company also avails itself to a future proof architecture by allowing the SaaS provider to continually embed the latest evolutions in process and solution capability.

Polaha notes, “there are times when companies have too many applications with significant overlap. It’s better to partner with fewer vendors that can use the cloud to cover multiple applications.

“If you’re using one finance vendor for account reconciliations and another to do cash application for accounts receivable, it’s much more efficient to give those jobs to a single, cloud-based vendor to simplify the overall technological and contractual footprint.”

Harmonize Finance Data with the Enterprise

Here’s where finance can be an evangelist and a valuable partner to IT.

Data analytics are growing in popularity as a tool for business planning, but Polaha notes that analytics are only effective when they’re based on data that’s harmonized—unified—so that all data uses common, standardized naming and formatting conventions.

As an example, today’s finance groups are making increasing use of analytics-driven rolling forecasts that produce continuous predictions based on the previous time period’s data. Rolling forecasts can be very effective planning tools, says Polaha, but only if they are based on harmonized data.

“The problem is that without harmonized data, some people will be basing their planning instances on their unique views of the data. So, you end up with 50 instances of planning and forecasting software, and you can’t put Humpy Dumpty back together again.”

Once finance has harmonized its own data, it can then become an evangelist for data harmonization across the enterprise.

“Finance can then present a common view of finance data to IT,” says Polaha. “IT can use that for further harmonizing their own data and applications,” he says.

“That’s the ultimate prize for transformation, isn’t it? To get finance, IT, and the entire enterprise moving smoothly into a digital future.”

FP&A Done Right: ESG Reporting Tools

May 6, 2022 by Revelwood Leave a Comment

There is a wide range of reasons why ESG (environmental, social, governance) reporting is an exploding market. One reason is that consumers care about ESG. PwC’s 2021 Consumer Intelligence Series survey reports that 91% of business leaders believe their company has a responsibility to act on ESG issues. Another is that the SEC is proposing rules that require SEC-registered companies to include “certain climate-related disclosures in their registration statements and periodic reports, including information about climate-related risks that are reasonably likely to have a material impact on their business.”

As such, the industry is expecting a standardization around ESG accounting – most likely coming this year.

What is ESG?

Gartner defines ESG as: “a collection of corporate performance evaluation criteria that assess the robustness of a company’s governance mechanisms and its ability to effectively manage its environmental and social impacts. Examples of ESG data include the quantification of a company’s carbon emissions, water consumption or customer privacy breaches. Institutional investors, stock exchanges and boards increasingly use sustainability and social responsibility disclosure information to explore the relationship between a company’s management of ESG risk factors and its business performance.”

According to one study from Harvard University, “Throughout 2021, the importance of environmental, social and governance matters proved to be even greater than expected, with ESG becoming a key area of focus for a range of stakeholders, particularly in the board room.”

When you take all these data points together, you can safely conclude that many companies, not just public companies, will soon be tracking, measuring and reporting on ESG factors.

The ESG Market

One can look at the ESG market in several ways:

How much companies are investing in ESG practices
How much VCs and other sources of funding are investing in ESG reporting
How many established software vendors are easily adapting existing reporting solutions for ESG reporting

Earlier this spring Deloitte announced a $1 billion investment to expand its Sustainability & Climate practice. The practice “supports the firm’s clients in defining their strategies, embedding sustainability into their operations, meeting tax, disclosure and regulatory requirements, and accelerating their organizational and value chain transformation … [it] will span the firm’s advisory, assurance, audit, consulting, finance and tax services.

The global investor ESG software market is projected to expand at a CAGR of 15.8%, as a result of the emergence of new technologies, approaches, and players with a renewed focus on ESG integration driven by data. The market report cites a “growing emphasis on high quality, verifiable, and consistent data.”

The market is seeking software that provides KPIs, reporting platforms and other solutions that make it easier to collect, measure, analyze and report on ESG initiatives and programs.

Highlighting Select ESG Solutions

There are clear drivers indicating more and more US-based companies will be evaluating ESG software options. Other regions, such as Europe, are ahead of the US in this aspect. Take note – just because you haven’t heard of ESG implementations in the US yet, you will soon. It’s not a matter of if, but when.

Revelwood is not in the software space. We deliver solutions for the Office of Finance. The Office of Finance will be taking the lead on ESG software. We are here to help.

Over the next few months, we’ll take a look at the role of Finance in ESG and will highlight how our partners, IBM, Workday Adaptive Planning, BlackLine and more are approaching ESG. Stay tuned for blog posts on these partners!

FP&A Done Right: The Value of Scenario Planning

September 17, 2021 by Revelwood Leave a Comment

This is a guest blog post from our partner Workday Adaptive Planning, highlighting the value of scenario planning in modern finance.

Considering all that’s happened over the last year, the case for robust scenario planning has rarely been stronger. Scenario planning—the practice of establishing strategies for variables (possible futures) in key business factors—helps organizations thrive amid uncertainty. To put it simply, scenario planning arms finance with the ability to incorporate responses as changes happen.

Without the ability to adjust revenue and expense assumptions over time, model multiple scenarios simultaneously, or see the impacts of new markets, staffing changes, or regulations, companies won’t have the ability to weather whatever comes next—much less respond to changes in real time.

In a recent webinar by the Associatio n for Financial Professionals, two panelists explored the value of scenario planning and management in modern finance.

“COVID-19 has been described as being the great accelerator and really has forced all of us to do some sort of scenario or contingency planning over the last year,” said Jack Alexander, a former CFO turned adviser, author, and coach. “And my hope is that finance and operating executives will utilize scenario planning broadly in the future and integrate those more into the key planning and management activities.”

Alexander described working with a client pre-pandemic that was facing two major uncertainties. “In this case, the company was unsure whether the economy would continue to expand or contract, and they also had a significant contract that was up for recompete. So they had basically four possible scenarios on a two-by-two matrix combining those two uncertainties,” he said. “And then I also encourage the development of a black swan scenario too—low-probability, high-impact events—and that sort of covers things including what happened with COVID.”

Kinnari Desai, vice president and head of corporate finance at Workday, described a multistep process for accelerating the scenario planning process.

Align leaders’ top priorities

First, organizations need to identify their top two or three priorities. “This could be top-line growth, margins, or cash flow, but it’s very important to be clear on those upfront,” Desai said. “We get perspectives from our executive team and align with them on what is important.”

It’s also critical to understand what is top of mind for business leaders, whether they’re in sales, services, G&A, technology, or other departments. “We need to ensure we have scenarios that are relevant cross-functionally and not only within finance,” she said. “This really helps us incorporate multiple perspectives and inputs into what is important, and we know where that knowledge belongs.”

Alexander echoed Desai’s process of speaking to the C-suite to understand competitive threats, market forces, and developing factors, as well as key personnel who have a view of such areas as critical raw materials and supply chains. “So it really has to be a broad participation across all functions,” he said.

Identify key drivers of sustained value creation

Another key step is to perform analyses to pinpoint the relevance of important factors and focus on the ones that matter. “How much could they influence the outcome? We also get an understanding of which variables and outcomes can be controlled in a short timespan versus ones that will take longer to pivot,” Desai said. “We do not try to optimize every variable but just focus on the ones that matter incrementally, and then we bring them all together in our scenarios.”

Bring in external data where relevant

Finance should develop a perspective that is informed by outside data. “It could be from industry, our peers, customers, economic data,” Desai said. “And at Workday, we use our software called Workday Prism Analytics, and that helps us marry this external data to our internal data, which informs our scenarios.”

Evaluate the frequency of scenario planning and adjust accordingly

“Not all variables, as we know, change on a similar cadence. Some need weekly attention, some monthly, or some even daily,” she said. “And our finance organization combines this power of scenario planning and continuous planning, which allows us to move in an agile fashion.”

Desai added that while there are many variables that impact the business, not all of them have a material impact. For her team, the top six variables garnered most of their attention. “And then we spent all our time understanding how they were going to shift,” she said. “Now, no one has a crystal ball, but the best we could do was to determine how those six variables would move. And those were the big rocks for us that were going to change our outcomes, not the 15 others.”

Three elements to enable agility

Alexander’s approach emphasizes three elements: vision, recognition, and response—all of which are aided by scenario planning and lead to better business agility.

“Even in terms of the vision, it helps because you’re going to be identifying critical assumptions, and you’re going to consider alternative outcomes other than the primary plan,” he said. “And if you combine that with business intelligence, external outlooks, a focus on customers and competitors, that really helps.”

As a year of uncertainty has shown, organizations better able to adapt to rapidly changing environments are often more optimally positioned to withstand crises or uncertainty. In order to build organizational resiliency, scenario planning performed correctly can help the enterprise identify its key business factors, take into account critical cross-functional needs, and create the agility necessary not only to survive, but to succeed.

This blog post was originally published on the Workday Adaptive Planning blog.

FP&A Done Right: Overcoming Obstacles to Collaboration in the Office of Finance

August 6, 2021 by Revelwood Leave a Comment

This is a guest blog post from our partner Workday Adaptive Planning, highlighting how to better improve collaboration in the Office of Finance.

As the role of CFO continues to become more strategic and collaborative, CFOs are expecting their teams to follow suit. As such, many finance leaders are requiring their teams to broaden their understanding of other functions and pushing them to communicate and collaborate more effectively, both internally and externally. According to our studies, collaborative work now consumes a significant portion of the finance team’s week.

The limitations of legacy tech

One of the primary obstacles to better collaboration is outdated technology. With many finance departments still relying on email and spreadsheets to drive their reporting process, collaboration is a time-consuming, frustrating task.

Think about this common scenario: A report identifies a variance and is emailed out to multiple stakeholders for review. This triggers a massive email chain of variance queries, change requests, and edits. Soon you have multiple versions of the spreadsheet existing on different computers. Which one is the right one? And if it’s not saved on the server, who can access it?

Of course, the other issue is accuracy. How does anyone know whether the numbers in the spreadsheet are correct in the first place? Manual-driven processes are susceptible to errors like entering data in the wrong cell, messing up a formula, or adding an extra digit by mistake. As stakeholders copy and paste information into spreadsheets and email them along, you lose the ability to easily track who is entering data or verify where that data originally came from.

The role of nonfinance managers in financial reporting

When some finance departments talk about collaboration, they think about ways of making it easier to collaborate within the department. While that’s important, true collaboration means making it just as easy for nonfinance managers to be able to access and make changes to a report.

Going back to spreadsheets, often the finance department works to get the report perfect before sending it off to an operational manager for review. If the operational manager adds a last-minute update, it can require a massive amount of work to incorporate, review, and verify.

While accurate data is obviously the top priority, something else to consider when collaborating with nonfinance managers is data visualization. Even after you have all the numbers together in a report, a spreadsheet can be difficult to interpret and understand. A report is only as good as the action your team can take from it; to improve collaboration, you must improve both access and understanding of the data.

The 3 steps to making reporting collaborative

If you wish to make your reporting a more collaborative process, here are three keys to keep in mind:

Step 1. Access
Instead of static spreadsheets and email, it’s critical to move your reporting process to the cloud using smart financial reporting software like Workday Adaptive Planning. Because it’s accessible through the web, all your stakeholders can work from the same set of numbers at the same time without confusion or delay. And since you can control and track at the user level who has access and who enters data, you can greatly increase transparency and accountability throughout the reporting process.

Step 2. Ownership
In addition, Workday Adaptive Planning can automatically import data from both your financial and nonfinancial systems. This not only saves time and reduces errors, but it also takes all your data out of departmental silos and brings it together to give your entire company a single source of truth to work from.

Step 3. Understanding
Once you’ve automated data collection, you can focus on delivering insights. Workday Adaptive Planning lets you easily distribute board reports, slice and dice management and financial reports for specific departments, and drill down into the details. Because it’s connected to all your systems, you can also easily create real-time, visually appealing dashboards that give nonfinancial managers instant insight into their department’s performance.

Collaboration is integral to today’s finance initiatives

The marriage of traditional accounting and analytic skills with interpersonal communication and collaboration skills reflects the changing face of today’s finance team and leaders. Data alone is not valuable to today’s organizations. But the ability to aggregate, align, and interpret company-wide data that guides corporate performance continues to separate the traditional from the modern CFO.

This blog post was originally published on the Workday Adaptive Planning blog.

IBM Planning Analytics Tips & Tricks: Depreciation

July 27, 2021 by Lee Lazarow Leave a Comment

P&L planning models consist of a variety of inputs, including revenue planning and various forms of expense planning. In addition to these standards, we are often asked to develop other planning components. One of these components entails a depreciation process, which leads to the question: what is depreciation?

Depreciation is defined as “a reduction in the value of an asset due to wear and tear or obsolescence.” In business terms, this typically entails a calculation to determine your current asset’s value.

There are various methods to calculate depreciation, all of which are taught in an Accounting 101 class. Most organizations, however, use a simple approach called “straight line” that spreads the reduction evenly over the course of a pre-defined asset life.

There are typically four components to a depreciation process:

Asset value – the original cost of the asset
Asset life – how long will it take for the asset to stop reducing its value
Salvage value – the amount you expect the asset to be worth at the end of the asset’s life (e.g., a resale value)
In service date – the time that you begin depreciating the asset, which is not always the same time as the purchase date

The calculation is relatively simple: subtract the salvage value from the asset value to determine the amount to be depreciated, then divide that amount by the asset life. Remember to ensure that the asset life uses the same level of time periods as your model … months, quarters, or years.

Once the depreciation calculation is performed you can easily view the original asset amount, the total allocated amount, and the current asset value. Want to learn more about depreciation details or recommended best practices? Contact us and we’ll help you.

IBM Planning Analytics, powered by TM1, is full of new features and functionality. Need advice? Our team here at Revelwood can help. Contact us for more information at info@revelwood.com. We post new Planning Analytics Tips & Tricks weekly in our Knowledge Center and in newsletters.