Revelwood

Your SUPER-powered WP Engine Site

modern FP&A

Modern Accounting: Achieving Finance Transformation

by 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.”

Home » modern FP&A

FP&A Done Right: Volatile Business Conditions Require Agile Planning

by Leave a Comment

This is a guest blog post from our partner Workday Adaptive Planning, explaining how to lay the groundwork for business agility.

Manual, spreadsheet-based planning may have worked well enough in a more predictable age. But today? Not so much. Volatile conditions demand a smarter approach to financial planning and analysis (FP&A), and more and more finance professionals are discovering that legacy planning processes don’t let you go there.

It’s not that spreadsheets aren’t great—we love them. But, let’s face it, spreadsheets break down if you’re trying to rely on them systematically to gather data from across the organization, roll up departmental plans, or do complex, collaborative planning.

Even traditional market forces have proven challenging to companies relying on old-world technologies and approaches. Technological advances, ever-increasing customer expectations, and smarter, data-driven decision-making put pressure on finance teams to find new ways to operate with agility.

But how do you plan in a way that allows you to respond to such events, from the predictable to the unlikely?

The answer begins—and ends—with a modern approach to planning.

Why old-world planning is a disadvantage

The traditional planning models finance teams relied on for decades aren’t just a questionable choice in times of disruption—they can leave your business at a grave disadvantage. Businesses hampered by outdated planning processes are often left scrambling to react to changes while more agile competitors outpace, outperform, and outmaneuver them. Look around you: The companies that are performing well at this minute have pivoted—sometimes substantially—in a matter of weeks, sometimes days. Their business agility has become their defining attribute for success.

It’s safe to conclude that many of these agile businesses aren’t weighed down by manual, episodic, and siloed planning. Rather, they’ve likely embraced a more modern approach to planning—planning that’s collaborative, comprehensive, and continuous. These businesses consistently minimize risk, maximize performance, and create competitive advantages because their planning empowers greater business agility.

The difference between static and modern planning can be stark. Legacy planning tools are typically bogged down by versioning headaches and siloed, instantly perishable data. In contrast, modern, strategic planning models allow teams to broaden planning data beyond finance, pulling in real-time operational and transactional data fromERP,HCM, and other slices of the enterprise stack—all to make better, data-driven decisions quickly.

Laying the groundwork for business agility

As many companies recognized even before the current crisis, agility is a business imperative—and this more modern approach to planning is the key to achieving it. These three milestones will get you started on your journey to achieving a new way to plan.

1. Assess the status quo

Before you map out where you’re going, you need to understand where you are. Take inventory of the current state of your company, more specifically the business planning obstacles keeping you from implementing a more modern and streamlined planning environment. More than likely, these obstacles will pertain to people, processes, or technology, or some combination thereof.

Assessing where you are means getting granular.

  • What do your current business planning processes look like?
  • How long does it take you to create a budget? A forecast? An annual plan?
  • Where are opportunities for improvement?
  • Who are your planning stakeholders?
  • What technology do you have in place, and how well is it serving you?
  • What data challenges need attention?
  • What are the bottlenecks?
  • What could be automated that isn’t?
  • Are there any opportunities for automated data integration?
  • What are you lacking in workforce planning?

Answering questions like these will help you get a clear sense of what you’re working with and where you can improve.

2. Get organizational alignment

Being a change agent is no easy task. That’s why you’ll need to recruit a savvy senior-level advocate to help champion planning as a worthy and necessary cause. Along with your senior advisor, you’ll need a task force representative of other departments outside of finance, including operations, sales, and HR. Don’t forget to include IT to help you navigate technology needs and coordinate various data sources.

The next move is to align these key people with the business agility cause you’re championing.

How? Build a business case.

You can do this by quantifying the impact that the organization’s current status quo has on the company. What are manual processes and bottlenecks costing your business in time and money? What opportunities are passing you by? Conversely, what would those measurement strategies and KPI models look like if you implemented a modern, or active planning model? Try to unearth more nuanced ROI measures—for instance, how cutting budget time in half could give your people more time to run critical what-if scenarios—to really drive home the meaningful change that a modern agility planning model would bring.

Once your team is in place and your pain points recognized and quantified, you can map out a plan for your initial project. Consider focusing your initial effort on a function within finance so you’ll have control over the rollout. Develop a multi-phased plan that clearly communicates goals, a concise and actionable plan, and the key metrics for your KPI model. The ability to effectively communicate the why behind this initiative will help secure any executive buy-in you need for the how. A comprehensive and well-thought-out plan will go a long way toward achieving that.

3. Expand across the business

As noted above, there’s a strong case for beginning the rollout of your new planning model in finance and focusing on low-hanging fruit to bring early and easy wins. You’re motoring along, mapping projects, tracking and communicating progress, analyzing KPI reports, and making necessary tweaks. Once a rhythm and familiarity are in place, broaden your scope beyond finance. Initiate planning projects that engage HR, sales, or marketing. This is where you begin to extend the use and impact of modern, company-wide planning.

The key in this phase is to strengthen cross-departmental communication and collaboration. Don’t fall into the trap of relying on your technology or tools to do the heavy lifting. It will be easier to realize and maintain success with regular stakeholder one-on-ones, identifying lessons learned along the way, uncovering opportunities for more ingenuity and improvement, and communicating success and congratulations when they’re warranted.

Doing this will help elevate the role of finance to a strategic force within your organization by orchestrating planning throughout the business. Finance will no longer be known primarily for gathering budget numbers and issuing reports. Instead, your business will look to finance to drive the change and innovation needed to not only weather times of uncertainty, but to thrive in them.

These three pillars lay the groundwork for creating a more agile planning environment—one that will help you plan for what’s coming, whatever that may be. With this foundation and the insights we’ll share in subsequent blogs, you’ll be much better equipped to map your way forward into that tomorrow.

The bottom line

It’s never been easier to define the main driver of business success. It comes down to how fast your business can identify and proactively respond to change. But if your business is mired in static planning —characterized by long planning cycles, immediately obsolete plans, siloed efforts, and hard-to-find errors—it won’t be operating with maximum speed or agility.

This is doubly true in today’s fast-paced, data-driven world. Businesses hampered by outdated planning processes are often left scrambling to react to changes while more agile competitors outpace, outperform, and outmaneuver them.

Wherever you are on your planning maturity journey, the tasks here will help you expand and accelerate business agility by:

  • Creating a new kind of planning mechanism that’s distributed, inclusive, and optimized for your strategic objectives.
  • Empowering finance to continuously deliver insights that help the business course-correct. To power better, faster decision-making in ever-shorter cycles based on rolling forecasts and real-time (and eventually, predictive) data.

The truth is, building a continuous one-to-one alignment between your strategic vision and your operational reality isn’t easy. It’s something very few businesses can claim. You won’t get there overnight and you will face hurdles.

But it only takes a few small steps in the right direction before momentum starts to build. Before long, those steps will amount to a giant leap forward and significant competitive advantage as business agility accelerates exponentially.

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

Home » modern FP&A

FP&A Done Right: What Type of CFO Are You?

by Leave a Comment

This is a guest blog post from our partner Workday Adaptive Planning. It is part 1 in a two-part series on the changing role of the CFO.

Finance has gained new perspectives from the impact of COVID-19, which has created the imperative for every business to move forward as a more agile and digitally enabled function.

But it can be tough for finance leaders to rise above day-to-day responsibilities to fill the big-picture role their companies need. Many formerly tactical CFOs have become strategic CFOs by taking one step at a time.

Here are three common hurdles on a CFO’s path to becoming more strategic and transformational—and how to move beyond them.

Hurdle #1: Cumbersome Planning Process

If the budget planning process is an onerous, time-intensive endeavor, it will remain stuck as an annual activity. That means financial insights are relatively static, reactive, and error-prone. To be strategic, CFOs are moving toward more frequent forecasting that needs a streamlined process.

Continuous planning requires financial teams to move beyond mere risk mitigation and financial metrics and to consider operational metrics and opportunity identification. This requires shifting your starting point. Rather than beginning in the past, with last year’s performance, you have to start in the future. Define and establish where you’re headed and the financial resources needed to get there.

Once you have these goals, the next step is to define a schedule for your company to reach those goals. When will strategic reviews take place? How do they translate into operational plans, and how do those plans mesh with your monthly, quarterly, or annual forecasts?

Hurdle #2: Time-intensive Data Management

Creating a streamlined process requires strong financial leadership. CFOs have to not only measure and report on financial and operational metrics, but also effectively communicate to the entire company its progress on financial and strategic goals. This takes time and sustained effort—which means you can’t bury your head in the numbers all day.

This is where leveraging technology comes in. At some organizations, finance departments spend up to two-thirds of their time gathering and managing financial data and ensuring its accuracy. That means there’s little time left for analysis, and the CFO isn’t able to rely on that deeper thinking when the CEO comes seeking advice.

In order to rise above this scenario, you have to make sure your team is using self-service, especially in reporting and analytics, and automation. A simple, powerful self-service platform provides real-time data, which frees up team members to do the deeper work of investigating that data without continually having to request more information.

Hurdle #3: Department Silos

When the finance team is viewed as a separate department on its own little island, everyone loses. Isolation makes it harder to gather accurate, real-time data. That makes budget managers less invested in the budget-planning process, which in turn makes it less likely that departments are held accountable for hitting their budgets and benchmarks. And it happens a lot: Nearly half of respondents in a Workday Adaptive Planning survey of CFOs said their teams could stand to collaborate better.

To avoid this downward spiral, high-performing companies increasingly train their finance teams to be well-rounded leaders from the get-go. By emphasizing general leadership and management skills in addition to quantitative mastery, CFOs ensure their departments are fully invested in the budget process. Put another way: In a world where the future is harder and harder to predict, the best plans must involve everyone in the business. That’s the value of company-wide planning, or extended planning and analysis (xP&A).

For FP&A practitioners, that means working with your team to ensure everyone is communicating clearly and consistently with the rest of the company. And “communicating” doesn’t mean throwing a ton of data at busy colleagues. The information you share has to be relevant and customized to different business units so each team can easily consume it.

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

Read more FP&A Done Right posts here:

FP&A Done Right: Predictions of “Extraordinary” Growth This Year

FP&A Done Right: Collaborate More When Planning

FP&A Done Right: Achieve More Reliable Financial Forecasting

Home » modern FP&A

FP&A Done Right: Traditional Budgeting is a Challenge

by Leave a Comment

This is a guest blog post from our partner Workday Adaptive Planning, written by Gary Cokins. Cokins explains why traditional budgeting is no longer adequate for most companies.

Traditional budgeting is simply too slow and too rigid to keep up with today’s rapidly changing business environment. There is great volatility, complexity, and uncertainty in the future. Gone are the days when budgets could be one-and-done — tied to a fixed point in time and too inflexible to adjust to quickly changing business opportunities and challenges. In today’s world, a startup can be up and running and profitable in three months and disrupt its competitors. Consider Uber and Airbnb as examples. If your company takes nearly as long to develop an annual budget, it will be extremely difficult to fight off the upstarts or keep up with your established competitors.

The solution? A flexible, continuous budgeting and forecasting process that helps you anticipate change and focus on outcomes rather than outputs. Rolling financial forecasts are emerging as a valuable planning method to augment the annual budget.

Here are five tips to modernize your budget process:

Tip 1 – Just say no to one-and-done

Now more than ever, December’s fiscal year-end budget numbers often bear little resemblance to July’s realities—requiring more streamlined, accurate, and responsive budgets and forecasts. Annual budgeting won’t go away, but spending weeks and months processing data and reconciling spreadsheets that are out of date soon after the consolidated master budget is published doesn’t cut it anymore.

Modern budget solution:
● Increase the frequency of budgets and forecasts to reflect shifting business conditions
● Make decisions and plans based on data-backed insights rather than old and stale information
● Change how resources are allocated throughout the year and how it incorporates real-time opportunities and challenges

Tip 2 – Focus on business drivers, not cost centers

Traditional budgeting focuses on allocating resources to cost centers, but business objectives (e.g., projects, products, service lines) are cross-functional with end-to-end business processes. By assigning resources to projects and processes, budgets and forecasts reflect company-wide versus cost-center specific performance.

Modern budget solution:
● Enable organization-wide access to reports and data that allows everyone to have visibility into project-level and process-level performance
● Review forecasts against project and process budgets to eliminate confusion among competing departments
● Provide real-time information for the needed insights to support better decision-making at all levels of the organization

Tip 3 – Create rolling forecasts

More than ever, fluctuating market conditions make accurate forecasts extremely challenging. Rolling financial forecasts help manage funds and provide visibility into business performance using time horizons that reflect the speed of your business.

Modern budget solution:
● Generate rolling financial forecasts that accommodate real-time shifts in market conditions
● Enable self-service reporting so everyone in the organization can measure their performance against companywide KPIs
● Help everyone understand the downstream effects of their resource allocation decisions

Tip 4 – Look forward, not back

Most budgets and forecasts are outdated before you push “publish” or soon afterward. And some factors are impossible to take into account (natural disasters, broken supply chains, work stoppages). The rear-view mirror orientation of traditional budgeting (last year’s actuals create this year’s budgets) can’t keep up with the speed of modern business. Look through the windshield.

Modern budget solution:
● Respond faster to shifts in market conditions with real-time access to financials
● Adjust outdated budgets and forecasts as change occurs
● Move leadership discussions toward insight, planning, and action, rather than using the budget as a cost control mechanism

Tip 5 – Use the right tools for the job

Creating a budget process that keeps up with the pace of today’s business requires a comprehensive, collaborative, and continuous planning platform—one that gives you robust, accessible reporting and modeling capabilities; dashboards that provide visibility into overall company performance; and automated tools that streamline budgeting and forecasting processes.

Modern budget solution:
● Enable comprehensive planning that aligns the priorities and actions of everyone across the organization around common KPIs
● Create opportunities for collaboration by giving everyone access to the data they need and deserve
● Adjust and update budgets and forecasts on a continuous basis so you can navigate volatile market conditions in real time

Don’t let traditional budgeting lock you into outdated assumptions and fixed targets. Some managers view the fiscal year budget as a “contract” with handcuffs that they cannot get out of to minimize unfavorable variances from their allotted cost center budget expenses. This short-term focus jeopardizes the longer-term view. The modern FP&A professional knows the truth: Aligning budgets and forecasts with comprehensive plans lays the groundwork for proactive rather than reactive planning—a significant strategic advantage in today’s highly competitive environment.

Gary Cokins is an internationally recognized expert, speaker, and author in enterprise and corporate performance management (EPM/CPM) systems. He is the founder of Analytics-Based Performance Management LLC. Gary can be reached at gcokins@garycokins.com

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

Read more guest blog posts from our partner Adaptive Insights:

FP&A Done Right: What is Financial Modeling?

FP&A Done Right: How to Improve your Financial Reporting Process

FP&A Done Right: 3 Barriers to Business Agility

Home » modern FP&A