Expanding Horizons: Making the FP&A Mindset Cross-Functional

By September 23, 2021No Comments

One member’s team streamlined its approach to forecasting with a transformation model from FP&A solutions provider Jedox. 

FP&A teams use data analysis to help companies understand their finances and plan for a long term future—but why limit this to only the finance group?

  • At a recent meeting of NeuGroup for Financial Planning and Analysis, Dr. Liran Edelist, president of Jedox, shared how the company’s planning and analytics solution supports digitizing the FP&A function and broadening its scope. (Dr. Edelist has a doctorate in business administration.)
  • Jedox uses the term xP&A (extended planning and analysis), coined by Gartner, to refer to this expansion of an FP&A-style approach, embracing a top-down, driver-based model of planning—one that focuses on the key drivers of business results.

Breaking down silos. Dr. Edelist called xP&A the natural evolution of FP&A. Where FP&A was a name some companies gave their budget department, xP&A is about expanded, cross-functional planning. The idea, he said, is to break down silos between financial planning and business planning to yield better cooperation and increased collaboration.

  • “For example, if the FP&A team is forecasting revenue with an advanced tool for the financial forecast, sometimes the salespeople, when they need to do analysis, they use different tools,” he said. “If we break those data silos, we can create one center of excellence that uses data science, consolidating planning into one.”
  • Members at the meeting had the opportunity to grade their progress on the journey to a driver-based planning model.
    • Though the term xP&A was new to all at the meeting, a number of members shared that they are in the midst of the process.  
  • One member, whose experience resonated with a number of others, said that his corporate FP&A team is fairly close to achieving the goal of xP&A’s cross-functional planning.
    • “But getting buy-in with our business group FP&A teams can be difficult,” he said. Those teams have made less progress; they’re “building detailed, bottoms-up roles as opposed to driver-based forecasting.”

Streamlining. Using Jedox’s model of transformation, one member adopted machine learning models to streamline many processes in three steps, starting with cash forecasting:

  1. Automation. In two months, Jedox’s automated data integration and validation aided the member in setting up a machine learning-based forecast that cut the time needed to from two weeks to two days.
    • Dr. Edelist said this automation doesn’t necessarily have to be limited to forecasting, and could include generating reports, revenue and HR.
  2. Collaboration across the business. As Jedox is able to ensure accurate data and provides a single location for everything from P&L, cash flow or balance sheet information, it aids in bringing teams together. “Thinking about xP&A, it’s not just breaking silos, but connecting different parts of the company,” Dr. Edelist said.
  3. Transformative planning, creating value. The member said the project essentially paid off immediately and recommends first aiming for projects that provide quick wins to demonstrate the value of transformation.

Streamlined. “Going back five years ago, our top-down budget would be sent out in the form of a slide deck with a table in it,” the member said. “Now, we have a robust, automated process using Jedox.”

  • Now, the moment the FP&A team sets its targets, leadership is all sent individual charts, and can see the assumptions and details in a matter of minutes.
  • “Being able to do all that work and get to that level of granularity is fantastic,” he said. “There are more areas, like supply chain, that are just getting started as well.”

The journey to better planning. To get started, Dr. Edelist recommends FP&A teams start to consolidate as much internal data as possible. “Look at your planning information—do you have enough data to start, and is planning flexible?”

  • He suggests consideration of modern planning solutions that can support xP&A early on in the process, moving away from dependence on spreadsheets and internally built Excel solutions. “Spreadsheets are fine, but automation is the future,” he said.
  • “The road map to xP&A starts with looking not only at the financial arm, but the corporate drivers behind that: expenses, revenue, investment,” Dr. Edelist said. “We can start the transformation by putting all of that analysis in the same place.”
Justin Jones

Author Justin Jones

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