Digitise This! The evolution of forecasting, and how it’s changing finance

We’ve always wanted FP&A to work a certain way – taking the company’s strategy, putting in place a plan to deliver it, then continually reporting on progress and refining that plan. But in reality, it never quite worked that way – only at a base level.

The past

Throughout the 90s, noughties and early teens, technology was a blocker for achieving FP&A nirvana: the tools were overly complex, costly to implement and didn’t perform as well as they should when it came to large data volumes and complex calculations. As a result, most companies struggled to get past simple financial budgeting, forecasting and reporting. Because these tools were so slow and complex, most of the real planning took place offline, using spreadsheets, and the results were then uploaded into the forecasting tool.

Thankfully, that’s starting to change, thanks to the advent of in-memory tools that can handle the data and calculation volume/complexity. These are available in the cloud and are far more intuitive, relying less on large, hardcore implementations reliant on IT teams. In fact, many users are starting to implement tools directly to their PCs to test and learn. 

This means that implementation costs can focus on building up models that connect all parts of the organisation to give a connected, holistic view. FP&A teams have less reliance on IT to maintain the solution once it’s live – they can maintain it themselves. It means the solutions always stay up-to-date as needs and technologies change. Truly connected business planning, joining up demand, supply and finance, is now achievable in real-time – something that was considered best practice in the 90s, but was practically impossible due to technology constraints.

The future

Due to the quality of that new technology, the original aspiration of FP&A may now be surpassed. Finance teams are forging stronger links between planning and forecasting models and transaction controls. For example, look at the model that is used to build up an incentive plan to ensure the sales force delivers their revenue target. That can also be used to track performance and automatically create journals, which then record finance postings back into the Enterprise Resource Planning (ERP) system.

By using a modern, cloud-based Enterprise Performance Management (EPM) system, finance teams are freed up to do true FP&A work. Being more of a business partner than a report creator, building a broad, accurate and up-to-date picture of the business using rich data from multiple sources, allowing them to set the business on the right track, and keep it there.

Anaplan is a popular example of one of the systems that has pioneered cloud-based, connected planning. It’s used by megacorps such as Barclays, Sky and Thomas Cook, and by fast-growing digital businesses such as Legalzoom and Booking.com.

 

This blog is co-authored by Christopher Argent of Generation CFO and Tristan Colgate of Fidenda. Join Fidenda at the Anaplan CPX London at Central Hall Westminster, 30 September-1 October. Sign up here.

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