Having each of these elements present in your function is easy enough, but getting the balance right is another thing entirely.
Taking a tech-first approach is, in almost all cases, a bad idea. Technology is never a driving factor – leading with tech is like offering up an answer without really knowing what the question is. But scrutinising the state of your current technology can tell you a lot about your people and processes, which is where the true balance comes in.
Budgeting and Forecasting is highly process driven, and as FDs and CFOs, we would all like to spend less time on the process and more time analyzing data and making better and more insightful decisions.
To handle our process-driven planning, we use Enterprise Performance Management Suites (EPM/CPM). These solutions collect and validate data across the entire enterprise with the goal of streamlining information across the entire organisation.
These tools so powerful due to their “Core” architecture – a centralised database that stores large amounts of data, so that information can be leveraged across the organisation.
Naturally, a lot of work needs to go into creating both access controls and pre-defined workflow rules, but you end up with something very robust. It allows you maintain centralised control, while allowing people across the organisation to access their own lanes of data.
Strategic Planning, Investment/Acquisition Screening and other forms of Corporate Development (growth initiatives) are driven by people, not process. In these cases, anyone can create a financial model and share it with others when it’s ready. Users can then offer their own perspectives on that plan, such as amending the logic or the assumptions.
This is the best approach for team-based planning, or business partnering. Finance professionals can work with their non-finance teams to steer the success of that department based on rigorous and relevant financial data.
It’s all about agile planning, based on ‘Edge’ architecture – great for experimentation in situations where much of what is evaluated has a very short shelf-life. In that case, why would you need to centralise data? Only the plans that offer the most value make their way to the core. Everything else is play and experimentation.
Edge architecture typically leverages a distributed database; a collection of one or more databases that operate independently of one another, but exchange messages between each other in a network relationship.
Integrated Business Planning is not about people or process. It’s tactical planning (process over people) and agile planning (people over process) working in harmony.
People think this somehow creates an integration challenge, but in reality, the integration points remain pretty constant over time. This is because Edge architecture only requires aggregate data from the Core architecture, which rarely changes. The real strategy gap occurs when companies try to address Edge questions using Core solutions, or vice versa.
For sure, data mapping and metadata alignment can be improved if vendors adopted shared APIs, common languages or other collaborative approaches, but this should not be a reason to hold off on adopting a dual Core and Edge toolset.
This flexible dual architecture is the future. New generations of employees will need more connectivity and integration of all systems through the use of open API technology. We use APIs on a daily basis, through various apps and subscriptions. I expect we’ll see a similar connectivity within financial technology and processes.
Furthermore, the new wave of employees will embrace working with agile frameworks. This is the future of financial modelling, with greater collaboration and real time results.
By Lance Rubin, a Cashflow Financial Modeler and Finance Innovator