We’ve had the privilege to converse with a number of FP&A Practitioners over the last few months about the following question:
What is the biggest challenge that you find with financial planning, reporting and analysis or FP&A?
What each professional shared with us both rang true and was insightful. That is why we anonymized what they shared with us and now offer the content to you with some or our own comments.
“Where do I begin? Keeping up to date is always a challenge, as there is so much information out there!”
I think this quote aptly describes the dilemma facing FP&A Practitioners today. It is not enough to just perform one’s tasks, instead, FP&A professionals must continually educate themselves and innovate to evolve and transform the FP&A process.
“With planning, I find that there are unknowns that the business is not proactively tracking. An example is some annual event or potential issues with a product. The analysis is not given time. Everything is rushed.”
“Handling uncertainties within the scope of a good financial planning model.”
Unknown unknowns, or unexpected or unforeseeable conditions, by definition cannot be anticipated based on past experience. This is why organization’s must have an agile performance management process allowing them to both minimize potential risk, as well as, make the best of every opportunity.
“The biggest challenge is keeping people centered and focused in the same direction while giving them the freedom to grow their own faculties, to make decisions that are in the best interests of the collective.”
This is why operational plans need to be linked together with the financial plan to model the business holistically and in a coordinated manner to ensure resources are used strategically for the organization’s best interest vs. siloed kingdom building.
“Managing C-level expectations that are unrealistic or impossible to meet regarding future targets.”
“Manage late or contradictory manager’s decisions.”
“Identifying what the real ask is (i.e. giving leaders what they need as opposed to what they ask for).”
“One of the challenges is that Operations does not always recognize the value that Finance is able to provide in understanding what is and is not working well. I believe that part of the issue is that accountants don’t always do a good job speaking the language of Operations. A great FP&A analyst has solid understanding of the challenges faced by Operations and explains financial analysis in a way that translates into Operational action.”
“Being able to craft messages across different business units and leaders. Something you present to your engineers may not work for your sales groups and vice versa. Not to mention managing the different personalities within an executive team.”
“People with knowledge to clearly communicate information to stakeholders realizing that not everyone in the company understands financial terms.”
Communication, communication, communication. From managing expectations, to resolving contradictory inputs, to understanding real needs, to truly partnering with Operations, to changing one’s presentation style and language depending on the audience, all while remaining calm and professional. This is no small task!
“Financial reporting and analysis needs to be more efficient and transparent while reducing the time needed to close the period. Moreover, performing periodic closing with no errors.”
In short, automation is required to reduce the amount of time it takes to perform financial reporting, perform routine period closing tasks and reduce the errors and risks associated with both activities.
“One operating company can be manually combined by adding in the trial balance of one branch into the software for the other. But for our international operations we do not have anything in place for consolidation other than Excel.”
“Consolidation of 58 legal entities using Management Reporter or MR.”
“I am just starting to create a consolidated report but do not have the data available to generate it.”
Most Enterprise Resource Planning (ERP) solutions come bundled with some form of financial reporting tool, however, these reporting tools often cannot handle all the complexities required to produce a full set of consolidated financial statements (i.e. P&L, Balance Sheet and Cashflow). From producing pro-forma statements, to consolidating companies using different ERPs in different locations around the world, to differing consolidation methods based on ownership percentages, to automating non-controlling interests, to currency translations with differing rates for the same currency, to the manual adjustments required at times, it is no wonder this is a challenge faced by many financial professionals.
“Accessing data, and systems, specifically systems that give you flexibility in forecasting and reporting.”
“Connecting different resources and consistency of data.”
“Unify data coming from different sources.”
“Manually manipulating data into something information for stakeholders.”
“A lot Excel schedules and manipulation.”
“Technology and access to information. A bottle neck for us at the moment is the best tools available for analytics, data management, visualization and predictive modelling.“
“Lack of good software!”
The statistics continue to reveal that too much time is spent on non-value adding tasks like data wrangling, formatting reports and presenting data; and that not enough time is spent on analysis or better yet, taking action to improve future outcomes. Given that more and more operational data sources are being leveraged and incorporated into dynamic, driver-based planning and forecasting models, without the proper tools, this trend will only worsen.
“I would say the biggest challenge is to maintain an on-going budgeting process with key business partners to avoid Annual Operations Plan (AOP) mayhem.”
It is often said that an annual budget or plan is outdated shortly after it is prepared, or even by the time it is approved. Regardless of whether your organization is a start-up or in a high-growth mode, all businesses are competing in ever changing markets and companies that plan to win are moving to a continuous, ongoing planning process facilitating real-time modelling, monitoring and analysis of performance.
“I would like to see more accurate forecasting models (i.e. machine learning).”
Imagine the day when any potential errors in the annual plan or rolling forecast are not only automatically detected, but a prescriptive correction for each potential issue is provided with an easily understandable explanation that can be accepted or overwritten. Or, rather than run multiple driver-based scenarios manually, what if the entire plan could be set to optimize based on selected criteria? Or, perhaps a range of AI driven Monte Carlo simulated future states could be presented for comparative analysis. Finally, imagine you the FP&A Practitioner was able to use these tools without engaging a data scientist or jumping between technology solutions. The day is coming!
If you’d like to have a conversation about your biggest challenges with FP&A, or if anything that you’ve read above piqued your interest and you’d like to contact us, we would love to hear from you!