Dynamic FP&A

Dynamic FP&A

It is not the strongest of the species that survives, nor the most intelligent that survives. It is the one that is most adaptable to change. – Charles Darwin

Yearly budgets, quarterly forecasts and monthly reports are all standard processes used by many organizations. In some cases, these standard processes work well together, however the business world is ever-changing, organizations need to adapt to stay competitive.

Because of that, the term Dynamic (Financial Planning and Analysis) FP&A was created.

Today, as new technologies, products and competitors quickly emerge, organizations face more daily threats and challenges. For example, financial controllers are being asked to provide accurate, timely and useful data while decreasing turnaround time and cost. So, what do organizations have to do? They need to start acting and reacting accordingly.

What is Dynamic FP&A?

Now, it is not about completely changing the way you plan – it’s simply about making the data more relevant and incorporating technologies and best practices that will allow you to:

A) Identify issues before they occur and,

B) Take corrective measures to avoid problems, mitigate risks and/or take advantage of a certain situation.

Dynamic FP&A means having an integrated platform that enables decision makers to have timely and current data available, while also allowing application of statistical models to achieve better business outcomes.

How do you implement Dynamic FP&A?

With the WHAT and the WHY answered above, the next section of this blog outlines the different areas that need to be considered for successful FP&A implementation.

Technology

You need a platform that will support the entire process. Having tools and systems that do not communicate well with each other will make the process difficult – for example, disconnected legacy systems. Systems need to integrate in a way that is transparent for end users. Also, having data in multiple sources, limits the organization’s ability to have a single version of the truth.

The technological platform must be responsive. It should provide results or scenarios in a timely fashion. That is, information needs to be available on the same day it was requested – instead of day(s) later.  This situation occurs in installations that process vast amounts of financial transactions due to the use of either old or obsolete technology.

Process

This area drives the entire planning process.  As such, it has to work in tandem with the technology. However, the success of this area depends on the human factor. Everyone in the team needs to  be aware of his/her role, collaborate with others and know how to react to the resulting output.

Modeling

Another important element to consider in this area is having a granular design that will enable departments to, perform their planning independently and keep an eye on the big picture. For example, you want the sales team to be able to run predictions while analyzing the impact of those numbers on the supply chain model.

Workflow

Finally, you need to have a solid workflow process in place – one based on triggers and alerts. These elements, designed to raise flags, will notify key players about the events, results or applied changes in the system – in turn allowing them to proactively apply the required solutions.

With all this in mind, let’s reiterate that this is not about completely changing the way organizations perform planning, but rather it is about making the planning process more integrated and cost effective.

 


Hector Guerra - Consulting Services Director

Mr. Guerra has extensive experience designing and implementing decision support systems using Business Intelligence, Data Mining and Performance Management technologies. He has developed solutions in many areas including financial models, costs, expenses, sales, and inventory. All these deployments involved model designing, ETL tools, data warehousing and reporting capabilities. His expertise currently is focused on designing and implementing Performance Management solutions, helping companies build scorecards, initiatives, dashboards and reports in order to achieve overall goals. Mr. Guerra holds a bachelors degree in Systems Engineering.

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