The past year or so has been turbulent for everyone, to say the least. Last year, the world experienced an economic shutdown from the deadliest pandemic in over a century. In 2021, much of the world has been blessed by the opportunity to get vaccinated, and have been able to begin to return to normal life. The silver lining of this difficult time is that recovery from such events often spell out new beginnings in people’s lives. Many take advantage of new opportunities to make positive changes in their professional or personal life.
The adoption of new technologies has been a continuous and universal trend across a variety of professions for several years, and has had a positive impact on many organizations. Finance professionals in particular have much to gain from implementing the newest and most innovative high tech resources to many of their processes. FP&A teams have been able to extract more (and better) insights from their data, and dramatically improve their efficiency and accuracy through the implementation of FP&A software.
However, achieving these improvements is more complicated than just adopting any system. Finance teams need to know the specific benefits of FP&A software, which solutions are best for their needs, proper implementation, and what are the best practices when using a software system.
How Does High Tech Improve Processes in FP&A?
What the most productive finance teams all have in common is the use of financial software in some capacity to improve their data collection’s insights, efficiency, and accuracy.
The technology stack is an enabler towards becoming a high-performance team. FP&A is one team and the stack must be suitable for everyone. To be successful, FP&A teams need to curate a unified data set that is accessible by the right people and provides quick answers to commercial questions.
Collaboration is enabled by the unified data set as everyone is looking at the same numbers. Too many meetings happen where the first 45 minutes are spent on who has the right spreadsheet. The more FP&A professionals can align the data between teams, the more trust they build. The better the systems work, the quicker teams can pull the analysis and spend time with the business. In other words, take advantage of the systems you have available to give your best to customers, rather than making them wait for your spreadsheets.
In finance/ FP&A, there is militant advocacy of Excel… part of the advocacy of Excel comes from the experience of failed technology implementations. Many of the current collaboration and data problems are caused by Excel. It’s a risk not to use FP&A tech; look no further than the JP Morgan London Whale disaster to see why.
How to Adapt to New Tools
A recent survey by CFO Research found that many companies employ a number of best practices when implementing new financial software. At the same time, a significant minority do not — including, in some cases, practices that affect far more than the success of the software implementation. Not following some of these practices can even impact a company’s ability to compete in a world where organizations lacking tech-savviness operate at an increasingly large disadvantage to more advanced peers.
Specifically, the online survey of U.S. senior finance executives found that a substantially large percentage of firms do not embrace the following best practices:
The establishment and use of clear metrics to measure the efficiency and effectiveness of the financial software they adopt.
The adoption of a phased approach to implementing enterprise financial software, opting instead for a single-step switch-over that can dramatically elevate the level of change management involved.
The consideration of user experience as a critical factor in selecting and implementing new enterprise financial software (ignoring a key variable in the success of the implementation).
Emphasis on the integration of their FP&A software not only with financial but also nonfinancial data sources. Failing to emphasize this effectively results in missing the opportunity to fully understand what’s driving their financial results.
The challenges of conducting financial planning and analysis using legacy systems and processes are well known. Legacy systems typically require that finance personnel to manually copy and paste information from disconnected data sources into numerous, disparate spreadsheets. Those spreadsheets are then shared via email with other parties involved in their creation. Several revisions of those spreadsheets occur along the way and also get shared.
While still common practice, that approach to FP&A is highly inefficient and lends itself to human error and version control problems. In some cases, requiring such tedious work can make it difficult to attract and retain skilled finance professionals.
A critical path to addressing these problems is by implementing an FP&A software solution that can:
1. Use data from many different sources, both financial and nonfinancial, and unify them in a single database so that everyone is always working with the same set of information. Today’s best-in-class FP&A systems do that by automating routine processes, eliminating version control issues, providing robust reporting and analysis tools, and allowing finance professionals to spend more time on higher-value activities, like scenario modeling.
2. Complement spreadsheet usage, as Excel is a versatile and universally well understood tool in the world of finance. Although Excel has its limitations, finance teams can still maximize their performance by continuing to use this perennial resource, as it has been relevant for decades.
The implementation of the following set of more specific best practices, (in addition to the four aforementioned) are supported by the findings of CFO research:
Engage Users Often: All users of new software should understand how its implementation will benefit the entire organization. Employees almost always perform and adapt better to new processes when they feel they’re working towards a specific outcome. Additionally, a more structured implementation process has a higher chance of success. Seventy-five percent of survey respondents said their rollouts of new FP&A software were highly structured, and included demos, workshops, help lines, and peer-to-peer mentoring.
Set and Manage User Expectations: Identifying goals, requirements, and success criteria upfront is critical to a successful implementation. By failing to spell this out early, CFOs risk burdening their organizations with wrong or poorly informed design decisions, gaps in functionality and usability, and longer adoption timelines and payback periods. They also may find they’ve damaged their own reputations and those of their organizations. In the survey, 81% of the executives polled said their organizations take the time to set clear expectations, timelines, and success criteria with their vendors, leaving nearly 20% that don’t.
Ensure Integration With Software: Today’s best FP&A solutions connect with ERP and other information systems containing operational and company-wide data. Once these ties are made, CFOs can use the systems to more easily connect the dots between operating decisions and financial results, and more accurately forecast how results might play out under different scenarios.
Putting It All Together
Integrating FP&A software is clearly beneficial for finance teams so long as the previously mentioned considerations are taken into account:
Know what your benefits will be.
Choose the right system.
Have a structure when implementing the software.
Adhere to the best practices.