Operations

Making finance a predictive powerhouse

August 23, 2022 5-Minuten Zeit

RESEARCH REPORT

In brief

Today's uncertainty has dialed up the pressure on finance planning (FP&A) teams, who are now expected to help the business prepare for what's next.
FP&A teams lack agility, spending 85% of time on labor-intensive production tasks to prepare data and 15% of their time on generating insights.
Agile FP&A teams: cut planning time by 80%; improve forecasting accuracy by up to 95%; and free up 12 hours each week for more interesting work.
To accelerate new value from finance planning, it’s essential to address data, technology, talent and processes.

How to create an agile finance function

Today’s uncertainty has dialed up the pressure on chief financial officers (CFOs) and their teams across finance planning and analysis (FP&A) as the function helps the business prepare for what’s next.

At a time when 62% of CFOs are seeing more demand for insight from financial data, 53% worry that finance is too reactive.1 This gap between the demand for insights and finance’s ability to deliver them suggests that planning teams are struggling to give the business what it needs quickly.

To understand this dynamic, we surveyed 550 CFOs and finance leaders from companies with over $1 billion in revenue. We discovered that in most cases, the FP&A function lacks the agility to provide the business with the insights they need to manage growing uncertainty. So much so that some leaders question the proportionate value that FP&A delivers to the business versus the cost.

FP&A teams spend 85% of their time on tactical and labor-intensive production tasks to prepare data and just 15% of their time on generating insights.

Our own data and experience working with finance organizations across industries reveals that FP&A teams that flip the 85% and the 15%—spending most of their time generating insights rather than preparing data—can become more agile and realize significant business benefits:

80%

reduction in planning time.

95%

improvement in forecasting accuracy.

12

Free up 12 hours of employee time each week to focus on more interesting work.

How to get from here to there

To bring more agility to finance planning and ultimately more value, it necessary to reinvent business processes by addressing data, technology, talent and processes. Specific actions and the extent of the changes needed depend on where an FP&A team begins. The goal: Make the FP&A team more agile, efficient, proactive and resilient.

Data
Technology
Talent
Processes

Data: The right data, right way

Most FP&A teams lack a single source of gold-standard data and have limited access to external diverse data. This creates an insight gap: 57% of finance executives say a lack of availability and access to data is keeping their function from achieving real-time, continuous accounting. This capability is key because it aligns with the always-on way businesses run.

Just 4% of FP&A teams use machine learning or AI to get more value from data, although 51% of finance executives think FP&A is the area of finance best suited for AI. Leaders acknowledge that AI is key for operating more efficiently, but they face significant adoption roadblocks. The most common are perceptions that automation is risky, lack of funding, and legacy IT and reliance on spreadsheets.

What agility looks like

Taking a stakeholder-first approach
Creating a stronger data foundation
Harnessing artificial intelligence
Conducting scenario planning

Strengthen the foundation

Technology continues to rapidly open new possibilities for how finance and FP&A teams work and collaborate with the business and other stakeholders. Yet 54% of finance executives are concerned about the lack of technical tools and resources.

When FP&A teams analyze data for reports and dashboards, most (76%) depend on hybrid systems, which are spreadsheet-based. Just 26% use cloud-based or on-premise enterprise performance management solutions and only 4% use data science or machine learning tools. While spreadsheets will have a place in FP&A for the foreseeable future, these findings suggest an overreliance on them given the efficiency and speed of today's advanced technologies and automation.

What agility looks like

Creating a resilient tech stack
Unleashing the power of cloud
Getting the most out of spreadsheets

One team, many skills

The ongoing expansion and evolution of the CFOs role is driving a need for broad-based talent in the planning teams they manage. FP&A teams now need data scientists, critical thinkers, automation experts, scenario planners and storytellers.

This dramatic shift in skills has leaders scrambling to upskill and augment their people amid a massive race for talent. As such, 56% of finance executives say access to talent is a challenge. This group is most in need of business intelligence and visualization capabilities, coding skills, machine learning knowledge and analytical skills. Despite these skills gaps, only 39% of finance leaders report that their organization would consider partnering with a managed services provider to a large or very large extent. As such, they are missing out on a potential competitive advantage of tapping into readily-available skilled resources.

What agility looks like

Making data literacy a priority
Working as one team
Partnering to fill the gaps

Processes: Truly agile, always improving

In many organizations, planning and forecasting processes don’t systematically connect finance to other business areas like Sales, Marketing, Human Resources and Supply Chain on a single platform. As a result, finance lacks a true 360-degree view of the business.

This lack of visibility is a liability for CFOs and FP&A teams who depend on insights to act as trusted advisors to the business. The business wants timely (if not real-time) insights into capital and cashflow to inform faster and more agile decision making. finance executives are feeling the pressure. Their top three FP&A priorities—real/right-time insights, real-time close and real-time scenario planning—align with this expectation for immediacy and agility.

What agility looks like

Streamlining processes

When uncertainty isn’t so daunting

CFOs and their planning teams have been moving from history and hindsight to intelligence and foresight for years. Today they face an urgent imperative to make faster, more radical changes to how they work and support the business. While many FP&A teams are implementing new technologies and process improvements, few are truly re-inventing their business partnering and decision support capabilities.

FP&A teams that can spend most of their time generating insights rather than preparing the data can realize significant benefits, such as reducing planning time by 80%, improving forecasting accuracy by up to 95% and freeing up to 12 hours of employee time each week to focus on more interesting work.

To get started today, FP&A teams need to make sure that they are addressing data, technology, talent and processes across their finance function. CFOs that get it right can help the business cut through uncertainty, deliver predictive insights to solve for today’s challenges and adopt to respond to tomorrow’s unknowns.