Financial planning and analysis (FP&A) are changing and now have a broader impact across different departments and dimensions. It's essential to have precise, regular, and interconnected business plans due to global economic shifts like geopolitical tensions, inflation, and supply chain issues.
Why is FP&A Important?
Finance plays a vital role in every aspect of a company's operations. It has a significant impact on a company's culture, growth, and future. FP&A is responsible for understanding the company's short-term and long-term financial needs. They handle various tasks, from routine activities like financial reporting and cash flow management to strategic planning such as budgeting and financial forecasting. While other finance tasks focus on record-keeping and compliance, FP&A looks ahead, analyzing financial data to provide valuable insights to executives and the company as a whole. Ultimately, FP&A's effectiveness lies in its ability to offer strategic guidance based on financial and operational analysis.
Top 8 FP&A Trends in 2023
In this article, we're focused on 8 key FP&A trends for 2023, which are also important to businesses worldwide.
1. Flexibility Trumps Stability
Embracing change is now more important than staying the same. Instead of seeking comfort in stability, FP&A teams should focus on becoming adaptable in unpredictable situations. Technology plays a crucial role in helping teams adapt quickly during uncertain times. Organizations that invest in digital transformation and train their employees to embrace new technologies are better equipped to make the most out of their tech investments. Even in uncertain times, organizations can become more adaptable by regularly predicting financial outcomes, considering different scenarios, using external data sources, and fostering strong collaboration between different departments.
2. Enhanced Business Planning Fosters Deeper Collaboration
Integrated Business Planning (IBP) is advanced planning that uses technology and teamwork. It combines information from different parts of a company, making it easier for people and technology to work together. If there are sudden changes in the economy due to global issues, companies need to adapt fast. IBP helps by allowing teams to collaborate better and make reliable predictions.
3. Streamlined Planning Fosters a Culture of Certainty and Assurance
To create strong and adaptable organizations, leaders need a clear plan to make accurate decisions quickly. Confidence doesn't just come from having data but understanding it. A simple plan, regardless of the data size, promotes a decisive and confident decision-making culture.
4. Finance Organizations Will See Growing AI Support
Artificial intelligence (AI) is already making a big impact on our daily lives. It helps by filtering out spam emails, customizing our social media posts, and enhancing our online shopping experience on platforms like Amazon. A recent study showed that the use of advanced planning technology in businesses has increased significantly, from 4% in 2020 to 27% in 2022.
AI technology is now stable and mature, especially in finance. There are multiple FP&A AI tools that are already rolled out and help finance teams in many ways. It enables CFOs to provide valuable insights and data that business leaders and investors need. As businesses are looking for more data-driven decisions, investing in AI can boost investor confidence, improve decision-making, and enhance forecast accuracy, which is crucial in uncertain times.
5. Technology Attracts Talent
According to a recent discussion among CFOs, one out of every five CFOs is concentrating on keeping good employees and finding new talent. In a competitive job market, technology can help by attracting top talents and keeping current employees happy. A study by LinkedIn showed that employees appreciate having a balance between work and personal life and the chance to learn new skills. Companies can keep and attract talented people by using technology to make tasks easier and support professional growth. Many finance professionals aim to succeed and become leaders in their organizations. To help them, it's important to give them advanced planning tools so they can perform their best.
6. FP&A Professionals as Key Business Collaborators
To make an organization strong, it needs to be able to change and adapt. FP&A professionals play an important role in helping organizations become more adaptable. With economic uncertainty, FP&A professionals should work closely with the organization. They should act as advisors and work together to plan for the unpredictable future. By moving from separate planning to working together, teams can feel satisfied and successful.
7. Geopolitical Factors Still Impact Inputs and Planning
In the 2022 EY CEO Survey, over half of the CEOs interviewed mentioned that political tensions between countries were a problem for their companies. Businesses worldwide must think about politics when making plans, especially because the war in Ukraine keeps affecting the global economy. Different countries' policies and how they deal with political uncertainty can really affect a company, depending on where it's located and does business. To get ready for these issues, organizations can make plans for different scenarios. This helps them be ready for problems and changes caused by politics and lets them make better predictions about the economy.
8. Real-time Data Integration Powers Quick Decision-Making in FP&A
In 2023, FP&A is evolving fast! Businesses are using real-time data integration to stay agile during uncertain times. This means FP&A teams can instantly access live data from various sources, allowing them to make quick, well-informed decisions. Real-time data integration is crucial because it enables businesses to respond swiftly to market changes, geopolitical events, and supply chain issues. FP&A professionals can create adaptable financial models, analyze different scenarios, and adjust forecasts instantly. This not only improves the accuracy of predictions but also helps businesses avoid risks and seize new opportunities.
Typical Obstacles in Financial Planning and Analysis
The main problem in financial planning and analysis is that 80% of your time is spent on tedious tasks, leaving only 20% for strategic work. Traditional FP&A teams struggle to be strategic due to these challenges:
Data Is Isolated: Business data is scattered across various tools and systems, making it hard to access all the necessary information. This limited view hampers strategic planning.
Manual Data Entry: Connecting different business systems is difficult, forcing FP&A teams to spend most of their time aggregating and reconciling data manually. This not only consumes time but also leads to potential errors.
Reactive Analysis: Due to data isolation and manual processes, FP&A teams can't provide timely answers to strategic questions. By the time they gather and update data, the information becomes outdated, hindering their ability to be proactive.
These challenges prevent FP&A teams from becoming proactive, agile, and strategic partners in decision-making.
Conclusion
Financial planning and analysis teams are gaining more importance in businesses. They are now key supporters of integrated business planning. It's crucial for businesses to plan accurately and regularly, considering global challenges like geopolitical tensions, inflation, and supply chain issues. In this uncertain economic climate, organizations that use digital planning tools can adapt faster and make their planning processes simpler.