The way businesses conduct operations are changing at breakneck speeds. Integrated working platforms, automation, and newer and faster ways to translate data into results are all constantly being improved. A big part of these changes is increased communication between technology teams and other business departments. However, one department seems to lag behind when it comes to communication procedures: the finance department.
While individual departments are data experts in their own fields- and know exactly what they need in order to succeed- the finance team is what glues the entire picture together. The impact of data driven financial analysis goes well beyond its traditional role of budgeting and forecasting, and has the potential to contribute greatly as a forward thinking department for real-time decision making.
Transforming value proposition, strategic direction, and operation models are all categories that FP&A teams can produce in- if only they would be encouraged to do so.
However, for a number of reasons, IT and FP&A collaboration is not up to par with collaboration between other departments. This is both causing lost time and money and leaving revenue on the table from innovation not occurring.
Productive finance teams
As automation has shown, everyone is better off when manual tasks are left to machines and more time is used for analyzing and planning. For finance teams this is more true than ever, and the recent market volatility has exasperated this issue. FP&A departments are spending too much time performing manual tasks, such as preparing budgets and account reconciliations, and not enough time analyzing the data.
A more productive finance team will find ways to collaborate with other departments and use their expertise and experience to influence financial decisions in the company. Strategic FP&A, or xP&A, is the ideal goal for companies to achieve, and the huge success of those who integrate it is influencing others to follow suit. However, the time and money lost from those companies with less productive finance teams is still a widespread phenomenon.
Acting on real-time data
Once again the pandemic has sped up the need for automation, as those who didn’t adapt quickly to changes, including real-time data, fell very far behind. Despite the importance of this, new technologies are still far less common amongst finance teams in comparison to other departments.
A Workday survey highlights this issue as less than half of those involved in budgeting say they use digital technologies to complete their analyses, while in departments such as sales or marketing, over 75% of team members regularly use automation!
Finance teams struggle to collect, analyze, and act on the growing piles of data, and without real-time data and automation, there is just no way to keep up with the growing workload. The cooperation between IT and finance has never been more important.
More accurate forecasting
Revenue forecasting is always the most important thing for finance teams and C-suite executives, because it dictates the current flow of capital and everything that goes along with it. But this comes at the expense of time and effort from other aspects of the finance team.
In addition to the high proportion of resources used for revenue forecasting, only a very small percentage of companies actually hit their target forecasts. A study conducted by “Big 4” accounting firm KPMG, found that only 1% of the world’s biggest companies actually reach their targets, which has a ripple effect on the company and its shareholders. Investor confidence goes way down and the share price is almost always negatively affected (sometimes for long periods of time).
Why then do so many companies continue this time-extensive and inefficient way of using their finance team without significant adjustments? Cloud based FP&A solutions provide platforms for more in depth and accurate forecasting. A big part of forecasting today is “what if” scenarios, which not only play into more accurate revenue forecasting and results, but also the overall preparation of all company departments. Of course having consistent and optimized processes is just as important as the right FP&A technology.
Preparing for the future
Even though collaboration between IT and finance departments still lags behind other inter-department collaboration levels, the wave of automation and FP&A extending its playing field is catching on. These cloud based solutions are branching out into HR, sales, and supply chain management by creating more and more automation. This in turn directly affects the finance teams’ influence on the broader picture of the company.
Gartner expects that by 2024, more than 70% of all FP&A projects will extend their reach beyond the finance domain- in other words xP&A. This means that all aspects of an organization will have the finance team and budgeting in mind, in addition to being more automated and efficient.
Although the benefits are clearly there (KPMG estimates that these SaaS tools can save costs of up to 75%), many companies have not come close to reaching their full potential with automated and data driven financial planning.