Transforming FP&A with Big Data Insights

Financial Planning and Analysis (FP&A) is going through a churn. New technologies like AI, ML, and Big Data Analytics are helping leadership teams to achieve outcomes-focused transformation in FP&A through improved process efficiency and faster and more informed decision-making. The FP&A function transcends from pure planning, budgeting, and forecasting to identifying business risks and opportunities and focusing on long-term value creation. As data courses through an organisation and the availability of advanced tools allow FP&A leaders to leverage a single pane of glass to get a unified view of data from multiple sources across the organisation, they benefit from improved insights and analytics to drive better synchronisation between strategy, planning, and analysis.

Understanding the Impact of Accounting Information on Decision-Making

As we delve deeper into the transformative role of big data and cutting-edge technologies in FP&A, the question arises: “How does accounting information help decision-making?” This crucial question sheds light on the fundamental role of accounting information in the corporate decision-making process. By meticulously tracking all financial transactions, accounting information is the bedrock for assessing a business’s financial health, guiding leaders toward making informed decisions. Beyond transaction tracking, it ensures compliance with industry-defined accounting principles, enhancing financial reporting quality and corporate governance. This foundational layer supports sound financial and lending decisions, bridging traditional accounting practices with the strategic, data-driven insights of big data.

Transformation Objectives for FP&A Leadership

The pandemic was tough for businesses in the UK, with over 90% of industries shrinking in the first two months and many companies shutting shop during the course of this event. It was also a wake-up call for the leadership team to plan for Black Swan events or any other scenario detrimental to business health. They started to focus on reducing risk and looking for stable and long-term opportunities that help them stay the course in any economic downturn, irrespective of the reason. FP&A leaders started planning for disruptive events such as stagflation, supply chain disruptions, material shortages, climate change, etc.

Gartner’s research underlines the following action items for finance and planning leaders:

The scope of F&A must undergo an evolution to enhance its role in maximising business impact
With 90% of finance leaders saying their finance structures must be scalable and 79% of leaders saying they will prefer using BI and AI-enabled platforms, there is no doubting the need for an action plan that revolves around centralised decision-making, making sure the FP&A Center of Excellence (CoE) is founded on the pillars of multisource data, advanced technology, and dependence of specialised data and other aspects.

Forecasting and planning should undergo tech-enabled transformation through BI and ML
The focus should be on facilitating agility by building a collaborative environment that leverages the best qualities of humans and technology (such as AI and BI); the objective should be to deploy technology that does not replace but complements human-led activities and enhances their strengths.

Optimising spending patterns, improving productivity, and unlocking business growth potential should be critical action items
Considering various economic challenges that companies must guard against, the focus should be on strategic cost reduction, wherein businesses focus on spending that differentiates their business from their competitors and control spending on capabilities that are similar to those of their competitors, which the competitors can match easily. The way ahead is to identify funding mechanisms for those investments that can deliver better ROI and maximise the potential of limited resources.

Big Data Insights Changing the FP&A Landscape

It will be fair to say that over the last decade or so, the role of big data and analytics has been nothing short of revolutionary in improving process efficiency and decision-making. The roots of big data lie in the tremendous amount of structured and unstructured data generated by company systems such as ERP, CRM, finance management systems, mobile data, point of sale, and much more. Early on, this data was lying in siloed systems. However, the evolution of technology drove the emergence of a tightly integrated tech stack that could deliver visibility into all company data through a single pane of glass. Thus began data’s journey to provide tremendous business value.

From the purview of FP&A, finance leaders cannot ignore the vast amounts of data at their disposal. They must integrate the old with the new and mix traditional financial indicators with granular and high-quality data from all corners of the business, like sales, finance, operations, and marketing. Imagine the difference in decision-making if the FP&A leader decided to not just focus on finance models bolstered by primary operational data but also enrich such data with customer data, behavioural data, inventory information, supply chain, customer experience, and many other functional areas of the business. This will allow the finance leaders to maximise the potential of predictive modelling and analysis.

The better the data foundation, the more the evolution of FP&A. If you dig a little deeper into the priorities mentioned above, we are essentially talking about the FP&A function improving its reporting and analysis, and rather than being a quarterly, bi-annual, or annual event, insightful reporting can happen every week or even daily. Annual budgets can be given new meaning with short-term rolling forecasts, and the power of data can be harnessed to model different scenarios and create simulations that allow the business to stay on top of trends. Big data can enable FP&A leaders to add new metrics to monitor business performance, including customer lifetime value, production efficiency, and others, rather than just focusing on legacy KPIs.

What should not be forgotten is the need for better alignment between their need to understand data better and technology to deliver on their need for getting faster and more improved data-based insights. Tech-led FP&A transformation should harness the power of AI, ML, and BI to augment the FP&A function and future-proof the data environment for the long run.

Challenges to Leveraging Big Data

The problem isn’t that FP&A leaders are unaware of the role big data and associated insights will play in improving the FP&A function. The problem is that many finance leaders cannot navigate the challenges surrounding big data. The UK suffers from a skills shortage in the data domain, making it difficult for companies to optimise their data environment by leveraging the knowledge and skill sets of qualified personnel. This means hiring talent becomes a time-consuming and expensive process. The other challenge is building and maintaining an agile technology infrastructure that helps create a seamless data environment to connect disparate data and offer continuous data analysis. Again, this calls for making significant investments in the tech stack, a budgetary allocation that might not be feasible at a given time. The further addition of AI and ML in the tech stack to automate repetitive tasks can push the budget further northwards, and maintaining a data-centric environment can appear cost-intensive and cumbersome for critical stakeholders.

The Answer is FP&A Outsourcing

Yes, outsourcing has an immense cost benefit attached to it. As finance leaders perform an extensive cost-benefit analysis that benchmarks the cost of in-house FP&A with outsourced FP&A, the latter will be much more affordable, other things like skill sets and experience of the accountants being equal. Moreover, record to report process outsourcing is a key component of FP&A outsourcing, allowing organisations to achieve greater efficiency and accuracy in their financial reporting. This strategic move towards outsourcing helps not only manage the recurring challenges related to skills shortages, technological investments, and high costs but also optimise non-performing FP&A activities and achieve standardisation through focused centralisation.

For organisations suffering from decentralised processes, an offshore FP&A function is a great way of centralising activities, harnessing the benefit of labour arbitrage. Working with the right outsourcing partner will also help you optimise non-performing FP&A activities and achieve standardisation through focused centralisation. An overarching objective of outsourcing is to manage all the recurring challenges with respect to skills shortages, technological investments, high costs, and low efficiency. In such cases, finance leaders can find their teams trapped in administrative tasks rather than focusing on delivering key business insights.

Moreover, FP&A leaders will find it far easier to develop an FP&A CoE, leveraging the skillsets of service providers specialising in all aspects of FP&A, including record-to-report process outsourcing. You can work with the provider to identify common data standards to drive the consolidation of FP&A processes to achieve end-to-end transformation. It is important to note that outsourcing will lower your bottom-line costs and support your topline growth by improving the quality of information delivered to decision-makers and the speed at which it is delivered.

To benefit from record-to-record process outsourcing, partnering with a provider with a proven track record of creating a high-performance outsourced FP&A ecosystem for finance leaders will help. QX is a leader in FP&A business process outsourcing services and has facilitated the optimisation of FP&A across companies in the UK. Contact us to usher in a new era of efficiency in FP&A driven by big data insights.

Originally published Feb 08, 2024 05:02:59, updated Jun 25 2024

Topics: FP&A, R2R