So, why is financial forecasting so challenging? Financial planning and analysis processes are often fragmented and lack inputs from operational areas, due to outdated planning technology and processes. More importantly, spreadsheets are still the most commonly used tool, especially for planning outside of finance. While the Finance team typically uses planning software, operational planning is still done via spreadsheets. There has been no significant impact on spreadsheet usage despite many technological advancements.
Top Financial Planning and Analysis Challenges
1. Disconnected systems and processes
According to Ventana Research, 77% of planning processes depend to some degree on having access to accurate and timely data from other parts of the organization. Therefore, integrating the various planning processes provides several benefits. However, integrating plans from different areas of the business can be challenging, especially if you are dealing with a number of disconnected spreadsheets. Cloud-based systems make it easier to move from spreadsheets and integrate financial planning and analysis with other areas of the business.
2. Lack of business insights
A common problem encountered by most CFOs today is the poor quality of data available and the inability to transform their business data into critical insights. Spreadsheets are shared with many different people and teams and over time, different versions exist which could differ from the actual version, making modeling difficult and unreliable. Without a single source of truth, tracking down and consolidating all the necessary data is a slow, manual and error-prone exercise. Spreadsheets cannot support an infinite number of calculations and macros which can leave your growing company without reliable models and projections to produce accurate budgets and forecasts. Senior management cannot drill down into business data and get actionable insights for decision making.
3. Manual tasks take too much time
Finance professionals are spending too much time performing manual tasks such as account reconciliation and financial close. Many finance departments still struggle with cutting down their cycle time to half of what they are used to. Strategic tasks like financial planning and analysis are crucial to generate timely, meaningful insights. However, finance teams are spending most of their time sorting and organizing data instead of analyzing it.
4. Inaccurate budgeting and forecasting
Cloud-based financial forecasting solutions can be very helpful in collecting and analyzing data, running scenarios, analyzing methodologies and potential outcomes. But, just having the right solution isn’t enough for accurate financial forecasting. More often, the financial processes are unreliable and need to be fixed, due to which the forecasts are inaccurate. There is often a lack of consistency in systems and processes, hindering effective decision-making.
5. Lack of collaboration
Financial planning and analysis, like any other business transformation initiatives, faces obstacles if effective collaboration across departments doesn’t exist. Collaboration in financial planning and analysis ensures better visibility and more accurate forecasts across your business functions. For example, information shared by the operations team aids in financial planning and cost optimization through a supportive system of shared information. Collaborative forecasting enables companies to move away from disparate and isolated forecasting activities to a unified, real-time enterprise forecasting process.
6. Lack of real-time information
Business leaders need up-to-the-minute information and finance teams are under constant pressure to deliver actionable insights to assist decision making. The lack of accurate, real-time data limits the level of detail your financial planning system provides. You can use this data to set the right goals and build the strategy for your business. Self-service analytics capabilities enable real-time reporting, helping you to understand which revenue sources are underperforming, how to improve operational efficiencies, analyze your company’s performance, and develop an achievable plan for driving growth. You can also adjust your plans as you go with any changes in the real-time information.
Benefits of Cloud-Based Financial Planning and Analysis
Gartner estimates that by 2024, 70% of new financial planning and analysis projects will become extended planning and analysis projects, extending their scope beyond the finance domain into other areas of enterprise planning and analysis. It is therefore important for businesses to have a financial planning solution that offers a compelling value proposition for both financial and operational planners.
Cloud FP&A solutions are expanding their ability to extend financial planning processes across different functions. This could include areas such as sales, human resources and supply chain operational planning. This will eventually require a robust FP&A solution that’s capable of supporting planning across the enterprise. The cloud makes it faster and easier to extend planning across the enterprise. Instead of having a number of disconnected plans, the cloud allows you to ensure the alignment of planning processes across your business. Cloud offers greater flexibility, scalability and a pay-as-you-go model, while still offering the transparency and control required for finance teams.
Cloud solutions cost less to implement, require fewer IT support staff, and need less administration. Best of all, they eliminate customizations and costly upgrades.
Cloud-based planning systems can easily connect and align planning processes across the enterprise, while maintaining autonomy for the individual planners. Rather than keeping track of multiple documents or spreadsheets in multiple places, cloud apps help establish a single source of truth across the enterprise.
With today’s cloud apps, many departments can share information and ideas via embedded social networks rather than sending large files back and forth. This type of centralized system makes it easier to accommodate a large base of contributors while simultaneously increasing accountability and awareness.
With cloud apps, there is no software to install or maintain, and users throughout the organization can tap into cloud services via a standard web browser on a phone, tablet, or computer. You no longer need multiple IT professionals monitoring infrastructure and servers and databases. You simply subscribe to software functionality and order as many licenses as you need.
Security is one of the advantages of moving to cloud, since it is difficult to achieve such rigorous controls in a corporate data center. Individual user access is role-based and can be controlled by admins according to their roles and responsibilities.