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Synching Financial and Nonfinancial Data

  • By Nilly Essaides
  • Published: 12/7/2016

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Integrated planning is where FP&A is headed. To execute on its mandate as a true partner to the business, finance has to support its interpersonal relationship with the operations with a collaborative toolset. Finance and the business must merge what were once disparate streams of data into one view that includes operational and financial information. To do its job effectively, FP&A needs to delve into business transaction-level information to understand how changing business drivers affects financial performance and vice versa.

The primary reason integrated planning is becoming more of a household term is the changing role of the CFO. “The CFO is becoming more important,” said Pras Chatterjee, senior director of product marketing, enterprise performance management at SAP. In the past, the budget and planning were done at a centralized, high level only. Today, finance functions are embedded in regional and functional entities and each create its own budget. According to Chatterjee, Integrated Planning is the glue that holds all these together, allowing senior finance leaders to have a line of sight into various budgets and allowing budget owners to make sure they’re all looking at the same numbers. “Technology brings all these plans together,” he said.

According to a 2016 report in the Harvard Business Review, companies face the need for innovation—not just in products, but also in their business models and strategies: “Organizations must streamline disparate sales and operational planning with traditional financial planning and analysis (FP&A) by using technology to connect people, data and processes across the organization. This new way of doing things has been called integrated business planning—something that every business can greatly benefit from achieving.”

The tools of collaboration

Collaborative technology is one of the three pillars that enable finance to build a strong partnership with the business, according to AFP’s latest FP&A Guide, How FP&A Can Become A Better Business Partner. The other two are a strong relationship between FP&A and business leaders and an alignment of the finance and business organizations. Combined, they allow finance to work closely with the operations and provide decision support and improve enterprise profitability.

According to Meredith Hobik, product line leader at Anaplan, today’s finance departments face a very different set of challenges. The stakes are higher and the pressures are greater: customers react faster. The external environment is more volatile. “The finance team has been pushed into a more strategic role,” she said. While the role of quarterly forecast and closing the books is not going to go away, “In this new world of integrated planning, you’re constantly staying in touch with the supply-chain teams, the sales operations teams, the HR teams, etc. It’s an opportunity for FP&A to take on more responsibility.”

New technologies are not just about handling ever-larger sets of data, but also bringing together different data sets. “We’re moving into the intersection of collaboration, mobility, conversation platforms, consumers and internal data,” said Christian Gheorghe, CEO at Tidemark. “There’s a desire on the part of FP&A to look for modern planning and analytical platforms that offer real-time access to information, both financial and operational, at the line-item level.” While before, planning was done at the regional or corporate level, to be able to compete at the digital age, companies need to be able to analyze their business at the transaction level to uncover patterns, look at business drivers and accumulate per-customer information. “Before they were basically blind,” Gheorghe said.

Added Steve Elliott, director at The Hackett Group’s EPM Transformation Practice: “Now there’s a real opportunity to integrate the S&OP process with the finance process and create a strong linkage between the budget and the forecast and operational information flows in real time.”

Old CRM tools often fall short in providing FP&A with the access it needs to the dual streams of data, according to Nari Viswanathan, vice president of product management at vendor River Logic. Ultimately, all financial metrics relate to something that at its core is operational. “If you are not able to look at those two sets of data simultaneously, you end up making bad decisions. The simple premise behind integrated planning is that every line in the P&L or the balance sheet is tied to real or virtual assets.” Production limits tie into marketing campaigns, which tie into working capital, which tie into what kinds of financing a company needs. “That’s why it doesn’t make sense to work in a silo.”

Things may not be so black or white, however, cautioned SAP’s Chatterjee. Traditional ERPs may be built around functional silos, but it’s important that everyone is on the same platform. Chatterjee acknowledges it may take some time for companies to migrate their operations to platforms like HANA (from SAP) and other SaaS solutions and in-memory computing. At the same time, using cloud solutions alone can lead to problems. “Those tools might work at the finance level but are often not scalable,” he noted. “They’re not in synch with other enterprise solutions and work off different KPIs.”  The key is to create a seamless integration of both to enable the sharing of information across silos while maintaining a single version of the data. “If you plan it, you can properly marry on premise and cloud solutions,” he said.

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