Progressing along the path to profitable decision making and creating the capacity to cope

We revisited the roadmap of the path to profitable decision making last week.

Something that’s clear from this outline is that consolidating FP&A activities in order to save time and effort is the fundamental baseline for any journey to profitability. Until this has happened, your finance team can’t direct their attention to the value-added tasks that will make a positive difference to the business.

The starting point

We frequently highlight the limitations of working within a purely spreadsheet-based system. From the pain points to its bluntness as a tool for complex modelling, Excel is likely holding your team back.

To tie in with our focus on efficient application of time and effort among your team, our Operations Director Adam Whittick highlighted the following challenges in our expert insight series last year:

“We’ll often see teams where there are people sat next to each other working on the same dataset, spending similar amounts of time converting it into useful answers… It’s also the case that we all have our own quirks in how we work with spreadsheets – meaning no two spreadsheets work the same way. Data gets decentralised and errors come in.”

This duplication of effort and inconsistency across the dataset will hold your FP&A team back from progressing along the path to enabling profitable decision making.

Evolving approach

As Adam establishes, there is a clear initial process to undertake:

“The first step on the path is removing these non-value-adding activities. If you can replace those with a system that can be populated with millions of rows of data in seconds, have it do it the same way every month and present it at aggregate level, detail level, however you need – then those niggly spreadsheet tasks are removed. This releases people for all kinds of higher-value activities further up the chain”.

If you are just starting out on the process, here are the essential elements we believe need to be addressed:

• Amend your driver-based model from an emphasis on revenue to focusing on cash. Particularly in the current uncertainty, cash is king and whilst liquidity is at stake you need to have reliable information at your fingertips without having to carry out lengthy processes whenever you want to review it.
• Spend time identifying the latest trends and key operational drivers. What’s changed? What new risks and opportunities have emerged? How sensitive are drivers to current uncertainties in the market?
• Prioritise ‘cleanliness and timeliness’ – ensuring you get the right numbers, on time, every time. Without this fundamental element in place you have no way of generating insight.

Automate the process

McKinsey have shown that technology could be used to fully automate 42% of finance activities and mostly automate a further 19%.

Automation through a solution like IBM Planning Analytics or Planning Analytics On Demand is an immediate way to remove time-intensive activities that aren’t adding immediate value from your team’s workload. Applying a technology solution to these necessary tasks will then focus the collective brainpower of your finance function on the more valuable tasks which would benefit from the hands-on attention of a person rather than a machine.

Single version of the truth

Once you have taken the steps outlined above and established a single version of the truth, you will have a baseline set of data to compare against emerging scenarios and use for insightful planning. The next move is driven by all of the time that has now been released for your team. There is finally the capacity to not just cope with running the numbers but also to look at the information that emerges and start to question it; there’s what Adam refers to as: ‘momentum toward new insights.’

Taking the first steps on your journey to profitable decision making is more accessible than you might realise – the foundations of a strong system for your FP&A activities can be achieved within the capability of Planning Analytics on Demand. Take this opportunity drive more strategic planning and get in touch today to discover exactly how valuable Planning Analytics could be to you.