FP&A processes of budgeting, planning, analysis and reporting are often focused on ‘what’ is going to be done or ‘what’ has happened. This misses a trick – for the activity to be of any value, it needs to look instead at ‘why’.
Why are we predicting these numbers?
When forecasting, it’s crucial to interrogate the reasoning behind the numbers. What is happening in the drivers that is going to deliver this outcome? What can you do more of? What are the things that are going to prevent you from achieving what you’ve planned?
The answers to these questions will allow you to pinpoint the key activities that will deliver the budget and will also inform your scenario planning. You’ll have the insight to act on emerging opportunities and defend against potential risks in the future.
This behaviour links to the importance of conducting mid-year reviews and examining forecast accuracy, both of which allow you to shift your focus if required and revise your plan as you go. None of this is possible however if the numbers aren’t readily accessible.
Why have we achieved this level of performance?
There’s no sense in just accepting your results – deriving actionable insights for the future should be the key driver for all reporting. Addressing the reasons behind your performance can reveal a valuable overview and inform ongoing decisions.
If you hit your targets, are there any emerging opportunities to be exploited? If you missed your goals, can you identify any underlying risks to the rest of your plan?
‘Why?’ tells stories
It’s also not enough to accept the macro context of your results without digging into the additional layers of meaning. If your sales numbers have been down in quarters two and three this year, that’s against the backdrop of a global virus. But you shouldn’t stop there – yes there’s an obvious reason why your numbers have dropped, but are they sitting higher or lower than you would expect given the wider situation?
Questioning and exploring further into the logic and narrative of your results gives you the whole story and provides a target for your increased focus moving forward. Asking ‘why?’ gives you the bigger picture rather than a limited snapshot.
‘Why?’ finds errors
Taking a closer look at all of your numbers forces an examination of the unexpected. If there’s an outlying number in your data – is it genuine? What does it tell you? And if it’s not, is it an error? Where has it come from? Nothing kills credibility for an FP&A team like data errors, particularly when they creep through the net and make it all the way to your management information.
‘Why?’ requires people augmented by technology
If the idea of asking ‘why?’ all the time gives you a headache, it’s likely that you’re not being supported by the right tools. Of course you’re less likely to question your data if that process is going to involve spending days manually combing through a web of spreadsheets. With software like Planning Analytics working for you, you can perform the analysis behind the very human skill of knowing which questions to ask with just a few clicks of the mouse.
Using this system will give you the capability to see the whole story behind your numbers and the time and opportunity to explore all avenues and refocus your activities with the answers to hand. IBM’s Planning Analytics Digital offering has opened this tool up to enterprises of all sizes. [https://spitfire-analytics.com/resources/is-excel-holding-you-back-in-lockdown/] Take this opportunity to ask more questions and get in touch today to discover exactly how valuable Planning Analytics could be to you.