Thoughtful financial planning and analysis (FP&A) is at the heart of successful business operations today, more so than in the past thanks to the emergence of robust analytical engines, artificial intelligence, and the dynamic marketplace brought on by global supply chains and greater availability of real-time data.
AI and effectively using the wide range of available data is making FP&A increasingly a competitive differentiator and the deciding factor between businesses that are leading and those that are just trying to keep up.
So is the emergence of xP&A. xP&A is a concept coined in 2020 by research firm Gartner to describe an extended form of financial planning and analysis that also accounts for variables across the entire business. xP&A leads to holistic forecasting, continuous planning, advanced analytics, and performance monitoring. Data-savvy companies are increasingly plugging into this trend.
Businesses today require a strong FP&A game, and cloud ERP is the cornerstone that enables it.
How FP&A Drives Competitiveness
Sophisticated financial planning & analysis plays a big role in competitiveness. With FP&A tools, businesses gain:
- Fast and accurate financial analysis and insight for company leaders, including overall company health indicators.
- Predictive capabilities for decisions around product and market decisions that include cash flow and profitability.
- Agile, integrated financial plans that account for multiple market scenarios.
- Opportunity identification for product offerings, quick pivots, supply chain adjustments, and market changes.
- Sophisticated risk analysis and minimization around multiple “what-if” scenarios.
- Alignment of corporate strategy with execution and performance tracking.
- Collaborative budget creation that extends across departments.
Where Cloud ERP Helps with Financial Planning & Analysis
There are four basic steps that every business follows for FP&A. Cloud ERP plays an important role in enabling each of these steps and making them more efficient.
1. Data Collection, Consolidation, and Verification
For planning and analysis, businesses need good data. That starts with collecting all operational data from company systems, data warehouses, and other business solutions. Data from outside the organization also must be collected, including broader demographic, economic, and market data. Cloud ERP makes this data collection almost trivial because all company data is housed in a single ERP solution and updated in real time.
Once data is collected, there’s also the need for standardizing and verifying it so the data is useful and accurate. Cloud ERP enforces data standardization and ensures the accuracy of this data through automatic capture, and artificial intelligence built into leading cloud ERP solutions or third-party AI engines that plug into ERP can standardize and make sense of unstructured data.
2. Planning and Forecasting
Armed with data, the next step with FP&A is creating financial forecasts that predict how the business will perform in the future and where it is headed, including forecasts and cash flow projections. Financial forecast models are also used to test out different scenarios, simulate the impact of different variables, and determine the best course of action to drive the right outcomes.
The analytics engine and AI intelligence baked into cloud ERP can automate much of the forecast creation and free up financial staff and business leaders for a greater focus on insight and strategy. With cloud ERP, businesses can automate and efficiently perform predictive financial planning, driver-based planning that identifies key business drivers, and multi-scenario planning that models scenarios based on assumptions about how market or business dynamics might play out.
After planning and forecasting come budget creation for meeting the defined strategic organizational goals. This includes allocating resources to each unit within the business and defining the revenue and cash flow these units are each expected to generate.
With the complete picture of all aspects of company operations that come from having an overarching cloud ERP backend, businesses can more accurately develop the right budgeting mix within a holistic, total company perspective. The real-time availability of operational data and the ease of automated report creation enable businesses to move from an annual or quarterly budget creation process to a continuous budgeting system. Zero-based budgeting can be an ongoing process when there is complete organizational visibility and it is tied to strategy.
4. Performance Monitoring and Analytics
Typically ongoing financial analysis and performance monitoring also is part of FP&A activity, including ongoing sales, expenses, profit, working capital, cash flow, and other KPI reports.
This step in the FP&A cycle is turbocharged by cloud ERP because this reporting can be fully automated by an ERP solution thanks to complete data visibility and real-time reporting. Both regular and ad hoc reporting can be achieved easily with a cloud ERP solution, enabling businesses to ask questions from financial and operational data and get immediate answers for ongoing, agile, data-driven decision-making.
Critically, this interrogation and analysis of company data can be performed without excessive technical skill. Dashboards, reports, and visualizations can be pre-configured for easy analysis by any authorized employee, and custom analysis can be created with a drag-and-drop editor within the cloud ERP system.
Cloud ERP Makes FP&A Easy
Ready to take the pain out of FP&A while improving insight and efficiency simultaneously? Learn more about how cloud ERP can help.
As a leading ERP implementation partner that has been supporting businesses for more than 25 years, we know both ERP and the needs of small and fast-growing businesses. Contact one of our experienced consultants at (801) 642-0123 or by writing us at email@example.com for more on how cloud ERP can help with financial planning & analysis.