Keys to Successful Financial Planning and Analysis

After working with so many finance functions in a wide variety of industries, one common challenge they are constantly facing is how to conduct good planning and analysis that is valued by their internal customers, be it sales, IT, marketing, manufacturing or supply chain. The plethora of data, tools and techniques available to finance professionals is also overwhelming at times. Nevertheless, there are some basic ‘keys’ to FP&A that ensure that the finance professional becomes that ‘trusted advisor’ providing high quality planning and analysis to their business colleagues. Clean, high quality transactional data – make sure you have quality data coming in. One touch accounting – Data should be entered once or captured automatically Two day close or less – you need time to think and understand your numbers.  Getting bogged down in closing the books will limit that time Automated reporting – you shouldn’t be generating any financial statements in excel in this day. Ruthless prioritization of work – time is fixed for everyone.  Make sure you focus on what’s going to make you and your company succeed. Define the service levels with your partners – it will allow you to better acheive 5 based on where you fit into their process and work flows Keep your tools sharp and organized – make sure you leverage the most recent solutions from your software providers (i.e. Microsoft).  They have built in functionality that can automate previous manual tasks. Ensure everyone understands the process – this will help reduce stress and focus the discussion on what to do as opposed to what are the numbers. Ensure you understand the difference between...

Spreadsheets – Duct Tape of Accounting

From the rise of Visicalc in 1979 on the Apple, to Lotus 123 on DOS to Excel on Windows, spreadsheets have become, after the accounting system, the number one program accountants use on a daily basis (some may argue that spreadsheets are indeed the number one program.)  In fact, so many accountants rely on spreadsheets today to do to all their work that instead of the powerful enabler that gave accountants a leadership position in business today, it has become a potential handicap that will soon have them automated away by programmers and artificial intelligence. The problem we see today is that so many accountants do not understand the risks they are unknowlingly take on as well as the shortcomings spreadsheets have over other solutions.  A number of studies have shown over 80% of spreadsheets have errors, with 1% of all cells having forumula errors alone.  If you have more than 20 formulas, you now have the potential of having a material significant error. Our colleagues at SPRIG have done a great job of highlighiting the impact of errors in spreadsheets, from $6 Billion dollar loses at JP Morgan, to lawsuits to complete banking and company failures. For a profession that prides itself in being conservative, risk adverse and double checks everything, why do accountants continue to rely on 30 year old technology as their prime tool? Why do they turn to the ‘duct tape of accounting’ for all their problem solving and decision support? First is comfort level.  Spreadsheets are easy. Second is cost. The only factor you have to put in is time and a bit of logic. Third is...

Variance Analysis and Decision Support – The differentiator for the future

As our society becomes more digital and data compilation is becoming close to free, it is becoming more and more clear to our team on which organizations will survive and which ones will be shrinking and dying in the years ahead.   While companies are still using excel to do some basic analysis, what is quite surprising is that alot of finance and accounting professionals are still not aware of or have not leveraged the power of data management and mining technologies for their company.  In fact, a lot of them risk being marginalized by the rise of the data scientist and being overtaken and put out of business by their competitors. At a recent course we taught on variance analysis, of the 32 attendees from a wide range of organizations, only one was implementing an automated variance analysis and decision support system to capture and provide data from multiple points in their processes to help their business make better decisions.   A vast majority of the attendees were still conducting variance analysis in excel, only on their income statement and some of them 15 to 20 days after the month end. Of all the clients we work with, we are now seeing some of them becoming poised to take advantage of the opportunities in today’s marketplace and monetize those opportunities due to their investments in following systems: Automated accounting processes (purchase to pay, order to cash, reconciliations) that leverage the network effect while reducing transaction costs to less than $1 per Centralized data repositories of both financial, performance and market data that allow 360, 3-d views of the business and the markets they are operating...
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