All too often, the return on investment of FP&A projects only encompasses productivity gains within the corporate finance team and ignore the massive amount of effort and cost that lies submerged in the business units. According to new research by business advisory firm CEB, it is this that is preventing companies from realizing the full potential of recent investments in FP&A improvements. In a global survey of 138 FP&A directors, CEB found that four in five companies realized less than half of their potential productivity and cost savings from FP&A initiatives because they failed to consider that the majority of workload is manual and time-consuming. The magnitude of this hidden workload sometimes presents a challenge to an FP&A team intent on improving corporate agility and budget accuracy by increasing the frequency of forecasts or the level of detail in a chart of accounts. Here are some tips for keeping your colleagues across the business with you every step of the way.
1. Engage with the businessUndoubtedly, there is a lot of budgeting and forecasting work that is done for controls and assurance rather than for decision-making and resource allocation. This is all too obvious to those in sales, commercial, and operational roles, who are responsible for running the day-to-day business. According to the FP&A directors CEB surveyed, only 21 percent of internal business stakeholders say budgeting is a valuable activity, and just 35 percent of stakeholders say forecasting is a valuable activity. The only way to overcome such resistance is to involve stakeholders from across the business in your project at the earliest opportunity and ensure that you create a win-win situation. That means producing forecasts that give the action-oriented outputs they need to manage their part of the business, such as predictions of future staffing needs or identifying potential capacity problems.
2. Minimize their workloadYou also need to make a conscious effort to minimize the workload that more frequent forecasting can place on the business. There are numerous ways to achieve that:
- Focus efforts on forecasting line items that are both material and variable. That typically means revenue, large amounts of variable expense, and discretionary spending. Everything else is less important and can be forecast far less frequently.
- Some line items in a forecast are more important than others; therefore, some need to be forecasted in considerable detail while others can simply be aggregated. For instance, you might ask for a detailed forecast of every pack size of fast-moving products, but not for slower-moving product groups.
- Build driver-based models that leverage operational data that is readily available, using rules to convert inputs into the financial view you need. Adopting such an approach produces the action-orientated information that business executives need—making forecasting a rapid, light-touch process that minimizes workload.