“Rhinos Play In Other Dinosaurs’ Streets.” If you have ever studied for your AICPA exams, that’s probably the mnemonic you used to remember the six principles of their Code of Professional Conduct, namely Responsibility, the Public interest, Integrity, Objectivity and independence, Due care, Scope and nature of services. Mnemonics clearly work, otherwise why would the ancient Greeks have invented the word in the first place? There is even a mnemonic for spelling the word: “Memory Needs Every Method Of Nurturing Its Capacity.”
Unfortunately, we have fewer mnemonics in the world of business and finance than there are in the sciences; perhaps because there is less hard theory that we need to remember. However, if we are light on mnemonics, then we make up for it in spades when it comes to acronyms. I even bumped into a new one last week, “VUCA.”
VUCA – an acronym for the “new normal”
This is an acronym that the US Army War College has come up with to describe the world today after 50 years of movement from an industrial to an information economy:
Volatile, Uncertain, Complex and Ambiguous
I must admit I like it a lot because it sums up everything we have been through in the last few decades. It also talks to the challenges we face for the future such as the relentless drive to lower costs, rapidly changing demographics, shifting geo-politics and an overwhelming myriad of game-changing technologies. All of this is presenting businesses with new challenges about how to anticipate, adapt, manoeuvre, make decisions, and change course in this new “VUCA” world.
One thing we know for sure is that the way we used to plan and budget can no longer cope. The days when financial budgeting was a calendar-driven process of issuing templates to collect revenue forecasts and departmental line item expenses should have ended decades ago. However, they are still with us because, until recently, there were no planning and budgeting solutions capable of supporting anything other than that traditional approach. Thankfully, that has now changed with the advent of user-friendly, real-time planning solutions that give us the opportunity to make planning and budgeting fit for purpose.
The 6 “C’s” of the new FP&A operating model
To describe what I – and others – see as the FP&A operating model that we should be working towards, allow me to continue with the word games. There is another type of aide-mémoire in common usage that relies on alliteration. These are simply lists of things that all begin with the same letter, such as the traditional 4 P’s of the marketing mix, (Product, Price, Promotion, and Place), or, more recently, the 7 V’s of big data, (Volume, Velocity, Variety, Variability, Veracity, Visualization, and Value).
Well, here is my straw man for the 6 “C’s” of the new FP&A operating model:
1. Continual – rather than calendar-driven, planning and budgeting needs to be event-driven.
2. Comprehensive – instead of just encompassing all financial line items, all aspects of planning in every line of business should be included.
3. Correct – with all users sharing the same robust and reliable data – and none of the error-prone spreadsheet nightmares of the past.
4. Connected – so that even the smallest amendment ripples through to others in real time to keep all data up-to-date.
5. Collaborative – with users sharing plans in a secure environment.
6. Community-owned – so that business users can manage all aspects of the process rather than having to rely on IT specialists or external expertise.
This is most definitely work in progress, so please feel free to add any suggestions and refinements in the comments box below.