Use xP&A to improve decision-making for your organization
Extended planning and analysis (xP&A) is a crucial evolution of financial planning and analysis (FP&A), aligning operational planning with financial planning and performance measurement. It is an enterprise planning strategy extending FP&A use cases beyond finance by adding cross-functional capabilities using the same vendor platform, architecture, and data model to improve visibility, alignment, forecasting accuracy.
Because of the way xP&A transcends finance and incorporates data and KPIs from across the organization, it functions as a natural step toward planning modernization and, ultimately, business transformation, which we call Connected Planning.
Evolving FP&A to xP&A
Most organizations are still using disparate spreadsheets passed among individuals via email or a shared drive with multiple users to generate templates, compile data across departments, and validate input. Traditional planning and analysis systems live separately without connecting or informing one another for a more holistic look at the process. It’s a lot of work and it’s not very accurate.
Visionary finance leaders are investing in improvement and are mapping the journey to a modernized and connected financial planning and analysis function.
Finance teams must enable cross-departmental business planning by contributing several key efforts via xP&A:
- Encouragement of decision-making aligned horizontally and vertically: Finance teams can ensure every business unit is working toward shared goals and strategic targets, and enable each stakeholder to align decisions based on reaching those goals.
- Identifying and outlining trade-offs: There will always be risks and benefits, and any decision made has an impact somewhere. Weighing various scenarios against one another to choose the optimal path is essential. Access to information better informs decisions based on business drivers and KPIs, such as demand, supply, pricing, revenue, cost of goods sold, and margin.
- Providing financial data to improve decision-making quality: Financial data should be robust. It should include internal and external sources. In addition, both low-latency and granular data can provide alerts about trends, anomalies, and outliers that better inform the decision-making process.
xP&A is Connected Planning led by finance to fully integrate the enterprise
Using xP&A allows the organization to benefit from these results:
- Faster and more accurate budgeting and financial forecasting: The ability to see and measure performance across the enterprise allows agile pivots and on-the-fly reforecasting for greater accuracy.
- Increased accountability and improved insights across several key areas: Workforce planning benefits from better understanding performance in each department and illuminating talent gaps or opportunities to upskill. Revenue owners can see where performance needs improvement, and respond by modifying go-to-market strategies, pricing, and marketing to maximize ROI. Operations can use all of this data to streamline or optimize for greater organization-wide efficiency and savings. When all functions are stakeholders in the financial planning process, leaders have a vested interest in assuring their performance adheres to agreed-upon goals.
- Better predictability and agility to address disruption and possible performance gaps for reduced risk: Eliminate surprises that derail a financial plan with “what-if” scenario modeling, risk reward analysis, and clearer lines of sight into organization-wide performance. Scenario planning and visibility into every function create more opportunities to plan for seemingly unlikely but possible events. With this knowledge, contingency plans and course changes can be made on the fly to reduce negative impacts and improve performance.
- Greater cross-team collaboration: With shared ownership of financial performance and related processes, there is greater personal investment to work together. There are fewer assumptions about results and KPIs, creating a more synced and synergistic team.
- Single source of data, more reliable truth: Eliminating spreadsheets and manual labor to compile financial data creates greater trust in both the numbers and the process. Everyone can input their data with confidence and finance can analyze it using context from the entire enterprise.
All these factors lead to the most important result: a strategic competitive advantage to weather and thrive in a variety of market conditions. Operationalizing xP&A within an organization is a natural progression, thanks to the advanced abilities and insights available beyond traditional FP&A.