xP&A: Extending FP&A Principles Beyond the Finance Department

Extending financial planning and analysis (FP&A) principles beyond the finance department, which the analyst firm Gartner has coined xP&A, has taken on greater importance recently. Doing so requires examining operational data, not only financials, to improve collaboration and increase visibility into organisational performance and foster better organisational decision making.

Typically, each department within a company generates its own operational activities and plans, while financial data, like budget and spend, roll up to the finance team for monitoring, reporting and occasional analysis. This creates siloed, departmental-focused planning. For true, company-wide planning, organisations need to integrate all of these departmental plans to gain a comprehensive view of the business. Financial planning and analysis (FP&A) teams, which already gather financial data company-wide and perform resource allocation, budgeting, forecasting and reporting, are well positioned to champion this effort.

The business disruptions caused by COVID-19 were a wake-up call for companies across many sectors and helped to demonstrate the importance of extending planning and analysis across the wider organisation. These quickly changing market factors showed the need for better processes for consolidating forecasts and performance metrics. As CFOs and controllers undertook that exercise and gained insights into the business, they came to appreciate how this extending planning approach can help empower them to lead company-wide strategic initiatives and help optimise business outcomes.

Is ‘xP&A’ any different than FP&A?

Because they work with actuals and forecasts to develop plans, FP&A teams evaluate a broad array of financial figures, including revenue, expenses, taxes, capital expenditures and financial statements. They must ensure their insight is timely, accurate, precisely detailed and actionable. The real value of the evolving FP&A function lies in its ability to provide data-driven answers to business questions. Generally speaking, FP&A analyses information with a financial and strategic lens.

xP&A takes that same strategic lens and applies it beyond the walls of finance. xP&A similarly seeks to uncover insights and improve decision-making. For example, many organisations are expanding planning to other departments like human resources for workforce planning and to sales for sales planning, with both plans connected back to the corporate financial model.

How do they accomplish this? The emergence of new tools and technologies have revolutionised the FP&A function by bringing continuous and collaborative planning to the organisation for faster, better insights.

Why is ‘xP&A’ so vital?

Just like the accounting and finance team, other business functions often have to manually pull data from dozens of siloed sources and piece together insights with limited resources. Creating plans with stale data and inadequate systems strains business process owners and their employees.

By applying FP&A principles to create an integrated and holistic business plan, other departments can reap similar benefits. This can give FP&A full visibility into organisational performance and build alignment across teams and business functions. This planning environment allows each function to plan the way it needs to, while keeping all plans connected to a holistic corporate financial plan. This helps improve agility within organisation where decisions are made based on data-driven insight rather than instinct.

What are ‘xP&A’s’ benefits?

xP&A is a call for better processes and insights into both financial and operational information. Standardising planning activities company-wide creates many organisational benefits, including:

• Business Alignment: Connect siloed teams and departments to better weather volatility and change. Connect every part of your business with a plan that is fully integrated across finance, operations and specific lines of business. With connected planning, you can immediately analyse the impact of changes across your business. For example, with extended planning discipline in place, if the business confronts supply chain and sourcing challenges, finance will be able to quickly identify where it can get the products the business wants, how they will be delivered and when they will arrive.
• Improved Visibility: When integrated with other departments and business units, xP&A gives finance a holistic view into the entire organisation, including the risks and resources that define it. This allows you to build a plan with the entire organisation in agreement, rather than one being driven just by the finance team. In HR, for example, workforce planning gives finance better access and visibility into how many employees the company will need during peak season to help determine the right balance of skills and a competitive rate of pay to improve employee retention.
• Identifying Growth Opportunities: With a more holistic view of the entire business and the data to support it, FP&A can find new growth opportunities for expansion or identify opportunities for cost savings. This helps optimise various aspects of the business and move it forward intelligently at every step. In sales and marketing, for example, xP&A can help identify growth opportunities by assessing macroeconomic trends, producing product-level forecasts and estimating the ROI of marketing spend.
• Increased Business Collaboration: xP&A encourages leaders to collaborate and plan more efficiently. It starts with getting the entire team working with one, trusted set of numbers and building on a foundation of accurate, up-to-date data. When you trust the numbers, you can focus your time on analysis and delivering valuable insights to stakeholders to improve engagement. When your partners in other departments can take more ownership of the data, turning it into “our numbers” instead of “finance’s numbers,” everybody wins. This empowers all of your teams to work together toward the same goals and follow the same roadmap to get there.

xP&A in Action

NetSuite customers are prime examples that company-wide planning is the future. Customers are already extending the NetSuite Planning and Budgeting solution beyond the finance department to work toward objectives beyond financial planning, such as workforce planning, sales planning and demand planning. One customer in the telecommunication industry starts the process alongside its HR team, which supplies the FP&A team with critical information on the entire workforce. The workforce plan, integrated with the budget, revenue forecasts and corporate financial plan helps the company determine where to expand next and when, how to staff new locations, what practise areas to grow and more.

By automating labour-intensive planning, budgeting and forecasting processes and an organisation’s financial and operational data, NetSuite Planning and Budgeting allows finance teams to quickly and easily produce plans and forecasts, model what-if scenarios and generate reports within one collaborative scalable solution. Finance teams are able to gain the control, collaboration and visibility they need to build and refine the overall organisation’s financial and operational plans.