Fatihah Ramzi, DigitalCFO Asia | 30 August 2022
DigitalCFO Asia recently wrapped up two executive roundtable discussions on FP&A in collaboration with Jedox in Singapore and Malaysia. The Singapore roundtable was held on the 24th of August at Straits Chinese Nonya Restaurant, Esplanade Mall and the Malaysia roundtable was held on the 18th of August at W Hotel, Kuala Lumpur.
CFOs and finance leaders are considered the principal steward of capital in an organization. As one of the decision-makers in an organization, they are supported by competent and progressive teams that allow them to monitor where the capital was, is, and goes next. While the finance function continues to progress, looking into the future is where the focus now lies. Digital transformation is the priority for most companies today.
In the dynamic world that we are in today, businesses need to remain agile or else, they will be left behind. Business foundations need to be stable first before implementing FP&A. Businesses will need to prioritise and capture all the drivers of success before moving forward. FP&A units continue to receive critical attention, as they are now considered the drivers of change not just in finance, but in the entire organization.
“Do not automate anything that is not relevant or not the main driver for business.”— Phillip Tan, CFO of IMC
What you can measure, you can manage. FP&A is important to sync operations, manage finance data from front-end as well as back-end and to manage 3rd party data such as real-time geopolitical or geoeconomic data. This is so that businesses are able to take black or grey swan events into account when forecasting.
“Aside from the finance standpoint, finance professionals need to streamline the goal across all teams for xP&A to make sense.”— Qi Yang Chan, CFO of Signature Market Sdn Bhd
What Is FP&A?
According to Jedox’s FP&A Handbook, FP&A drives business decisions throughout the organization through three key services:
1. Integrated planning and forecasting: A key function of FP&A is to translate the strategic plan into a strategy that coordinates the company, can be measured, and can be checked. This includes forecasting and budgeting, for those that use budgets.
2. Performance management: Companies set financial and operational goals and metrics that align with the desired outcomes. FP&A supports the company through management reporting on progress and performance on these metrics, supplemented with the additional context of “the three what’s”: what happened, what it means and what do we do next.
3. Financial analysis: FP&A delivers insight based on constructed models, data and information.
To deliver on these promises to the business, FP&A must also add a fourth activity:
4. Manage its own growth: FP&A plans its own growth to remain relevant to the changing operating models of business, data management and systems architecture, and team development.
“Having FP&A allows us to think outside and for the future, placing ourselves in the mindsets of others, as well as streamlining priorities across all departments. Without FP&A, forecasting and successful forecasting would be almost impossible.”— Srinidhi BK, CFO of Apar Technologies
Sieving Through The Noise In Data To Get A Single Source Of Truth
It is critical that business leaders position their finance team as a partner who can work together with diverse teams within the organisation to find meaning from disparate data sources, both internal and external, and accurately forecast and plan a company’s finances and success through the dynamic world of today. Forecast today is challenged by geopolitical events so businesses really need to have a combined approach to data analysis (internal and external data, historical and current data, bring most turbulent insights into your data).
Businesses must centralise their digital FP&A team with the right access to the right data. No matter what tool a business adopts, user adoption is important which is why many successful businesses believe in 3 crucial pillars that will bring FP&A to life – People, Process and Technology. When it comes to “People”, finance leaders must expect each and every one to be different. Different age groups have different experiences with technology and they also have their own pace of learning. Businesses that take into account these differences, have a higher success rate at embodying digital literacy within the company which will eventually lead to digital adoption.
When it comes to “Process”, organizations need to use their data appropriately.
“Rather than working for the Data, let the Data work for you. When you let the data work for you, the finance team would be able to prioritise on deriving insights and increase value of the company in the long run,” says Philip Tan, CFO of IMC.
Hence why they need to simplify processes as far as possible. When it comes to “Technology”, the centralisation of the data is critical and businesses will require a talented data analytics team as this will help businesses to sieve through the noise and provide a single source of truth. Understanding the maturity of the organisation is key. Once businesses have done that, they can then implement any tool or process around FP&A.
Therefore, organizations need to ensure that their resource allocation is done right. To gauge whether you are allocating your resources adequately, you can think about the weightage of historical and real-time data in your current data systems (e.g. 30% historical and 70% real-time). Businesses need to have a higher weightage of real-time data as the economy is no longer cyclical in nature. Real time data is definitely necessary in making better informed or timely decisions in the dynamic economy of today.