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Large organizations have quickly realized that they must drive digital transformation efforts to remain competitive in today’s turbulent markets. In business planning and analysis, achieving this requires reducing the reliance on disparate spreadsheets, standalone systems, and disconnected point-to-point solutions and replacing them with a more coherent, standardized, and integrated approach. Businesses looking to adopt an end-to-end step-change that exemplifies the above should seriously consider Extended Planning & Analysis (xP&A).
xP&A is summarizable as taking essential Financial Planning & Analysis (FP&A) principles and extending them beyond the finance department. This is possible in any organizational area that produces business plans, including sales, marketing, and HR.
Applying these concepts to xP&A eliminates traditional barriers between finance and operations to better connect strategic, financial, and operational plans.
By synchronizing plans across the organization, xP&A helps businesses to benefit from greater transparency, alignment, and accountability for the actions taken by each department – with everything tying back to the financial implications of undertaking them. This works to add more agility which, given the complexity and pressure of the modern market, is necessary when change can occur at an incredible rate.
The FP&A process provides finance teams with a structured approach to financial budgeting, planning, forecasting, and reporting – enabling them to inform strategic decisions and assess financial impacts. The challenge is that FP&A only offers a financial perspective, ignoring the activities and plans of other business areas that all contribute to the bottom line.
The sales team has planned forecasts and targets, marketing a series of campaigns, HR plans for remuneration and headcount, and production has schedules, planned material, resources, and capacity. Each operational plan is typically conceived in isolation from the others, lacking real insight into the impact on the business. For example, a rise in sales requires increased production capacity, which needs additional headcount and machinery.
xP&A, on the other hand, works to break down silos and create a transparent view across all business operational plans. Sales, marketing, HR, procurement, supply chain, and so on contribute to the bottom line; linking these plans helps identify each department’s impact from a financial perspective. This is, in part, the core of what xP&A can do.
Trying to manually collate data from different spreadsheets and systems to pull together an overall business plan is time-consuming and near-impossible, especially given the ever-evolving nature of planned activities. As a result, it rarely happens, leaving management teams without clarity over the relationship between the output of each team or the overall business picture.
Likewise, traditional FP&A cannot adequately support the needs of modern businesses with the volatility we see in the markets.
xP&A overcomes these significant hurdles. By applying standardized principles of FP&A to other departments, financial and operational data come together to generate collaborative sales, demand, procurement, HR, and IT planning with a common goal.
Enterprises using xP&A principles will outperform those that are not through a robust, integrated approach to planning that focuses on informed, profitable decision-making at all stages.
The standardization, automation, and integration of planning activities business-wide bring far-reaching benefits for both management teams and employees:
The overall result of xP&A is unification. The organization has the tools and access to data it needs to be more efficient and effective across all departments.
When evolving from FP&A to xP&A, there is likely to be a significant shift in technology, general operational infrastructure, and organizational-wide mindset. Support from the C-Suite is therefore critical.
With executive buy-in, businesses can then take the following steps to determine their transformational journey:
Of course, these steps are very high-level. Businesses need to fully explore the challenges of traditional planning and the benefits of extending its principles outside the finance domain with xP&A. Only then can they look to maximize the value of FP&A through xP&A and plan for success.
Cloud xP&A is a maturing enterprise planning approach—consolidating financial and operational planning solutions on a single vendor platform. Application leaders can look to these vendors to enable continuous enterprise-wide planning and collaboration.
In the recent release of the Gartner® Market Guide for Cloud Extended Planning and Analysis Solutions, a proclamation is made that “through 2024, 30% of FP&A implementations will be extended to support operational finance processes, with 50% requiring a substantial cloud xP&A roadmap from their FP&A vendors.” Download the guide today to learn more.