It’s no secret that today’s business leaders are facing unprecedented uncertainty. Between a still evolving post-pandemic "new normal" in the workplace, labor shortages, overlapping and ongoing supply chain crises, recurring concerns over inflation and recession, and growing geopolitical instability, companies that rely on traditional planning and forecasting find themselves struggling to stay current and competitive.Fortunately, modern financial planning and analysis software offers savvy business leaders the opportunity to get ahead and stay in the loop despite compounding uncertainty. Updating your current FP&A process to meet these unpredictable times involves cutting loose manual, time-consuming processes and adopting a new paradigm for forecasting success. Here are 5 tips to make sure your Finance function stays on the cusp of the change, and doesn't get left in the dust by it.
1. Increase the frequency of key financial reports
In the current economic climate, waiting too long for your financial planning and analysis processes can cause serious issues for your business. Spreadsheets and other traditional budgeting tools result in errors, and they prevent companies from updating information as it comes in. To stay agile and accurate, businesses need to utilize automated financial tools that allow for rolling forecasts. When you update your forecast regularly, you have a better chance of identifying triggers and trends that can impact your bottom line. The result is that you can evaluate what-if scenarios and adjust your plans as needed.
2. Improve the precision of your model, drivers, and assumptions by incorporating a higher level of detail
How detailed are your models, drivers, and assumptions? If you aren’t engaging in automated driver-based budgeting, you’re missing an opportunity to make your plans both accurate and resilient over time. As an FP&A process connecting resources and activities with financials, driver-based planning involves identifying key drivers and modeling scenarios around them. This allows businesses to better assess how they’d fare when faced with different variables. The goal is to improve planning agility without getting bogged down in manual data entry or dealing with the errors common in spreadsheet macros and formulas.
3. Track performance to plan across assumptions and drivers
It’s not enough to identify the main drivers affecting your business. If you want to generate the best business strategy, tracking performance across assumptions and drivers is key. With dedicated FP&A software, companies can identify the most crucial business drivers and easily assess their results before engaging in strategic decision-making. For example, a business with multiple stores may opt to track store size, product volume, sales staff size, and revenue, among other metrics. Engaging in this type of performance tracking helps companies evaluate various planning strategies and determine how adjusting one driver can impact others in the long run. Additionally, leaders can easily generate operational reports conveying this data to others within the organization.
4. Foster more collaboration with key stakeholders in the company
Business leaders often make the mistake of only involving owners and other key stakeholders in decision-making. Any plan is more likely to be successful when it includes multiple team members in the process. In particular, individuals who work directly with the drivers and metrics in question will have a unique perspective on the financial plan. An FP&A process with collaborative planning results in deeper insights and more accurate, effective forecasting. Make adjustments as information comes in or adjust goals over the long term to better reflect the changing reality.
5. Increase communication across the company to keep your FP&A process nimble
Post-pandemic, many businesses continue to operate remotely on a hybrid model, out of either convenience or necessity. As a result, your sales, operations, IT, and finance teams may not be in the same place at the same time. If you want your FP&A process to stay nimble during this time of upheaval, it's essential to track work with an online dashboard. By enabling centralized communication and collaboration, FP&A software with robust reporting dashboards empower your team to visualize the results of decisions while enabling them to change assumptions as needed.Centage's financial forecasting software is designed to help businesses stay agile in times of economic upheaval. Using the latest automation technology, companies can gather the practical, data-driven insights they need to make intelligent contributions. Along with helping businesses see how and why actuals differ from plans, Centage empowers them to generate accurate P&L statements, facilitate better collaboration company wide, and initiate changes quickly in response to predictions and results.Book a demo to discover how Centage can help your FP&A process and your business stay competitive in uncertain times.