“Innovation distinguishes between a leader and a follower.”Steve Jobs
In 2023, we face a series of global planning challenges across accounting, finance, supply chain, workforce management, information technology, and data management. Each of these challenges involves a different set of stakeholders, data structures, key performance indicators, and broader economic and environmental drivers.
In light of this increasingly complex and nuanced set of categories that now make up the responsibilities associated with financial performance management (also known as enterprise performance management; corporate performance management; budgeting, planning, and forecasting, and other buzzwords, but all basically coming back to the financial planning and analysis FP&A role that we have known for decades), companies face a technology-related challenge for managing business plans. Is it better to work with a platform-based approach that allows every user to use the same application to support a variety of accounting and finance use cases including consolidation, close, and planning? Or is it better to use a Best-in-Breed application for business planning?
The basic starting point for evaluating this decision starts with a common sense question for enterprises: is it worth spending money on a standalone planning application or is it better to bundle planning with consolidation and transactional accounting such as an ERP or an accounting platform? In making this decision, companies should look at the following considerations:
Is the solution easy to use? In the 2020s, planning apps should be fairly easy to use, including ease of data entry, the ability to analyze data once it is entered, collaborative planning with other colleagues or budget-holding executives, mobile app support, and the ability to drill into planning data to explore specific deltas, outliers, and budget categories that are of specific interest. Ease of use should also extend to model and scenario management as financial professionals seek to bring a wide variety of potential considerations to enterprise forecasting environments. This ease of use is especially important as planning and forecasting exercises have accelerated in the 2020s based on COVID, supply chain challenges, currency value shifts, inflation, and the looming threat of a potential recession. The need to support flexible planning scenarios can be challenging to accomplish within the accounting framework of creating a fixed and defined set of data that is fully consolidated and auditable.
Is the current solution integrated with all of the data – including operational data – that is needed from a planning perspective? If spreadsheets are considered, this immediately leads to potential governance and consistency problems as each individual will probably have their own specific assumptions. Suppose companies are using a planning solution as part of their ERP. In that case, the planning solution will likely have access to the majority of accounting data associated with planning. Still, companies then have to see how much of their semi-structured data, third-party data (such as weather, government, or market-based data), and other external data are integrated into a solution. And do these integrations require significant IT support or can they be supported either by the vendor, line-of-business operations manager, or even by the end users, themselves?
Is the current planning solution flexible enough to both provide each department with the level of planning they are trying to perform while providing a consistent and shared version of the truth? Over the past few decades, the worlds of enterprise analytics and business accounting have both focused on the idea of a rigid “single version of the truth,” but the reality is that there is no single version of the truth as each individual and each department typically has specific goals, assumptions, terminology, and performance drivers specific to their specific job roles. And the moment that data is officially published or defined as “clean,” it immediately starts becoming outdated.
Accordingly, planning data needs to be organized so that every person involved in planning is able to access a consistent set of metrics while also having specialized views of the operational benchmarks and drivers associated with their specific goals as well as the ability to explore specific “what-if” hypothetical scenarios related to the variability of business situations that the organization may encounter. The operational data needed to support this level of flexibility is not always included as part of a core ERP suite and may need to come from a variety of transactional, payment, process automation systems, workflow management, and project management solutions to provide the level of clarity needed to support enterprise planning.
From Amalgam Insights’ perspective, this initial question of planning application vs platform is a bit of a red herring. Consolidation, close, and accounting audits are based on the need to lock down every transaction and document what has happened in the past. This historical view provides guidance and can be reviewed as necessary. But planning and forecasting are exercises in constructing the present and future of a business that requires the need to view the company through multiple lenses and scenarios and need to be altered based on possible business or global activities that may never happen. By nature, financial planning and analysis activities involve some level of uncertainty. Organizations seeking to accelerate the pace of planning and to extend planning beyond pure financial planning into sales, workforce, supply chain, information technology, & project portfolio management, will likely find that the need for near real-time analytics and data management increasingly requires an application that combines analytic speed, collaboration, and the ability to experiment within an application in ways that may conflict with or surpass the rate of accounting. Business planning needs to be a Best-in-Breed capability that allows for the flexibility of what-if analysis, the real-time feedback associated with new data and business considerations, the scale of modern data challenges, and the ability to collaboratively work with relevant business stakeholders. Without these supporting capabilities that can help organizations to independently adjust to the future, financial planning is ultimately a compliance exercise that lacks the impact and strategic guidance that executive teams need to make hard decisions.