But for finance to play a more expansive and value-added role within the organization, it requires an investment in the structure of the finance team itself, specifically in people, process, and technology. That investment is an evolution and many organizations find themselves in one of three phases of development:
- FP&A 1.0: Reactive
- FP&A 2.0: Proactive
- FP&A 3.0: Optimized
FP&A 1.0: Reactive
Companies in Phase 1.0 do not have an EPM system installed. As a result, all processes are manual. The finance team uses Excel spreadsheets for all of their budgeting, forecasting, modeling, and reporting activities. Collaboration is inefficient because the primary tool is email. Finance spends so much time producing budgets and forecasts, that by the time the plans are complete, they are already out of date. As a result of these issues and more, finance is able to deliver the basics but has limited time for value-added activities to help decision makers make educated decisions, faster.
FP&A 2.0: Proactive
Companies in Phase 2.0 have a finance-owned EPM system installed, which means they are using the system to automate a significant portion of critical EPM activities like data collection and validation, budgeting and forecasting, and reporting. They’re likely experiencing significantly shortened budget cycles, providing self-service reporting, and performing monthly forecasting. But while they’re becoming a trusted business partner with a seat at the table, they have not fully maximized all that EPM has to offer.
FP&A 3.0: Optimized
Phase 3.0 takes the basic use of EPM up a notch – enabling rolling forecasts, full automation, and empowering budget owners to create and manage their own budgets and forecasts. Companies in Phase 3.0 have an EPM solution installed and are also optimizing for continuous, connected and collaborative planning. Decisions are made in real time – not in hindsight – because decision makers have visibility into accurate and timely data. Budget owners are engaged, empowered, and accountable. Finance owners benefit because there is more participation and accountability in the planning process, reduced support and training required by finance personnel, more accurate forecasts, and fewer surprises.
We want to see all finance teams maximize their potential – evolving to Phase 3.0 should be a priority for all finance teams because the competitive benefits are critical. Learn more about these three phases and what other companies are experiencing in next week’s webinar, The Evolution of Enterprise Performance Management. We’ll discuss the three distinct phases in detail and deep dive into collaborative planning with Project Orion.