Financial Analytics: Redefining FP&A
Financial planning & analysis (FP&A) is entering a new era. FP&A teams at companies of all sizes—from startups to global enterprises—are leveraging advances in technology to do their job of guiding companies’ strategic plans and investments, and building profitable operations.
Financial departments are trading spreadsheets and legacy systems for SaaS platforms that combine real-time, historical data, and powerful reporting features, delivered over flexible, user-friendly interfaces. This is a trend that will continue to accelerate throughout 2020 and beyond.
FP&A: The Next Generation
We can point to at least five technological advancements that are reshaping the FP&A landscape: artificial intelligence (AI), big data, the cloud, connectivity, and blockchain. These technologies are transforming business intelligence (BI) and changing the way that companies manage their financial analytics.
Here are some benefits to using next-gen FP&A solutions.
Blockchain is allowing financial departments to effortlessly track and manage data—resulting in faster and more effective reporting. In layman’s terms, blockchain allows information to be distributed across a digital ledger in a way that is completely tamper-proof.
“Blockchain has the potential to be very transformative,” says Jon Raphael, chief audit innovation officer at Deloitte. “By itself, blockchain will likely change how records are maintained and how value is transferred between counterparties.”
According to Raphael, the proliferation of blockchain will be as transformative as the internet itself was on business.
“Blockchain, when it reaches scale, could produce the same type of impact [as the internet] in terms of how transactions are recorded, and on the transfer and evidence of value,” Raphael continues. “I’m confident we will witness this as we start to see scaling of blockchain applications over the next couple of years.”
Using a BI platform like Tableau or Power BI, financial departments can glean useful insights that might otherwise go overlooked when using traditional reporting mechanisms.
For example, Tableau has a special feature that helps financial departments identify channel stuffing—a practice that occurs when a company inflates its sales figures by pumping more products through a distribution channel than it can realistically sell. Sales teams and companies often engage in channel stuffing to inflate their numbers or fool investors.
Using Tableau, a financial department can sort suspicious returns by sales; identify potential anomalies; drill down into unusual transactions; and see specific details about each transaction. This tool can help a financial department gain an accurate assessment of a particular branch, subsidiary, or partner—without having to spend hours or days auditing them.
Using Neebo, finance teams can bridge data silos and quickly perform analyses on new data sets uncovering new strategic insights which would have been difficult to get to previously.
Simpler Sharing and Collaboration
Financial departments typically spend a lot of time communicating their research to managers, executives, investors, and potential customers. Much time is spent sorting through data, interpreting it, and compiling information into reports.
Modern FP&A solutions like Tableau and Power BI contain features like custom visualization libraries, which make it easy to build attractive and impactful visuals. Print dashboards also help export reports for board meetings and planning sessions.
Tools like Neebo, allow teams to annotate and document their work, create transparency around dataset lineage, make it much easier to search for and reuse past analytics work, avoiding wasting time reinventing the wheel.
Maintaining accurate financial analysis can be challenging when working with disparate branch locations—each with their own teams and systems. This often results in financial blind spots for an enterprise, which in turn creates risk in the form of compliance issues, tax problems, inaccurate sales forecasts, and more.
By using a BI platform, and an analytics hub like Neebo, an enterprise can share critical data across all of its global branch locations. This can reduce auditing risks, improve communication, and result in a healthier and more effective organization.
Pitfalls to Avoid
While digital transformation is having a big impact on FP&A, it’s also creating many problems in companies that rush into the process without fully understanding the tools they are using.
Here are some common pitfalls to avoid when using modern BI solutions to streamline FP&A.
More and more SaaS solutions come to market promising to streamline all aspects of FP&A. However, platforms do not eliminate the need for trained financial experts. Employees who work with data should have a close understanding of the information they are analyzing. Financial processes shouldn’t be fully automated or given to employees who lack financial knowledge. Otherwise, bad things can happen. SaaS platforms such a Neebo are procured and administrated directly by the lines of business, leaving the control of the data back to the domain experts and not a central IT or BI team without the domain knowledge.
Poor Data Quality
When using an analytics platform, data quality is incredibly important. Inaccurate or disorganized data can lead to major reporting errors—which can have devastating consequences for an organization. As such, it’s important to maintain strong data quality every step of the way.
Confusing Reporting for BI Tools
It’s easy to confuse a financial reporting tool for an advanced BI solution. However, there is a big difference between the two. Reporting tools provide access to events that have already taken place. On the other hand, BI tools explain why certain things took place and provide insight to guide future development and uncover latent opportunities.
Remember, effective FP&A starts and ends with clean, organized, and processed data. To learn more about how your financial department can improve its operations using modern tools, check this out.