The pandemic answered some long-standing questions and posed new ones.
Can entire workforces go remote without causing a company to collapse? Yep. We’ve proven that.
Can traditional finance teams keep up with the changing demands and expectations that accelerated since COVID? No. Not unless they change.
That’s a sticky subject. There’s a freight train headed toward financial teams regardless of industry. But most organizations are so caught up in the day-to-day that they don’t have time to look up and see it coming.
We work with clients on this issue and don’t want you to be caught off guard.
In this two-part discussion, we’ll go over seven signs that your company needs to rethink the way they do FP&A (financial planning and analysis).
We’ll cover four signs in this article. Then, in Part 2, we discuss the remaining signs and explain what you must do to solve the problem. For now, let’s begin.
Is this you? As your business has grown, you’ve accumulated more sources of data. More people contribute to the data pool and there are far more opportunities for human error.
What the business wants you to do with that data has changed too. Track more metrics. Answer more questions. Do it quickly. Preferably yesterday.
Your team might be fighting with spreadsheets and fragmented information because each department has its own spreadsheets and software. Then, once or twice a year, you must madly rush to reconcile all of this and figure out what you did wrong – or what you must do to pass an audit or do your taxes.
You’re drowning in pivot tables. You’re constantly cobbling together Excel spreadsheets and emailing them to provide reporting and answers to business questions.
Your out-of-the-box accounting software doesn’t cut it, but you deal with it because there’s no time for major changes. It’s chaos.
The business wants data-driven decision making, but nothing in your process facilitates that. If this describes your finance team, you’re not alone.
What about this scenario? If your team asks you to solve a problem or answer a question (using data) so that leaders can make business decisions, is the process horribly painful?
For example, if you’re using traditional analysis, doing things manually might look like this:
It could take you two days to a week to get everything in line just to begin answering the question.
When you get another question, you start all over with all the data in the entire system, sort it, and weed your way down to answer the question. You go through the same information and steps every time.
Your decision-making is still based on past numbers. It’s time to think about doing it differently.
If your month-end closing is painful, take heart. It doesn’t need to be anymore. See if your process goes something like this.
Your company might have an ERP, an HR system, and financial and accounting software. None are connected, so you’ve got to manually input data into each of those transactional systems monthly. It takes until the 3rd of the month for your accounting team to be done and tell you they’ve closed the books on the previous month.
You do a CSV dump out of the ERP, a CSV dump out of the HR System, and you combine all of those and go through a process. Then you check for human error to make sure everything
If there are problems, you need to figure out the source of truth and then make changes to ensure all the data is the same. It might take a week, and now, on the 10th of the new month, you can produce a report on what happened last month.
But the story takes a bad turn. The CFO discovers a huge variance in the month-end reports and realizes you totally missed recording expenses in trucking and freight costs!
The financial analyst must immediately figure out what happened in trucking. But all he or she has as a resource is the monthly report.
That’s not enough to solve the problem. The financial analyst must go back to the original data, sort out all the trucking information, figure out who is missing their budget numbers, what region is it, etc.
It potentially takes two more days to answer just one question. Sound familiar?
Meanwhile, the problem has been compounding daily. It might not be until mid-month when you finally solve last month’s crisis, and the business suffers the fallout.
That’s why this model doesn’t work anymore. Your data is buried. You must sort through it to figure out what’s valuable, and time is not on your side.
You’re spending more time fighting with the data than analyzing it. And your data isn’t driving decision making, you’re driving the data.
As a finance professional, much of your modern-day pain is rooted in the fact that accounting has been a backwards-focused practice, focused on prior, not future, data.
Historic data is critical for compliance, when a business looks for investors, or when the bank needs information.
Prior to the pandemic, it was also quite useful for budgeting to make reasonable assumptions about the future. “Based on past knowledge, we’ll open this new line of business and do 20% organic growth, and we can do one acquisition, and that will be roughly $3 million of new revenues we’ll bring in.”
But the pandemic introduced a new scenario. Then another. Then even more. Each came with new factors to consider. Each time we scrambled to adapt. We’re still running to keep up.
In hindsight, the way we’d done forecasting in the past was essentially a single forecast. Today you have multiple variables in multiple scenarios. How do you manage nine variables at the same time?
The business counts on you to give them insights to make quick decisions, but your current system doesn’t lend itself to speed. There’s a new level of complexity that your toolset is not prepared to handle. That’s a sign that change is necessary.
The cost of poor decisions based on gut instead of data is expensive. The cumulative effect of bad decisions can cost millions or billions of dollars, depending on the size of your organization.
You can end the cycles of chaos by taking action to facilitate data-driven decision making.
But you have to recognize the problem, the train that’s headed at you, before you’ll make a change.
What are the remaining three signs and what changes should you make to address these issues? Head over to Part 2, the conclusion of this discussion, and to learn what you must do to solve these problems.
If you're in a hurry and want the details right now to learn how to overcome these challenges, download our whitepaper, “The A is for Analytics: Navigate Data and Analytics to Enable Next-Generation FP&A.” You’ll get the answers you’re looking for.
Onebridge comes with vast data, technology, and analytics experience. Anders offers decades of business and financial advisory expertise. Combining expertise helps our clients get to their goal state much faster.