Digital Finance for FP&A

Digital finance is fuelling the transformation of finance functions across the globe. The demand for being a “business partner” instead of a “number cruncher” is stronger than ever. How does state-of-the-art FP&A technology fit in?

Digitisation of operational finance processes seems straightforward compared to tactical and strategical finance processes that are touched by FP&A. The main reason for this is that multiple datasets need to be combined into a financial model that needs to reflect the agility required to support forward looking processes. Agility is usually not a key strength of ERP systems, hence the need for FP&A systems.

In the past, finance acted as a gate-keeper, making sure the source data was correct, the model was up-to-date, the assumptions had the right values, the input was gathered, the output was generated, consolidated and reported. This meant a lot of work with a lot of activities that are of low added value, like managing spreadsheets.

In a world where a lot more data is generated and the integration of external and unstructured data is required, the classic spreadsheet approach will fail. On top of that there will be the need to execute more planning cycles and look at scenarios to keep up with the faster pace of the world and anticipate change. This a great opportunity for FP&A specialists to become a better business partner as they are in a great position to fully understand the dynamics of the business and capture this in a financial business model with the input of their business peers.

The market of FP&A technology is mature and throughout the decades the inventors have moved to new companies to create new solutions based on latest technology. If you have basic requirements, probably all solutions can suit your needs if the implementation is done well. If the requirements become more complex, which is fuelled by the digitisation of finance, the process of selecting proper FP&A technology is trickier.

So which characteristics of FP&A technology are truly important in this new era?

• Flexible modeling capabilities – to be truly agile, financial models must be able to cope with changes without having to rebuild the entire application. Building a financial model is an art and it really pays off in the long run to spend more time on designing your model. Solutions that store models in multi-cube structures offer by nature more flexibility than single cube-based structures.

• Handling big data volumes – it is not only about the ability to store big data volumes, more important is the capability to be able to handle big data-volumes for the required calculations and analysis. There are solutions who use proprietary database technology and others who use relational database technology. Solutions that store data in-memory in a compressed format are more geared towards handling big volumes. Relational databases will fall behind as these types of databases are by design more geared towards storing transactions than supporting analytical processes.

• Calculation speed – here is the big differentiator. A solution that offers killer calculation speed without requiring a datacenter full of servers is the winner. That is why it is important to do performance tests upfront, before deciding which technology is offering the basic speed you need. In-memory technology that leverages multi-core data processing in combination with clever caching can deliver more raw calculation speed.

• Scalability – scalability in terms of data volumes, the number of users and the required infrastructure (cloud or on premise) is key to having a future proof FP&A system.

• Infusion with AI – Generating a baseline for your planning cycle may not be a simple extrapolation of actual data anymore in the era of machine learning and AI. Today’s cutting-edge FP&A solutions already infuse AI technologies to create a sophisticated baseline without the need of being a data scientist.

• Extensive data integration possibilities – As more and more data become available from internal and external sources that are valuable to FP&A processes, flexible integration of your (cloud-based) sources are key. Integration becomes easier is the FP&A solution is exposed to a modern Web service, so you can leverage the expertise of your own data-integration specialists to get the job done, without requiring the knowledge of the proprietary data integration possibilities of the FP&A solution.

• Modern user interface – A modern user interface must support the productivity of the end user, regardless of the role in the FP&A process. A classic choice is the Excel interface. Whereas Excel is good for personal productivity and getting numbers in a planning submission, it is not very suitable to easily navigate your corporate data and do analysis and reporting. Modern FP&A solutions seem to look more and more like BI solutions. Hence a modern web-based interface that supports planning, analysis and reporting processes will be the best option. Look-and-feel is a matter of taste and most solutions offer capabilities to adopt to your corporate standards.