Advancing FP&A Tools Guide Finance Leaders Successfully Through Disruption

What tools do finance leaders need to help guide their organizations more strategically through these VUCA times?

The acronym VUCA means "volatility, uncertainty, complexity and ambiguity" and was coined by the U.S. Army War College to describe the multilateral world after the end of the Cold War. We have always dealt with some amount of VUCA, but it is at or near the highest level of our collective lifetimes in today's business climate:

• Most organizations' employees are working remotely, and leaders should expect to be working in a hybrid remote model for 12-18 months.
• Technology that worked in an office environment is now inadequate for a remote workforce.
• Information that was adequate traditionally is incomplete for decision making now.
• The need for collaboration is greater than ever.

In these turbulent times, CEOs, investors and management teams want and need CFOs to be business partners. Successful companies have found they can't live without financial analysis and forecasting that allows them to understand their past and chart their best path to a prosperous future without having to live it first.

The finance team brings unique skills to evaluate resource allocation and capital investment decisions and measure results to drive profitability. Organizations need to turn down some activities so that the few most important ones thrive, and CFOs who ask the right questions and provide the right insights can guide their organizations on when to say no and how to say yes.

Technology challenges

A May 2020 survey by the Chicago CFO Leadership Council found that 80% of organizations recognize their systems are lacking in some way and can't meet today's challenges.

Many organizations find themselves using on-premise, legacy systems or relying heavily on Excel and Google Sheets. Siloed data results in out-of-date and fragmented information to make decisions. Lack of integration, workflows and manual processes are slow and limit collaboration. Excel is great at an individual working level, but its limitations become glaring when you need to have multiple people working on plans simultaneously:

• Version control and comparisons are painful and add challenges to scenario evaluations.
• Creating reports with drill downs is not possible.
• Integration with one or more data sources (ERP, CRM, HRIS, etc.) is difficult.
• Analysis at the line of business, department, geographic, project and other granular levels is extremely time-consuming.

Today's VUCA requires a new approach to forecasting

To succeed today, finance leaders need new information, processes and tools. Traditionally, CFOs have focused on financial metrics, but today's data requirements extend far beyond financial data into non-financial aspects, including:

• Key performance drivers (KPDs) – are forward-looking and are the day-to-day activities required to produce the desired KPI outcomes, such as the time it takes to respond to a customer inquiry, time to resolution or on-time delivery. Customer satisfaction is a driver that improves brand perception, which in turn drives customer retention and referral rates, resulting in increased revenue and profitability. In other words, they underpin the strategy in place to ensure success.
• Collaboration – 46% of companies with zero or negative revenue growth say that an isolated finance function is keeping them from achieving business goals¹.
• Modern tools – enable finance to be the hub and not the barrier to making the right information available to the right teams across the organization.

You need a strategic solution

In the face of urgent needs, necessity becomes the mother of invention. But what may be an adequate short-term solution should not become the strategic resolution.

Excel is one of the finance team's best friends. We regularly work with many clients who have spent weeks/months building complex models to answer a question or plan for their businesses. The challenge comes when the organization:

• Wants to run multiple scenarios and compare and contrast them and what is driving the variances
• Wants to re-run every month (updating actuals can be painful in Excel...)
• Decides to get more stakeholders (Sales, IT, HR, department heads, etc.) engaged in the process to plan their wants

Too often, companies buy a solution for a specific problem or do an ad-hoc project that isn't scalable or easy enough to use on an ongoing basis. You don't want to waste resources or go down a fruitless path.

Finance leaders need a programmatic approach to analyze the current state and design the future state of their company. Assessing requirements, examining what solutions and processes are already in place, reviewing which tools may be underutilized and identifying gaps between them is the critical starting point to transforming your organization.

Often quick wins and low-cost solutions will surface. From there, you can make more strategic decisions to guide investments that will allow your organization to survive the current crisis and thrive once it's over.

Armanino has worked with thousands of clients to enable their cloud-first information strategy and is committed to helping finance leaders be successful. Check out Armaninos COVID Tracker for updates on real time tracking data in your state or county. If you have questions about our Budget Planning & Forecasting Services or want to explore options, please reach out to Sam Kashy