by Pierce Owen, VP, Research, SAPinsider
Unified reporting tools and financial planning and analysis (FP&A) solutions emerged as the two most common technologies used by respondents in the recent SAPinsider research report, “Streamlining Financial Processes in the Cloud” (see Figure 1). The reporting tools align directly with the top requirement of financial professionals — multidimensional reporting — while FP&A solutions support the forecasting and simulation requirements, which were also very important requirements for survey respondents.
To learn more about how FP&A solutions can make an impact, SAPinsider recently interviewed Brian Kalish, Principal and Founder at Kalish Consulting. This research brief shares Kalish’s thoughts on how FP&A professionals can evolve from financial reporters to financial strategists.
4 Personas of FP&A
When Kalish talks about climbing the FP&A maturity curve, he means scaling up the abilities of an organization’s FP&A professionals.
Kalish shared, “You must understand what you want to accomplish with your FP&A function and what you want it to do.”
FP&A abilities shape four personas along the FP&A maturity curve. Reporters represent the first and most crucial persona. In fact, 76.5% of survey respondents chose multidimensional reporting as a very or extremely important requirement to improving their finance technology strategy (see Figure 2). Multidimensional reporting empowers users to view balances from different perspectives for deeper drill-down analysis and reduces the need for manual manipulation of financial data.
“Most finance departments have conquered the ‘Reporter’ step on the maturity curve and have an efficient month-end financial close,” said Kalish. “You need an efficient financial close to gain the capacity to move beyond the ‘Reporter’ step.”
The SAPinsider research data backs up Kalish’s claims, as SAP customers complete their monthly financial close relatively quickly — with 53% of respondents indicating they close their books in six days or less, and 29% closing in four days or less.
Kalish said that finance departments need the three Cs (capacity, capability, and collaboration) to step beyond the Reporter stage. “If you don’t have the capacity, nothing else matters,” he said. “If the month-end financial close takes thirty days, you can’t do anything else. If it takes five days or less, you have capacity.”
Capability includes the organization’s people, processes, technologies, and culture. Kalish pointed out that processes are the “Achilles’ heel” of almost all organizations because scaling up the FP&A maturity curve requires documented processes and well-governed data and decisions, and “no one likes to document processes in detail,” according to Kalish. He continued, “If you only want the FP&A function to be a ‘Reporter,’ that is fine, but with the right people, processes, technologies, and culture, you can make FP&A a true business partner.”
With intelligent technologies, organizations can automate repetitive tasks and move people to higher value-added activities. If organizations apply the right technologies to well-documented processes, they can “liberate people from the blocking and tackling of reporting and move them into advanced analytics and simulations,” said Kalish.
The collaboration part of the three Cs means senior management cares about maximizing the value of FP&A and IT supports the FP&A function.
If companies master the three Cs, they can progress their FP&A function into the Commentator persona. In this persona, the FP&A function moves from describing what happened to diagnosing why it happened.
The stage after that, the Advisor persona, involves using predictive analytics with the proper algorithms to determine what might happen next, within certain ranges.
At the top of the FP&A maturity curve, the FP&A function can act as a Strategist. This means using prescriptive analytics and simulations to make better, faster, and smarter decisions. Strategists help determine how organizations can grow revenue and profits. “‘Strategists’ represent half a percent of all organizations’ FP&A functions,” said Kalish. “Everyone in the organization needs to agree and collaborate to get to this stage.”
Beverage Company Example
One of Kalish’s clients, a beverage company, had grown at the rate of inflation for decades — until three years ago when this company began growing over 50% per year. As an organization, it decided that the FP&A function needed to start answering questions before they came up, especially around planning for inventory management. To accomplish this, it needed a more forward-looking process to identify how to ramp up production and distribution, geographically.
Kalish started his work by surveying and interviewing all relevant staff to get their perception of the organization’s analytics. He created a radar graph of its strengths and weaknesses. “It looked like a ninja star,” said Kalish. “They had as many weaknesses as strengths.”
The company’s senior management had a strong desire to build a world-class FP&A function. “That top-down mandate was very helpful,” Kalish said. “Culture comes from the top, and this company had an appetite for analytics.”
The beverage company had the capacity and the collaboration. Within its capabilities, it had people with analytics, problem solving, and communication skills who wanted to evolve into true business partners. What it lacked was the process documentation and the technology to implement what it wanted.
“We are currently in the middle of the project. We will document their processes, put in a new data architecture with a data hub, and implement a new budgeting tool in 2020 to save time and resources,” concluded Kalish. Once we have accomplished all that, the company will try to scale the FP&A maturity curve.
What Does This Mean for SAPinsiders?
Based on our research and the interview with Brian Kalish, the following considerations can help SAP customers climb the FP&A maturity curve:
- Determine what the FP&A function should do at the leadership level. Kalish believes senior management creates company culture. Without a mandate from the top, any organization will struggle to evolve through the four FP&A personas. If the FP&A team only needs and wants to act as a Reporter, it should stay at that level.
- Assess the people. Does the FP&A team have the necessary analytics skills to move beyond reporting? If not, find the right people, and get them on the bus.
- Focus on the financial close to gain the capacity. FP&A professionals cannot scale the maturity curve if they spend all their time on the financial close. Most SAP customers have shortened their financial close to fewer than six days so now have available capacity.
- Document processes and select technologies that accelerate them. Technologies only provide value if they are applied to the appropriate processes. If organizations apply the right technologies to well-documented processes within the FP&A function, they can elevate FP&A professionals to strategic business partners who can help accelerate revenue and profit growth.
Following this strategic guidance should help SAP customers get the most out of their FP&A function.
Pierce Owen, VP, Research, SAPinsider, can be reached at Pierce.Owen@wispubs.com.