FP&A (Financial Planning and Analysis) software versus Excel
Who wouldn’t fall in love... instantly! What a brilliant piece of software – paste to multiple cells, formulas, conditional formatting, multi-sheets, vlookup, macros, and more. Spreadsheets made the lives of everyone easier – from a student doing his project work to a fresher who is tasked with market study to the mid-career person who is doing financial modeling to an experienced professional who is analyzing huge sets of data.
So it’s no surprise that spreadsheets are the go-to tool for executives across industries and functions, especially finance. Whether it’s a simple task like compiling entries or a complex one like creating a future income statement, spreadsheets help finance professionals accomplish their chores and deliverables. From a financial planning and analysis standpoint, doing budgeting and planning, variance analysis, forecasting, or any other ad hoc analysis, spreadsheets are the default tool.
However, as businesses grow, completing the same tasks and deliverables using spreadsheets becomes more time- and labor-intensive, resulting in delays or inaccuracies. Managing multiple versions, disability to quickly compare business scenarios, forecast disconnect, dated cash-flow predictions, delays in ad-hoc analysis, and difficulty in getting category or geolevel P&L instantly – just some of the challenges faced in financial planning and analysis.
Impact - static plans, dated or shallow analysis, costing and forecast inconsistencies, limited scenario planning, and most importantly, subpar decisions. It’s not uncommon to see FP&A professionals spending as much as 75% of their time on unproductive tasks such as:
- Tracking different versions
- Data massaging and maintenance
- Defining business rules, assumptions, and formulae
- Publish daily/weekly/monthly nos.
- MBR/QBR preparation
- Reviews and Approvals
- Collaboration and Communication
Here we look at 11 things FP&A software can do that spreadsheets cannot. These features not only help FP&A professionals improve their productivity but also empower them with capabilities that help them deliver on their core responsibilities:
- No multi-dimensional analysis:
Business metrics like revenue and costs need to be analyzed not just by time but also with additional dimensions such as product/services, territory, product-category, channels, etc. To do this, executives have to create multiple tabs or sheets within a spreadsheet, making the understanding and analysis cumbersome and slow. FP&A tools have a multi-dimensional engine at their core, which enables organizations to store and analyze data in three or more dimensions simultaneously.
- Set-up your calculations and assumptions multiple times:
The basic role of the financial planning and analysis function is to translate the statutory financials into business financials. This involves applying business rules, allocations, assumptions, formulae, and logic. Plus, it needs to be applied to all spreadsheets wherever it’s applicable. While doing this is possible in spreadsheets, without significant labor and effort, it leads to inconsistencies or inaccuracies.
Modern FP&A solutions provide a centralized workspace to define, apply, and modify business definitions. Thus, FP&A teams can write their rules and assumptions once and apply them when and where required.
- Tedious “What-if” scenario planning:
Whether organizations are considering new investments, initiatives, or divestments, they always need to consider its impact on the P&L. This is a very dynamic process where different variables need to be studied and moderated to arrive at the target position. What may take hours and days in spreadsheets can be done in minutes with a FP&A system.
- Difficult to integrate source data:
Most FP&A teams live off the ERP dump. They tend to spend considerable time massaging and transforming the data from the ERP dump before developing the monthly MIS pack. FP&A solutions have built-in integration capabilities which streamline the data movement between transactional systems (ERP, CRM, etc.) and FP&A solutions, thereby reducing considerable manual effort and time.
- Dashboards:
Once it is ingested, FP&A tools enable the data to be easily visualized using intuitive dashboards and reports. This makes it easier for executives and senior management to interpret and monitor the business performance quickly. In this sense, the FP&A tool performs the role of a reporting, visualization, and dashboarding platform.
- No predictive analytics:
Unlike spreadsheets, FP&A solutions come with in-built AI and ML algorithms. These predictive algorithms help organizations develop a more accurate view of their future outcomes, viz., financial forecasts. Taking into account multiple variables, seasonality, and historical data, they predict the forecasts, which can be used by FP&A teams to compare and fine-tune their financial guidance to the stakeholders.
- Limited data security and access control:
Business finance data is competitive and confidential information. In the hands of a competitor, an analyst, or an investor, it can bare open the inner workings of any organization. Spreadsheets can be easily shareable or downloaded. At times, even data within organizations needs to be secured. FP&A solutions enable authentication and access control to sheets, modules, or cells by roles. Thus, each department or region representative can see only its data, whereas senior management can see the entire information.
- No audit trail:
It’s a common scene in business review meetings where the field team is disputing the forecast numbers . presented by the ops team saying that the ops team did not update the most recent data sent by them. FP&A systems include audit trails, functionality, which lists the changes made to any module, sheet, or cell – by user, date, and time. Thus all team members know exactly which were the changes made by whom and when.
- Limited scalability:
From a finance perspective, scalability comes in different forms – not just the number of records. No. of users, complexity of the financial model, multiple versions, query processing, as well as the data stored. When compared across all these dimensions, it’s difficult for spreadsheets to match a system built grounds-up to service these exact parameters and capabilities.
- Workflow and Process Automation:
Whether it's the monthly forecast, the AOP, or the quarterly review, all financial planning and analysis processes have 2 things in common – (a) they are time-bound, and (b) they have multiple teams involved who need to perform their respective tasks. Otherwise, these processes will be incomplete, inaccurate, or delayed. Neither workflow nor process automation is possible with spreadsheets. Whereas both these features, along with collaboration, are available with FP&A tools dramatically speed of decision making.
- Person-dependency:
While this is true of any system vs. a manual process, we have first-hand experience of organizations getting crippled due to a person departing, leaving the entire FP&A team in the lurch. When you have a FP&A solution, you don’t need to worry about this issue since all the business rules, logic, assumptions, and sheets are centrally defined and applied for everyone to see/modify.
The FP&A platform, combined with financial planning and analysis services, not only automates the unproductive and routine tasks but, more importantly, provides valuable capabilities that empower the important and value-add tasks, e.g., rolling forecasts, insights and analysis, financial modeling, and developing financial scenarios to analyze future business strategies and new business initiatives. While organizations may begin their financial planning and analysis with spreadsheets, they should evaluate migrating to a FP&A platform along with FP&A consulting services when the velocity and complexity of the business start impacting the speed and dynamism of decision-making. From a Rs 600 Cr services unicorn to a Rs. 4000+ Cr IT services company to a Rs 6,600 Cr Life Sciences manufacturer to a Rs 8,000+ Cr media house, organizations of different scales and sizes have already benefited.
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