More than ever before, the business world relies on agility and speed. Management teams no longer have the luxury of lengthy reporting, budgeting, and forecasting cycles. Instead, they need to rely on quick and efficient month-ends, full organizational analysis, and informed decision-making. Financial planning and analysis personnel need to align strategy with financial and operational goals, which is where xP&A comes in.
What is xP&A?
xP&A is a short-term for extended planning and analysis – an emerging methodology based on operational and financial planning unification. As the name suggests, xP&A takes the fundamentals of classic financial planning and analysis and extends them company-wide; essentially removing the gaps which have historically existed between finance and operations.
What does this mean in the real world? Companies benefit from a single point of reference comprised of financial and non-financial data used for planning, reporting and analysis to inform decision-making throughout the organization.
What does moving to xP&A look like for you?
Implementing xP&A in your organization means expanding the finance department’s mandate into a company-wide role, leveraging FP&A principles in cooperation with the operating units throughout the business. One of the best ways to start this process is by partnering members of the operational units with the financial planning and analysis team – to gain team knowledge and experience from across the company, fostering improved engagement and accountability.
The classic forecasting and planning model includes a degree of business partnering – when key operational stakeholders are involved with business planning. xP&A takes this one step further; truly effective business partnering involves not just a passing engagement with decision-makers but a complete, integrated alignment that leads to higher-value analysis, input, and insight. Effective use of technology platforms can assist in this endeavor: the less time spent on manual tasks, processing data, the more your planning team is free to spend meaningful time interacting with operating unit leaders to drive business performance.
What Are the Technology Requirements?
An effective xP&A strategy relies on a scalable planning platform. Leading businesses deploy planning platforms to automate most manual processes, which removes the human error factor and frees up personnel to engage in more meaningful, thought-driven activity. Your planning platform should incorporate reporting, planning, and analysis, to manage all relevant data from across the company in one place for a single, unified version of the truth.
Rolling Forecast Planning
Most xP&A solutions use the concept of a ‘rolling forecast planning model.’ In this scenario, the planning and analysis leadership agree on a timeframe for forecasting (usually 6, 12, or 18 months). The model extends by a month with each monthly update, so forecasting is always for the relevant timeframe. As the drivers are updated, so does the expected outcome, allowing for swift changes in strategy to accommodate for different market, operational and financial conditions as they arise.
One of the key benefits of adopting an extended forecasting and planning strategy is that the planning cycles are much quicker, as manual processes become automated and increased engagement with the stakeholders aids communication and alignment. Driver-based planning expands on this benefit – core business and value drivers are used to calculate values for forecasting the plan. This form of driver-based planning focuses on the relationships between operations and finance. It is a vital step in xP&A as the operational drivers are usually leading indicators.
Ultimately, your xP&A platform could incorporate predictive analytics, employing statistical methods and historical data to predict future outcomes. Leading decision-making platforms offer predictive analytics modeling - reducing the reliance on data scientists and other specialists. Having all the necessary data on one platform means that your financial planning and analysis team can more efficiently interact with the information they need and create predictive analytics scenarios.
The ability of analysis and planning teams to assess various scenarios is another core benefit of an expanded planning and analysis implementation. The centralized, unified, single view of the truth allows for improved data access. A broader data set allows for scenario modeling using a richer set of variables, assessing more alternatives, enabling better decision-making with greater accuracy and increased predictability.
xP&A depends on collaboration and partnership, which your technology should reflect and facilitate. Your xP&A platform needs to incorporate the data from across the business and present it so that analysts can easily and quickly assess, forecast, and predict. Still, it also needs to be collaborative for the end-users. Choose a planning platform built for intra-team communication, with chat features, presentation capabilities, and link-sharing.
Peak Analytics focuses on providing next-generation business intelligence and corporate management tools for businesses that want to improve and optimize forecasting and planning. We work collaboratively with our clients to get a complete understanding of the strategic roadmap for the company before designing and developing a unique solution that meets each requirement. You can get more information about Peak Analytics by visiting our website and a deeper understanding of xP&A by downloading our whitepaper.