Extend Planning & Analysis (xP&A) is the new term coined by Gartner in its 2020 strategic roadmap of cloud financial planning and analysis (FP&A). According to Gartner, by 2024, an estimate of over 70% of the new FP&A projects will become xP&A projects.
This leads us to a question.
‘What exactly is Extend Planning and Analysis or xP&A, and why is it being discussed so much?’
As the name suggests, it is about extending the Financial Planning & Analysis (FP&A) principles/capabilities to departments beyond finance. This gives all the departments the required impetus to collectively plan and support the overall organization’s goals.
In this blog post, you will learn about the three most important reasons for adopting Extend Planning & Analysis (xP&A) in your organization.
1. Extend Planning and Analysis creates unison among Strategic, Financial and Operational planning.
Let us take an example.
Company ‘A’ aims to be the market leader (Strategic Plan) in the Singapore region in the next 3 years. To achieve this, it needs to clock a Year-on-Year revenue growth of 50% (Financial plan). To achieve revenue growth of 50%, marketing expenses need to be risen by 30%, which results in an increase in demand and thereby an increase in various production-related costs by 40% (Operation Plan).
Different departments carry out these three different plans in the enterprise. Only when all these plans are in unison will the organization’s overall goal be reached. In other words, all these departments should plan and work collectively to achieve the overall business goals.
Conventionally, since only the finance department was in control of the Financial Planning & Analysis, there was a lack of unison among these plans. The other departments like Marketing, Supply Chain, Sales are only involved in providing their department’s data to the finance team for company-wide planning. This resulted in ineffective planning due to a lack of proper alignment.
Extend Planning and Analysis helps organizations eliminate this challenge by combining strategic, operational and financial planning. It provides the FP&A capabilities to all the departments to effectively do their planning and align with the overall business goals.
2. It fosters real collaboration across departments in company-wide planning.
The first question that arises after reading this point is, was there no collaboration in FP&A?
Why is it overemphasized in Extend Planning and Analysis?
Simply put, in FP&A, the term ‘collaboration’ is very loosely used. It is often limited to data collection, data management and data consolidation. In other words, each department performs intra-departmental planning and passes on the necessary information to the finance department to do the overall enterprise planning. This creates silos as there is no true collaboration and alignment among the departments on the overall business goals.
Moreover, this approach does no good to the entire organization’s planning. It does not deliver the expected results since it is more of silo-based planning than collaborative enterprise planning.
xP&A takes more of a collaborative approach to enterprise planning. It brings harmony in planning among all the departments. It makes sure that every department understands how their activities impact others and vice-versa. This provides the required inputs to align their planning with the overall company-wide plans and achieve stated goals.
3. Extend Planning & Analysis improves an organization’s responsiveness to the external world.
The most pertinent weapon every business is striving for is ‘Agility.’
Covid-19 ensured that agility is no more a ‘to-be’ but a ‘must-have’ for every organization. No wonder most of the companies are going entirely digital to address this most pressing need.
In conventional FP&A projects, agility takes a hit mainly because of silo-based planning. This approach drastically affects the responsiveness of the company.
For example, In response to the slowing market caused by covid-19, top management decides to reprioritize their plans and cut down various expenses. With the planning done in silos, management cannot get a quick integrated view of the enterprise plans. It involves a tedious process of gathering all the relevant information about key business drivers and metrics from different departments.
Moreover, altering these department-wise plans and making sure they match the redefined goals is time-consuming. This dampens the speed aspect of their responsiveness and may cause severe losses based on the market uncertainties.
Unlike FP&A, xP&A adds speed to your organization’s responsiveness. It does not just make sure that all the departments’ plans are aligned but also provides the entire planning in a quick integrated view. This empowers management to make decisions and quickly act upon them. Simply put, xP&A enables near real-time decision-making to respond quickly to external changes.
In this uncertain and rapidly evolving digital world, Extend Planning and Analysis (xP&A) is the path going forward for your effective performance management.
With the rising need for xP&A, there are various solutions that are being developed to address this demand. However, these solutions are developed to address the process execution part of it. They do not help organisations in the process definition of their planning processes.
JustPerform is a process definition platform that has in-built business reference models based on industry best practices. It is designed for defining planning and consolidation processes
It helps organizations adopt extend planning & analysis by helping them define effective planning and budgeting processes by:
- Enabling easy and user-friendly planning process definition with visually enriching value driver trees – JustPerform helps business users easily define all the accurate drivers and underlying metrics by using planning infoblocks based on simple arithmetic formulae. These infoblocks can be tagged to the relevant planning model for performing the required calculations. Once the valued driver trees are defined they are automatically deployed to the target solution with its machine learning algorithms. This helps eliminate silo-based planning as all the departments can easily plan using these visual process design capabilities.
- Fostering collaboration in process definition – Unlike conventional planning process definition, JustPerform empowers the business users to work together on defining the metrics and key drivers involved in organizational planning. Its intuitive dashboards and in-platform collaboration capabilities ensure that collaboration is not restricted to mere data collection. This ensures that all the departments are aligned with overall business goals.
- Maintaining high scalability of the end solution – Process enhancements and process refinements are common especially in this unpredictable business world. JustPerform’s machine learning algorithms ensure that any changes made to the value driver trees or business rules are seamlessly deployed into the target solution in real quick time. This results in higher responsiveness for the organization with a highly scalable planning solution.
In this way, while most of the solutions in the market address the process execution part, JustPerform address the process definition part. Its robust planning process definition capabilities coupled with a good end solution can help organizations effectively adopt xP&A.
Please note that a particular section of this blog is also published is on https://blogs.sap.com/2021/04/23/3-reasons-for-you-to-adopt-extend-planning-and-analysis/.