The webinar “Gain Agility and Control with SAP Business Planning & Consolidation” features a presentation and demonstration by David Roberts, Director of Analytics at SAP North America. The presentation was held on January 30, 2013. Roberts talks about how proper financial planning and analysis affect the entire organization. But it’s not just about crunching the numbers; it’s also about communicating the results and using the information to make better business decisions.
The 3 Cs of Financial Planning and Analysis
Financial planning and analysis are always done with the organization’s big goals in mind. That’s why financial analysts need to understand and follow the 3 Cs of financial planning and analysis: communication, collaboration, and confidence.
Communicate to Broad Audiences
Financial planning and analysis do not exist in a vacuum. Both are done in order to communicate results to a wide audience. The results of financial planning and analysis can be displayed in dashboard form in order to help employees act on the information. But financial information also has to be communicated via more traditional forms, such as financial reports.
Collaborate across the Organization
Financial data isn’t useful if it stays inside the finance department. Financial planning and analysis are useful and necessary for integrated business planning. The easier it is to use the information, the easier it is for organizations to make good decisions based on financial facts.
Have Confidence in Planning
Companies should feel confident with financial planning. Visualization can help provide deeper insights for business executives, but it’s also important to use predictive algorithms to better build a plan, budget, or forecast for your company.
Begin with the End in Mind
We recommend that companies begin with the end in mind when defining external and internal priorities. For example, you should be able to provide accurate guidance on future performance and outlook. Your company also wants a plan to outperform those financial objectives and create sustainable value. Last but not least, your company wants to deliver superior service at reduced costs.
Of course, when it comes to cutting costs, the finance department is often one of the first ones to get targeted. But finance professionals consider measuring performance, planning, budgeting, forecasting, and using dashboards to be important components that should be updated before statistical analysis and predictive modeling tools.
How Financial Analysts Spend Their Time
Most companies consider financial professionals to provide value-added analysis for their business. In reality, financial analysts spend almost half of their time collecting and validating data (47%), but less than a quarter of their time (23%) in providing value-added analysis for the company. The rest of their time (30%) is spent on administering the process.
The Disparity Between Being Average and Being the Best
Finance is always being evaluated on how it performs. It turns out that there is a huge disparity between being one of the best companies or being only average. For example, one of the numbers that companies tend to look at is the number of days that sales are outstanding. The average number reported was 52 while the best was 43. The worst is much further out at 74.
Statistics like these show that it’s worth improving your organization at the finance level because closing the books quicker and being on top of your accounting records can help your company improve in many different ways. And even if your company is well within the average for its industry, there is plenty of room for improvement.
Is Your Finance Organization Making Progress?
According to a 2012 survey, many finance and accounting organizations are not making progress to becoming a better partner for the business. Only 12% of organizations surveyed reported that they were rolling along with confidence and learning more about the journey. 30% of companies reported that they were gaining some traction and overcoming obstacles. The rest were either hopeful or making only some progress while facing obstacles.
The Use of Dashboards to Communicate Financial Information
The use of dashboards has risen dramatically. Dashboards are great for communicating important financial information because the data can be presented in a way that it’s easy to understand. For example, SAP dashboards include a quick list of key performance indicators (KPI). These indicators will vary depending on your company, but examples include sales volume and expenses.
With a dashboard, your finance department can communicate the most important financial information to a broad audience inside your organizations. Most employees can quickly see and understand a graph that shows a trend of some kind, whether that trend represents sales volume or something else. And graphs and charts can even be used to communicate complicated numbers related to bookkeeping or taxes to any employee in your company.
The Use of Scientific Algorithms to Portray Different Scenarios
One of the things that finance organizations can do in SAP is use scientific algorithms to portray different scenarios. This helps finance professionals more accurately forecast and plan. Finance analysts use scientific algorithms to increase their confidence in those numbers.
Last but not least, SAP uses visualization to help company employees attain deeper insights. When you see a graph or a chart, it’s often easier to visualize the trends that are happening in your company. With the use of graphs and charts, your company executives are no longer required to rely on their gut feeling to make financial decisions.