APQC’s Financial Management research team is finishing up a study on advanced techniques in financial planning and analysis (FP&A). The following are some highlights and insights into what we’ve found so far. If you are interested in learning more about this topic, join me on Wednesday, March 25 at 11:00 a.m. CDT for March Financial Management Webinar: FP&A: Aspiring to Influence Performance to hear the results of extensive research on why FP&A teams struggle, and what best practices can be building blocks to improve performance and business strategy.
Why is there so much interest today in improving corporate performance management (CPM)?
Now more than ever, companies aspiring to grow by dominating competitors have to look at world-class CPM as a strategic enabler. The majority of companies continue to struggle with an inability to successfully execute their growth strategies. At least one in three strategic initiatives fails. The issues stem from poor execution, rather than design or intent. The drivers of volatility—unpredictable demand, pricing power, core commodity costs, government regulations, weather patterns, among other factors—are becoming more problematic for many companies.
Why are more companies using rolling forecasts to manage performance?
Advanced analytical techniques, whether statistical or empirical in nature, hold great promise in the effort to drive strong financial performance. When an organization conducts a rolling forecast of revenues and operating margins, it is anticipating and dissecting emerging trends that will impact the business four to eight quarters into the future. Every quarter or so the organization reviews economic performance and then forecasts trends for another specified amount of time in the future. This provides a continuous cycle of re-forecasting.
As a yardstick, the rolling forecast is preferable to the static annual budget because it provides the business with a continually refreshed view of opportunities and challenges. APQC research shows that by mid-2016, two-thirds of organizations will use this technique in some form or another.
How do rolling forecasts help to mitigate planning risks?
APQC’s latest research shows that organizations that do use rolling forecasts are better aligned with unfolding business strategy, are more effective at business analysis, derive greater value from their budgeting processes, and have more reliable forecasts than those who do not use them. Rolling forecasts allow finance functions to predict the impacts of changing economic conditions and revisit budget assumptions in the wake of a changed market conditions. Arguably, without adopting this very fundamental precept, finance will increasingly lose its relevance to plan execution.
Are CFOs warming up to the idea of using cloud-based solutions?
APQC found that nearly 50 percent of survey respondents are currently using cloud computing or plan to do so in the next 12-to-18 months. ’s research sponsor, Grant Thornton, the research sponsor, has this to say: “The findings reflect the sentiment of the larger market regarding migration to a cloud-based planning and forecast solution. The maintaining and upgrading of planning solution are time consuming, costly, and generally outside a core competency. Taking a measured approach over the next few years, even for those not currently considering a move, will prove to be beneficial as it will allow more focus on value-add activities around the planning and forecasting function. Selecting a pilot group or a specific function or department will be a cost-effective way to discover how a migration to a cloud solution can benefit an organization.”
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