London FP&A Advisory Board: Key Tech Requirements of an FP&A System

The financial planning and analysis (FP&A) advisory board comprises members such as Ash Sharma, head of FP&A at Alliance Boots Healthcare; Hans Gobin, who was until this month head of at Costa Coffee International, part of the £15bn Whitbread Group; and Joseph McElligott, a finance manager in the NHS.

All were in attendance with many of their colleagues on 25 February for the first board meeting this year in the City of London. Alongside them was the founder and director of the London FP&A Club networking body, Larysa Melnychuk, who established the advisory board of senior professionals to help guide the knowledge-sharing club’s evening meetings and to generally assist strategic advancement of the FP&A sector.

The first board meeting detailed the cultural aspects of an ideal FP&A professional and accompanying skillset, while this latest meeting addressed the technological requirements needed for effective FP&A. The well-known Chatham House anonymised rules were deployed to encourage a full and frank debate.

Playing host to the latest meeting was Marc Lloyd, FP&A head at Hermes Fund Managers, whose offices were kindly provided for the event. Other board members in attendance to formulate a best practice ‘wish list’ of technological requirements for FP&A systems – covering everything from the need for real-time reporting dashboards, collaborative cross-departmental connectivity and an ability to take fuzzy data and run scenarios – were Jay Mehta, associate director of finance at the NHS North West London Commissioning Support Unit; and Toby Burton, finance director for The Economist magazine.

Discussion and formulation of best practice guidelines was helped by a presentation from Michael Coveney, a consultant with STW Consulting and experienced business and technology professional. Coveney worked for 32 years with software group Comshare and knows most of the available systems on the marketplace from Cognos TM1, Hyperion, SAP, Adaptive Planning, Infor and many other vendors. He reminded board members that “technology (like any tool) is only as good as people’s ability to use it and to apply it for business benefit”, as the discussions about the key requirements of an FP&A system got underway.

Excel Still Prevails

“I’ve been contracting a lot over the past four years, worked for many different firms and seen many examples of different technology systems,” said an attending FP&A advisory board member, speaking under Chatham House rules, as debate about the key requirements for tech systems began. “Even at the huge multibillion pound firm I’m at now, the one consistent thing is that Excel can still be found everywhere. It is not the best or most flexible system, but it is ubiquitous. I think we should be using better technology by now.”

The comment was backed up by another board member, who added that “the latest surveys show that 50% of organisations still rely on Excel”.

Another member agreed that the prevalence of Excel – even when used as an ad hoc front-end tool for data stored in Oracle, SAP or other systems – is a problem, especially where ‘fat finger’ data entry mistakes mean a whole series of calculations can be thrown off. Board members recognised this threat and other technological weaknesses of Excel, but as a fellow colleague and senior FP&A professional pointed out: “Excel does give us a throw-away, flexible capability; that is why so many people still use it – despite its limitations.”

Managing a multinational corporation (MNC) on a spreadsheet just isn’t professional in the 21st century, countered another member, and there is always the possibility of resiliency, employee handover and other continuity problems.

Chatham House rules enabled another board member to comment that the main problem with technology was the lack of integration. “Legacy systems don’t talk to each other – even in my finance department our internal systems cannot talk to one another! This causes me a host of pain when I want to do even simple analysis. It is definitely something I’d like to move away from.”

What then are the key requirements for any potential replacement systems for the ubiquitous Excel and what are FP&A professionals’ major requirements of a technology stack?

Key Requirements of an FP&A System

Having decided that Excel spreadsheets have their uses, but need to be replaced by more modern, flexible systems the FP&A advisory board set out to list their key demands and ‘wish list’ for supporting technology systems and architectures.

The key findings were:

  • A requirement for dashboards: Modern FP&A technology systems should be real-time and flexible enough to run analysis, raise alerts and support presentations.
  • More flexible modelling capabilities: which are multidimensional in nature, simple-to-use and enable cross-departmental buy-in for new budgeting techniques, such as driver-based planning and rolling forecasts, are essential. Driver-based systems aid flexibility and speed.
  • Connectivity and collaboration: Collaborative cross-departmental functionality and easier integration with other corporate systems was deemed an essential component of an effective FP&A system. Remote access was also desirable. As was noted, Excel is not great at any of these things.
  • Calculating speed and accuracy: A good, fast calculation engine is essential, preferably linked to reporting tools that can quickly present figures in the best light.
  • Automation: Automated processes free up staff to do value-adding work and should be highly-prized. This was a key requirement for an effective FP&A system in the opinion of the advisory board and can support continuous planning.
  • Analytical, data handling and predictive functionality: The ability to analyse fuzzy data (i.e. unstructured data); run multiple scenarios and test hypotheses is vital; as is predictive planning capabilities and powerful analytical tools. A good system should allow for both top-down and bottom-up planning procedures.
  • Initiative planning capabilities: Systems should come with the ability to ‘time shift’ data. This means, for instance, that should a marketing campaign or a pharmaceutical drug launch be delayed by six months its resources and predicted impacts can still be simply and easily moved back six months. It should also allow departments to continually propose initiatives that can be tested in isolation and in combination with the business as usual (BAU) situation.
  • Ease-of-use: Simple and intuitive technology interfaces are also desirable to reduce the amount of training and installation work.
  • No ‘black boxes’ and expensive programmers: Systems should be owned by finance departments and easily manageable.

Alongside the above top-line recommendations for how to specify an effective FP&A system, a number of best practice observations and real world comments were shared by various members of the FP&A advisory board. One of them observed that: “you have to build the architectural relationships yourself to get any good scenario planning functionality out of most systems, regardless of the marketing claims.”

Best Practice Tips

Despite the continuing prevelance of Excel spreadsheets it is not possible to build an effective, flexible and dynamic FP&A process on them. Specific replacement FP&A systems are needed, the board advised as it began a summation, but members don’t see any out there at the moment.

The marketplace is very dynamic, with more and more vendors constantly appearing, it was added during the concluding part of the evening’s discussions, but there still isn’t a single ‘ideal’ system for FP&A proposes at the moment. A gap in the market can be filled by the vendor who gets it right.

Current well-known FP&A systems are good at process routine management and multidimensionality. However, they are weak in the area of advanced analytics and in effectively managing top-down and bottom-up planning processes-not to mention ‘real life’ dashboard reporting inadequacies.

The board felt that the available FP&A systems do not yet match up to the key requirements listed above. It is also important to remember that everything is starting from a financial model standpoint, they warned, and should consequently be driver-based and flexible. The modelling should, additionally, be carried out in-house and then transferred into the technology system. The computer language deployed should be easily manageable and business rules shouldn’t be hard coded because FP&A departments need a flexible model.

Structure and data should be separated as part of your architectural relationship building process; it’s a matter of good practice, said the evening’s presenter and co-moderator STW Consulting’s Michael Coveney. He also pointed out that Infor’s recent new system demo in New York could point the way to the future, “as it looked like Facebook and was totally integrated, intuitive and very very promising”.

Other best practice tips for specifying effective FP&A technology systems were to:

  •  Release a request for proposal/information (RFI/P) and define your specific needs.
  •  Do a proof of concept.
  •  Don’t hard code rules into a system, as this prevents the flexible and scalable solutions that finance end users want. If you aren’t careful you could end up ‘hand chiselling’ applications in order to make them work as you want. This wastes valuable time when the technology should merely be a support to the FP&A function.

The evening concluded with a reminder that the concept of annual budgetary reporting, quarterly figures and other such traditional budgeting norms, started way back in the 1920s. “Even the balanced scorecard approach was invented before the internet era,” said one participant, before adding that this was precisely why new, faster FP&A-based approaches to budgeting and rolling forecasting needed newer, better supporting technology.

The existing patterns of work and supporting infrastructures, connectivity and technology all need to change to cope with the coming emphasis on analysis, real-time reporting and scenario testing. The advisory board hopes that its recommendations will help fellow FP&A professionals get the technological solutions that they need to succeed and welcomes any feedback via the LinkedIn FP&A Group.

The issue of FP&A technology systems will be addressed at the next London FP&A Club meeting on 8 April. Michael Coveney, who guided the board’s key requirements list and best practice tips, will share his knowledge of the field with the wider audience and numerous finance and FP&A professionals are expected to attend.

• If you would like to find out more about FP&A and the plans for the Association for Financial Professionals’ (AFP) certification programme please follow the highlighted link for more information. The AFP is the supporting organisation behind gtnews and the FP&A Club, which has already held events in London, Moscow, Kiev, Dubai and various other international locations. You can also sign up to the AFP FP&A e-newsletter or visit the FP&A website. On the gtnews website, FP&A interviews are available with London FP&A Advisory Board members Ash Sharma, head of FP&A at Alliance Boots Healthcare, and Lewis Girdwood, head of FP&A at easyJet. gtnews interviews with Jeremy Dahdi, director of planning and reporting at Pearson; Fabrice Domange, senior vice president and head of FP&A for Europe, Middle-East and Africa (EMEA) at AIG Property and Casualty, and Ricardo Losada Revol, director of corporate finance at World Fuel Services, are also available via the highlighted links. For those interested in reading more about the subject, there is also the dedicated gtnews FP&A section.

• To contact the London FP&A Club about the free membership for finance professionals, or to find out more details about forthcoming international events, please email Larysa Melnychuk or join the LinkedIn FP&A Group. The next staging of the London FP&A Advisory Board will be in May when ‘Insight Management’ is the planned topic of debate, as business culture is examined with a view to making useful recommendations.

* This blog, originally published on 27 February 2014, was updated on 4 March to accommodate a number of additions and revisions.