Michael Coveney, a consultant with STW Consulting and experienced business and technology professional, outlined his best practice approach to specifying a financial planning and analysis (FP&A) system to the FP&A Club in London. As a veteran of 32 years with software group Comshare and latterly Infor, he knows all about available technology systems in the marketplace from Cognos TM1, Hyperion and SAP to Anaplan, and a plethora of other vendors.
He joked: “When I started out in the late 1970s we were doing cloud computing from Comshare’s headquarters in London’s Chelsea district only at the time we just didn’t know it was called that. The name ‘the cloud’ and the practice – which I’ll address later – came later.”
Coveney directed attendees towards his latest book, entitled ‘Budgeting, Planning and Forecasting in Uncertain Times’ and the Best Practice series of tech guidelines produced by the FP&A Advisory Board – as well as his series of gtnews articles – before reminding his audience that essentially FP&A systems are about business processes. These should be in order before embarking on the implementation of a new technology system to help with budgeting and strategic planning.
As he said: “The purpose of FP&A systems is to help manage business processes – covering resources, workload and outcomes – in an unknowable and uncontrollable environment in order to achieve the organisation’s purpose.”
“All you can do when facing ‘unknowable’ events [such as new regulations which shape your business] and ‘uncontrollable’ factors [such as social media criticism which is prevalent in a big data world] is to manage tightly the three things in any senior management team’s gift – process, resource and workload.”
That is how users can predict, strategise and react to changing consumer needs and business practices to stay on top, Coveney added – by controlling the process, resource and workload, all of which overlap to some extent. The process is what matters most when designing and specifying a new FP&A technology system or upgrading an old solution. Business processes and rules across the sales department, product development team, commercial services, treasury and procurement departments, for instance, can all be ordered to achieve optimum efficiency and receptivity to a tech system.
Once implemented, a tech system can introduce automation, useful analytical and predictive data, and efficiency into any FP&A function – provided users complete the human groundwork first. Just because you specify a new technology system doesn’t mean you are absolved from working out how it should fit into a corporation’s processes. Ultimately, technology is only as good as people’s ability to use it, and apply it for business benefit.
“Two key things have happened over the course of my career, with both speed and business complexity increasing during my working life,” said Coveney. “The internet changed everything and social media, using unstructured big data and predictive analytics, will do so again.” Even faster in-memory analytical techniques, using the graphics cards in computers, will further accelerate the pace of modern business, he warned, and increase complexity too.
A straw poll of attendees revealed that despite these changes, most still use an annual budget approach to their finance activities, with the opportunity to move towards a dynamic rolling forecasting methodology not being fully seized.
“We need to change to cope with these changes in the speed and complexity of business, and to be able to properly harness the abilities we now have to look into the future,” said Coveney. A good FP&A computer system, properly ordered and implemented was a sure way of doing this as it can aid the budgeting process, dynamic planning and predictive capabilities of finance professionals and corporations.
Basic FP&A System Building Blocks: 10 Capabilities to Look for
Having outlined the basics of performance management and setting the scene, Coveney identified the essential features that financial professionals should look for before ordering a new technology system or upgrade.
His top 10 requirements for an effective system are:
- A multi-user database: This should be accessible to all who need it and the database should be multidimensional in nature to mimic and align with your organisation. It should also be able to time-shift so that, for example, it can cope with a six-month delay if a marketing campaign is delayed without requiring data re-entry. Other ‘must-haves’ include flexible, relational database capabilities that can make links and accommodate big data in your IT architecture set-up, to enable customer sentiment to be mined and predictive capabilities to be maximised.
- Security: You should be able to restrict data access to certain people at certain times, and ensure a secure operating environment that is accessible, yet protected.
- Model builder: A modelling capability is essential when specifying an FP&A system as you must be able to run test scenarios, accommodating hierarchical and non-hierarchical organisations and situations. Decide which type of organisation you are beforehand and how your sales department relates to procurement, delivery, treasury and so forth.
- Business rules: You need to be able to enter and run business rules so that data can be ordered and made useful to the corporate, with percentages, ratios, summations and other presentational tools also useful functions. “It is no good being told that C27 relates to F29 on an Excel spreadsheet – still prevalent in the industry by the way – when this doesn’t tell anyone, not in the know, anything useful,” explained Coveney.
- Data acquisition: Extracting data and transposing it into the FP&A technology system from anywhere, for example the general ledger, should always be possible, alongside typing data in and other matching and loading capabilities.
- Financial application ‘intelligence’: A shiny new computer system is of little use unless it can help make your life easier as a finance professional. That means it should be able to cope with currency conversions, intercompany allocations and work out the correlations between them.
- Presentational tools: These should be in-built so that you can present static and dynamic reports to the board with charts, grids and graphs harnessed to good effect.
- Data/User control: This functionality is important so that workflows can be controlled. It should be possible to send a budget submission for approval and for it to be locked, approved and amended as required, and for master planning documents to be easily controlled.
- Collaboration: On a similar theme, notes, alerts and comments should all be possible during document formation. Indeed, if a true dynamic budgetary approach is to be incubated at a firm, with profit alerts and due payment warnings encouraging cross-departmental collaboration, then collaborative tools are essential.
- User access methods: The web, mobile, and veteran but still popular Excel spreadsheet formats, should all be built into your computer system in order to enable easy user access and flexibility.
“All FP&A systems should have these 10 components ideally, but not all will,” concluded Coveney, “It’s up to you to build out systems yourself, so that you get as many of these capabilities as possible – there is not a single ‘off-the-shelf’ solution.”
In order to get the best technology system to support your FP&A function, he added eight key system mapping requirements that finance professionals seeking extra tech support should use as a checklist. He advised that any FP&A system should be able to:
- Monitor business processes and how they contribute towards business goals.
- Provide back up to actual results, to establish the relationship between workload and resources.
- Track forecasts and the detail behind the numbers.
- Use business relationships to create driver-based budgets.
- Assess the impact of change.
- Use analytics to validate forecasts and budgets.
- Link budgets to strategy.
- Implement a continuous approach to planning.
“Once all eight requirements have been built into your processes and mapped to your technology system, which is specified with the 10 aforementioned capabilities, then you will truly be in a position to do continuous budgeting,” said Coveney. “Remember, the key point is you need to be able to mix metrics and profit and loss (P&L) data dynamically. The system is not worthwhile otherwise.”
Conclusions and Emerging Tech Trends
The presentation concluded with a discussion of emerging trends in the technology sector, principally the need for single system flexible architectures that avoid silos; intelligent workflow programming; big data analytical trends; and cloud computing. The rise of Software-as-a-Service (SaaS) systems in the cloud, which can be trailed for as little as £1,000 allowing finance professionals to experiment before specifying a solution, was particularly discussed by Coveney. He encouraged attendees to “try before you buy” and not worry overly about security and resiliency concerns, which have now been largely overcome by cloud services providers.
A lively Q&A session then ensured with attendees able to question presenter and founder Larysa Melnychuk about their experiences in the sector, before the evening’s networking opportunity to talk to FP&A peers and colleagues. The discussions continued long into the night with technology experiences good and bad shared in a supportive, learning environment.
Reaction Quotes: Treasurers and FP&A Professionals
Claire Delicata, an FP&A director at Costa Coffee (part of the £15bn Whitbread Group) until January 2014, was impressed by Coveney’s presentation.
Delicata, now an FP&A contractor with vast experience in this space after working in senior FP&A positions at insurer Legal & General and at Vodafone, told gtnews: “I found it very interesting. Clearly, Michael’s background with Comshare and latterly Infor, plus his experience working on treasury and finance projects, is very relevant and he’s a knowledgeable guy.”
She added that particularly useful was Coveney’s breakdown of the methodology for an FP&A system into understandable subsets. “A lot of finance professionals don’t break it down to that level of detail or give you the detailed technical information that you need: he does!”
Regarding the AFP Certification programme for FP&A professionals, as was mentioned by Melnychuk, Delicata said that it was hard for her to comment – having not seen last month’s beta exams – but she’d be interested in viewing the website.
“I’d have to ask myself though, what is the value to me? I studied hard for my finance qualifications for three years and would probably need persuading to do yet more exams. I can see, however, that the AFP certificate could fill a specific FP&A gap and potentially be useful as a hiring tool for juniors, especially as I am not aware of any other organisations presently offering training in the FP&A segment. I can see it being a useful benchmark next time I am looking to hire staff, alongside my own in-situ tests.”
According to Dan Andrew, treasury manager at the Towers Watson consultancy: “It was an excellent evening and covered all the things you should be looking for in a technology system, which is what I wanted. It wasn’t a sales pitch, but rather a useful checklist.”
- To find out more about future FP&A Club events in London and elsewhere, plus details about the free membership available to finance professionals, please click on the highlighted link. Alternatively you can email the founder Larysa Melnychuk mailto:email@example.com. To join the LinkedIn FP&A Group click on the highlighted text.
- For more on 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. You can also sign up to the AFP FP&A e-newsletter or visit the AFP FP&A website to find out more about the topic. The gtnews FP&A section homepage also has a wealth of information, interviews and articles about financial planning and analysis and its developing role in treasury and finance.
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