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).
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.
Let us look at an example;
Company ‘A’ aims to be the market leader (Strategic Plan) in Singapore 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.
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 to 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.
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 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 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.
JustPerform is a new generation, intelligent Corporate Performance Management (CPM) platform. It empowers enterprises and organizations in business planning, consolidation, and performance monitoring. Its process-driven approach helps analyze the results that matter, discover insights, and plan for success.JustPerform is a new generation, intelligent Corporate Performance Management (CPM) platform. It empowers enterprises and organizations in business planning, consolidation, and performance monitoring. Its process-driven approach helps analyze the results that matter, discover insights, and plan for success.
Three reasons to adopt extended planning and analysis:
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