Evolution of the Traditional Planning Process
xP&A is the next-generation planning process that is needed for this fast-changing business environment. It involves the entire organization and harmonizes the three key planning processes:
- Strategic Planning;
- Business Planning and Forecasting; and
- Operational Planning and Forecasting.
Plans under the xP&A universe tend to be adjustable with more ease in real-time given that it utilizes technology in assisting the FP&A team. These new-age planning platforms are equipped with advanced analytical capabilities that provide more insight into the future and enable a great collaboration between key stakeholders. Such planning framework would allow an organization to manage scenarios at ease, and be ready to face extraordinary events such as the recent pandemic, and to plan during uncertainty.
Which is the role of CFO in xP&A?
Planning is usually undertaken by a certain group of people and departments, leaving most of the organization is usually detached from this. Hence, it boils down to the Finance/FP&A function to take the lead. Here, CFOs play an important role to drive their respective Finance function to transform their thinking from “score-keeping” to “goal-scoring”. Consequently, it means that Finance functions can no longer afford to wait for information and data to flow to them. CFOs have to embolden the Finance function to be proactive and gather insights. In order to implement and manage the xP&A process, the FP&A function has to become more static and influential.
The importance of Planning Beyond Finance
With a siloed department mentality, organizations are in danger of losing their collaborative advantage. As a central function, Finance is able to drive cross-organizational collaboration via the planning exercise. xP&A encourages Finance to venture beyond its departmental boundaries in its conquest of establishing the key metrics and business plan for the board.
Transforming into the Business Partner Mentality Mindset
The evolution from traditional planning to xP&A is impossible without changes, and the most important is a shift in mindset. Here a Finance department comes into play by managing these changes and playing their business partner role.
Apart from carrying out statutory and organizational responsibilities, the CFO and their Finance Team should be encouraged to transform into better Business Partners. It will ensure the xP&A is understood by all department/business unit leaders in an organization. Therefore, to bring their respective Finance function to the next level and to serve as better Business Partners, CFOs need to think differently and set priorities clearly.
2024 Top 5 Priorities for CFOs in xP&A Transformation
Assuming, the CFO is able to evolve their mindset to become more efficient, agile finance practitioners, then these are the top 5 priorities in xP&A implementation with practical applications:
