4 Critical Steps to Enhance Your FP&A Technology
FinanceFebruary 23, 2024

2024 priorities for CFO for xP&A transformation

Which are the 2024 top 5 priorities for CFO in xP&A transformation? Read this blog to discover more.

Introduction of Extended Planning & Analysis (xP&A)

A traditional FP&A process within any organization may look something like this: 

  • Planning process has not changed in the last decade; 
  • Budget process starts in 4th quarter of every year; 
  • Bottom-up, consensus approach to planning; or 
  • Top-down management commercial/sales-focused approach; and Final adjustment by top management and approval by executive board. 

On the other hand, Extended Planning & Analysis (xP&A) is defined as a harmonized planning process that goes beyond finance to the entire organization. It is essentially a more dynamic and analytical method of planning that targets untapped planning and decision-making potential within organizations. 

xP&A encourages departments and managers at all levels of the organization to plan as a single process on a single platform. This means that plans at all levels of an organization will be integrated, data-driven, agile, adjustable in real-time with collaborative support from the Finance and Business Teams. 

This article explores the evolution of xP&A and provides some ideas, as well as new ways of working for Finance Teams and CFOs in 2024. 

Integrated Business Planning
Bring visibility and agility to planning. Link the entire planning chain with one source of the truth.

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: 

Priorities How to Implement 
Encourage Finance to function as better business partners
To understand the business on a deeper level and not just through Excel spreadsheets - join operational meetings, visit the supply chain, build trust with colleagues
Challenge given estimates To not take forecasts at face value. To challenge, not to police, but ask fair questions
Forecast ranges and manage scenarios   Always ask for a range and explore different scenarios
Build simple Driver Based models
Have in mind that you are able to explain your model to a university student with ease
Be flexible and agile in your planning approach
 Build your plans to be dynamic and account for any future fluctuations

xP&A is a very effective planning framework that is able to streamline various departments within an organization to produce a single source of truth. It utilizes technology and provides insights that allow the plans to be dynamic and reactive. It is important that the Finance function plays a key role here in driving the inter-organizational planning process. That said, the Finance function requires an evolution of its mentality and traditional central functional role. It needs to be more ambitious and hold a better grasp of the plan and the people behind it. CFOs now more than ever need to have the right team to execute this. 

Principal at Aera Technology

Niels is an engagement principal at Aera Technology. He has 20+ years of experience in supply chain management and is an expert in integrated planning and decision intelligence. He enjoys writing a thing or two every now and then.

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