Why FP&A Maturity Matters for the Future of Finance - And How to Get There

Prophix Symbol 1 Col Spot 185 01Prophix Feb 15, 2022, 8:25:00 AM

When you think about maturity, think about dark chocolate. While adults appreciate a complex flavor profile that might include hints of saltiness and bitterness, kids… well… this video is a good illustration of how they feel.

It takes age and experience to truly enjoy dark chocolate. And once you make the switch, store-brand milk chocolate may seem teeth-achingly, almost nauseatingly sweet.

Maturity in Finance—FP&A specifically—is also about embracing complexity and expanding your capabilities. Our latest guide, FP&A Upgraded, is all about transforming your FP&A into a more sophisticated, efficient process.

But what does maturity mean for FP&A, specifically? And why does it matter?

Defining Maturity for FP&A

In simplest terms, FP&A maturity means you’re free from manual processes and spreadsheets, able to focus your time on forward-looking business decision-making.

“Leaders in FP&A are the ones who are focusing on the windshield view and anticipating trends and issues across their business,” says Tom Hood, CPA, CITP, CGMA, EVP Business Engagement & Growth, AICPA (Association of International Certified Professional Accountants).

Tom continues, “They are leading with digital transformation and the requisite skills in their Finance and Accounting teams. They are adept at partnering with business units and divisions across their company. They are getting the benefit of being co-pilots with a seat at the decision-making table versus being overlooked or not even asked.”

Stages of Maturity

The above is a good description of the ideal state of FP&A maturity; it’s a goal to work towards. But most organizations don’t get there in one big leap forward. In our CFO Benchmark survey, we identified four stages most organizations go through:

  1. Developing: Dependent on a few individual people, FP&A is a hands-on, mostly spreadsheet-based process.
  2. Defined: Some advanced processes laid out but may not be properly documented. Still a manual process that relies on the expertise of a few key people.
  3. Advanced: Roles and responsibilities are defined, processes are standardized and documented, and there’s a high level of support and integration.
  4. Leading: Processes are fully defined and tool-use optimized, systems are integrated, and the FP&A function is aligned tightly to business objectives.

If your organization is still in that first stage, you’re not alone. Over half of the CFOs we surveyed in 2020 said they were in the Developing stage. Only 2% said their organizations were at the Leading level.

These statistics represent an enormous opportunity for CFOs to level up and expand their role in the organization.

Jack McCullough, President of the CFO Leadership Council, highlights just how big the potential gains can be: “Elite CFOs with the right solutions can increase their productivity by more than 30%,” he says. “That is like receiving $100,000 in free strategic consulting every year.”

Why Does Maturity Matter?

The Finance department is evolving to a more forward-looking, advisory role. But if your department is mired in manual processes, there’s less time to take on a more valuable position in the business.

Maturity means less time on manual tasks

We found that Finance teams with a low level of maturity spent over half of their time on spreadsheets—and over half of all respondents said time with spreadsheets was the least productive time they spent.

On the other side, those who were most sophisticated spent 20% or less of their time in spreadsheets. That means 30% more time on higher-value tasks.

Maturity means enhanced forecasting and budgeting abilities

In our digital transformation survey, we looked at the capabilities of teams across the maturity spectrum. Only 11% of low-maturity teams said they could forecast beyond 12 months. However, over 33% of high-maturity teams have that capability.

Maturity means a transformed department of Finance

FP&A maturity brings standardization, automation, and artificial intelligence to the Finance department. It’s a cornerstone of digital transformation and a key component of taking on a more valuable role in the organization.

“The future of FP&A will be driven by artificial intelligence and analysts who have strong soft skills, such as communication, problem-solving, and strategic insight,” says Stephen J. McLain III, Business Consultant, Host, Finance Leader Podcast. “The future FP&A department will utilize an intuitive financial system administered by a highly skilled internal IT team who build models and format reports for the analysts.”

First Steps to FP&A Maturity

There are three major components to upgrading your FP&A processes. It starts with mindset: It takes executive buy-in, clear leadership, and a change management strategy to start the process. All of the above starts with Finance leadership, says Robert Kugel, Senior VP- Research Director, Ventana Research:

Finance leaders need to be familiar with what’s happening in business technology. They can’t be passive and rely on IT — the IT department knows what they’re doing, of course, but they’re not well-versed in the specific needs of the Finance department. So, Finance leaders need to be knowledgeable enough to advocate for the solutions that will benefit the Finance department in particular, and, ultimately, the entire organization.

The second component is the skill set. Skills to hire or train include data science, data management, and a smattering of IT skills, of course. But it’s important to not overlook soft skills, as well.

“The one surprising role that's becoming more and more in-demand is the storytelling role,” says Gabrielle Luoma, CPA, CGMA, CEO, MOD Ventures, LLC. “We accountants are great at reading off the numbers. Storytelling requires us to have much better communication skills, interpret the data, and explain it in a way that others can understand.”

The final component is the toolset. Upgraded FP&A relies on technology that can consolidate data from across the organization and apply intelligent analytics for forecasting, scenario planning, and budgeting.

“For far too long, FP&A was conducted with antiquated tools and shrouded in mystery,” says Janet Schijns, CEO, JS Group. “The latest analytics tools not only automate the intelligence of FP&A, but they also allow a broader set of leadership to truly understand and benefit from the data.”

Launch the Next Evolution of Finance

Upgrading FP&A makes the Finance Department more productive and efficient, empowering the whole team to focus on more valuable, meaningful work. The benefits don’t stop there, however.

With standardized and automated processes based on a single source of data truth, the transformed team has more time to innovate and more insight to guide their exploration. FP&A maturity can be your springboard to the future of Finance — and the next evolution of your entire organization.

To learn more, check out our interactive report: FP&A Upgraded.

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Ambitious finance leaders use Prophix to drive progress. By improving the speed and accuracy of decision making, Prophix’s Financial Performance Platform elevates the talents of finance teams to do their best work. Crush complexity, reduce uncertainty, and illuminate insights with access to best-in-class AI insights and planning, budgeting, forecasting, reporting, and consolidation functionalities. Prophix is a private company, backed by Hg Capital, a leading investor in software and services businesses. More than 2,500 active customers across the globe rely on Prophix to achieve organizational success.

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