Larysa Melnychuk, Founder and CEO of FP&A Trends Group, shares her views on how the pandemic and increasingly volatile times have affected financial planning and analysis (FP&A) – and how, in her experience, these challenges can be overcome.
For those tasked with planning and forecasting the future of a business, these are unenviable times. But thanks to technology and new approaches, the Financial Planning and Analysis (FP&A) sector is adapting and overcoming the myriad of challenges in their way, to steer businesses through the volatile global climate.
We spoke to Larysa Melnychuk, Founder and CEO of FP&A Trends Group, to hear about the lessons learned and new trends that are shaping the future of financial planning.
IWG: The pandemic disrupted and altered nearly every business sector and discipline. What were the main challenges and lessons learned for people working in FP&A?
It is a very timely question, as I am just back from my trip to North America, where I facilitated the International FP&A Board meetings on ‘FP&A Lessons Learned’ in eight cities. This is on top of four similar meetings in Europe.
You are correct: the pandemic altered everything. The main conclusion is that the pandemic made it very obvious that the traditional management accounting methods do not work anymore.
In March 2020, the world was full of outdated budgets and unrealistic forecasts. That is why the biggest question that every FP&A professional is asking right now is: “how to plan and forecast in an environment of high uncertainty?”
IWG: So what is the key to planning amid such uncertainty? What has been learned?
I would say the key lessons learned are:
- Scenario management mindset is the key; running through and preparing for multiple different scenarios.
- FP&A is moving beyond just the finance function. It involves the entire organisation: from strategic to operational planning, both top-down and bottom-up planning processes. In other words, FP&A is moving to xP&A – Extended Planning and Analysis.
- It is evident that FP&A people now require new skills to adapt to remote and hybrid working environments, and our profession has become more multi-disciplined in general. The high demand for FP&A data scientists and architects proves that the profession is changing and becoming more sophisticated than just an accountant or financial analyst.
- Digital FP&A is the way to go. Modern, flexible technologies are game changers in bringing agility to the planning process. As our recent 2022 FP&A Trends Survey confirmed, artificial intelligence and machine learning in FP&A has started to deliver incredible results.
IWG: You mention the shift towards hybrid working requiring new skills. What does this mean for FP&A professionals?
Remote and hybrid working means that an FP&A business partner now needs new skills: the ability to tell the story and to influence remotely, using new communication technology, while adjusting their communication practices to the new realities.
At the recent meeting of the International FP&A Board, senior finance practitioners were sharing insights on their organisations. The main conclusion was that the flexible working environment is here to stay, and we must find a way to develop those remote influencing and communication skills further.
IWG: Aside from the pandemic, how have climate change, volatile economies and recent conflict affected FP&A?
Being able to adapt quickly to a changing environment – i.e., agility – is the way to survive and prosper.
Traditional management accounting has always been very focused on details. Previously, we spent weeks on variance analysis and many months on budgeting and planning. In this environment of global uncertainty, it is all about general direction, not so much the detail and simplicity.
So, agility and simplicity are essential principles.
IWG: Looking ahead, what impact is technology having on FP&A activity?
Digital transformation is high on the agendas of FP&A for many reasons.
It can help to significantly reduce inefficiencies or time spent on non-value-adding activities such as data collection and validation. The 2022 FP&A Trends Survey revealed that only one-third of FP&A time (33%) is spent on insight generation and driving actions. But almost half of the time (45%) is spent on data collection and validation. This is apparent as 31% of all respondents revealed that they do not have a single source of data everyone trusts, and only 23% say they have good and excellent data quality.
Modern technology helps to solve the above problems significantly. The survey revealed how using Artificial Intelligence/Machine Learning (AI/ML) increases satisfaction with the quality of forecasting from 39% (for an average respondent) to 63% (for AI/ML users).
In these fast-moving, volatile times, hybrid working can give your organisation the flexibility needed to adapt. Find out how you can start benefiting from office spaces suited to the size and location of your business.