Simplified Financial Planning, Part III: The Future of Financial Planning and Analysis is Closer Than You Think

by Babak Ghoreyshi, Global Marketing Program manager at SAP

In the previous posts in this series, we reviewed survey data from a report by the CFO Research and SAP titled “The Future of Financial Planning and Analysis.” This detailed report covered what finance executives are saying about their current FP&A mandate and the role of data, technology and right solutions in making quicker, better and more accurate business decisions. In this final installment, we look at three of the top priorities for CFO’s and other finance executives.

New IT Systems That Can Handle the Flood of Data

The demands for real-time, ad-hoc analysis in FP&A are overwhelming existing IT systems. Finance leaders suggest that that current systems will fall even further behind as these demands grow. A majority have been unable to plan as they would like due to short turnaround times. Nearly all agree that they need faster and more responsive infrastructure for the next wave of big data. In the CFO Research study, the results show that:

  • Over half (56 percent) of finance executives are not satisfied with the scope and granularity of data due to system constraints and time pressure.
  • Just over 53 percent admit to jettisoning some complexity during “what-if” projections and risk modeling to get actionable advice quick enough to be effective.
  • A full 93 percent say that focusing on increasing speed and responsiveness will have the biggest impact on their bottom line.

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Tighter Integration of Financial Planning Software with Core ERP

Instinct and experience can only take you so far in a turbulent environment. Data-based decision making software is becoming a critical tool. Financial execs report that they rely heavily on decision support software that already integrates their financial planning systems with their enterprise resource planning (ERP) systems. From the CFO Research survey data, it’s clear that the majority of financial leaders recognize the significance of ERP integration:

  • 82 percent of financial leaders who say their financial planning systems are already integrated with core ERP systems confirm that they rely on this tech to support their decisions.
  • In comparison, only 41 percent of those with financial-planning systems that are “fairly well integrated with core ERP systems, requiring some data migration” say that their systems substantially contribute to decision-support abilities.

The companies that have already integrated their financial planning systems with core ERP systems are winning in that they are better able to support effective decision making.

More Flexible and Responsive Systems

Looking into the future, financial leaders expect business users to demand greater contributions from high-value FP&A projections through 2017. Decision makers will want to dive into the numbers themselves with interactive reports and projections that reach further into the future.

Providing that level of depth in planning, analysis and reporting will grow in importance as a business need that requires higher and more effective contribution from the finance function. Here are two more fascinating predictions from financial executives that have emerged from the CFO Research survey:

  • In the near future, information and analysis systems will need to be simpler to use, but also more sophisticated and interactive with longer-range validity.
  • 88 percent of financial leaders say that decision makers in their enterprise want a better understanding of the analysis they receive and they want finance to simplify it for them.

Finance executives are already striving to help other business users make the best decisions with the analysis that they provide. In results from this survey, finance leaders expect that this trend will expand across the enterprise in the future.

How to Build on Financial Success

Success in this turbulent new economic landscape depends on access to higher quality data and analysis tools. Finance experts need more far-reaching projections that can be presented simply and clearly to their colleagues for better decision making. Start now from Finance Solution content hub, and find more details on EPM in the cloud, collaborative analytics and advice on how to best communicate reporting data. The right financial planning places a CFO in the position of a trusted adviser who can see beyond the chaos in the marketplace.

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Want to Be a CFO? You’ll Need More Than an Accounting Degree

by Chris Grundy, Director Product Marketing, SAP

If you’ve reached a position as prestigious as CFO, you must be finished with formal education, right? Actually, nothing could be further from the truth. As the technological landscape has evolved with in-memory technology, visualization, plus the ability to integrate forecasting and planning with the ERP system, CFOs must use of a whole new set of tools.

Panelists at a recent SAP Game-Changers radiocast, John Steele, principal with Deloitte Consulting LLP and head of the U.S. SAP finance transformation practice at Deloitte; David Dixon, partner principal at TruQua Enterprises; and Henner Schliebs, head of finance audience marketing at SAP, discussed the need to adapt to a rapidly evolving role and what characteristics define a successful CFO.

SAP's current range of mobile solutions for Finance

SAP’s current range of mobile solutions for Finance

Fulfill the many purposes of CFO

Being CFO is now a balancing act that requires tending to the traditional post of information steward and business advisor while heralding a new vision for the finance department.

According to Steele, finance is the “Rome” of a business – all roads lead to it. Every other department relies on information held by the CFO. And as finance moves further toward the back end of an organization, CFOs need a greater handle on technology so they can drive analytics in a highly mobile and social world.

Dixon adds that this critical role has reached a tipping point – you can’t just crunch numbers and expect to get the job done. If the office of the CFO can’t step up and fulfill all the organization’s needs, it will have to start sharing leadership space. This new trend is on the rise with positions such as chief information officer and other digital executives gaining in popularity.

Ideally, less is more in global leadership. It’s easier to unify an organization under one solid viewpoint. That’s where the idea of continuing education arises. Steele says, “The CFO really should think about learning more about the technology. If the CFO can rely on the CFO team to get a little bit deeper and educate the CFO, I think that’s beneficial.”

Master a Technology-Driven Finance Function

One of the key topics is data security. Schliebs explains the double-edged sword that comes with bringing a world of information to the masses: “We need to make sure that we bring the people to data, that we go away from the area of bringing data to the people, but have the service arrangement.”

He also suggests that one of the CFO’s top priorities is guaranteeing a single source of truth. Instead of spending half of planning and analysis time wondering where data came from and if it’s reliable, you can get down to brass tacks and truly run in real time.

Imagine the CFO of the Future

Dixon asserts that it’s paramount for a CFO to keep up with what’s happening in technology and the market – and that means going outside the four walls of the company. Schliebs takes this idea a step further, saying that the CFO is evolving into the true leader of an organization.

Essentially, we’re moving from a CPA-type CFO to an MBA-type CFO. More than chief bean counters, they need to be business managers who can lead and inspire an entire organization. To learn more about the characteristics and market forces that are shaping the role of CFO, listen to the full radiocast.

Why Finance Operations Shined at SAPPHIRENOW

From Joseph Pacor, SAP, with his thoughts on Finance and the SAPPHIRENOW conference

Recently I wrote a blog about SAP’s Finance Operations which were being showcased at SAPPHIRENOW. These included Collaborative Invoice Management, which we presented as one integrated demonstration for the solutions of the Ariba Network, SAP Vendor Invoice Management by OpenText and SAP Accounts Payable. Bringing these solutions together in a seamless demo really highlights the benefits any company can achieve and it’s something that ExxonMobil has been doing for a couple of years now. The presentation at SAPPHIRENOW by Lionel Jellins, Manager- Global IT Ventures and Operations ExxonMobil Global Procurement, captured the strategic advantages of automating the invoice to pay process, and many of his comments are very compelling for anyone looking to improve their accounts payable management.

To begin with, the magnitude of ExxonMobil’s invoice operations is staggering…$500 Billion in disbursements annually, consisting of 5.2 million invoices from 1400 suppliers. As Lionel mentioned, such volumes necessitated a touch-less, intuitive, connected and cost-effective solution such as SAP Collaborative Invoice Management. The goal was to bring money to the bottom line for shareholders by taking advantage of early-pay discounts and ExxonMobil’s ability to pay faster (commonly referred to as dynamic discounting). They use the Ariba Network to exchange purchase orders and invoices electronically, which helps them lower order costs, reduce cycle times and improve visibility into the procurement to pay process. The SAP Vendor Invoice Management solution supports their invoice approval and exception management processes, all in one easily-accessed workplace. The benefits include faster response to price changes and consolidated payables activities, all within a user-friendly interface with enhanced workflow capabilities.

While the ExxonMobil presentation was excellent and deserving of your viewing here, I also want to highlight the interest we experienced in our other Finance Operations, notably for the Receivables Management and the Shared Services for Financials solutions. Today, finance managers must contribute more strategic value to their corporate objectives, and these applications help to improve employee productivity, cash flow, cost reductions and profitability. Clearly this was why we had a constant flow of interested attendees for three straight days, looking for the latest innovations to support their finance operations processes. If you didn’t stop by our Expert Table, I encourage you to view these solution links and short demo videos to enjoy the experience of the SAPPHIRENOW participants, making Finance Operations shine brightly: Receivables Management, Shared Services for Financials, Collaborative Invoice Management (second demo in search) and Fiori for Collections.

Place your bids for an improved Financial Close

I came across an interesting SAP customer story the other day, which was in part referred to in an earlier CFOKnowledge article published in November 2013. As you’ll know from reading that blog article, SAP had augmented its comprehensive Accounting and Financial Close offerings by endorsing the BlackLine Financial Close Suite a Software-as-a-Service (SaaS) offering from partner BlackLine Systems. Citing benefits such as reduced risk and easier compliance in their account reconciliation and financial close processes, efficiency gains and increased employee productivity, along with the freeing-up of resources (personnel time) to do other things, on the face of it this cloud-based solution has much to offer. I can certainly see why this would appeal to organizations eager to improve and further streamline their Financial processes.Businessman Looking at Stock Prices

An article in SAP Insider this month now reports how eBay have transformed their Journal Entry, Task Management, and Account Reconciliations processes using BlackLine’s solution, working in tandem with their existing SAP ERP software landscape. According to the article the results of the implementation have been a reduction by several days in the financial close, greater visibility into close processes and reconciliations, and improved auditing controls. And by the sound of it, the system also seems to be easy to implement and use.

Take a look at the SAP Insider article for more information (you may need to register for access), I think you’ll find it an interesting read, and it may perhaps leave you wondering whether you should also bid for an improved Close process.

What’s Needed in a Solution for Driving Profitability Improvements in Manufacturing

Although growth is now returning to most economies, companies should not expect all the woes of the recent past to disappear overnight. Profit margins will continue to be tight as raw material prices continue to increase while selling prices are still under pressure as customers continue to ask for ‘your best price’. This situation requires manufacturers in particular to continually improve their efficiency and cost position by doing more with less.

Although much of the core information about material costs, labor rates, logistics, storage, cost of sales, return rates and the like already resides in companies’  ERP system, they are far from ideal for planning, profitability modelling and what-if? simulations and most practitioners today recognize that these are best done by front-ending the ERP system with purpose-built performance management applications such as those in the SAP EPM portfolio.

indexThis is something that a recently published white paper ‘Manufacturers: optimize cost tracking, product profitability analysis and simulation’ by Sébastien L’Hôte of the Stampa Group  – one of the Europe’s leading experts in delivering enterprise performance management solutions – picks up on, suggesting that when it comes to modelling forward-looking costs and profitability in manufacturing where there are complicated bills of materials then it makes eminent sense to use an independent tool that directly retrieves data from the ERP application. The solution that the paper recommends is SAP Profitability and Cost Management (PCM) on the basis that although it was designed as a costing and profitability management solution, it has very flexible dimensionality that can be used for things such as manufacturing sites and selling territories as well as a flexible rules engine for forward-looking scenario planning and budgeting.

N-tiered Bill of Materials - something that always needs bespoke modelling

N-tiered Bill of Materials – something that always needs bespoke modelling

SAP Profitability and Cost Management was always designed to be part solution / part toolbox so that it can be configured for a number of uses; product costs simulations, customer profitability, shared services chargeback – and the calculation and audit of transfer prices, which is another increasingly hot topic coming under scrutiny.  But the new “Bill of Materials” functionality which has been available since version 10.0, enriches an already comprehensive tool for both SAP, non-SAP and hybrid environments.  At a time when Finance is expected to take a lead in driving productivity and profitability improvement initiatives in manufacturing environments, flexible, open and agnostic  solutions such as SAP Profitability and Cost Management that can easily be tailored to specific, and often complex situations, may be just what you’re looking for.

Who has the big picture for performance management?

Almost all the documented case studies of companies benefiting from EPM solutions are still to do with the stand-alone silo solutions for planning and budgeting, (and sometimes rolling reforecasts), workforce planning, consolidations and cost management. There is nothing wrong with this and in most instances the organizations have benefited from real dollar savings in improved efficiency in the finance department yet alone the less tangible, but ultimately far more important benefits, of better decision making, greater agility and the like.

But where is the big picture? With the power of in memory computing such as SAP HANA that can eat up big data and spit out the results before you can blink, isn’t it time one of the vendors or analysts set out the big picture; the end game, so that companies can plan out the easily digestible chunks that will ultimately eat the elephant? 

At the moment, the hot topic seems to be Integrated Business Planning, ( i.e. the seamless integration of annual budgeting with detailed sales and operations planning), and undoubtedly this will be transformed by the power of in memory computing. But sadly, the vision seems to have stopped there for the moment, when surely there is a laundry list of other pieces of functionality that ought to be included in scope. For instance what about:

  • Full P&L, balance sheet and cash flow forecasts – in total and by business segment  
  • Dynamic cash flow, working capital and foreign currency forecasting – something SAP have already released with SAP Dynamic Cash Management
  • Forward looking process costing and cost and profitability forecasts at category and product level

From the outside, it seems to me that the vendors are currently going through this type of laundry list and ‘clustering’ some of the obvious pieces such as cash flow, working capital and foreign currency forecasting together into new ‘uber’ solutions for clearly defined groups of users. Again, in my mind that’s all good and it will certainly be easier for the vendor to sell and the client to buy.

But surely the clusters still need unifying so managers can get quick answers about how changes to the sales and operations plan impact product profitability in future periods; determine how to utilize current capacity to optimize profits and how best to supply products to new geographies.  

Given the technologies available at the time, the mega vendors did an excellent job in developing and delivering a vision for ERP. So I guess it’s back to the drawing board with the whole of operational and financial performance management in scope this time around.   

The SAP and Open Text eBook

From Joe Pacor

Click to access

We’re often inundated with solution content which is received sporadically, gets filed away, or worse, gets misplaced or deleted. Then someone will ask you about that particular topic and the mad scramble begins to compile all of the dispersed material. Wouldn’t it be great if all of the content you ever wanted on a topic was organized in an electronic library, or eBook, which coordinated the material in a very easy-to-consume manner? Well, that is exactly what has been created in the ‘SAP and OpenText Solution Extensions e-Book’, available now for your review. Months of hard work by SAP Partner Marketing went into the production of this multi-faceted piece of collateral, so let’s take a quick look at what you will find.

Firstly, the partnership between SAP and Open Text offers solutions which span the entire enterprise, providing fully integrated content management applications for your business processes. The eBook material is indexed to accommodate quick access to the areas of most interest to you. The structure of the collateral combines positioning and messaging information along with a variety of media, including customer testimonial videos, solution demonstrations, and thought leadership recordings. You can hear direct commentary from industry analysts, as well as the SAP and Open Text leadership team…and gain access to related white papers. The eBook even contains value calculators which assist in determining the most likely benefits for your company, based upon the individual corporate metrics which you enter. Continue reading