With 2020 in the rear-view mirror, financial planning and analysis teams can celebrate having navigated one of the most volatile years on record. Pushed to the limit, organizations relied on FP&A teams to provide quick insights into forecasts, operational performance and data-driven answers to make important decisions. With widespread instability, finance had no choice but to embrace uncertainty and commit to constantly updating business scenarios, overhauling future projections and creating new contingency plans.
And now as the FP&A function turns its attention to 2021, what can we expect the new year to bring? Here are four predictions for FP&A teams:
Prediction #1: Fixed Costs Will Continue to Face Scrutiny
In 2020, FP&A teams got creative when it came to managing fixed costs. In times of uncertainty, organizations must turn a critical eye toward which costs can be cut without harming the future of the company. Teams must continually monitor several categories, including payroll and benefits, outsourcing, cost of operations, supplier contract terms and culture expenses.
This scrutiny will continue if not be more extreme in 2021. Despite heightened cost management, organizations will need to fiercely focus on the growth of the business while keeping people motivated.
Prediction #2: Organizations Will Gut Legacy Systems
Businesses often rely on FP&A to provide insights that help business leaders make informed decisions. As the CFO seeks to maintain and mitigate additional costs to the organization, FP&A plays a critical role in establishing operational efficiencies, maximizing profitability, uncovering cost savings and investments. To successfully deliver results, finance organizations should challenge the existing mechanisms and systems by which they execute their planning and forecasting processes. FP&A teams cannot afford to be slowed down by old legacy systems. In 2021, organizations will seek to enhance or eliminate systems that can’t keep up with the organization.
In addition, organizations will continue to adopt new technologies that create efficiencies in their processes. Cloud planning and budgeting software solutions, for example, are completely changing the way FP&A teams conduct their budgeting, planning and analysis. By eliminating the manual consolidation of budgets from disparate spreadsheets, finance teams have more time for analysis. Meanwhile, cloud-based tools provide remote access, which has quickly taken on much greater importance, and greater access in general to improve collaboration. Finally, the cloud is making sophisticated planning tools, once accessible by only large enterprises, accessible by midsized and fast-growing businesses. Bolstering planning capabilities can unlock the value of financial forecasting and inform strategic decision-making.
Prediction #3: Agility Becomes a Priority
The last year showed how important agility is for survival. Organizations don’t want to be caught off guard. FP&A teams learned the importance of adjusting plans quickly and communicating insights early and often. With resources already stretched thin, teams have to deliver more reports, meet business needs and find the capacity to partner with business functions and provide insight. FP&A teams will continue to enhance technological capabilities that allow organizations to reduce planning cycle times, improve forecast accuracy, deliver insights quickly and proactively plan as the world changes rapidly.
Prediction #4: Strong but Flexible Financial Planning Becomes Vital
In any given year, planning can be a complex process for FP&A. The volatility of 2020 forced
FP&A to rethink the art of prediction and highlighted the importance of mitigating risk. Organizations faced additional strains on their financial planning and forecasting process this year, which will easily continue into next year.
Organizations will expand probabilities and outcomes, using multiple modeling approaches to prepare and understand impacts throughout the organization. There will be an increased focus on driver-based modeling and collaboration with those most familiar with a defined driver. In addition, planning teams will rely even more on external economic drivers.
How NetSuite Planning and Budgeting can Help
A powerful, yet easy-to-use-and-deploy planning solution, NetSuite Planning and Budgeting runs pre-configured data synchronization with NetSuite’s ERP ensuring financial and operational data is automatically pulled from NetSuite into the planning tool. It eliminates manual data entry with reporting at your fingertips with no need to worry about who got what data and when. Plus, you’re able to easily include everyone in the organization that needs to be involved in the planning process.