Financial Planning & Analysis (FP&A) provides a crucial framework for managing a company’s financial health and driving business success. It enhances business performance by enabling strategic planning, precise budgeting and forecasting, and performance monitoring. For the purposes of this article, we are also including reporting as part of FP&A.
The truth is that Reporting and Budgeting or FP&A implementations can fail for various reasons, often due to technical, organizational, and strategic factors.
Research indicates that over 50% of FP&A projects (regardless of the brand of FP&A product used) fail to deliver the anticipated outcomes for businesses. This trend is also evident in FP&A projects designed to assist organizations with enterprise planning and consolidation.
Let's explore the top reasons why reporting and budgeting implementations sometimes fail:
Implementations often fail due to a lack of clear goals and objectives. Without a way to maintain focus, implementations can become prone to scope creep, where new features and changes are added without proper assessment. This can lead to delays, higher costs, and a final product that is unable to meet the original requirements or deliver the expected benefits.
Effective communication, collaboration, and a unified vision among all stakeholders and departments are essential for a successful solution. This can be facilitated through workshops led by internal subject matter experts or partners, with the aim of thoroughly educating users about expectations and desired outcomes. It is crucial to have someone overseeing the solution to help ensure it aligns with the business goals and vision.
Reporting and budgeting or FP&A implementations usually involve substantial changes to existing processes and systems. Ineffective change management can result in staff resistance, low adoption rates, and operational disruptions. Employees might not fully adopt the new system, leading to underutilization or continued use of outdated processes, which diminishes the advantages of the new implementation.
A standard error is emphasizing the ROI of an FP&A solution rather than the value it brings to the business and its stakeholders. Short-term ROI can sometimes conflict with achieving top-tier, cutting-edge results. Viewing quick ROI as a success marker is a simplistic approach to implementing an FP&A solution, as it overlooks the complex decision-making involved in developing a strategic business case. Many businesses set their FP&A solution budget as a percentage of annual turnover, which fails to recognize the value of the new opportunities it can create.
Successful FP&A depends greatly on accurate and timely data. Poor data quality, including inconsistencies, inaccuracies, or incomplete information, can significantly hinder the implementation's effectiveness. Furthermore, difficulties with integrating data from various sources can cause delays and errors. This compromises decision-making processes and undermines the FP&A system's credibility, resulting in a lack of trust and reliance on the system.
The average company analyzes only 37-40% of its data, leaving the rest unused; this raises the question of why it was collected, if not to inform future decisions. Implementing an FP&A solution to utilize all available business data needs to be revised—it’s more important to use only valuable data. For instance, importing ten years of historical data, including the COVID years, into your FP&A solution won't aid future decision-making and may distort it. In contrast, importing data from the past two years, which have been more typical, will provide more relevant information unaffected by an extraordinary global event.
With repositories containing millions of records, machine learning can analyze these vast data sets to detect patterns (such as fraudulent behavior) and predict future outcomes, enhancing your forecasting accuracy. In planning, AI excels in making predictions. It helps determine budget allocations for the next three to four years, identify subtle revenue stream changes that are hard to detect manually, decide staff compensation, and assess the need for restructuring.
AI enables exploring various "what if" scenarios, considering the complexities of demand and availability while integrating trends to forecast potential outcomes. It can also predict production needs, such as how much to produce and when. For manufacturers, AI can forecast expected downtime based on historical data and future production capacity; it can also recommend optimal times for preventative maintenance to minimize machine and operator downtime.
Addressing these challenges requires thorough planning, clear communication, and strong leadership throughout the implementation process to help ensure the FP&A system delivers its intended benefits.
Within Epicor, our solution for financial planning, reporting, and analysis needs needs is Epicor FP&A. Connected to on-premises and cloud-deployed ERP systems, it is a complete and comprehensive solution for generating financial statements and other non-financial reports, budgets, plans, and forecasts.
Epicor FP&A can prevent implementation failures by applying best practices not only in the way the product is designed but also in the way it is implemented. Epicor FP&A projects start out with clear goal definitions. They also involve key stakeholders necessary to create effective change management; this way, project leaders make a conscious decision on how much historical data is loaded and can review the quality of the data. Epicor FP&A implementation normally includes training, so users are empowered and self-sufficient, helping provide solid support for the product.
To learn more about Epicor FP&A and how a successful implementation can help your business thrive, contact your account manager today.
