McKinsey: Turbocharging FP&A Among Top CFO COVID-19 Duties

McKinsey recently published an article on the CFO’s critical role in helping companies navigate the coronavirus crisis. The CFO’s responsibilities persist throughout all segments of the organization’s crisis life-cycle of survival, stability, and a hopeful recovery by actively dealing with the crisis’ 3 segments:  Addressing the immediate crisis, stabilizing the business, and thriving in the next normal.

FP&A has a sizeable presence in each one of these segments. We’ll discuss FP&A’s role in each segment, as well as how it can be optimized.

Addressing the immediate crisis

Develop scenarios

Amid this period of heightened uncertainty, finance and strategy teams will need to rely on a range of scenarios rather than on individual time-horizon–based frameworks. The finance leader should develop a point of view about two or three integrated scenarios that encompass multiple eventualities—for instance, which paths might the pandemic take, and which geographies or industries are poised for faster recovery than others?

The CFO should also articulate clear thresholds or trigger points that suggest what financial actions the company will take and when. The financial planning and analysis (FP&A) group is uniquely positioned to help in this regard, as it works closely with the business units and can help project the effects of the pandemic on various aspects of demand and supply.

Datarails offers a next-gen financial analytics solution that can help quickly analyze and understand the current state of the business, spot variances, and respond dynamically with best actions. With Datarails, connected teams can conduct what-if scenario planning and collaboratively decide how to make up for shortfalls, seize emerging opportunities, and avoid pitfalls. 

What’s really needed to respond to rapidly changing conditions with agility is a platform that can tie together the data, the people, and the plans to maximize visibility, and Datarails does that. 

Stabilizing the business

Reevaluating investments & strengthening the balance sheet

CFOs should use this period of crisis as an opportunity to perform a deep diagnostic on the balance sheet—for instance, reviewing goodwill impairments; refinancing debt; reducing inventory, accounts-payable and accounts-receivable terms; and so on. This sort of balance-sheet cleanup can extend the company’s financial flexibility while keeping everyone focused on key metrics at a chaotic time.

Additionally, CFOs should guide peer executives in a review of major R&D, IT, and capital allocations and use the opportunity to optimize the company’s investment portfolio. It is very likely that business units’ initial projected returns on investments will have changed significantly as a result of the pandemic. Finance leaders will need to quickly shift human and financial resources to higher-yielding projects and the initiatives most valuable to the company’s future.

Datarails is an adaptive tool that brings much needed agility and flexibility to financial management, particularly during these turbulent times. All organizational data including unstructured data that is spreadsheet-based, is consolidated on the cloud and made instantaneously accessible and ready for analysis. 

View the full history of a cell, including values and formulas that have changed over time, automate any data preparation process (like consolidations, FX conversions, eliminations, drill-downs and variance analyses), benefit from comprehensive and error-free numbers, and access up-to-date operating expenses to strategically plan and allocate future expenditures based on real-time numbers consolidated from your disparate organizational systems.

Turbocharging the role of FP&A

Under crisis conditions, the FP&A team must accelerate its budgeting and forecasting work, providing continually updated business information that the CFO and the finance organization can then incorporate into an integrated forecast. The FP&A team should use collaborative tools to monitor and manage key performance indicators; in a crisis period, issues with data latency will not be acceptable. And the team’s updates need to become a true rolling forecast, supported by a “decision cockpit”—a real-time dashboard business leaders can use to focus on the seven to ten key metrics that will guide the organization’s operations through the coming months.

Datarails is the “decision cockpit” decision-makers need. Datarails’ Insights feature offers web-based, real-time financial dashboards that are fully customizable, allowing executives to visualize their data as they see fit. And should they be interested in seeing the formulas or decisions behind each number, that’s easily done with the solution’s single-click drill downs.

Should executives be interested in presenting their data, Datarails has a live embedded charts feature. So when they present reports and presentations, figures and charts update on the spot thanks to on Office-native integration that supplies real-time, live charts.

Addressing a skills gap

Some finance organizations may lack executives with the skills necessary to elevate the FP&A team—those with analytics and business backgrounds may be in particularly short supply. To build up the finance bench, the CFO will need to scout for dynamic, proactive individuals; explicitly recognize their performance; and support their experiments with new tasks and new roles on the fly.

Datarails addresses functional and skills shortcomings without asking employees to change the way they work, meaning finance professionals win big.  

With Datarails, finance professionals can access and leverage financial and operational data independently, regardless of technical competency.  The turnkey solution allows finance professionals to quickly and easily gather, prepare, and analyze data on their own. They can perform advanced investigations into data including variance, horizontal, and vertical analyses with ease, slice and dice data, drill-down, and perform ad-hoc analyses without the need for any new skills.  Altogether, this means the finance team can easily support planning, analysis and reporting needs on-the-go to drive faster and more effective decisions.

Thriving in the next normal

Adopting a transformation mindset

Crises are often opportune times to restructure parts of the business that require transformation (and to take the related charges). This one is no different. The CFO and finance organization would be well served to adopt a transformation mindset when they are setting targets, managing performance, constructing budgets, or challenging their business on growth or expense actions. The finance team should launch a review of the portfolio, with a focus on achieving the full potential of each business unit. This is a time to shelve incremental thinking and seek out transformational plans that could boost revenues or reduce costs—not by 5-10% but by 30-40%.

Datarails is a transformative technology for the finance function that allows for complete financial intelligence. Datarails connects all your data, insights, and teams to drive ROI, speed, and growth across your business. The augmented intelligence platform empowers each finance professional to independently work with data to deliver actionable, data-driven insights.

Boosting productivity through digitization

This is the first economic disruption that requires a large part of the global workforce to perform their duties remotely, making digital-collaboration tools necessary to keep the business functioning. But the finance team’s use of digitization to help the company manage the crisis should not be considered a onetime event. Digital initiatives that once seemed out of reach—from automated closings to real-time forecasts—are now business critical.

The CFO and finance team should take a leadership position in advocating for the use of digitization across the organization, long after the crisis has passed. This active, informed embrace of digitization will be invaluable for ensuring accurate reporting, informed decision making, and business continuity in any future crises. CFOs will need to do the hard work of digitizing and automating core business processes to reduce their exposure to exogenous shocks and to create resilience.

Process automation is a huge game-changer for finance. Datarails’ automated data transformations include consolidations, FX conversions, eliminations, hierarchies, financial adjustments, and more.

– Automatic data aggregation reduces manual spreadsheet work by over ¾.
– Automated consolidation results in saved time, time that can be dedicated to value-added work.

Implementing process automation is excellent for optimization of processes as it allows for the reallocation of costs and time towards strategy and analysis.

About Datarails

Datarails is developing a business augmented intelligence platform for the corporate finance function. Our FP&A solution allows for the connection and centralization of all organizational financial data from various systems (ERP, GL, CRM) alongside Excel spreadsheets and operational data. It also allows for the creation of automated financial reports (P&L, cash-flow, budgets, etc.), as well as thorough analysis of consolidated data for the creation of business and financial insights.