2021 marked a year of rapid financial expansion as the global economy continued one of the most prolific recoveries ever. With the damage of the 2020 pandemic largely behind us, 2021 presented a new set of unique challenges. In response, finance professionals have adapted their FP&A framework to meet these new business demands. In 2022 FP&A trends lean more towards FP&A professionals doubling down on automation, working to create agility, managing changes to the workplace, and continuing to shift into a more integrated business intelligence framework.
Shifting Cost Through Automation
One of the major shifts in corporate finance over the past few years is the changing dynamic of the finance department from a cost center to a revenue optimizer. The change has been spreading through the field as organizations began utilizing their finance departments in more integrated ways. Once considered a pure cost center that produced and enforced budgets and managed treasury, the finance department is blossoming into much more.
In 2022, finance departments will work hard to automate historically manual functions and consolidate roles to focus more heavily on analytics rather than data aggregation. In the same way that the abacus was replaced by the calculator and the ledger by Excel, automation will pave the way for finance departments to focus on business strategy over everything else.
Trends Behind Finance Automation
The historical limiting factor of all finance departments was resource management. At the heart of this was employee time spent on data aggregation and management. Increasingly, other functional areas like marketing, HR, and operations leaned on the finance departments to provide data and complex analytics to decipher what the data was communicating. Arrived at this junction, finance departments took on a critical role in shaping the strategy of businesses.
As businesses became more integrated, ERP and CRM systems were developed, and as a byproduct began structuring and producing data autonomously. The result was that finance departments became inundated with data and were forced to manage this data with spreadsheets. This shifted the focus of departments from data analysis to data management and validation.
Automation has taken the burden off finance departments from aggregating and managing data and has redistributed it to more appropriate functional areas. For example, functions that were previously siloed have moved onto cloud-based platforms. This has paved the way for more dynamic and efficient reporting, planning, and analytics.
Artificial intelligence (AI) is being used to identify patterns and trends across large data sets to develop a deeper understanding of what data is trying to communicate. Finally, cloud-based applications are being used to develop robust self-service dashboards that allow departments to access and utilize their own data without placing a burden on finance departments.
Accounting automation will shift the focus of finance departments from accounting and backward-looking record-keeping to higher value-add functions and forward-looking financial analytics and planning.
FP&A Departments Working Hard to Become Agile
COVID-19 created an environment where businesses were forced to be agile to survive. Financial departments were on the front line, working to communicate helpful insights to leaders as early and as frequently as possible. Disaster recovery plans were examined and scrutinized as remote working became a standard.
FP&A professionals over the next year will focus heavily on incorporating changes into their departments that allow for swift responses and planning cycle times. They will also put emphasis on business continuity and having the ability to produce helpful insights and improve accuracy even in conditions where resources are limited.
A Changing Workplace
2021 was dubbed the “great resignation” as many individuals left their post in search for more rewarding or fulfilling work. A huge population shift occurred from cities to suburbs and suburbs to rural areas as workers found themselves in a more flexible work environment.
Many FP&A professionals are left in a situation where resources are scant or possibly just now recovering. One of 2022 FP&A trends is that finance departments need to focus on being able to meet the needs of both business leaders and internal team members in a remote environment. Shifts in cost will occur as technology is implemented that will better help businesses meet the demands of a changing workforce.
Predictive Analytics in Finance
As businesses search to maximize their competitive advantages over one another, predictive analytics has become a key topic of focus. The process utilizes everything from basic data to advanced statistics to attempt to predict what might occur after an event is triggered.
The insights produced by predictive analytics range from creating more accurate revenue projections to creating efficiencies in supply chains. For example, predictive analytics helps online retailers identify the paths that are more likely to end in a sale.
These paths are used to design sites that increase the likelihood of generating sales. Amazon deploys a strategy that uses predictive analytics to adjust real-time pricing for customers on paths that are most likely to produce a sale.
Finance departments are using predictive analytics to assist in lowering costs associated with unexpected events like COVID-19. They do this by focusing on detecting patterns that reveal events that might lead to financial underperformance. With the supply chain disruptions introduced in both 2020 and 2021, more emphasis will be placed on predicting patterns in inventory fluctuations, which can have significant impacts on both cost and revenue.
2022 will see further development and use of predictive analytics to maximize supply chain and production efficiency, reduce labor costs, and produce real-team forecasts and scenarios. This access to real-time predictions will help finance departments respond with agility.
The Expansion of xP&A
In 2020, Gartner was able to identify an emerging trend of what they described as “Extended Planning and Analysis.” Gartner coined the term “xP&A” heralding a new dynamic of financial planning and analysis. The area has since been a topic of hot discussion among finance professionals.
The premise of xP&A is that over time FP&A will shift and traditional silos will be reduced between enterprise and operations planning processes. This silo reduction will lead to more integrated business intelligence that will have the ability to transform how businesses use data to produce more extensive business plans that have a much further reach than traditional financial plans.
xP&A allows for business leaders to take forecast and performance measurements from across various functional roles in a business and consolidate them into one cohesive forecast with integrated business metrics. These metrics are intertwined with other functional areas to reveal how one functional area impacts another.
Historical financial planning and analysis were limited in that it is somewhat difficult to identify how one functional area of a business can impact another. For example, sales projections might be developed and implemented that contradict limitations placed on staffing or marketing.
This is because it is somewhat difficult to develop performance metrics that encompass how functional areas are intertwined. xP&A allows for more sophisticated integration of metrics specific to each functional area to generate plans that maximize profitability. With the challenges introduced because of the pandemic and supply chain disruptions of 2021, an integrated framework will become paramount to financial professionals as the need for relevant and insightful data has increased.
Using Datarails to Propel Your Finance Department Into 2022
Adopting a CPM solution is incredibly important for your organization. You need a system that can manage and make use of big data to ensure accuracy, timely execution, and of course, monitoring. Datarails’ FP&A solution is an enhanced data management tool that can help your team create and monitor budgets, plans, and other KPIs faster and more accurately than ever before.
Big data must be useful, and Datarails helps you use it to the maximum without having to learn a new proprietary user interface. Using Excel as a backdrop provides a familiar dynamic framework that makes adopting Datarails easy for any finance professional.
By replacing spreadsheets with real-time data and integrating fragmented workbooks and data sources into one centralized location, you can work in the comfort of excel with the support of a much more sophisticated data management system behind you. Build beautiful budgets, track and monitor business performance, and give users stunning and easy-to-use dashboards with Datarails.
Learn more about the benefits of Datarails’ financial solution before requesting a demo