Extended Planning and Analysis (xP&A) – The Next Phase of Financial Planning

This year, Gartner coined a new term to describe a broader definition of financial planning and performance management using the term “extended planning and analysis (xP&A).”

According to Gartner, by 2024, 70% of new financial planning and analysis projects will become extended planning and analysis (xP&A) projects, extending their scope beyond the finance domain into other areas of enterprise planning and analysis. xP&A involves looking at more varied types of data to allow for greater visibility into operations and better organizational decision-making.

What exactly is xP&A?

Put simply, xP&A aims to extend FP&A principles beyond the finance department to any and all areas of the organization that produces business plans. This could for example include sales, marketing, and HR. The value of such principles is clear—creating the possibility for all departments to become more efficient and more effective benefits the organization as a whole and directly impacts the bottom line.

Extended planning and analysis join the planning components of other business domains, going beyond simply integrated financial planning, such as workforce, operations, and sales performance, or any other area of an organization that develops plans. xP&A enables finance professionals to consolidate forecasts and metrics from across the organization, which can be integrated into a holistic view of the business.

It integrates the operational and financial components of such domains into a single solution, which then gives members of the C-suite and other managers the ability to understand how the organization as a whole is operating, where redundancies exist, where opportunities for growth and improvement exist, and how to create a forecast or put in place processes that will address these issues and lead to growth, ultimately increasing profitability.

“The main difference between traditional FP&A and xP&A is in the amount, and range, of data that goes into your analysis, and how your analysis links to the company’s business goals,” said Gregory Panik, vice president of FP&A at global engineering company CTDI.

Put simply, xP&A takes the standard practices of FP&A and applies them to other functional areas of the business, creating one unified approach to business planning. In the coming decade, as many businesses still struggle to increase efficiency while reducing costs, such processes will become the norm as advancing technologies make the integration of data from across an organization simpler and faster.

In embracing xP&A, users will have to embrace a new vision for FP&A. 

In its 2020 Strategic Roadmap for Cloud Financial Planning and Analysis Solutions, it was noted by Gartner that “by 2024, Gartner expects FP&A to evolve to encompass xP&A, a strategy where the “x” denotes breaking down traditional silos between enterprise financial and operational planning processes in order to deliver new levels of transformative business value. The “x” represents consistent and continuous planning that extends beyond the finance domain into other areas of enterprise planning and analysis.”

The end goal of xP&A is to place FP&A front and center and will extend its current role by giving it a more prominent and leading role in driving agile, continuous company-wide planning. With xP&A, the finance organization has the opportunity to become true business partners with the rest of the enterprise.

FP&A vendors evolving toward xP&A will rapidly increase the accessibility and flexibility of current data integration and data management functions.

The broader vision of xP&A is to create an organization where all functions have the potential to be engaged in some form of planning aligned to common goals based on a single version of the truth. Unfortunately, the ability to use cloud FP&A beyond the boundaries of the finance organization in a manner encompassing this broader vision still remains elusive for most organizations. However, with tools such as Datarails, it doesn’t have to be.

Benefits of xP&A Over FP&A

Traditional FP&A relied on a structured approach to budgeting, planning, forecasting, and reporting that used financial measures as the only metric for success. This limits the overall view on planning and analysis to financial metrics that often segregate other functional areas of the business that contribute to profitability and impact other functional areas. Overall, the impact on one functional area might limit profitability, but the traditional FP&A approach does not offer visibility into these impacts.

A financial plan might generate objectives for sales, marketing, HR, and production. Each of these functional areas might have their own set of objectives that impact the way they influence other functional areas. For example, sales teams might be given aggressive targets but the marketing team might not receive ample budget to support the sales team. In addition, HR departments might be restricted on the number of heads they can add in a given year, thereby limiting the ability to produce enough product to match the sales generated.

This leaves teams to manage data in their own ways, which often remains siloed. Finance teams can’t always utilize this fragmented data effectively. It can be a manual and time intensive task that often gets pushed to the wayside. This leaves management without the ability to connect the dots between the various functional areas of the business.

xP&A breaks this barrier and standardizes, automates, and integrates data from the various functional areas of the business that can have an impact on not just the bottom line, but each other. This type of approach allows for better visibility into performance by breaking data out of the silos, resulting in a singular view of financial performance and operational performance.

Because the data becomes unified, it is easier to identify potential areas of opportunity and model outcomes. It also aligns each of the functional areas towards one goal because the data is available and easily interpreted as to how each of the functional areas interact with one another.

The exposed relationships between functional areas can give rise to far more collaboration. Because the datasets are unified and the various impacts each group has on one another are exposed, the practice lends itself to place accountability with the appropriate parties.

Eliminate Data Silos and Consolidate them with a Click.

Datarails allows for extended planning and analysis by connecting data from your various organizational systems (ERP, GL, CRM, disparate spreadsheets, etc). With Datarails, you can access all your organizational data, including HR or Sales data, within Excel, or within the Insights feature. The solution makes all your cross-organizational data available at your fingertips. 

Datarails allows you to capitalize on all of your organizational data by bringing it all together to understand the financial health of your business. Enabled by tools such as Datarails, drive your FP&A function forward by integrating financial and operational analysis into your FP&A function to drive better organizational decisions.

Integrate xP&A Into Your Organization

In every case, FP&A processes kick off by setting goals and defining a strategy for the coming year. The goals and strategy are then implemented in the form of a budget. Various budgeting approaches exist, and which one is right depends on what needs your organization has.

xP&A differs from the traditional approach by taking the standardized FP&A principles and applying them to other functional areas and then bringing all of the standardized data back together. This is the basis of “integrated business planning”, which marries strategy, operations, and finance into one unified plan.

In order to adopt and implement xP&A effectively, organizations will need to break free from traditional FP&A product offerings. This is because each functional area of the business has its own unique demands that FP&A software is not designed to accommodate.

Gartner recognizes the need to adopt a single solution and suggests organizations move away from utilizing multiple vendors. Instead, Gartner emphasizes the need to adopt a software solution that can adapt to an organization by having a multitude of capabilities at its disposal.

Another key aspect of integration is the user interface, which needs to be flexible enough to support traditional finance operations and planning while accommodating other functional areas of the business. In order for xP&A adoption to happen successfully, it needs to be wrapped in a solution that is easy for users to navigate and adapt to, regardless of their functional area.

About Datarails

Datarails is an FP&A solution for the corporate finance function. The 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 reports (profit and loss report, cash-flow, budgets, etc.), as well as a thorough analysis of consolidated data for the creation of business and financial insights.