Breakaway Technologies Highlights Five Keys to a Successful XP&A Process
Meet the Authors
⇨ Many organizations are moving from Financial Planning and Analysis (FP&A) to Extended Planning and Analysis (XP&A) to better position themselves for the long-term.
⇨ Effective XP&A requires companies to avoid certain pitfalls in the early stages of the process.
⇨ Breakaway Technologies laid out a list of five common challenges for XP&A processes, and what companies can do to avoid them.
From FP&A to XP&A
For organizations utilizing SAP S/4HANA for Finance, planning is a top priority. SAPinsider’s SAP S/4HANA Finance and Central Finance: State of the Market 2023 research report found that improved planning and insights from finance is the top overall driver of finance and accounting strategy, cited by 38% of respondents.
Financial planning and analysis (FP&A) is an essential component of any finance team’s core responsibilities, yet FP&A ranks among the most common pain points and planned future investments. Legacy FP&A processes can hamper the process of making decisions and cause teams to miss opportunities to save money.
This led to an evolution, from FP&A to XP&A, or extending planning and analysis. XP&A represents an innovation in business planning that offers many advantages over current FP&A methods focused mainly on financial data. It promises extended, cross-functional planning and analysis.
Organizations implementing an XP&A approach to business planning can leverage all types of data, including financial, operational, workforce, customer, and supplier data to make better decisions. However, as with any emerging process, XP&A is not necessarily straightforward.
To help organizations avoid some of the potential pitfalls and issues associated with introducing an XP&A planning process, the finance and accounting experts at Breakaway Technologies laid out a list of five common challenges for XP&A processes, and what companies can do to avoid them. They are:
- Systems integration – Integrating financial data across multiple different platforms poses a significant challenge to many organizations, particularly those with multiple ERP systems that are also relying on a planning system. Companies should invest in a system that can consolidate data from across these platforms, allowing them to forecast more accurately into the future.
- Data quality – In SAPinsider’s finance research report, clean and harmonized master data was listed as a requirement by 81% of respondent organizations – a higher share than any other requirement listed. XP&A processes rely heavily on accurate data, as projections can only be as good as the information they are based on. Organizations must be able to vet the data already in their system while also ensuring any new data is collected properly and cleaned so XP&A processes provide accurate projections.
- Limited Resources – As with any other project, XP&A processes are limited by the budget and working hours an organization can commit, while also ensuring that other financial necessities are also taken care of. If proper resources are not allocated, XP&A functions may have insufficient data and strategies and they may not receive the benefits they expected. Before embarking on an XP&A process, organizations should ensure that they have allocated the appropriate resources. Financial teams should consider using XP&A software and automation tools to reduce time and expenditure requirements.
- Communication – Though finance teams will ultimately be responsible for the XP&A process, it requires communication between business leaders from across the organization. Process owners should garner full buy-in from all necessary stakeholders and maintain an active line of communication with them throughout the process.
- External Factors – An XP&A process does not exist in a vacuum. It is subject to factors like shifts in regulations, new technologies, and evolving market conditions. When planning for the long-term, organizations must keep in mind that their business environment is constantly shifting and that they must remain agile and leave room to tweak their plans.