Efficient financial planning and analysis (FP&A) is essential for organizations striving to make data-informed decisions and drive growth. However, research highlights significant inefficiencies in FP&A processes, hampering productivity and stifling innovation and growth.
Lost Productivity: Manual Processes Take Their Toll
FP&A teams are losing at least two hours per week for each employee due to manual processes. This staggering statistic reveals that valuable time is wasted on tasks that could be automated. Gathering and managing data accounts for more than 75% of FP&A employees’ time, leaving a mere 25% for value-added work. Remarkably, this ratio has remained largely unchanged over the past decade.
To put the magnitude of this lost productivity into perspective, researchers estimated that U.S. companies with 50 to 999 employees lose a staggering $6.1 billion annually due to inefficient FP&A processes. This significant financial impact underscores the urgent need for businesses to address these inefficiencies head-on.
The Innovation Deficit: A Missed Opportunity
In addition to lost productivity, inefficient FP&A processes also hamper innovation. It’s estimated that businesses are missing out on $1.7 billion in value-added innovation. This figure represents the economic uplift that each FP&A analyst could contribute, which, when combined, amounts to a substantial missed opportunity for growth.
Factors Contributing to Inefficiencies
Manual Data Entry and Manipulation: Relying on manual data entry and manipulation processes is time-consuming, error-prone and inefficient. Inputting data from multiple sources, reconciling spreadsheets, and aggregating information manually leads to data inaccuracies and delays.
Data Silos and Disparate Systems: When data is scattered across different systems or departments, it creates inefficiencies in gathering and consolidating information. Accessing and integrating data from various sources becomes challenging, requiring additional time and effort to compile and analyze the data.
Lack of Automation: Inadequate utilization of automation tools and technologies in FP&A processes results in wasted time and resources. Automating tasks such as data collection, data analysis, financial modeling, and report generation frees up time for higher-value activities.
Inefficient Forecasting and Budgeting Processes: If forecasting and budgeting processes are not well-defined, it leads to inefficiencies. Lack of standardized templates, unclear guidelines, and inadequate collaboration among stakeholders results in delays, inconsistencies, and inaccuracies in forecasting and budgeting activities.
Manual Reporting and Analysis: Relying on manual reporting and analysis methods is time-consuming and limits the ability to generate timely insights. If FP&A teams spend a significant amount of time manually compiling reports or analyzing data, it hinders their ability to provide real-time insights and strategic recommendations.
Ineffective Communication and Collaboration: Poor communication and collaboration among FP&A teams and other stakeholders leads to inefficiencies. Misalignment of goals, lack of clarity in expectations, and inadequate information sharing results in delays, errors, and misinterpretation of data.
Lack of Integration with Business Processes: When FP&A processes are not well-integrated with broader business processes, it leads to inefficiencies. For example, if financial data is not integrated with operational data, it becomes challenging to analyze the impact of financial decisions on operational performance.
Low morale: High-value employees performing low-value tasks experience reduced productivity and job satisfaction, leading to turnover. Placing highly competent individuals in roles that don’t utilize their skills effectively extinguishes passion within the business and finance function specifically.
FP&A is widely recognized as a crucial function within organizations, yet it often falls short of its potential. There is an urgent need to tackle inefficiencies head-on to unlock productivity gains, foster innovation and drive growth.
To address these challenges, research implementing automation and data management solutions that streamline FP&A processes. By automating repetitive tasks and enabling real-time data analysis, businesses can free up valuable time for high-value work that drives growth and innovation.
Additionally, nurturing a supportive work environment, where high-value employees are engaged in meaningful tasks aligned with their expertise, can bolster morale and reduce turnover.
The time has come for organizations to recognize the impact of inefficient FP&A processes and take proactive steps to optimize these critical functions. By doing so, businesses can harness the true potential of FP&A and position themselves for sustained success in a rapidly evolving business landscape.
Source: CFO Dive