Why modern financial reporting needs to limber up.

Once upon a time, an ERP (enterprise resource planning) solution and Excel were the mainstays of financial reporting. But as time passed, it became clear that today’s CFOs needed a more powerful reporting and analysis arsenal than Excel and an ERP could offer – when used either jointly or separately.  

While beloved by finance professionals around the world, Excel has its limits and risks. Although great for collecting data, it’s not equipped to analyse it. And if things change, data needs to be updated manually – creating room for error. When the EU Spreadsheet Risk Group reports that 90% of spreadsheets contain errors, and research by a major accounting firm says there are errors in 90% of all spreadsheets with 150 rows or more – you should be worried. With no effective way to audit or control data (so there’s no one source of the truth) or deliver it in real-time, it’s difficult to ensure you have the 100% accurate information needed to make wise business decisions – let alone forecast probable outcomes. Yes, Excel is a powerful tool, but it can be difficult to manage at scale. This, along with those hard-to-escape manual errors, can lead to mistakes in financial reporting, which can have profound consequences for a business. 

Yet, despite the myriad shortcomings of Excel processes, only 47% of those in consolidated annual planning and budgeting use digital technologies. 

And relying on your ERP’s limited reporting capabilities isn’t much better unless you have excess time to waste. Low productivity is a genuine concern with reports suggesting that in the US alone, FP&A departments waste 96,000 hours a year in conducting tasks which could and should be automated. These tasks include identifying and correcting errors (64%), manually updating reports (63%), manually collecting and compiling data (60%), and tracking multiple report versions (54%). 

While an ERP does offer core reporting functionality, and (often cumbersome) basic budgeting and forecasting tools, it lacks the advanced analytics and customisation features required by today’s CFOs. Without the necessary level of detail, flexibility, and accuracy, it’s challenging to gain meaningful insights from financial data and make informed decisions. 

The result? Suboptimal decision-making and missed opportunities. 

So, why are FP&A teams being short-changed when it comes to digital technology? 

In a 2019 report generated by the Institute of Management Accountants, they discuss the increased demand CFOs face to ‘provide detailed insights based on financial performance and the growing importance that FP&A has to the finance function.’ And the advent of COVID only further accelerated the importance of FP&A and the business-critical nature of scenario planning. 

So clearly, the pressure is on to improve output – especially when recession looms large. In times that are characterised by change and challenge, the business that is unable to flex and keep pace is doomed to failure.  

What do you need in a modern FP&A solution, and what’s truly important? 

McKinsey & Company says that “Even though the typical finance organization spends about 10 percent more time and resources on financial planning and analysis (FP&A) activities than it did a decade ago, today’s FP&A teams still find themselves a step behind.”  

They put this down to the pressure of game-changing trends like the increasing frequency and magnitude of economic volatility, including supply chain disruptions and labour shortages, as well as the ever-increasing volume of business data that requires even more reconciliation and consolidation.  

McKinsey points out that rather than buckle under the weight of these trends, leading FP&A teams are “installing new technologies, tapping new sources of data and types of talent, and launching new reporting processes so they can work faster and smarter—and with more accountability and flexibility.” 

Those who embrace FP&A technologies that offer speed, flexibility, scalability, and the ability to customise planning models and scenarios, will become champions. So, when the only way to meet changing market conditions is to pivot or adapt on demand, those FP&A champs find it easy to model and analyse every contingency and identify gaps and opportunities.