The process of compiling and collating financial data often bogs down business owners eager to make their hopes and dreams come true. Putting together and updating budget plans and forecasts help business owners better manage cash flow and make smart business decisions. A comprehensive financial planning and analysis (FP&A) strategy is key to ensuring a company’s long-time financial future. Financial planning involves generating management reports, analyzing financial trends, and calculating the financial consequences of business decisions.
Research done by APQC shows that only 40% of the surveyed 130 finance executives of big businesses believed that their FP&A was effective. As a business owner, how do you learn from big business to create a solid financial strategy?
Too Much Data
Many big businesses often spend too much time on periodic forecasting. They compare their trending performance versus annual budget targets to a fault. This takes away time from pinpointing individual cost drivers or researching probable outcomes of bundling and pricing options. Instead of focusing on compiling a monolithic amount of raw numbers for your business, financial analysis should incorporate more human judgment. They key is to integrate qualitative and quantitative data into financial reports.
Don’t attempt to invest in overly fancy financial systems and data models when the real problem is the lack of talent in the financial analysis. FP&A should be more a business decision-driver than mere data collection.
Unlike traditional forecasts, rolling forecasts make businesses adaptable and don’t adhere to static fiscal years. With a rolling forecast, the number of periods (months) in the forecast remain constant. This type of forecasting gives business managers a moving window into the future. Having a constantly updated forecast allows companies to have an accurate grasp on future cash flow. 94% of corporations that use rolling forecasts see their financial analysis as effective.
Automating any manual-based financial processes drastically streamlines workflow and reduces errors. Automating routine tasks also gives managers timely and quality business insights. Stepping away from outdated technologies in favor of dynamic technologies can minimize the risk of important business decisions. For example, an automation system can make cash flow more visible and produce key reports quickly for short-term business decisions.
Embracing new technologies, staying on top of new financial trends, and relying on strong predictive analysis can lead to big changes in your company. Don’t fear the transition.