There has been a big increase in interest in extended planning and analysis (xP&A).
However this is not a new concept. We’ve seen tools such as IBM Planning Analytics take planning into other areas of the business, not just the finance function. This integrated approach gives businesses the ability to instantly see the impact a change can have right across the business.
Gartner has coined the phrase extended planning and analysis (xP&A) to describe the trend that suggests by 2024, 70% of all new planning and analysis projects will reach beyond finance to support operational processes. Businesses are likely to use an integrated model to take planning and analysis into a wider range of areas within the business, such as workforce, supply chain and marketing.
The heightening interest in integrated, joined-up planning has steamed from the disruption over the last year. The pandemic has been a wake-up call for many businesses. It has identified where businesses haven’t been able to respond effectively to changing markets and operational factors. xP&A is able to give businesses a complete view for consolidation forecasts and performance metrics, allowing the business to respond more effectively to changes.
How does xP&A work?
Traditional financial planning and analysis (FP&A), links revenue, expenses and capital expenditure data and pulls these elements together for budgeting, reporting and forecasting. As its name suggests, FP&A’s focus is from the financial perspective.
However, HR needs a plan to manage headcount, while production has a plan for plant and materials, then marketing has a plan to manage its ad spend… and so on. There are multiple plans in production. Each plan is generated in isolation to the others (often in Excel spreadsheets), which can cause problems. For anyone seeking to build a cross-departmental report drawing on different assets, can lead to a time-consuming and incredibly difficult task.
xP&A takes the automated planning tools and processes used by finance, and extends their usage to operational planners. The end result is that everyone - from departmental managers through to the CFO and wider C-suite - gets a more complete and up-to-date view of the business.
Here’s an example of how xP&A can be used:
Responding to demand
Your production department needs to arrange a slot for a maintenance shutdown. Ideally, this needs to be scheduled at such a time that the ability to meet demand is not jeopardised.
With all planning processes and data unified in a single solution, you can draw directly on up-to-date marketing and sales data to understand when demand is likely to peak and wane. From this, you can plan the optimum time for the shutdown, while still ensuring production demands are met. For implementing the shutdown project, HR can draw on the same data to determine when they are going to have to bring extra technical resources on board.
What are the benefits of xP&A?
A holistic view
With departments using siloed, spreadsheet-based planning processes, they are unable to get a view of the bigger picture of factors impacting their output. It can also be difficult to see how their performance impacts other areas of the business. xP&A breaks these boundaries, providing a deeper context to the numbers and delivers a more complete picture of performance.
Collaborative, real-time planning
xP&A joins up financial, operational and external data. The planning tools that were previously the preserve of finance are now opened up to other departments, so that insiders from across the business can now potentially contribute to company plans. The planning process becomes more agile; inputs can be amended as circumstances alter, and key insiders can instantly see how these changes impact their area of operations and the bottom line.
As we flagged up recently in Accountancy Age, scorecarding is one of those techniques that encourages you to examine performance holistically from four cross-departmental perspectives: financial, customer/stakeholder, internal processes and organisational capacity.
The core objective of xP&A is to break down silos across the organisation and to foster a shared vision of success. As such, it provides the ideal framework for appreciating the cause-and-effect connection between various strategic objectives, and for defining relevant, achievable KPIs across the business.
Successful xP&A implementation requires the ability to unify data sources, people and planning practices in a single solution. We hosting a webinar on achieving an xP&A approach on 13th October, you can register your free space here. Or alternatively, for a full and frank discussion on how best to achieve this within your organisation, speak to us today.
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