I always enjoy addressing the question, “What do you think will be the biggest/most important/most impactful trends in FP&A of the coming year”? It gives me a chance to pause and review all the places I’ve been, all the CFOs I spoken with, and all the companies I’ve worked with over the past twelve months, to refine and distill what I believe are the top technological trends for financial planning & analysis in 2019.
FP&A Trends No. #1: Predictive Analytics
The progression from descriptive to diagnostic to predictive analytics will continue to accelerate. As the tools we have available to us continue to advance and enable us to provide our customers, stakeholders and business partners with what is truly valuable to their work – insights – and not just hindsight.
I believe in the not-too-distant future, best-in-class FP&A functions will be incorporating Artificial Intelligence (AI), Machine Learning (ML), Natural Language Processing (NLP), data mining, and simulation analysis to produce predictive analytics and give our business partners across the enterprise actual foresights. This also has the additional benefit of moving the FP&A function further up both the analytical intelligence and value creation curves. By developing and utilizing this kind of intellectual firepower, the FP&A function will legitimately move from just providing analysis to actually influencing and ultimately, impacting the business.
The benefits of improving our predictive analytics include developing more efficient processes, lowering costs, improving decision making, and providing us with the ability to ask and answer better and more strategic questions about the performance of the business.
FP&A Trends No. #2: The Cloud
The cloud will continue to be the platform of choice going forward. Research indicates that 70% of all organizations have at least one application in the cloud today. There has been a wholesale shift to Software-as-a-Service (SaaS) which now dominates the market, due to its flexibility and justifiable costs, which are too attractive to forgo. Organizations are able to select best-in-class application solutions, with real-time data accessibility, and support business partnering capabilities.
As early as 2020, we may see IT expenditures on cloud infrastructure greater than on-premise infrastructure spending, with most of the on-premise expenses on legacy systems with little or no new outlay. The cloud platform will continue to evolve to support new technologies, new requirements, the explosion of connected things and real-time user interfaces.
The benefits of the cloud are clear: more flexibility to adopt new technologies to meet changing business needs, ease of collaboration and data sharing among departments and partners, and greater computing capacity for data storage and analysis, especially as more devices are connected.
FP&A Trend No. #3: Dynamic Planning, Budgeting and Forecasting
The key to better budgeting and forecasting is better data, but more data doesn’t mean better data. Master Data management will continue to be of critical importance to the organization. Many organizations continue to rely on spreadsheets for their budgeting and forecasting, which aren’t collaborative, consistent, or updated regularly with the most current data.
Best-in-class organizations are moving forward with advanced dynamic budgeting and forecasting that’s integrated with reporting, including enhanced cost and profitability reporting, rolling forecasts, and zero-based budgeting (ZBB). Cloud-based platforms that provide predictive analytics capabilities out-of-the-box to help analyze data for better business decisions are critical to more agile and accurate forecasts.
More relevant and accurate forecasting supports better budgeting and planning. The ability to have automated, more frequent updates with flexible tools will allow organizations to become more data-driven in budgeting and planning.
FP&A Trends No. #4: Robotic Processing Automation (RPA)
I believe we will witness an explosion in the development and deployment of RPA in 2019. While many people still believe RPA resides in the realm of science fiction, I have observed first-hand, the aggressive growth and utilization rates of this technology.
I believe some of the disbelief is due to the magnitude of change and transformation RPA represents. I’m of the opinion that all rules-based and tactical activities of the FP&A function, and really all of Finance, will be automated in the near future.
The more we automate, the more we will be able to leverage AI and ML to identify certain trends that, given the vastness of the data involved, no number of humans would ever be able to decipher. By automating, we will be able to ease the introduction of NLP not just to Finance, but to the entire organization.
I hope sharing my thoughts may help the audience better understand the true paradigm shift and transformation the FP&A function is currently undergoing. Change can often be difficult and uncomfortable, but I believe we are moving towards a better state of being. I believe given the proper people, processes, technology and culture, the FP&A function can genuinely have a significant impact on creating top-line growth for the organization.
This blog post was written by Brian Kalish
You want to learn more about predictive analytics? Then take a chance and watch the recorded webinar:
- AI for Sales Forecasting and Budgeting Recorded Webinar (English)
- AI for Sales Forecasting and Budgeting Recorded Webinar (German)