From Features to Functionality and Cost: A Comprehensive Guide to Selecting the Right Financial Planning and Analysis Solution
You might have heard of Anaplan, Board, Workday Adaptive Planning, TM1, IBM Planning Analytics, Oracle and Planful. These are tools that aid Financial Planning and Analysis (FP&A). They have the potential to elevate your financial planning, budgeting, forecasting and reporting capabilities, making these activities more robust, yet also easier to achieve.
But do you really need an FP&A solution when you have Excel? If so, how do you evaluate and select the right tool for your organisation? What is the cost and return on investment?
We covered these questions in a webinar hosted by Alex Houghton (Practice Manager) and myself, with Rob Stanley as our guest. Rob is a Senior FP&A Manager at RightShip and has wide experience implementing and using several FP&A solutions. Watch the webinar here or read on for more insights.
What is a Financial Planning and Analysis solution?
FP&A solutions are designed to help finance teams by facilitating enterprise-wide financial budgeting, forecasting, long-term strategic planning, and reporting and analysis.
An FP&A solution is also commonly referred to as a Corporate Performance Management (CPM) or Enterprise Performance Management (EPM) solution. The terminology has simply evolved to better align with the position title that these solutions most commonly support.
Key indicators that you might need an FP&A solution
So do you really need a Financial Planning and Analysis solution? Here are some leading indicators that you may need to consider an FP&A solution:
- Increased collaboration: More stakeholders and contributors are involved in the planning process.
- Expanding data complexity: Larger datasets from various source systems are needed for more accurate forward planning.
- Version control challenges: Difficulty managing numerous versions, linked models and workbooks.
- Reconciliation of Top-Down and Bottom-Up plans: The requirement to seamlessly reconcile top-down strategic planning from executives with bottom-up planning by budget owners.
- Accountability shift to finance: Finance suddenly finds itself owning the numbers instead of the budget owners.
At the end of the day, it is important to remember that the purpose of planning and reporting is to primarily drive accountability and effective management of company performance (hence the Corporate Performance Management / Enterprise Performance Management terminology).
While this may sound provocative, drawing from our extensive experience implementing these solutions, the most successful ones have a good understanding of Dwight D Eisenhower’s quote: “I have always found that plans are useless, but planning is indispensable”.
Have a look again at the leading indicators above, but this time look at it from the point of view of how they hinder the planning process and therefore negatively impact the level of buy-in and accountability from budget owners.
Back to the question though: Do you need an FP&A solution? The real question you should be asking is yourself is “Does my current planning process help to drive accountability from budget owners?”
Do you need an FP&A solution?
Is an FP&A or CPM solution essential for your business and for you to succeed in your role? This question fundamentally hinges on a clear understanding of the challenges you aim to address and problem you are trying to solve for.
It is important to acknowledge that the spreadsheet remains the go-to tool for finance professionals across organisations of all sizes for a reason; it does a good job of facilitating month-end reporting, budgeting, reforecasting, modelling, and ad-hoc analysis.
Therefore, if your Excel spreadsheet or Google Sheet continues to serve you well, is easy to maintain and manage, and enables you to accomplish all your necessary planning and reporting tasks accurately and in a timely manner, then it may be unnecessary to explore FP&A or CPM solutions solutions.
However, given spreadsheets are so malleable, flexible, and comforting for finance professionals, it is often used as the solution to solve everything, even where it shouldn’t be. I refer to the wisdom of Maslow’s adage: “If all you have is a hammer, everything looks like a nail”.
The question of whether your business has outgrown spreadsheets isn’t solely dependent on its size or revenue. Nevertheless, there is a correlation between organisational size and the likelihood of requiring an FP&A solution.
For those who are well-versed in spreadsheet intricacies, you are also likely to be aware of their inherent limitations, particularly when confronted with needs for increased collaboration, handling larger datasets, and maintaining various linked workbooks, among other considerations.
How does an FP&A tool help finance teams?
What does an FP&A or CPM tool actually bring to the table? Below, I have listed several fundamental features that FP&A solutions offer. The features are intentionally not ranked, as the importance of each one largely depends on your specific circumstances and the particular problem you are addressing.
- Version control
- Automatic consolidations
- Integration to the GL
- Drill to transactions
- Top down and bottom up planning
- What-if scenario analysis
- Rolling forecasting
- Dashboards/visualisations
- Excel integration
- Multi-dimensional planning
- Multi-currency support
- Workflow and process management
For a more comprehensive list of features available, check out this CPM Solutions Comparison Checklist.
Ultimately, an FP&A solution remains a technology, serving as both an enabler and a tool. Its features are designed with convenience in mind, aiming to save finance professionals time and to simplify processes.
FP&A solutions don’t have the same transformative impact on finance professionals as spreadsheets did back in 1979 when they were introduced. However, once you become accustomed to using an FP&A solution, reverting to older methods can prove very challenging.
We have several clients who, after moving to a different organisation, reach out to us when they discover their new workplaces are still reliant on spreadsheets. The experience is truly so different once you have moved from spreadsheets to an FP&A solution that offers upgraded functionality and real time savings.
As I discussed in the webinar using the mobile phone analogy, I can still manage with a basic “dumb” phone for calls and SMS, but the convenience of using it as my GPS, music player, entertainment (for both myself and my kids), wallet, and boarding pass for flights has become indispensable. However, it is crucial to remember that, at its core, an FP&A solution is just a tool – it is important to first know why you would want to use one.
To further understand why finance teams are choosing to upgrade their tools, here is an article by my colleague Brett Ruwoldt: Why finance teams are choosing planning and reporting software over Excel.
How to choose an FP&A tool
Like with most things, before diving in and putting in enquiries with software vendors, it is best to do your research. To clarify, I don’t mean researching vendors and product evaluations. I am referring to the research you and your organisation need to first undertake.
Begin by defining the problem at hand, what the core non-negotiable requirements are, what the “nice to have” features are, and then prioritise and rank each one. This strategic approach will serve as the basis for your selection criteria, ensuring that you choose a solution that aligns optimally with your needs and delivers maximum value to both you and the organisation.
Another reason why it is critical to first evaluate what your needs and priorities are, is in fact to best align with the right solution. There are quite a few FP&A solutions in the market, and each one will tout that they are the best and can do it all. As we all know, this is simply not true.
Each solution has their own strengths and weaknesses, and the suitability of a solution can vary significantly from one company to another. For instance, some solutions work really well for organisations with in-house IT experts and offer high levels of customisation to accommodate diverse requirements, while others may prioritise ease of management and use over extensive customisation.
Do your research first, and make sure you do it without too much time pressure to make the right choice. After all, you don’t want to go grocery shopping when you are starving – imagine what else could end up in your cart!
How much does an FP&A tool cost?
Here’s the big question everyone wants to know: so how much does it cost?
Everyone has a budget, right? So how much does it cost to purchase and implement an FP&A solution? Drawing upon what I mentioned in the webinar, this query is similar to asking how much it costs to build a house – it can vary significantly.
We can provide some guidance though. The cost can vary depending on the size of the business and level of usage.
For most companies between 200 to 1,000 employees, the investment for a good quality reputable solution typically spans from $30,000 to $100,000 for the software itself, with a comparable amount allocated for implementation services.
The best way to get a gauge of pricing is to speak to vendor resellers such as QMetrix first. We recommend this as a first course of action as vendor resellers work directly with clients, and can provide advice from their day-to-day experience with clients.
If you reach out to us at QMetrix, we work with you to understand what you are trying to achieve, and can provide an initial ballpark cost of what the software and associated service could add up to.
Building the business case for an FP&A tool
In most situations it is recommended to build a business case to validate calculations regarding the anticipated the Return on Investment (ROI) and value it will bring to the business over a 3 year journey.
As a guide, here are some high-level things to consider when building your business case:
- Finance productivity: Enhance operational efficiency within the team to do more with fewer resources.
- Business user productivity: Increased efficiency enables greater collaboration with business units, improving their financial literacy and enhancing accountability among stakeholders.
- Future cost avoidance: Finance is often asked to do more to help the business. The answer doesn’t have to simply be to hire people. What about the cost of decisions made from poor planning?
- Cost control / margin improvement: Equipping both finance and the business with streamlined access to data, and the ability to plan more frequently and accurately, can lead to cost savings and performance improvements that positively impact the bottom line.
QMetrix offers a complimentary and comprehensive value assessment tool that can be a great resource. This tool requires just 30 minutes of your time to complete together, and can provide really good insights for you to take away and consider. To access this tool, contact us at info@qmetrix.com.au.
If you have made it down to this part of the article, well done. There isn’t much for me to add except to simply summarise the following for you:
- Watch a replay of the webinar – our guest speaker Rob Stanley shares insights from implementing 3 different FP&A solutions with 3 different organisations
- Critically consider why you need an FP&A solution in the first place
- Remember that the goal is to drive business performance through accountability
- Do your groundwork and research first (on your organisational needs) to come up with a selection criteria before going out to vendors
- Build a business case to ensure you can articulate the value and ROI to leadership
All the best as you figure out whether your organisation needs a Financial Planning and Analysis tool.
Learn how things changed for Integria Healthcare when they swapped out Excel for an FP&A tool for their budgeting, forecasting and planning process.
