How CFOs Can Prepare for a Post-Pandemic World

by Wayne Slater

CFOs learned important lessons about speed and agility over the past two years, and are turning to technology like FP&A software and AI for strategic insights and competitive advantage.

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Before the pandemic, corporate performance management (CPM) software and automated financial planning and analysis (FP&A) processes were viewed as a nice-to-have, but not a must-have for many companies. Most organizations were getting by, simply relying on manual finance processes and manipulating spreadsheets. CPM was seen as an area that might help a company edge out its competition, but not as an essential tool. But all of that changed with COVID-19.

According to data from a new “State of the Finance Function” survey of more than 200 CFOs and senior finance leaders commissioned by Prophix in collaboration with CFO Dive, many executives have committed to substantial upgrades in automating FP&A. Today, cloud-based CPM software has become an essential element of a digital transformation strategy for finance. The pandemic proved all companies, regardless of size, need to be equipped to tackle dynamic market shifts as they happen. Whenever there is uncertainty in the markets, CFOs and their finance teams are increasingly called up on for their insights to help steer strategic decisions. But given most finance teams were pretty much “maxed out”, this drove the need to adopt technology, such as CPM software, that could accelerate insights and automate FP&A processes to give them the agility they would need.

Lessons Learned from a Turbulent Economy

When the pandemic hit, CFOs were thrust into triage mode and asked to model and propose plans to keep their companies financially healthy. With that, they assumed more strategic roles as their companies struggled under harsh economic conditions acerbated by Covid-19. These finance leaders needed to create sophisticated models for personnel planning and contend with supply chain issues, two areas that turned into long-term business issues. As a result, according to Prophix’s survey, three-quarters of finance executives reported stepping up their forecasting frequency during the pandemic and focusing more on ‘what-if’ scenario modeling.

Thoroughly embracing digital transformation helps prepare organizations for the new finance imperative: to move at the speed of change. The survey found 36% of businesses quickly moved their finance technology to the cloud, and almost a quarter of respondents said they scrambled to implement automated FP&A processes to keep their businesses afloat. These moves allowed for more nimble adjustments to plans, budgets, and forecasts in a remote environment.

On the flip side, companies that failed to embrace technology in their finance office, and instead continued to rely on reviewing and manipulating data through manual processes, struggled to keep up with the pace of these market shifts: ten percent of businesses surveyed barely managed by using manual or legacy processes, and 14% found it extremely difficult to react to changes while relying on Excel spreadsheets.

Automation Continues to be a Key Strategic Advantage in 2022

In a post-pandemic world, automating the FP&A process can bring many advantages to organizations looking for a competitive edge. By leveraging CPM software, finance executives can see an instant return on investment by eliminating error-prone manual and spreadsheet-dependent processes. Even more significant is the strategic value that finance executives receive by better understanding internal and external data to make more confident and timely decisions.

The benefits of automated FP&A are proving valuable to companies as they contend with ongoing supply chain issues, the Great Resignation and inflation. For instance, companies can model the implications on their production capabilities given workforce shortages and also understand how production shortfalls would affect company financials. Because CPM software automates tasks, CFOs and their teams can tackle more critical business initiatives, become less reactive to business changes, and uncover strategic investment and growth opportunities for the company based on scenarios and complex modeling capabilities.

Further, investing in cloud-based CPM software allows finance teams to work more efficiently no matter where they’re located. But the advantages go beyond remote work. Instead of working using manual processes where versions of spreadsheets are shared over email, finance team members can access cloud-based CPM for accelerated budgeting and/or rolling forecast adjustments. CPM tools help to consolidate and centralize company data, updating that information in real-time. Finance leaders can access and analyze data across the organization – whether it’s ERP data, personnel planning from human resources or sales information from customer relationship management (CRM) tools. This provides a single, holistic view of the company’s financial situation.

This visibility makes scenario planning “in a timely fashion” possible: companies with automated FP&A can map out combinations of possible events, how those events might affect the company, and implications on the company’s financial wellbeing. Then the FP&A team can develop detailed action plans and run them through various scenarios, revealing how those action plans would affect company finances over the long term. With automated FP&A processes, CFOs and their finance teams can also incorporate daily and weekly data into the models to capture rapidly changing circumstances and adjust their planning accordingly. These automated FP&A processes also allow CFOs to plan further into the future, creating rolling 36-month forecasts they can update with new data every month.

Finance Leaders are Making Moves - Now

The survey found there is significant room for improvement in most finance offices, with 91% of companies reporting fewer than 75% of their FP&A processes are currently automated. But companies are jumping on the strategic opportunities presented by agile FP&A, with 82% of CFOs dedicating their 2022 budgets to the purchase of CPM software, business intelligence and AI tools that make this type of agile forecasting possible. And they’re planning to move quickly. Two-thirds of surveyed executives report an increase in their finance budget of at least 10% to date in 2022 and one-third will have automated 75% of their FP&A processes by the end of the year; a threefold increase from current figures.

In a chaotic and uncertain world, the CFO and the FP&A organization must understand both the company’s internal business and external factors, and then extrapolate answers for what finance can do to move the company forward. Before the pandemic, many CFOs focused more on simply getting through financial processes and meeting compliance. They took a reactive rather than a strategic role. But as the stakes rose to survival mode for many companies, the strategic importance of CFOs and the finance function has been validated. Some CFOs have embraced their ability to drive change at their companies with the help of CPM software and FP&A tools. But those who lag in digital transformation risk their company’s future—and their own.

Wayne Slater is Director of Product Marketing at Prophix.