Extended planning and analysis (xP&A) is gaining traction in the world of finance as a bridge between FP&A and other functions. By combining finance with HR, sales, marketing, etc., xP&A allows for more efficient and better decision-making.
However, xP&A is nothing new. Before Gartner decided to name it, xP&A was known as company-wide planning, collaborative planning, or integrated FP&A.
The new name has breathed some life into the concept of collaborative planning. And, more CFOs are taking a proactive approach toward xP&A. We seem to be entering a new era of continuous planning and collaboration, where finance rubs elbows with operations across the organization.
But… what is xP&A? And why should you care about it, let alone integrate it into your organization?
Say no more.
In this post, we define the meaning of xP&A and share 5 surprising advantages of xP&A that every CFO should be aware of.
Keep reading to discover:
- What is xP&A
- What’s the difference between FP&A and xP&A?
- 5 key benefits of xP&A
- Tips to help your organization transition to xP&A
What is xP&A?
xP&A is a continuous planning approach that extends things like planning, forecasting, performance monitoring, and analytics across the entire organization. In many ways, it’s a step up from FP&A because it allows for strategic collaboration between multiple functions beyond finance.
According to Gartner:
“By 2024, 70% of new financial planning and analysis projects will become extended planning and analysis (xP&A) projects, extending their scope beyond the finance domain into other areas of enterprise planning and analysis.”
This collaborative approach (when done right) can have a serious impact on the bottom line since the finance team can synchronize plans, forecasts, and metrics business-wide. Doing so can help integrate various financial and operational components and provide a holistic view of the organization.
What’s the difference between FP&A and xP&A?
Despite being very similar, there are some major differences between FP&A and xP&A.
Let’s start by defining the role of FP&A…
Financial planning and analysis (FP&A) involves performing budgeting, forecasting, and analysis to support business leaders with decision-making. When the C-Suite have questions, they look to the FP&A team for answers.
The main thing to note is that FP&A is a lot more structured than xP&A. It’s also limited in the sense that it only provides financial data and KPIs. It turns a blind eye to other business functions that impact profitability and the bottom line.
In other words, every function (and its planning processes) is siloed. One function may have no idea how another could impact its plan or outcome. This means that the sales team doesn’t know what marketing has planned for future product launches or promotions. That’s just one example, though.
Other functions besides sales and marketing also create operational plans that contribute to the bottom line, including HR, procurement, and supply chain.
So, what’s the solution to this lack of communication and collaboration between organizational functions and their workflows?
You guessed it – xP&A.
xP&A not only links operational plans, but it ties them to overall business objectives and financial goals. Unlike FP&A, xP&A allows teams to react in real-time. It helps CFOs to forecast and assess matters efficiently and holistically. xP&A equips businesses with everything they need to work together effectively.
5 benefits of extended planning & analysis (xP&A)
If you’re still on the fence and can’t decide whether to take the leap and integrate an xP&A strategy into your organization, here are 5 benefits of xP&A that might help you make a decision:
1. Increases transparency
Gone are the days when finance teams had to work tirelessly to retrieve and assess every piece of data from across the organization. xP&A drops the invisibility cloak and allows for complete performance transparency.
It creates a singular holistic view of strategic plans and performance across every function. Better yet, it does so in real-time. This cross-functional approach to reporting and analysis across the business leads to better decision-making as a result of holistic business visibility.
2. Business alignment
Many businesses struggle to align finance departments with the rest of the organization. However, xP&A ensures that every function shares the same vision for the future of the business. Thus, operational and financial plans are aligned and everyone knows what they (and other functions) must do to reach, meet, and exceed business goals.
3. Streamlined continuous planning
One of the main benefits of xP&A lies in its ability to create and maintain continuous planning using real-time data.
With the right xP&A tools, organizations can keep track of plans and rely on artificial intelligence and automation to complete necessary updates so that all relevant parties are informed of any changes. Manual labor time is cut drastically, giving CFOs and their teams more time to focus on other important matters.
4. Reliable data management
Conflicting versions of the truth are a thing of the past thanks to xP&A’s ability to house the same data in one place. Having multiple places (such as excel spreadsheets, dashboards, etc.) where data is stored can lead to misalignment and confusion.
The problem only gets worse with the more data you have, which is why many organizations are enjoying the ’single source of truth’ that xP&A provides. You can now find everything you need in one place, making the jobs of key decision-makers so much easier.
5. Business partnering enablement
Finance professionals are more than just number crunchers. They’re business partners. Of course, transitioning from number crunchers to business partners isn’t easy.
However, xP&A has simplified the process by providing the necessary tools to help avoid risks and identify growth opportunities. In turn, it’s become a lot easier for finance teams to step into the role of strategic business partners as they have the necessary insights and data on hand.
How to transition to xP&A
If you want to evolve from FP&A to xP&A, start by assessing the maturity of your finance function. This is important because it will help you determine where improvements are required before you transition to xP&A.
Take time to evaluate your organization’s existing technology. Is it flexible enough? Does it allow for the level of scalability the organization requires? If so, great. If not, it’s time to find better tools for the job.
Perhaps your performance management tool isn’t flexible enough, or you haven’t found adequate planning tools to support digital transformation. Whatever the case, it’s worth identifying possible disruptions and working on a solution (together with the office of finance) to find an ideal xP&A solution.
You want to avoid creating silos within the organization. After all, that’s what you’re trying to get away from by integrating xP&A.
Focus on building a unified approach and connecting financial and operational data as efficiently as possible. By doing this, your organization will move towards integrated business planning, which helps departments work together in a way that directly impacts the bottom line.
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