How Extended Planning & Analysis (XP&A) Can Grow Your Business
What is extended planning & analysis?
Although Gartner officially coined the term in 2020, the ideas and concepts behind XP&A have been around for some time.
What we now call XP&A has previously been referred to as “connective planning," “collaborative enterprise planning," “integrated business planning," and “company-wide planning," among other buzzwords.
Whatever you want to call it, optimizing interdepartmental financial planning through accurate, strategic modeling and collaborative decision-making has been an elusive, longtime goal for Finance departments worldwide.
Since the pandemic began, XP&A has been adopted by leading brands worldwide to meet the complex needs of competitive businesses looking to grow, adapt, and thrive in an ever-changing world.
Traditional FP&A, with its endless spreadsheet snarls, opaque silos, disconnected planning, and lack of long-range visibility and transparency, cannot meet the that comes with evolving demands from stakeholders.
That's why now, more than ever, it's increasingly clear that any business looking to succeed long-term will have to change the status quo and rethink day-to-day financial planning.
What can XP&A do for your business?
The harsh truth is that relying on familiar but outdated legacy FP&A systems to run your business today is like running a marathon without stretching just because you already know how to walk.
FP&A processes are far too manual for 21st-century demands. When everything is done mostly by hand and ad hoc, you end up with inaccurate data, information siloes, endless back-and-forth, lack of agreement between teams and departments, and frequent breakdowns in communication, all of which make running a growing company difficult, to say the least.
These financial plans built in silos create patchwork analyses and a greater margin for error. And the outputs and projections that finally end up making their way upstairs? The CFO that what's on his desk is an accurate picture of his best options, but it may lack pertinent information.
This disconnected view of the future forces decision-makers to fly mostly blind.
Speaking of flight, here's another analogy. When you rely on traditional FP&A tools and solutions for modern financial planning, it's like flying a propeller-powered plane with no co-pilot or useful instruments. For those who've adopted agile modeling processes, their experience is different. For the agile teams, they're flying a jet engine, assisted by a co-pilot, control towers, radar, and modern navigation tools.
In other words, on bright and clear days with simple flight paths, the propeller plane pilot might be ok, but the jet pilot is certainly safer and more equipped. Now, with an approaching storm—which would you rather have? Unfortunately, we can’t choose which day to fly, so preparing now and investing in the right tools and systems is critical.
Upgrading to an XP&A approach encourages collaboration and broadens and improves visibility. When stakeholders are empowered to collaborate more efficiently within the same trusted tool, they can focus their valuable time on strategic conversations that will improve the business instead of spending time muddling through unexplained numbers and analysis. With a system that supports strategic exploration, power and accuracy, and a 360-degree long-range view of their organization, leaders can easily and quickly avoid risks,
The goal of XP&A is to help organizations struggling with FP&A with their strategic, operational, and financial planning by introducing more intelligent functions and modeling into data-informed decisions, allowing companies to optimize both individual departmental planning and organization-wide decision-making.
Properly implemented, XP&A can provide simpler, faster, and more accessible financial choices for decision-makers, making it easier than ever to achieve consensus in the C-suite and improve long-term, big-picture decision-making.
Of course, all of that is easier said than done. To implement XP&A effectively, your organization needs an agile, powerful, and dynamic financial modeling engine to help manage every facet of financial planning, scenario analysis, and forecasting.
The XP&A checklist, are you navigating safely through turbulence?
By integrating plans into a cohesive model and making the planning process more transparent and accessible, businesses can react far more quickly when a marketing product launch takes off, a supply chain is suddenly disrupted, new staffing needs arise, or a black swan event—such as the COVID-19 pandemic—strikes without warning.
No matter what happens in the future, by opening up the planning process enterprise-wide, XP&A makes it easier and more efficient for decision-makers to adapt to the market without disrupting the flow of every department. If one plan changes, the others can quickly pivot, allowing the plane—in this case, your company—to make it to your next destination no matter the weather.
For example, in the event of potential supply chain disruptions, executives would be able to rapidly run thousands of financial scenario simulations for supply, demand, and other financial drivers with agile modeling software. The more scenarios you are able to explore and analyze quickly, the more confident you become when selecting the best financial path forward.
If you're wondering how close your business is to achieving this degree of agility and adaptability in your financial planning and analysis, consider this checklist:
☐ Are your teams agile enough to address every ad hoc what-if question asked?
☐ Is leadership able to explore various scenarios and make confident, long-range business decisions with the financial insights they receive?
☐ Can you and your staff avoid spending 80-100 hour work weeks conducting analysis?
☐ Close to 90% of spreadsheets contain errors. Are you confident of your organization's planning and scenario spreadsheet-based analysis models?
☐ Are your FP&A processes flexible enough to change as needed, and agile enough to scale with your business?
If it's difficult for you to check off most of these, then you're likely experiencing challenges, frustration, and a lack of confidence in high-stakes decision-making. Luckily, there is an opportunity to do better and source the right solution to help you get even more out of your FP&A process.
Ideally, you probably want to get to the point where you can use rapid modeling to support as many concurrent what-if analyses as you need, allowing your finance teams to quickly adapt to unexpected events and compare numerous scenarios before making the best, most well-informed business decisions—no matter how much your organization grows.
When you have the technological firepower to run all those complex scenarios and find the best options within your parameters? You're way ahead of the game. Few things, if any, will ever catch you by surprise because you've traded in your propeller-powered plane for a state-of-the-art jet engine.
This flexible, customizable approach offers real-time financial visibility and transparency, allowing your teams to quickly understand, communicate, and collaborate on different plans without the endless delays or drudgery of the 20th century.
By linking every single financial plan to specific financial goals and strategic objectives, as well as clear courses of action and desired outcomes, CFOs, and their teams are better able to model, forecast, monitor, and evaluate their choices with true confidence.
See the bigger picture ahead of time, every time
With modern XP&A, you can offer your finance teams a single source of financial truth, giving them a place to experiment with and build more insightful, actionable, and scalable business plans that consider the bigger picture, rather than each individual department or team's piece of the puzzle.
Done right, XP&A is a unique opportunity to unite formerly disjointed or isolated departments into a more cohesive, engaged, and informed group working towards common financial objectives in an accessible platform that keeps everyone in the loop.
Automated modeling, dynamic analysis capabilities, and driver-based planning ensure that all related financials stay in sync when a change occurs anywhere in your constellation of plans. This advancement will show you what's impacted, helping you understand the outcomes, and focusing the conversation on what you and your team need to do next to move your business forward intelligently.
If you find increased collaboration, visibility, and scalability impressive, consider Synario's Modeling Intelligence for your XP&A approach.