What is xP&A and Why Does It Matter to Corporate Leadership?

Simulation
Feb 2022
What is xP&A and Why Does It Matter to Corporate Leadership?

The term “financial planning and analysis” (FP&A) has long referred to the collection, processing, and application of corporate data. While FP&A is helpful in essentials, the pivot to extended planning and analysis (xP&A) demonstrates the desire to integrate corporate departments seamlessly in real time.

The practice of “chunking” departments into their own finances and then attempting to reconcile those departments annually or quarterly cannot hold at the pace business is done today.

This article will describe the essential differences of xP&A over traditional financial planning methods and then present steps for implementation.


What’s Better About xP&A?

The truth is, not much is different between FP&A and xP&A. They both enable forecasting, performance monitoring, continuous planning, and in-depth analytics at their core. However, xP&A newly focuses on bridging the gap between corporate finances and operations.

It has been increasingly challenging for companies to accurately feed important data from sales, marketing, HR and more, in any way that could provide real-time information. However, corporate leaders understand that decision-making quality is only as good as the available data.

Perhaps the greatest goal of any financial department is to provide and maintain a single source of truth. xP&A is the best systematic approach to enabling real-time, “siloless” information. xP&A refers to breaking down departmental walls and placing robust systems to close the loop.

Another crucial element to xP&A is leveraging automation. After standardizing company metrics across departments, businesses can take advantage of powerful automation tools that automatically feed all changes into the big picture.  

xP&A will newly enable companies to react to the most minute sales, marketing, and HR changes in real-time. This data isn’t only available to accurately report what is happening now, but its ripple effect automatically informs and adjusts forecasting and future planning.


How to Implement xP&A at Your Corporation

While xP&A is undoubtedly the future of financial planning, successful implementation requires preparation. Here are the basic steps to getting your corporation ready to break down silo walls and integrate finances and operations.

1.    Perform FP&A on the Cloud

Successful xP&A relies heavily on automation and cloud computing. If your company isn’t using cloud-based financial planning already, a jump straight to xP&A will likely overwhelm your company infrastructure.  

Cloud computing itself provides many benefits that will automatically enhance your companies financial and operational power. SaaS (software as a service) providers may offer similar products as on-premise options at a glance, but SaaS offers many competitive advantages.

For example, SaaS products typically receive more attention in addressing bugs and new developments than on-premise products. They are more likely to integrate with other applications as their structure makes them inherently more flexible. Finally, cloud-based software allows employees to work anywhere, anytime, with live updates. This final point cannot be discounted in light of the COVID pandemic.

2.    Start with Integrated Financial Planning (IFP)

xP&A can powerfully penetrate corporate barriers and provide great information. Yet, many companies have not created a standardized way to report data between departments or adequately prepared leadership to work seamlessly together. Most departments run according to their own systems, and finance departments are tasked with finding meaning between disparate information.

By building up IFP infrastructure first, you’ll allow your company time to responsibly grow into the culture and systems required for successful xP&A. This change alone will help you create standardized methods and implement software you can use to build xP&A within a few years.

3.    Prepare Your Culture

The systems required to implement xP&A will likely be significantly different from what your employees and leadership team are used to working with. Therefore, it will take deliberate planning and education to help employees let go of their old systems and department values to adjust them to more synergistic goals and values.

Work in advance with your leadership team to troubleshoot how to close the gap between your current FP&A practices and your desired xP&A requirements. This will likely require a comprehensive evaluation of departmental practices and procedures. Next, create your visions for standardization, then allow adequate time (up to a few years) for management to teach their employees about what the shift will entail and how it will impact them and company success.

Companies that jump into a dramatic change like xP&A without proper cultural assimilation time will likely fight an uphill battle. A successful deployment depends on employee compliance.


Conclusion

Experts predict that xP&A will be normalized by 2024. Undoubtedly new tools and practices will emerge as more companies adopt the strategy. If your company doesn’t want to be competitively left behind, now is the time to prepare for rollout.  

Check out our blog to stay up to date with corporate finance best practices.