Proven Techniques for Optimizing FP&A Processes

Transcription

1 Proven Techniques for Optimizing FP&A Processes Peri Pierone CEO U N I F I E D P E R F O R M A N C E M A N A G E M E N T

2 Agenda The Strategic Role of Finance Axiom Research Keys to Improving Management Reporting Keys to Improving Planning 2

3 The Strategic Role of Finance. How is that evolving in your organization? As a Data Steward Increasingly own data to drive decisions Own non-gl systems, (i.e., cost accounting) As a Partner to Operations Educating managers on cost realities Supporting the monitoring function (policing) As a Strategic Advisor to the Organization Being more agile and responsive to needs Supporting data-driven decision making 3

4 The Evolving Role of Finance Analytic Capability Analyst Measuring Planning Calculating Modeling Past and future Strategic Partner Advising Growth focused Risk aware Present & future Connected Quadrant 4 Embodies all the characteristics of the other three quadrants plus leadership and outbound activities Scorekeeper Controller Question #1 Reporting Accuracy Retrospective Disconnected Gatekeeper Expense focused Governance Retrospective Efficiency & Control 4

5 2013 Research Demographics Role in the Organization Company Size 4% 17% 5% 7% 7% 5% 23% 32% CFO Finance VP/Director Financial Analyst Budgeting/Reporting IT Executive Consultant Other 38% 12% 15% 25% 10% $0-$50M $50-$100M $100-$500M $500M-$1B $1B+ * 2013 Axiom EPM Survey 5

6 Market Research 2014 Performance Management Priorities Performance Initiatives Providing more insightful reporting and analysis to support decision making Understanding key drivers of profitability across various dimensions (customer, channel etc.) Cost containment and efficiency Improving and shortening budgeting and planning process Scenario modeling to analyze the impact of various drivers, initiatives and risk factors Linking long-range strategic planning and forecasts to short-term operational plans Becoming a better strategic partner to the business Streamlining the financial consolidations and close process 23% 21% 53% 48% 47% 41% 35% 76% Axiom EPM 2013 Performance Management Survey 0% 20% 40% 60% 80% 6

7 Challenge #1: More Insightful Reporting Provide more insightful reporting and analysis to support decision making Which areas of reporting are most important for you to address? Management reporting Ad hoc end user reporting 59% Legal/Statutory reporting 16% Prepackaged eternal reporting (SEC formats, XBRL etc.) 13% 94% 0% 50% 100% 7

8 What is your Most Significant Reporting Challenge? Ability to pull data from multiple data sources Accessing clean, consistent and trusted data Ability to "drill" into reports and understand details Need for better dashboards and visualizations Ability to deliver meaningful ad hoc analysis Ease of report creation Ability to integrate with MS Office Etc. Other 8% 14% 7% 6% 3% 16% 27% 19% 8

9 Report Example Financial and Operational Question #2 9

10 Showcasing Effective Use of Visualization Question #3 10

11 Add Intelligence to Reporting* Relevancy Customer Wait Times Early alert Tolerance Trend!! Call to Action Unplanned Staff Turnover Increased 14% Forecast Impact Additional Context Question #4 Q3 Q4 Q1 Q2 Q3 * Courtesy of David Axson - Accenture 11

12 Survey Research on Budgeting Question #5 How long is your budgeting process? 12% 8% 7% 19% 26% What is the most important factor impacting your budgeting timeline? 13% 6% 32% 28% 36% 8% 1-2 months 2-3 months 3-4 months 4-5 months 5-6 months Greater than 6 months Internal business processes Technology (or lack thereof) Lack of resources Iterating and negotiating to reach an acceptable plan The number of participants Other (please specify) 12 * 2013 Axiom EPM Survey

13 Axiom Thought Leadership Proven Approaches to Improving the Planning Process Reduce the size of the chart of accounts Driver-based intelligent modeling Financials are outcomes and should be treated as such Scenario-based planning sensitivity analysis Initiative-based planning Introduce Rolling forecasts 13

14 Ideas for Improving the Budget Cycle Time COA Reduction # of Accounts in Budget 1. Streamline the input required take a more calculation rich approach 2. Reduce the size of your chart of accounts 1. Detail does not equal accuracy > % 20% 40% 60% Question #6 14

15 Best Practices in Planning Driver Based Planning Revenue / COS / Margin Gross Margin Analysis Model: A4 2013MY JAN FEB Audi A4 Unit Forecast Wholesale Pricing Manufacturer s Cost Per Unit Stats Options, Freight, Port Processing, Incentives etc. 15

16 Driver-based Planning is the Key Insurance Example UNDERWRITING INCOME Written/Earned Premiums Losses Incurred Loss Expenses Incurred Other UW Expenses Incurred Aggregate Write Ins for Underwriting Deductions Net Underwriting Gain (Loss) INVESTMENT INCOME Net Investment Income Earned Net Realized Capital Gains (Losses) Net Investment Gain (Loss) OTHER INCOME Net Gain (Loss) from Agents or Premium Balances Charged Off Finance and Service Fees Not Included in Premiums Aggregate Write Ins for Miscellaneous Income Total Other Income Dividends to Policyholders Net Income, after Dividends to Policyholders Federal & Foreign Income Taxes Incurred Net Income ROA / ROE Key Drivers: Number of Agents Applications Per Agent Policies In Force Rate Changes Commission Rates Customer Retention Consumer/Producer Price Index Loss Frequency Loss Severity Claim Cycle Time # of Claims # of Adjusters # of Underwriters # of Customer Service Reps Question #7 16

17 Best Practices in Planning Scenario Planning and Uncertainty The notion of uncertainty is at the crux of both finance and risk management domains Even so when it comes to strategic planning, budgeting and forecasting, most practitioners are content with completing the the budget or the forecast without addressing the issue of uncertainty There is false sense of security when underlying assumptions are treated as facts vs. assumptions masking both exposure and opportunity 90% 8% Of the organizations surveyed take at least 2 months to complete a budget many more than 4 months Source: Business Finance, April 2012 Only 8% of organizations surveyed do scenario planning regularly. 17

18 Best Practices in Planning Single Variable Sensitivity Analysis Question #8 Easiest to set up and process Useful in quantifying the impact of a particular DV Can be a great educational tool Primary criticism is its simplicity market variables seldom move on a standalone basis 18

19 Best Practices in Planning Initiative Based Scenario Planning Question #9 Base Case Given current trends, what is our financial outlook 3-10 years? Base Case (Conservative) Forecasting Methods Include: Statistically-Driven Modeling Payor Mix and Revenue Forecasting Labor Rate & Efficiency Targets Cost Modeling Initiatives As we prioritize growth or cost containment initiatives, what is the incremental impact? Initiative #1 Initiative #3 Initiative #2 Initiative #4 Examples: Re-Design ER, Flow Thru Implications Expand Cardiac Cath Lab Open an OP Urgent Care (Northside) Scenarios What is the impact on our baseline projections given the initiatives we ve proposed? Consolidated Results Analysis Contains: 1. Income Statement 2. Balance Sheet 3. Cash Flow 4. Key Ratios 19

20 Best Practices in Planning Rolling Forecasts Question #10 Rolling nature provides consistent business outlook Tends to be more accurate than aspirational budgets Enables waterfall analysis and trending Q Q Q Q Q Q Q Q Feb Forecast May Forecast Aug Forecast Nov Forecast Actual Forecast Out Period 20

21 Score Your Organization Count the Xs for each column and write result in each column box Multiple each column total by its column multiplier Sum the multiplied totals for the five columns into a single score 21

22 Performance Management Assessment 0 17 EPM Novice Reporting & analytics aren t providing the value they could The organization likely lives on spreadsheets Planning processes are not well evolved EPM Intermediate Your organization has some insightful reporting Likely good investments in enabling technology You ve moved beyond simple budgeting EPM Expert The analytical nature of your reporting is impressive Technology is well leveraged Planning processes are highly evolved 22