Financial Planning & Analysis Challenges CFOs are Facing in 2023

Financial Planning and Analysis (FP&A) is a critical function in any organization and is becoming increasingly important as more data becomes available. A well-functioning FP&A process can help a company closely monitor and forecast its financial performance while identifying trends and opportunities. It can also help allocate resources more efficiently.

As organizations seek to maximize their value with analysis, there are still critical obstacles that need to be overcome. One of the main challenges for financial leaders is the lack of confidence in the data that is powered by analytical tools, resulting in difficulties in the process of financial planning and forecasting. Analytic processes are often fragmented and lack inputs from different areas of the business due to outdated technology and inefficient business structure.

Let’s explore some of the most significant FP&A challenges faced by organizations today.

Inaccurate budgeting and forecasting

Using cloud-based financial forecasting solutions can be helpful for gathering and evaluating data, running simulations, and projecting potential outcomes. However, having the right solution alone does not ensure precise financial forecasting. More often, financial processes are inaccurate and require improvement, leading to unreliable predictions, hindering effective decision-making.

To overcome this challenge, organizations need to invest in data management tools and establish data governance policies to ensure data accuracy and consistency. “Many SMEs are not taking advantage of utilizing technology in the budgeting and forecasting process,” says Jolene Bredenkamp, Vice Preside of Finance at Quantum FBI.  “Instead, spreadsheets are still used, which are susceptible to human error. The process of updating budget and forecast spreadsheets frequently is arduous and impacts efficiency, and if not available in real time, also impacts proactivity and management’s ability to react timely.”

Forecasting accuracy is crucial in FP&A, but it is also challenging to achieve. Forecasting requires analyzing historical data, market trends, and other variables to predict future outcomes. However, there are numerous factors that can impact accuracy, including changes in the market, unforeseen events, and fluctuations in customer behavior. To improve forecasting accuracy, organizations need to continually evaluate and refine their forecasting methods, use a range of data sources, and leverage technology like machine learning and artificial intelligence.

Lack of communication and collaboration

Business leaders need up-to-date data, and finance teams are constantly under pressure to provide meaningful insights to support decision-making. However, many organizations struggle to facilitate communication and collaboration between teams responsible for financial planning and analysis. Often, this leads to misaligned goals, duplicate efforts, and inaccurate analysis. As a result, organizations need to establish clear communication channels and processes, encourage cross-functional collaboration, and use collaboration tools like project management software.

Disconnected data systems and processes

According to a study by Ventana Research, 77% of planning processes depend on having access to accurate and timely data from departments across the organization in one way or another.

This information is critical to creating accurate budgets, aligning KPIs, analyzing results, and setting future finance goals. To address this, it is essential to set clear expectations and standards for data collection, analysis, and reporting throughout the entire organization. Also, regular monitoring of the quality of the data is essential before it creates a more significant problem.

Budget constraints

Financial planning and analysis require significant resources, including technology, staff, and time. However, many organizations face budget constraints that limit their ability to invest in these resources. This can impact the quality of financial planning and analysis, leading to inaccurate forecasts and decisions. Organizations must prioritize financial planning and analysis as a critical function and invest in the necessary resources to support it. Outsourcing financial planning and analysis functions can also help reduce costs significantly.

Financial planning and analysis are critical functions for any organization, but they also present significant challenges. By addressing these challenges head-on and investing in the necessary resources, organizations can improve their financial planning and analysis capabilities and make more informed decisions about the future of their business.

Quantum FBI FP&A experts can help you tackle any challenges you may be facing.  Visit us at www.QuantumFBI.com to learn more.