Question

Discuss 2–3 challenges an administrator may face when developing and reviewing a financial plan or capital improvement plan. Justify your response with examples and references

Answer 1

It’s well known that many organizations invest a lot of time and resources preparing the annual operating or financial plan. Some issues faced are:

• Errors manipulating data in spreadsheets: Fragile formulas, data security, limited versions, and little-to-no collaboration features are just a few areas where a spreadsheet falls short of purpose-built planning solutions.
  
• Budget is too detailed or too summarized: Operating units build detailed models using local accounts, departments, customers, and employees. Corporate finance teams then consolidate these to a level too summarized for meaningful operational analysis. Companies often struggle to find the right balance or serve all constituents with a single platform.
  
• Difficult root cause analysis: Variances to the plan can be the result of market volatility, unexpected wins or losses, or simple human error. But how can you tell what’s actionable? Purpose-built planning systems give executives and line of business managers insight into root causes at the division, region, country, customer, and even department level.
  
• Changing data sources: Management makes an acquisition mid-month. Another business unit is upgrading its ERP. Another business unit wants to change its product segments. Data governance and integration tools can eliminate the associated stress with changing data and accelerate the reporting cycle.

  Other key challenges:

• Forecasting Errors: Finance teams struggle with mistakes that occur when people collaborating inside a vast organization make errors, confuse versions, miss important data and place heavy burdens on data collection.
• Handling Uncertainty: Teams often deal with incomplete data or information that is in flux. FP&A professionals don’t have the luxury of having 100% certainty when planning for the future.
• Unified View of Data: Numbers come from various areas within the company and in various forms. Unifying these numbers poses a massive challenge.
• Collaboration & Communication: Consolidating inputs from multiple sources, analyzing the data and communicating results that are understood and respected by decision makers.
• Real-time Results: Everyone wants up-to-the-minute information. FP&A teams are under massive pressure to deliver analyses when and where decision makers need them.

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