How an integrated FP&A solution enables service-based organizations to become strategic in an age of ongoing change
Against a backdrop of ever-changing market conditions, it’s more important than ever to quickly identify trends, and make confident decisions about the future.
For professional service organizations (PSOs), this presents a particular challenge. But they have two secret weapons: their CFOs and the data clarity they receive from combining FP&A and ERP systems.
Keep reading to hear from Unit4’s VP of FP&A, Michael Lengenfelder, exactly how CFOs can use integrated ERP to build organizational resilience and future-proof PSOs.
Why strategy is needed to combat periods of uncertainty
We’re living in a time of unpredictable change: an environment that entrepreneur and business author Peter Hinssen has called the “Never Normal”. The phrase comes from the popular term “New Normal” to describe the period when society bounced back from recent lockdowns.
Yet, there is a period where we no longer expect a return to orthodox trading conditions but instead must adapt to a period of “seismic shocks”, placing pressure on all of us to respond, rethink, and reform.
PSOs must now react to change fast, and finance leaders must control costs and protect margins while increasing planning agility. Service-based organizations are particularly open to being affected by fluctuating supply and demand.
To advise better decision-making, CFOs need to pursue the most desirable of targets: the single source of data truth.
But more than anything they need to learn to “steer by numbers”, placing their faith in data to make unemotional decisions based on inarguable factual evidence.
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How PSOs and CFOs can reimagine their data challenges
Of course, letting the data lead decision-making is widely advocated as a modern business practice, but to make it work the data needs to be well managed with modern systems. The challenge here has always been one of having data that is standardized, integrated, and reliable.
Data-driven enterprises require operational rigor; to successfully manage an organization, data needs to be succinct, holistic, and accurate. Even a simple missing timesheet or an unbilled customer will skew a forecast.
The modern CFO must become strategic, ensuring finance works closely with HR, IT, logistics, and other functions, to deliver unparalleled visibility across the organization.
At a time when so many factors are in play, they are best positioned to provide benchmarks and evaluations based on unbiased, KPI-based business logic.
Most notably, the integration of FP&A systems and ERP systems represents an excellent opportunity to harness data quickly and enable near real-time decision-making where the CFO’ is always up to date with business conditions.
How digital transformation enables future-proof processes
All organizations must adapt quickly to new technology to survive in the “Never Normal”. According to McKinsey Digital, 64% of business leaders believe they will need to digitize their business to be economically viable.
Service-based operations are no different; forward-thinking CFOs must empower digital finance transformation with a platform designed for people-centric, project-focused organizations.
When empowered with digital solutions, CFOs can satisfy the steps that build organizational resilience and help ward against future disruption:
- Forecast: Organizations can respond confidently to opportunities and changing priorities by using ‘what if?’ scenario planning to model cost, profitability, and outcomes, and boost resilience.
- Plan: By making use of technology tools and strong processes, CFOs can create systems for planning that can adapt to changing circumstances.
- Integrate: The integration of business processes such as FP&A with HR and ERP is critical to creating reliable data ecosystems. Buying from a single vendor provides the levels of pre-integration that soothe processes.
- Execute: CFOs can use adaptable workflows to provide their organizations with the flexibility to act and adapt with enhanced billing, new approaches such as automated invoicing, and natural language assistants.
- Review: Advanced analytics can uncover hidden opportunities to identify and track performance indicators. By enabling transparent calculation and reporting with standardized business logic and KPIs, CFOs can enable people at all levels of the organization to understand their financial contribution.
Research shows visibility and control of data will be a vital investment for PSOs
Many service-based organizations are still using outdated technology. The message from research by leading analysts and industry specialists is clear: they need to catch up to remain competitive.
Tech-savvy CFOs invest in tools that deliver visibility and control across the entire organization, so they are aware of all factors affecting financial performance from costs of customer acquisition through to revenue, recurring services, upselling opportunities, and the state of customer relationships.
Research by PwC found that 42% of finance teams that are heavily reliant on spreadsheets report a high ratio of late payments overall. In our Business Future Index 2022, respondents also cited legacy systems as a challenge for accurate forecasting.
Other research shows that investment in digital tools and processes pays off; Harvard Business Review reported that mid-market companies with a clear and comprehensive digital vision, that guides strategic decisions, grow 75% faster, on average, than those without.
To address this issue the top three priorities to improve forecasting accuracy are:
- Greater communication across teams
- Improved planning for different scenarios
- Greater investment in forecasting technology.
Looking to the future
By using the right technology for their industry and partnering with best-of-breed ERP providers, CFOs can help the whole organization remain agile and profitable — whatever happens in the Never Normal.
This is a time of rapid change but also an opportunity for those organizations that can combine data from their finance planning and ERP systems to create transparent processes that easily yield insight.
As McKinsey said back in 2021: “Tech-savvy leadership helped set top performers apart — and will be even more valuable in the future.” In other words, those PSO leaders who invest in digital transformation today can help protect tomorrow.
