Even before the pandemic, the FP&A market was seeing a shift from the first phase of financial planning and reporting through Excel spreadsheets and on-premise solutions to cloud-based automated corporate performance management (CPM) software tools.
These technology-enabled solutions support senior finance executives in their quest to make more timely and efficient data-driven business decisions. But as most organizations have discovered over the last year, today's dynamic business landscape calls for even more robust and proficient reporting to empower finance teams to run a variety of what/if scenarios and make on-the-fly adjustments to forecasts based on real-time data. This new business imperative has given rise to the next generation of FP&A tools: CPM 3.0.
Introducing CPM Software 3.0
CPM 3.0 solutions include new AI-powered software to help financial executives manage the complexities of today's business environment – including a remote workforce, vast amounts of data, and expanding security and compliance directives. Featuring predictive analytics and machine learning (ML) based forecasting, anomaly detection and natural language interaction capabilities, this next generation of CPM tools provides finance teams with the higher-level insights needed to meet evolving business demands, while also ensuring the ease of user accessibility to cloud-based digital tools for integrated planning across the entire business ecosystem.
By adopting this more advanced CPM model, finance executives can more proactively navigate turbulent times and capitalize on new opportunities, instead of the reactive defense they played over the past year.
Your peers have spoken
According to Prophix's 2021 Agility in Planning, Budgeting and Forecasting Global Survey conducted in partnership with FSN Research, 80 percent of finance teams surveyed are unable to forecast beyond a year, and only 43 percent are able to forecast their revenue within +/- 5 percent accuracy.
However, those that leveraged cloud-based CPM software and scenario planning were able to forecast more quickly, more accurately, and farther into the future – helping to prepare their organizations for whatever comes next. According to the survey, 77 percent of organizations that find the time to run through their data and consider alternative scenarios for re-forecasting their earnings can do so within a week, compared to 41% of finance executives who say they don't have the time for scenario planning. Scenario planning has also been proven to improve forecasting accuracy of earnings and revenue, with 54 percent of scenario planners able to forecast within +/- 5 percent.
It has become clear that digital transformation in the office of finance has become a higher priority for many organizations, and advanced cloud-based technological solutions like CPM software are in greater demand. Traditional FP&A tools and processes no longer meet the needs of organizations looking to thrive amid turbulent and unexpected market changes.
By adopting advanced CPM 3.0 software solutions, CFOs can rely on insights pulled from rolling budgets and forecasts to remain quick-footed in response to market changes and proactive in pursuing new opportunities for future competitive advantage. This not only places the CFO in a more offensive position for whatever comes next, but also elevates them into a more strategic role within the organization.