3 things to look for when evaluating software for FP&A

Posted by  Douglas Yeung

When an organisation decides to invest in an FP&A software, there are three things to look for which will help ensure that the software selected will benefit the organisation as a whole, not just the FP&A function.

1. Data integration – One key benefit that an FP&A software can bring to the table is the integration of data from other sources. It should be used to assist in the modelling and projecting of financials.  With this in mind, an FP&A software should be able to integrate with various data sources and be flexible by pulling in not only financial data, but other data that may help in the modelling and projecting of the financials.

The process of data validation which is going into a financial model usually starts with the importing process.  For FP&A, this may include historical financials from the company’s own financial system, it may also include external data such as economic data, market data shared or subscribed from research firms, or data the FP&A team gathers from other functions within the company. 

Therefore, an FP&A software should allow FP&A professionals to access or upload the data directly.  After that, it will be important to provide different ways to check and validate data and, in the future, AI or machine learning should be able to highlight and alert users on data issues (missing data, invalid data and even abnormal trends).

2. After FP&A professionals import and validate the data, the next and crucial step is to perform an actual analysis.  There are a few ways where an FP&A software can help:

    1. Be flexible enough to incorporate different types of forecasting techniques. Different businesses in different industries will require very different type of forecasting models.  For example, retail industries may rely more on trend or statistical analysis, adjusting for variables like seasonality or spikes or troughs due to unexpected events. Engineering companies may require by project forecasting or ways to incorporate project plans into the forecasting models. 
    2. Expenses forecast – On top of revenue drivers, cost drivers are equally important to a forecast.  Here again a good FP&A software should be able to accommodate different types of forecasting techniques, from expenses that allow for year over year adjustments to zero based budgeting that can be used on discretion spending.  Allowing for different types of expenses techniques can help avoid having to do the analysis in a spreadsheet and then having to transfer to the model. 
    3. Scenario planning - A good FP&A software should also allow for scenario planning or different versions of budgets for comparisons.  Scenario planning is important especially when significant changes are expected so management can understand different levels of risks that relate to the uncertainties.  Different versions of the budget can allow auditing and tracking of the evolution of the budget, and also highlight the changes between versions.

3. Finally, reporting and visualization of the results – After the analysis are done, normally FP&A professionals spend a lot of time preparing the information in a more management friendly format (for example, charts and graphs, summary of certain key financials).  By being able to have a strong suite of reporting and visualisation tools, FP&A software can save the finance team a lot of time which is usually used for preparing the basics. The team will be able to spend the time framing the discussion instead.

Ten years ago, it was difficult to imagine a tool that can do all the above well.  But with companies using increasingly more data in their business, along with improvements in AI and machine learning, it is exciting to see how companies that specialise in FP&A software can come up with the next generation of planning tools.

Douglas Yeung

Douglas is a partner at Epitelligence Consulting, a management consulting firm specializing in helping startups and mid-stage companies scale up their operations.  By implementing the right business processes, these companies are able to gain operational efficiencies and improve profitability while maintaining a high growth model.

Before starting Epitelligence, Douglas spent 20+ years with Fortune 500 companies and startups in various finance and business roles.  His industry experience includes software (SaaS), travel, ecommerce, FMCG, industrial automation and telecom equipment manufacturing.  He has led FP&A teams for Asia Pacific headquarters in Hong Kong and Singapore and also worked in China and the United States.  In addition to finance roles, Douglas has led APAC wide strategy and pricing teams and was appointed interim general manager of a well-known beauty brand’s China business.

Douglas has conducted finance training in different companies and also gave speeches to students at universities in Hong Kong and Singapore to promote a career in FP&A.

Douglas holds an MBA from Rice University, a BBA in Accounting from the University of Texas at Austin and also a BA in Philosophy from Birkbeck College, University of London.  He is also a member of Texas Society of Certified Public Accountants.