In the ever-changing world of modern Finance leadership, the road ahead for Financial Planning & Analysis (FP&A) becomes more defined every day. A significant transformation is taking shape, highlighting the imperative of consolidating connected planning to foster alignment among Strategy, Finance and Operations. Not too long ago, this ambitious vision of seamlessly integrating financial and operational planning faced obstacles due to technological limitations. In fact, the rapid evolution of planning processes often outpaced the capabilities of the supporting technology – a challenge to which many businesses can relate.
However, the undeniable reality is that organizations now find themselves at a critical juncture – either embrace unified connected planning or risk incurring hidden costs.
In the world of corporate performance management (CPM), modeling and planning toolkits such as Anaplan, Board and Essbase have been celebrated for their flexibility and speed in addressing departmental planning needs. However, a critical issue arises when these toolkits are tasked with unifying planning processes across an entire enterprise. The fundamental problem lies in the approach employed by FP&A teams, as the toolkits rely on individual planning models that must be interconnected.
That reliance on disconnected models introduces data latency, risks and chaos. The result? A planning process that’s cumbersome, challenging to access, slow to consolidate and prone to inconsistencies. Moreover, the reliance on disconnected models also often leads to user errors and incurs substantial data movement costs (see Figure #1).
Understanding the root of this chaos requires recognizing that these disconnected models primarily serve three purposes:
The drawback of using disconnected models is the significant amount of time and effort invested in creating and maintaining them. Exacerbating the issue, the models are frequently misused, leading to additional time spent on fixing and consolidating data.
In today’s corporate landscape, FP&A leaders have a newfound influence, empowered by technological innovations to shift the focus from static back-office tasks to delivering timely, accurate financial and operational insights across the enterprise. However, when contemplating investments to unify connected planning, Finance-oriented CFOs and leaders must consider the common attributes and hidden costs associated with modeling toolkits:
While modeling toolkits are effective for departmental needs, the widespread use of these toolkits across the enterprise planning process generates hidden costs that cannot be ignored (see Figure #2).
For FP&A teams aiming to unify their connected planning processes using modeling toolkits, below are four hidden costs that must be considered:
Hidden Cost #1: Technical Debt Is More Than Total Cost of Ownership (TCO)
Scaling connected planning with modeling toolkits often focuses solely on the return on investment (ROI), overlooking the burden of technical debt. Yet implementing a new entity or structure within the organization frequently requires rebuilding modeling toolkits, leading to increased technical debt and higher overall costs (see Figure #3).
Key TCO Consideration
Hidden Cost #2: Short-Term Gains Erode Organizational Efficiencies
While modeling toolkits offer short-term gains by automating manual processes, using the toolkits can lead to near-term losses for large organizations. These toolkits, despite efforts to connect toolkits, remain fragmented systems that lack scalability, posing a risk to organizational performance.
Key Efficiency Consideration:
Hidden Cost #3: Forfeiting Effectiveness Is Not an Option
While efficiency gains are enticing, forfeiting effectiveness for the sake of efficiency can be counterproductive. The fragmented nature of modeling toolkits often results in efficient work being applied to inaccurate data, increasing costs as teams seek correct information.
Key Effectiveness Consideration:
Hidden Cost #4: Poor Collaboration Increases Organizational Risks
Collaboration breakdowns related to disconnected data sets can lead to costly mistakes. Only a unified platform can effectively mitigate these risks by ensuring seamless collaboration among departments and applications.
Key Risk Mitigation Consideration:
Modeling toolkits, despite their merits, also come with hidden costs and complexities that can hinder enterprise-wide planning and performance. FP&A leaders must carefully weigh these factors when considering the adoption of modeling toolkits for connected planning and explore more unified solutions to optimize financial and operational insights across the organization.
To learn more about how organizations are scaling connected planning, click here to read our whitepaper on the topic. And if you’re ready to take the leap from spreadsheets or legacy CPM solutions and start your Finance Transformation, let’s chat!Download The White Paper