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Extended Planning & Analysis (xP&A)

What is Extended Planning and Analysis (xP&A)?

xP&A is an emerging trend identified by Gartner which indicates that financial planning and analysis (FP&A) projects are gradually “extending their scope beyond the finance domain into other areas of enterprise planning and analysis.”1 In other words, xP&A gives FP&A capabilities to departments beyond finance including supply chain, marketing, workforce, sales, and IT. By providing automated planning processes to this broader range of domains, each one is better positioned to support enterprise performance goals.

This new vision of planning and analysis requires organizations to break down siloes between financial and operational planning to get to the goods: transformative business value. Gartner estimates that by 2024, over 70% of new FP&A projects will become xP&A projects.2

What’s the difference between xP&A and FP&A?

FP&A is focused exclusively on providing finance teams with financial planning tools, like budgeting, forecasting, and reporting. FP&A is limited to the financial perspective. It doesn’t consider the activities, projects, and plans of other departments, which also contribute to the bottom line.

According to Gartner, xP&A “launches a new era of continuous enterprise financial and operational planning” and notes that FP&A efforts are often flawed by disconnected metrics and processes that impede broader, more complete approaches to performance management.3

xP&A extends the automated planning processes FP&A uses to operational planners who would otherwise be planning using outdated methods, like spreadsheets and their own isolated databases. xP&A applies FP&A principles to operational planning processes. For example: Instead of limited production plans that are composed of supply data alone, with xP&A production departments can use information from sales and marketing to better understand when demand fluctuations might peak and how production should adjust. xP&A gives operational departments a clearer view of the relationship between the output of each team and the impact on the business at large.

Why is xP&A needed in our current environment?

xP&A brings continuity to fragmented enterprises: Demand impacts production. Sales impacts demand. Marketing impacts sales. Everything affects the bottom line. And yet, using mono-departmental data and spreadsheet-based planning processes, operational departments can’t see the larger picture of factors impacting their performance, nor can they see how their performance affects other departments. As a result, decisions are made in isolation of competing factors and strategic action is limited to the small amount of insight on hand.

xP&A helps operational departments transform raw data into strategic guidance: Technology has provided Finance with the unprecedented ability to make connections between financial results and operational activities. Why not extend that visibility to the rest of the organization? FP&A’s limitations are an issue of access; traditionally it was only finance only had access to a variety of performance data. But now, technology has evolved to where we can contextualize financial and operational information universally, so all players, regardless of their department, can see how their activities affect — and are affected by — other domains.

Uncertain local markets, tumultuous global economy, competitive industry players: The need for speed, urgency and precision in decision making has never been more pertinent. Areas of accelerated change now have their pedal to the floor. Operational departments will be left in the dust if they don’t have the visibility to match their activities to the pace of the competition and industry.

What are the benefits of xP&A?

Continuous Planning: Just as FP&A gave finance the visibility to see how operational information impacted the bottom line, xP&A gives operational departments the same power. By linking departmental data that is both operational and financial in nature, each department can create continuous company-wide plans that are more agile, considerate, comprehensive, and correct.

Comprehensive Understanding of Performance: xP&A extends the FP&A planning practice of using financial, non-financial and external data to departments beyond finance. xP&A expands traditional boundaries, bridges gaps in performance management, and provides richer context to numbers. xP&A promises a more comprehensive picture of performance from the bottom up.

Improved Accuracy of Financial and Strategic Plans: Because of its expansive, inclusive nature, xP&A involves the analysis of larger datasets and more data sources. By synchronizing planning efforts across functions and expanding the data participating in operational plans, xP&A will improve the accuracy and alignment of plans across the business.

Organizational Alignment: By virtue of its continuous, cross-functional nature, xP&A cascades top-level strategic goals down to operational activities to ensure all departments work towards the same goals.

Cross-functional Congruency: When planners across departments are brought together around a single data source, they can see how activities across functions impact one another. This enables departments to identify opportunities, shed light on blind spots, and more plainly see the domino effect decisions and activities have across performance.

What should you look for in an xP&A solution?

Unified solution with integrated planning: Look for a platform that unifies all people, planning processes and data in a single solution. The solution should be able to adapt to the different planning needs of various departments without custom coding, and while preserving data accuracy, permissions, and process control.

Smart data discovery at granular levels: Your operational performance results are your “what happened.” But you need to know why it happened and determine what to do next. Look for a tool that enables you to slice, dice, and drill deeply into data across multiple dimensions. By having granular data readily available for exploration across all operational units, you’re better equipped to learn from the past and explore your “why” at deeper levels. Combine that power with AI and machine learning techniques, and you tie financial and operational results together create projections that consider the nuances behind each number. As Gartner suggests, “New capabilities will enable financial and operational planning to be conducted in a more collaborative, continuous and consistent manner.”4

Support for multiple planning types: No plan is an island. Your planning solution shouldn’t be either. Look for vendors that have a highly-configurable platform and/or have planning apps that enable you to put financial and operational performance management data to use instantly.

Driver-based planning: At any given time, your operational drivers can change, impacting the entire performance management chain. When you can plan by driver, you can preview the operational path towards a desired financial outcome or play out the potential financial outcomes of various operational paths. You can also see how operational drivers in one department impact the operational plans of another, which is why this capability is so critical for xP&A.

1, 2, 3, 4 Van Decker, J., & Anderson, R. (2020, February 21). 2020 Strategic Roadmap for Cloud Financial Planning and Analysis Solutions (Rep.). Retrieved from https://www.gartner.com/en/documents/3981226/2020-strategic-roadmap-for-cloud-financial-planning-and-

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