What Are Best Practices?
Best practices are the gold standard to which you should strive for maximum success. Your Financial Planning and Analytics suite can help you take steps to comply with your industry standard.
How Best Practices Work
Best practices serve as a general framework for a variety of situations. For instance, in businesses that produce physical products, a list of best practices may be furnished to employees, highlighting the most efficient way to complete their individual tasks. Best practice list may also delineate safety procedures, in order to minimise employee injuries.
Best practices can also be used as a benchmark, where one company can share actionable solutions with other organisations, for example:
A firm is well known for its award-winning, best-in-class product distribution infrastructure. When asked to precisely describe the best practices that led to their hyper-efficiency, the company reveals that it outfits all fulfilment staffers with green stickers to highlight the highest priority deliveries.
In our case, best practice means Cortell and IBM assessing the various problems within your business, and offering our world-class proven solutions to resolve and evolve your company.
Where does my FP&A software fit in?
Modern FP&A software is a critical tool in addressing best practice. With customised roles, rules and access permissions all integrated into a centralised and connected cloud database, modern solutions ensure all users have a trusted, single source of information.
Additionally, today’s leading FP&A solution IBM offers version control, audit trails and transaction-level drill-down capabilities to provide transparency into FP&A data and the processes that use them.
1. Driving Strategic Business Planning
In direct collaboration with department heads and stakeholders, FP&A teams can access this data, compile a list of prioritised business needs to be budgeted for, and determine which long term goals are company priorities. FP&A works closely with company management to create strategic plans by:
- Analysing and finding correlations between financial and product, sales, marketing, supply chain and other operational data to uncover the story behind summary financials
- Determining what resources are best allocated where and when
- Creating rolling forecasts to continually improve forecasting and planning accuracy
- Translating forecasts into actionable departmental plans aligned across the business
- Performing a variety of what-if and scenario analyses to prepare for any change in internal or market conditions
Once defined, this plan can be shared easily throughout the company and influence appropriate departments, for example, by redirecting marketing strategy according to new insights and with a new budget.
By using a modern FP&A software solution, managers can easily access high-level data or drill into transaction-level details directly from their dashboard reports. Software that integrates seamlessly with existing software allows finance teams and business users to draw on the numbers and insights they need, using the software they are familiar with.
2. Real-Time Performance Monitoring
Continuous monitoring of financial and non-financial performance is an essential FP&A role. Effective financial monitoring can identify variances between projected and actual results, determining where existing plans need adjustment to remain on target.
Monitoring operational performance can help identify problems in production, distribution, marketing and more, in order to make similar course corrections on resource allocation and investment.
Best practice guidelines for monitoring require teams to:
- Provide stakeholders with real-time, self-serve dashboard reports
- Conduct regular variance and profitability analyses
- Regularly analyse scenario plans and what-if models to be prepared for changing conditions
- Communicate critical analysis findings to company leadership
- Assess changes in compliance obligations to confidently meet regulatory reporting and security requirements
- To look beyond standard financial statements to monitor business KPIs, including customer acquisition costs, customer lifetime value and customer satisfaction
3. Insightful Dashboard Reporting
An FP&A professional equipped with the right tools will spend 70 to 80 per cent of their time analysing data trends, versus 20 per cent in more traditional, siloed finance teams. Teams should perform variance, profitability, scenario and other analyses on a continual basis as changes occur both within the business and externally.
Best practices for analysis include:
- Consolidating data from all relevant sources
- Understanding the cause of variances between actual and forecasted data
- Understanding the context of the data set: is it relevant to a specific date range, region or line of business
- Working to establish a hypothesis and reformulating it as it aligns with the data
- Formulating insights that lead to smart business actions
- Remaining agile with regard to industry trends and a changing landscape
- Forecasting on a rolling basis to capture changes, momentum and a variety of scenarios
Modern FP&A software solutions drastically reduce the time it takes to compile and then analyse data by offering in-the-moment financial intelligence, especially in today’s volatile business and economic environments. The question is not whether your business can continue to go without it, but rather how did you survive for so long without it.