Financial planning and analysis (FP&A) software is an invaluable tool to help you understand and analyze your company’s financial situation. This buyer’s guide will help you understand what to look for when selecting an FP&A software solution, and how to know if the software is right for you.
2.3. User Adoption
2.5. Scalability
2.6. Autonomy
2.7. Security
2.8. Support
3.4. Integrations
3.5. Design/UI
5. Conclusion
1. What is FP&A Software
Financial Planning and Analysis (FP&A) software is a specialized tool that helps finance professionals streamline their budgeting, forecasting, and financial reporting processes. These tools provide a comprehensive platform for managing, monitoring, and analyzing an organization's financial health by integrating data from various sources and providing advanced analytics capabilities.
While both FP&A and Enterprise Resource Planning (ERP) software serve a business's financial needs, there are key differences. ERP systems focus on managing an organization's day-to-day operations and transactions, such as purchasing, inventory management, and accounting. On the other hand, FP&A software is specifically designed for strategic financial management, including budgeting, forecasting, and scenario analysis.
With the rapid evolution of technology and increasing globalization, businesses face more complex challenges than ever before. Traditional financial management methods, like spreadsheets and manual data entry, have become inadequate for handling large volumes of data and complex financial models. By adopting FP&A software, finance departments can simplify their operations, improve decision-making, and enhance collaboration between departments.
2. Essential Considerations Before Purchasing FP&A Software
The history of FP&A software can be traced back to the early 1980s when the first spreadsheet applications were introduced. As the technology evolved, the 1990s saw the advent of specialized financial planning software, which focused on budgeting and forecasting. In the early 2000s, these tools started to integrate with other business applications, paving the way for modern FP&A software. Today, FP&A solutions have evolved into sophisticated platforms, offering advanced analytics, real-time data integration, and cloud-based access to cater to the ever-changing needs of modern finance departments.
The so-called third generation of FP&A software offers advanced analytics, real-time data integration, cloud-based access, and user-friendly interfaces, making it well-suited to meet the evolving needs of modern finance departments.
Here are the key differences of 3rd gen FP&A software compared to its older counterparts:
Better Design: Modern FP&A tools have simple and user-friendly interfaces, while older software is often confusing and hard to navigate.
Teamwork: They let users work together on financial plans and models in real-time, while older tools had limited teamwork options.
Smarter Analysis: They use advanced techniques like machine learning to give better insights, while older software has basic analysis features.
Easier Integrations: They can connect with many data sources and business applications easily, while older tools have limited options.
Cloud Access: These tools are usually cloud-based, making them easy to access from anywhere, while older ones are installed on-premise.
Better Visuals: 3rd gen FP&A tools have advanced ways to display data, like interactive charts, while older software has simpler visuals.
Real-time Data: Modern FP&A software shows real-time data, helping users make decisions based on the latest information, while older tools might have had outdated data.
2.1 Do you even need FP&A Software?
Unfortunately, it’s not always clear for businesses when is the right time to start using dedicated FP&A software. Finance teams get stuck in their day-to-day operations in spreadsheets, and sometimes lose perspective of the broad picture. But, we can help you here. If you and your team check more than three boxes, you might want to take a better look at your FP&A software situation:
Yearly planning lasts > 1 month
Lots of people participate
Lots of spreadsheets used
Lots of versions
Data-heavy model(s)
Manual template management
Manual reports
The plan is not viable (departments not co-ordinated)
Boss wants rolling forecast
Boss wants what-if simulations
Boss wants driver-based planning
Boss wants to plan profitability on the product/person/atom level
To learn more, check out our blog: 6 Things CFOs Are Risking by Not Implementing an FP&A Solution.
2.2 What is the problem worth to you, and what is your company budget?
The fact is that FP&A software can be on the expensive side of the business tools spectrum. Before starting to research vendors and do a deep dive into software features and various use cases, it is smart to start looking at the problem from a budget perspective. The most important question you must ask yourself is: how much does this problem cost the company? In other words, you need to perform an ROI analysis and determine if FP&A software is the answer to your problem, and more importantly, does the solution cost more than the problem itself. If that is the case, you are better off sitting down with your team, optimizing your planning processes and operations, and maybe considering other types of solutions first. In our blog “Is Implementing a New Financial Planning Software Worth it?” we talk about this, and there’s also an ROI calculator you can use to explore your FP&A software needs in more detail.
2.3 User Adoption
Another critical factor you will want to be careful about when considering acquiring FP&A software is the ease of use of the software. The reason for this is simple - the tool's ease of use will dictate the adoption rate throughout your company, and lower the TCO (Total Cost of Ownership). In other words, the more simple, intuitive, and flexible the tool is, the more resources your company will save in the onboarding phase.
In enterprise companies, managers often purchase expensive planning software for their teams without consulting with the team members to determine their actual needs. Consequently, team members tend to avoid using the software because it creates more problems than it solves. Although they use the tool for some business aspects, such as obtaining high-level P&L reports, planners mostly rely on their dependable spreadsheets because they are flexible and better suited for their daily planning needs.
In his blog post on the most common problems he faced in his career, a long-time FP&A analyst who worked for several pharma companies calls these tools it-was-expensive-so-we’re-keeping-it-tools. The planners do not have enough reasons to use these overpriced and clunky tools, except for the manager's sunk-cost fallacy.
When talking to companies with complex planning processes, we at Farseer learned that this happens more often than anyone likes to admit.
Historically, 1st and 2nd generation of FP&A tools has had lower adoption rates because they were too rigid and did not address the users' problems.
2.4 Implementation Complexity
As an FP&A software buyer, you should be very careful about the implementation process. Many pitfalls hide here. A lack of clear communication between you and the vendor can lead to:
inadequate planning and testing,
poor data quality,
insufficient user training and support,
unrealistic expectations of what the software can deliver.
In this phase, your priority should be setting and following a clear implementation action plan with the vendor. You should include all major stakeholders in the implementation planning, not just the finance and IT departments. If you want Sales and Production teams to use the software (and you probably do), they should have a say in the planning phase and voice their priorities and concerns early on. Happy teams -> better adoption, remember?
Setting clear goals for the implementation, including all relevant stakeholders, preparing your data sources, mapping your data properly, and communicating tasks and responsibilities between your internal team and the vendor can save you from headaches and problems in the long run.
Some vendors can be less than transparent in this phase because they can log more billable hours during the implementation that way. Implementations can be costly, to begin with, and whatever you don't communicate well initially, you will pay for later on with change requests.
Luckily, most of the vendors from the 3rd generation of FP&A software are aware of this, and they optimized their tools and implementation processes, so the customers get shorter time-to-value (TTV) and realize the expected benefits and ROI from the software in the first few weeks. Some of them (including Farseer) guarantee an implementation length of only 8 weeks.
2.5 Scalability
If an enterprise software system is scalable, it can accommodate growth and expansion as a company's needs evolve over time. For example, if a company initially implements a software solution to support a small team of users but later needs to expand the user base or add new functionality, a scalable software solution should be able to accommodate those changes without requiring significant upgrades or replacements. For FP&A software tools, you will want to ensure that your teams can edit the models in the software by themselves without the vendor's assistance.
Another crucial thing to be mindful of here is how the software handles the increasing process, data structure, and model complexity - will you have to request changes from the vendor, or will your teams be able to handle it internally? As mentioned previously, change requests can significantly raise the tool's total cost of ownership (TCO). Once again, the new generation of FP&A software is better for the clients in this regard, but as the buyer, you should look into this early on to save both time and money for your organization.
2.6 Autonomy
After scalability, the question of user autonomy arises organically. Autonomy means that a company can manage and customize the software solution to meet its unique business needs without relying on the vendor for every change or update.
A less autonomous software solution may require more vendor involvement, making it more challenging for companies to make changes or modifications without significant vendor assistance or custom development. Once again, third-gen FP&A tools provide more user autonomy and flexibility than the old-school enterprise software mastodons. For example, they allow users to handle and filter their own data, model, and test scenarios, automate budgeting and forecasting, and get the insights they need quickly and easily, without vendor involvement.
2.7 Security
Security is crucial in cloud-based FP&A software implementations for several reasons. Firstly, this software typically deals with sensitive financial data, including budgeting and forecasting information that could be attractive to cybercriminals or malicious insiders. Ensuring the confidentiality, integrity, and availability of the data is essential to prevent data breaches, financial loss, and reputational damage.
Secondly, companies are often required by industry-specific regulations to have security controls in place to protect sensitive data, regardless of where it is stored. Hence, cloud-based FP&A software vendors must implement security measures that comply with these regulations to ensure their customers' compliance.
Finally, adequate security measures can help enhance user trust and confidence in the software, leading to better user adoption and, ultimately, protecting the company's reputation and finances.
Security measures you want to look into with the vendor include:
at-rest and transit data encryption,
role-based access control (to restrict access to the FP&A software based on user roles and responsibilities),
security training for software users,
data backup and recovery measures (in case of accidental deletion, hardware failure, or a security breach),
regular software updates
2.8 Support
When considering FP&A tools, you should be mindful of the quality and availability of support provided by the software vendor. This includes everything from technical and implementation support across training and education to customer success management.
Does the vendor offer dedicated free support? What additional support fees are required, if any?
What is the background of their customer success team, and do they have relevant financial experience?
To ensure successful adoption and ongoing usage of the software, you should evaluate the vendor's support services and resources and determine how comprehensive, timely, and responsive to customer needs the vendor is. Additionally, FP&A teams should consider the vendor's reputation for support and their ability to scale support services as the customer's needs evolve. By selecting a vendor with quality support services, FP&A teams can maximize the value and ROI of their FP&A tools.
3. What to Look for in FP&A Software
In this section, we’ll focus on specific feature groups and use cases that organizations would (and should) expect from some of the more modern, flexible, and agile FP&A solutions.
3.1 Budgeting and Forecasting
Budgeting and forecasting are the essential financial planning processes that help businesses allocate resources, set financial targets, and plan for future growth. Third-generation FP&A tools have advanced features and capabilities that improve accuracy, efficiency, and decision-making when performing these processes.
They streamline the budgeting process by offering advanced data integration, real-time collaboration, and user-friendly interfaces. These features allow businesses to create more accurate and agile budgets that can be adjusted as needed in response to changes in the market or business environment.
The new FP&A tools also enhance the forecasting process by incorporating AI and machine learning algorithms, driver-based forecasting, rolling forecasts, scenario modeling, and what-if analysis. These advanced capabilities enable businesses to create more accurate and dynamic forecasts that can be continuously updated as new data becomes available.
3.2 Reporting and Analytics
Quality-built reporting and analytics feature systems are a crucial part of FP&A software. They can be a dealbreaker if not implemented properly. Feature-wise, the FP&A tool can check all the boxes for your business, but if it is lacking in the reporting department, you should re-think the implementation.
First of all, you want to make sure that the FP&A software has an integrated database. 3rd party data warehouse can significantly lower the processing and analytical potentials of the software - it gets slower and less responsive as your dataset grows. We constantly hear horror stories about cumbersome overnight data updates, manual data cleaning, and complex coding database workflows from Farseer's clients that switch from old-school enterprise solutions.
Intelligently built reporting and analytics systems should work in real time and automatically, for the most part. Users, especially managers, must be able to create custom reports and dashboards for their specific business needs. If managers can't quickly access reports and analyze data on-demand, the decision-making process slows down, making the FP&A software more of a hindrance than a helpful tool. Luckily, the 3rd gen of FP&A software is much more advanced in this regard than some older generations of planning tools.
3.3 Collaboration and Workflow
When talking about collaboration and workflow, we aim for all features designed to improve communication between team members and streamline processes. As you might have guessed already, 3rd gen FP&A software improved these features drastically compared to older gen software. Besides RBAC (role-based access control) we mentioned earlier, here are some other features you want to see in these types of tools:
Real-time collaboration - multiple users can work simultaneously on a centralized model and get real-time updates.
Version control & audit trails - tracking user actions, changes, and approvals, providing transparency and accountability within the financial planning process.
Task management - various features that help users assign tasks, set deadlines, and monitor progress, ensuring that all team members are aligned and working towards common goals.
Commenting and annotations: users can add comments and annotations directly within the tool, facilitating discussions and enabling clear communication on specific data points or assumptions.
Workflow Automation - users can automate repetitive tasks and processes, such as data input, report generation, and approvals, saving time and improving overall efficiency.
Approval Process: maintain control over budgets, forecasts, and financial models by requiring designated approvers to review and sign off on changes.
Different tools even have other advanced collaboration features, but the ones listed here are minimum in the 3rd gen FP&A software.
3.4 Integrations
Easier integrations are one of the most important aspects of 3rd gen FP&A software. When investigating a tool, you should check if it connects with various data sources like ERP, CRM, and HR systems. Pre-built connectors for common applications such as SAP, Oracle, Salesforce, and Microsoft Dynamics can save time and effort.
Also, you should make sure the software offers APIs for custom integration and has ETL(Extract, Transform, Load) capabilities to manage data efficiently. Real-time data syncing and compatibility with data warehouses are helpful too. Integrations with BI tools such as Tableau or Power BI can enhance your FP&A experience. Depending on what other tools your company uses, you may want other connections, and more often than not, those won't be a problem with 3rd gen tools. Also, you need to be able to connect and refresh various data sources yourself without the vendor's assistance (more vendor interaction, bigger TCO).
3.5 Design/UI
3rd gen FP&A software moves away from the standard spreadsheet UI approach. Many tools in this space significantly upgrade the spreadsheet user experience with specific FP&A workflows and UI patterns. When searching for the perfect FP&A software, pay close attention to the design and user interface (UI), which is critical in enhancing the user experience (and adoption rates).
Modern FP&A tools prioritize intuitive, user-friendly interfaces that streamline navigation and make it easy for users to access features and functions, unlike some older tools (SAP, we're looking at you).
Also, look for customizable dashboards, drag-and-drop functionality, and responsive design that works seamlessly across different devices. These tools often include context-sensitive help features, tutorials, and examples to assist users in using the software effectively. In essence, third-gen FP&A software focuses on usability, accessibility, and flexibility, making it much easier to work with.
4. Free FP&A Software Comparison Checklist Download
If you are looking into FP&A software tools and don't know where to start, our free FP&A Software Comparison Checklist can help you.
You can use it to compare up to 3 different FP&A software vendors by specific features and services the vendor provides.
Click on the image below to download it now.
5. Conclusion
In conclusion, FP&A software is essential for managing financial health, and modern solutions offer advanced features like cloud-based analytics and user-friendly interfaces. Businesses should consider implementation complexity, scalability, autonomy, security, and support and involve all stakeholders in the planning. Buyers should look for vendors with advanced budgeting and forecasting, real-time reporting and analytics, robust collaboration and workflow, integration with data sources, and a modern UI. Additionally, buyers should prioritize vendors with quality support services and reputation, scalable services, and security measures to protect sensitive data.
If you think that your financial models are overgrowing spreadsheets, and you need a better financial modeling tool, Farseer might be for you:
- Financial modeling in Farseer is centralized, fast, and consistent.
- You won’t need to worry about errors and mistakes.
- Natural language formulas are intuitive, error-proof, and cannot be deleted by accident.
- Sharing and exporting your work is granulated - you can share only parts of your model relevant to your user
- Built-in hierarchy makes modeling transparent by default
- Reorganize models by simply dragging and dropping entire spreadsheets to a specific location in the model.
LEARN MORE ABOUT FARSEER HERE