Extended Planning & Analysis (xP&A) represents an evolution beyond traditional financial planning and analysis (FP&A).
FP&A focuses on financial budgeting, forecasting, and reporting. XP&A integrates these finance insights with broader operational data for real-time planning and decisions across business units. The key benefit of XP&A, also called collaborative planning, is enabling dynamic planning and collaboration between finance and business teams using real-time data.
In essence, XP&A expands the scope of FP&A to be more strategic, collaborative, and data-driven in powering enterprise-wide planning and decisions
In business, the ability to adapt quickly and make informed decisions is crucial. xP&A empowers organizations, enabling them to adapt to changing market conditions more readily and course-correct when necessary. Yet, less than a third of companies have implemented xP&A strategies.
Large enterprises have invested heavily in these capabilities, but many midmarket companies are only beginning their data journey. Some of the key barriers for adoption include:
- Cost of digital transformation
- Data locked in silos
- Lack of experience with advanced AI or FP&A software
- Complex legacy tech stacks
- Lack of qualified financial talent
- Resource constraints
Yet, right-sizing xP&A for your business can produce significant benefits
The Benefits of Implementing an xP&A Strategy
Quite simply, xP&A delivers powerful insights that produce better outcomes than merely analyzing historical data. Benefits include:
- Broader insights: Connecting financial data with operational metrics provides a 360-degree view versus finance-only.
- Breaks down data silos: Collaboration allows information and insights to flow across organizations
- Aligned tactical plans: Shared insights align departmental activities to broader goals.
- Accelerated planning cycles: Automation enables real-time modeling versus waiting on analysts.
- Proactive foresight: Predictive analytics flag risks and opportunities early.
- Optimized resource allocation: Holistic visibility allows dynamic prioritization for optimal impact.
- Democratized insights: Self-service analytics empower frontline managers.
These benefits allow companies to increase agility and continually adapt to market conditions—a key to success in today’s constantly changing business environment. Not every company can do that easily.
How xP&A Delivers Short and Long-Term Wins
Organizations adopting this planning approach see long-term efficiencies, but they can also deliver tangible results for quick wins.
For example, AI-driven predictive models can quickly create sales projections and update them with real-time data. Real-time data makes forecasts more accurate, accounting for evolving market conditions. During budgeting reviews and planning cycles, users can quickly generate and compare different budget scenarios. This enables dynamic what-if analysis without having to recreate entire budgets. Changes to underlying assumptions can be made to model short-term and long-term impacts.
Another quick win is in creating personalized dashboards for executives and managers. Dashboards can easily be customized for specific roles, showcasing the relevant KPIs that are needed for different users. This is especially important to democratize data and planning. Insights can be aligned to department or business unit goals as they relate to overall company performance.
Workforce planning and forecasting tools allow running scenarios for investments in various departments to better understand their role in achieving broader goals. Managers can also do tradeoff analysis to see how operational changes can affect targets positively or negatively.
What Does xP&A Require?
Transitioning to xP&A requires a holistic approach for midsize companies. While finance is the starting point for xP&A, it requires a commitment from departments like sales, marketing, operations and human resources for effectiveness. Because multiple departments or business units plan in relation to their unique needs, everything needs to be linked to a central, company-wide plan.
Implementing xP&A requires the technical infrastructure to make the transition to a data-driven organization. A technical solution must connect stakeholders and provide access to data across the organization and visualize it for both technical and non-technical users. The best systems unlock data throughout the organization and empower managers to model different scenarios to see impacts in real-time.
Companies must also invest in the technical skill sets required to manage and maintain the technical process as well as financial leadership that can drive the process.
Right-Sizing xP&A Solutions for Your Business
In the past, implementing an xP&A solution required extensive IT infrastructure and custom software development that was out of reach for most midsize businesses. However, newer low-cost xP&A solutions tailored for smaller businesses have helped even the playing field.
For example, preconfigured solutions are available that offer pre-built modules or templates for specific use cases. This accelerates deployment and also saves considerable time rather than having to build custom solutions from scratch.
Vendors also offer flexible Software as a Service (SaaS) software as a cloud-based solution. Not only does this reduce the expense of hardware and personnel to run and maintain systems, but subscription-based prices allow businesses to pay for what they need now and scale as their business grows.
Today’s software also increasingly embraces no-code solutions and guided workflows to simplify the creation and scenario modeling process. AI is helping organizations with analytics and data mining to find underlying patterns to improve forecasting and planning.
Taking a Gradual Approach: Buy-In & Targeted Adoption
Transitioning from traditional FP&A to modern xP&A is a journey that requires more than technical and process changes. Leveraging the full value of xP&A requires a holistic approach across finance and other departments. This cross-functional buy-in requires executive sponsorship from the top of the organization. Without mandating this approach as a strategic priority, it can easily be considered just another tool.
Most mid-market companies should start small and scale as needed. For example, start with targeted xP&A solutions to attack specific problems or opportunities. Targeted use can help uncover roadblocks to broader adoption. A phased xP&A rollout is more likely to build momentum and drive widespread adoption.
It’s also important to focus on ease of use when considering xP&A solutions. The user experience often dictates acceptance and adoption. Look for solutions that are intuitive and empower business users to leverage analytics and modeling without data science backgrounds or extensive training. While training is important to use xP&A effectively, everyone in your decision-making chain must feel comfortable using any tool you provide.
Finally, consider how consultants can help jumpstart the process of collaborative planning and implementing the right tools to surface insights across the organization. From dashboards to advanced forecasting, an expert can help secure quick wins without the need to hire full-time.
Find the Financial and Accounting Talent You Need to Drive Success
The difference between FP&A and xP&A can be significant. It’s not just a technical change, but an evolution that breaks down functional barriers and supercharges planning. This provides broader insights, accelerated planning schedules, enhanced agility and aligned business goals.
However, you need the right financial talent to help leverage the benefits. The right leadership can drive adoption and accelerate growth.
Paro is a financial talent marketplace that matches businesses with freelance finance and accounting professionals. Find the fractional professionals you need to align your finances and operational planning for future success.
