Extended Planning and Analysis (xP&A) is a form of financial planning that takes the best financial planning and analysis capabilities and extends them into other fields across the organization.
Implementing xP&A allows planning, forecasting, analytics, and all of the other benefits of FP&A to reach all of the operational departments in the company. Not only does this approach help everyone be more connected to company data and goals, but it also eliminates the traditional barriers between finance and operations.
By synchronizing xP&A across the organization, companies improve visibility and become much more agile and adaptable. Bringing continuous, comprehensive, and collaborative planning to every part of an enterprise improves it in so many ways.
While the concept of xP&A has become increasingly popular as companies transition to this naturally, it was Gartner who put xP&A under the spotlight. The 2020 Strategic Roadmap for Cloud Financial Planning and Analysis Solutions report highlighted the idea of xP&A and everything that comes along with it.
“By 2024, 70% of new financial planning and analysis projects will become extended planning and analysis (xP&A) projects, extending their scope beyond the finance domain into other areas of enterprise planning and analysis,” the report said.
Benefits of xP&A
Increased collaboration in which everyone in the organization has a better grasp of company wide goals and is able to work together far more effectively
Single version of the truth where data is consistent and approved for who it needs to be
Continuous planning
Up-to-date information and alerts with real-time updates across all operations
Choice of deployment such as cloud or on premise
Improved performance across the organization
Standard and advanced business processes like automation and AI
The xP&A Transformation
Finance has always been the department behind the data, so it only makes sense that they would lead the company-wide financial planning processes. Therefore the need for extending that into the rest of the company should also be led by the finance department.
The same Gartner report that brought out the benefits and roadmap of xP&A highlighted the leadership position of the finance department: “The office of finance is uniquely positioned to drive continuous company-wide financial planning and analysis (FP&A) initiatives. Finance’s connection to all other business domains means that these initiatives will be capable of driving higher-quality decisions and outcomes.”
xP&A is a product of the times, as it mirrors the culture of modern businesses. xP&A highlights a few valuable actions: Cross-departmental collaboration, making strategic decisions from a holistic approach, and perhaps most importantly, cutting through data silos to extract key metrics and insights.
The end of data silos
Sales, marketing, HR, and supply chain all contribute to the bottom line, but they all create their own operational plans, oftentimes independent of each other. While the sales team develops a plan to meet their targets, marketing creates campaigns, procurement figures out how much to buy, and HR builds a plan to meet future workforce needs. But other than when one directly affects another, each department’s plans are created in silos separate from each other.
xP&A allows all users in the organization to access a single source of truth- a centralized database that can integrate data from multiple sources such as ERP, GL, and CRM. This is a big change from the traditional barriers that existed between different departments- namely huge amounts of data and no way to access it all and communicate it.
As an example, before xP&A, the parts of the finance team that would work on demand planning would traditionally only be able to use supply data due to data and time constraints. xP&A allows them to use sales and marketing data along with other analytics to better understand demand shifts, fluctuations, and patterns, and create more accurate demand plans all without spending more time than before.
The advantages will then spread to the rest of the company as well. With a more accurate demand forecast, budgets can be adjusted, executives can stay ahead of predictions, and the entire company can create more efficient uses of their time and energy.
The role of FP&A software tools in xP&A
The transformation into xP&A wouldn’t be possible without one valuable tool that ties it all together: technology. Automation and FP&A software tools are what has caused xP&A to take off in the past decade, as without them, the large-scale collaboration and ability to analyze data wouldn’t be possible.
In fact, FP&A solutions give each organization all of the tools they need in order to start their journey into xP&A. Automating manual processes, increased collaboration and access to data, one source of truth, integrated planning, and advanced forecasting analytics are some of the ways in which FP&A software solutions help organizations transition into xP&A. The best FP&A software solutions provide the right tools for the transition, and after that it’s up to leadership to transform the company culture.
As Gartner predicts: “By 2024, 70% of new financial planning and analysis projects will become extended planning and analysis (xP&A) projects.”