xP&A

What is xP&A, and how does it relate to FP&A?

Traditional planning and analysis are increasingly giving way to extended planning and analysis. But what does this term mean, and how does xP&A relate to traditional FP&A? As the name suggests, xP&A goes far beyond FP&A. The x does not stand for one department, such as Sales, HR, or Supply Chain? No; it includes every other department within the organization. Traditional silos are broken down, and xP&A enables the organization to connect and synchronize.

What is the added value of xP&A? For both finance teams and the organization?

The ability of xP&A to connect and align the entire organization is immediately the added value this method offers to organizations. Finance teams can thereby synchronize plans and forecasts into one single plan and make a significant contribution to the decisions of individual departments.

What is needed for an FP&A Team to master xP&A? And what is needed from within the organization

Finance teams are the driving force to support organizations in the transition to xP&A. The finance teams are able to align the important KPI’s of an organization. From this point they   and can play a crucial role in rolling out a successful xP&A driven organization by implementing the best of (financial) planning & analysis capabilities throughout the organization by aligning different planning subjects; think continuous planning, forecasting, advanced analytics.

Today, many organizations must respond quickly to changes,  unpredictable factors and do more with fewer resources. Of course, the FP&A teams understand better than anyone that different, disjointed spreadsheets and (old) separate cpm systems will not suffice in this task. To successfully embrace xP&A requires a mature organization and change in management culture.

For which organizations is xP&A particularly suited at this time?

xP&A is necessary for organizations that depend on flexible planning and performance management processes, either due to market disruption or, for example, setting up digital sales channels. Take the automotive industry, for example. Due to the shortage of chips, car manufacturers have had to shut down factories in the past. This shortage of chips was caused by, the corona pandemic. As a result, delivery times became significantly longer. This industry is already facing another crisis in Europe. The automotive industry is being hit hard by the war in Ukraine. Problems are now arising because components for the automotive industry were manufactured in Ukraine. These are now no longer being supplied by producers in Ukraine. Delivery times are rising again. Not even mentioning expensive logistics (limited containers, oil price), etc.

These markets in which the ability to quickly identify, analyze, and respond to disruptions is expected to benefit greatly from xP&A. How do you optimally manage as an organization this scarcity and all the choices you have to make in doing so with an eye on a healthy P&L and margin? That’s where xP&A especially comes together to get the best insights and make choices! This is mainly an example of aligning Supply Chain planning with Financial Planning. Surmounting these challenges will require organizations to plan in a more consistent, cross-functionally aligned, collaborative, agile, and accurate manner as they seek to pivot quickly and gain a competitive advantage (Gartner,2021).

By synchronizing plans across the organization, xP&A helps companies improve their visibility become more agile and flexible. Especially in times of uncertainty, one change following another at breakneck speed, the shape-eye to respond quickly is no longer a nice-to-have – it’s a necessity.

xP&A Not Suitable for Every Organization

As we have described, there are many benefits to be gained from xP&A. Nevertheless, it is not the best solution for every organization. To successfully implement xP&A you need a mature organization and a change in management culture. Also, the scope will not be solely finance-oriented but will have to deal with broader objectives.

Of course, there are alternatives to support the organizations that are not (yet) ready for xP&A in creating the right insights. However, it often remains a matter of reporting and analyzing from different business units.