Forrester Research recently dubbed 2018 as a “year of reckoning.” The analyst firm reports that for every pocket of the marketplace currently thriving—such as mushrooming economies, stable stock markets, and healthy employment rates—an equally influential part is shrouded in uncertainty. Consumer frustration, sluggish digital transformations, and once durable, but now crumbling business models have caused doubt to steadily creep into the performance potential of many organizations.
It should come as no surprise, then, that Forrester’s report indicates the impending year will be a critical juncture for every organization—those emboldened with the necessary tools and preparation to progress further in a more innovative future, and others who have relied on stagnant business models that have in turn held their next moves captive in a purgatory of uncertain strategic decision-making.
For finance organizations, specifically, 2018 is projected to usher in yet another year of innovation, challenge, and resourceful opportunities that can help steer effective business performance. And while the road ahead will undoubtedly bring about a diverse range of unique opportunities for different organizations, there are several focus areas that every finance team can consider when seeking to make improvements to their planning and performance management capabilities in the coming year.
From avoiding the potential barriers that block better business performance, to keeping abreast with and preparing for this year’s imminent milestones, to adopting best practices that enhance productivity, here are three ways finance teams can seize the opportunities that 2018 will bring.
- FP&A barriers to avoid
Organizations streamline FP&A efficiency to improve long-term, sustainable business performance. However, in doing so, organizations may encounter different roadblocks that prevent them from making meaningful progress in this area. In fact, all too often the capacity of the FP&A team remains trapped in collecting and validating data rather than delivering value-added analysis to drive the business.
For many organizations, it’s an overreliance on traditional processes and archaic technology that not only causes, but enforces, these limitations. The use of outdated approaches and ineffectual combinations of tools often turns into an overly complex process that makes steering business performance effectively through market volatility, uncertainty, and risk increasingly difficult. This is largely because outdated technology, such as manual spreadsheet processes and brittle, IT-intensive legacy systems, were designed in a world that simply didn’t have the type of connectivity requirements and access to data that exist today.
The continued use of these tools leads to slow, disconnected, and unreliable analyses and forecasts. It also enforces siloed processes that keep operational tactics separated from one another and from financial outcomes. In order to navigate through the fast-paced, evolving markets of the coming year, finance teams will need to leverage stronger business insights that can only be gleaned by connecting financial and operational data and plans. For instance, changes in demand plans need to be fulfilled with adjusted supply plans and reflected in updated revenue and working capital forecasts in real-time. We cannot wait weeks to measure the impact of operational decisions on financial outcomes in order to drive management decision making.
- Watch for regulatory landmarks
Big regulatory landmarks are on the horizon for 2018, and finance teams will need to keep a watchful eye on the new requirements and their implications for compliance and regulatory reporting. Affecting organizations across all industries, some of the key 2018 regulations to impact finance teams and businesses are:
- IFRS16: new lease accounting regulations that were issued in 2016 and require full compliance by January 2019
- ASC606/IFRS 15: a revenue recognition standard issued in 2014 that requires full compliance by January 2018
- GDPR: a regulation that requires greater data protection of individuals in the European Union (EU) and is enforceable by May 2018
The last of these regulations, interestingly enough, is one to keep especially close tabs on as organizations head into mid-2018, as the Forrester report estimates that 80 percent of firms will not fully comply with GDPR.
As the deadlines for these regulations loom ahead, it will be noteworthy to observe how organizations across every industry prepare for them and adapt their business strategies and processes to comply with these new requirements.
- Adopt innovative practices
A new year brings new opportunities to improve business performance, and 2018 won’t be an exception to this. Organizations will continue to look for more effective business models that can allow them to plan strategically and effectively in the new year. This renewed sense of focus will cause several best practices to be pushed out front and center for further adoption across enterprises:
- Organizations will rely more on fast, reliable, driver-based, rolling forecasts to steer business performance than the traditional annual budget
- Zero-based budgeting approaches gain favor, however, as organizations focus on stronger cost disciplines and in order to unlock savings that can fund profitable growth
- Enterprise-wide connected planning approaches will continue to go mainstream as organizations seek to align corporate objectives with financial plans linked to market events and operational drivers
As finance teams close the books on yet another year and anticipate the promises of the road ahead, one thing is certain: Organizations that maintain a focus on achieving finance transformation through the right set of tools, preparation for regulatory compliance, and the adoption of best practices will continue to reach new heights.
Tony Levy is the Head of Finance Solutions at Anaplan.