Did you outgrow Excel? How do you know you need an FP&A tool?

With all the hype related to Finance Transformation and new technology adoption, it is easy to think that either you upgrade to an FP&A tool, or you get left behind with “just” Excel spreadsheets.

To some this may sound controversial, but there is such a thing as a right time to adopt new technology in the Office of Finance. Despite what everyone says, technology will not solve everything for you, and before you make the decision to adopt it, you should have a clear understanding of your current process limitations and what your options truly are, including how to better use the tools you already have.

But how do you know when it is better to adopt a new FP&A tool versus sticking with Excel?

Let’s look at a few cases:

1.        Do you spend a lot of time getting data together from various systems at the start of your planning or reporting process?

Excel is a great tool to collate information, transform, validate, and then combine it into multiple reports. Are you already using its full capabilities to automate the process of data collection and mapping? Maybe you do, but if you feel you’ve reached the limits of what Excel can do for you here (very large datasets which make your files cumbersome and slow, changing structures which constantly require formula updates, etc.) then maybe a tool that can automatically collect and transform your data into your defined reporting structure would save you time, and effort while also reducing errors.

2.        Do you need several teams to collaborate in real time on your planning process?

You probably already have software (Teams, SharePoint, Power Automate and others) that allows collaboration between different teams, ensuring their input is captured as part of your process while still using Excel as your main planning tool. But if you want an advanced workflow (approvals, deadlines, tasks delegation, validations) and collaboration that goes beyond just working on the same file (for example conversation threads around the data submitted etc.) then you need to graduate from Excel.

3.        Are you managing complex and different sub-models for your P&L and Balance Sheet planning?

For example, if your plan needs to cover multiple revenue streams, which are planned for differently, or at different levels of detail, managed by different teams, who tend to constantly change the way they use the data, then it quickly becomes complicated to get everything together every time. If you find that you are spending a lot of time changing your Excel files to keep up with your inputs, you might want to look for alternatives to help you get some control over your time spent on manual repetitive tasks.

4.        Do you have a complex consolidation structure with multiple entities, multiple currencies and do you need to cater for the reporting needs of each of them?

You can use Excel to put together a simple financial consolidation model, potentially even handling multi-currency requirements. But when your needs exceed what Excel can offer, when you have to do intercompany matching and eliminations, manage minority interest, good will and investments in subsidiaries etc., then it is time to move away from the chaos that your Excel model would’ve become.

5.        Do you need better security and controls over how the plan is put together?

If you are accountable for the accuracy of your numbers to the board, investors, banks, or other stakeholders, then Excel will just not cut it. It is about data traceability, audit trail (who changed what and when) and the security around that data (certain numbers can be changed/viewed only by certain people, even on the same form) that Excel cannot manage in a transparent way. Moreover, if you need to demonstrate you have all these controls in place and that they are effective, then this is a definite sign you need to upgrade.

6.        Are you comfortable with how you manage different plan scenarios and versions? Is it easy to compare between any of them or do you need to build reports every time someone asks for a new comparison? How about the frequency and speed of the planning process you currently have?

If you find it is getting increasingly difficult to keep track of your versions and scenarios, that the business wants new insights every cycle which take a lot of time to put together, then the answer is you need better tools. If you would like to plan more frequently (your business plans change not just once a year) but you can’t because your budget is already taking a long time to put together, that’s also a sign. If it takes you weeks to months to complete your plan and by the time it is done it is already out of whack with reality, then look for a tool that speeds up that process.

7.        Are your stakeholders asking you for better insights and analytics?

FP&A and BI tools have dynamic dashboards that allow users to slice and dice the data to be able to get more insights into how the business is doing. Many of them employ natural language AI where users can ask questions about the data they’re looking at and get explanations for the variances or contributing factors. You can even use AI to generate the forecast for you or to spot errors in it, giving you a head start on your planning process.

This was by no means an exhaustive list. Nuances can be found within every business.

Excel is a wonderful tool, and it is the best and cheapest planning software for simple budgeting/forecasting within a small team. It is flexible, it can handle quite a lot of data before becoming unruly and your team already learned to use it. If your Excel-based process gives you the reports you need on time and with minimal error, then I wouldn’t suggest you do anything else. Don’t fix it if it isn’t broken. There might be automations or process changes you can adopt to improve it, but it doesn’t sound like you need something else. In fact, many FP&A tools already use Excel based interfaces for their users, in some form or another, to get some of that flexibility and user experience.

On the other hand, if any of the issues above sound familiar, a dedicated software will probably improve your Finance processes.

But do not expect that a new FP&A tool will fix everything for you. You need to have realistic expectations about what it can and cannot do and how it will improve your job.

-              Your process must be well defined and adhered to by all stakeholders. The new system will provide structure around your process, but the change needs to be managed internally.

-              Your source data must be clean and correct for the integrations to work seamlessly. A tool will not fix erroneous transactions posted in the ERP for example. But it can provide validations and error reporting for you.

-              You will need to learn to use it and administer it after you go live with it. You need to own it.

If you need help to either improve your existing Excel based process or started looking for an alternative solution, feel free to contact us for a consultation.