Prophix Shares Findings of New CFO Survey: Significant Shortfall in Digital Transformation Hinders Ability of Finance Departments to Anticipate and React to Business ChangesMay 10, 2021
80% of finance executives can’t forecast beyond one year, underscoring the need to reimagine FP&A for more agile reporting, improved collaboration to drive businesses forward
MISSISSAUGA, ONTARIO – Prophix Software, a global leader in mid-market corporate performance management (CPM) software, today shared findings from its 2021 Agility in Planning, Budgeting and Forecasting Global Survey done in collaboration with FSN Research. The findings revealed sizable gaps in abilities and outcomes in nearly every survey category, ranging from speed to insight to forecasting accuracy, to the ability to conduct scenario planning. These gaps underscore the need for organizations to accelerate their digital transformation initiatives and adopt more agile, cloud-based planning, budgeting and forecasting technology tools to better equip them to navigate today’s ever-changing business environment. Prophix partnered with FSN Research to survey more than 500 global finance executives in 23 different industries to assess their ‘agility’ in financial planning and analysis (FP&A) and gauge the state of the industry.
“Businesses are increasingly relying on their finance teams to guide them through constant change, whether that’s in the face of global crises like COVID-19 or ongoing market shifts and events,” said Alok Ajmera, president and CEO of Prophix. “The business imperative for greater speed and nimbleness comes through loud and clear in our ‘Agility in Planning, Budgeting and Forecasting’ survey findings. This benchmark report underscores the need for digital transformation to help fundamentally change the role of finance from reactive to proactive, better anticipate change, and take a stronger role as a business advisor. Our survey results show most finance departments still face challenges in their digital transformation, but by leveraging cloud-based corporate performance management software, especially with artificial intelligence capabilities, finance executives can forecast more quickly, more accurately and farther into the future – helping to prepare their organizations for whatever comes next.”
Key findings from the report:
While organizations are able to forecast more quickly than four years ago, forecasting accuracy has deteriorated:
- Eighty percent of finance teams surveyed are unable to forecast beyond a year, and over 50% cannot project further than six months
- Two thirds of organizations manage to reforecast their earnings in under a week, but only 39% are able to do so within +/-5% accuracy
- Only 43% are able to forecast their revenue within +/- 5%
Advanced technologies are still slow to be adopted by businesses:
- Only 31% of finance leaders say they have made significant changes to their planning, budgeting and forecasting (PBF) processes, and only 5% have completely transformed the
- Even for business leaders who have truly transformed the process, tools like artificial intelligence and machine learning are still out of reach. AI and machine learning are the preserve of just 17% of transformed businesses.
- Zero based budgeting (ZBB), a marker of agility, requires budget holders to justify their resource requirements at each budget setting, and allows organizations to generate more accurate forecasts. Yet, only 13% of organizations use ZBB in all areas of the business while 32% report not using it at all.
- Rolling Forecasts enable a rapid response to change and helps with many aspects of agility, but only 19% of companies use this method.
Scenario planning improves forecasting accuracy, reinforces the ability to change in times of extreme flux and crucially allows scenario planners to forecast further ahead:
- Double the number of scenario planners can forecast a year ahead compared to organizations that do not carry out scenario planning.
- Seventy-seven percent of organizations that find the time to consider alternative scenarios can reforecast earnings within a week, compared to 41% of finance executives who say they don’t have the time for scenario planning.
- Scenario planners improve accuracy, 54% are able to forecast within +/- 5% earnings and revenue
- Eighty-three percent of scenario planners are able to get a minor change, like a new cost line added or taken out of a budget or forecast model, in half a day versus just 58% for their less-prepared competitors.
- Scenario planners are more likely to be data masters. 42% of scenario planners experiment with tools like AI and machine learning to drive predictive analysis, compared to only 5% of companies that do not use scenario planning.
The pandemic showed most businesses are unprepared to conduct more nimble and agile budgeting and forecasting, which hindered organizations’ responsiveness over the course of the last year. But even as many organizations fall short of agile planning, budgeting and forecasting, the survey found those that have made headway in transforming these processes are better equipped to handle change and adopt advanced tools such as AI and machine learning.
“This survey confirms that transformation leaders outperform those companies that have not transformed in almost every measure,” said Gary Simon, CEO of FSN Research. “Agile finance teams forecast more quickly, accurately and further into the future. But, this enhanced agility is made possible only because they have invested in a unified business model, mastered their data and use more advanced analytical tools by leveraging specialized planning, budgeting and forecasting software in the cloud.”
You can view the full 2021 Agility in Planning, Budgeting and Forecasting Survey here.
Your business is evolving. And the way you plan and report on your business should evolve too. Prophix helps mid-market companies achieve their goals more successfully with innovative, cloud-based Corporate Performance Management (CPM) software. With Prophix, finance leaders improve profitability and minimize risk by automating budgeting, forecasting, and reporting and puts the focus back on what matters most – uncovering business opportunities. Prophix supports your future with AI innovation that flexes to meet your strategic realities, today and tomorrow. Over 1,500 global companies rely on Prophix to transform the way they work. To learn more, visit Prophix.com.
FSN Publishing Limited, “FSN” is a trusted provider of thought leadership, innovative content and research to the global finance community. FSN’s Modern Finance Forum on LinkedIn has a membership of over 54,000 senior finance professionals and provides a platform for strong debate and dialogue for CFOs and other senior finance professionals in different industries across the globe. FSN is noted for its independence and the strength of its research which seeks to furnish modern finance professionals with the information, tools and best practices needed to thrive and do their job better in a highly changeable global environment. To learn more visit the FSN Modern Finance Forum on LinkedIn or the FSN website.
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