By Ben Heinl

In this series I will be looking at the Hard Problems of FP&A. Too often our industry gets distracted by things that do not matter or we focus only on problems that are very easy to solve. I intend to point directly at specific Hard Problems of FP&A and how we have seen them solved.

The first hard problem is Integrated Business Planning. It is a planning process that allows for input and collaboration across multiple business disciplines (Finance, Sales, HR, Supply Chain, Production, etc.) to create plans at the necessary level of detail that join up into a single planning model. A proper integrated business plan will allow users to update sales drivers, headcounts, demand forecasts, etc. and instantly see the impact it makes not just on the sales plan or workforce plan, but also the ultimate Profit & Loss, Balance Sheet and Cashflow.

This has been something seemingly just out of reach for so many organizations for as long as I can remember. For many years now, when the industry analysts such as Gartner, Forrester, BARC, etc. ask CFOs what they hope to achieve using FP&A software implementations, Integrated Business Planning is at or near the top of the list. We have been talking about this forever and my colleague Daniele Tedesco wrote the best explanation and essay on defining and solving the problem there is.

However, the problem is rarely solved. Often the reason given for this is issues with people and process – and sometimes this is correct. But it is wrong to think that “any of the planning tools out there can do this”

Some can do it in a very simple way, but Integrated Business Planning is rarely simple in real life. Ideally, a truly valuable Integrated Business Plan models some of the unique detail of the complexity of your business (long-term project accounting, big CAPEX projects, intricate workforce plans, dealing with exchange and inflation risk, etc.)

Why is this hard at the software level?

• There are often lots of concurrent users and multiple stakeholders; so the system needs to manage users doing input, reporting and analysis constantly in the same environment.
• The complexity of such detailed and interconnected models is not easy to do in solutions that are not cell-oriented like spreadsheets and TM1.
• Recalculating entire interconnected models in real time is not what non-Functional databases were designed to do.
• Such models need access to and integrations with multiple data sources (payroll, GL, sales ledgers, etc.) to constantly pull in and update data and business structures (chart of accounts, cost centers, product hierarchies, etc.).
• Data volumes can often be very large.
• …among other complexities

At some point, any engine that is not a Functional Database (the core invention of Manny Perez that he branded TM1), hits a capability barrier and costs and performance go exponential. TM1 does not face this issue and therefore has solved the Integrated Business Planning problem now for over 40 years.