Financial decision making is especially challenging in a business. In this context, FP&A is a valuable tool to optimize the use of resources and thus guide investments, increase profitability, and bring better results to the organization.
In practice, FP&A comprises a group of four main activities whose function is to assess and maintain the financial health of a company:
These activities collectively offer a comprehensive view of the financial situation, enabling the identification of trends and opportunities through the monitoring of the business’s financial performance.
Although the two concepts are related, they are differentiated in that they play distinct roles in a company. While financial management encompasses corporate finance activities more broadly, FP&A falls within the scope of financial management and is dedicated to strategic planning, analysis, and informed decision making.
While financial management encompasses accounting, cost control, cash flow, investments, and risk management, with a strong emphasis on documentation and operations, FP&A brings a strategic dimension to financial management. It focuses on analyzing the organization’s financial data to enable informed decision making and establish realistic, measurable goals.
In essence, while financial management aims to optimize day-to-day operations, FP&A leverages financial information to steer the company, mitigate risks, and optimize outcomes in the medium and long term.
To implement FP&A effectively, it is crucial to have accurate and reliable data sources. The financial management team should utilize data collection and consolidation tools, while also ensuring the availability of relevant accounting information for the various FP&A processes.
Some of the most relevant documents and information to support FP&A include:
It is important to highlight the existence of another strategic model called xtended Planning and Analysis (xP&A), which enriches the financial analyses performed in FP&A by incorporating additional dimensions.
It employs the best FP&A capabilities, such as forecasting, ongoing planning, and performance monitoring, and combines them with other metrics and information that are not typical of financial statements, generating a more comprehensive view. Data used includes employee turnover, customer acquisition cost, customer experience, etc.
Applying FP&A can be an important competitive differentiator. By providing detailed financial analysis, FP&A brings valuable insights that help identify savings opportunities, optimize resource allocation, and make financial decisions based on historical and predictive data, with controlled risks.
Investing in sustainability is a strategic imperative for every company. First and foremost, it is crucial for preserving life as we know it. But it is also a matter of market positioning. Taking actions to reduce the environmental impact caused by your activities positions your organization favorably in the market and often facilitates access to government subsidies and support” for a more direct and concise statement.
If your company doesn’t already have a project focused on environmental preservation, now is the perfect time to start. And it may be simpler than it sounds. Understanding your business’s carbon footprint is the initial step to determine where to begin implementing efficient and impactful actions for the benefit of all.
A carbon footprint is a measure of the atmospheric emissions of greenhouse gases (GHGs) that contribute to climate change, impacting ecosystems worldwide. It can be calculated at various levels, ranging from an individual’s footprint to that of organizations and entire countries.
The carbon footprint includes gases such as carbon dioxide (CO2), methane (CH4), nitrous oxide (N2O), chlorofluorocarbons (CFCs), ozone (O3), and even water vapor. These gases are emitted as by-products of various activities, ranging from transportation to the production process and the disposal of materials.
In this context, certain market segments, such as energy, industry, and transportation, are recognized for generating larger carbon footprints. For example, in countries like the European Union, the USA, and China, the majority of emissions stem from energy and heat production, whereas in Brazil, they predominantly result from agricultural activities.
There are many online calculators available to help your organization calculate its carbon footprint. For instance, the 2030 calculator, aligned with the UN’s Agenda 2030, was developed specifically to assist companies in determining their carbon footprint. It is the result of a partnership between the United Nations Framework Convention on Climate Change and a Swedish FinTech company.
More comprehensive than other calculators found online, it requires specific information that varies based on your company’s business segment (education, industry, consulting, etc.). For industrial sectors, the required data includes:
This calculator is a valuable tool for your company to visualize the environmental impact of its operations and develop actions to mitigate it. However, it is essential to note that for a more sophisticated and comprehensive analysis of your organization’s carbon footprint, it is necessary to have precise and more comprehensive data about your business activities and utilize additional tools for processing.
Are you aware that you can utilize MyABCM to calculate your carbon footprint? This software offers flexibility and can integrate with an organization’s various systems. It can be configured to employ CO2-eq (carbon dioxide equivalent) as the unit of measurement, enabling precise and automated tracking of the carbon footprint.
From this information, it is possible to develop methods not only to reduce emissions but also to safely enter the carbon credit market and put in place compensatory actions to help minimize the organization’s carbon footprint.
The carbon footprint is a vital metric for companies to comprehend the environmental impact of their activities and implement sustainable measures. This in-depth analysis enables the exploration of opportunities in the carbon credit market and the pursuit of compensatory actions, ensuring operations with reduced environmental impact and a favorable market position, with enhanced prospects for government support and the establishment of a significant competitive advantage.
BPCE is one of the largest banking groups in Europe. For this reason, it requires cutting-edge technological support, which is provided by Informatique Banque Populaire (IBP), one of the group’s affiliated entities. IBP’s role is to create innovative technology solutions that simplify banking processes.
In addition to developing information systems for the group’s member institutions, IBP’s experts are responsible for designing, testing, and launching IT applications across various business sectors, including consumer finance, trade promotion, leasing, and other related services.
Managing the development of solutions in the banking industry, with its stringent requirements for security and usability, presents several challenges. In this context, IBP suffered from some difficulties associated with its billing model and a heavy reliance on Excel in its internal management activities.
Therefore, the institution sought a system that could meet these demands, optimize workflow, and fully automate the billing process.
Among the various options available, IBP selected MyABCM, based on its cost-effectiveness and the positive experience of BPCE in implementing the software.
Choosing MyABCM provided IBP with scalability beyond what Excel allowed. Additionally, it benefits from an optimized workflow on the platform that promotes user collaboration. Other significant benefits positively impacting the organization’s routine include scenario simulation, previously impossible with simple spreadsheets, and the ability of each operational department to analyze results confidently and reliably. Implementing MyABCM also enhanced data management security, reduced the risk of errors occurring, and increased team productivity.
Using specialized software for cost and profitability management, IBP now has a clear understanding of its costs and the impact of its business activities, linking cost sources to corresponding activities. The management team also values the increased control over refund and traceability resources, which are now acknowledged as valuable business assets, and experiences increased production capacity within the team.
Universidad Alberto Hurtado is a public, non-profit institution of higher education with its primary campus in Santiago, Chile. Member of AUSJAL and FLACSI, two large groups consisting of over 200 educational organizations in Latin America, the university has great prestige and offers undergraduate and graduate programs in more than 20 areas of disciplinary areas in the humanities and exact sciences, as well as exchange programs.
Throughout its structure, the institution employs around 500 teachers and serves a community of more than 6 thousand students across its multiple faculties located on two campuses. Confronted with the challenge of providing quality education by effectively managing the resources received from its benefactors, Universidad Alberto Hurtado was looking for a solution to identify the primary cost drivers and allocate investments to strategic areas of the institution.
MyABCM arrives at Universidad Alberto Hurtado at a very special moment. With a structured strategic plan consisting of 13 goals to be achieved by 2030, the institution has chosen our solutions to manage resource allocation and facilitate the achievement of its plans. The goals for the near future include topics in the educational and administrative spheres, such as:
In this context, comprehending the financial collection process and which of your activities consume the most resources “is the initial step in balancing investment distribution and achieving all the strategic objectives within the designated timeframe.
Using MyABCM, Universidad Alberto Hurtado will be able to have a clear view of how resources are utilized in each teaching and research activity. In this way, it can confidently make critical decisions and strategic allocations, investing in resource-needy areas that provide growth potential for the institution and its activities.
It will be possible, for example, to understand how much investment is needed to achieve the goals of new students and campus expansion and to eliminate or adjust possible deficit activities to reallocate resources to them and obtain better results. These resources are expected to support the institution in providing high-quality education while expanding its operations into essential areas.
The agricultural sector ranks among the top three segments contributing the most to the global Gross Domestic Product. According to data published on the Statista website, in 2021, the production of agricultural products came in second after the service and industry sectors, responsible for 4.3% of the entire GDP generated worldwide. In the year, global agricultural production surpassed 1 trillion dollars in the United States alone.
However, even with a large share in the generation of wealth, the sector has been facing increased challenges. Climate change, regulatory acts, high competition, more expensive inputs, and other factors have led to an increase in agricultural production costs all over the planet. According to data from the Food and Agriculture Organization of the United Nations (FAO), the costs of agricultural production worldwide increased by about 70% between 2000 and 2018.
In contrast, the world’s need for food production will continue to grow each year. According to the FAO’s Agriculture at a Crossroads report, the demand for food is projected to increase by around 70% by 2050. This pattern characterizes agribusiness as one of the sectors with the most challenging perspectives for the coming years.
An increase in demand associated with rising costs and the challenges imposed by environmental regulations and global competition requires that agribusiness companies bet on cost control tools and increase profitability, without losing space in the disputed commodities market.
The main sources of costs and the most underestimated costs in agribusiness
One of the most underestimated sources of costs in the sector is that of storage and transportation operations of the production. According to a study published in 2020 in the scientific journal Nature Food, which evaluated losses at various stages of the agricultural production chain, food losses during transportation and storage represent a cost of US$ 220 billion per year for companies in the sector.
This data reveals an important opportunity for agribusiness organizations that need to control prices and increase market demand. Understanding exactly what is the weight of the loss generated by storage and logistics operations within your production chain and in which stages of distribution it occurs is a crucial step to determine actions to mitigate the problem and thus expand your margins without necessarily increasing prices, which are already skyrocketing due to the high input costs.
The other cost centers of each company vary according to the products in its portfolio, the extent of its crops, climatic factors, labor, investment in mechanization, and many other aspects. It is up to each organization to develop methods to identify the different cost drivers and how each one of them impacts the profitability of the business.
As if the losses in the production chain and the rise in input prices were not to mention, agricultural production is facing a particularly complex scenario. As production must be expanded to meet demand in the coming years, food production is expected to become increasingly expensive and difficult.
The sustainability and environmental responsibility requirements will weigh increasingly on the sector, demanding that agribusiness take measures to reduce the negative impact of its activities. The agricultural sector currently accounts for 25% of global carbon emissions (FAO data) and is responsible for half of the world’s soil erosion annually, making 1.3 billion tons of soil unusable each year. For this reason, governmental pressures with new regulations for the sector must become ever greater.
In this context investing in technology and action to reverse these numbers is necessary not only to comply with the regulations but also to enable the continuity of the operations themselves in the long term and to position the companies in the sector competitively as allies of environmental causes. But this comes at a great cost. Adopting less destructive production techniques while maintaining productivity is neither simple nor cheap.
For this reason, we are living in a moment where it is now essential to invest in technologies that allow us to accurately track the various sources of production costs. Organizations that invest in technologies capable of tracking costs accurately and simulating scenarios based on reliable data will be better able to maintain their margins even in the face of rising production costs, taking advantage of opportunities generated by increased demand, and gain the financial flexibility to invest in actions and sustainable positioning without compromising business gains.
ChatGPT has become a topic of discussion, especially in the business world. Entrepreneurs and professionals from various segments tirelessly debate about how it will impact the labor market and how it can help organizations lower costs thereby increasing profitability.
But the truth is that ChatGPT is only the visible portion of a large and constantly developing field that has been already in operation among us for a long time. If we investigate the history of artificial intelligence as they are known today, we will find their origins in the mid-1950s, when technologies such as the Logic Theorist, developed by Allen Newell and Herbert Simon at RAND Corporation in the United States; and the Perceptron, created by psychologist Frank Rosenblatt in 1957.
While the first reproduced human reasoning and problem-solving, even proving mathematical theorems, the second was a network of artificial neurons capable of learning, being one of the main precursors of Machine Learning, which is now the driving force of mechanisms such as ChatGPT.
ChatGPT is a technology based on natural language processing (NLP), which enables it to understand text in multiple languages and generate natural language responses, without the need for specific programming to perform each task. In other words, it literally speaks our language.
And this is part of the reason it causes such a stir. Besides optimizing Web searches (posing a threat to powerful representatives of Big Techs, such as Google), promotes a conversational experience with the machine, without requiring the user to know any programming language. With the liberated access to its technology, those who are not feeling like the protagonist of a science fiction movie are living in the past.
But countless Ais work daily in other functions. In the financial market, for example, there are systems not only based on NLP but also on machine learning, fraud detection systems, as well as robo-advisors and trading algorithms. The latter two stand out because they act directly on transactions.
While robo-advisors offer automated investment guidance based on information provided by investors (being great allies for beginners in the financial market and for those who don’t have time to monitor the scenario), trading algorithms employ market data obtained in real-time to make critical decisions to buy and sell financial assets. This is possible because they are programmed to identify price patterns and market trends, enabling traders to make data-driven decisions and execute trades with much more agility and confidence.
And those who think this is new are wrong. The use of AIs in the financial market began in the 1970s, with systems like INGRES (Intelligent Graphic Reinvestment System). Developed by the investment company Dean Witter Reynolds (now part of Morgan Stanley, a world leader in financial services) it was a pioneer in the industry. By applying neural networks (in a Perceptron-like fashion), it analyzed transaction data and predicted market trends.
INGRA is no longer in use, but today systems like Sentieo, Kavout, Kensho, and Acorns are some of the AI technologies in application in stock buying and selling and investment advice.
Amidst so many fears about information security (and even a possible machine revolution), it is difficult to predict exactly where these technologies will go and what role they will play in our daily lives soon. However, the market expectation is that their use will become more and more massive, as a tool to boost results and reduce costs in the medium and long term.
According to research by Market Data Forecast, the AI market in the financial sector is expected to grow at a compound annual growth rate of 41.2% between 2020 and 2027, jumping from $6.7 billion to $15.8 billion over the period. This is in line with research by Tractica, whose estimate is that by 2025, AI-mediated e-commerce transactions worldwide will exceed $36 billion.
This growth is a result of the increased efficiency produced by these technologies. Nasdaq itself applies AI algorithms to accelerate and reduce trading costs, taking transactions to a new level.
Of course, such an advance would not be restricted to the financial market. Research indicates that the use of these technologies can also benefit companies and that this is why they will also play a greater role in the corporate environment.
According to Accenture, the AIs applied to business management can reduce costs by up to 30% and increase revenue by up to 38% in 16 different segments, such as Education, Food Service, Hospitality, Healthcare, Wholesale, Retail, and Manufacturing, among others. A true springboard of profitability for organizations that invest in these tools.
And businessmen are already keeping an eye on this trend. From a complementary perspective, data from Forbes indicates that by the end of this year, business process automation with AI systems is expected to grow by 57%.
Looking beyond ChatGPT, it is easy to note that the use of Artificial Intelligence has already become a giant competitive advantage aggregator for businesses across all industries. Thus, it’s up to CEOs and CFOs to be on the lookout for ways to get ahead in this race, investing in solutions that can make their businesses stand out from the competition.
With 90 years of history and six production lines in its two factories, Sevam is a world leader in glass manufacturing. To optimize cost management for its extensive portfolio, which caters to large industries in different countries, the Moroccan company chose MyABCM as the solution to replace the previous software, which was discontinued.
Throughout its 9 decades of consolidation in the market, Sevam has acquired customers from all over the world and today exports its products to 12 countries. Among the global organizations served by the products of the Moroccan industry are giants like Coca-Cola, Nestlé, and Pepsi.
To supply the glass packaging needs of these and other major brands, Sevam operates with a diversified portfolio and has one plant dedicated solely to producing this merchandise. This industrial plant alone produces 400 million items per year, including bottles, jars, and jugs, which are exported to different countries.
The second plant, on the other hand, operates exclusively in the production of domestic glassware, such as ornamented glasses, bowls, and lampshades. The production lines dedicated to these products manufacture produces 120 million items annually.
With a focus on excellent customer service and sustainable operations, managing the production of a diversified portfolio that is distributed worldwide is a challenge that requires sophisticated tools. For this reason, Sevam recognized MyABCM as a tool with the potential for profitability and continue growth.
Sevam needed not only a system that could provide optimal cost control functionality, but also an implementation process that would optimize the costing model and centralize its multiple sources of information.
MyABCM was chosen for its ability to provide detailed information for each business activity, while integrating with other company systems, offering consolidated reports and scenario simulation. With these features, among many others, the industry will be able to continue investing in new fronts of activity and safety solutions for its employees and sustainability for its region without compromising its results in the medium and long term.
Learn more about the features of MyABCM. Request a demo in the form below.
The last few months have been marked by high-interest rates and many uncertainties regarding the global economic scenario. The recent bankruptcy of two large American banks has increased tension and the expectation of a possible recession of worldwide proportions.
The bankruptcy of Silicon Valley Bank (SVB) and Signature Bank is for many one of the expected symptoms of an inevitable crisis. But it is necessary to understand what happened in order to assess the possible impact on the activities of other banking institutions.
Located in the Silicon Valley region of California, SVB was one of the leading institutions providing credit to startups and technology companies. It was considered the 16th largest US bank by the Fed (the US central bank) and in 2021 it declared that Silicon Valley Bank was the main financial institution for 50% of venture startups in the US.
According to Alexandre Cancherini in an interview with InfoMoney, the SVB had a large fundraising through deposits. And according to the expert, the response of a bank when there is a lot of liquidity is to give loans and invest in securities.
But as the Covid-19 pandemic slows down investments in many areas, and therefore on credit applications, the bank directed its management to buying bonds. Now, with the increase in interest rates, investors that used to make large deposits are now making large withdrawals.
Cancherini explains that in order to cover the turnover, Silicon Valley Bank was forced to sell many bonds with low returns. In this way, the deficit that led to its bankruptcy was formed. The same phenomenon of bankruptcy was repeated with Signature Bank, which suffered the same fate.
Two major bank failures in such a short time and in an unstable economic environment could trigger a cascading effect that worsens the situation in the markets. With the insecurity in the economic scenario, clients from banks all over the world have started a process of withdrawing their accounts and investments.
A possible massive movement of flight from the banking institutions would inevitably result in the bankruptcy of more banks, causing an implacable domino effect on the global economy. Not surprisingly, President Biden has spoken out on the matter, stating categorically that the deposits of US bank customers are safe.
As Biden put it: ‘The American people can trust that the banking system is safe. Your deposits will be there when you need them.”
In an effort to restore investor confidence in the American banking system, Biden indirectly referred to some of the safety measures implemented following the recession caused by the American housing bubble.
The 2008 housing bubble in the US, known as the Subprime Crisis, impacted countries across the world and had severe consequences for the US, which in 2012 still had a public debt of 103% of its GDP. Therefore, during the recovery the country instituted a series of actions to protect banks, customers, and investors, such as:
In summary, the American system is prepared with numerous instruments to prevent the spread of a crisis throughout its entire banking system. Hence Biden’s request that investors maintain confidence and not withdraw their assets from their banking institutions.
One of the moves that confirm the availability of instruments to prevent further bank failures was the injection of about 30 billion in resources into First Republic Bank. The bailout was provided by a group of 11 US banks, which issued a statement informing that the action reflected the confidence of the institutions in the American banking system.
On the same path, but on another continent, Credit Suisse received support that could reach 50 billion Swiss francs (equivalent to more than 53 billion dollars). The bankruptcy of the institution culminated in its sale, the result of which will be the formation of the largest banking conglomerate in Europe since the Subprime Crisis.
Assuming the scenario stabilizes, and investors keep their assets in the banks where they are deposited, the expectation is that the bankruptcy of Silicon Valley Bank, Signature Bank, and the injection of funds into other banking institutions should not trigger a global recession. should not trigger a global recession.
Providing sanitation and electricity to hundreds of thousands of people is no simple task. But it is the mission that Radees has taken on in Morocco, serving several communities with urban infrastructure solutions essential to the quality of human life.
Responsible for the distribution of drinking water and energy, Radees has just signed a contract to use the MyABCM solution in its cost and profitability management. Assisting in the software implementation process, the renowned consulting and auditing company BDO will be a strategic partner in the project.
With not only a corporate but a social commitment to provide quality drinking water and energy to over 300,000 people, the organization needed a tool to visualize the costs associated with managing miles of infrastructure equipment. Therefore, MyABCM is the chosen software to visualize the multiple sources of costs and the possible impacts of making decisions before subjecting hundreds of thousands of people to them.
The version of the software selected to serve the company offers features for flexible and intuitive multidimensional modeling with a relatively low implementation time. The system will allow allocations to be made through clear visual representations and with the application of business rules at various levels of complexity to allocate values from sources to destinations.
The organization will also benefit from advanced cost-tracking solutions that control resource consumption and pass-through to customers, as well as model summaries that allow potential distortions to be identified quickly and corrected before they damage business results.
To learn more about the solutions that serve Radees and other large companies distributed in more than 50 countries, contact us! Use the form below.
Crises often occur without warning. But this time the scenario is different. With an unprecedented economic and social context, experts predict a worsening instability in the world economy.
The expectation in 2020 was that economies would improve as we recover from the Covid-19 pandemic. However, the prognosis for the global economy through 2024 is not encouraging.
The projections reveal a slowdown in growth even in developing countries (which generally have better rates), with expansion well below expectations. The most recent Global Economic Prospects report from the World Bank indicates a probable global crisis in the face of high inflation, equally high-interest rates, and reduced investments.
World Bank projections indicate that the global economy will grow by 1.7% this year, and by 2.7% in 2024. These numbers reflect a generalized situation that will impact markets on all continents, with low growth expectations for 95% of the first-world economies and approximately 70% of developing economies.
It is estimated that the global economy in 2024 will grow 6% less than the forecasted rate for 2020, the year before the Covid-19 pandemic exploded. In a more alarming context, this data highlights a significant concern for companies around the world: with such a weakened outlook, any adverse event can start a recession.
An increase in Covid-19 cases, military tensions between countries, or banking fragility with the collapse of banks like Silicon Valley Bank and the bailout of Republic Bank and Credit Suisse could be the push that’s needed. Events such as these can cause GDPs to plummet, real incomes to fall, unemployment to rise, and industries to become idle, with companies in various segments experiencing severe crises or even going bankrupt.
Although on a downward trend by the end of next year, inflation will remain above the rates obtained before the start of the Coronavirus pandemic. High inflation, coupled with projections of low economic growth in 2024, is expected to lead to decreased demand for emerging economies’ exports and depreciation of their currencies. Advanced economies are expected to have their growth slowed from 2.5% in 2022 to 0.5% in 2023.
In the last 20 years, declines of this magnitude preceded global recessions (in 2009 and 2020). For the US in 2023, for example, the worst economic performance out of recession periods in 53 years is forecast.
However, some believe that the crisis is inevitable, with or without major global unforeseen events. Tom Simons, an economist specializing in the financial market, predicts that we are entering a period of classic recession.
According to Simons, the rise in inflation and interest rates should lead to a significant drop in organizations’ profit margins, resulting in cost cuts that should begin with a reduction in the workforce. Simons believes that this worsening of the crisis will start from the middle of this year, affecting both advanced and developing economies.
On the other hand, opinions are beginning to split among scholars. The abnormalities of the current economic context may imply a different market behavior, leading to unexpected developments. Mark Zandi, Head of Economics at Moods Analytics, states that the simple expectation of a recession can lead to unexpected results.
According to Zandi, with everyone foreseeing and preparing for the crisis, an unprecedented phenomenon, the picture may develop differently, leading to a cooling of inflation and even a possible drop in the unemployment rate.
The certainty we have is that the crisis is here, after all, levels of economic growth like the current ones historically point to the emergence of another global recession. However, it is difficult to say what the extent of the damage and the impact on the different markets will be.
Thus, managers can only watch interest rates and carefully analyze how economic instability will affect different aspects of their business: from supplier relations to customers’ purchasing power. Only then will it be possible to take specific actions to help preserve margins without compromising production and market positioning over the next two years.
