Extended Planning & Analysis (xP&A) is an evolution of the traditional FP&A, widely known and employed in organizations. In a scenario where technologies have developed to the point of allowing the collection, relationship, and integration of large amounts of data, this deployment of analysis and financial planning is an expected phenomenon.
After all, why ignore departments whose activities impact the financial results of the business, if it is now possible to understand how their actions at a specific level have repercussions on the overall picture of the company?
Want to understand better? Then continue reading to learn about xP&A!
The simplest definition is that xP&A is an FP&A that broadens the view of the financial sector. And as we have already mentioned, it is a natural result of the advance in management software, which is now able to fluidly interrelate information from all sectors of a business.
In other words, the xP&A differential is the proposal to centralize the data from the company’s various departments and manage them in a single interface. It allows the different cost centers of a business to be identified and correctly considered in the organization’s financial analyses.
xP&A fills a very important gap: it uncovers costs that in other analysis models remain hidden. Read more about overhead costs and hidden costs and their dangers here.
When integrating the needs and operations of the different sectors of the company, it is easy to create information silos that isolate departmental data and prevent the finance team from understanding its origins and validating its acuity. With tools that allow the organization to adopt xP&A, managers can observe how the various sectors (marketing, human resources, distribution, production, technology, research, etc.) contribute to the generation of costs and results.
In short: xP&A creates a real map of the inflow and outflow of resources within the organization.
xP&A allows the visualization of costs and financial allocations at the sector level. As such, it allows the identification of cost sources and bottlenecks, improving the decision-making process regarding the application of resources.
Here we are talking about a unification of data within the company. Financial, sales, marketing, HR, etc. All within the same platform with a unified model in data collection and presentation, making the information more consistent and reliable.
By connecting information, xP&A opens the door for the creation of integrated planning. This way, we have the company working more like a uniform gear, where everything is connected and working coordinated.
Companies that adopt xP&A can have much more agility when it comes to planning and projections. This impacts all niches, but especially those that deal with greater economic uncertainty and volatility.
Visualizing the origins of costs and the way resources flow through the organizational structure guarantees much more predictability regarding the results and the impacts of actions.
This last benefit is the result of the union of all the others. Thanks to all the visibility promoted by xP&A, decision-makers can be more efficient in seeing improvements, opportunities, and risks. Scenario modeling can simulate situations and anticipate changes, preparing the company to act strategically.
However, one must keep in mind that not just any software is suited for the adoption of xP&A. Traditional ERPs, as well as less sophisticated accounting systems and financial solutions, traditionally are not able to integrate information at such a detailed level.
To obtain all the benefits of this methodology, it is indispensable to count on a solution that can manage and update in real time a high volume of information, as well as collect data from the various sources fed by each department.
MyABCM was tailored to provide this level of detail in the analysis, in a flexible model that adapts to the most diverse segments and business models.
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