The tools and technologies we use for financial planning and analysis play a critical role in shaping our efficiency and effectiveness. However, the humble spreadsheet still remains a staple across many finance departments. This raises an important question: Can spreadsheets still help with FP&A?
In this blog post, we’ll explore the continuous relevance of spreadsheets and how they can complement modern FP&A tools to enhance financial decision-making.
What is FP&A?
Financial Planning and Analysis (FP&A) is critical for businesses. It requires budgeting, forecasting, and analyzing financial data to inform any future decisions. FP&A plays a key role in helping businesses understand their financial health and plan for future growth.
Historically, how have spreadsheets helped with FP&A?
Spreadsheets have been a cornerstone in the realm of FP&A for decades:
Improved flexibility and customization
Spreadsheets offer a level of flexibility that is almost unmatched in the financial world, allowing FP&A professionals to create custom models tailored to their specific needs. This adaptability makes it easy to adjust assumptions, scenarios, and forecasts on the fly.
Robust budgeting and forecasting
Spreadsheets have been instrumental in developing detailed budgets and forecasts. Their ability to handle complex calculations and create interconnected worksheets helps in building robust financial models that predict future performance.
Strategic scenario planning
Spreadsheets allow for the creation of multiple scenarios, helping businesses to prepare for different potential futures. By completing scenario analysis, businesses can prepare for the impact of various assumptions and decisions.
Digestible reporting
Through easy to read charts and graphs, spreadsheets provide clear and effective financial reporting. They help in visualizing your data and making it easier to communicate insights to stakeholders.
A low cost tool for businesses
As a relatively low-cost tool, spreadsheets have been accessible to businesses of all sizes. This affordability has made them a go-to solution for many years, especially for those that may not have the resources to invest in more expensive FP&A software.
In summary, spreadsheets have been indispensable in FP&A due to their flexibility, comprehensive data handling capabilities, and cost-effectiveness. They have empowered financial professionals to perform detailed analysis, create and manage budgets, and plan strategically, laying the groundwork for informed decision-making.
If spreadsheets still work for FP&A, why do businesses choose dedicated FP&A software?
We have talked extensively about how beneficial FP&A software is for a business. However, we have listed several key reasons below:
They provide an improved accuracy
FP&A software reduces the risk of human error that comes in manual spreadsheet handling, ensuring more accurate financial data and forecasts.
They further increase efficiency
With an FP&A tool, you can automate repetitive tasks like data entry and report generation, saving time and allowing finance teams to focus on higher-value activities.
They integrate with or include real-time data
FP&A software provides access to real-time financial data, enabling quicker and more informed decision-making. Some can also integrate with accounting software to ensure the most up-to-date information.
They allow for scalability
As businesses grow, FP&A software can handle larger volumes of data and more complex financial models than spreadsheets.
They excel in collaboration
These tools provide a much improved collaboration among teams by offering features for shared access, simultaneous editing, and centralized data storage.
- Recommended Reading: Excel vs accounting tools
How can spreadsheets compliment FP&A software?
Spreadsheets will not be going anywhere anytime soon, and are actually quite helpful in accompanying your FP&A software – thought they may not work as the best tool on their own. Have a look at some of our reasonings below.
Spreadsheets can allow for one-offs or ad-hoc analyses that might be too difficult or tiresome to set up in FP&A software. This flexibility is ideal for exploring specific scenarios or detailed aspects of financial data that need quick adjustments.
A key note for spreadsheets – they can act as an intermediate tool for importing and exporting data to and from FP&A software, ensuring compatibility with various data sources. This is key if you are using multiple tools for different financial aspects. Alongside this, spreadsheets can be easier to prep your data, cleaning and refining before uploading to a FP&A system.
A FP&A tool might also be limited in the way it handles some calculations. It may not have a specific calculation or formula that you need for your processes, which means exporting to a spreadsheet can be beneficial.
Finally, although lots of SaaS tools have inbuilt version histories, spreadsheets can act as a backup tool. If you maintain folders of copies from prior models and data sets, you can ensure a long track of history.
The future of FP&A and spreadsheets
The future of FP&A lies in using these new, advanced technologies while maintaining the practical benefits of traditional tools like spreadsheets.
FP&A software is on track to become even more sophisticated, especially with the mass production of artificial intelligence (AI) and machine learning (ML), essential in helping to improve financial analysis. ChatGPT is already transforming accounting. These 21st century advancements will allow your financial teams to focus more so on the strategy of finance, rather than the manual processing of data, which is inherent in spreadsheets.
As advanced as FP&A tools might become, spreadsheets will likely always play a role in your analysis. There is a reason they have held on for so long! They are cemented as a user friendly tool, flexible and easy to use for those in finance. However, they might move to serve as a complimentary tool, rather than a single option. The future will likely see more synergy between the two, as those still working exclusively in spreadsheets move to see just how beneficial FP&A software can be. We recommend that you try signing up to a financial planning tool like Brixx and test it for a few months, running it alongside your usual spreadsheets. Sign up today!
