CFOs reveal their biggest FP&A (Financial Planning & Analysis) Modelling concerns as file linkages, broken formulae and lack of time to create and analyse multiple scenarios
By Simon Hurst, ACA, a chartered accountant who regularly lectures on the subject of spreadsheets throughout the UK and Europe. Much of Simon’s writing concerns his belief that £billions is wasted each year by organisations through inappropriate and inefficient spreadsheet use. Simon was part of the ICAEW team that produced the influential documents: ’20 Principles for Good Spreadsheet Practice’ and ‘The Spreadsheet Competency Framework’.
Individual Excel spreadsheets can be complicated and confusing enough but, when links to multiple other spreadsheets are also involved in FP&A Modelling, problems can increase dramatically.
In a recent webinar run by the Institute of Chartered Accountants in England and Wales in association with Synapse on how to resolve FP&A Modelling challenges, some interesting insights were revealed during an online poll. File linkages and broken formulae came out on top with 44% of respondents saying they see this as a major challenge, followed closely behind by 36% of respondents citing creation and maintenance as their main worry.
Excel is loved universally because of its immense power and also because of its flexibility. However, it is this very flexibility than can cause the most problems. What starts off feeling like the freedom to be creative, and to use hard-earned skills to their utmost, can quickly turn into the nightmare of struggling to track down seemingly untraceable errors through a maze of formula references. This is particularly true when having to deal with spreadsheets created by others and over 10% of those who took part in the webinar poll say that the direct costs of wasted management time represents a significant and ongoing obstacle.
There’s a possibility that most of the time spent in Excel is in the areas where accountants’ skills are least valuable. The real skill lies in understanding what is being modelled and working out how to translate this understanding into a grid-based model. At the other end of the process, expertise can be used to report the result in a way that communicates the message behind the numbers with maximum clarity and impact. However, it’s probably the mechanical bit in the middle that takes most time: entering thousands of formulae, checking and testing, and often troubleshooting problems and issues.
Amongst those attending the webinar, the sheer lack of time to create and analyse multiple scenarios was regarded as the largest business problem facing finance teams today with half of respondents citing this as their primary concern.
To replace the mechanical element with an automated process would allow the opportunity to focus skills in the areas where they can provide the most benefit. More general developments in the world of spreadsheets suggest that the time might be exactly right for organisations to consider seeking new ways to maximise the benefits, and minimise the risks, associated with spreadsheet use. It is this risk of publishing unreliable data that is galvanising a move to simplify the modelling process, with a third of those who took part in the online poll expressing worries about data reliability.
A newly-developed, simple Cloud-based Excel add-in, which is discussed during the ICAEW webinar, addresses the concerns surrounding the use of Excel in FP&A and seeks to make it possible to retain all of Excel’s flexibility whilst adding the benefits of remote access, control, auditability and integrity.
By using the Cloud, issues with remote access, collaboration and workbook proliferation can also be solved. The Cloud can make models securely available to all authorised users at all times, and wherever they happen to be, with enormous practical benefits and can also avoid the need to create multiple, potentially conflicting, versions of the same spreadsheet that are then distributed via email.
This has great advantages for organisations of all sizes. Even an individual would benefit from the increased convenience and simplification of the modelling process. For large organisations, one person can be working on the costs side of the model, another on growth projections and staff in remote entities can update their actuals into the rolling forecast – just as they would with SAP or any 6-figure modelling system – but now with desktop Excel.
Can a simple Cloud-based Excel add-on deliver the seemingly impossible ideal of ensuring vital structural integrity and control, without compromising the freedom and flexibility that is such an important part of the fatal attraction of using a spreadsheet?
There have been many attempts in the past to tame Excel, but most have secured only niche acceptance at best, and none have really changed the way that the majority of Excel spreadsheets are constructed, used and managed. The time might be right for a radical change in our relationship with the spreadsheet.
Several factors are converging to change spreadsheet expectations:
- There is growing recognition of the need to control the spreadsheet habit, not only to reduce expensive and career-threatening errors, but also to avoid the £billions lost through the insidious waste of time and resources caused by poor spreadsheet design and inappropriate usage;
- The chasm between spreadsheet skills and database skills is being bridged by Microsoft’s incorporation of database methodology into the heart of Excel;
- A new generation of spreadsheet users will find the idea of a single document fixed to a single device very restrictive, having become used to the freedom provided by mobile apps and the Cloud. That same generation will also be more ready to trust the security of their data to the Cloud.
Accepting a little background help with spreadsheet structure and management with the help of simple Excel add-on can free up time to unleash the real power of Excel to concentrate on ensuring that robust spreadsheets are created with sufficient impact to drive correct business decisions.
The ICAEW webinar – A new and practical approach to FP&A Modelling Problems – is available now to watch as a download and the accompanying white paper written by Simon Hurst ACA & Dr Josef Baker PhD looks at how it is possible to harness the power of spreadsheets and eliminate their disadvantages with CloudModeller.
Beyond the bottom line: why brands must show they care to connect with customers
By Vadim Grigoryan, Partner, Lunu
Over the past few years, we’ve witnessed an ever-growing activism among consumers, with public opinion demanding that their concerns be heard and addressed. No industry has experienced this more than the retail sector, with brands regularly slammed by NGS or consumer-led initiatives for violating legal requirements or moral principles. Moving one step further in the experience economy, brands are not only required to provide a first-rate customer experience, but also a conscience. The product must be good quality, as should the experience of purchasing it. But now on top of that, consumers should feel positive about where they’re spending their money. This is particularly true in the crypto community, with cryptocurrencies regularly pointed out as too speculative as a product, or to energy-intensive. Is this really a surprise coming from a generation whose top concerns are collective ones such as the environment and global warming? The answer is a straight no! Brands have to face this new reality and embrace it accordingly.
This next step in the experience economy, that can be called conscious consumerism, provides an opportunity for brands to reinvent themselves and bring to the top of their agenda something that has so long been kept at the bottom, or on the side. Brands need to stand for something bigger than themselves. If they fail to do so, they will also fail to make an impact in the consumer’s mind, ultimately disappearing as a brand altogether.
- From the experience to the conscious consumerism. Today’s economy is as much about giving people the opportunity to feel good while purchasing the product or service, as it is about the feeling after the purchase. Environmental, social, and moral concerns are increasingly at the top of consumers’ minds and on the front pages. Brands need to realise this and adapt, but also accept this as an opportunity rather than a constraint. Profitability isn’t the number one priority anymore and they now have the chance to fully develop their CSR programmes without facing many of the internal/external constraints they would traditionally have faced.
- Having a meaning actually means something. Modern brands have to stand for something and if they do, they will also stand out in the consumer’s mind. Your brand won’t just be a jewellery maker anymore – it will be one that aims to make diamonds cleanly and ethically by creating them in a lab instead of digging them out from thousands of meters below the ground. Standing for something will also give you a voice and help you break through the noise, reaching out to ever more consumers.
- Having a purpose provides a valid reason to exist. By this we mean existing in the customer’s mind, as well as in stores and shops – because the truth is, both are now linked. To truly connect with your customers, brands need to go beyond their bottom line. They also need to show that this bottom line serves a purpose and isn’t a finality. Don’t be scared to embrace a cause if you want to keep a place in consumers’ hearts and minds.
The largest event in e-commerce history? ‘Tis the season
By James Booth, VP Head of Partnerships for EMEA, at PPRO
Sometimes, change happens slowly. Other times it chases you down like that boulder at the beginning of Indiana Jones. In 2020, change is fully in boulder mode. And the holiday season is when it either catches up with you or you leap triumphantly from the temple entrance, golden statue in hand.
The shopping season kicks off on 11 November, with the 11.11 Global Shopping Holiday (formerly Singles’ Day). According to analysts, Alibaba and its merchants are on track to rack up $45 billion worth of sales on Singles Day alone , up from $38 billion last year . And if last year’s results are anything to go by, a large proportion of those sales will go to non-Chinese companies. Last year brands such as Bose, Estée Lauder, Gap, Levi’s, Nike, The North Face and Apple all made over 1 billion yuan ($143 million) on Singles’ Day .
Increasingly, US and European consumers are also participating in Singles’ Day. However, both markets shift into proper holiday mode with Black Friday on 27 November. And there is every indication that this, too, will be bigger in 2020 than ever before.
Adobe Marketing Insights predicts a 20% increase in e-commerce spend over the Black Friday to Cyber Monday weekend . Looking at the holiday season as a whole, Deloitte forecasts that seasonal e-commerce — online spending is expected to grow by up to 35%, compared with just 14% last year .
But that doesn’t mean you can just relax and wait for the holiday season sales to rack up. As well as driving customers online, lockdown has also disrupted brand loyalties. During lockdown more than two-thirds of customers in some markets have tried a new product or service and of these, a quarter do not plan to return to their old habits once lockdown has ended .
Old shopping loyalties have been upended, and that means their holiday-season shopping is up for grabs.
For instance, 43% of over-65s are now shopping online compared to just 16% before lockdown . For online merchants the grandparent present budget just became accessible. But to win your share of it, you have to provide a customer experience that this demographic will love.
Making the checkout page a priority
The question then, is how to prepare your merchants’ or your own e-commerce site for the holiday shopping season. It’s only a few weeks until Black Friday, so there’s no time to lose. You need to find out where gaps are in your customer journey, and plug them, before those customers run away to someone else.
The customer experience at checkout is particularly crucial. One of the surest ways to lose customer trust at the checkout, is by not offering shoppers’ preferred payment methods. According to research by PPRO, up to 50% of customers have abandoned a transaction because the merchant did not offer their preferred payment method .
It’s a question of localisation. Except in this case, you’re not necessarily localising for customers in a particular geography. Instead, you might consider localising for consumers in a particular age group who are now shopping online for the first time. Or customers from a range of demographics who have never shopped online for a particular category.
No one size fits all when it comes to global payment preferences
If you want to succeed in global e-commerce, you must offer the preferred payment methods for every market and demographic you want to win over.
Worldwide, consumers use alternative or local payment methods in more than 70% of all consumer transactions . These are the payment methods whole markets and demographics grew up with online and trust. Fail to offer them and you can have the best possible customer journey, but you’ll still lose basket after basket at the checkout.
With the acceleration of e-commerce and the influx of online competition, anyone who hasn’t optimised their payments offering will be desperately racing to catch up. Merchants need to think now about how they are going to maximise their revenue from what looks to be the biggest online holiday season ever. And payments is a crucial part of that conversation.
9. Original PPRO research.
Why insurance needs Tesla’s autopilot too
By Christian Wiens, CEO of Getsafe
Digitization is the industrial revolution of the 21st century. What does this mean for a data-driven industry like insurance? The answer is simple: Turn everything on its head and reinvent yourself under high pressure- the future of insurance is digital.
“Hello Timo, nice to see you. I’ll be glad to help you.” Carla records claims 24 hours a day, seven days a week and takes less than two minutes to evaluate and process them. Carla works for a digital insurer and is a chatbot by profession. While she is answering Timo, she contacts the bank in the background, which pays Timo back his money – the same day. This is not a dream, but already reality.
In the digital age, intelligent machines are the new workers on the assembly line, and data is the new raw material. This applies to almost all industries and applies in particular to the insurance world as insurance is based on mathematical models and probability calculations – in short: on data. The more data on which the calculations are based, the easier it is to derive and price risk profiles. Data therefore changes the core of the product “insurance” in three essential areas; the offer phase, in the event of a claim and in the long-term customer relationship.
In the offer phase, we will experience long-term personalized product bundles that fit customer needs much better – away from standardized and inflexible policies. If the insurer can better assess the needs of the customer on the basis of his past history or behaviour, he is in a position to put together tailor-made insurance packages.
For example, it would be conceivable to automatically adjust the insurance cover as soon as the customer’s life changes, for example if the customer gets married, buys a car or a property or travels abroad.
Customer experience in the event of a claim will also change dramatically. Fraud is still the biggest problem in the system, with 2 percent of the customer base causing 40 percent of the system’s inefficiency. According to estimates by the Association of British Insurers (ABI), one insurance fraud is detected every minute – amounting to economic losses of £3bn every year. Of the estimated worth of total fraud cases a year, £2bn goes undetected.
But what if insurers are better able to assess customers on the basis of data and know which customers they can trust – and which not? Credible customers could then benefit from immediate payment of the loss incurred, while the few “black sheep” would not even be accepted as customers or would be checked more closely in the event of a claim being reported.
The computer does not act uncontrolled, but within certain parameters defined by humans. This is comparable to processes in the manufacturing industry: Here, too, people define the exact parameters that are to be checked – controls are implemented by machines that are significantly less prone to errors. The situation is similar when it comes to insurance fraud: people make value judgements and specify which indicators can point to a case of fraud. They retain sovereignty over the entire process. The smart algorithm, on the other hand, is only the tool for evaluating and linking the many individual data points. Smart algorithms will reduce employees’ workload, but will not replace them.
Finally, digitization will also change the long-term relationship between insurer and insured. Tomorrow’s insurance will not only settle claims, it could even prevent them arising. A better database will not only make it possible to calculate the probability and amount of loss more precisely, it will also make it easier to calculate the risk of loss. Digital systems and sensors can also help prevent possible claims. Telematic tariffs in motor vehicle insurance are already moving in this direction by promoting a prudent driving style.
Sensors on washing machines and industrial plants or intelligent smoke detectors are one thing – monitoring people in the health sector is another. Some health insurers reward sport activities, for example, if the customer can prove this with smart fitness watches. It remains to be seen to what extent customers are willing to exchange this personal data for premium refunds. In the long term, the legislator will also be asked to take action to ensure that the solidarity principle is not undermined.
However, the danger of increasing surveillance is countered by a clear increase in customer service, individualised services and flexibility on the customer side: Digital insurers rely on customer’s self-determination and a positive insurance experience in an industry that sometimes appears to be immobile and non-transparent.
Digitalisation has reached the insurance industry, but has not yet shaken its foundations. That will change: Tomorrow’s insurance will have little in common with today’s structures and processes. The autopilot at Tesla will also come for insurance. Not all companies will be able to master this switch to become digital insurers.
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