When I sat down last year to make my predictions for the new year, there was no way to know what 2020 would have in store. Many of us felt we had a good grasp on the coming months, only to be taken by surprise by COVID-19, social unrest, a divisive election, and countless other scenarios.
Many businesses had to entirely reevaluate their approach to budgeting, scenario planning, forecasting, and more.
But despite a tumultuous year, or maybe because of it, some of my predictions for 2020 came true.
When I predicted that it would be the year of the cloud, I had no idea just how important cloud-based tools would become to finance leaders working remotely. Self-serve training became equally as vital
to meet the need for remote onboarding and upskilling.
The CPM market also saw rapid growth in 2020. The increasing complexity behind financial management during a pandemic placed greater pressure on businesses to adopt specialized CPM technology – and they benefited as a result! According to Nucleus Research, CPM software returns $3.18 for every dollar spent.
And it got me thinking, what can businesses expect in 2021? How can we ensure our success in an uncertain time? To help us prepare, I spent some time making some predictions on the role of the CFO, the CPM market, and the focus of the finance industry in the coming year.
Let’s review my seven predictions for 2021 and how they will affect your business.
1. Dynamic Financial Planning Becomes the New Constant
The past year has been filled with uncertainty and rapid change, forcing businesses to approach their financial planning and annual budgets differently. The era of fixed planning models and rigid spreadsheets is officially over, as businesses recognize the importance of cloud-based “if/then” scenario planning software tools. These tools empower FP&A professionals to continuously reset forecasts (whether quarterly, monthly or weekly) according to real-time data insights to meet fluid market conditions. You can expect to see this agile financial planning and continuous forecasting method take hold in the coming year as the “new constant,” enabling businesses to remain nimble and quick-footed in their strategic decision-making to drive competitive advantage.
2. The Rise of Next-Gen FP&A Solutions: CPM 3.0
Prior to COVID-19, the FP&A market was already starting to see a shift from the first phase of financial planning and reporting through Excel spreadsheets and on-premise solutions, to cloud-based automated CPM software tools, enabling senior finance executives to make more timely and efficient data-driven financial planning decisions. Next up, we’ll see the emergence of “CPM 3.0,” including new artificial intelligence (AI) powered software being adopted by financial executives. This will help them manage the complexities of today’s business environment, including a remote workforce, vast amounts of data, and expanding security and compliance directives. Consisting of predictive analytics and machine learning (ML) forecasting, anomaly detection, and natural language interaction, this next generation of CPM software will provide finance teams with the high-level insights needed to meet new business demands, while still ensuring ease of accessibility to cloud-based digital tools needed for integrated planning across the entire business ecosystem.
3. The Era of AI in Corporate Finance Approaches
For the last couple of years, artificial intelligence and machine learning have promised to be a game changer for the FP&A space, just as this technology has revolutionized consumer-facing apps. The question hasn’t been a matter of if, but when? Although the adoption rate of advanced technologies may have slowed down during COVID, innovation has continued during the pandemic as software companies have had the opportunity to focus on enhancing their product offerings further. As the economy bounces back and businesses have been awakened to the many advantages AI-powered CPM tools can provide (e.g., significant time savings, reduced errors, higher-level insights around the future of the business, especially while their workforce remains remote), the need and desire for these advanced technologies has accelerated. We anticipate 2021 to be the year AI-powered CPM finally goes full throttle in adoption and usage, bringing with it the promised ROI.
Since we can always be certain of uncertainty, planning for success means more than just mitigating risk. To maximize your organization’s opportunities, get your guide to smart scenario planning today.
4. The Cloud Wakeup Call for Businesses: Full Adoption at Warp Speed to Remain Competitive Post-COVID
Despite the obvious advantages of moving to a cloud-based platform, many mid-sized organizations remained skeptical of migrating their traditional on-premise systems prior to COVID-19. Since the pandemic, however, that skepticism has waned. Managing all shared information on cloud-based servers has become a must-do, and it needs to be done at record speed to keep up with today’s work from home demands and other business shifts. Without full-featured cloud functionality, finance teams waste countless hours tracking information they need from disparate departments and systems to configure and analyze data for updated reports. As we’ve experienced over the last year, businesses can’t afford to take this extra time in a crisis; they need access to accurate data in real-time to visualize variances, run scenarios, and react quickly. The cloud empowers teams with a more efficient and scalable financial management system in a secure environment, while also presenting a platform for advanced AI and machine learning technologies for a competitive advantage.
5. The CFO Will Evolve to Chief Strategist
Thanks to modern day corporate performance management (CPM) systems that provide a new level of financial planning efficiency and automation, CFOs have the power to make strategic business decisions based on data-driven insights, transforming their role within the organization from number cruncher to advisor and business counselor. Never have we seen this transformation more apparent than during the pandemic, when the CFOs took a lead role in steering their organizations to recovery. As we see further advancements in CPM technology this year, including the adoption of AI, machine learning, and natural language technologies, expect to see the CFO assume a more permanent strategic role working hand-in-hand with their C-suite peers to drive the business into the future.
6. We Will See the Convergence of Human Intelligence with Data Decision Making
While big data has long been harnessed by leaders across virtually every industry to make key business decisions, the focus has been primarily on the technology that enables the prep, management, governance, and analysis of the data. An important element missing from this equation, as seen in the corporate planning process, is the experiential knowledge of finance professionals infused in the decision-making to interpret data and results from forecasts. This couldn’t be more important right now, considering historical data pre-COVID can’t be fully trusted for making business decisions. To guarantee accurate decision-making, there’s a new value put on human intervention and analysis to connect the dots. By embedding analytics into business processes, such as financial planning and reforecasting, employees will become better analytics consumers, confident in making data-driven decisions and increasing value across the organization.
7. CPM Tools Will be Augmented Beyond the Finance Office
No matter what the industry, the pandemic has highlighted the need for continuous and agile planning, and the importance of technology to model different scenarios to make timely decisions. This includes whether to quickly pivot business operations and/or reset expectations and goals. Or even for predictions around COVID cases, contact tracing or retail businesses looking to close locations based on potential low foot traffic. The common thread is the importance and reliance on data analytics software, such as corporate performance management systems, that provide a granular level of detail for smarter and faster decisions. We will continue to see tech tools, such as AI-powered CPM, augmented across all industries to provide the level of intelligence needed in 2021 and beyond.
The start of a new year is the perfect opportunity to plan where you want to take your business in the upcoming 12 months. Many of my predictions touched on the importance of agile planning, cloud-based CPM tools that promote collaboration, and automating financial processes with Artificial Intelligence.
In summary, my 2020 predictions for the Corporate Performance Management (CPM) space are:
- Dynamic Financial Planning Becomes the New Constant
- The Rise of Next-Gen FP&A Solutions: CPM 3.0
- The Era of AI in Corporate Finance Approaches
- The Cloud Wakeup Call for Businesses: Full Adoption at Warp Speed to Remain Competitive Post-COVID
- The CFO Will Evolve to Chief Strategist
- We Will See the Convergence of Human Intelligence with Data Decision Making
- CPM Tools Will be Augmented Beyond the Finance Office