What is extended planning and analysis (xP&A)?

xP&A connects financial planning with all other business functions within an organization as a way to streamline teams and break down data silos. The xP&A approach connects financial and non-financial data into a single, real-time view, enabling more pointed, strategic decision-making for both strategic planning and operational planning. Some examples of other enterprise planning domains into which xP&A can extend include human resources, sales, supply chain and marketing.

By using advanced FP&A solutions that incorporate artificial intelligence (AI) and automation, finance teams can form a holistic view of an organization and bring all functions into one place.

Financial planning and analysis (FP&A) is the foundational finance function, and xP&A is an evolution of those basic FP&A functions.

Conceptually, FP&A has been around since the late 1980s, whereas xP&A has only recently been introduced as the latest iteration of the process. xP&A uses AI to make advanced forecasting, budgeting and data visualization.

The term was popularized by Gartner in the 2020 Strategic Roadmap for Cloud Financial Planning and Analysis Solutions report and has since caught on.

The concept of integrated planning is one of three top priorities for organizations, according to the IDC’s recent report AI-Powered Integrated Planning: Increase Speed, Productivity and Confidence with Scalable and Flexible Planning.

However, the IDC also found that just 40% of organizations felt they might apply advanced analytics to forecasting. Most organizations were only 30% done introducing AI into business processes, so it is clearly an area where organizations are still finding the path that best suits them.

The IDC report on AI-powered integrated planning finds the current environment to be a “delicate balance” between agility and optimization. There is mounting pressure on organizations and chief financial officers (CFOs) to stretch resources while also being more efficient across all processes.

While the exact processes and features of an organization’s xP&A will differ depending on its needs, there are several features that an organization should consider when looking for a solution.

Finance teams shouldn’t have to conduct manual, Excel-based data collection or time-consuming analysis of spreadsheets. An xP&A solution should automate data import, consolidation and reconciliation, making data accessible while reducing human error.

xP&A solutions should have self-service dashboards and built-in visualizations so teams can look at data by themselves and avoid being reliant upon IT support. The interface of the xP&A solution should also be simple, intuitive and modern so all employees can use the new tools with minimal training necessary.

Market conditions can change unexpectedly, and organizations must have plans in place for multiple scenarios.

An xP&A solution should have dynamic scenario modeling, which compares different business “what-if” situations and can conduct forecasting on a rolling basis. The solution should drive improved forecasting accuracy and supply chain planning.

Furthermore, the xP&A should create detailed what-if analysis for evaluating potential cost, revenue and investment changes so the organization acts proactively and mitigates disruptions.

A finance team’s effectiveness against business objectives is important to track. xP&A solutions enable employees and managers to conduct well-rounded evaluations by pulling data from across different business units. This cross-functional view shows how different areas impact overall performance and whether the organization is achieving alignment.

With all the data, metrics and insights in one place, organizations can make strategic, agile decisions for greater business performance.

A modern xP&A solution will have AI and machine learning (ML) capabilities in place that can revolutionize data integration and business planning. The AI-powered solutions should feature natural language queries for simplified asks. They should also have automated anomaly detection for preemptive detection of expense spikes or budget variances.

Separately, the solutions should have AI-powered forecasting that is continuously being refined based on real-time input and historical trends.

A strong xP&A solution should bring all financial and operational data from multiple systems into a single platform. Some examples of different systems that might be integrated include enterprise resource planning (ERP), customer relationship management (CRM) and human capital management (HCM).

This helps ensure that everyone is seeing the same data and not going over conflicting figures. The xP&A solution should also automate data synchronization, eliminating the need for manual reconciliation.

As organizations evolve, their xP&A solutions must evolve with them—scalability is essential. A modern xP&A solution should have multi-dimensional analysis, providing deep insights across all business units.

The solution should also be able to seamlessly grow as the organization enters new markets or faces restructurings in operations.

Organizations have a lot to consider when moving to extended planning and analysis (xP&A), and it’s important to make time for strategic planning and execution. These are seven basic steps organizations can take when considering this transformation.

1. Assess organizational readiness: The first step before implementing xP&A is to evaluate the current state of affairs across the organization. All stakeholders involved should be clear on how data flows currently from one business unit to the next and which systems are in use and are impacted by the solution.
2. Establish a cross-functional team: A transformation of this size requires two things; buy-in from the executive level and a team of people from across disciplines. High-level support is vital to the success of an xP&A solution as those individuals decide resource allocation and drive change across the entire business. The planning process should include team members from human resources, the sales team, IT and other key departments.
3. Provide a scope and vision: Implementing an xP&A planning solution will change how an organization functions overall. It’s important to articulate what a xP&A solution will mean for the organization and how that will enhance traditional FP&A capabilities already in place. Set goals for different departments to understand how the integrated planning process will function.
4. Evaluate the technology solution: An xP&A approach requires technology that supports connected planning across the organization. The organization should evaluate solutions not on prices, but on how flexible and scalable they are. After choosing the technology, the next step is to decide where to start within the organization and provide clear markers and key performance indicators (KPIs) to measure progress.
5. Integrate data and implement planning models: If the organization’s finance department is functioning separately from other teams, it will need to integrate its data with other business units. In this step of implementing xP&A, finance teams might need to do some data cleansing and review data availability. New data governance policies and initiatives might also need to be put in place. After the data has been integrated, organizations can start putting planning models in place that reflect the new interconnected planning approach. This process might start with just piloting the solution in one department and expanding incrementally.
6. Prioritize change management: A new extended planning and analysis solution can mean new processes and workflows. It’s important to train all stakeholders on the technologies and be open about the changes being made. A change management strategy will be vital to the success of xP&A and its overall adoption.
7. Measure success and continuously improve: Organizations should revisit the KPIs defined during the roadmap planning phase often as the baseline for success. xP&A transformation requires continuous monitoring as an ongoing process. Teams should welcome feedback and make adjustments—both minor and major—depending on the issues they identify. When organizations achieve positive outcomes, they can begin scaling xP&A across the enterprise

Extended planning and analysis (xP&A) offers a wide range of benefits to an organization that go well beyond just the finance team. The planning processes bridge the gap between financial and operational planning, connecting business leaders and powering data-driven decisions.

Landmark Retail, one of the largest omnichannel retailers across the Middle East and Northern Africa (MENA), India and Southeast Asia (SEA) sought out a financial planning and analysis solution after massive growth. The company turned to IBM Planning Analytics, which was able to perform a proof of concept within just 8–10 weeks.

“The budgeting and consolidation processes underwent a remarkable transformation, resulting in a 75% reduction in time spent by employees,” according to Gopal Chandak, FP&A Leader at Landmark [parent organization to Landmark Retail]. “They improved governance and transparency across different brands and countries, enabling a sharper focus on strategic business analysis to drive growth and innovation.”

Separately, to help ensure company buy-in to IBM Planning Analytics, the company used change management initiatives and maintained open communication throughout the entire process. Since the implementation in 2013, Landmark Retail has scaled significantly to include areas like core budgeting and warehouse budgeting.

Organizations are facing unpredictable market conditions, such as costs and inflation, but they can prepare for events outside of their control by embracing xP&A strategies.

Modern FP&A solutions are increasingly offering advanced technology integrated into their software. These integrations are becoming the norm and are enhancing forecasting accuracy and extracting valuable insights.

A cloud-based xP&A strategy is likely going to be the next significant thing because it’s highly scalable and fosters a collaborative environment within an organization. With a single source of truth for an entire business, leaders can act quickly and be purposeful in their decision-making.

Another technology advancement becoming more popular in xP&A is predictive analytics. This tool helps organizations go beyond analyzing historical data and instead helps them anticipate market trends and what might happen in a specific scenario.

There is a growing emphasis on sustainability practices and professionals who use environmental, social and governance (ESG) metrics. Organizations are facing more pressure to have socially responsible financial practices, and integrating ESG metrics is one way to track if they are meeting their environmental goals.

Increasing data usage is heightening data concerns for organizations. There will be a bigger emphasis on data privacy policies and regulatory requirements to protect sensitive information. xP&A platforms will also likely be prioritizing safety features and compliance capabilities.