Will the Roles of Financial Planning and Analysis (FPA) Be Automated in the Near Future?
Great question! In answering this, it's important to differentiate between the historic analysis of financial data and the more complex tasks such as budgeting and forecasting. Let’s explore the current landscape and potential future where automation can play a significant role in FPA.
Automation of Historic Analysis
The analysis of historic financial data, including profit and loss accounts (PL), balance sheets (BS), and cash flow statements (CF), can and will be automated. This is becoming increasingly feasible due to advancements in software and algorithms.
Software solutions, such as Qokoon, are already handling a significant part of this task. By leveraging sophisticated algorithms, these tools can provide accurate financial insights without human biases or errors. This not only speeds up the process but also ensures that monthly or quarterly reports are generated instantly.
For instance, a skilled software can perform a comprehensive financial analysis in seconds, offering detailed insights that might take a human hours or even days to produce. These insights can then be utilized to make informed decisions, facilitating more strategic financial management.
Challenges in Budgeting and Forecasting
Budgeting and forecasting, while greatly facilitated by software, still require a significant level of human intervention. A software can generate budgets and forecasts based on historical data, but the predictive process needs input that a machine or a machine learning algorithm cannot provide.
For example, budget planning often involves factors such as hiring new employees, purchasing new machinery, or other market events that are unpredictable. These real-time, non-data driven decisions are crucial for accurate forecasting and cannot be entirely automated.
Furthermore, machines cannot fully grasp the context or qualitative factors that influence financial outcomes, such as market conditions, regulatory changes, or company-specific events. These elements add complexity that currently only human input can address.
Adapting to a More Automated Future
While automation is evolving and enhancing the tools available to financial analysts, the key to success lies in understanding and leveraging historic financial data. This understanding is crucial for building solid financial projections, which in turn support effective decision-making.
Awareness and adoption of proper bookkeeping practices, including timely and accurate record-keeping, are essential. Implementing regular month-end adjustments and not relying on quarterly or yearly evaluations will ensure that data is consistently and accurately analyzed, providing deeper insights.
The transition to a more automated future in FPA requires a shift in mindset among business owners, accountants, and finance directors. Embracing the potential of technology while maintaining a disciplined approach to bookkeeping will be key to maximizing the benefits of these tools.
Finding the Right Balance
Historic financial analysis is ripe for automation, but the more complex and strategic tasks in FPA, such as forecasting, still require human input.
The goal is to strike a balance between leveraging the power of software tools and maintaining the human touch that is essential for comprehensive financial analysis and strategic planning. By embracing both, organizations can enhance their financial management processes, leading to better outcomes and more strategic decisions.
By understanding the current state of financial planning and analysis, and recognizing the potential of automation, businesses can position themselves to thrive in an increasingly digital and data-driven landscape.