When Companies Don't Seek Better Understanding of Their Numbers, Prof. Pevzner Says, 'They Risk Billions in Lost Opportunities'
January 14, 2022
Contact: Office of Advancement and External Relations
A new study co-authored by Mikhail B. Pevzner, professor of accounting in The University of Baltimore's Merrick School of Business, finds that manual work done by financial planning and analysis (FP&A) teams at both large and small companies in the U.S. results in costs exceeding $6 billion annually. This work, including budgets, month-end closes, and forecasts, takes hours of manual labor every week, the report states. Annual company budgets, for example, may take up to six months to prepare.
The report, commissioned by DataRails, a financial planning and reporting software company, estimates that FP&A teams that do not capitalize on automation or insufficiently drive revenues will cost American businesses as much as $7.8 billion this year. The report is co-authored by Roberto Cavazos, executive in residence in the Merrick School of Business.
"Since COVID-19, the role of financial planning and analysis has gained even greater momentum as businesses seek better understanding of their numbers," Prof. Pevzner says. "However, despite more than a decade of efforts, the daily life of an FP&A professional still involves strategy-sapping manual processes, including identifying and correcting errors, updating reports, and collecting data. This is essentially depriving both companies and the wider U.S. economy of billions of dollars of economic opportunity."
Conversely, when FP&A teams are encouraged to be inventive, linking their work directly to top-line company outcomes, revenue growth cam be expected. The report cites Amazon's FP&A units as being responsible for the creation of Amazon Prime, which today counts 200 million members.
"Other revenue-driven FP&A initiatives include manufacturing company Chemours, whose FP&A team improved margins for industrial plants at the $6 billion company, while other companies including Lego and HP used real time data to drive revenue during COVID-19," the report states.
Read the DataRails report (login required).
Learn more about Prof. Mikhail B. Pevzner.