IMA Releases New Report on Using Predictive Analytics for FP&A
Stern Strategy Group
Montvale, N.J., August 4, 2021 – IMA® (Institute of Management Accountants) today released a new Statement on Management Accounting (SMA), “Overcoming FP&A’s Biggest Challenge: Predicting the Future,” which explores how predictive analytics combined with knowledge of the business and scenario planning can help organizations make better forecasts. The SMA is the first in a series on this topic.
Among the many impacts of COVID-19, financial planning and analysis (FP&A) became even more challenging. By using basic predictive analytics with different types of data, any company can improve its forecasting and ability to make corrections quickly. It does not have to be super complex or require expensive software as simple tools such as Bayes Theorem and the “Rule of Five” can help decrease a lot of uncertainty.
“Any information that can be potentially useful to reduce uncertainty can add value to predictive models,” said Kip Krumwiede, Ph.D., CMA, CSCA, CPA, director of research at IMA and the lead author of the report. “Contrary to common belief, anything can be measured and modeled.”
The SMA provides and discusses nine ways to facilitate effective predictive analytics, including:
- Expand the data available
- Tools: Start small and add on
- Use scenario planning
- Address the “Knowing-Doing Gap”
- Model building: Think causality
- Establish data collection systems
- Improve assumptions and estimates
- Monitor results and quickly identify the business reasons behind variances
- Improve analytical skills
“Management accountants should expand their view of what data is available for forecasting purposes and may even need to identify and collect such data,” added Krumwiede.
The SMA is directly related to Part 1 of the CMA® (Certified Management Accountant) exam which covers competencies related to financial planning, performance, and analytics. The SMA can serve as a guide for those interested in learning more about these competencies and/or are studying to take the CMA exam.
To read the full report, visit https://www.imanet.org/insights-and-trends/planning-and-analysis/overcoming-fpanda-biggest-challenge-predicting-future.
About IMA® (Institute of Management Accountants)
IMA® is one of the largest and most respected associations focused exclusively on advancing the management accounting profession. Globally, IMA supports the profession through research, the CMA® (Certified Management Accountant) and CSCA® (Certified in Strategy and Competitive Analysis) programs, continuing education, networking, and advocacy of the highest ethical business practices. Twice named Professional Body of the Year by The Accountant/International Accounting Bulletin, IMA has a global network of about 140,000 members in 150 countries and 350 professional and student chapters. Headquartered in Montvale, N.J., USA, IMA provides localized services through its four global regions: The Americas, Asia/Pacific, Europe and Middle East/India. For more information about IMA, please visit www.imanet.org.