PART 1: FP&A best practices

1. Becoming operationally focused, embracing speed
2. Rely on the data that matters
3. Support strategy, not accounting
4. Improve execution

It is fair to say that the words unpredicted, unprecedented, unplanned, and unanticipated have received more use in the last two years than for possibly the preceding 50 to 100 years. Read any press release covering company performance, and you will find them liberally scattered throughout the text, used to explain all aspects of company performance. Expand your reading to include newspapers, or websites covering economics, business, technology, or politics and the volume will be almost immeasurable.

However, as unprecedented as the times are, as unplanned as activities required are, and as unanticipated as the next set of events may be, there is a team within each business that hold the unenviable task of providing the planning required to support decisions makers during this period. As well as supporting the fluctuations of ad-hoc scenario modeling, they are also responsible for the more predictable task of producing the 3–5-year strategic plan, the budget, the reforecasts for the budget, acquisition & divestment financial modeling, as well as dealing with many other ad-hoc requests. This is the challenging remit of the FP&A team.

The chances are that if you have come to Metapraxis.com and have clicked to read this blog you are working in an FP&A team already. You are probably also aware of the various Enterprise Performance Management software, or Financial Modeling tools that are marketed aggressively at finance professionals. Some of you would have had your fingers burnt by implementing these applications in the past; out-of-the-box configuration not matching your business model, long-winded processes, tricky workflow setup, and dashboarding which looks good but fails to deliver the reporting that your teams need. On other websites, you may find that similar content that suggests the right tools, software or package to use. This would of course be the software that they want you to buy. This content is not the same.

Our FP&A Best Practice three-part blog series provides a blueprint for anyone aiming to lead a high performance FP&A team. It does not stress that the only way to achieve this is by using our Empower software, instead it focuses on the changes FP&A teams should make to support their business better.

Becoming operationally focussed

Historically, FP&A teams have been wedded to the more predictable rhythms of the business; annual budgeting, quarterly reforecasting, month-end, quarter-end, year-end…The predictability of these processes has in many organizations allowed inefficient, cumbersome processes to evolve which invariably involve the use of Excel to produce the analysis required. To add insult to injury, the vast majority of the analysis produced is not used in decision-making. It is at best padding within a report, and at worst it distracts discussions away from the data that matters.

A recent McKinsey report states that a typical finance organization spends 10% more of its time and resources on FP&A than 10 years ago, but that they (teams) remain a step behind. A challenge a CFO, VP of FP&A, or Director should be asking is, “for the amount of time that we are spending, are we adding value or simply adding up?”. The vast majority of respondents, if answering honestly, will tell you that their biggest time drain is waiting for, adding up and then creating the presentations or analysis required. It is the very opposite of being operationally efficient, it fails to provide the capacity required to deal with extra data needed for effective ad-hoc scenario modeling.

Blueprint action 1
Create a “Clean Sheet”. Conduct a ruthless audit of how your FP&A team supports the business; what processes are supported? What data is used? Where is the data from and how are reports/materials produced?

This is finance, there is no good reason why manual processes should exist. Producing regular reporting from Microsoft Excel, PowerPoint or ad-hoc Power BI activities cannot be tolerated if an FP&A team wants to become a high-performing team. If your team is currently doing this, you should be improving the team’s ability to automate processes or looking to change the technology you are using. If you want your FP&A team to support the business, then you must work in ways that scale effectively to support a larger workload. Embrace speed and challenge anything that prevents your team from working faster. Measure, record, and improve performance on key processes.

<Read Part 2>