The essence of the FP&A role is about helping to enhance the decision quality of the organization. It measures this by reporting on, analyzing and planning for the financial performance of the organization. And it does this by partnering effectively with the business.
In short, we can say that FP&A tends to revolve around the following:
- Performance Management and Measurement
- Business and Financial Planning
- Decision Support
- Investment Analysis
More than ever, technology solutions are being used to provide faster, more in-depth insights from these tasks. One example would be workflow solutions that support more timely posting of invoices, thus allowing for an easier accruals process, which in turn can give you more confidence in the results and more time to analyze variances and consequences. Another example is the use of dynamic and powerful predictive models that can easily spit out a baseline financial plan based on a larger quantity of business drivers.
Here are 5 main phases a FP&A professional can use to approach their work:
- The Planning Phase – Within this phase we can define three additional concrete steps: Scoping, Clarifying and Committing. It starts with the initial scoping of the request including deliverables. Clarifying is a sometimes underestimated element. By forcing oneself to think about what may not be clear or is uncertain, it requires critical thinking which often leads to a clearer brief. The final step it to commit by establishing a detailed plan of action with detailed steps, milestones and timelines.
- The Information Phase – In this phase, the work begins. It starts with identifying and collecting the relevant data. This may be quantitative data of either a financial or non-financial nature and it can be structured or unstructured. The next step is to validate and clean the data. Given the average organization and their approach to data management, even structured data may have inconsistencies or be incomplete. Therefore, allowing enough time to check the “raw” information/data is critical. And finally you can begin formatting the data to allow the necessary analysis to be performed.
- The Analysis Phase – This is where the real magic starts to happen and where critical thinking is required. When you are conducting analysis, it’s critical to keep in mind the deliverables. The analysis here can be quantitative and statistical in nature, but it can also be of a more qualitative nature. When making a report turn it in to something digestible for the evaluators. It’s important here to really think about the audience, the structure of the report, and what tool might best serve the purpose. When reviewing the report, ask someone who knows something about the topic, and critically, is not involved in the discussion. Look for critical and objective feedback on the impact of the report.
- The Business Partnering Phase – The report is now ready and has been stress tested. It will now have to be presented to the relevant audience who have the responsibility to do something with it. When you communicate the recommendations, avoid spending a lot of time explaining the process, the context and the details. Check that expectations are still the same regarding the brief and the deliverable and, if yes, go straight to any recommended plan of action/decision. When discussing the insights, allow this to be a real interaction, as the audience must have the freedom to critically challenge and, therefore, be convinced. When it comes to decision-making, FP&A should play a supportive part. It’s probably the most challenging part, where all the influencing and persuasive skills of FP&A will be called for. What’s important is that, if after the necessary time has been spent and no decision is taken, FP&A is clear on what the next steps are. It can be that the level of confidence is not yet high enough in the analysis. Or that further alternatives need to be explored.
- The Control Phase –Finally, from an end-to-end perspective, there is the Control Phase, where FP&A has an important role in monitoring outcomes and helping to capture learning. It starts with verifying the implementation of recommendations and decisions. If the activities are not implemented, then benefits delivery is at risk. A commitment to follow up on implementation status is therefore crucial. The second step is measuring the outcomes. If clearly highlighted in the briefing document, it needs to be followed up. It is therefore smart to think very early in the planning phase about how things―and, in fact, whether outcomes―can be measured. If not, a proxy should be explored. And last is about evaluating the learnings. Where the task is of an important nature (materiality and/or newness), retroactive learning is important for both the business and the FP&A team in their search to make this entire process more seamless and effective for future activities.
We hope this five-stage approach gives some ideas for FP&A about how to approach the tasks that are of high impact for the business they are supporting. Technology is a great facilitator in most phases; for example, Artificial Intelligence in the Information Phase, Data Analytics in the Analysis Phase, Data Visualization in the Partnering Phase and Dashboards in the Control Phase.