3 FP&A Practices That Will Transform Your Finance Team



FP&A is a strategic component of the financial organization with the potential to influence critical business outcomes. When done correctly, it can have a significant positive impact on the company's future. When done incorrectly, it can cause a company to slow down.


The role of FP&A has changed throughout time. It's no longer just about taking data and crunching figures; it's also about serving as a strategic counsel to the company. An effective FP&A team should work to understand the company's goals and help drive improved decision-making throughout the organization, as well as shape strategy to guarantee goals are accomplished.


When done incorrectly, the FP&A process is set on autopilot, with the goal of just "keeping track" of figures and producing budgets, often for the sake of the process.


The differences in outcome are nicely summarized in this graphic from Strategic Finance Magazine:

12 PRINCIPLES OF BEST PRACTICE FP&A, Strategic Finance Magazine


So, how can you ensure that you're generating outcomes for your company rather than holding it back? If you follow the three FP&A best practices listed below, you'll know your team is on the correct track — one that can actually transform your business.


FP&A New Era

Financial planning is essentially about forecasting and achieving precise results for your company. Traditionally, the FP&A process entails creating a budget, cash flow, profit and loss statement, and balance sheet, then using them to forecast future performance.


Modern finance now functions as an extension of the teams with which it collaborates. Instead of retroactively analyzing performance, they work to understand the goals, strategies, and tactics of the team. Finance needs to be part of the conversation, not just the referee.


What does this concept look like in practice? If finance collaborates with marketing, for example, they should be aware of everything from the return on investment of advertising campaigns to the cost and outcome of trade shows. Similarly, if finance is working with engineering, they should know how to calculate the return on their cloud investment, how to use manpower to encourage innovation, and how much it costs to fix a bug. That transformation in thinking necessitates a change in financial attitude, as well as practices and processes.


Shifting To Strategic FP&A

Top Practice Transformation Tips

If your company wants to make financial planning and analysis useful, you'll need to take a step back and look at the big picture — and create an FP&A process flow that works for you. There is no such thing as right or wrong. However, there are a few things you can do to make finance more strategic.


Begin with these three practices:


Act as if the board meeting is never more than a few days away.

At many organizations' a couple of weeks before the board meeting FP&A teams can be found locked in a room with the CEO crunching figures and sending Slack messages to stakeholders in various departments to get up-to-date metrics. The numbers are then woven into the story they intend to portray.


For everyone concerned, the process is time-consuming and stressful, not to mention disruptive to day-to-day operations as team members are pulled away from their regular tasks. What's more disturbing, however, is the tendency for surprises. A team may report metrics that differ from what the presenting executives expected, catching them off guard and forcing them to retell their stories.


What can you do to avoid this situation? Act as if the board meeting is never more than a few days away.


Instead of scrambling to get critical metrics and information on a monthly or quarterly basis, find a way to gain a continuous understanding of your business partners' financials and key performance indicators (KPIs). Consider this data a dynamic, breathing asset that will evolve as your company grows.


To begin, make sure you have access to any relevant dashboards and reports used by your business partners to track KPIs. If you work in engineering, for example, you'll want to obtain access to applications like Jira. Similarly, you'll want to keep an eye on particular dashboards in products like Salesforce for go-to-market teams.


Then, schedule regular check-ins with your business partners to learn about their spending patterns, as well as their business strategy and outcomes. Inquire as to why they are investing time and money in various areas, as well as what they anticipate to gain from it.


Not only will you be able to swiftly gather the necessary data for a board meeting, but you'll also be able to provide your executives with a compelling, factual story to explain the numbers.


This mindset also has advantages outside of the boardroom. FP&A professionals can make better decisions with business context if they have a continuous understanding of the metrics and the "why" behind them. This, in turn, helps them better serve their business partners.


Serve as a trustworthy advisor to your business partners.

Many finance professionals feel as if they're constantly taking inputs and are buried with work that necessitates calculations and reporting. However, the most strategic finance professionals devote just as much (if not more) effort to making recommendations to their business partners.


The first step in being a strategic business partner is to stop thinking about how much everything costs and instead concentrate on how to bring value. Instead of simply tracking the cost of a trade show for your marketing team, take the time to understand the KPIs they want to impact with that spend. Is the goal to impact the existing pipeline? Are you looking to generate new leads? Or simply raise brand awareness? Depending on the answer, you could drive revenue generated, average cost per lead, cost per impression, or something else.


Once you've worked out the metrics you want to impact, you may spend some time analyzing the different events marketing runs and how varying amounts of spend resulted in different outcomes. When it's time to pick next year's trade shows, you may provide your marketing team with crucial information that will help them decide which events to sponsor, how to set realistic goals, and whether their budget is sufficient to meet revenue targets.


Ultimately, you'll collaborate with your business partners to achieve a common goal: increasing corporate value and profit. If you're successful, you may notice that your business partners will proactively seek your guidance. You'll have real talks about how to make better business decisions instead of merely hunting them down for numbers.


To expedite FP&A processes, establish a shared language and set of metrics.

It's challenging to standardize data throughout an entire organization, and a lack of standardized data can lead to confusion and inefficiency. Finance, on the other hand, may assist other departments in developing a standardized approach, saving everyone time and money.


When utilized appropriately, technology can be a valuable asset to your company, and there are numerous finance solutions and FP&A software available to help automate repetitive operations and increase accuracy. Standardizing reporting, on the other hand, should go beyond how you report and include what you're reporting.


To communicate with finance and business stakeholders, it's critical to have a shared language and set of KPIs. For example, if you're collaborating with engineers, they're probably more concerned with the best way to build products and solve problems than with business ROI. You may need to collaborate with your engineering team to help them understand how to put their work into terms that the rest of the company can understand. For example, instead of “production environment costs” they should think in terms of “cost of goods sold.”


Financial planning and analysis are crucial to the success of your business. However, if you don’t have the story behind the numbers, your financial planning may not be driving the growth you need.


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