In his presentation, Jack showed us how to effectively evaluate both our finance processes and the talent in our team to meet the demands of the changing FP&A environment. Below, we’ll share 3 of Jack’s top tips based on his 40+ years of experience.
For more details on how to improve your FP&A processes, make sure to watch the complete webinar here and sign up for future presentations from expert speakers like Jack or members of the Apliqo team.
Understanding the challenges of the current FP&A environment
The FP&A landscape is changing. The advent of Big Data, improved analytics, advanced data visualization, new technology, and AI are raising the demands and expectations of finance teams.
“FP&A has always been a key value-add activity in finance,” says Jack. “However, the breadth and scope of FP&A has changed dramatically over time.”
Today, FP&A teams need to do more than simply run the same old historical reports looking at past data. Instead, executives expect their FP&A teams to take a more active position in the organization and help drive value for their business.
The role of FP&A was traditionally focused on more standardized reporting, analysis, and projections that typically fall under Finance and Accounting umbrellas. Now, however, that role has expanded to include performance analysis (such as managing KPIs and benchmarking), rolling forecasts, analytics, data visualization, and more.
Unfortunately, many CFOs struggle to have their teams adapt to this new role. In his experience, Jack has found that CFOs and FP&A teams repeatedly fall short of these new expectations due to:
- Budget and time pressures.
- Limited opportunities for development and training.
- Outdated legacy systems that lack functionality.
- Weak communication and presentation skills.
- A lack of business perspective among analysts and finance team leaders.
- Weak planning models.
- A lack of a “service mindset.”
1. Assessment: The first step in improving your FP&A processes
Chances are you identify with the above challenges and are eager to see how to overcome them. However, before you can start making any concrete changes to your department, you need to first run a thorough analysis of your team, processes, and tools.
“Improving FPA involves making progress on people, process, and technology,” says Jack.
“Typically, however, there’s not a thorough assessment of where we stand today on FP&A and that’s what we really need to do to identify high-leverage improvement opportunities,” he adds.
Jack recommends starting with an analysis of your:
- Reports and projections: List all the reports your FP&A team puts together. Analyze the amount of time each report takes to complete, the value it provides, and a client assessment. Based on this analysis, you’ll quickly see which reports are crucial to your company’s operations, which ones need improving, and which ones can be scrapped altogether.
- Reporting methodologies: You’ll want to review the methods behind each one of your reports/projections and see if they align with new FP&A best practices. Take your annual plan, for example, and review whether it’s driver-based and provides clear scenario analysis rather than a simple, more traditional financial perspective.
- Team and organization: To help you make better use of your team and resources, it helps to analyze your talent; inventory their skills and experience; analyze the bench strength of your team; review your succession plans, and critically assess performance distribution. From there, you’ll see whether you have the right people in place to propel your team forward or whether you need to invest in new talent.
- Tools: Once you’ve reviewed your people and processes, you’ll want to analyze the tools and technology available to your team. FinTech has evolved far beyond Excel, and your team should have the right tools in place to maximize its efficiency.
2. Thinking of FP&A as a service, not a finance drill
Once you’ve reviewed your reports and FP&A staff, Jack recommends working on installing a “service mindset” among your team.
“We don’t often think in finance that we are serving a set of clients,” says Jack. However, as we saw earlier, finance has always been a high-value activity in any business, and it’s important you reinforce that idea to your team.
To help you improve your processes, Jack recommends running a “client survey” in which you ask key departments within your company (such as the board of directors, your CFO, or anyone else receiving your reports) to discuss:
- What reports they are using on a regular basis and how they can be improved.
- Whether these reports are concise and well-presented.
- What business area the client would like more insight/analysis into.
- What their biggest challenges/objectives are and how the FP&A team can help achieve them.
- Whether the client considers FP&A a reliable resource they can draw on for information and support.
“In my experience, this process alone will launch your FP&A into a new level where you’re more collaborative with your entire organization,” says Jack. Based on the results of this survey, you should quickly be able to identify areas where you can improve your level of service to the rest of the company.
3. Reviewing FP&A best practices
Last in Jack’s tips for assessing and improving your FP&A processes is running a best practices review. Here, you’ll be comparing your team and processes to the leading best practices that are really propelling FP&A forward.
In this analysis, you’ll want to look at things like:
- Modeling: Are you documenting and using the most up-to-date models available?
- Projections and forecasts: Are you using rolling forecasts and driver-based planning, for example? Are your forecasts business orientated?
- Reporting: Are your reports well-presented and actually being utilized by your clients?
- Technology and systems: Are you still stuck in Excel or do you have access to the latest software to fast-track your processes?
- Performance Management integration: Are your processes integrated with performance management, or are you still just running outdated finance drills?
- Client service: Does your team have a service mindset?
- Human capital: Does your team have the skills and expertise to be as productive as possible? Do you need to invest in new talent or professional development opportunities?
Examples of key improvement areas
Once you’ve completed the above review, you’ll want to get together with your clients and senior management to put together a clear action plan to begin improving your FP&A.
“It’s important to have some high-leverage opportunities and low-hanging fruit to get some traction and begin to show that you’re serious about improving the deliverables of your FP&A,” says Jack.
In his experience, Jack has identified the following FP&A areas that almost always offer some of this low-hanging fruit:
- Presentation and communication: 80% of the value from analysis comes from its delivery. Unfortunately, most finance teams do a pretty poor job of communicating and presenting their reports and projections. To improve the way you present your data, make sure you:
- Know your audience.
- Use business jargon rather than finance terminology.
- Summarize your key findings and takeaways. No one has time to read 50-page reports.
- Don’t just identify problems. Offer recommended actions based on your findings.
- Integrating FP&A and performance management: Finance is uniquely positioned to help guide and focus performance management. To integrate the two, FP&A needs to work with real-time data, what-if scenario planning, and driver-based methodologies. In doing so, FP&A can start driving real value for the company by linking key business drivers to clear financial outcomes.
- Building analytical capability for the individual: Unfortunately, some companies don’t prioritize the personal development of their finance team members or executives. In these situations, it’s up to the individual to assume responsibility for their own development. You can do this via:
- Formal education.
- Reference materials like webinars, free courses, books, and online resources.
- Creating a portfolio of analytical examples you’d like to adopt.
Stop crunching numbers, increase your FP&A efficiency today
Improving your FP&A requires an in-depth analysis of your current team and processes, installing a service mindset among your team, and a detailed review of current FP&A best practices.
At Apliqo, we’re dedicated to helping CFOs and their teams stop crunching numbers so they can focus on driving real value for their organization. To help you do that, make sure to join us for Jack’s upcoming webinar on Best Practices in Planning and Budgeting on October 30th, 2019.