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What is FP&A

Clinical & Statistical FP&A

By Karl Kern, Founder/President, Kern Analytics LLC

In his book THINKING, FAST AND SLOW Daniel Kahneman describes two schools of psychology within the study of decision making.  Clinical psychologists advocate the use of methods like heuristics (rules of thumb) and intuition for making decisions.

Statistical psychologists, on the other hand, advocate the use of methods like simple algorithms or formulas for making decisions.  Clinical psychologists believe their methods are better than the methods used by statistical psychologists and vice versa.  The passion that each school of psychology has for its methods led me to examine my work as an FP&A practitioner.

Financial planning and analysis: a blueprint for analytical transformation

by Graham Buck, GTnews
This article was published first on gtnews.com

Two-and-a-half years since its formation, the London Financial Planning and Analysis (FP&A) Board is setting itself ambitious goals.

The Board has acquired two official sponsors; Michael Page, the specialist recruitment firm, which now provides its central London office as the venue for Board meetings; and Metapraxis, the consultancy, analytics for financial professionals and software provider.

For its 10th meeting, held in mid-March, Board members embarked on developing a generic blueprint for FP&A analytical transformation and an advanced FP&A analytics maturity model.

What are the basic ingredients of advanced FP&A analytics? Getting the discussion underway the Board’s founder and managing director, Larysa Melnychuk, suggested that it should be proactive, forward-looking, agile, available in real-time, multidimensional and integrated – although these elements are no more than the basic essentials.

Two Proven Techniques to Minimize Optimism Bias in Financial Planning & Analysis

By Karl Kern, Founder/President, Kern Analytics LLC

One of the realities that FP&A professionals need to realize is people tend to be too optimistic in their financial plans.  People tend to expect higher revenues, lower expenses, or less time to recover the amounts of their investments.  Psychologists label these expectations as optimism bias.

As an accountant, I am guided by the conservatism principle.  The conservatism principle frames financial reporting around errors.  The errors that I don’t want to make is overstating assets and net income.  Making these errors create an impression that I am presenting a situation that looks better than it is.  At its extreme presenting a situation that looks better than it is may be perceived as a fraud and this perception damages the most important qualification of an accountant, integrity.

Five Common FP&A Problems and How to Solve Them

 

After her  round of meetings with financial planning and analysis professionals across the globe, Larysa Melnychuk, managing director of the London FP&A Club, returned with plenty of stories and insights about the challenges they face. Here, Melnychuk reflected on the biggest obstacles FP&A professionals face, and possible solutions to overcome them.

 

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