Within any organisation you’ll find some groups of people who are the most well-known and...
A 5-stage Approach to Know-How in FP&A
The essence of the FP&A role is about helping to enhance the decision quality of the organisation. It measures this by reporting on, analysing and planning for the financial performance of the organisation. And it does this by partnering effectively with the business.
FP&A does tend to revolve around the following:
- Performance Management and Measurement
- Business and Financial Planning
- Decision Support
- Investment Analysis.
Increasingly technology solutions can be used to provide faster, deeper insights from these tasks. An example would be workflow solutions that support more timely posting of invoices thus allowing for an easier accruals process which in turn allows FP&A more confidence in the results and more time to analyse variances and consequences. Another example is the use of dynamic and powerful predictive models that can much easier spit out a baseline financial plan based on a larger quantity of business drivers.
This article focuses on HOW FP&A practitioners could approach their work.
I define 5 main phases that FP&A practitioners can use to approach their work.
- The Planning phase
- The Information phase
- The Analysis phase
- The Business Partnering phase
- The Controlling phase
Let’s look at each one in turn.
The Planning Phase
Within this one, we can define 3 more concrete steps
- Scoping – the initial scoping of the request including deliverables.
- Clarifying – an underestimated element. By forcing oneself to think about what may not be clear or is uncertain, it forces critical thinking which often leads to a clearer brief.
- Committing – establishing a more detailed plan of action with detailed steps, milestones and timelines.
The Information Phase
In this phase, the work begins.
- Gathering – 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.
- Validating / Cleaning – again an underestimated area. Given the average organisation 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.
- Formatting – this step now gets it in the shape required 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.
- Conducting – critical here is to keep in mind the deliverables (the questions to be answered). The analysis here can be of a quantitative and statistical nature, but it can also be of a more qualitative nature.
- Making a report – turning the analysis into something digestible for the evaluators. Again, this step is often underestimated, and the insightful analysis conducted is, in the worst case, just copied and pasted into PowerPoint. Important here is to really think about the audience and think about the structure of the report what tool might best serve the purpose.
- Reviewing the report – this is by far and away from the step most often overlooked. It feels like a luxury and when time is of the essence, the easiest one to put aside. Use someone who knows something about the topic but not too much 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. The real test is now to come with it being presented to the relevant audience who have the responsibility to do something with it. In general, the three things that are important from an FP&A perspective are:
- Communicate the recommendations – avoid a lot of time explaining the process and the context and the details. Check expectations are still the same regarding the brief and the deliverable and, if yes, go straight to any recommended plan of action / decision.
- Discuss insights – this stage of the interaction should be about presenting the insights that have led to the recommendation. Allow this to be a real interaction, as the audience must have the freedom to critically challenge and, therefore, be convinced.
- Supporting decision making – probably the most challenging part, where all the influencing and persuasive skills of FP&A will be called for. In the vast majority of cases, FP&A is not the decision-maker. It is important that if after the necessary time has been spent no decision is taken, that 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 to monitor outcomes and help capture learning.
- Verify implementation – this is also easy to overlook. If the activities are not implemented, then benefits delivery is at risk. Therefore, a commitment to follow up on implementation status is key.
- Measure outcomes – if clearly highlighted in the briefing document it needs to be followed up. It is therefore smart to think deeply early in the planning phase about how things and, in fact, whether outcomes can be measured. If not, a proxy should be explored.
- Evaluate learning – where the task is of an important nature (materiality and / or newness), retroactive learning is important for both the Business and FP&A in their search to make this entire process more seamless and effective for future activities.
A key focus of FP&A Transformation is to move from a current situation where too much time is spent downstream to more time spent on upstream activities. For example, a typical journey could look as follows:
Adopting an end to end process and drastically reducing time on collecting phase to invest elsewhere.
I hope this 5-stage approach gives some ideas for FP&A on how to approach not every single operational task but definitely those 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 Information Phase, Data Analytics in Analysis Phase, Data Visualisation in Partnering Phase and Dashboards in Control phase.