The second FP&A Trends E-Book is devoted to FP&A business partnering and contains articles from 10...
FP&A Business Partnering – What It Is and What It Is Not
August 5, 2020
In the following article, I claim that true Business Partnering starts when the FP&A community fully owns the numbers, completely agrees with them, and publicly endorses them.
There is a lot of hype these days about the concept of Business Partnering. We create Business Partner roles seemingly everywhere – from HR to Finance; we include this term in job descriptions – but what is it?
And what does it mean for FP&A specifically?
I was confronted with this question quite many times during my career trying to figure out for myself how to best support my business leader, but the moment when the question really hit me and I was made to spell out a meaningful answer was when I promoted a very bright and talented young person into a … Business Partner role! The person was very talented and hardworking, so I had no doubt she could make it, but I knew I had to point her into the right direction. I had to describe very precisely what FP&A Business Partnering was.
Where does the True FP&A Business Partnering start?
First and foremost a Business Partner – someone to advise on the business. Advise on the choices and actions regarding industry, customers, competition, internal company structure, products, marketing, entering new markets, etc.
This implies the person needs to have experience in:
- General Business Management
- Our Industry
- Our Company
Second, I expect this advisor to look at things from an FP&A perspective, to make sure the choices we make are financially sound.
- This implies the person needs to have solid experience in financial analysis and “own the financials”: Know the numbers
- Understand the numbers
- Agree with the numbers
Knowing the numbers is being aware of the P&L, EBIT, Balance Sheet items, Volumes, KPIs, etc. This is the basic stuff.
Understanding the numbers is knowing what operational drivers are behind financials. What does our volume and mix depend on? What drives the selling and general costs? What impacts our Accounts Receivable level? What are the key assumptions, historical evolution, etc.? This is the advanced stuff. Most finance people are here.
Agreeing with the numbers is when you do not just take the inputs from business and build it in into the P&L, but apply your own experience, knowledge, etc. to see if these inputs make sense, if you can agree with them. If not – they need to be discussed and reviewed until FP&A and Business get to an agreement. Here the finance person stops acting as an external data analyst providing numbers and reports but rather acts as a fully integrated and equal member of the business lead team.
To become part of the decision-making process, you first need to have an informed opinion about your business extending beyond the technical cause-and-effect relation. You need to be able to judge and evaluate how the choices being considered fit into the reality of your company and the overall industry. To decide if you agree or not, you need a lot of business acumen. Is it realistic? Will it work? What are the risks and opportunities?
In turbulent times like the financial crisis of 2008 or the current COVID-19 crisis, several things are especially important:
- Understand how your business and industry reacted to previous challenges
- Be able to embed this experience into the models and scenarios you build See yourself as part of the management team, understand you are an equal member and speak up. Do not let it go until you make sure you fully support the plan and numbers.
True FP&A Business Partnering starts here. Very few finance people actually do it.
I strongly believe that only after you cross this line and begin to fully OWN financials, honestly AGREE with what your numbers say, when you SEE how they confirm the financial soundness of your business plan behind – only then you begin to act as a true FP&A Business Partner. And you cannot say you OWN the financials until you AGREE with them, SUPPORT and ENDORSE them to the point when you can say “These are MY numbers”.
What Does Not Characterize FP&A Business Partnering?
- Month End Closing
- Generating Reports, Walks, Bridges, Variance Analysis, etc.
- Process Optimization
- Improving the accuracy of financial data
- Etc.
All these subjects are very important, but they are not Business Partnering!
Reporting and analytics should not take all the time
The whole finance community is somewhat guilty of overpromising on the concept of Business Partnering and then focusing too much on the technical side of the job, neglecting the business part of it.
Reporting and analytics are obviously the toolbox of any finance professional, therefore that of a proper FP&A Business Partner as well. The better this toolbox, the more proficient she gets.
However, as most Business Partners come from the ranks of FP&A Analysts, Finance Specialists – basically people whose primary task is reporting and analysis. Usually, they have very little exposure to the business.
Naturally, in their new Business Partnering roles, they will try to leverage the skills and experience they already possess. They will focus on providing their business leaders with accurate reports, additional data, better (i.e. more detailed) variance analysis, etc.
They will feel masters and guardians of the numbers and leave the business rationale behind them for the leadership team.
This is why I exclude this toolbox from my definition of FP&A Business Partnering and put so much emphasis on building business skills and exposure to company daily operations among FP&A.
If you were recently promoted into an FP&A Business Partner role you will need to learn a lot about the operational side of the business your company is in. This will obviously require a lot of time and effort. However, you will still need to prepare all your reporting, all your numbers, walks and variances. This will usually eat up most of the time you spend at work. The time you should be spending on gaining business experience.
Here is how you can leverage your technical skills to solve this dilemma: AUTOMATE!
Reporting and analytics automation helps reduce the manual interactions and saves time but it also requires FP&A professionals to keep several things in mind:
- Don’t wait for big company-wide IT projects to solve this. Use Excel and whatever reporting system you have. It is unbelievable what you can do with Excel these days (think Power Pivots, VBA, Macros, etc.)
- Agree a fixed set of reporting layouts with your business leaders and automate the systems behind to generate these layouts as automatic as possible.
- Schedule time to work on this, put it into your calendar.
- Repeat this regularly.
Once you’re there, once your reporting is generated by the push of a single button, you will have more time to spend actually working with the business. Isn’t this wonderful!?
Business Partnering concept is not for everyone
This is true.
Many people in FP&A, especially in entry level positions don’t get to work directly with the business. They usually work out the details for their CFOs, Finance Directors or Managers, who then in turn get to speak to the Business Leadership.
BUT
Even in those positions you can and should work on understanding the business your company is in. You should use this knowledge and experience in your discussions with your Finance Manager:
- Instead of just answering the question that was addressed to you, say what you think (based on your business experience) about the issue being considered. Disagree if needed. Ask to reconsider, to take into account your observations.
- Propose “scenario 2” if needed. For example, how the answer or report would look like with altered assumptions – based on your business experience, based on the observations you have made in your company daily operations. Explain that you’re doing this because you feel you have specific, tangible observations which support an alternative view. Try to answer that “next” question. Think why you have been asked to provide some specific piece of reporting. What question is it supposed to answer? What is the bigger context? What is the next, follow-up question you will most probably receive?
Besides improving the FP&A function in your organization, you will surely be on your way to a promotion.
How to gain business experience?
Spend time with your colleagues from other departments, preferably in the front line, where the business happens, where your company makes money:
- Speak to the sales people, go with them on a customer visit or a contract negotiation
- Work with the marketing people – offer to help with the numbers for their next campaign
- Visit the product development engineers – maybe get basic product training
- Discuss with the manufacturing people – take a plant tour, learn how your products are manufactured
The possibilities are endless. You just need to get up from behind your desk and venture out to wherever your company’s business takes place!
This might be even easier now in the current coronavirus crisis situation, which has robbed lot of us of their office desks. Your business counterparts and your colleagues from other departments are probably all working remotely and feel detached. They will eagerly see you on their project teams helping with numbers and analysis!
In conclusion, the path to FP&A Business Partnering can start in many different places. It could be a finance analyst role, a finance controller position or an accountant job. The prerequisite of growing into a proper Business Partner is the mindset of ownership of the results produced.
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Lindaxu
August 11, 2020
Lack of skills such as VBA & Marco is the main barrier, however FP&A usually waits for IT-system solution instead of using VBA to solve efficiency problem by themselves. Of course, learning VBA skills could be a long and painful process, not all FP&A would willing to go for it. So this is basically a mindset shifting issue.