The FP&A Trends Webinar. Five Critical Roles for Building a World-Class FP&A Team
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The FP&A Trends Webinar. Five Critical Roles for Building a World-Class FP&A Team
Click here to view details and register
By Steve Benham, Co-Founder and Director at Profit& Ltd
Steve Benham is Co-Founder and Director at Profit&.
Steve's passion is to help finance departments become genuine business partners, transforming them from corporate historians into fortune tellers, so that CFOs become relied upon for insights into the effect of decisions on future profitability. Steve qualified as an accountant with PwC and spent 15 years of his early career in CFO roles, before forging a career in cost management consulting, spanning over 20 years.
Steve has implemented large cost management projects and developed deep expertise in key sectors including Airlines, Utilities and Manufacturing. Prior to establishing Profit& in 2016, Steve was a Director in PwC Finance Consulting, and Cost Management Practice Lead in Vantage Performance Solutions. Steve also led Consulting Practices for Cost Management in technology firms including SAP, Business Objects and ALG Software.
One thing’s for certain; uncertainty is here to stay.
Last decade it was the global banking crisis that produced disruption and discontinuity for business. Now the coronavirus pandemic looks set to throw global trade into recession. This steady stream of interruptions has presented financial planning and analysis (FP&A) professionals with significant challenges and now represents the ‘new normal’; a period that the US Army War College suggested has four primary characteristics – Volatility, Uncertainty, Complexity and Ambiguity - or VUCA if you’re a fan of acronyms. It has certainly captured the popular imagination, in that it sums up the business environment we have been through in the last few years, and are inevitably going to have to face up to in the future.
The almost instinctive reaction to such crises is to batten down the hatches and tough it out until better times return. Although economic downturns can be severe for both business and individuals such a knee-jerk reaction is seldom the best strategy.
Recessions are typically short-lived, and those that weather recessions best tend to adopt a more balanced approach of continuing to invest in their future while selectively reducing costs. That means simultaneously developing planning scenarios that span short-, medium- and long-term imperatives such as
In my experience, most companies simply do not have FP&A processes that enable business leaders to make informed and incisive decisions across multiple time horizons like this. In fact, many do not even possess far simpler planning capabilities, such as keeping departmental plans optimally aligned on a day-to-day basis, let alone being able to demonstrate to investors exactly how various levels of funding are likely to translate into faster growth in more benign times.
Anyone working in the FP&A space knows intermittent disruptions such as the COVID-19 epidemic are the just tip of the iceberg because, at some level or another, every business day is a ‘VUCA’ day and if you invest in building FP&A processes that prove their worth every working day then you’ll be better able to weather a crisis.
To improve the decision-making process, FP&A needs to transform. There are several steps that could be taken…
For me, the critical attribute of such capabilities is that processes are integrated, so I’ll add the term ‘Integrated FP&A’ into the mix. By that I mean systematically bringing together a myriad of different types of financial and non-financial processes, across finance, sales, marketing, workforce (HR), and the supply chain on a single platform to give a 360° view of the business, despite the fact that different departments are typically working on differing time horizons and at vastly different levels of granularity.
In recent years, having created ‘Integrated FP&A’ capabilities for clients, I’ve seen companies substantially reduce cycle times for core processes, such as budgeting and reforecasting sales pipelines, while almost totally eradicating the need for outside IT support, which has given them greater agility while simultaneously driving down the cost of the finance function.
I’ve also seen companies benefit from more accurate forecasting and being more able to home in on the underlying causes of variances, resulting in them making better informed responses. Today as companies battle with the continuing uncertainty of how soon the economy will recover from the COVID-19 lockdown, they are telling us that they don’t know how they would have coped with their old systems and ways of operating. In these difficult times, such comments demonstrate the importance of an integrated approach.
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