By FP&A suite, we shall understand here the different elements that are needed to manage a given business. Obviously, industry is a keep differentiator but how does this reflect in practice? What are the key elements that needs to be in the suite and on what basis shall it be customised?

During our studies, we all learn that accounting, forecasting, analysis and reporting are the basis. This can be further subdivided in more detail tools or methods such as general and cost/analytical accounting, Plan (with few qualificatives), budget, rolling forecast, zero base, drivers based ... etc. Furthermore, we learn that few technologies and multiple products permit to automate/industrialize those tools. 

Still, when we face the challenge of managing our companies, we are left with the more important and difficult task which is how to choose, to customise, to implement the most relevant set of tools, methods and systems for our business. The major concerns are generally more around the revenues and associated costs of sales (on which I will focus the following).

My first point, here, is that in the list above there is one key missing tool that needs to be considered. Competitive and business intelligence is essential in building an FP&A suite. At least, the part of it that permit to understand the key underlining elements that structure that specific industry segment or activity. 

1. At the top, will be the position of the company within the matrix of possible strategic choices below (in a synthetic form). 
 

A pure vertical integration (i.e. internal is the response for all the line of activity) is far to be the only real-life situation. Some companies are essentially “subcontractors” i.e. they produce parts for other companies. Those other companies in return conceive, assemble and sell the product. Different combinations of activities are possible as well as level of cooperation. Furthermore, the strategy may be to evolve from the present status.
Each of those combinations reflect on the way the FP&A suite must be designed and organized. 

2. Next will be the type of products and services proposed. Is it consumable (one-time usage), investment (multiple time usage) or recurrent/contractual services? 
In most case, it will be a mix. It will be organised in some, more or less, sophisticated lines of products sold as standard, but it could also exist as customisable or customer specific type products or services. Pricing may follow several practices from pure catalogue prices with potential discounts structure to proposal specific pricing. 
Selling and delivery may turn to be from extremely short to lengthy processes. These key “time to” (time from proposals to orders, time from orders to revenues) shall drive your basic schedule for analysis, reporting and forecast.
Those product and services are most probably subject to few business external influences (Season, weather, other type of events) or dependences (economic, social, technological…) on top of a particular competition and market status. Maturity cycle, prices evolution, entry/exit barriers, change in competition are important to understand as general business culture and more specifically, how it impacts your way to capture information, measure, analyse and forecast. 

3. Companies acting on international or global markets will need to understand the evolution and consequences of their geographical reach. This may be achieved through export, multi-local or global presence and bring two difficult subjects:

• Currency management (booking and consolidation currency versus pricing currency).
• Delivering versus Selling versus Destination countries (which in the most complex global situations can be 3 different countries/organisations).

4.    Finally, customer profiles and evolutions are to be understood, measure, analysed and forecasted. This may involve small to very large numbers of customers and can also be complex due to the mix of channels used (direct consumers or B to B, B to B to C, distributors/resellers). Whereas some of them would be partners/VIP customers other may be only “purchasers”. Your suite will need to give you access and analysis of such information. 

5.    In many case, the cost of sales will be following or driven the same logic than revenues. Still this may not be the case and the specific needs to be understood. In anyway it is essential that you can measure and analyse your margin on cost of sales (by product line, customer types, countries, by project…)

The second step will be to picture how this “intelligence” impacts on your suite and the company operational systems. In other words, which information shall be captured, where, in what format and how this information is transferred to the FP&A suite in time, efficiently and with quality. 
This brings several issues to be decide upon and solution to be implemented:

• Data structures to put in place through the different systems(referential),
• Management rules for those referential and data flows that will capture the information,
• Systems capabilities and interfaces,
• Periodicity of data transfer, analysis and forecast.

Many different combinations can be envisaged and would be correct as long as they properly represent the company activities and businesses. For simplicity, some trade off may have to be made but make sure they are not on essential dimensions/items. 
As an example, here would be the suite definition for a theoretical global conglomerate that would have most of the business types.

• All types of data points codes are structured as the bottom level of hierarchies. Only the basic codes are captured in the data flow. The hierarchies are used in reporting and analysis.
• Statutory chart of account is standard and make sure it does not in-bed any of the other analysis.
• Legal entities structured by geographies, correspond to booking entity and is in local currency. Intercompany flows, consolidation entries and consolidated results needs to be clearly identified and potential associated currency conversion differences isolated.
• Organisation code structure for costs and investments representing the company organisation and structured as such i.e. base team code associated along a hierarchy made of Services (N3) into Department (N2) into Divisions (N1) to top management (N0). Could be more level and the base team code can be associated to any level. Those would include among others the selling organisation/geography.
• For revenues and cost of sales (and inventories) the organisation code would be replaced by a Product code structure. In large companies the basic codes used in production and billing may not be moved as such to the financial systems but may be mapped to a financial code that constitute as such a first step in the hierarchy. From there the financial codes are structured in logical product lines over few meaningful level (usually consistent with marketing/sales catalogues). The financial codes will be individualised to the point that each code can be associated to recurrent/none recurrent type revenues as well as standard, customised, customer specific product and pricing.
• If a single currency code table is in place, it would be used in different field types in transaction coding:
  • The entity will be naturally associated with its national currency, (Entity currency)
  • The transaction will also capture the billing currency (transaction currency) and rate,
  • (Few businesses may have pricing currency that are different from the billing one. That is a more complex case that needs to be manage.)
  • The analysis and reporting system will permit current and constant exchange rate analysis (i.e. FX impacts isolated from business impacts). Forecast activities will be at constant rates.
• A somewhat similar to currency issue exists in certain industry on the prices of certain raw material (oil, coffee, cooper, ...). Similar solutions will need to be implemented.
• Customer account codes and/or Supplier account codes (from receivables/payables) may be interfaced to revenues and specific cost accounts when very large portion of such costs or revenues are done with very large ones. In addition, or in all cases, those receivable/payable codes may be mapped to customers/suppliers’ types or categories that are moved with the transactions. In some case, project coding would be necessary.
• Whereas legal entity and organisation codes are generally sufficient to picture the delivering and selling countries, there is a need in many businesses to also encode the destination countries (exports) or origin countries (imports).     

This data structure will be used through the different systems including consolidation / reporting and forecasting. By different systems I mean from (potentially proposals) to Orders to billing to accounting to reporting and forecast. This is to insure coherency and quality of data and subsequent analysis. 

It shall permit you to measure and explain:

• Actual variances from period to period
• Variance to budget or forecast 

The periods to compare shall take in consideration your business. Among the possible choices not all make business sense. Week on Week, Month on month, Quarter on quarter, Year to date on prior year to date, Month on Prior year month, Quarter on prior year quarter, Season cycle on season cycle, etc… there are a lot of combination that are mathematically easy to produce with modern tools. Still what is important are the ones that are relevant/meaningful for your business.

You should be able to identify, explain and measure the variance coming from FX, the one coming from pricing effects, the ones associated with volumes, the one coming from customer won or lost, the one coming from delays… You will only be able to do so accurately if this was thought through when designing the overall suite. 

Competitive and business intelligence will be needed in order to compare or even benchmark those results versus the surrounding. Comparing with ourselves can be quite gratifying but irrelevant. Results may be well in line with the forecast or budget, improved from period to period etc...  and still the FP&A team may be giving a false security impression if the competitors or the industry is doing far better than the company. It means the company shall get organise to capture and assess this kind of intelligence (to benchmark actual and to assess budget/forecast).  

At end (within reasonable margin!) the data structure and the integration all along the data flow is more important than the system themselves. Sizing may be a critical issue in large companies and needs to be considered. Ease to extract and compare data and report is also a key element.
A lot of focus, nowadays, tend to be put to the ability to present synthetic and …sexy reports, keep in mind that this is probably less than 5% of the work to be done (although the most visible). The other 95% are fully dependant on the quality of your data structure, data flows, system integration, ability to analyse. 

Of course, the example I use picture a relatively complex case and not all companies need the full extend. Either some dimensions are not needed or certain dimensions can be more or less complex. Still, keep in mind that the shortcuts that may have been made creates blind spots that reduce your ability to efficiently support your company. 

The key “Time to …” will have huge influence in such a design. Proposal, orders in take and portfolio analysis, reporting and forecast are of essence for long sales and/or delivery cycle and/or for recurrent revenues types, it just does not exist when those cycle are immediate or short (say less than a month in total) and/or for none recurrent revenue type. It also conditions the frequency and timing of such analysis, reporting and reforecast. This schedule (and its potential changes) shall be known largely in advance.

In other words, if the large majority of a product line revenues are recurrent with delivery cycle (time from order to revenues) of 2 to 6 months and an average sale cycle (Time from initial proposal to contract then orders) of 6 to 12 months, Proposal, Contracts and orders in takes and revenue monthly analysis and reporting associated with forecast exercises every 6 months (budget/reforecast) is quite sufficient. The View is probably best with 18 months actual + 18 months forecast. In addition, specific measure, reporting and forecast for the delivery delay may be necessary in order to explain variance coming from the delay variances.  

At the opposite, a non-recurrent and short cycle type product line will necessitate a daily or weekly revenue analysis and reporting (No proposal/orders) with weekly or monthly revenue forecast exercises and a rolling view that is 3 to 6 months. Several other schedule types can be advocate corresponding to different “time to” situations.

Seasonal and or/project type product lines, will be analysing, reporting and forecasting along the seasonal cycle or the project phases. 

Specific material none forecasted events may generate the need for additional reforecast or impacts analysis E.g. If a customer contract/project representing a material part of the revenues is lost or won and whereas the contrary was forecasted; A major price reduction not forecasted. 
A revolution/War/economic crisis in a country or a group of country, Etc. In such events the minimum shall be an impact analysis i.e. even if not turn into a complete reforecast for the coming periods (this will largely depend on how compressed is your schedule). 

The revenues and cost of sales giving the margin is the most sensitive part for most business. It may drive to a schedule that is different from the other costs and investment.

Whereas forecasting is concerned (been multi-year plans or budget/forecast), detail zero base type activities may be a plus in certain circumstances whereas in others deriving costs from the revenues and margin through ratios or drivers may be sufficient and more efficient. In any case, consider that measuring, explaining and forecasting the financial weight (ratio cost to revenues or to margin) of each key function in the company is a must. It may be used to plan and forecast or to arbitrate on resource allocations. 

Example of a summary schedule (in practice it is more detailed)

In summary, insure that you understand your business and your company in order to built your FP&A suite. There are numerous tools, systems, methods and practices on the market. None can be use as on the shelf. You must insure than you select the more relevant and customise them in order to fit your business present and future topology and needs.