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The Time for FP&A Analytical Transformation Is Here!
February 23, 2023

By Kedar Kale, MENA FP&A at Amazon

FP&A Tags
FP&A Transformation
FP&A Analytics

The past decade brought many changes in the world of business. The COVID-19 pandemic has confined billions of people to their homes and brought the flow of money to a grinding halt, threatening a deep global recession. A crisis of this magnitude and uncertainty can potentially create more shifts in the world order than in the previous decade. For example, the sudden surge in online shopping and subscriptions is a sticky habit that will stay even after the lockdown. 

A crisis like this one can be a great change-maker and provides opportunities to drive changes that may deliver significant benefits in the long run. One such organisational change, whose need has often been discussed but not executed, is ‘FP&A transformation’. In times such as these, when revenues start drying up and cost pressures start mounting, the demand for ‘value-add’ and ‘efficiency’ increases across the business world. FP&A transformation can make the overall finance function more efficient whilst adding more value through analytical insights. The time for transformation is now!

 

Key Components of FP&A Transformation

  • Align the FP&A & Overall Business Strategy and Clearly Define FP&A Goals 

The role of FP&A is to guide a business to more informed decisions and optimal performance. Hence, before attempting to transform FP&A, it is important to clearly define the business strategy and align it to the FP&A strategy. It is also important to determine the goals of FP&A as clearly as possible. For example, giving an FP&A team specific revenue growth and cost optimisation targets is a good way to build more ownership and can help drive the team to improve analytics, identify opportunities and make recommendations. This ownership mindset is important to drive true transformation. Without this, an FP&A team may remain in the comfort zone of building budgets, tracking variances in budgets, etc., without adding much value.

  • Become Friends with Data and Statistics

Over the past decade, we have seen an unprecedented increase in the capability to both collect and process data. Data analytics now regularly drive business decisions and deliver improved results. FP&A cannot function without truly harnessing the power of data and learning the art of analytics. While forecasting, it is important to link financial metrics with non-financial ones and use statistical regression modelling. While business partnering, FP&A should use statistical methods such as hypothesis testing and A/B testing to drive a healthier decision-making process. All of these methods require a good working knowledge of statistical concepts. FP&A team members with more traditional accounting backgrounds should be trained in statistics and data analytics courses. Incorporating a hard-core data analyst into the FP&A team may also be a good idea.

  • Let Technology Be Your Guide

The most important component to the success of FP&A transformation is harnessing technology. It is crucial to improve both the efficiency and effectiveness of FP&A. Through automation of repetitive, manual, non-value-adding tasks such as completing management reports, FP&A can be more efficient.

By using technology-enabled models and real-time dashboards, FP&A can generate more insights, interact with the business and impact decisions made. However, to truly harness technology, it is important to:

      1. Implement the right systems and tools

  • Planning systems need to be integrated, collaborative, easy to use and work in real-time
  • Analytics tools need to be integrated with ERP software, strong data manipulation and visualisation capabilities

      2. Engage and upskill the team

  • While implementing new systems and tools, it is a common fallacy that top-down enforcement works. 

There have been innumerable instances where a corporate team responsible for ‘transformation’ has passed down a tool to all FP&A teams across a company without realising the nuances of one particular business unit or location. Hence, FP&A team members from across the organisation should be involved from the early stages to iron out issues before implementation.

  • Teams need to be upskilled to use the systems and tools implemented effectively. Investments in training can pay huge rewards in the long run.

      3. Integrate with the Business 

The true benefits of FP&A transformation will only be seen when FP&A is fully integrated with the business. Through leveraging technology and being more data-savvy, an FP&A professional can add tremendous value to any business. They can provide real-time intervention in decision-making. For example, a brand financial analyst should be able to provide inputs on financial KPI impact when a brand manager is planning a consumer discount. They will be able to verify the discount’s financial sense since the FP&A models used will determine whether the benefit of the volume uplift outweighs the revenue impact of the discount.
 

Conclusion

Overall, the benefits of a successful FP&A transformation are tremendous, and this moment is a great time to invest in one. By making FP&A a truly value-adding function, this transformation will not only protect the FP&A function during the crisis and strengthen the organisation’s performance after the crisis.

This article was first published on Unit4/Prevero blog.

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