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Introduction: A Harmonious Partnership between the Business and FP&A

The core responsibility of the Financial Planning and Analysis (FP&A) department is to measure current performance and plan for the future. In this blog, we will look at integrated FP&A: what it is and why it is relevant. We will also explore what is required for a successful FP&A integration with the business and identify the main challenges. By integrated FP&A, we mean an FP&A function that is working for but also in harmony with the business.

Three Reasons Why an Integrated FP&A Department Is Relevant to and Beneficial for the Business

• Reason #1: Foster Collaboration Across Departments

FP&A, as part of the broader finance function, is a support function. The purpose of FP&A, in its broadest sense, is to support the frontline activities that directly generate revenues, costs, assets and liabilities. Therefore, one requirement for integration is a constructive relationship to enable effective support. This relationship will allow FP&A to understand better how the business works and provide business leaders with relevant analysis and an associated narrative.

• Reason #2: Improving the Analysis of Performance Drivers

One of FP&A’s responsibilities is to analyse performance drivers. An organisation exists to deliver tangible outcomes. These are so-called performance outcomes. When measured, they act as a way to determine progress, rewards and learnings that help develop different directions, tactics or plans. Every part of the organisation impacts the financial statements and will appear as an expense item at some point, be that immediately or in the future. For example, a department may create assets that generate future revenues or liabilities, and these will also ultimately generate future expenses. To sufficiently analyse the performance of all different business units, FP&A needs to be integrated with the business and be engaged with business leaders. This integration is necessary for FP&A to acquire a deep enough understanding of the business performance drivers to measure, analyse, interpret and plan them.

• Reason #3: Emphasis on the Forward-Looking Financial Planning

Just measuring performance today will not inform the business of the actions it needs to take tomorrow or the decisions it needs to make about the future. Understanding the causes of performance will help shape the context and allow management to take relevant learnings. Thus it is only by understanding the why, in other words, the performance drivers, that it is possible to plan the trajectory of the business going forward. In addition, a robust plan for the future of the business cannot exist in a vacuum. The business is accountable for performance, yet plans need to be connected with the financials. Otherwise, organisations cannot set real targets against which performance can be measured. Only by collaborating can a plan be achieved.

Requirements for Shifting towards Integrated FP&A

An integrated FP&A team is in daily interaction with the business, constantly updating its knowledge and insight of the business while supporting the build of detailed, driver-based key performance indicators (KPIs). These KPIs act as a robust system allowing each business area to assess its performance. An FP&A team that is not integrated is more like a commodity that can be outsourced or done away with altogether.

In practice, moving from being a traditional FP&A team to an integrated FP&A department requires team members to change from being gatekeepers to enablers. In addition, it requires an ability to generate better insights, which can be supported by the use of analytical and digital tools. These two shifts will lead to FP&A being embraced as a trusted advisor to the business. One that the business would not dream of outsourcing.

Summary: Successful Integration is a Joint Effort

The true shift comes with trade-offs for the business. It requires cooperation, an open mind that welcomes challenges and generosity with time to allow for the education of FP&A. People do not always want to hear trusted advice, but continually re-evaluating one’s fundamental assumptions is necessary. This re-evaluation is a quality that finds itself in increased demand within today’s complex business environment.

This article was first published in Unit4/Prevero.