Financial Planning and Analysis (FP&A), play a pivotal role between Strategy, Business and Data: a business partner advisor, helping to form a pathway that navigates an uncertain future, but in reality, the value created is very difficult to measure. It’s critical to the health of the organization, much the way supplements build up the immune system for a healthier life.

Supplements and Vitamins are an essential part of our daily life, giving us the ability to get up and go - but how do we measure these benefit?

Most of the benefits are long term: living healthier, happier, more successful lives. That has been the fundamental issue with FP&A, it’s often difficult for a company to invest in building future capabilities as the ROI is not obvious or difficult to calculate (footnote 1).

That is changing with the advent of FP&A Strategy. Our approach makes the FP&A element of an organization more than long term strategy; it makes it an immediate navigation tool for negotiating the turbulent waters of today’s global economies. With uncertainty everywhere and unplanned events like Brexit, companies need immediate data analysis. 

While the benefits of FP&A are hard to put a monetary value on, they are critical. In 2012 CEB found the “insight” deficit in finance had very discouraging results in terms of company performance. They concluded that analytic capabilities are central to FP&A ability to establish influence with business partners and this influence can play a critical role in driving business outcomes and impacted annual total shareholder return (TSR). Those who invested in FP&A received an astounding 5.9% average annual TSR premium across five years vs. their peers.

How should we look at measuring the success of FP&A?

Similar to our vitamin example, we need to look at some of the short term drivers. For FP&A it can be broken down into 3 main areas:

1. Measure Improved Partnership Value: The proportion of time spent on high-value business partner activities.
2. Measure Improved Partnership Satisfaction: The Quality of these interactions.
3. Participating in the Financial Empowerment Index ©: The willingness of management to listen and empower the FP&A solution and opportunities for improvement.

The first two are the easier ones to measure - Time x Quality i.e. how much time are you spending with business partners and what is the quality of that time. If you think of FP&A as a consulting function, then this makes sense. Too often FP&A is considered a branch of accounting, which is very back-office focused vs. the business partner advisor role. FP&A is not mandated like the accounting function, so the only reason for their existence is to add value to the business.

The final area of FP&A empowerment is a lot harder to measure - i.e. how empowered is your FP&A teams within your organisation to have an impact? Much like the revered “360 Reviews” and 6 SIGMA methodologies, resistance is currently a challenge. Although this is difficult to measure, and influence or change currently, the process has begun. Nationally, FP&A Strategy is promoting the Finance Empowerment Index, to selected Fortune 75 corporations.

As the role of the CFO moves away from spending their time on backwards-looking accounting data to being tech-savvy innovators, FP&A Strategy is the team supporting this transition (footnote 2). Be certain your FP&A team is up for the challenge: It’s time to take the big step and invest now to be able to survive in the future.

Footnotes

1. The results of the APQC survey were staggering - the survey drew responses from 130 executives currently working in financial management at large, global organizations - they found 62% admitted that the reason their company was lacking the necessary competencies was due to lack of time as staff buried on basic duties. The survey also found that many companies are not culturally prepared to deploy stronger FP&A talent.
2. 2016 AFP Financial Planning & Analysis Benchmark Survey: FP&A, a Function in Transition demonstrates return on investment in technology: FP&A teams investing less than 10% of their budget on technology required an average of 60 Full-time employee (FTE) days to collect and manipulate budget data vs. companies that invested 20%-49% only required 14 FTE days