Financial planning and analysis, or FP&A, is a catch-all title—and with good reason. On any single day this function may be called upon to perform work in any department in the company. The basic function of the FP&A department is to perform budgeting and forecasting to keep the company on track toward its financial goals. To perform that task implies that the FP&A department's members understand the entire business from top to bottom. The budget process and subsequent re-forecasts during the year provide the platform for FP&A, but that is where their job begins.
The FP&A department is like a maestro with no wand to lead the orchestra. It must make the beautiful music happen creatively, and if the company has a financial or performance problem there will be no one to blame but FP&A.
Although no two FP&A departments are alike, all share one common goal: meeting or beating expectations based on internal goals and external public earnings guidance. To make things even more difficult, the FP&A department, if they are performing their jobs correctly, have no one to blame if expectations are not met.
In a sense, the FP&A department's main goals are to drive performance while managing external expectations. To accomplish these goals, the department must have open lines of communication into each functional area of the business and the support of CEO and the rest of senior management. It rarely happens that you get both, but the department still needs to find ways to receive relevant and timely information about your company's performance and to convince management why it is a good thing that you know about such issues as quickly as possible. On occasion management may not want to deal with the problem, but a good FP&A professional can find a solution to this puzzle. And what bigger puzzle is there than to maximize the performance of a large, diverse and fully-integrated company?
One big misconception is that FP&A is an accounting function. Accounting is a process of looking backwards using historical data. FP&A looks forward as it tries to help the organization plan and forecast. An FP&A professional would not make a good accountant, and it is a difficult proposition at best to convert an accountant into an FP&A professional. In fact, the FP&A function should report up through the CFO and be separate from the accounting department. FP&A should be included in senior management discussions regarding short-term and long-term planning. I say should because often senior management does not always understand why this is necessary when in fact it is vital if the company is to be successful.
A great FP&A professional has only one goal and that is the success of the company. FP&A professionals are more than happy to get little if no credit (usually the case) as long as the company is tremendously successful. By definition, the success of the company shows they did their job, and it is apparent to anyone.
Peter Wolfe has been an FP&A professional for 15 years, and has created FP&A departments from scratch. His greatest career achievement was 27 consecutive quarters of meeting or exceeding Wall Street earnings estimates. Reach Peter Wolfe at email@example.com or 305-898-7638.