Two forces are moving in tandem to tempt accounting personnel to move into financial planning and analysis (FP&A). First is a change at the corporate level, where for many years, a robust accounting function sufficed for many organizations concerned with preparing a budget, reporting the numbers and filing SEC documentation. In recent years, organizations realized they needed staff with finance skills to improve forecasting and modeling and to work with the business.
Second, FP&A is growing more and more attractive at a personal level. It has fewer regulations to follow, making it less of a bureaucratic maze. And, for the right person, the intellectual challenge of forecasting and planning and the opportunity to impact the direction of the company is appealing.
The maturation of the FP&A function has led to increased specialization and accelerated expertise on that team. For those who aspire to become CFO, it is important to “gain stamps in your finance passport” by demonstrating experience and proficiency in several varied roles around the finance function. While both accounting and FP&A are part of the CFO function, they play different, valuable roles in capital management. For those considering how to transition their careers from accounting to FP&A, it is critical to understand the differences between these two teams.
THE OBJECTIVE FUNCTION
Accounting’s goal is to create the book of record of financial transactions in a standardized way; FP&A’s goal is to apply its finance and accounting acumen to support decisions and drive business performance.
- Inside out. Explain the financial view of the company and its ability to remain a going concern in the market.
- Control-focused. Ensure financial controls are in place to govern and report on financial transactions to owners (investors), regulators, and interested parties.
- Outside in. Explain how the company will interact upon the market, based on the success of products and services in the marketplace relative to competitors.
- Decision-focused. Support business decisions to allocate capital to its most productive use, through planning (budgets and forecasts), performance management, and financial analysis at all levels of operation.
FINANCE AND BUSINESS ACUMEN
Accounting is more focused on capital reporting, while FP&A is more focused on capital allocation. The differing views are considered in three areas: decision-making, reporting and metrics.
- Historical financial reporting. Produce for owners, regulators, creditors and management the financial activities and performance of the legal entity.
- Functional and quantitative KPIs. Standardized to allow for comparability over time and to other companies.
- Forward-looking management reporting. Produce for management and selected others, the information that drives alignment and decisions at any number of levels, e.g., legal entity, department, process, customer, product.
- Balanced family of metrics. Quantitative, qualitative, leaders and laggers, KPIs, includes analysis and analytics, updated to keep pace with changing requirements.
TECHNOLOGY AND DATA
Accounting’s tools and data are designed to meet its goal by getting data into the general ledger to establish the record, serve as the basis for financial reporting, and meet compliance objectives. FP&A needs that information as a foundation, then chops it up, adds operational and market data, and feeds various management reporting and information systems for alignment and action.
- General ledger. The key tool for accounting is to correctly record information in the general ledger. The ERP is the tool companies use to record daily transactions from across the company (think supply chain, procurement, payments, etc.) into the general ledger system.
- Finance data. Finance data for finance, with appropriate access, controls and extracts for others. Create a single source of truth that is trusted, auditable, and the bedrock for financial and management reporting.
- Explanatory and exploratory tools. FP&A is evolving away from spreadsheets in a variety of ways including advance spreadsheet add-ins that link to database back-ends, dedicated enterprise performance management (EPM or CPM systems), and business intelligence tools.
- Business data. Finance cannot stand apart from data for fear of losing control and stewardship. It needs to go the opposite direction and bring that discipline to the rest of the enterprise. This may require joint creation of a data lake/data-mart to establish the commonly accepted data/metrics, calculations, sources and uses.
PERSONAL AND TEAM EFFECTIVENESS
While both uphold the perspective of the CFO with strong integrity, accuracy and reliability, accounting teams will spend most of their time interacting with other accountants. FP&A will generally develop relationships with the business and parts of finance to become a highly credible, trusted advisor with a seat at the decision-making table, based on their ability to add value to strategic and operational decisions.
- Investor focused. Accountants provide information to management but also reports to shareholders, creditors and regulators.
- Finance customers. For most accountants in their day-to-day activities, the end-user of their work is other finance practitioners who speak the same language and may have similar personality profiles.
- Business focused. Demonstrates business and industry understanding, focuses on what matters to the partners, speaks the language (jargon and data) of the business. Brings to the table finance expertise, analysis and problem solving to deliver insight.
- Business customers. Communicates well in formal and informal settings including communication, influencing and negotiation skills. Develops relationships and is a role model for collaboration. Can challenge without being confrontational.
PUTTING IT ALL TOGETHER
There’s a lot of knowledge accountants bring to FP&A as they make the transition, and there are also many skills they must acquire to make the switch successful. They need to learn to be comfortable with ambiguity, i.e., giving up rules and precision for being directionally right, to turn their gaze forward, and to develop strong ties with business partners.
There are various ways to learn these new skills: the FP&A certification program, going out into the business, internal training and mentoring, and learning on the job. The ease of transition ultimately depends on the professional: Is he or she eager to learn? Do they like to ask the “why” questions? Do they recognize the gaps in skills?
The skill gap may be there, but there are many ways to make the switch. The prevalence of former accountants in the ranks of FP&A executives is evidence that it’s a transition worth making.
Are you ready to make the switch? The Transition from Accounting to FP&A lays out the steps you need to take to make your transition to FP&A successful. Get started today.