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Financial planning and analysis (FP&A) groups are increasingly called on to help operations achieve better process efficiency and make better investment decisions. During the inaugural conference call of AFP’s new FP&A Advisory Council, a group of FP&A practitioners and experts/academics, several said they’ve been heavily involved in advising their operations on how to improve processes and resource allocation choices.
According to FP&A executives, finance is increasingly involved as a strategic partner not just to senior management but also to business leaders and operations, offering advice and financial expertise and pushing some of its tools and modeling capabilities throughout the organization. “I actually got a call from operations; they challenged us to review their process and offer improvement ideas,” said Pete Gailer, FP&A, a senior FP&A professional. “They wanted us to run process analysis.”
Conversely, Tijana Balotic Truong, finance professional working in a fast growing FMCG company, commented that some businesses resist finance intervention. Therefore, “it’s good that the businesses are aware of the value that finance can bring to the table, and that FP&A is familiar with how operational processes work and can bring a fresh set of eyes to provide insight into how to do things better,” she said. “For this to succeed, it is really helpful to develop the tools for fact-based assessments. That enables decision-making based on transparent and neutral grounds, and not emotions or individual preferences.”
Others on the call had similar experiences. “We do that work with the operations team year-round,” said Irena Barisic, FP&A, deputy CFO of the Brookings Institute. “We have monthly meetings with all the departmental heads.” Business leaders bring a list of projects and initiatives to each meeting and the group prioritizes and decides which ones will be added to the capital plan for the current year or future years.
Of course, this monthly review process didn’t start working overnight. It took some time for everyone to trust the process. “Everyone wanted their projects to be added first, without fully understanding the financial impact or the impact on the level of effort of the team,” recalled Barisic. The perception of the vetting process changed when managers saw the impact on their own budgets as well as the bottom line. “FP&A can facilitate the discussion among the operational groups and they can entrust finance with doing the financial analysis,” she said.
Igor Panivko, director of finance at the Moscow and Ukraine operations of Konica Minolta, added that he always tries to understand the business key performance indicators (KPIs), “so I can advise them on how to do things better.” Then his team analyzes the data sources of the KPIs and builds an analytical model that maps business dimensions with financial ledger transactions and budgets.
Such a centralized analytical model aligns operational performance metrics with financial categories and provides a holistic view on business performance, aggregating financial results by business lines and enabling drill-down to operational metrics on the fly by the process owners themselves. “Our FP&A team is permanently managing the model by adding either new business logic or improving definitions of already existing key business dimensions, which change over time and ensure the quality of business information, which is supplied in accordance with unified business terms and definitions. That’s what we do all the time: we analyze and model to help improve the business results,” Panivko said.