What is FP&A’s role? That was perhaps the key question participants pondered at a FP&A roundtable, underwritten by the Peloton Group, at the AFP Annual Conference.
“What’s really important to FP&A is: How we can become better business partners,” asked one of the roundtable participants. “At the same time, FP&A should enable decision makers to be at the cutting edge. The question for FP&A is: How do we put ourselves in that position? How do we get involved in that conversation?”
Five ways FP&A can organize itself for success:
- Examine the external and internal environment. To create the right organizational structure, companies need to first examine their market characteristics, growth trajectory and operational complexity. “You should look at what type of FP&A organization fits those three dimensions,” said Scott Brennan, managing director, Finance & Enterprise Performance Strategy Group at Accenture. “Based on those factors, companies can decide which finance model characteristics would be most successful.”
- Acquire the right tools. Technology is critical to collaboration between headquarters’ FP&A and finance staff at the business unit level. “There are tools that enable this collaborative model,” said Vic Datta, Managing Director with the Office of the CFO at FTI Consulting. At the high end, systems like SAP and Hyperion provide the integrated support companies need. But increasingly, companies, even large ones, turn to FP&A cloud solutions like Adaptive Planning and Host Analytics.
- Separate accounting from FP&A. According to a former FP&A director, for a company that’s building up its FP&A capabilities, the function should be clearly differentiated—at least at the corporate level—from the accounting function and have a direct reporting relationship to the CFO.
- Tie business and FP&A closely together. Another best practice is leveraging other groups and functions within the organization to find ways to streamline the process. “That’s given rise to greater collaboration between FP&A and treasury, risk and accounting,” said Brian Kalish, FP&A lead at AFP. “Companies should explore ways to better tie these groups together to increase efficiency.
- Review the approach. “People should take the opportunity to not be satisfied with how things are set up today, but instead consider what the best structure is going forward,” Kalish said. “FP&A is always asking why; this can be viewed as an opportunity to ask: ‘What is the best structure to support the operations?’”
The value proposition for FP&A is to be at the decision making table, agreed the FP&A director at another organization. “We need to put a lot of effort to convince the leaders and operations managers to get us there, to be considered partners and spend less time preparing PPT and spreadsheet and instead analyze more data and be involved more in business,” he said.
Some executives get it, said one participant, but some don’t. “We’ve gone through a transformation in our company and FP&A has grown from a team of three to a team of eight,” he said. While that was good news for FP&A, one of the unintended consequences is that VPs of some divisions have grabbed on to the new resources to perform tasks that are not core to FP&A mission, such as helping them prepare presentations. “We’re not getting so much value out of that,” said this professional. “The ones who have grabbed us are over-utilizing us. There can be too much of a good thing.”
To a great extent, according to several roundtable participants, the mandate must come from the top. “The CFO has to understand your resources, and how you should spend them, instead of doing the work of division managers,” said one professional. “It has to come from management.”
“In many of my previous jobs,” recalled one seasoned FP&A professional, “we were just creating the numbers and putting them nicely together, getting them to the operations and letting them make the decisions.” But in his current role, the CFO wants a finance person in every meeting. “I’m actually in meetings with IT, engineering, etc. It comes from the top down,” he said.