March 31, 2021
4 Ways FP&A Can Ensure Better Organizational Alignment
As Paul Meyer once said, “Productivity is never an accident, it is always the result of a commitment to excellence, intelligent planning, and focused effort.”
As business leaders in this post-pandemic world, we need to look for new ways to leverage our resources constantly. Time is the most precious resource. For many years the belief has been that if we are not very busy, we are not very productive. Nothing can be farther from reality. While it is imperative to invest the time and effort to accomplish results, too much busy-ness deviates us away from goals and impacts our ability to think strategically. While this is true in many organization departments, this is especially true when it comes to a team’s abilities to dissect financial information. With so much data to digest and understand, it’s time-consuming and challenging to process the appropriate information productively. This is where the value of FP&A organizations comes into play.
As an integral strategic partner to decision-makers in organizations, FP&A bridges the gap between financials and leadership. They’re the people who can take an organization’s financial performance and tell the story behind them, making it easy for decision-makers to determine actions needed, reducing “busy-ness.” Ensuring your organization has the right partnership with FP&A will provide the required information and tools to make the decision-making process smooth and timely.
But how does the FP&A function provide better support to leadership? Today we’ll cover four areas FP&A can better align with leadership teams.
- Define, implement, and report relevant key performance indicators (KPIs)
- Create “what-if” scenarios
- Be proactive
- Increase your involvement
Define, implement, and report KPIs
How we measure the results and success of the decision-making process is a fundamental part of business. Analyzing the track record of results and using those results as learning opportunities to keep improving the company’s performance is paramount. However, the resulting data FP&A provides can be irrelevant when not adequately aligned with leadership and overwhelming when too much information is presented. With so much data readily available, it’s vital to identify a limited number of KPIs that are aligned with the overall goal of the organization. FP&A is highly numbers and metrics-driven, and while it’s exciting to dive into the weeds to pull as much information as possible, this is overkill. In a sense, it results in “analysis paralysis” for those looking at the numbers.
Before jumping into your organization’s (or client’s) data, be sure to align with leadership. We recommend setting recurring conversations with leadership to define, implement, report KPIs, evaluate progress and change as necessary. A regular communication cadence with aligned expectations will enable you to provide more relevant data and hone-in on organizational priorities.
Create “what-ifs” scenarios
“What-if” scenarios are the hidden gem of FP&A’s success. They’re a financial tool that’s a decision-makers best friend. If you’re unfamiliar with a “what-if” scenario, it’s pretty straightforward to understand: create a potential outcome based on specific parameters. For example, what is the expected number of customers that will purchase based on our latest promotion? It’s essentially an estimate that can help provide beneficial insights to leadership, both good and bad. Creating these estimates provides an edge in understanding potential results based on real-time and historical data, enabling the key stakeholder(s) to make decisions in a timely manner. They’re also instrumental in identifying potential risks like over expenditures, forecast issues, and inaccurate prior estimates.
While this sounds cliché, the fact of the matter is in order to develop a meaningful partnership with your stakeholders, the FP&A organization has to bring strategic and value-added analysis to help stakeholders in their decision-making process. Thinking ahead of what metrics or information may be needed is a must-have for any FP&A organization. Leaders and key stakeholders want to have access to information, often even before they formally ask for it. Timing is of the essence. If an FP&A function can be proactive, it can help create insights, thereby improving the organization’s utilization and providing additional value to the partnership with leadership.
Making the case for Financial Transformation? Discover what to expect from this investment
Get the free e-book –>
Increase Your Involvement
The real value of an FP&A organization comes from being strategic in taking data and translating that data into current and future action plans. When FP&A teams shy away from truly involving themselves in an organization they become a team that simply “reports” information. While this is helpful to an extent, the FP&A team needs to take the extra step to provide real value.
It’s critical for the FP&A team to be involved in the operations of an organization. They need to step out of the financials and understand what’s going on in the operations of the business. Numbers only tell so much of the story, and by getting your feet on the ground, you’re able to see more of the business. Once you’re able to have a more holistic understanding of the business operations, you can identify new areas of improvement and analyze how those improvements may be accomplished.
Not only is it important to involve yourself in the operations of the business, it’s even more valuable to spend time building relationships across the organization. When you step outside of the financials, you can forge strong relationships, build trust and create bonds by connecting with people and adding value in-person. Relationship building is a necessary skill that will benefit you throughout your entire career. Investing time early on in each new position will allow you to accelerate your involvement within the organization, enabling you to build successful partnerships between peers, departments, and stakeholders.
The FP&A function is a crucial component of every organization, but it can be challenging for stakeholders to recognize the value they provide. The above four recommendations are aligned with increasing that value and revolve heavily around communication and being part of the team. As you continue to operate, ensure you’re putting communication at the forefront of your objectives. Not only will communication help establish more value by aligning KPIs and understanding the day-to-day operations of the business, but it will help you build confidence and further development your skillsets. If you’re an organization looking to build out an FP&A function or you’re an individual looking for FP&A roles, Bridgepoint Consulting can help. With decades of experience, we work to truly understand your needs and growth challenges before providing a solution. Start the conversation today.
Overcoming 5 Common FP&A Reporting Challenges with Institutional Investments
Fractional Accounting is the New Trend for Startups
3 Ways to Speed Up EBITDA Growth in Post-Acquisition Organizations