The Financial Planning and Analysis (FP&A) function of Finance is clearly becoming a critical piece in many organizations. And with the fast-changing and uncertain environment most organizations are operating within, this is a challenging time for FP&A executives and professionals.
I recently connected with Brian Kalish to discuss the latest trends in FP&A. Brian is an FP&A consultant with over 20 years of experience in Finance, FP&A, Treasury, and Investor Relations.
Most recently, he was the Executive Director of the Global FP&A Practice at the Association for Financial Professionals (AFP). From 2008 to 2015, he had responsibility for Corporate Finance, Risk Management, Capital Markets, Investor Relations, FP&A, Accounting, and Financial Reporting. Prior to joining AFP, he held several Treasury and Finance positions with the FHLB, Washington Mutual/JP Morgan, NRUCFC, Fifth Third, and Fannie Mae.
Here’s what he had to say.
John: Brian, thanks for taking the time to chat with me. What are some of the key planning challenges for organizations in 2017?
Brian: You’re welcome, John. Thanks for the opportunity. There are so many challenges in corporate planning at this time. Let’s start with the volatility and uncertainty in global politics, world business, economics, and regulations. The ability to effectively plan and forecast has never been more important.
Then factor in the capacity in FP&A. While there has been investment in FP&A functions over the past few years, most organizations seem to be cutting back now, trying to maintain headcount and costs, do more with fewer resources. That means FP&A needs to become more efficient – look more closely at how it spends its time. Put more focus on planning and analytics, less on data collection. And they need to be more agile, get better at planning, forecasting, and reacting to change. Think of the analogy of an ocean freighter vs. a power boat, which can change direction quickly. How do we get better at adjusting operations plans and resources in response to new market opportunities and risks?
Technology also continues to challenge us. Much of what’s in place in many organizations today is outdated. Think about ERP systems, Excel spreadsheets, and legacy planning applications – they were not designed for today’s world. FP&A needs to be able to adapt better to the rate of change in the market. We need to re-evaluate and upgrade business processes, the technology that supports the processes, and the skillsets needed to succeed.
John: Agreed, these are challenging times indeed. How are leading organizations responding to these challenges?
Brian: The biggest trend I see is the continued push to move low-value activities out of FP&A. That can mean shifting them into other parts of the organization, using shared services centers, consolidating, or even offshoring low-value tasks. Can standard variance analysis be outsourced? Let FP&A staff focus on more complex analysis, forecasting. Organizations need to audit what they are doing, see if all of the tasks they are doingare still necessary. For instance, survey stakeholders and stop producing so many reports that no one reads.
Companies are also looking at new technologies that can help FP&A get more efficient. It can be difficult to upgrade systems when people are so busy. It’s like changing the engine on a moving car. But we need to make the investment to get ahead, and we can’t afford to wait. Business and technology are changing. FP&A needs to move with it.
Another trend is FP&A moving more to communications and collaboration, more line of business support. We need to understand internal and external customers, give FP&A staff more time with their internal customers and maybe even customer-facing exposure. For instance, letting them work shifts in a retail operation to get a better sense of how the business works.
John: Wow, there is certainly a lot going on. How has the role of the FP&A function changed or expanded in recent years?
Brian: In general, I think the biggest shift has been to be more forward-looking vs. backward-looking. Improvements in technology have made it easier to report on the past – now we need to focus more on the future, project key trends forward. It’s not about being perfectly accurate, but thinking about what can happen, doing more what-if scenario planning and modeling. Companies need to get better prepared to react to changing market conditions. They need to have a game plan for different scenarios – such as a drop in oil prices, a spike in interest rates, or an increase in other commodity prices.
I see FP&A automating routine tasks, putting more focus on value-added analysis. A good practice is to understand where FP&A stands on the maturity model. This can range from basic management reporting to annual budgeting, rolling forecasts, predictive modeling, and enterprise-wide business support. There is more focus on being a better business partner, and better advisor to LOB executives. Help them make decisions and evaluate new opportunities.
John: What new skillsets must organizations have in FP&A to succeed in today’s environment?
Brian: The table stakes are still basic knowledge of Accounting and Finance, and the tools of the trade. But killer Excel skills aren’t enough. FP&A staff need to be more technology savvy, know how to use the latest tools and techniques. They also need to understand the business, be able to communicate as well as collaborate with and advise LOB executives. This could be an embedded model or an assignment model – but FP&A needs to become part of the LOB teams it supports. Collaboration and communication skills are key, including writing and presenting information and packaging it for key audiences.
This can be a blind spot in some Finance groups. Grids of numbers don’t make sense to everyone. You need to understand how the audience thinks and package information accordingly. Check out the IBCS – International Business Communication Standards. This has great tips on how to present and format information for key audiences.
John: Thanks for that tip. You mentioned being more technology savvy. What new technologies should FP&A departments be considering to be more effective?
Brian: Some of the key ones are advanced analytics and forecasting tools that are being used more readily across industries and geographies. Cloud-based planning solutions are also becoming more popular, although I still hear some fear about control and security over data. Small and mid-sized companies embraced the cloud sooner, but now large companies are seeing the benefit. Some startups, such as Host Analytics, jumped in early, but large vendors are finally on the bandwagon after lagging the market.
Mobile technology is now moving from personal into business use – such as in travel and expense management. In FP&A, mobile technologies are being used mostly for consumption of reports and KPIs. Mobile can also be used for workflow and process management, such as budget reviews and approvals. But there’s a great opportunity to arm people with the right information, at the right time, in the right format. The key is to have a single version of the truth that gets pushed out to LOB managers – and that’s where the cloud excels.
Artificial intelligence is also coming into play. This includes machine to human, machine to machine, and robotic process automation (RPA). This can help shift manual tasks off FP&A’s plate, automate more, and let humans take on more advanced tasks.
John: There is certainly plenty to take advantage of out there. What steps can FP&A teams take to more forward?
Brian: My recommendation is to audit your skill sets, your FP&A process maturity, and your technology capabilities. See where you stand, and identify areas for potential improvement and ways to increase productivity. What technologies people use in their personal lives shouldn’t be more advanced than their work systems. Look at where the world is going, and look for ways to get ahead – and stay ahead. Maybe you can find opportunities to leapfrog the competition. Be curious, and look forward. The status quo won’t cut it in the future.
FP&A has huge opportunities ahead – those who succeed will be efficient, leverage the latest techniques and tools, and become more agile than their competitors.
John: Thanks, Brian, great advice.
To learn more about Brian and the best practices discussed here, check out Brian's LinkedIn profile.