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Author's profile photo Chris Ortega

People First: Putting the Partner in FP&A 2.0

What’s financial planning and analysis (FP&A)? Traditionally it’s about planning, budgeting, reporting, and forecasting based on available financial data sets.

Are you still awake?

FP&A, the new version
Today’s FP&A needs to be so much more.

First, the relationship between finance and the business needs some guide rails. Sometimes, finance teams operate as compliance-oriented, risk-averse “heavies” who seem to rejoice in putting the brakes on the business. It’s as if the business serves finance. But let’s be clear, finance needs to serve the business.

Second, let’s acknowledge that software and systems are now available to do the bulk of traditional tasks associated with the FP&A function. I say let the machines do their jobs.

Using technology to crunch and analyze the data, leading organizations are freeing up time to focus more energy on the business. Nowhere has this been more evident than with the pandemic.

During the life-altering, business-transforming, supply chain–wrecking cataclysm known as COVID-19, CFOs and financial teams everywhere stepped up – acting as full business partners helping their organizations weather the storm.

Best in class FP&A, in a sense, grew up – earning a seat at the table by giving the business the financial and business agility needed to survive.

Financial partnership and advising in the face of uncertainty

Planning and analysis are still important – very much so. They remain at the core of finance. But the crucial point is that FP&A is now liberated from the back office.

I call it financial “partnership and advising.” The idea is to elevate a function that clearly needs to be elevated. Real-time, high-quality FP&A is needed now more than ever as so-called “black swan events” proliferate.

Black swan events are major disruptions to business that can come from anywhere. Think of climate events, financial crises, trade wars, pandemics, and political upheavals. Seems like the list just keeps going. Looks like these black swan events are quickly becoming regular ol’ everyday swan events.

Which is why finance needs to be less of a back-office function and more of partner. To navigate uncertainty and change, FP&A insights need to be understood by the business – and finance can play a critical role in helping to drive decision-making and guiding the business toward achieving its goals.

The people focus

Finance gets so wrapped up in numbers, spreadsheets, and models that it’s sometimes easy to forget that behind it all are people. Again, solid financial guidance and execution is critical, but with FP&A 2.0 finance needs to embrace the messy reality of human interaction.

The term “reporting” comes to mind in this context. Reporting is something I associate with government agencies, military officers and their superiors, or maybe one nurse to another at shift change. It’s a crucial function but it’s highly formalized.

Good reporting from finance to the business can build transparency and trust. But if you want your finance team to take trust to the next level, you need to get to know the people in the business you serve.

This is why I encourage finance teams to get deep into the mix. If you have a seat at the table, make sure you take it. Get to know everybody and understand what they want.

The “x” factor

A term closely associated with FP&A 2.0 is extended planning and analysis (xP&A). Here, the “x” is  not a stand-in for some role or department. Rather it indicates that in today’s world, silos will not stand.

Both FP&A 2.0 and xP&A understand the unique horizontal reach of finance. Few departments within a business can justify the same breadth of scope. Add in the people focus, and finance becomes critical for business success.

Instead of incoming reports that detail dry numbers, FP&A 2.0 and xP&A ask you to get out there, collaborate with all facets of the business, and understand the stories of behind the numbers. This can help you better empathize with your colleagues, understand where they’re coming from, and develop intelligent solutions that serve the business best.

Ultimately, it’s the face-to-face working relationships over the long term that help build the kind of trust that allows your finance team to break down silos. Now the business is ready for the expertise that finance can offer – not as a business “function” where communication is managed through reports but as a business partner where communication is face-to-face and human-to-human. This is direction that finance needs to go.

If you’re interested in exploring this topic further, I encourage you to watch this recent Financial Excellence podcast I participated in with Jon Essig, CEO and managing partner at SimpleFi Solutions and Floyd Conrad, Global Center of Excellence at SAP.

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