Expertise Beyond the Numbers

Let’s Talk FP&A — Strategic Whiteboard Series

In today’s Strategic Whiteboard Series, SC&H’s Kelsey Finnegan offers up concrete advice and best practices for an organization’s FP&A department to maximize their potential.

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      Let's Talk FP&A Best Practices

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      Video Transcription

      Hi, my name is Kelsey Finnegan with SC&H Group, and what I’m going to do today is to walk through what a lot of our clients see as common challenges related to their forecasting processes and what we’ve been able to help them with to improve those challenges.

      Defining the Role of FP&A

      It is a set of processes that help identify future revenue and expenditure items that have an immediate or long-term influence on the strategic goals and business performance. So what we see a cycle of an FP&A department and what they’re trying to accomplish is really starting with that strategy. And after they walk through the strategy of what they’re looking to accomplish it’s really about setting goals for the department which goes hand in hand with forecasts and analysis.

      And then once they see those forecasts and analysis they make business decisions based on that. And you’re kind of going through that cycle to really improve the business performance and see what you can do for the future of your organization.

      Common Challenges

      There’s a lot of stagnant and old FP&A models. So what this really means is that they’re using old processes that may not really fit the need of their current organization’s trend or really even what they’re going to need in the future. Whether that’s one year or five years in advance. So you have to do a lot of manual and outside potentially Excel models to kind of fit your organization’s current needs. Another big common challenge is just the lack of visibility really poor data integrity around your forecast and planning cycles.

      So what this looks like as I mentioned before is a lot of Excel offline models. There could be a lot of sending emails of a bunch of Excel documents for the FP&A department to consolidate for your final budget and forecast numbers. And this really doesn’t give the C-suite of your organization, or even your planning department, a lot of faith and where those numbers are coming from because there’s a lot of disparate manual processes to get those consolidated.

      Another challenge is really rigid forecasting processes. So there could be different reasons why you’re in an older model one of them could be just the outdated system that needs to be updated to help your organization grow, or it could be still thinking in the past of how those processes should be working. Maybe having a very set budget cycle and a very set forecasting cycle instead of looking at it as one I’m kind of rolling process.

      Best Practices of Forecasting and Analysis

      So I want to talk about best practices and what we do to help our clients overcome those challenges. And our first rule of thumb here is always to keep it simple. A lot of reasons that we see our clients struggle is they try to build every single potential functionality into their system, which can be hard for users to understand and really even for the company to maintain. So another rule that goes along with this is apply the 80-20 rule. And what that means is you really should be focusing on the 80 percent of what you need that’s really going to fit the majority of your business and focus on that first knowing that there might be 20 percent of different processes or things that you may be looking to enhance later, but start with those quick wins of that 80 percent that’s really going to help out the most people.

      Some other things that are important for best practices is processes and systems built for where you want to go not where you are today. So when I think of this best practice that really goes hand in hand with that stagnant model that a lot of our organizations find themselves in and what you should be looking for when you’re either implementing a new system or even just thinking strategy wise, is where do we think we’re going to be in the next five years and what are some of those things that we may need to build in to accommodate growth or change or acquisitions, etc., throughout our organization.

      And then leverage best-in-class enterprise systems as well. Having a robust system that’s going to be able to fulfill all of your needs is one of the most important things that you can do just to ensure again that you’re going to be successful.

      Proven Results

      Alright, a few things that I want to talk through with proven results and this is really from our experience working with numerous different clients on enhancing their FP&A processes. Again, whether it’s just strategy or through an implementation of a new software to really enhance their forecasting cycles, is taking manual processes and making those automated. This is going to go hand in hand for a lot of different areaswhether it be the flow of data to help provide that data integrity that your organization is looking for, or whether it’s just being able to automate different metrics and different KPIs that you potentially use on a daily basis, just knowing that those calculations and those metrics are from a centralized location.

      Another thing that’s always extremely important for our clients is moving from a disparate, potentially manual Excel reporting process where you could be getting different data through emails and trying to consolidate them into Excel, is being able to have that reporting package where you can click a button and being able to pull your budget and do variance analysis against your actuals and have all of that flow and being able to run that at the click of a button.

      One of the main goals throughout this entire process is to eliminate that collection of data that I’ve been talking about or having your department spend a ton of time gathering data, and to focus on reporting. So, the goal is always to give your team more time for analysis, and empower them to dig into what’s causing those metrics to change, instead of spending all of their time compiling that information.

      Lastly, another big thing that’s been a hot topic over the last few years is moving to the cloud. Another thought that you should consider if you’re thinking about updating your processes is really where you want your IT involvement to be. A lot of companies are now moving to the cloud which gives them less IT involvement and no extra server costs and things of that to just again give you guys more of a streamlined process.

      Now What?

      Focus on the future initiatives. Once you have a streamlined forecasting and budgeting process, you can focus on other things that are important to your organizationwhether that’s data analytics and BI, or whether or not you’re looking for more narrative reportingand you can kind of focus on those next step items now that you’re forecasting and budgeting process is streamlined.

      Trust your results! Once you have achieved data integrity and a more streamlined process you have faith in where your numbers are coming from and you don’t have to worry about the back and forth when everything used to be manual. And you can also as I mentioned have a streamlined reporting package have all of that centralized and really spend more time on analysis of your data.

      Thanks for listening. That’s all I have today. If you have any questions, please don’t hesitate to reach out to me via email or phone (703-852-5613). Thanks!