The Rise of FP&A: Opportunities, Challenges, and the Path Forward
By Paul Barnhurst, The FP&A Guy
The role of Financial Planning & Analysis (FP&A) in today's business world is undeniable. As Michael Jordan once said, “Obstacles don’t have to stop you. If you run into a wall, don’t turn around and give up. Figure out how to climb it, go through it, or work around it.” In the context of FP&A, these walls are the ever-evolving challenges that professionals face daily.
The Rising Role of FP&A
FP&A is finally starting to earn the seat at the table it has long coveted. In a recent conversation with me, Jack McCullough - author of Secrets of Rockstar CFOs and a 26-time CFO - shared that he predicted three years ago that most CFOs would come from FP&A in the future.Today, this trend is not just a prediction; it's become a reality, as FP&A is being recognized as a value-added function in businesses globally.
However, as the stature of FP&A grows, so do its challenges. Financial professionals worldwide grapple with escalating workloads amid increasing uncertainties, from COVID-19 to economic fluctuations. Here’s a glimpse of the current state:
Widespread Burnout: In a recent AICPA & CIMA 2023 Survey, over half of the respondents indicated symptoms of professional burnout.
Need for Rapid Skill Evolution: In the same survey, 83% of respondents said that the ability to learn new competencies quickly is the most crucial soft skill. Next in line are analytical thinking (81%) and the ability to deal with complexity/ambiguity (80%).
Frustrations with Non-Value-Added Activities: Other surveys highlight a disproportionate time spent by FP&A professionals on non-value add activities.
Tool Limitations: A significant number of FP&A professionals believe their toolkit falls short of business demands.
The Solutions: People, Process, and Technology
It’s clear many finance professionals and FP&A departments are being stretched to the breaking point. So what is the solution? As with most organizational transformations, the answer lies in People, Process, and Technology. For FP&A departments to meet the expectations placed on them by the business, they need to hire the right people; help them develop the right skillsets; streamline processes; and utilize technology to increase the team's overall productivity. FP&A departments need to be careful not to look to technology as a solution to their challenges but as a tool to improve the team's productivity. To manage their many challenges, FP&A departments need to focus on these three key areas:
The first thing every FP&A department needs to do is ensure they have the right people and skillsets on the team. To this end, the department lead should do the following:
- Understand what the business seeks from FP&A in order to be successful
- Ascertain the skills and resources necessary to meet these business needs
- Assess strengths, weaknesses, and overall abilities of individuals to identify gaps in the team that may not match up to business expectations
- Devise a plan to bridge skill gaps, irrespective of the team's size
Alongside team reviews, processes used to complete work must be evaluated. Often, there's vast potential waiting to be unlocked in improving existing processes. FP&A professionals must challenge the status quo, eliminating redundant practices and focusing on efficiency. There is often resistance to change, and people may default to wanting to do things “as they have always been done.” Overcoming this inertia demands more than just introducing efficient procedures; it requires a comprehensive strategy that pairs process innovation with behavioral reinforcements, like recognitions or KPI-driven incentives. This combination not only catalyzes the adoption of improved processes but also encourages teams to redirect their efforts towards value-add activities.
Recent studies, such as the FP&A Trends Annual Survey, reveal a strong correlation between technology adoption and business satisfaction. Best-in-class FP&A departments leveraging cutting-edge technologies are happier with the budgets/forecasts they are producing. Companies using AI/ML and cloud-based technologies saw a 24% improvement in satisfaction with the plan. It’s clear that in today’s environment of increasing data complexity and economic uncertainty, companies need to plan for how they will utilize technology to improve the quality of work they produce.
However, it’s important that companies are thoughtful in their approach and do not just select the latest software platform that wows them during the sales demo. In the rush to modernize, companies must prioritize discernment over dazzle. It's crucial to focus on FP&A software's foundational pillars:
- Data Management
- Budgeting/Financial Modelling
- Artificial Intelligence/Machine Learning
Ensure the company you consider has solutions that incorporate these key pillars of planning tools and support your company and industry reporting requirements.
Selecting the Right Tech Platform
In today’s world, companies should expect quick time-to-value when implementing a new tool; it’s not reasonable to have to wait weeks and months before obtaining value from the tool. It’s also unrealistic to expect every software implementation to be a highly-customizable process that results in a bespoke FP&A platform. Obviously, the larger and more complex the company is, the longer the implementation time will be. Still, for many companies, a good software platform can bring in data and provide value in days, not weeks.
Today, it’s appropriate to expect than an FP&A vendor has the following:
- Native Integrations with common ERP, CRM, and HR software
- Cloud-based deployment
- Low-code and no-code solutions that do not require extensive training to use
- Pre-configured planning templates and reports for different industries
- Intuitive, user-friendly design
- An integrated approach to managing all three financial statements
- Ability to create driver-based plans
- Scenario and sensitivity analysis
In today’s environment, some tools can start providing you basic reporting and access to historical data in hours while they work with you to implement the planning templates and reporting required to meet the needs of your business. As you go through the process of implementing a planning tool, make sure you start by understanding these fundamentals:
- Software Requirements (Short-term and long-term)
- Data and system issues and limitations
Armed with this information, an understanding of what an FP&A tool should be able to do, and the core pillars of an FP&A tool, you’ll be able to better select the right tool for the job.
The market is crowded, and many tools have similar capabilities; so it’s more important than ever to understand what to expect from a vendor and how to ensure they can meet your company's needs from the beginning. This ensures that your FP&A platform will enable your team to create value for the business vs. becoming one more frustration you have to deal with.
Spotlight: Jirav - A Trusted Tool for Small-Mid size Businesses
As you go through this process, one tool that has built a strong reputation for helping businesses and accounting firms manage FP&A is Jirav. Jirav is an “all-in-one” FP&A platform that businesses across several industries have chosen, thanks to its capabilities, time-to-value, and support for empowering their FP&A operations. Click here to learn more about the Jirav FP&A platform.