7 Best Practices for Building a Robust FP&A Process

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2024 FP&A Priorities for Autonomous Finance; Source: Gartner 

Navigating the complex world of business in 2024 requires more than just crunching numbers and making forecasts. It demands a keen understanding of financial planning and analysis (FP&A), which has become the backbone of strategic decision-making. As businesses strive to do more with less, the need for streamlined FP&A best practices is more crucial than ever. To optimize financial forecasting and decision-making, it’s crucial to streamline the FP&A process flow within your organization.

At its core, good FP&A work goes beyond preparing financial reports—it’s about diving deep into the data to grasp the “why” behind every financial shift, whether it’s a gain or a loss. This involves crafting detailed forecasts, planning for various scenarios, and spotting opportunities to lessen risks and enhance business agility.

However, there’s a big challenge that many face: teams often get bogged down with routine tasks. Recent studies, like one from AQPC, show that financial analysts spend nearly half their time just gathering and checking data, with another chunk of their day lost to managing these processes. This leaves them a scant 23% of their time for the kind of analysis that can genuinely add value. This not only slows down their work but can also be a real drag on morale.

So, how do we shift this balance? How do we ensure our finance teams aren’t just busy, but impactful? The key lies in embracing cutting-edge FP&A tools and refining our processes to free up our teams for higher-value work. This isn’t just about reducing workload—it’s about creating opportunities for meaningful analysis that informs better business decisions. In this article, we’ll explore seven essential FP&A best practices that promise not only to enhance operational efficiency but also to elevate the strategic role of finance within your organization.

Why Should You Focus on Financial Planning and Analysis?

Top 10 Strategic Business Priorities for 2024-2025; Source: Gartner

Financial planning and analysis isn’t just number crunching; it’s the roadmap to your business’s future success. Whether you’re managing a quaint local bookstore or a bustling multinational corporation, the insights from FP&A are critical.

What does FP&A really do? It helps you peer into the future using your current financial data, helping you shape business strategies that align with your long-term goals. Imagine running a boutique—FP&A is not only about knowing what’s in the cash register; it’s about using sales data to predict busy periods, plan sales, and set the right prices.

FP&A takes you a step beyond everyday accounting. It involves looking at how money moves in and out of your business, identifying trends in customer spending, and understanding how your revenues stack up against your costs. This is not just about keeping your business afloat; it’s about planning for growth and stability.

Adopting financial planning and analysis best practices means you’re setting your sights on not just surviving but thriving. With it, you can make smarter decisions, adapt to market changes more swiftly, and position your business for the kind of growth that lasts. That’s why integrating FP&A into your business practices is essential—it turns data into a powerful tool for future-proofing your enterprise.

Explore how outsourcing can transform your financial planning and analysis and boost your business growth.

7 FP&A Best Practices for Building a Robust Function

Priority of Key Elements in the Finance Function; Source: WNS

Best Practice 1: Forecasting Through Multiple Scenarios

As businesses grow, it’s crucial to prepare for various financial landscapes. Sure, setting a budget based on goals and actual performance is standard, but what about those less likely situations? Imagine slower revenue growth than expected, or difficulties in scaling your sales team. What if a new government policy suddenly increases your taxes next year? These are scenarios where comprehensive planning becomes invaluable.

Effective scenario analysis should consider:

• Base Scenario: What if things stay the course?
• Upside Scenario: What if your company outperforms expectations?
• Downside Scenario: What if things don’t go as planned?

Best Practice 2: Identifying Key Business Drivers

FP&A professionals aren’t just problem solvers; they’re also detectives of financial success. It’s not enough to recognize growth; understanding why it happens is essential. Consider factors like innovation. Does it directly contribute to new sales? Can you influence this driver through internal processes? How strong is the correlation between this driver and your revenue growth? Answering these questions can provide deeper insights into what truly propels your business forward.

Best Practice 3: Collaborative Project Planning

Imagine starting a journey without a map. That’s where a Project Plan comes into play. It’s a blueprint for success, detailing milestones and actions essential for achieving objectives. This plan requires seamless collaboration across departments like Operations, Finance, and HR. Using the right FP&A software can dramatically streamline this process, ensuring that everyone is on the same page, facilitating data sharing, and reducing the chances of human error.

Best Practice 4: Focus on Impactful Drivers

Time is precious in business. Focusing on ineffective drivers can divert attention from opportunities that genuinely affect your bottom line. Ensure your team concentrates on drivers that are logical, actionable, and relevant. This approach helps in constructing models that are not only efficient but also adaptable to changing business conditions, enabling more accurate forecasts.

Best Practice 5: Aligning Targets with Broader Goals

Effective FP&A professionals excel at translating high-level goals into specific, actionable targets. For example, if increasing EBITDA is a goal, you’ll need to outline clear, measurable steps for sales, marketing, and operations to follow. These targets ensure that every department and individual contribute directly towards the broader financial and operational objectives.

Best Practice 6: Building a Supportive Tech Stack

How different technologies affect forecast satisfaction?; Source: FPA Trends

In today’s digital age, having a robust tech stack is fundamental for efficient financial planning and analysis. A good FP&A tool should allow you to easily compare budgets with actuals, build forecasts, and visualize crucial financial metrics. This technology supports FP&A professionals by saving time and enhancing the accuracy of their analyses.

Best Practice 7: Developing Measurement Processes

Setting targets is the beginning; the real challenge lies in measuring and achieving them. Define clear KPIs for each target, determine who is responsible, and establish regular reporting intervals. It’s also crucial to have processes in place for adjusting strategies if targets aren’t being met, ensuring continuous alignment with overall business objectives.

Discover how QX helped a PBSA giant cut costs by 50% and improve efficiency through end-to-end F&A outsourcing.

What’s the Bottom Line?

To ensure strategic growth and financial oversight, it’s crucial to understand how to build an FP&A function that aligns with your company’s objectives. The above-mentioned FP&A best practices can significantly improve the effectiveness of the FP&A function, but for businesses with a forward-looking approach, a more comprehensive solution may be necessary. Outsourcing financial planning & analysis can allow companies to focus on their core competencies, gain access to cutting-edge analytics tools & benchmarking data and improve decision-making. Furthermore, outsourcing can provide businesses with the scalability and flexibility needed to adapt to changing market conditions and pursue growth opportunities.

QX Global Group is a leading consulting, automation and BPM company offering comprehensive FP&A services to businesses across industries and geographies. By leveraging our FP&A services, businesses can establish a team of skilled professionals who can efficiently extract data from key business functions and analyze it objectively. This service helps companies identify strategic actions that align with their goals and implement them effectively – all at a fraction of the cost of maintaining an in-house financial planning & analysis team. Contact us today to take the conversation ahead!

Originally published Aug 27, 2024 09:08:29, updated Dec 04 2024

Topics: Finance and Accounting Transformation, FP&A