FP&A: An Evergreen Challenge

There have been lively discussions recently in various corners about the need for finance to do more in the realm of business analytics. The general sentiment seems to be that finance, where natural analytical talent resides, has a great deal to offer to operating managers who are trying to discern the most favorable options for growth.

Which customer segment deserves more hand-holding? Will more hand-holding pay off with better retention rates and more consistent levels of profitability? Which new market opportunity to jump on? Which option would incur an unbearable level of marketing cost? Why is one manufacturing plant capable of 30 percent greater throughput than others? What’s the net economic benefit of that superior performance? Is it wise to spur demand by offering customers the option of locking in current commodity-driven price levels for the next six months?    

Without a doubt, financial planning and analysis (FP&A) professionals could bring practical perspectives to the table. But note: observers of the finance community have literally been repeating this mantra for decades. One could infer there has been no progress made during all this time. But the more reasonable interpretation is that operating managers’ needs for financial analysis evolve continually.

FP&A: Top Improvement Target

In December 2014, APQC fielded a survey to learn what financial process improvement projects are top priorities for 2015. The survey was sent to APQC’s audience segment that is called “Business Excellence.” These are people with titles such as enterprise process architect. They are credentialed in process management, change, and quality. They parachute in from a central group to manage large transformation projects within administrative functions such as finance, HR, and procurement.

Planning and forecasting are the most prevalent activities that the change agents are working on in 2015 (Figure 1). The implication is that finance must do a better job of helping operating managers allocate resources wisely as they pursue promising opportunities.    

     Top Five Financial Management Process Improvement Priorities*

Figure 1

David Axson, a Managing Director in Accenture’s Finance and Enterprise Performance practice, says the majority of CFOs now have to grapple with business conditions characterized by persistent volatility. Axson also directs thought leadership programs for his practice area and points to a recent Accenture survey. “This comes at a time when CFOs are pivoting from a focus on cost management to a focus on growth.” The upshot, he says, is that finance must excel at complex risk management and complex performance forecasting—and be very persuasive when delivering insights to the business. “CFOs and FP&A professionals need diplomatic skills and sales skills to be effective in today’s markets,” says Axson. “You need to be able to make a case for the advice you are giving to the business side.” Another implication, he adds: “FP&A will have to perform more sophisticated scenario and sensitivity analysis.”