Controllers Council recently held a panel discussion titled, Beyond the Spreadsheet: Real FP&A Stories from the Trenches, sponsored by insightsoftware.
Our subject matter experts were Ted Weitzel, VP Finance & Ops at Logik.io, Philip Peck, VP Finance Transformation at Peloton Group, and Mike Wiley, Product Manager at insightsoftware.
Following are key takeaways to this discussion. If you are interested in learning more, view the full webinar archive video here.
How do you manage FP&A in your organization? Is FP&A manual or automated? Managed internally or external?
Philip: When you think about the world of organizations and their relative maturity in the FP&A space, at Peloton Consulting Group over now 15 plus years, I’ve worked with hundreds and hundreds of organizations, and I should say my company has helping them extensively improve their FP&A and finance capabilities. I’m going to paint the picture by immature and mature side. Let’s start at the ones who are somewhat more immature. Manual would be a good way to characterize an organization like that. I recently just started a project with a manufacturing organization and they’re a good size. They’re probably a little over a billion in total revenue. They’re privately-held and they have a lot of legacy thinking. I would characterize their environment as manually intensive, non-standard processes throughout the organization. They’ve grown through acquisition; segments and subsidiaries don’t do things the same way. And even thinking about the different planning events, a long-range plan, an annual plan or a budget, inconsistent processes, disconnected processes, differing levels of detail, long cycle times. They’re heavily, heavily dependent on Excel. That’s not necessarily bad, but when it’s highly fragmented, individual models, lack of documentation, kind of the tyranny of spreadsheets comes to the forefront because of their environment. The other component is they’re very insular slash internally focused. They have limited purview into the broader, broader industry and infusing that from an FP&A perspective.
The other end of the continuum, an organization that we’ve worked with for a number of years, they’re in the car retailing business, also with a captive finance company, and they also have some other different operations, wholesale operations, et cetera with over $30 billion in revenue, they have moved to a highly, highly streamlined and automated FP&A environment.
Mike: I think the way you phrased where organizations are at today and relative to their size or maturity, I think is a very good mindset around it. Because when we work with the smaller, maybe younger organizations, it is very manual. But as they grow, the complexity increases. But oftentimes, it’s usually individuals who have that knowledge in their head but then trying to put a process behind it and automate it, it becomes very challenging. At insightsoftware, we see a lot of that as well. A huge dependence on Excel. Everybody’s using Excel to some extent. If you’re not using it effectively, it can be a bit chaotic. It can lead to users looking at different reports or different metrics at different points in time and everybody has their own personal copies of those reports. If it’s not a well-managed process, it can be a very manual and inconsistent process with inconsistent outcomes. I would say we see a lot of that in the organizations we work with. And that’s where we come alongside and try to help get them to that automation level. But I would say it’s certainly depending on the company size, the longevity, their priorities, where they’re at and what they’ve started and what they’ve learned along the way.
Ted: If you are going to be leading any sort of FP&A transformation in your organization, one, be the subject matter expert. Know your model inside and out if you’re doing it in Excel or Google Sheets or wherever you’re doing it right now. And then leverage outside tools, resources, consultants, and bring it internally through you, not through another manner where it’s being shoved down your throat. And being able to advocate for yourself as your organization grows has got to be the biggest item on your list as far as professional development goes. And please be the ones who are always saying “I’m going to keep my FP&A budget and my resourcing under this level per our plan.” These are the things as we grow, I want to bring in and start thinking about that on the front end. So that someday down the road some board member doesn’t say, “oh, actually, I’m going to go this guy I know.” You should go find your people, your tools, your resources, and have a plan, a roadmap, not only for your FP&A process and plan, but also for consultants tooling best practices that you want to bring in as your company matures.
Please explain how your FP&A works with reporting, budgeting, and financial close?
Ted: FP&A in our organization, and I run these in all our organizations, we’re extremely lean. It’s normally me, one or two accountants, and then some sort of FP&A analyst, or a rev ops kind of FP&A hybrid role. Because sales drive the business. But we always start off with a plan. That plan is always a minimum rolling 13 months go forward plan. We have always been very lucky that we’ve been well capitalized. Having to look kind of shorter term hasn’t been on our radar, which is very nice. We have a financial close. We’re holding people in our organization super accountable, especially in the sales organization to make sure that whatever ERP system, CRM system they’re using to enter orders is there. And the biggest thing that you need to think about is, hey, do you have the tags between tools so that if you have to do it manually, you can dump things from different systems and evaluate them between the two different systems. But as you go forward, are you going to be able to put in a tool between your existing tools that can pull data from various sources and aggregate them? And can you download that mind map in your brain into whatever tool you’re going to use? So as far as FP&A reporting and budgeting, I’m on a quarterly basis with the board.
Mike: We provide solutions that address these different areas, you know, the reporting, the budgeting, the clothes or visualization aspects, and having workflows, approval steps, all those things defined along the way. We have many solutions that fill these different needs. What I specifically work with is the reporting side. And that’s usually a good starting point to get organizations on this journey. If we can automate their reports within Excel to take out that manual component, have everybody looking at dynamic data that’s live and coming from your source system, everybody’s seeing the same up-to-date information, and we can push of a button, press and push out reports for your your month-end close, your board packs, whatever it is, automating that along the way is usually a good first step towards getting the longer journey started. So that’s typically where we see it. That’s where I fit into that equation or that process. It’s assisting companies with taking that manual process in Excel, automating it so that you’re still using Excel, your teams are still using something they’re comfortable with, but now they’re on that journey towards getting, towards a full automated FP&A solution.
Philip: I’m going to pick up a couple of cues here from both of you. As you were describing initially here, Ted, connection to Ops and saying, at the end of the day, what FP&A is doing is trying to say all the operational activities in the organization, how does that translate to financial outcomes? And you’re trying to define those driver relationships and the things that manifest themselves. We’re going to rack and stack and put it in an income statement and then hopefully eventually a balance sheet or at least working capital and generating cash flow statements or cash position. But the connection to the ops is critical. And there is what are those data sources? You start with things that are typically ERP actuals in nature, but you may look to Salesforce. There are contracts, there’s pipeline, there’s activity. You may look to a demand planning solution. Say you’re in manufacturing or CPG, and those are purpose-built to provide the inputs, be it volume, be it price, whatever it is, that eventually flows through FP&A. You’re also going to have some other operational systems, your HR/HRIS systems. All those different things provide the operational level kind of information that now you say, well, I’m going to model that. And whether you model that in Excel, you have a proprietary model where you have a robust EPM solution, that’s where you’re manifesting and connecting the dots. They call it the taxonomy or the metadata, the master data, the how do you connect and make sure that those worlds are aligned? Then when you’re designing your models and solutions, at what level of grain and granularity? You don’t necessarily want to be at the lowest level, not from an FP &A perspective. If you’re talking about products, am I down at SKU? Am I down at product family, product group, by customer, by channel? Those are all the things where FP&A brings the secret sauce, but you still need to come back to the operational drivers.
Then Mike, connecting it back to you, at the end of the day, you’re doing reporting and analysis. What are those views that you need to not only represent performance results, but more importantly, on a forward-looking basis, what can we impact? What can we change? What can we drive? So that’s a lot of what we’re doing with clients is through the lens of their industry and their relative maturity on where they are, size, scale, complexity. Some other dynamics that were popping into my head as we’re talking is the decentralized potential nature of FP &A and planning or a more centralized approach. And does that depend in an annual planning cycle or budgeting cycle? Maybe you bring more people and involve them. But from a periodic forecast, maybe you just focus on a critical few things and make some minor tweaks to there’s some of those dynamics you need to wrestle with kind of where you are as an organization.
Tips for more effective FP&A
- Become an extrovert: Start walking around, meeting people, becoming a resource to everybody in your organization.
- Ensure that all your systems have tags or dimensions that are similar between the systems so that you can pull information from one source and another source, knock them together. And then you’ll be able to systematize that in the future if you have another tool that goes out the pipe.
- Visibility of your workout, but just, said, don’t ring the bell, but you got to make people understand why you’re as important.
- Always hire your replacements. Hire yourself out of the job and the next job will be easier to build teams.
- Learn the business and continue to learn the business. The more you truly understand every aspect about the business, the underlying value chain, how things fit together or don’t fit together, only gives you that much more credibility, that much more insights, and the ability to be the most effective FP&A practitioner.
- Being able to define and baseline you the FP &A function across the critical dimensions, business processes, tools and technology, data and information and people or organization, baseline yourself first.
What is the difference between FP&A and business intelligence, scenario modeling, or some other tools?
To view this question and a live demo, watch the full webinar here.
ABOUT THE SPONSOR:
insightsoftware is a global provider of comprehensive solutions for the office of the CFO and the controllership. We believe an actionable business strategy begins and ends with accessible financial data, with solutions across financial planning and analysis, FP&A, accounting, and operations. We transform how teams operate empowering leaders to make timely and informed decisions. Learn more at www.insightsoftware.com.
