Most CFOs are not happy with their Financial Planning and Analysis process, believing it delivers too little value and can eat up too many resources. As a result, they often ask “what best practices should we be following when it comes to Financial Planning & Analysis?” To date, the answers have been based on other financial colleagues or Google results. What’s been lacking is valuable information from experience – until now. Our experts have collaborated and come up with 6 best practices in Financial Planning & Analysis (FP&A) that we think will help all financial executives.
When working with FP&A, we learned what the most successful organizations are doing differently from everyone else when it comes to FP&A. These successful organizations consistently meet or exceed their targets, and they consistently meet or beat their competition. Hard to think of a single CEO who wouldn’t crave
those results. Here is what we found:
- Transform Strategy into Actionable Plans
It’s not necessarily to plot the strategic direction of your organization, but to help design and then facilitate the process of translating strategy into actionable plans.
- Connect Operations and the Financials
Incorporating lessons learned from operations will improve forecast accuracy and ultimately will help your organization achieve greater success.
- Translate both Financial and Operational Goals down to more Specific Targets
Companies can have explicitly linked operational metrics & goals with financial performance, and they understand the relationship.
- Establish Short- and Longer-Term Targets for Business Drivers
Have a vision of where you want to be on those business drivers in the long term, but also “make it real” by establishing short term targets.
- Develop Initiatives and Projects to Achieve Business Targets
Longer term targets will probably need strategic initiatives, while operational projects will deliver the nearer term results.
- Monitor Business Results and Tie them to Incentives
- Monitor your operational and financial results, including progress toward goals, and provide the right incentive structure to help ensure those goals are met.
Again, what CFO, or CEO for that matter, wouldn’t want to put these best practices to use? The question though is how these best-managed organizations were able to achieve these results. The companies that are best at using FP&A are using it to drive business outcomes, not just predict them. They have a clear understanding of how operational improvements will drive financial results, and they focus just as much attention (if not more) on operational planning as they do financial planning. They know the resources they need to get those results, and after making their case, those resources are baked right into the budget and clearly identified. Is there more to it than that? Yes, a lot more, but like a compass, those basics point north.
So, what’s the first step to take in your journey to move toward best practices for FP&A? After reading this blog, you may feel that your organization is behind on following best practices. You aren’t alone. The good news is that even small steps can make a big difference. What’s that next small step? Contact us or another FP&A expert to get the conversation started.
Author: David Bence, Director of Business Analytics
Other articles you might be interested in:
{% set pop_posts = blog_popular_posts(‘default’, 3, ‘iot-analytics’) %} {% for pop_post in pop_posts %}
{% endfor %}