How to get started with FP&A

Your firm isn‘t doing much FP&A yet, but you are eager to start?

Don’t do it without a plan.

Here is a concrete tip on what to implement first:

If your company has never done FP&A before, it can be tough to convince the cross-functional teams that there is value in it.

But it doesn’t make sense to invest in building FP&A processes if it’s just a Finance exercise.

That’s because a forecast or a budget process doesn’t add much value if it doesn’t consider detailed assumptions on business drivers.

I’ve gotten push-back in the past, for example, the sales team said all this FP&A work distracts them from selling.

So, you need to start with something the other departments immediately see value in.

All departments want more flexibility around budgets.

I’d recommend you start there. That will unlock a way to begin to do FP&A collaboratively.

Instead of setting a budget at the beginning of the year and then not allowing changes, allow flexibility as long as two things happen:

1) Departments tell us early enough about the upcoming change,

and

2) they share an estimate of what the impact on results will be.

That allows us then to implement two critical FP&A processes:

A forecast that is regularly updated and an analysis process that takes the inputs from the business and turns it into a financial model with an output like a return on investment or a net present value.

In sum -

You give budget flexibility and, in turn, receive buy-in for a forecast and a financial analysis process that is done in close collaboration between the business teams and Finance.

Do that, and the business will quickly start to see the value of FP&A.

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If you’d like to learn more about FP&A, I offer help in three ways:

1️⃣ Watch my free FP&A Masterclass.

2️⃣ Subscribe to my free newsletter, “FP&A Tuesday”.

3️⃣ Join my live online course FP&A Bootcamp to truly master FP&A.