Financial Planning and Analysis (FP&A) is an important function within any finance department. Many CFOs and senior members of Finance are skilled in FP&A. A strong Financial Planning and Analysis function provides important financial information and control to every business. Here are three ways to maximize your FP&A in supporting your company’s growth.
Write your story with numbers
Every business has a founder, and every founder wants to tell a story. They hire Sales and Marketing to tell stories about the product, but who tells the story about the business? FP&A. The company’s Financial Planning and Analysis team translates the Sales and Marketing story into a financial plan that tells that story from the perspective of the company’s financial statements.
What financial story does your business need to tell? The most obvious is the amount of income your Sales and Marketing team expect to generate, but as with every good story – there are subplots. What cots will your Sales and Marketing incur to generate and convert leads? What will your research and development team need to continue to develop solutions according to market research and feedback from customers? How will you attract and retain quality talent? Where will your employees work, and where will your customers meet you? These sub-plots tell the company’s full story. FP&A is the omniscient narrator who explains everything from an outside perspective and providing management a full understanding of all activities within the company.
So, when you’re sitting in your planning meeting and discussing how business is expected to perform, make sure you’ve invited your FP&A team. They will plan your goals in numbers and write the full story. Now, your company has a story that can be reviewed making sure there are not plot holes!
Proof of success (and failure)
Numbers don’t lie. They can’t. They’re numbers. But people make excuses and to explain why they aren’t performing or try to embellish the truth of their successes. When FP&A presents and reviews number, they do so independently of the stories the business will tell. A good FP&A team will have enough market knowledge to explain these numbers from both a financial and a business perspective.
The proof is in the numbers, and FP&A will hold your teams accountable for reaching their goals. It’s difficult to argue with FP&As assessment of the company unless the business is hiding something. Would you want to know if something isn’t right?
Leading the growth
FP&A truly shines in leading company growth. Every sales person will boast about beating their revenue targets, but will they champion the amount they spent to reach it causing a reduction in margin? HR will tell you how much staff will cost and whether the organization design is achieving results, but will they be able to relate that back to a revenue number? Marketing will want budgets for ad revenue and events. Who is going to make sure all of this is included in a health business model? You guessed it! FP&A.
One of the strongest controls that FP&A provides is Plan vs. Actuals and Reforecasting. The conversations which are had because of this review will help to mitigate risks of overspending and failure. (It won’t mitigate them completely.) FP&A will benchmark the actual activity against he plan and based on results will reforecast each line item of your financials. Has your company done well? FP&A will review the market with you and possibly suggest you reforecast your revenue line upwards. Is the market performance less than optimal? FP&A will take a look at what your revenue might be if the trend continues and how that will affect your company’s ability to remain profitable and operate or if additional cash infusions are required from an outside source.
So are you ready to tell the story you want to tell and grow your company the way you want to grow it? Now’s the time to consider FP&A as a real component of your team and someone you can and should rely upon to help your business grow. Advancing to IPO provides Outsource CFO and Consulting services to companies at every step of their growth – from pre-seed and ideas to IPO and beyond. Schedule a meeting with us today to talk about your company’s future.