As summer draws to a close, FP&A is settling in with a more pragmatic view of the road ahead. The challenges faced due to the pandemic are now less chaos and disruption and more known uncertainty and a new normal. Teams are frequently finding themselves raised to a much more strategic role, especially if they have the right tools and focus to guide the business to continued short-term success. And, with the economic outlook still quite murky, those who can successfully navigate this transition could become a hot commodity in the near future.
Here are a few expert opinions we’ve found helpful in the past week, and we hope you do, too.
What the Experts are Saying on FP&A
The pandemic is forcing more companies into bankruptcy, but surviving that process can be viewed as a learning experience for FP&A and the CFO. Of course, CFOs need to have done their best to avoid bankruptcy, but given the current environment, it’s been an unavoidable fate for many companies, especially those in retail and travel. And, for better or worse, it adds to a CFO’s skillset and demonstrates their ability to juggle the process while managing ongoing FP&A activities. “Among their marketable new skills: the ability to produce high-stakes liquidity forecasts, negotiate with lenders and even revamp a company’s whole business model, all while navigating legal proceedings and managing everyday responsibilities such as closing the books.”
On the same topic as above, companies struggling to adapt to a post-pandemic normal are actively recruiting FP&A professionals, while those at unstable companies may already be looking to make a move before they’re downsized. That puts pressure on CFOs to actively retain their most valuable team members. Those who are adept with digital tools, show curiosity, and are comfortable with their remote work environment are bubbling to the top of that retention list. “‘They must be willing to be innovative, help drive the right kinds of decisions, and are not just doing one thing for our company, but are part of a larger team making our company better.’”
Deloitte / WSJ: Laying the Groundwork for a Future-Ready Planning Process
There is hope that this black swan event is pushing FP&A to better prepare for continued uncertainty and potential future events. Experts suggest companies employ more “shock resistant” planning techniques, such as continuous planning, a focus on value-add activity, and incorporating more digital capabilities. “CFOs also need to challenge the existing mechanisms by which they are integrating, analyzing, and modeling vast quantities of data. Using enhanced capabilities, they may be able to unlock the value uniquely attributable to financial forecasting—its ability to inform strategic decision-making—and, hopefully, avoid the kind of shell shock they’ve experienced in the past year.”
Financial Management: The pandemic’s effects on forecasting and budget allocation
Results from a survey earlier this summer indicate that FP&A teams have significantly accelerated their financial modeling frequency. That’s to be expected given so much uncertainty and change, but the results are quite jarring: 43% of companies are modeling weekly or more often. The remainder model at least monthly or as needed. And while most used to forecast on three- to five-year horizons, the norm is now a year or less. “The majority of the respondents now forecast for the next 12 months, with forecasting for the next six months and for the next three months being the next most common.”
“The new normal” is an overused, yet accurate, term. Most FP&A teams have adapted to the current reality and stabilized cash flow, increased liquidity, and equipped the business with the financial IQ they need to, at the very least, survive for the short-term. But now that those temporary fixes have taken hold, where should CFOs look to instill longer-term stability? “Companies now face the task of balancing competing goals: improving cash flow and implementing sustainable value creation strategies, while simultaneously ramping up for increased business activity.”
It can be a challenge to get every corner of the business speaking the language of finance. But when even FP&A and Accounting are siloed, it can cause inconsistencies and derail both sides of the conversation. Communication and collaboration are critical, and the best solution might be to keep these two teams focused on the business. “Another way to keep teams working together is to train them to look at numbers in terms of business drivers. FP&A specialists tend to be better-equipped to do this, because translating business activity into financial terms is their job. But accounting staff can benefit from it as well.”
Stay Tuned for More Useful FP&A Content
We’ll be continuing this weekly update with links related to how FP&A and CFO’s are leading their organizations through the continuing recovery. If you have comments, questions, or suggestions, please engage with us on Twitter, LinkedIn, and Facebook.