By Thomas Lundell, Director FP&A at NetApp
For quite some time CFOs and the finance community have been talking about transforming the finance function, becoming better business partners and focusing on the value-add, strategic activities.
At the core of that transformation is FP&A, as activities like business planning, business unit strategy, investment allocation and predictive analytics become important to fulfil finance’s new, expanded position within the company.
But to do that, FP&A itself must transform and change from its traditional flux analysis and flash reports to a much more modern and cutting edge department within the company. When starting to embark on your own FP&A Transformation journey, there are a couple of principles you need to keep in mind.
First, there isn’t a one-size fit all optimal FP&A operating model that all companies in all industries should implement. Personally, I have worked in finance in FMCG, Consumer Durables and Silicon Valley IT. It would not be possible to run the same finance operating model in all those companies at the various life-cycle and maturity stages there were in. The industries and companies were at very different levels of maturity, complexity, growth, and the technological capabilities were very different. So you need to make a proper assessment and decide on a model that is right for your specific company.
Second, you need to articulate the future operating model (see figure 1), what your new FP&A department will look like in a future state and what your key focus areas will be. If you only articulate what FP&A is not going to be doing, (for instance no flash reports, accruals, or expense reclasses) your transformation will be materially slowed down or impossible. Your team may even fear that they are losing their jobs and will actively work to resist your transformation efforts. Transforming FP&A needs to be a positive thing that will allow FP&A to take on an even more strategic role within your company.
Figure 1: FP&A Operating Models
Third, you need to work with a phased and structure approach. Transformation is difficult, time-consuming and not without risk. Your FP&A staff is very busy and working very long hours already. They are buried in basic duties and don’t have the time to undertake major transformations. Furthermore, there is operational risk involved when transforming FP&A. If you do it wrong, you could even inhibit your company’s ability to close the books timely and accurately. So you have to approach transformation in a structured way and use a phased approached to balance the workload of your team and mitigate the operational risk of the company.
Lastly, the optimal operating model evolves continuously over time, which means that finance leadership constantly must evaluate the current position and continuously transform their departments. Technology changes, your industry changes, your growth rate changes, your business complexity changes, and you need to continuously evolve and adjust your operating model to those changes. Transformation is an infinite game, not a finite game. What is cutting edge today, is probably old-fashioned tomorrow.
By Michael Royall, author
Interview with founder of the International FP&A Board Larysa Melnychuk
The global trend for FP&A is surprisingly singular; apparently, we all want to know how to influence and predict our financial future. At the International FP&A Boards, professionals from all over are eagerly sharing and learning about how to get there.
Three-and-a-half years ago Larysa Melnychuk left her corporate job of 18 years working as an FP&A (Financial Planning and Analysis) professional for several different large companies in the UK. At the time, the discipline, involving—roughly speaking—the use of financial data to make fast decisions based on prediction, was rapidly developing.
When Melnychuk left, she remembered a question that had fascinated her before: how do the other companies do it? It was the seed that led to the International FP&A Board, a professional discussion and debate forum for senior finance practitioners. The Board is now well established in 10 cities and 9 countries in Europe, the Middle East and Africa. Soon, it will be expanding to North America and Australia.
Why is the Board growing so fast?
People are realizing that the classical style of management accounting and financial planning and forecasting simply isn’t enough anymore. When I was a practitioner myself, we were always working on tight deadlines. But at some point, you just need to stop and look at your company from the outside—think about how others might be doing it.
That’s the main reason a lot of prominent CFO’s and Finance Directors attend our boards: to understand what’s happening around the globe. The Boards are exclusive to CFO and FD-level practitioners. We share diagnostic content and case studies, analyze the latest trends and discuss best practices. Contributing to this global exchange of knowledge really appeals to a lot of people.
Our Boards offer a non-commercial and vendor-agnostic environment to do so.
And it seems to be working?
The first Boards were organized in London. That’s where we developed the FP&A Analytics Maturity Model, Rolling forecast and the FP&A Business Partnering Models. They all received great feedback in the global FP&A community. Soon people were joining in the London boardroom through Skype or flying in from the Middle East and all over the place.
That’s when we decided to come to them. Our first International Board was held in May of last year in Stockholm. Now we're on three continents and the exposure and support we're getting are fantastic.
In the Benelux, the events are complimentary to our members thanks to the partnerships we’ve developed. One of those partners is Tagetik, a company that currently sponsors many of the international Boards, namely in the Benelux, Switzerland, Germany, UK and Sweden. Tagetik will also sponsor the launch of New York FP&A Board on the 6th of April 2017.
The Association for Financial Professional (AFP) is our educational partner. They provide the first FP&A certification in the world. We’re provided with the beautiful boardrooms we meet in by the Page Group, the global recruitment and consulting company we’re partnering with.
You've only just had a Board in Brussels and Amsterdam, how's FP&A developing in the Benelux?
Each country has its own dynamic. Even when we discuss the same case study, the results are different. During the Benelux meetings, we tried to lay the foundation for changing the FP&A Analytics Maturity Model into an operational model. It was incredibly inspiring.
Thomas Lundell was present at both meetings. He’s the FP&A director of NetApp and held a presentation about the big FP&A transformation his company is going through right now. Thomas was asked questions long after we'd finished. You could see people’s inner child being released, they were so curious.
What's interesting about the NetApp case study is that it shows that there's no single 'right way' for making the transition to a more predictive, real-time FP&A — each organization is unique, even though we broadly face many of the same challenges.
What would you say those challenges are?
We’re definitely living in the Big-Data world already. Still, there is an inability to use this data for forecasting and planning—or to distinguish key business drivers. Huge amounts of time are spent by financial analysts on cleaning data, trying to find the logic, consolidating the result. This means less space for creative, predictive analytics.
At the same time, many organizations still have not-so-consolidated processes, very dispersed and disconnected. In reality, this should be a company-wide initiative, integrated and collaborative with a simple planning process that’s easy to manage.
In terms of technology, from spreadsheets and markers, we're moving towards integrated and collaborative planning platforms, where different kinds of planning processes are harmonized.
Isn't there software to help with that?
Of course, but before you introduce the new FP&A systems you have to understand the architecture of your model. Not enough companies have predictive models that are based on key drivers that allow you to react fast enough to developments. Historically there are a lot of partially data-driven businesses — very complex and very static models — and we still continue to have that today.
We need to harness the ability the power of modern technology. Excel is still dominating the world, and because of its ease and flexibility, everyone likes it. However, it has a lot of shortcomings and limitations. As I always say, it's good to have Excel, but it's not enough.
So what's next for FP&A?
If a driver-based model is implemented in a good system properly, then organizations can have incredible results—including an agile and flexible decision-making process. But don’t forget the people. FP&A business partnering and a good communication flow are essential for those results. The right talent is increasingly hard to find. We need people to crunch incredible amounts of data, yet with the ability to communicate with decision makers.
Eventually, companies should be able to predict in real time in order to react to current changes. Leading organizations are already moving towards this. They’re utilizing best practices and trends for their analytics, as well as their forecasting and decision-making processes.
By Feng Moon, Finance Business Partner at Medtronic Singapore
Working in FP&A is one of the most dynamic & challenging careers in finance and business world. It appears that FP&A professionals wear multiple hats, performing tasks of a master of communication, a strategic leader, a resource allocator as well as a positive influencer. However, nowadays we experience lack of mature theories and models facilitating FP&A professionals’ development.
As a result of FP&A practice combined with MBA curriculum, an FP&A capacity framework was developed to facilitate:
The framework consists of 13 modules that fall into 3 sectors – core skills, hard skills and soft skills.
Core skills reflect the roles an FP&A professional plays in an organisation. Furthermore, they comprise the key financial knowledge & skills used in a daily practice. Module 12 extends far beyond work helping us rethink our health, our families and our spiritual growth. It is about finding the life balance for every business partner who, on the one hand, dedicates plenty of time and energy to developing their careers, and, on the other hand, securing the foundation of their work.
As everyone knows, the FP&A role is a mixture of hard skills and soft skills. A trust-based relationship helps us fit into the organisation while the quality of our business advice creates values. We summarise hard skills (5 modules) to demonstrate what other knowledge an FP&A professional should master and soft skills (5 modules) to explore what soft skills may contribute to success.
It is clear that these 13 blocks do not have the same priority, we rank the priorities and fill “more important” blocks in blue.
Financial skills mainly fall into 3 categories:
Hardly anyone would argue that to become a true business partner one should have strategy & big picture, FP&A most important capabilities. Senior FP&A professionals always immerse widely and deeply in business with a high portion of time allocated for strategic analysis and planning.
Most business decisions should consider both financial and HR impact. For example, target setting always links with incentive discussion. Future Finance & HR business partners will share more similar capacities & knowledge to mutually build up integrated business solutions.
Leadership (Art of Influence)
Influence level decides the financial business partner level. One of good ways to gain influence level is to take an NGO (like church) leader and influence others positively without power.
Communication & Negotiation
Communication and negotiation are crucial and time-consuming soft skills. Just imagine how time-consuming it is to learn a foreign language and present in a logical & structured way. If there is a big gap in this section, take action as early as possible.
Coach has two meanings here. First is finance coach for business & supporting functions. Some FP&A professionals host finance seminars to develop business team’s finance acumen. This creates the culture of “take finance into every business decision” and at the same time helps these FP&A gain trust quickly. Second, an FP&A always takes the role of a personal coach for their business partners helping them achieve their potential.
This framework may also be applied as a development tool for FP&A professionals to identify knowledge - performance gap, analyse this gap and define the areas of improvement.
This example helps you sort out where the main gaps come from and develop an action plan to strengthen your weakness areas and further develop your strong points.
An FP&A development is just a start-up and the road ahead will be long with no ending. Financial organisations of tomorrow will be leaner and business driven. To achieve this, financial professionals should continuously develop not only in finance & business fields but also master influence skills, strategic thinking as well as work-life balance. Hope this sharing will cast light on your potential and boost your career.
A couple of weeks ago I joined the meeting of the Amsterdam FP&A Board where we discussed the subject of the FP&A analytical transformation. In the course of the meeting the participants mentioned their current main concerns, some of which such as Data ownership, Data quality, and Business Glossary (‘Speaking the same language’). This surprised me. Why? Because these topics are ‘hot’ topics of Data Management (DM) with no common vision on the subject.
As a result I decided to write several articles on these topics for FP&A professionals. The main purpose is to share some knowledge and practical experience and to start a discussion about these subjects.
In this article I would like to talk about the following questions: How to recognize a Data owner? and What the Data owner is accountable for?
I was deeply touched when some of participants said they considered FP&A to be the owner of all data that comes to the department. The arguments were: ‘FP&A makes reports’, ‘Nobody else wants to take responsibility’. I wonder how many of you also share this vision?
To create a common opinion on the subject, let’s explore the following questions first:
Case study: an account officer of your company closed a deal with a new customer and signed a contract. He/she provides data about the customer and the contract. First the data is input in CRM system. Then the data moves to the Financial system and DWH undergoing some processing and finally the reaches FP&A department to be used in reports.
Using Data management language, Customer and Contract data (facts represented as text, numbers, graphics, images, sound, or video) went through the data life cycle (creation, transformation, and usage) through different applications. In the process the Data has been transformed, aggregated, etc. These transformations could have taken place according to different business rules. When data got into some context (in the form of a report) it turned into Information (data within a certain context and timeframe, that have a particular meaning  ). It could happen that Data lifecycle has been embedded in different business processes and went through different departments.
What kind of Data has been involved in our Case Study? Customer data is considered to be a Master data, Contract data is usually classified as Transactional data. Business rules are also some sort of data, which usually defined as Meta-data (data about data).
So, on our journey to define Data owner we need to take into consideration several contexts:
You might become lost as there are plenty of Data-related roles described in different sources. I came across Data owners, stewards, users, providers etc. I was always curious: if I were a person who has to play several roles simultaneously, would I get a A4 paper with clear description what I have to do on a daily basis?
I think one of the reasons for such a variety of functions, is that the creators of these functions do not put them in the relevant context (like the four, that we have just identified above).
So, let’s us concentrate only on the context of Ownership and let’s us continue with the Customer and Contract data example.
We all know that it is difficult to find volunteers within your company who would say ‘I am a Data owner’. How can you prove that somebody is actually a Data owner? Years ago, while setting up Data ownership responsibilities within a company, we developed a list of questions that helped in Data ownership recognition. Some of them are presented below:
Now I am convinced that the solution is quite simple. There are two unambiguous ‘recognition’ criteria for a Data owner which are an ability and an authority to:
One small detail (where the Devil is): these rules are applicable for unchanged data. As soon as data has been transformed it might change an owner.
Let’s get back to the Case Study to get a clear picture.
Customer data (name, address, country of residence etc.) stays unchanged till it reaches FP&A department. So, if you as FP&A professional discover some mismatch or finds that the data is not fully complete, what will you do? Who will be able to verify accuracy and completeness of the data and fill in gaps? As for me only one answer is possible: The Account officer is the Data owner.
Contract data, such as e.g. the contract amount might stay unchanged till it reaches FP&A department. And it still the Account officer who might verify the accuracy of the contract amount. But let’s assume that you will need to convert the amount into another currency, decide which exchange rate to apply or aggregate the data according certain rules… What does it mean? From the moment when these data transformations take place, you, FP&A professional, become the data owner. The same rule is applied for the rules that you might apply to transform data, because these rules are also data.
I will offer some general responsibilities for your consideration, but I need to warn you that these responsibilities might vary for each company. Why? The responsibilities are dependable on the size of the organization and overlap with responsibilities of other roles that might exist (such as System owner, Business process owner etc.).
So, a Data owner is accountable (based on RACI) for:
I hope that the article provokes more questions and arguments that I would like to discuss with you. Feel free to contact FP&A Board and me if you want advice on how to apply these concepts within your company.
 DAMA Dictionary, p.66
 Accuracy is freedom from mistake or error, conformity to truth or to a standard, exactness, the degree of conformity of a measure to a standard or true value, DAMA Dictionary, p.12
 Completeness is the quality of being whole or perfect and having nothing missing, Cambridge Dictionary [http://dictionary.cambridge.org/dictionary/english/completeness]
By Steve Morlidge, Business Forecasting thought leader, author of "Future Ready: How to Master Business Forecasting" and "The Little Book of Beyond Budgeting"
It is difficult to think of another business process that is as universally detested as annual budgeting.
The list of complaints will be familiar to anyone who has run a budget process or has been subjected to one…and that probably means everyone reading this article.
Budgeting has been around for nearly a century but it is still with us, despite its well-known failings.
My guess is the reason is that most people are not aware that there is an alternative to traditional budgeting. Most of the ones that have been touted over the last few decades – Zero Based Budgeting and ‘Better Budgeting’ – amount to no more than doing the same things in a slightly different way. In my view, they do the wrong things slightly righter.
The best alternative – Beyond Budgeting – has also been around for some time but it has failed to have the impact that it should have because it has not been properly understood, or it has been actively misrepresented.
The name ‘Beyond Budgeting’ is an accurate description of what ‘it’ is but unfortunately in some people’s minds it conjures up a nihilistic vision of chaos. I believe these fears are misplaced. Control (in the non-pejorative sense of the word) is key to Beyond Budgeting – it is simply exercised in a different way, using different tools. The ends are is the same, but the means differ.
This is summed up in the following table:
The Beyond Budgeting ideas have matured over the last decade or so and there are now many examples of companies that have applied these ideas and seen their business performance improve dramatically. As a result, I think it is time to correct false impressions of what BB is, and why it is successful. To help relaunch these ideas I have written a short book based on my experience of working with the concepts since they first burst onto the scene in 1998.
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