What’s financial planning and analysis (FP&A)? Traditionally it’s about planning, budgeting, reporting, and forecasting based on available financial data sets.

FP&A, the new version

Today’s FP&A needs to be so much more.

First, there should be certain guidelines for how finance and business should interact. Sometimes, finance teams behave as risk-averse “heavies” who are focused on compliance and seem to relish slowing down the company’s growth. The company seems to be in the financial sector. But let’s be clear: finance must work for the benefit of the company.

Second, let’s admit that the majority of the FP&A function’s conventional activities can now be completed by software and computers. Let the machinery do its work, is what I say.

Leading companies are freeing up time to devote more efforts to the business by using technology to crunch and analyse the data. The epidemic has been the clearest example of this anywhere.

CFOs and financial teams globally rose to the occasion during the COVID-19 catastrophe, which changed lives, transformed businesses, and wrecked supply chains. They did so by serving as full business partners and assisting their firms in weathering the storm.

Top of the class In a sense, FP&A matured, gaining a place at the table by enabling the organisation to operate with the financial and organisational agility required to thrive.

Financial partnership and advising in the face of uncertainty

Planning and analysis continue to be crucial—very crucial. The foundation of finance still rests on them. The fact that FP&A is now free of the back office is the important point, though.

It is what I refer to as financial “partnership and advising.” The goal is to advance a function that obviously merits advancement. More than ever, real-time, high-quality FP&A is required because of the rise in so-called “black swan events.”

Significant business interruptions known as black swan incidents can occur anywhere. Think about natural disasters, economic downturns, trade disputes, pandemics, and political upheavals. The list appears to be endless. It appears that these black swan instances will soon pass into the realm of commonplace swan occurrences.

For this reason, finance needs to act more like a partner than a back-office task. Insights from FP&A must be understood by the business in order to handle uncertainty and change, and finance may be a key player in influencing decision-making and directing the enterprise toward its objectives.

The people focus

It’s sometimes simple to forget that humans are behind all of the financial calculations because the field of finance is so enmeshed in figures, spreadsheets, and models. Once again, sound financial planning and execution are essential, but with FP&A 2.0, finance must accept the messy reality of interpersonal interactions.

In this situation, the word “reporting” comes to mind. I usually connect reporting with governmental organisations, military commanders and their superiors, or perhaps a nurse to another during a shift change. Although it performs a vital role, it is highly formalised.

Transparency and trust can grow as a result of good financial reporting to the firm. However, you need to get to know the individuals in the organisation you support if you want your finance team to take trust to the next level.

I advise finance teams to actively participate in the process because of this. Make sure you occupy your seat if it is available at the table. Discover each person’s desires and get to know them.

The “x” factor

Extended planning and analysis is a phrase that is strongly related to FP&A 2.0. (xP&A). The “x” in this case does not represent a particular position or division. Instead, it suggests that silos will not survive in the modern world.

The distinctive horizontal reach of finance is recognised by both FP&A 2.0 and xP&A. Few company departments can justify having such a broad range of responsibilities. Finance becomes crucial for corporate success when the emphasis on people is included.

FP&A 2.0 and xP&A require you to go out and collaborate with all areas of the business in order to grasp the stories that lie behind the numbers rather than receiving inbound reports that contain dry numbers. By doing so, you’ll be able to comprehend your coworkers’ perspectives and produce clever solutions that will benefit the company most.

The long-term face-to-face working connections that contribute to the development of the kind of trust that enables your finance team to dismantle silos are ultimately what will enable this. The time has come for the business to take advantage of the expertise that finance has to offer – not as a “function” where reports are used to control communication, but as a partner where face-to-face, human-to-human interaction is the norm. The financial industry must move in this direction.

I strongly advise you to listen to the most recent Financial Excellence podcast I was a part of with Floyd Conrad, the Global Center of Excellence at SAP, and Jon Essig, CEO and managing partner at SimpleFi Solutions, if you’re interested in learning more about this subject.