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Hi everyone! My name is Anna, and I am an FP&A-holic. Yes, I said that, I am addicted to financial planning and analysis. I am excited when all the checks in my financial models are colored green, and I get thrilled out of digging into data and finding insights that lead to better business decisions. After 15+ years in Financial Planning & Analysis (FP&A), Ive learned some hard truths things I wish someone had told me earlier in my career.
As FP&A professional, how often do you feel that you do something you shouldnt? FP&A is an evolving function that falls into the intersection of finance, operations and strategy aimed at driving better decision-making trough insightful analysis, forecasting and goal setting. Having unique access to data about all the activities throughout an organization, it is not uncommon that FP&A teams are often asked to perform tasks which are not necessarily aligned with their core objectives.
With constantly evolving role of the finance function in the organization, these are FP&A practitioners who feel the most pressure to be jack-of-all-trades. Growing variety and complexity of tasks force them to develop skills, both hard and soft, to keep up with all requirements and expectations. There is a specific product on the market I could associate FP&A with, and this is a Swiss multi-tool.
Finance business partnering is not a new concept and has been around for a while. Well, not just for a while, for more than 60 years. “ The success …depends on the extent to which finance men are capable of looking outside finance and playing an active, rather than a passive, role in the business. ” — S. R. Harding, F.C.A., (Royal Dutch/Shell Group), 1963.
FP&A is the sexiest job in finance… While this may seem like an overstatement, FP&A positions are becoming incredibly popular and sought-after. Many finance professionals are starting to feel that they are too focused on historical data, reporting, compliance, etc. Moving into FP&A from other fields of finance, such as accounting and audit, has recently become very trendy.
Hurricanes are among the most violent storms on our planet producing strong winds, heavy rains and floodings. Budgeting is a type of short-term planning the goal of which is to transform strategic objectives into operational plan by allocating available resources. Though one is a natural phenomenon and the other is a business process, budgets and hurricanes have more in common than it may be noticed at first sight.
FP&A teams do not have a crystal ball… Yet, they have to answer management’s questions about the future every day. What sales will the company generate next year? What revenue will the launch of a new product bring us? How will the competitor’s move impact our market share? These are only few examples of the uncertainty we face. Being asked for advice about uncertain future outcomes is indeed flattering, but at the same time it adds much pressure and responsibility.
Warren Buffett once suggested that the concepts of time value of money and discounted cash flow (DCF) model were introduced more than 2500 years ago. In about 600 B.C. oracle Aesop formulated his investment insight "a bird in the hand is worth two in the bush" and since that time the model for calculating the value of an asset as the present value of the cash generated by this asset throughout its life has remained unchanged.
Budget and annual planning cycle - these words can make many people tremble. Aimed at determining firm’s short-term objectives and transforming them into operational plan by allocating available resources, annual planning exercise is mostly considered by its stakeholders to be a curse rather than a savior. There are many reasons to hate budget effort.
Marketing teams, being among FP&A’s counterparties, are usually considered to be the most creative people in the company. They are responsible for understanding consumers, building relationships with them and eventually getting them interested in company’s products and services. To perform these functions marketing, as a discipline, possesses a wide range of tools and techniques that can be used to analyze data, verify hypotheses and communicate information.
Young people usually choose their career in finance as it seems to be rather easy to measure success: there is a beaten path from an entry-level accountant/auditor or financial analyst to finance manager and later to CFO. But with all this professional success going with a bunch of certifications and high salary, the real question that comes up is whether it is possible to be happy at work?
Fast-changing environment of the digital age requires not only rapid adaptation of business but also of the finance function, which leads to the evolving responsibilities and roles of the finance professionals. Today’s digital era is known as a turbulent environment with constant changes which forces companies to be extremely nimble to mitigate risks and, what is more important, to identify and capture opportunities.
The finance function now plays a crucial role in many organizations supporting and driving effective business decisions, and this is exactly the responsibility of FP&A standing at the crossroads of finance, strategy and technology to leverage data and generate insights. Many finance and FP&A leaders are now facing transformational projects trying to find the future shape of the FP&A organization.
Assessing efficiency of businesses, projects and processes, the finance function does not always set an example in terms of best productivity. There is always a room for process optimization in which lean approach can help by focusing on value maximization while minimizing efforts. The evolution of the finance function results in new roles of finance professionals as strategic co-pilots and process and performance management experts.
Recent technological advancements and constant changes in the business environment enable the finance function in general and FP&A teams in particular to adopt new ways of work, new practices, new tools to meet the needs of their internal and external customers. Unfortunately, 75% of time of FP&A teams is still allocated to data gathering and process administration.
Many FP&A professionals have faced the misunderstanding of the role of the FP&A function and its core activities in the company. Unfortunately, the existence and support of some of the misperceptions create a negative image of FP&A practitioners in the eyes of their colleagues and make the profession less attractive from the standpoint of graduates and young specialists.
The growing variety and complexity of tasks within the finance function has resulted in the creation of a discipline that is supposed to become a bridge between the finance and business to support decision-making process by leveraging data and technology. This relates to FP&A which stands for financial planning and analysis. The emerging FP&A practice steps out of the shadow of other finance functions becoming a standalone entity which involves its own mission, goals, organization, proce
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