Part 19 in the Dynamic Planning Series
Finance, and financial planning and analysis (FP&A) in particular, is being asked to play a larger role in strategy and the success of the enterprise. The world we live in is a much more volatile and unpredictable environment than it was just a few short years ago. Gone are the days where successful organizations are focusing their finance resources on accounting, auditing, and budgeting. The emphasis today and going forward is much more on guidance-based support like advanced analytics and demand planning.
How does an organization move from the old world of bean-counting and reporting to the new world of helping the enterprise make better, smarter decisions faster? The answer is finance transformation.
Aligning finance with the overall business strategy
Finance transformation can be broadly defined as the strategic initiatives aimed at improving finance within an organization. The goal is to align finance (and FP&A) with the overall business strategy to become more efficient and provide better service to their business partners. The focus of finance transformation is often on one or more of the following: governance, scale, and service.
One mistake to avoid is setting too broad a goal, such as having a “best-in-class” FP&A function. This kind of thinking often leads to a) focusing only on costs, b) underestimating business complexity and added services, and c) seeking universal satisfaction.
An important aspect of the finance transformation is to have a clear and concise vision, or more simply, “What do you want your FP&A team to be able to do?” One of the first steps is to chart what your FP&A team is doing today versus what you aspire your FP&A team to be doing. You need to concentrate on where the company is heading rather than on where the company has been.
Your organization should be much more focused on ROI rather than on cost minimization. Set goals that are specific and decide what to stop doing.
Building the capacity for higher-value activities
Survey after survey report that FP&A teams continue to spend way too much of their time on low-value, and even arguably no-value activities. An often-overlooked component of a finance transformation is eliminating and minimizing these kinds of activities to build the capacity to take on more profitable initiatives.
I am a true believer in the “3-Cs” philosophy: capacity, capability, and collaboration. You have to build capacity so that you have the bandwidth to take on additional responsibilities. Then you have to have the capability via the right people, processes, procedures, systems, and tools to perform the new responsibilities. Once you have achieved the first two, you can then reach the desired state: that of collaboration as a business partner (or even business adviser).
You must be able to manage your business partners’ expectations, because by trying to please everyone, you may end up pleasing no one. You need to work with each of your constituents to determine the most important activities, then scope out and prioritize the work that needs to be done.
It is very important to realize and embrace finance transformation as an ongoing process and not a one-off exercise. People should be willing to question and challenge the finance transformation plan, because we continue to operate in a dynamic business environment where the velocity of change will only continue to increase.
In the next blog. we’ll continue this topic on finance transformation.
2018 will be a busy year with FP&A Roundtables in St. Louis, Charlotte, Atlanta, San Diego, Las Vegas, Phoenix, Boston, San Francisco, DFW, Minneapolis, London, Jeddah, Hong Kong, Denver, Raleigh, NYC, Singapore, Chicago, Bahrain, Kuwait, Frankfurt, Dubai, Kuala Lumpur, and many other locations around the world to support the global FP&A community.