Financial Planning & Analysis to Strategic Finance

Don’t get stuck in the cycle of backward-looking reporting and drawn-out planning cycles. I have assembled this list of FP&A best practices and tips that can elevate your role as a strategic finance leader. So find out how you can set yourself apart from the norm.

?Finance teams have fought for years to earn a strategic seat at the table and now that finally we have it, the work is only just beginning. Once we are sitting at the decision-making table, we have to make the most of it. The primary function of a?financial planning and analysis (FP&A) team?is table stakes. The business expects you to

• build models,
• Run scenarios for different business outcomes,
• Manage ad hoc analysis requests, and
• Add the financial perspective to growth strategies.

How are you going to go above and beyond to show that you’re an indispensable value driver for the business?

That’s not an easy question to answer. But these FP&A best practices and tips will help you.

1. Understand the common process for headcount forecasting to strengthen your financial models

While there’s plenty of information you can dig up about common processes for revenue forecasting, there’s surprisingly little content out there about?the headcount planning process. That’s why one of the biggest tips from?one of my CFO friend, is to spend time understanding the right rules of thumb for your headcount mix.

Some of the high-level best practices to mention here are:

• In the Initial stage of business with <50 employees, think about having 1 full-time sales and marketing employee for every 2 in R&D
• As your company scales to ~100 employees, flip assumption and start adding add 2 sales and marketing employees for every 1 R&D person
• On the R&D side, think about adding a product manager and designer for every 4 or 5 software engineers and once you have 4 to 5 Product Managers add a group product manager.
• For a sales-led GTM motion, consider adding 1 or 2 SDR / BDRs for every 2 new Account Executive / ?Sales reps
• Likewise, add 1 new solutions architect for every 2 new AEs
• Expect to bring on more employees in G&A (5-6 hires until the company reaches 100 employees) but reduce that pace beyond 100.

?2. Leverage Software to the maximum possible and lean on automation to Optimize Processes

The pace of business change puts far too much pressure on teams to be agile for all of your FP&A processes to live in spreadsheets. While innovation in the CFO software stack has been missing, there have never been more opportunities to bring finance automation into your business. I believe that while spreadsheets aren’t going anywhere, however, I do not see an option but to optimize the finance function by embracing FP&A Software.

I would love to get to the place where we can eliminate spreadsheets, but I don’t think we’ll ever get there. But it would be nice to put much less emphasis on them…. I don’t care if you are amazing at Excel in the future because I want you to be leveraging software, and I’m more curious about how you think through problems and use your analytical skillset.

Technical financial modeling skills are a must for any effective FP&A pro. But the more you emphasize the ability to automate and leverage technology to focus more on putting your analytical skills to work, the further ahead you’ll get.?

3. Don’t Settle for Traditional Budgeting Processes and Annual Planning Cycles

Running the business based on one detailed planning process per year used to be the norm. But the best FP&A professionals have evolved far beyond making planning an annual affair. This is what?I see as a critical part of elevating finance’s strategic role in the business.

There’s always a big annual lift toward the end of your fiscal year. It’ll take multiple weeks and, in some cases, can take more than a few month to do all the work that you need to do… You can’t skip the annual process, and you must always expect that you’re going to have quarterly plans. But if you’re keeping track of things every month, it allows you to iterate and change the plan as needed, so you maximize the chances of hitting your goals.

Your ability to maintain a rolling forecast and continually re-forecast to add new context to financial and FP&A models is crucial to making data-driven business decisions across the organization. The more iterative you can make the planning process, the more strategic value you can deliver to the company.

4. Focus on Flexibility and Consolidation in Your Operating Model

The last thing you want to do is spend weeks building a financial model for the business, only for the file to sit unopened in a folder once you’re done. Your goal should be to create an operating model that perfectly represents the business and remains flexible enough for practical use cases and

• This model should be the one source of truth for all financial data. It makes the model the go-to place to look for any metric about the business.
• The model is the ability to run different cases… We weren’t able to do that before because it was not consolidated, you can’t see how all the different metrics shake out… And then the
• Third is just general comfort in the forecast. I would say the accuracy of the forecast… is at an appropriate level for where we’re at… and I don’t know if that was the case before.

So build your model so that it’s a tool for partnering with stakeholders across your business. If it’s not, you risk wasting valuable time and effort creating a model that can’t help the company move forward.

5. Build Strong Relationships with Business Partners to Get a Unique Perspective of the Data

It’s easy for finance professionals to get caught up in the cyclical nature of the role and a transactional relationship with department leaders. That’s where the perception of finance as budget gatekeepers and number crunchers often comes from.

The strategic FP&A functions must resist this dynamic of gatekeeper and number cruncher. The more you push to build true partnerships with people across the business, the more successful you’ll be in your role and as a value driver for the company.

Knowing how teams are organized and being able to see them; knowing who’s in charge of what and what they’re working on — whether it’s tenure or whatever data you’re trying to look for — you can get a perspective on the business that you don’t normally have. And so, taking that information into a planning meeting gives you just that much more context for when people are asking for things, justifying things, or asking for feedback on whether or not they should do something.

So better partnerships lead to a better understanding of the business. And a better understanding of the business is what makes department heads feel like they can trust you. Consistently building this trust is the difference maker for strategic finance functions.

6. Surround Yourself with the Best Talent Possible

Success in FP&A doesn’t revolve solely around your skills. The people you surround yourself with?inside and outside of the finance function?can make all the difference in your growth.

One of the many things that I can take away from my experience so far is to work with A-team people to the best of your ability. And the A-team doesn’t just mean your boss or your coworkers or colleagues, it also means your partners and your vendors and folks you work with even outside of your company and your immediate comfort zone. When you have a highly-motivated, highly-driven, very ambitious people around you, it’s so much easier to unblock certain things.

Making the shift from traditional FP&A to a true strategic finance function isn’t easy. But it’s a lot easier when you have the right people and partners around you.?

7. Establish a Solid Data Infrastructure as Early as Possible

Your ability to answer critical questions about the business at the pace your partner's demand comes down to the strength of your data infrastructure. It doesn’t matter how good your modeling or analysis skills are if the data is a mess. So your top priority should be to bolster the company’s data infrastructure.

We are the ones who are oftentimes looking at datasets that touch various parts of the organization, everything from product usage to customer data, software subscriptions, etc… With that in mind, you can see that if we can’t answer questions quickly, then we’re unable to make strategic decisions quickly. At this stage, waiting months to make strategic decisions makes the difference between incremental or hockey stick growth.

8. Learn Your Business from the Bottom Up

Even though your overarching goal may be to elevate your strategic role in the business, you can’t lose sight of the day-to-day work that finance has to do to keep the lights on. Don’t think of these lower-value tasks as menial work to automate away as soon as possible. However Automation is critical for your ability to play a strategic role long-term. I my view getting your hands dirty in every single finance workflow gives you the foundational understanding of the business needed to succeed in that strategic role.

Being more technically savvy and more data-savvy was helpful to my early success at TATA Communication. But ultimately, it was just getting my hands dirty in as many workflows as I could, learning things from the bottom up, and wearing as many hats as I possibly could. That really helped with where I am today, building things and really understanding how they work, understanding dependencies through and through. It’s been a tremendous help just being able to speak the language of all the different finance functions.

9. Show Business Partners the Disruptive Impact of Finance

It may seem obvious, but the best way to make a reputation as an FP&A team that adds strategic value to the business is to prove that tangible value as early and often as possible. It meant finding ways to showcase the “disruptive impact” of the finance function.

The second thing that comes to mind is disruptive impact. The more you can find a way to have a transformative impact on the company through your work, demonstrating that that’s going to be your philosophical and cultural approach goes a long way. If you’re focused on going above and beyond to deliver impact to the company and transform not only the way your organization or team works but how the company works and what the company does… can set you up for success.

The Future of Financial Planning & Analysis Is Strategic Finance

If there’s one thing to take away from all of these FP&A best practices, it’s that you should focus your initiatives beyond the baseline tasks and workflows you’re responsible for. Do everything you can to set yourself and your team up to focus more on building relationships and doing work that delivers tangible value your partners can understand.

In many cases, that means revamping your?software stack with solutions that automate the transactional, repetitive work of the job. But it also means embracing a philosophical shift from FP&A to strategic finance.