FP&A perspectives from the frontline
Anders Liu-Lindberg
Leading advisor to senior Finance and FP&A leaders on creating impact through business partnering | Interim | VP Finance | Business Finance
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We live in the world of the Next Normal where unimaginable changes at coming at us at breathtaking speeds. Doing things like we used to do seems to be out of the question. That also goes for financial planning and analysis. Doing a 12-month budget that takes three-five months to produce just seems silly. Why? Because already two Next Normals might have passed in the period it takes to produce the budget!?
We recently spend half a day with some of the leading companies in financial planning and analysis. They have all experienced the pandemic, the supply chain crisis, the sky-high inflation, and latest the war in Ukraine. We couldn’t think of anyone better to ask how they are dealing with the Next Normal world.?
We specifically asked them what they have learned about financial planning and analysis in the past years and how it has changed the way they approach their standard practices on planning. In this article, we share the answers, and we hope they can inspire you to make some much-needed changes too!?
More frequently and faster?
You’ve all heard buzzwords like agile, xP&A, and beyond budgeting but when it comes to reality the answer to dealing with the Next Normal is much simpler. Companies simply responded by doing things more frequently and faster.?
If they used to do quarterly planning, they now did monthly. If they were used to monthly, they changed it to weekly. And they also started to run the processes faster. Seems obvious since you need to run it more frequently. However, you can argue if they could run them faster due to better processes or simply working more. Likely it’s a combination of both.?
However, it’s fair to ask how in reality they made this happen. Couldn’t be with unchanged processes, right? It wasn’t but again the answer was simple. They asked for fewer details and they rather did their planning top-down than bottom-up. To be frequent and faster they gave in to the need for details.?
And it seems like an obvious choice because what’s the point of forecasting details when you know you’re not going to be anywhere close to accurate. Even if you only did a high-level forecast, you’d most likely be quite wrong but better to be roughly right than accurately wrong as one of the companies mentioned using a very popular phrase in the FP&A world.?
Planning for the Next Normal?
What we heard during this meeting very much aligns with our way of thinking. When planning for the Next Normal we must do something differently. Otherwise, everything breaks down and we don’t get any planning we can rely on anyway.?
We need a new approach and as we have highlighted in our series “Planning as we know it is dead” we recommend taking a driver-based approach. Here you will employ top-down forecasting and shift the dialogue from what the number should be to how we can realize (or even beat) the number). It’s the only way to give management a reasonable view of expected future performance in a fast-changing world.?
Now we’re curious to hear what you changed in your FP&A processes in the last few years. Did you also go fast and frequent or did you stick with your processes? And are you taking a bottom-up or top-down approach? Share your experiences in the comments and let’s keep learning together about how financial planning and analysis should work in the age of the Next Normal!
This was the sixth article in the series "Planning as we know it is dead". You can read the previous articles in the series below.
While you await future articles why not read our latest series "FP&A Transformation Talks" below.
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You can read a lot more articles about FP&A, Business Partnering, and Finance Transformation below. It all start's with “Introducing The Finance Transformation Nine Box”?where you set the ambition for your transformation. You should join the?Finance Business Partner Forum,?which is part of the Business Partnering Institute's online community.
How Finance should use its seat at the table?(the last article in a series about the "Unfair Advantage" of Finance)
The ultimate guide to decision-making for finance professionals?(the last article in a series about the decision-making process and how Finance should impact it).
The Mindset Change Checklist For Finance Professionals?(the last article in a series about the mindset change that finance and accounting professionals should make to become business partners)
It's Time To Decide If You Want To Be A Business Partner?(the last article in a series about the personality traits of business partners)
All Successful Business Partners Are "Leaders"?(the last article in the series about our new capability model)
Should We Keep Talking About Business Partnering??(part of a 17-article series where we deep-dive on the WHY, WHAT, and HOW of business partnering by putting it on a formula)
Everyone Can Adopt A Business Partnering Mindset?(part of a six-article series about FP&A Business Partnering)
From Business Partner To Working Within The Business?(part of an article series where I interview finance professionals about their careers in FP&A and Business Partnering)
Is Your Product Optimized For Value Creation??(part of a toolbox series where we look at what tools FP&A professionals should leverage to drive value creation)
How Business Partners Turn Analysis To Insight?(part of case study series where I interview business partners about how they drive value creation using real cases)
Anders Liu-Lindberg?is the co-founder and a partner at the?Business Partnering Institute?and owner of the largest?group dedicated to Finance Business Partnering?on LinkedIn with more than 10,000 members. I have ten years of experience as a business partner at the global transport and logistics company?Maersk. I am the co-author of the book “Create Value as a Finance Business Partner” and a?long-time Finance Blogger?on LinkedIn with 70,000+ followers and 150,000+ subscribers to my blog. I am also an advisory board member at?Born Capital?where I help identify and grow the next big thing in #CFOTech.?
Fractional CFO | Business Partner | Results Oriented
2 年great points. making or beating your sales, profit and cash flow targets are equally important as losing less of your topline, booking a lower loss or protecting your cash flow in a negative business environment. I believe that forecasting is adding value and helps to identify immediate actions businesses need to take to protect the business. Agree budgets are dead and largely irrelevant if they take 5 months to generate. Now we need to figure out how to make incentives work in the new normal.
Director Wharton FP&A Certificate Program | Corporate FP&A Trainer | ex. P&G, Unilever, Squarespace | 100k Finance Audience
2 年I agree that if there is a lot of uncertainty, less time should be spent on trying to achieve the impossible via detailed bottom-up forecasting. That said, I’d caveat that public companies do not have the luxury to deprioritize forecast accuracy to same extend private ones can. For these companies, it’s all about finding the right balance between top down guidance and enough (but not too much) time spent into getting to accuracy.
Finance Business Partner | Writer | Geek
2 年Mostly top down on our end since the pandemic Anders, however I’ve realised communication hasn’t been the most practical under a top down perspective. Why? Because of export representatives who may have direct information on SKU’s from different markets. This is why it feels as if a hybrid approach between top down and bottom up has also worked to a certain degree. Outside of this, then I’m all for top down within the last 2 years
Controller | Credit Controller | Credit Manager | Credit Analyst | Business Controller | Administrative Responsible | Project Controller | Property Manager | Senior accountant | CBCA? | CMSA?
2 年I think it is implied also a dramatic dichotomy between lean, agile, fast ever more requested and apparently even necessary in the current business world and the antithetic need for "buffers" and gears, we know, ever necessary to move against and neutralize uncertainty ...... To act on buffers (or in case hedging) and gears in order to rightly steer the organizations according to the changing situations and periods; but when you haven't got those instruments and mindset because of the invoked speed, lean thinking and acting, agility, that to me could represent quite a problem ....
Controller | Credit Controller | Credit Manager | Credit Analyst | Business Controller | Administrative Responsible | Project Controller | Property Manager | Senior accountant | CBCA? | CMSA?
2 年I think the real point of all that boils down to the reported statement: "....... shift the dialogue from what the number should be to how we can realize (or even beat) the number." Have the professionals of FP&A and business partners, also using the new advice about how to possibly change and tackle all that, at least approximately and reasonably approached the actual versus the forecast figures? If not the problem persists .....