What your FP&A set up reveals about yor company

1. What your FP&A set up reveals about your company?
The way a company FP&A suite (11) is organised (i.e. its setup) covers the way
data are produced and organised, the way they are analysed, the reporting and
the forecasting produced and the way performances aremeasured.
This setup is or should be highly indicative of a whole given company. Itreveals:
 its business and competitive environment,
 the way it interacts with this environment,
 its challenges,
 its culture in particular management culture,
 the company data management quality,
 and also, the “level” and place of its finance function.
Intuitively, one may question whether the revealed image is exact or not (i.e.
the setup is correct or not)? Then, whether he likes the image or not? Itopens
possiblestrategies either to bring changes to the company which FP&A setup
will have to facilitate and follows or to adapt the FP&A set up only (12).
“I do not like the image so FP&A set up is incorrect” is a call for
disappointments. An ingenuous responsecould be “Anyway FP&A willhave to
adapt so let us build the bestFP&A set up”. Itposes two differentquestions:
1. What will qualify as best FP&A set up?
2. How will it be accepted by the company?
Defining the Best FP&A Set Up
There are different industries, strategic setups, organisations, challenges,
cultures, etc. There is no reason for a standard typeof an FP&A setup to
emerge. Do not be blinded by the consulting companies’ marketing or
specialised authors’ literature. They will give you a good level of awareness on
the methods and challenges you will meet but it will not give you “The”
solution adapted to your company.
This solution needs:

2. 1. To be customised to your specific environment. In other words, thereis
no BEST set up. There are only tools and methods that needs to be
adapted to fit optimally a particular situation (11).
2. To creatively match your present andfuture business andcompetitive
environment and the way your company interacts with it (11).
3. To develop more focus on the key challenges metby the company.
4. To favour (promote) achievements of company overall goals through
management ownership thanks to soundtechnical processes thatgives
visibility andpredictability based on educatedunderstanding of the
situation and proper decision-making process.
5. To be supported by data management excellence.
6. To be fully integrated in company management logic and supported by a
finance team that acts as a true business partners to all functions.
Your solution will haveto respond to 7 challenges that are generally addressed
by FP&A:
1. Timeliness,
2. Accuracy,
3. Relevance,
4. Transparency,
5. Efficiency,
6. Help to decision-making,
7. Flexibility,
The different domains i.e. orders, revenues, OPEX, CAPEX, inventories, cash
flow, etc., will be organised by responsibility centres
(geographies/departments) and permit to understand the profitability
evolution by productlines and customer/customer types, potentially projects
(11) (3).
The natural complexity of the company situation drives the overall setting yet
the setting shall not complexify nor oversimplify the situation. Finding the right
balance is key (4).
So that is a lot to take in consideration!Butnot enough!
Making the FP&A Set Up Accepted by the Company
The setup needs to be highly culture-compatible i.e. well-accepted by the
company. Lack of cultural compatibility will create behaviour biases that can

3. become highly counterproductive. Still it shall not be “sacralised” to the point
of becoming THE only reference. “FP&A fundamentalism” can be extremely
damageable (5).
This posean issuewhen the company culture needs to be or is challenged. The
FP&A setup is a good tool to supportchanges but can it be the tool that initiate
the changes by itself? A chicken and egg question, may be.
Cultural changes need a strong leadership push and supportbut also changes in
the tools that are culturally sensitive such as FP&A setup and recognition
mechanisms. So, both are needed and shall draw in the samedirection.
What Should Be in the Set Up Then?
Tools that permit to give visibility and predictability and insuremanagement
ownership:
 Financial statements giving the overall financial situation.
 Tools that permits toanalyse the results in a meaningful way considering
the company situation. The standard financialstatements are definitively
insufficient (except for small, mono productcompanies).
 Tools that permit to communicate the results and the analysis outcomes
to the relevant accountable managers.
 Tools that permit to predict the situation in the future.
 Tools that permit to take (material) decisions.
Depending on the company sizeand situation, on its market and geographic
reach, on its type of activity those different tools will have to be configured
differently i.e. customised (11).
The key will be how you match the 7 challenges previously mentioned and to
make surethere are tested againstthe possibility to generate Simpson
paradoxes (9) i.e. the dependant variables clearly identified and followed, the
time distribution effects are correctly taken in consideration as well as the
different data group size.
How to Handle the 7 Challenges?
1. Timeliness,

4. The way different industries/businesses “respire” is different i.e.
different Time To. Some havea high degree of immediateness (e.g.
retail) whereas other goes through sales and delivery processes that are
measured in weeks, months potentially years. Somemay have seasonal
activities others are driven by large recurrentrevenuetype contract etc.
This shall drivethe time table of analysis, reporting and forecasting
activities. Itmay result in budget windows thatare quarters/
semesters/year, or seasons, or in rolling forecasts of different
frequencies (rather than the annual standard financial time table).
The whole point of the time table is to bring informationwhen it is
needed i.e. actionable. Too early/too often, too late/not frequent
enough will both results in inefficiencies and frustration (8).
This posea specific challenge in companies having productlines with
materially different time to. Itmay bring mix solutions wheredifferent
productlines have different forecasting frequencies with some overall
full company consolidation along the way.
2. Accuracy,
Actuals and forecasts are two different “animals”. Accuracy shallnot be
confused with precision. For actuals, it largely refers to data quality but
not only. For forecast, it is both data quality and competitive and
business intelligence. Budgetbasezero is a possible option in this
domain (10) (7).
3. Relevance,
The main point is that the person that receive an information can
determine (with the help of FP&A) if actions are needed and if yes, take
the appropriateactions.
Receiving information (on a systematic manner) that are outside its area
of responsibilities and ability to act can only create confusion and be a
distraction. Same if the information is not specific enough.
Furthermore, somefocus needs to exist on the key company challenges
e.g. If financing situation is dire, the cash in and cash out needs to be
work in more detail and focus more attention.
4. Transparency,
Understanding and transparency on the way the figures are built are
important to achieve trust in the figures and then focus on actions rather
than on challenging the figures.

5. 5. Efficiency,
Amount of effort it takes to producea report, a forecast, a productor
customer P&L is often a sourceof discussion notto say complains. Data
quality, ITtools and FP&A processes arekey to deliver efficiently. Yet,
clear time table and due deliverables is a must (Who shall deliver what
and when).
One note here, amounts of effortand delays are two different things e.g.
a forecastmay take 3 months to finalise but involve only 10 men days of
effort.
6. Helpto decision-making,
Most decisions involveunderstanding the underlining financial impacts.
This involveability to producea view that is limited to the area of
decision as well to model the consequences of the possibledecision(s) (1)
(2).
7. Flexibility,
Itcovers severalpossibleaspects. Let say here that the setup shall not
impact the ability to take decisions and act on it whether it is internal
changes or reaction to the environment. This is particularly true for
budget/forecast. Actions shall be business driven rather than
budget/forecastdriven (6).
The following specific articles give more details on a number of subjects:
(1) https://www.fpa-trends.com/article/business-cases-key-decision-making-tool-fpa
(2) https://www.fpa-trends.com/article/explaining-reporting-and-forecasting-revenues-
evolutions
(3) https://www.fpa-trends.com/article/fpa-and-profitability
(4) https://www.fpa-trends.com/article/role-fpa-mastering-company-ecosystem-
complexity
(5) https://www.fpa-trends.com/article/when-measure-become-target-it-ceases-be-
good-measure
(6) https://www.fpa-trends.com/article/two-examples-flexible-target-setting-fpa-
process
(7) https://www.fpa-trends.com/article/competitive-and-business-intelligence-
forecasting-activities
(8) https://www.fpa-trends.com/article/watch-your-fpa-processes
(9) https://www.fpa-trends.com/article/fpa-analytics-and-simpsons-paradox
(10)https://www.fpa-trends.com/article/forecast-accuracy
(11)https://www.fpa-trends.com/article/my-fpa-suite
(12)https://www.fpa-trends.com/article/evaluate-your-fpa-processes

6. In summary, as a CFO or FP&A manager, you must take the time to analyse
your complete FP&A setup and define whatit reveals on your company. The
image can bring you to improve your setup and/or to promote moregeneral
changes in your company culture.