Are you looking for ways to scale your business amidst the unpredictability of the pandemic? Don’t you wish you had access to tools and insights that’ll help you invest business resources and time in the right direction? Wouldn’t it be great if you could evaluate your company’s current financial status and make optimal decisions for the future?
If you just answered “yes” to any of the above questions, it’s high time you start integrating financial planning and analysis (FP&A) into your overall business strategy.
The Role of Financial Data in Business Strategy
A well-defined business strategy is crucial for the survival and growth of every organization. But implementing your strategy requires you to make a series of critical decisions. These decisions are influenced by a plethora of factors, including market trends, supply chain disruptions, tech advancements, and more.
The uncertainty of the COVID-19 pandemic has added even more variables to that mix, making it difficult to develop and deploy a business strategy.
That’s where your company’s FP&A function steps into the picture. FP&A provides business leaders with actionable insights to optimize their strategy. It can help improve daily operations in other departments as well. That’s what makes skilled FP&A analysts so integral to modern businesses.
It is, however, important to understand that FP&A isn’t just about generating reports and mathematical models based on income statements and financial data. If you want to harness its full potential, FP&A analysts can’t operate in isolation. Instead, you must develop a framework to inform your business strategy using data and insights from FP&A.
In this article, we’ll delve deeper into the benefits of integrating FP&A into your business strategy. We’ll also discuss a few useful techniques to help align the FP&A function with your business goals. Let’s get started.
Why Merge FP&A With Business Strategy?
Building a business strategy that doesn’t take insights from FP&A into account is nothing short of shooting in the dark. A financial analyst can provide a company’s leadership with the data and analytics they need to make smarter decisions and investments.
It eliminates the need for business leaders to rely on intuition and guesswork while setting goals and building their strategy.
Accurate projections from the FP&A function can help you identify the areas that’ll generate the maximum return on investment (ROI). Also, it helps you stay on top of industry trends. Instead of reacting to ongoing trends, FP&A data helps you inculcate a proactive approach to harness emerging market trends.
It helps consolidate all the data business leaders need to make crucial financial decisions.
It’s worth noting here that FP&A isn’t just useful for CFOs and other top-level decision-makers in a company. Every department, from human resources and supply chain operations to marketing and sales, can improve its operations based on FP&A projections. That, in turn, helps maximize efficiency and productivity, thus generating more profit.
Ultimately, all these factors help your company achieve sustained growth, and steer it towards greater heights of success.
How to Align FP&A With Business Strategy
Now that you’re familiar with the benefits of merging business strategy and FP&A projections, you must be yearning to get started. Here are the steps you should follow to achieve the same:
1. Build a Rock-Solid FP&A Function
If you want access to accurate financial projections and action-based insights, you must recruit experienced FP&A analysts. Start by identifying the essential skills you need in these analysts.
Make sure you have a clear understanding of the responsibilities they’ll have to handle on the job. It’s just as important to provide your FP&A analysts with the right tools and resources to generate accurate projections.
2. Integrate FP&A With Other Departments
If you want to utilize financial planning to the fullest, you must encourage other departments in the company to collaborate with the FP&A function. It involves reaching out to different department heads and learning more about their challenges.
The idea is to position FP&A as a solution to overcome their challenges. Instead of overwhelming these departments with financial planning data, provide them with relevant analysis and insights.
3. Isolate FP&A From Standard Reporting
FP&A projections should consistently inform the decision-making process of a company’s leadership.
That emphasizes the need to separate financial planning and modeling from quarterly or annual reporting.
4. Leave Room for Flexibility
FP&A processes take into account various aspects of the current market scenario. If your company has business units in more than one region, the local market conditions in each region will vary.
It’s important to allow each business unit the freedom to customize FP&A cycles and processes accordingly.
Accurate financial planning and analysis are crucial for the sustained growth of your company. Focus on building a skilled FP&A team with experienced analysts. Make sure the FP&A process is aligned with your business goals. Lastly, create a work environment where every department relies on FP&A projections to optimize business operations and improve efficiency.