Companies need to invest in financial planning and analysis and cement relationships between finance teams and other departments in order to drive sustainable growth, corporate finance leaders outlined at a Datarails webinar. Tasha Tolliver Senior Finance Manager at Tenneco, a Fortune 500 automotive component manufacturer and Christian Wattig, a FP&A veteran from Proctor and Gamble, Unilever and Squarespace and founder of a leading FP&A course, FP&A Bootcamp, said being able to show the value and time saving functions of FP&A solutions to management is needed for the initial implementation, while developing relationships with the other departments is critical in sustaining and growing this value.
“FP&A is a tool. It strives to tell you what the future could look like based on what happened in the past,” Tolliver said.
“We were at the stage when we knew that we needed to get help in terms of implementing a tool to help with the 12 Excel files that we had to consolidate every month,” said Wattig. “But the CFO didn’t see the value at the beginning.”
After initial backlash to the idea, Wattig changed his strategy and instead of trying to sell the idea as a time-saving solution, he explained to management that FP&A technologies provide value in how a company controls the data. “If you have a tool that supplements Excel, you can avoid making mistakes that may make it into the forecast. In addition, there is the ability to have an audit trail where you can see who made changes… and that’s what sold him right away”, Wattig said.
However, the rest of the departments weren’t too happy about implementing a new software to their already busy schedules and that’s where team communication comes in. Wattig offered to give “them a seat at the table” in order to share their concerns and help shape how the company will use the tool. This helped get everyone on the same page as well as improve the individual value of financial planning for each department.
Tolliver echoed these sentiments. “One of the biggest obstacles I faced is putting a well thought out plan and forecast and bringing it to leadership and they say ‘it isn’t enough- we need to sell more’. Forecast is a tool that strives to tell you a little about what the future could look like based on the past, but if leadership isn’t buying what you’re selling then it almost doesn’t matter what you submit.”
While each company has their own specific reasons for implementing FP&A that come with individualized challenges, showing value to management while involving other departments will provide smooth sailing during budgeting and forecasting.
FP&A Solutions with a Native Excel Interface
One of the biggest questions there is when choosing an FP&A automation solution is whether to stick with Excel or implement a new platform.
“I firmly believe that Excel will stay because it’s so easy to use,” said Wattig. “Even if you are not an expert there are so many resources available to teach you and it’s super flexible. Look for a tool that builds on top of Excel that allows you to keep using what you’re used to, because then you’ll save so much stress down the line by not having to teach people a new tool or track how many employees are using it.”
In addition to the ease-of-use and flexibility, many people want to stay in Excel for practical reasons as well.
“It’s really hard to get people out of Excel,” said Wattig. “Even if they realize that perhaps the other tool is better, they just go back to their offline reports and duplicate work. That’s why I would always argue to look for a tool like Datarails that allows you to stay in Excel.”
Tolliver explained that when approaching management about implementing a software, staying with Excel is far simpler and cheaper. Without needing to add on additional employees to learn the system, a much cheaper price, and a faster and greater ROI, management is far more likely to give the green light on a solution with these qualifications in comparison to one that needs a long onboarding process and a bigger team to run it.
“There’s a lot of different systems you can implement,” Tolliver said. “The things that I was looking for were low cost, short implementation time, and a platform where the majority of the manipulation can be done if you know how to use Excel. So the important thing is usability, and if you understand how to use Excel, you understand how to use Datarails.”
FP&A’s role in budgeting
Companies constantly need to allocate funds to each department and decide who receives what. FP&A connects the dots between departments and is an important set of eyes in the background of each organization.
But budgeting doesn’t end with numbers and company-wide planning. Once again, communication is key in driving points home and creating real changes within the data collected.
“Budgeting is a pointless FP&A exercise if you’re not talking to the business leaders”, Tolliver said. “That’s where a budget begins- It doesn’t begin with finance. A budget is pointless unless you know how to use the data and create impact.
“[The process] sounds super scary to non-finance people,” Tolliver continued. “I would say that as an FP&A person one of your most important responsibilities is figuring out how to communicate what you need communicated in layman’s terms.”
Wattig explained that the key to successful FP&A is spending a small amount of time collecting data for the budget and forecast, and as much time as possible crunching the numbers and analyzing it. The real value is finding insights into risks and opportunities by asking why the numbers are the way they are.
“Don’t stop asking questions until you come to a real insight,” Wattig said. “And how do you know [when that is]? You come to a real insight when there’s an action that’s implied by it… For example, we have less revenue because we have 10 customers who ordered less is not the root cause… But if you say we had lower revenue because our website converted fewer leads into paying customers, then that’s a real insight because the next step is immediately clear.”
[TAKEAWAY 1] FP&A connects the dots between departments
“Good FP&A leaders challenge the cross functional team to grow more sustainably and keep an eye on margin,” Wattig says. “Not just by producing a large number of P&Ls, tables, and numbers, but really by connecting the vision of the company, the strategy, the action plans, and then KPIs that can be tracked. From that the company can make trade offs- because every successful company needs to make tradeoffs.”
[TAKEAWAY 2] FP&A Is Crucial for Budgeting
“Resources are scarce,” Tolliver says in regards to FP&A’s role in deciding which department receives what budgets. “Everyone at every company is vying for their piece of the pie and it’s very important to know where we’re spending money so that we can make strategic choices about how to allocate funds.”
[TAKEAWAY 3] Include Detailed Assumptions on Business Drivers
“It doesn’t make sense to invest time and resources into FP&A processes if it’s just a finance exercise,” Wattig explains. “If you’re building a forecast or a budget it doesn’t really add much value if it doesn’t include detailed assumptions on business drivers. And for that you need to get engagement with the sales team, marketing team, product team, etc.”
Tolliver echoes this sentiment: “A budget is just a pointless FP&A exercise if you’re not talking to the business leaders. That is where the budget begins- it does not begin with finance. It might begin with sharing some insights with them on former trends or what you’re seeing for the past few quarters or seasonally, but you need to talk to the business owners about what’s going right now, what’s changing, and what they would like to see change right now. And then figure out how to change how you are running your business in order to get to that result.”