By Hellen Liu
This month, FLG Partners welcomes Hellen Liu, an FP&A (Financial Planning and Analysis) professional of 15 years with depth of expertise gained from prominent positions at Clorox, McKesson, and Rodan &Fields before establishing her own FP&A consulting practice. Hellen works with many FLG partners in support of their clients, assisting them in establishing best practices around annual planning. Her recommendations below are invaluable for any CFO who wants to get the most out of his or her FP&A team at this critical point in a company’s strategic planning process.
Finance, Planning and Analysis (FP&A) is a broad discipline and can mean different things for different companies. This flexibility is a significant strength, lending versatility to the function and enabling an FP&A team to continuously adapt and add value as organizational needs evolve. Whether a company’s goal is growth, austerity, or anything in between, FP&A is a CFO’s strongest ally and the annual planning process one of the best assets in the FP&A tool kit. But a tool is only as effective as it’s wielded and it is critical for CFOs to set their FP&A team up for success before, during, and even after the annual planning process.
Here are three ways CFOs can best accomplish this:
Champion the Vernacular
How many times has the difference between a plan, a budget, and a forecast, been a point of confusion in your organization? How about revenue vs. bookings vs. sales? Get ahead of this by owning and championing the corporate lexicon for financial terminology and enforcing these definitions rigorously and consistently across your organization. Annual Planning should not be the time when these terms are defined – they should already be part of a company’s DNA. To this end, it’s critical that not only your entire Finance team, but the entire executive team, understand your company’s lexicon for finance. If they don’t already, lead a refresh for your executive team today and continue to do this once a year going forward.
Define Roles Within Your FP&A Team
Whether your FP&A team is made up of 2 people or 20+, it’s important to establish the roles of those on the team. In particular, I recommend drawing a distinction between “business partners” and “corporate planners,” bifurcating those whose role it is to help a department reach their targets (business partners) versus those whose role it is to enforce those targets (corporate planners). When you have financial representation on both sides of the table, any negotiation is exponentially more productive – analysis is done using the same metrics, accrual vs. cash basis is clear, and financial terms are consistently used and understood. The value is immeasurable.
Update Your Long-Range Plan (LRP)
The Annual Operating Plan is a milestone in the corporate planning process, not a stand-alone exercise. Don’t start from scratch every Annual Planning season – leverage your LRP by keeping it updated, relevant and top of mind. I recommend a strategic planning offsite before Annual Planning kicks off as an opportunity to calibrate the LRP and align the executive team. This exercise will naturally cascade into the Annual Planning process and allow your FP&A team to hit the ground running.
Annual planning is too valuable of an exercise to waste – as a CFO, it is imperative that you ensure your FP&A team is empowered to make the most of it. Don’t wait, start using these powerful tips today.
