Week 3 of a Typical FP&A Calendar

We recently had a discussion about the functions and responsibilities of FP&A teams. Why is it important for a company to have an FP&A team?

Here is a quick recap:

What Do FP&A Teams Do?

FP&A Teams act as a bridge between the business teams and the leadership.

They collect information from various business and functional teams.

Analyze that information, and present it to senior management to help them make better business decisions.

FP&A is 3 Core Functions and 1 Key Mindset.

Last week we looked at Week 1 and 2 of the Typical FP&A Calendar.

WEEK 1: ACCOUNTING CLOSE AND MANAGEMENT REPORT

1. FLASH REPORTS (For Key Revenues Expenses)

Brief summary of financial data and key performance indicators (KPIs) that provides a snapshot of a company’s financial health and performance.
Covers a specific period, a day, week, or month, and is prepared quickly to provide timely insights.
Focuses on the most critical information and highlights any significant changes or trends.
A way to keep decision-makers updated on the financial performance and enable them to make informed decisions based on the current state of the business.

2. MONTH CLOSE AND ACCOUNTING REVIEWS

Month close: Ensure that all financial transactions for that period are recorded accurately and completely.
FP&A assists the Accounting team in a smooth month-end close.
BVA stands for Budget Variance Analysis and helps assess how well the company’s actual financial results align with the budgeted expectations.
It involves comparing the budgeted revenues, expenses, and other financial metrics with the actual figures and analyzing the variances.
Focuses on the most critical information and highlights any significant changes or trends.

3. MONTH END REPORTING PACKS with COMMENTARIES

Comprehensive summaries of a company’s financial performance at the end of each month.
Detailed overview of the company’s financial performance, key metrics, and other relevant information for that particular month.
Typically distributed to senior management, to keep them informed about the financial health of the organization.
The actual results from last month are compared to both the budget and the most up-to-date forecast.
Variance analysis, commentary, and business recommendations

4. QUARTER END REPORTS / QUARTERLY BUSINESS REVIEW DEC

Discuss Highlights, Lowlights and Key Learnings from the previous quarter.
Provide a detailed overview of Significant Risks, Opportunities, Action Plan, OKRs or Targets and Forecast for next quarter
Identify adjustments that need to be made in the next quarter based on previous quarters’ performance.

WEEK 2: FORECASTING AND BUSINESS REVIEWS.

1. FP&A UPDATES PRELIM FORECAST

The Forecast cycle starts with finance reviewing historical performance, assessing current trends, and considering any external factors that may impact the forecast.
The finance team incorporates this information into the preliminary forecast.

2. FP&A REVIEWS FORECAST WITH BUSINESS TEAMS

Collaboration with key business teams is vital for accurate forecasting.

The finance team engages with department heads, sales teams, marketing teams, and other relevant stakeholders to gather their inputs and insights.
This collaborative effort ensures that the forecast aligns with the operational realities of the business.
The finance team incorporates feedback from these teams and refines the forecast accordingly.

3. FP&A REVIEWS FORECAST WITH CFO

The FP&A team presents the forecast, discussing key assumptions, and seeking input from the CFO.
The CFO provides valuable insights, challenges assumptions, and ensures the forecast is in line with the organization’s financial goals and objectives.

4. UPLOAD + LOCK FORECAST IN THE SYSTEM

Once the forecast is finalized, it is uploaded into the designated financial planning system.
Uploading the forecast into a centralized system facilitates easy access, data consolidation, and automated reporting.
To maintain consistency and integrity, it is crucial to lock the current forecast once it has been uploaded into the system.
This ensures that the forecast remains unchanged, preventing inadvertent modifications that could compromise accuracy.
Locking in the forecast also establishes a clear baseline for tracking performance and enables effective comparison with actual results.

5. MONTHEND / QUARTER END BUSINESS REVIEWS (MBR’s and QBR’s)

These meetings bring together FP&A and business stakeholders to review the financial performance, discuss variances, and gain insights into the factors driving the results.
Monthend reviews involve analyzing the financial results for a specific month, including revenue, expenses, and other key financial metrics.
Quarter end reviews are more comprehensive and encompass the entire three-month period.
Helps bridge the gap between financial data and operational realities, leading to better decision-making.

1. RECHARGES & ALLOCATIONS

Recharges involve transferring costs incurred by one department or entity to another within the same organization.
Allocations are used to distribute costs across different departments or cost centers based on predefined allocation methods. A way of assigning shared costs to various entities or business units based on predetermined criteria, such as the proportion of usage, headcount, revenue, etc.
Both recharges and allocations are important tools for accurately assigning costs within an organization, enabling better cost visibility and accountability.

2. PROFITABILITY ANALYSIS

Provides insights into the most profitable aspects of the business and guides decision-making to maximize profitability.
Examples: BU wise Profitabilty, Branch Profitability, Customer wise Profitabilty, Project wise Profitabilty, Country wise Profitabilty etc.

3. WORKING CAPITAL MANAGEMENT

Monitor and optimize the company’s short-term liquidity and operational efficiency IF THERE IS NO SEPERATE TREASURY TEAM
Ensure that the company has enough cash and resources to support its day-to-day operations while minimizing unnecessary costs tied up in working capital.
Activities: Cashflow Forecasting, Working Capital Efficiency initiatives etc.

4. AUTOMATION

By automating repetitive tasks, improving data accuracy, and enabling efficient analysis
By embracing automation, FP&A teams can focus more on value-added activities and provide timely insights to drive strategic decision-making.

5. SPECIAL PROJECTS, SUPPORTING BUSINESS

FP&A plays a vital role in special cross-functional projects by providing financial analysis, budgeting, forecasting, and decision support.
Their involvement ensures that projects are financially viable, align with strategic goals, and are effectively managed from a financial perspective throughout their lifecycle.

6. RISK & OPPORTUNITIES ASSESSMENT

By actively assessing risks and opportunities, FP&A helps organizations make informed decisions to mitigate risks, exploit opportunities, and improve financial performance.