The human heart is the most important organ of the body as it supplies the most critical oxygenated blood to all the organs of the body so that they function efficiently and smoothly. 

Just as blood is critical to the human body, cash is critical to every business organisation. Therefore, the finance team plays a critical role similar to the human heart by planning, managing, analysing, and allocating the organisation's cash to various departments to ensure efficient and smooth functioning and achieve organisational goals. 

Finance is the heart, and cash is the blood. Just as the heart pumps blood to keep the body alive, financial planning is the process that keeps an organisation's goals alive by deciding how to use this crucial resource, cash, in the best possible manner. 

Therefore, financial planning is a crucial process. But what is the best manner to execute this process? Have you considered this question in your role as a finance professional or business manager? 

To answer this question, let us look at what one of the greatest scientists in history has to say about this. Issac Newton put it very succinctly in the historical letter to Robert Hooke in 1675:  

“If I have seen further, it is by standing on the shoulders of giants.”

What does this mean? It means learning from people who have already succeeded in the relevant domain of expertise. In other words, it means to learn from the ‘best practices’. 

Therefore, in this blog, we will learn industry leaders' best practices for Financial Planning & Analysis (FP&A). Before that, let us look at what FP&A means for business organisations.  

Understanding the role of FP&A 

What is FP&A? 

Financial planning and analysis (FP&A) is a crucial function within finance that focuses on budgeting, forecasting, and analytical processes that maintain the organisation's sound financial health and support strategic decision-making. 

For FP&A managers, the scope includes developing financial models, analysing financial data, and providing actionable insights to guide business goal setting and implement business strategy, driving the right performance. 

“I think great FP&A in my mind is a function that is deeply integrated into the strategic planning and the decision-making of any organization.” - Jon Laudie, CFO Zerorez

The Corporate Finance Institute states, “Financial Planning and Analysis (FP&A) teams play crucial company roles by performing budgeting, forecasting, and analysis that support major corporate decisions of the CEO, CFO, and the Board of Directors.” 

Now that we have a basic understanding of FP&A and the role played by FP&A teams, let's examine their key responsibilities. 

Key responsibilities of FP&A teams 

Broadly, the FP&A teams are responsible for: 

Budgeting and Forecasting: Creating and managing detailed financial forecasts and budgets. 

Financial Analysis: Conducting variance analysis and financial performance reviews. 

Strategic Planning: Supporting long-term planning by aligning financial goals with business objectives. 

Reporting: Developing and presenting financial reports to senior management. 

Data Management: Ensuring data integrity and accuracy in financial systems. 

Cross-functional Collaboration: Partnering with various departments, involving them in the goal-setting process, gathering inputs, and providing financial insights. 

These responsibilities help organisations make informed decisions and maintain financial stability. 

So far, we have seen that FP&A teams are as important for an organisation as the heart is to the human body. We then looked at what FP&A is and what the key responsibilities of FP&A teams are. Let us look at FP&A teams' challenges in performing their key responsibilities. 

Common challenges 

Any business activity always has challenges due to the volatile, uncertain, complex and ambiguous nature of the business environment in which we operate. Therefore, even the FP&A activity conducted by the finance team has many challenges. Let us look at them from the point of view of the key responsibilities that FP&A teams have. 

Let us take the perspective of an automobile manufacturing company with HQ in Singapore, operations in Southeast Asia and suppliers & vendors across the globe. What are the challenges that FP&A teams face while having to fulfil their key responsibilities: 


1. Budgeting and Forecasting: Predicting financial outcomes is highly complex due to fluctuating raw material costs, diverse market demands, and geopolitical factors affecting supply chains, to name a few. 

For example, a sudden increase in steel prices from China disrupts budget projections, necessitating swift adjustments to forecasts and strategic plans. 

This scenario requires an immediate re-evaluation of cost projections and financial forecasts to maintain profitability and align with revised budgetary constraints. 

To be agile and flexible enough to accommodate these changes is a challenge for FP&A teams. 


2. Financial Analysis: As part of the financial analysis, it becomes challenging for the FP&A teams to conduct variance analysis with inconsistent data from various production plants and international suppliers. 

For example, quarterly performance analysis reveals data discrepancies in production costs across different factories in Thailand and Indonesia due to variations in reporting standards and multiple data formats. 

These discrepancies could arise from historical practices in which each plant was established independently, often following local practices and standards. The lack of standardised reporting systems across these facilities could lead to inconsistent data, making it difficult to perform accurate variance analysis and pinpoint areas requiring efficiency improvements. 


3. Strategic Planning: Aligning financial goals with long-term business objectives requires understanding market trends, consumer preferences, and internal capabilities across diverse regions. 

For example, developing a strategic plan for launching electric vehicles involves integrating market research, competitor analysis, and internal manufacturing capacity from factories across the globe, all of which can change rapidly. 

The rapid evolution of market trends and consumer preferences, coupled with varying regulatory environments, makes it challenging to create a unified strategic plan. 

Additionally, internal manufacturing capabilities across different geographies must be evaluated and optimised to meet the demands of new product lines, such as electric vehicles, which require different production processes and supply chain adjustments compared to traditional vehicles. 


4. Reporting: Creating clear, actionable financial reports for senior management involves synthesising complex data from production, sales, and supply chain operations across multiple countries. 

For example, preparing end-of-year financial reports involves condensing extensive data on production efficiency from Philippine plants, sales performance across ASEAN markets, and supply chain trends in Europe into concise executive summaries for the board in Singapore. 

The complexity and volume of data from different regions and departments requires a meticulous data consolidation and analysis approach. Each region operates under different market conditions and regulatory frameworks, leading to diverse data sets that need to be harmonised to present an accurate financial overview to senior management. 


5. Data Management: Ensuring data integrity is challenging with data from various production lines, international suppliers, and market sources.  

For example, integrating financial data from different production units in Indonesia and suppliers from Europe and India can lead to discrepancies, requiring meticulous reconciliation and validation. 

Data integrity issues arise due to the use of multiple disparate systems for data entry and management across the production and supply chain network. These systems often lack integration, leading to inconsistencies and errors in data reporting. 

Ensuring accurate data requires extensive reconciliation efforts and implementing centralised data management systems to standardise data collection and reporting practices. 


6. Cross-functional Collaboration: Differing priorities and communication barriers across regions can hinder effective collaboration with various departments. 

For example, working with the sales team to forecast demand for new car models is difficult if sales in Vietnam use different metrics or have varying priorities compared to the sales team in Malaysia, leading to potential misalignments in projected revenue. 

Regional sales teams operate semi-autonomously to cater to local market conditions, resulting in different performance metrics and strategic priorities. While this decentralised approach is beneficial for local adaptability, it poses challenges for cross-functional collaboration and alignment of objectives.  

Effective collaboration requires establishing common goals, improving communication channels, and integrating diverse perspectives to create a cohesive strategy. 

How can technology solve these challenges 

Technology can solve these FP&A challenges by offering advanced data analytics capabilities for precise forecasting, ready-made, customisable templates for consistent reporting, unified platforms for non-duplication of efforts, and inbuilt AI capabilities for financial planning. 

Cloud-based FP&A solutions can ensure data integrity by integrating disparate sources and enable improved cross-functional communication with a unified platform experience. 

Overall, technology enhances agility, accuracy, and efficiency in financial planning and analysis. Also, leveraging technology is the only way forward for FP&A managers, as FP&A expert Brian Kalish put it, 

Today, CFOs expect FP&A to do twice as much analysis than is currently being generated. But I don't hear anyone talking about adding twice as much staff. So how do you bridge that gap? It's going to be technology that will enable the capability to collaborate.

Best practices for effective FP&A 

Standardise data management and reporting 

It is essential for FP&A teams to standardise data management and reporting practices to ensure consistency and reliability of financial data across various locations. 

The FP&A team also needs to develop and enforce standardised reporting templates and data management protocols across all production plants and vendors. This can be done using pre-built branding-compliant templates across the organisation. 

By doing this, FP&A teams can ensure consistent and accurate data reporting, facilitating easier consolidation and analysis of financial data. 

 
Let us relook at the example of the Singapore-based automobile manufacturer. 

For example, when the FP&A team uses the same reporting templates across production plants in Thailand and Indonesia, it eliminates discrepancies in financial data formats, denominations, etc., making it easier to compare and consolidate financial reports from different locations. 
 

Pro Tip: Involve team members from each location in the development of standardised reporting templates. Their on-the-ground insights can help identify and address potential discrepancies early, ensuring the templates are practical and effective across diverse contexts. 

Regularly review and update financial models

By regularly reviewing and updating the financial models, the FP&A teams ensure that they remain relevant in changing market conditions. 

This can be ensured by establishing a routine for regularly reviewing and updating financial models, updating the dimensions, revising the variables, incorporating the latest market data, etc., feedback from different departments, and updating assumptions.

When this happens, the financial models remain accurate and reflective of current business realities, aiding in effective decision-making. 

For example, the FP&A team schedules quarterly reviews of their financial models, incorporating new market data from the Middle East and updated cost projections from European suppliers. This keeps their models accurate and ensures strategic plans are based on the most current information. 

Pro Tip: During financial model reviews, include scenario planning sessions with cross-functional teams. This allows you to validate model assumptions against real-world conditions and gather diverse perspectives, ensuring the models are robust and adaptable to unforeseen changes. 

Establish clear KPIs and performance metrics

Why should FP&A teams establish clear KPIs and performance metrics?  To measure the effectiveness of FP&A activities.

By defining and tracking the right KPIs that align with the organisation’s strategic objectives, the FP&A teams can improve the effectiveness of FP&A. Also, regularly reviewing these KPIs to assess performance and make necessary adjustments is a good practice. 

This helps the FP&A teams by ensuring that they have a measurable framework for evaluating FP&A activities, ensuring alignment with business goals and continuous improvement. 

For example, the FP&A team defines KPIs such as budget variance, revenue growth, cash conversion cycle, NPV for new projects, etc. These metrics are reviewed monthly, and any deviations are analysed to improve future financial planning and analysis. 

Pro Tip: To ensure that KPIs and performance metrics provide a comprehensive view of the organisation's performance, implement a balanced scorecard approach. This method goes beyond financial metrics to include customer, internal process, and learning and growth perspectives. 

Use benchmarking against industry peers

To understand performance relative to competitors and identify areas for improvement, it is essential for FP&A teams to use benchmarking against industry peers. 

The FP&A team must regularly benchmark its financial performance and processes against industry peers to gain new insights and adopt best practices. 

This helps the company gain valuable insights into competitive standing and opportunities for strategic improvement. 

For example, the FP&A team benchmarks the company’s financial performance against other automobile manufacturers in Southeast Asia. By identifying areas where they lag behind competitors, they adopt best practices to improve efficiency and profitability. 

Pro Tip: Instead of treating benchmarking as a periodic exercise, integrate it into an ongoing process. This continuous approach helps in staying current with industry trends and swiftly adopting best practices. 

Enhance cross-functional collaboration 

When a company operates across time zones and geographies, it is important to ensure alignment and effective collaboration across departments. 

This can be ensured by establishing common goals, improving communication channels, and integrating diverse perspectives. From a technological point of view, the use of collaborative platforms to facilitate seamless interaction is always helpful. 

This results in better alignment of objectives, more effective collaboration, and a cohesive strategy. 

For example, the FP&A team collaborates closely with sales and operations teams across Southeast Asia and the Middle East. By establishing common goals and using collaborative tools, they ensure that financial planning aligns with sales targets and operational capabilities, leading to a more unified and effective strategy. 

Pro Tip: To enhance cross-functional collaboration, create a "shadowing" program where team members from the FP&A team spend time working within other departments, such as sales or operations, on a rotational basis. This firsthand experience fosters a deeper understanding of each department's challenges and processes, leading to more effective collaboration and alignment. 

Integrate ESG (Environmental, Social, and Governance) considerations

In today's modern business world it is important to align financial planning with sustainability goals and regulatory requirements. 

Incorporating ESG factors into financial models, budgeting, and reporting processes makes the FP&A practice up to date and relevant. Tracking and reporting on ESG-related KPIs is a good practice especially for those FP&A teams that have a global presence. 

This supports long-term sustainability, compliance with regulations, and enhances corporate reputation. 

Pro Tip: Appoint ESG champions within the FP&A team who are responsible for staying updated on sustainability trends, regulatory changes, and best practices. These champions can then embed ESG metrics into financial models and ensure that sustainability goals are consistently aligned with financial planning and analysis.

Invest in continuous training and development

All the best practices can be implemented only if the team has the right skills.  

Therefore, keeping the FP&A team’s skills up-to-date with the latest tools and trends is important. 

Finance functions lose the potential to steer their organizations to success when they defer performance management to other functions.

-Jack Alexander, FP&A expert 

The FP&A manager must provide the team with ongoing training programs, certifications, and opportunities to attend industry conferences and workshops. 

This will result in an FP&A team that is equipped with the latest knowledge and skills, thus improving overall efficiency and effectiveness.
 

Pro Tip: Establish a rotational learning program within your FP&A team. This involves rotating team members through different roles and projects within the finance department and other related departments. This hands-on experience enhances their understanding of the entire business, promotes skill diversification, and fosters a more holistic approach to financial planning an analysis. 

Foster a culture of transparency and accountability

To build trust among stakeholders and ensure alignment with financial goals, fostering a culture of accountability and transparency is essential.

The FP&A manager should share relevant financial information and insights openly across the organisation and clearly define roles and responsibilities within the FP&A team and other departments. 

This results in enhanced collaboration, better alignment of objectives, and a more cohesive approach to financial planning. 

For example, the FP&A team holds regular meetings with department heads to share financial insights and updates. Fostering open communication and clearly defining responsibilities ensures everyone is aligned with the company’s financial goals and strategies. 

Pro Tip: Designate "Transparency Hours" where the FP&A team is available to address questions, discuss financial data, and provide insights to other departments in an open, informal setting. This promotes a culture of openness and demystifies financial information, making it more accessible to non-finance team members. 

Adopting a cloud-based solution for effective FP&A

All the above best practices can be automatically implemented by adopting cloud-based solutions for FP&A. Adopting a unified cloud-based FP&A solution ensures data centralisation and streamlines the financial planning process. 

Implementing such a platform integrates data from all production sites, suppliers, and markets, supporting real-time data updates. The inbuilt advanced data analytics and forecasting capabilities, along with various scenario planning and sensitivity analysis templates, improve the accuracy of forecasts and budgets. 

Leveraging scenario planning and sensitivity analysis within the unified platform allows the FP&A team to prepare for potential business scenarios, mitigate risks, and ensure business continuity, all while handling the complexity of diverse markets and supply chains. 

Pro Tip: Prioritise thorough user training and ongoing engagement when implementing a cloud-based FP&A solution. Equip your team to effectively utilise advanced features like scenario planning and sensitivity analysis tailored to your business needs. Solicit regular feedback to refine workflows and maximise the platform's impact on financial planning and analysis efficiency. This approach enhances adoption rates and fosters continuous improvement within your FP&A operations. 

How did JustPerform improve the accuracy and agility of Pan Pacific Hotels Group’s FP&A process 

Pan Pacific Hotels Group (PPHG), one of the largest hospitality companies in Singapore, owns and/or manages more than 50 Hotels, resorts and serviced suites across three brands, Pan Pacific, PARKROYAL COLLECTION, PARKROYAL – in more than 30 Cities across Asia Pacific, North America, Europe and Africa, providing luxury hospitality at its best. 

Previously, PPHG’s budgeting processes were manual and laborious, relying on offline Excel worksheets. Each department and section would prepare its own spreadsheet and submit it to the Finance Team, who would then have to manually compile the figures or link up the spreadsheets to generate the Budget Profit and Loss Statement, investing a lot of valuable time by doing it manually.  

After finalisation, manual mapping into another template was required to upload information into the Enterprise Performance Management (EPM) system. Integrating data into the EPM system was also manual and inefficient.

“The complexity of managing over 50 properties, 60 entities, and a growing pipeline of properties necessitated a more scalable and agile solution, so we engaged JustPerform to address these challenges.” -Valerie Foo, Senior Vice President, Finance, PPHG

JustPerform allowed PPHG to seamlessly reconstruct their Budgeting and Forecasting with the added metrics and dimensions on the Enterprise Structure that was required for enhanced analysis such as multi-segmentation, multi-currency and multiple versions.  

Also, JustPerform's allocation engine enabled PPHG to set the rules to define allocation methodologies across properties without external dependencies. This was pivotal in simplifying and bringing transparency to PPHG’s inter-property allocations.

You too can enjoy the benefits of a streamlined and accurate FP&A process. Book a demo today to learn how JustPerform can positively transform your FP&A process. 

 

Conclusion : FP&A best practices 

In conclusion, adopting best practices such as leveraging advanced technology, standardising data management, and fostering collaboration can significantly enhance the effectiveness of FP&A processes. 

Pan Pacific Hotels Group's experience exemplifies the transformative impact of cloud-based FP&A solutions, i.e. improving accuracy, agility, and strategic alignment.

By embracing these practices, organisations can ensure robust financial planning and analysis, driving efficient decision-making and long-term success. 

Look no further. Adopt a solution like JustPerform to revolutionise your FP&A process today.