Success through revenue gains, sustainable growth, or expansion doesn’t happen by accident. Successful organizations know that their finance leader and FP&A team are key to that success through strategic financial planning.
A simple search for ‘strategic finance’ on LinkedIn jobs yields 5,000+ results. That’s 5000+ businesses searching for someone who can lead with a strategic approach to traditional finance responsibilities. Why are so many organizations recruiting strategic finance professionals?
Because there are difficult discussions happening in boardrooms right now. C-suite leaders desperately need insights to make decisions on workforce cuts, where to invest, and where they can save without derailing the business.
Strategic financial planning is the best approach to survive current economic uncertainties – plus it adds business value in some surprising ways.
What is strategic financial planning?
Strategic financial planning is the continuous process where finance teams provide the analysis and advice to help budget owners and C-suite leaders minimize waste, manage resources, and achieve a company’s financial and operational goals.
Strategic financial planning answers the question: “How will our business plan and use of resources help us achieve the strategic goals and objectives set by our leadership team?” FP&A teams collaborate with business partners to create an annual financial plan that sets deadlines and budgets for each business unit to accomplish their part of the overall strategic plan.
“Strategic Finance is ultimately about taking a longer-term strategy and quantifying it, in a way that enables alternative future outcomes to be measured and evaluated so that optimal decisions can be made.” Michael Huthwaite, Director of FP&A at Walmart, for FP&A Trends
Some businesses have a dedicated strategic finance team adjacent to FP&A to focus on this process. But any finance team can become more strategic in their planning, reporting, and forecasting. It’s all about the approach:
How do FP&A teams drive strategic financial planning?
Strategic financial planning is impossible without each member of the FP&A team playing their role. From the finance leader to each analyst on the team, here’s how they put a strategic spin on every task.
The Finance Leader (Head of FP&A, VP of Finance, etc.)
- Translate the business vision and goals into a comprehensive financial + operational plan
Finance leaders take lofty goals from the boardroom and translate them into a concrete financial plan that every department can agree to and support, along with measurable KPIs. There are a lot of moving parts to oversee.
Finance leaders are also responsible for identifying the right operational KPIs to measure business performance, and the operational metrics or drivers that have the biggest effect on financial performance.
Finance leaders should be the connector between the operational plans of different business units to ensure that they are based on common assumptions, and highlight the operational metrics from one business unit that will affect another’s performance.
For example, the finance leader should know that the marketing and professional services team plans are both dependent on the sales plan. Or, that timelines to implement a new customer will determine how and when customer success steps in, and when to expect revenue from the deal.
Sensitivity to all these factors is a key skill for strategic finance leaders.
- Earn the trust of C-suite executives
The finance leader needs to give the CFO and the rest of the leadership team a unique perspective on operational and financial trends, along with data-driven guidance.
“One of my first steps as CFO of Docker was to get my FP&A team embedded within our business units. It was great to hear from my CMO that Raheem (my FP&A Director assigned to Marketing) was driving tremendous value. Raheem was diligently digging into operations data to see the performance and ROI on different marketing strategies and sharing that with Marketing. They saw his input as real partnership, not just oversight.” Brian Camposano, CEO at Stratify
This type of partnership is only possible with a streamlined planning, forecasting, and reporting process; otherwise, too much valuable time is wasted gathering data and getting stuck in the spreadsheets with analysts.
- Confidently navigate into the future
Finance leaders need quick visibility into performance and the ability to quickly generate new scenarios and share findings with leadership. The big-picture perspective of strategic financial planning helps FP&A teams recommend strategies to manage financial risks that could affect business performance. No other team has this level of visibility across the organization, so it’s up to a strategic finance team to assess macroeconomic factors and interpret how or when they may impact the business.
- Tell the story behind finance reports
The strategic finance leader can provide the context and storytelling that brings typical finance reports to life. This includes pulling out key insights and trends, and distilling the top headlines to answer the question, “So what?” for senior leaders. Then, reports are much more likely to enlighten stakeholders and inspire action.
The Financial Analyst
- Support department leaders and the Finance Leader as a business partner
Analysts drive strategic financial planning when they step out of their comfort zone to learn more about operational challenges for each department. They can feed these insights back to the Finance Leader for a better financial plan.
- Share reports that work harder
Strategic financial analysts use reports to do more than just report. How? They can automate reporting using FP&A software to deliver those reports to stakeholders faster – and have time to identify insights that matter most.
- Ensure data accuracy to reduce risk
Financial analysts are closest to the data, 24/7. In traditional FP&A, there’s a significant risk of inconsistent or incorrect data or faulty formulas leading to incorrect plans and reports. Strategic financial analysts use 3rd gen FP&A software to eliminate those manual errors and ensure data accuracy.
What strategic value do FP&A teams provide?
When finance teams embrace strategic financial planning, some unexpected benefits will follow. There’s an opportunity to add value to the business in these surprising ways:
- Increased discipline within the finance team & business
The value of an on-time annual plan can’t be overstated. Without it, businesses will struggle to meet their goals. A strategic financial planning process requires discipline: sticking to deadlines, engaging with stakeholders, and spinning new scenarios as needed. And a more disciplined process will give you more margin for the inevitable twists and turns of annual planning.
- A connected business
Imagine a business where each department knows how they contribute to financial success and looks up to the FP&A team for guidance as strategic partners – not just as bad guys who reject spending requests. A strategic financial planning process puts finance at the heart of the business to unlock the potential of every team.
- Financial plans drive actual success
After a strategic financial planning process, financial plans will be more than wishful thinking (or ignored!). A collaborative budgeting process produces a more accurate annual plan and makes each department more accountable for their spending. Plus, the accuracy of a FP&A tool means cash flow and revenue forecasts will be more reliable and lead to better decisions.
- Attract investors
A well-developed, operationally-informed strategic financial plan is hard to ignore! Finance teams can help attract investors or new partners to the business with a planning process that delivers real results.
- A competitive edge
Agility is a top trend in financial planning. Strategic financial planning puts the full picture in view to guide big decisions. It also sets the daily guardrails to keep all expenses in line with overall targets. This efficiency leaves margin for quick changes and saying ‘yes’ when a new opportunity pops up.
Learn More: FAQs on the FP&A Process
Strategic financial planning success
Strategic financial planning is fuel for business success. This means that the modern FP&A team is perfectly positioned to help business leaders succeed through a powerful combination of financial management and operational strategy. With a forward-looking approach, finance leaders and analysts can transform traditional financial planning into a dynamic process to help the organization achieve long-term goals.
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