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CFO V. FP&A
The Chief Financial Officer role is often likened to that of a financial strategist, a navigator, or even a conductor of an intricate financial orchestra. There are many components that enhance a CFO's ability to forecast and create strategic plans for a company’s sustainable growth. One of the key pillars that support this role is Financial Planning and Analysis (FP&A).
In my 35+ years in the accounting/finance field, I have held just about every position possible, from working the A thru C Accounts Payable desk at General Motors as a college intern to ringing the NASDAQ bell as the CFO of a newly public company. In all those years, I would have to say that my role as an FP&A Director was one of the more interesting jobs. The FP&A role knows just about everything that is going on in a company, the past, the present, and the future direction. The position knows who is being terminated, who is getting a promotion, and how many people are expected to be hired. The role is so much more than crunching numbers at a desk and working on a model. This person works closely with the CFO as a business partner, as well as part investigator, finding out what is going on in the organization, and interviewing the various business units to uncover spending and projects. When getting updates from the sales leaders, the person in this position must know who is sandbagging or worse, overestimating their revenue projections.
CFO INSIGHTS ABOUT FP&A
The significance of FP&A from a CFO’s perspective might be surprising. This role is instrumental in steering the company towards success, but ultimately it is the CFO that does the navigating. Understanding the vital ways FP&A supports strategy is imperative for CEOs and/or business owners, as there are often misconceptions.
With that in mind, here are 5 things CEOs and business owners should know about FP&A
Financial Visionary Tools- The CFO is the architect of the financial future and FP&A plays a pivotal role in this by providing insights, tools, and forecasts that allow CFOs to chart a course for the company, identifying financial opportunities and risks. The CFO is involved in the strategic discussions and will work with FP&A on the “what if” scenarios and ensure that the model is accurate and complete under the most realistic business direction. The data and analysis provided by the FP&A team are invaluable in assessing the financial feasibility and expected return on investment.
Financial Health Tools- Every CFO understands the importance of maintaining financial health. FP&A is the stethoscope that allows CFOs to monitor the financial pulse of the organization. It provides critical metrics, key performance indicators (KPIs), maintaining covenants, and financial ratios that help CFOs gauge the company's overall well-being.
Budgeting and Resource Allocation- Managing the company's budget is a core responsibility of the CFO. FP&A aids in creating budgets, allocating resources effectively, and monitoring performance against budgeted targets. It's all about optimizing the use of financial resources to achieve the company's strategic objectives.
Risk Management Tools- In today's volatile business environment, risk management is more critical than ever. FP&A helps identify and quantify risks, allowing the CFO to implement strategies to mitigate them. From market fluctuations to supply chain disruptions, FP&A is A CFO’s radar for potential threats.
Investor Relations- For publicly traded companies, maintaining a positive relationship with investors is crucial for a CFO. FP&A plays a key role in determining how a company is performing against analysts’ projections for a CFO to utilize in communications and decision-making. It's about transparency and credibility.
In essence, the FP&A is the compass that keeps CFOs on the right course to navigate the turbulent seas of the business world and reach their financial destination. Whether a business has an FP&A team or the CFO has the responsibility for it, it’s important to understand that without a compass, a company can easily get lost.
Susan Echard is a Partner in the Phoenix office team of SeatonHill. She has over 35 years’ experience, both domestic and international, within Big Four and CFO roles. Susan has conducted an Initial Public Offering as well as a Private Placement Offering, playing an integral role in the development of the S-1 Registration Statement, as well as the Investor presentation deck for road show and investor relations presentations. She has also taken the lead in large-scale financing and SEC filings with numerous companies. Susan has successfully raised over $250 million in private equity, facilitated over $300 million in credit, and spearheaded two company exits. She led the implementation of ERP, accounting, and tax compliance platforms and created efficient processes that enhanced internal controls in the accounting functions of many organizations through the consolidation of disparate reporting systems and the establishment of effective metrics and KPI reporting.
SeatonHill Partners, the nation’s fastest-growing strategic CFO services firm, is available to provide guidance for engaging a Fractional CFO. SeatonHill provides organizations financial leadership with a strategic and operational focus by placing elite CFO talent to challenge the business and contribute to operational decisions to achieve results. With their curated talent, SeatonHill’s partners guide lower-middle market businesses through complex financial issues to mitigate risk and achieve organizational goals. Visit the SeatonHill website at https://www.seatonhill.com/.