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Strategy

FP&A Teams Need Horsepower: Now More Than Ever


by Gordon Stuart

How companies are thoughtfully resuming operations in Normal 2.0.

©Oleksandr Pupko/iStock/Getty Images Plus

The lessons we’re learning in real time from COVID-19’s economic fallout will be taught in business schools for generations. That’s because the current situation is completely without historical parallel. Humanity has survived pandemics before, but we’ve never deliberately put large segments of the economy on pause for months on end to slow the spread of a virus.

The trickle-down effects of the pandemic have drastically altered financials and forecasts, and many CFOs and financial planning and analysis (FP&A) teams wish they had a crystal ball to see the future. Some have the next best thing: strong FP&A capabilities that allow them to test financial levers and make decisions at speed.

Those who don’t have an integrated FP&A platform should consider investing in one now. Every company needs the capability to quickly build and iterate scenarios so they can meet the unprecedented challenges they are confronting. In short, financial professionals need FP&A horsepower to drive business strategy so the company can not only survive this crisis but thrive in the Normal 2.0 to come.

The planning paradox: adapt or be swept away

The unprecedented speed of the pandemic’s economic impact changed everything. In January, some finance teams were creating expansion projections, operations teams were optimizing global supply chains and HR was competing for skilled employees. Now, companies are focused on making it to the next quarter, piecing broken supply chains together and figuring out how to bring workers back.

Virtually every business faced massive challenges at the outset of the pandemic and public safety measures taken to address it. Some tech firms experienced huge demand spikes, like teleconference providers who had to scale up quickly. Other companies faced a drastic decrease in revenue, such as travel and hospitality businesses.

In both cases, planning was and is the key to survival. Airlines have to calculate the cash burn rate to realistically plan cuts so they can survive the lockdown. Grocery chains, delivery services and tech providers have to plan to scale successfully so they can meet demand and operate safely in a completely transformed economic and public health environment. The choice is stark: adapt or be swept away.

This is not a drill, so execute the plan

Everyone who’s worked in an office building or spent time in school has experienced a fire drill. You know what to do because there’s a plan in place, so you take your immediate necessities and proceed calmly to the predetermined exits to evacuate the building safely. Robust FP&A capabilities can provide a similar blueprint for how to react in a crisis — a plan to execute when it’s not a drill.

Companies that had a modern, integrated FP&A platform when the COVID-19 crisis hit were able to harness data to understand the scale of the challenge quickly and create what-if scenarios to model possible reactions and foresee the effect. Businesses that lacked FP&A horsepower tended to approach the need for cuts (or investment) in a more knee-jerk fashion, which put them at a disadvantage.

FP&A maturity levels vary across industry, company size and geography. But the pandemic demonstrated that companies that were able to identify reduction and/or scale-up levels in advance (e.g., demand increases or decreases, sales gains or losses, etc.) and set metrics to trigger actions to meet the challenges at each level could act quickly to execute on the business plan.

Thoughtfully resuming operations in Normal 2.0   

So, what comes next? Finance leaders received a wave of advice and documentation from consultants and accountants to help them deal with the immediate crisis, but now it’s time to think about what a restart looks like and outline scenarios for a return to work. As it was at the start of the crisis, the ability to access current data and iterate scenarios will be the key to restarting successfully.

Depending on the business type and location, you’ll need to think through requirements for people to return to work safely, what financial resources are available and what restrictions will be in place. Perhaps offices will need to be reconfigured to put more space between desks and install protective screens. Employees may return in stages rather than all at once.

Businesses with sufficient FP&A horsepower can put costs back into the equation thoughtfully, using metrics and triggers to invest in recovery as methodically as they reduced costs and/or scaled up to meet the challenges of the initial stages of the crisis. Successfully executing a return to work in Normal 2.0 will require the same degree of insight, collaboration and technology.

Crisis reveals character: the opportunity for finance leaders

As the old saying goes, crisis reveals character. Nobody wants to face a challenge like a pandemic and the accompanying economic fallout, but those who act in a way that improves the situation will display true leadership. For finance teams, that means presenting company officers with options based on timely, accurate data and sound decision-making.

FP&A can earn the right to lead by demonstrating the ability to collaborate, rapidly assimilate data and present realistic scenarios to help the company thrive. Spreadsheets, a personal productivity tool with no consistent assumptions and data standards, are not a suitable solution for this moment. An FP&A platform with horsepower is, now more than ever.

Gordon Stuart is Chief Financial Officer, Unit4.