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Can the Financial Planning and Analysis (FP&A) Function be outsourced?
The views expressed in this article are those of the author only.
According to research outlined in a White Paper “FP&A outsourcing will become an increasingly standard offering in the marketplace as companies seek to achieve additional savings, improve capabilities and reduce cycle times”.
There are of course varying degrees of sophistication when it comes to the nature of the finance processes, which could lie at any point on a continuum. However for the purposes of this article, we can look at the finance processes in three broadly distinct categories: highly manual, semi-automated and highly automated.
‘Highly Automated’: Data is automatically reconciled and stored centrally, representing a ‘single source of the truth’. Data is extracted by using queries to produce standard reports. Automated budgeting, forecasting and management reporting approaches. Enhanced business review and performance measurement processes.
‘Semi-automated’ A combination of the above environments: the degree of automation versus manual work will depend on the type of organization.
‘Highly manual’ : The team usually have advanced levels spreadsheeting ability. They also tend to be experts at building and administering databases when the volume and complexity of data may go beyond conventional spreadsheeting capabilities. Template building, particularly in the area of budgeting and forecasting, is a key skill required to address and overcome some of the challenges from working in a non-standardized environment. Also the ability to reconcile and make sense of large amounts of raw, often incomplete, data. An in-depth knowledge of the business helps to understand the underlying perspective(s) upon which information should be presented in order to optimize decision making. However in reality it is not always possible to demonstrate expertise in generating business insights due to the timescales and labour intensity involved in ensuring data completeness and accuracy.
‘Highly automated’: A ‘single source of the truth’ with appropriate business intelligence tools, can eliminate the day to day operational FP&A tasks associated with maintaining data integrity, large complex spreadsheets, inconsistent reporting formats, inter-system reconciliation. Equips FP&A team to ‘slice and dice’ data in a variety of ways according to pre-defined business criteria and rules governing the data set.
Prior to the development and introduction of a single source of the truth and much reduced processing cycles, many global organizations were in a state of reluctant acceptance that the FP&A function was over-committed with routine activities such as planning, budgeting, forecasting and management reporting. Little, if any time was available for decision support activities, meaningful analysis and other special investment related projects. With the creation of highly automated working environments the situation has changed and the question becomes whether the FP&A team needs to continue operating under the Finance umbrella, or report directly into the business.
Many smaller organizations may evolve with a Finance focus that is largely geared to ‘compliance’. A newly created FP&A function may subsequently introduced when the organization has reached a critical point on its development and expansion roadmap and requires an additional level of support from its Finance function. Cultural factors may impact the speed and level of FP&A acceptance by the business in this context. This may be due to a possible misunderstanding of the ‘value add’ that can be brought to the decision making process. Also if the FP&A environment is highly manual, the potential for business partnering may not be realized.
Technology has enabled many larger organizations to leverage the single source of the truth concept and directly empower the business user. Marketing and Operations professionals are becoming increasingly financially savvy as many traditional FP&A tasks such as P&L management, expenses monitoring, budget control and forecast variance analysis are decentralized and transferred to the business. In certain industries, e.g. ‘consumer packaged goods / fast moving consumer goods’, non-financial managers are able to independently query the financial systems and find their own answers as to why their part of the business may be over or under-performing.
Similarly a high degree of automation enables many of these managers to prepare their own budgets, forecasts and strategic plans with little intervention from Finance. To this end FP&A serves mainly as a consolidation point at the ‘total company’ level; the business not only has the tools to perform the periodic and routine FP&A activities, but the business knowledge and acumen to subsequently overlay the numbers once produced.
So where does this leave the FP&A function? In a tough spot, no doubt.
The first thought when discussing the prospect of outsourcing the FP&A function, might be to consider transferring the service to a third party as indicated by the Deloitte. This article shows that for certain organizations in certain industries, there is a different discussion to be had; a potential internal transfer of the FP&A function to the business, without the involvement of a third party service provider. Since business roles have changed dramatically due to technology, this is now a distinct possibility. Under these conditions the case for outsourcing may not be as relevant.
For organizations operating in a ‘highly manual’ environment, a cost-benefit comparison would of course help evaluate a potential move to FP&A outsourcing. However it is important to bear in mind that in these types of business environment, much of the critical knowledge is likely to be highly decentralized, undocumented and tacit in nature. Inherent lack of standardization in the business processes may prove difficult for a third party service provider to adopt the existing role of the FP&A function who have undoubtedly developed their own survival kit consisting of various coping mechanisms, context specific techniques as well as manual workarounds to achieve desired business results.
Should you accept a gift from a family member?
Remember when we were children, our parents always taught us not to accept gifts from strangers?
Well, it may be worthwhile considering this advice when it comes to family members as well!
In the article the author uses a hypothetical example of a small business owner gifting money to his daughter for her dream wedding.
Take a moment to think about that. Depending on the ‘size’ of that gift, I think you would agree that’s a pretty scary thought.
One can assume there may be a possibility that if a small business owes money to CRA and is making gifts to family members (e.g. daughter, son, spouse) when the business owners dies, the ‘gift’ could become a ‘liability’ in the hands of the recipient, presumably going towards settlement to the extent of unpaid taxes upon death.
• The tax-debtor husband takes his name off the title of the house he owns jointly with his wife.
• The tax-debtor wife makes mortgage payments on the family home that is solely in the husband’s name.
• The tax-debtor corporation pays a dividend to an individual who on his or her own (or combined with relatives), has a controlling position in the corporation.
If you are a small business owner and / or an entrepreneur, it might be worth reading and sharing this info with your business network.
Job seeking is widely recognized as one of the top 5 most stressful activities – alongside other life changing-events such as planning a wedding, moving house, etc.
As human beings we strive to avoid having to do these things on a regular basis. In a time when many could carve out a lifetime career with a single firm, this also used to apply to job-seeking.
However as we all know, times have changed. Many professionals are changing jobs more frequently than ever before. The dreaded phrase “In Between Jobs” is no longer a reputation-sinking confession. With increased mobility across worldwide borders the candidate pool is now a global market.
Networking can really help you re-enter the job market, accelerating the job-search itself and boosting one’s morale. Although people need to talk, it is vitally important to maintain focus, professional boundaries and avoid the distraction of overly personal, situation-specific details. Its not easy. These forthcoming articles provide some tips on how to do just that, by treating the networking meeting as a forum for a mutual discovery process.
This important topic will form the basis of a forthcoming ebook where we will be interviewing people to collect their views.
Fundamentally, a discovery process is needed to deal with these complications. Due to periodic changes and updates in regulations, this may also require the leading of time-consuming investigations with software providers and the CRA (for incorporated businesses, a considerably more complex T2 returns process is always necessary).
The reality is that nearly all OMBs have the potential opportunity to “claw back” tax liability by fully accounting for their costs and claiming tax credits. Continuity and consistency can be expected benefits given that these issues almost always span a number of years of tax submissions, past and present. Therefore a “partnering” approach can work well in terms of collaboratively developing practical controls for record-keeping to ease next year’s burden.
Please note that although tax preparers can range from independent consultants trained in T1/T2 form preparation through to professional services CICA-qualified outfits the OMB may need to file the return themselves. Due to this variation in practice, this “learning snack” is a general cross-industry observation offered without liability.
Record-keeping, the ‘bug-bear’ of the owner-managed business, becomes critical in the period leading up to the preparation of your corporate income tax return. Incomplete, or missing records, can lead to under-recovery of business expenses, unnecessarily increasing tax liability.
And yet technology offers a simple resolution. With Multi-function printers containing inbuilt scanners costing less than $200, document scanning is now ‘almost free’ to do. ‘Google Drive’, ‘Dropbox.com’ and others provide a facility to share and index these documents securely with your tax accountant.
The key is Discipline. Scanning paper records such as cash receipts within a few days of purchase. With so many small business owners remembering the headache of expense filing in the corporate world, its an important lesson we need to re-teach ourselves. When you’ve down-sized to less than 10 employees, fumbling around for receipts can be a frustrating and time-consuming experience.
I know Churchill’s quote has become a bit clichéd (‘failing to plan is planning to fail.’) but the thing about clichés … they are more often true than not.
Good planning, the process of thinking through how you will accomplish something is the only way that you will achieve anything. Things will not happen because you wish them to and life’s pitfalls, pratfalls and misadventures are largely the results of bad planning (or no planning at all).
Good plans shape good decisions and good decisions make things happen by purpose not by accident… or worse, by someone else’s design or plan.
How do you create a meaningful plan and the actions that will get you where you want to be?
•	What do I need to do to achieve or get what I want?
•	Who or what will I need to help me?
•	What do I have to change or add to my life, my skills and/or my outlook to achieve or get what I want?
•	How long will it take? OR How long will I give myself?
•	How will I measure my progress?
•	How will I KNOW I arrived?
In writing everything down you MUST be brief! Keep the action plan for each item to less than a page. The more complete AND short the better.
Brevity is essential for good plans and almost everything else in life. The more words are involved in planning and detailing something… the less likely that anything is going to get done. Be brief but also be SPECIFIC because you must be able to see and track your results.
You should be able to get onto one page what you want or will accomplish and how you plan to do it. More than one page and you will glaze over when you read it.
Tip: Write everything out once just as it comes to mind. Set it aside. Read it all a minimum of 3 times after that and each time shorten it by at least 10% each time you read it. Just wording things in more concise and simple manner will get rid of more words (and make everything crisper) than you think.
When you have reached a goal or completed a step toward achieving what you want or accomplishing what you want congratulate yourself and then move it off your plan.
If something new arises or it becomes clear you need to adjust or add something to your planning add it and make it part of your daily review.
Finally: You MUST take a minimum 15 minutes every day to review your plans and your progress. Like the need for daily physical exercise to remain physically healthy, you must exercise your plan and your vision daily to keep them healthy and moving you forward.
Here is a tip that has worked for many to help them make their 15 minutes a day work for them. Make one summary page of the items you want and the TOP actions and activities that will get you there. This page will change fairly frequently and should be a high level rundown or outline of your total wants and goals. Read and manage this page daily and read your more detailed lists on a rotating basis getting to each at least once a week.
Enjoy the journey, enjoy the destination!
If you are not 100% committed to what you want, trying to achieve anything is like grabbing Jell-O –you think maybe you have it, but there’s really nothing to hang on to.
The higher your commitment level, the clearer the vision of reaching your goals will be. You’ll be able to SEE what you want clearly, as if you already have it, and by seeing it your path to receiving it becomes clearer.
What is the best way to ramp up your total commitment? Look at what the item, when accomplished or gotten, can do for your life.
Ask yourself why you want to achieve or have that particular ‘thing’ or goal.
Take the written lists created when you asked yourself “What do I want?” and answer for every item: What will it do for me? Why is it important to me? What will my life be like when I have reached it? How will achieving it change things for me?
The narrative statements you will create become that ‘vision’ I discussed. A visual image you are creating in your mind’s eye of how your life will look, feel, and be when you have achieved or attained what you want.
Picture yourself doing what it takes to succeed and you will soon find yourself believing that you can and guess what, once your believe you can… you will.
Let me leave you with this: The test of being true committed is like the difference between eggs and bacon at breakfast. The chicken was involved. The pig was committed. This little joke illustrates the nature of commitment. To be truly committed means giving 100% of everything you have and at all times to completing your objective, and really caring about the outcome. It means having the tenacity and backbone to create the outcome you desire, regardless of the amount of energy it takes to accomplish.
Remember commitment is part of the FIRST step to your personal and professional success: there are nine more.
1. Know what you want and commit to having/accomplishing it.
2. Believe that you can and will accomplish what you want.
3. Use your imagination and allow yourself to see what things will be like when you accomplish them.
4. Create a plan to accomplish what you desire and act and improve on it every day.
6. Be tenacious and positive.
7. Look outside yourself for help.
9. Lose all negativity, fear and doubt.
10. Enjoy the journey, enjoy the destination.
This will be a journey so, as I say in #10… enjoy the journey, enjoy the destination.
What makes a successful Finance business partner?
Is ‘business partnering’ a consciously chosen career path, or more like an area you fall into? When considering a Finance career, I knew I wanted to be a ‘management accountant’. This included providing superior financial decision support to leadership teams in both Commercial and Operations.
So, what makes a successful Finance Business Partner?
1. Acting as a neutral ‘go between’ for Sales and Operations.
This is not as straightforward as it sounds. Both functions have very different agendas, priorities and points of focus within a business. The finance business partner (FBP ) is often acting as the ‘referee’ between the two departments, reconciling and compiling both viewpoints on the future for executive decision making. Business performance ideally needs to be tracked against a single set of metrics (I’ve learned from experience that this is not always the case). For this reason, FBPs are often process owners for corporate sales and operations planning (S&OP).
One aim of S&OP is to assist in more effective demand planning and inventory management by delivering an integrated business review of year to date performance plus a consensus sales and production forecast for the following period (e.g. month, current quarter and full year).
In one of my assignments, I remember a humorous moment where one of my senior internal customers welcomed me into the organization by saying ‘you are welcome to police our activities at any time’. After politely pointing out that I was a ‘business partner’ and not a ‘policewoman’, I went on to explain the agreed vision for my role. Thankfully we were on the same page!
FBPs are often required to make recommendations that may influence the decisions of stakeholders at the Executive level. They need to be comfortable in managing ‘change’ (leadership) as well as managing ‘complexity’ (management). What lies at the heart of this dual role is a constant need to ‘provide the numbers’ in the shortest time possible (to minimize risk in decision making). This in turn frees up resources and increases the opportunity to ‘think beyond the numbers’ (to maximize commercial opportunity).
While working in the IT division of a global consumer bank, I was tasked with developing a financial management framework for a multi-million dollar technology upgrade that had been running for a year. The mandate was to get visibility on the project spend to date and to stop the costs from spiraling out of control.
More communication and teamwork across the programme was required.
The first two issues were addressed by building and leading a Project Management Office, implementing appropriate systems and processes, and training the project staff. The project cost base was quickly established and project managers made accountable for their individual budgets. The project financials were included in the monthly project status meetings and overspends were analyzed in depth.
Despite all this good stuff I felt something was missing. A key question came to mind: how can an overspend on a UK based project, which we will call ‘Project X’, be effectively explained when it was actually driven by a scope change in ‘Project Y’ in Singapore?
After a great conversation with a highly talented IT programmer, my global Project MIS idea was born. The system was built from Lotus Notes, providing instant ‘borderless communication’ (accessible across all geographies).
The system was populated with all the projects from around the world that made up the programme, along, with project manager name, contact details, project team member details, etc.
A notification email would automatically be sent to the impacted PM.
If a solution could not be found, the matter would be escalated electronically to the next level of management for resolution.
A simple idea, yet extremely effective. Not only did project communication increase by over 50%, project risk (and consequently cost overruns) was significantly reduced.
From a ‘knowledge management’ perspective, the MIS provided a repository of valuable project insights and information that could act as a reference guide on future change initiatives; information that otherwise have been lost.
From experience, it is challenging to wear both a full-time ‘Controller’ hat and a full time ‘Business Partnering’ hat. Progressive and forward looking pharmaceutical firms in my opinion have got it right by having a separate decision support function, allowing these managers and analysts to focus purely on helping move the business forward, attending to the more traditional accounting duties at the year-end, to ensure a minimal financial exposure to the company.
The other business and support functions (Sales, Marketing, IT, Supply Chain, etc) need to partner with a Finance professional to whom they can relate. Strong people and communication skills are critical. Showing interest (at the beginning) , followed by more detailed knowledge in the business (its products, services, suppliers and competitors) separates the ‘Partners’ from the ‘Processors’.
If the concept of business partnering is new to your organization, ensure that the President / GM is bought into the philosophy right from the start. Even in a culture where partnering is well established it’s important to align what you think are critical objectives with those of the business leadership. I have been in meeting situations where there was a lack of awareness amongst the Executive as to what the No1 priority should be, i.e. the CEO had one view and the Finance Leadership had another. This is especially common in dual reporting situations, i.e the Finance Director / VP reports into both the GM of a subsidiary and the CFO at Group Head Office.
A challenging situation can arise where the Head of the Finance function has come from a totally different career route and has not had any exposure to business partnering. Business partnering is not about ‘cracking the compliance whip’; it is about building relationships and confidence in your personal abilities to change the impossible to the possible. Diplomacy, tact and professional integrity are needed in abundance. It’s important to be seen as a business planning and decision support specialist who ‘looks beyond the numbers’. In many instances there are valid business reasons for why 2 + 2 = 4.5 and it’s having the confidence to present the business case accordingly.
Depending on the size and skill set of the Finance function, business partnering can occur at one of several levels of what I will call the ‘Finance Business Partnering Progression Model’ (discussed in a future article).
There was one role during the earlier stages of my career, in an organization where, due to legacy staffing issues, the Finance function was held in very low regard. It came to my attention that the VP of Operations was highly concerned about the levels of annual product warranty spend in the business, an ongoing business problem which required urgent attention.
Presenting him with an 80-page Powerpoint deck, detailing warranty spend to date / by month, analyzed by various dimensions including customer, product SKU, customer location, province, etc four weeks after joining, complete with a national overview and executive summary quickly changed historic perceptions of the value add role of Finance.
Be confident in establishing boundaries (business partnering can often feel like trying to ‘ringfence a cloud’). Say what you are going to do and do what you say – enough said!
The real life scenario outlined in Point 9 illustrates this well, and helps promote the attributes mentioned in Point 10.