The profession of financial planning and analysis (FP&A) has evolved from a forecasting and reporting function to a key influential position driving key decisions from C-level Executives and Board Members. CFOs lean heavily on their FP&A team to: (1) analyze financial results for trends and opportunities to improve future results, (2) create compelling presentations that have a clear financial story, and (3) deliver the presentation to the C-level Executives and Board Members.
Smooth sailing during “good times.” When financial results are better than expected, sharing with company leadership turns into a celebration meeting. Presenters can rest assured that the audience will have few, if any, probing questions and the focus might even be on ensuring the various teams receive public recognition for exceeding expectations.
Navigating choppy waters during “bad times.” Every business goes through down cycles when revenue and/or operating income declines or misses the financial forecast. This is when top-performing FP&A teams can shine. Robust analysis of every line in the income statement and crisp storytelling in the presentation to explain variances are essential functions of an FP&A team – these are the “scientific” aspects of the team’s responsibilities. The art of engaging a room of type-A overachievers in a meeting to go over disappointing results is much more amorphous and often overlooked.
Art and finance mix well. One definition of the word “Art” in the Webster dictionary is: the conscious use of skill and creative imagination especially in the production of aesthetic objects. As any accomplished artist knows, the most important opinion on the quality of art is the one that comes from the audience. In a business context, an astute FP&A leader will seek a deep understanding of the levers that any function in the business can activate to change financial outcomes. Building high-trust relationships with business stakeholders is the foundation for FP&A to understand the business levers that ultimately shed light on why results missed expectations.
Like a slice of New York pizza purchased at Wall Street, financial information loses its appeal quickly if not consumed quickly. Every time a fiscal quarter ends, Accounting first completes the financial close activities and then FP&A takes the helm to generate a story of the results. Why did sales miss in our international segment? What is the impact of foreign exchange currency fluctuations? Is the economy where we operate internationally in a downturn? Are there geopolitical events impacting certain regions? Do consumers still find our products bring value for their hard-earned money? A finance team could spend months studying every line in the three financial statements and operating key performance indicators. However, the presentation to the CEO and Board of Directors is scheduled in five days if we include the weekend.
Quickly identifying trends in financial and operating metrics requires a systematic way to track results. Business intelligence systems are critical to a high-functioning finance team. Most humans are not “wired” to go through volumes of data and quickly identify trends. Computers and software that drives business intelligence systems fill in the need for finance teams to quickly identify trends. If done properly, data visualizations can be set-up in advance to illustrate the most impactful metrics for inclusion in a presentation. Tableau is one example of a powerful data visualization tool. From personal experience, I have seen very large, global companies who have not veered away from looking at excel spreadsheets for nuggets of information and creating PowerPoint slides that have endless bullet points and dense tables that are difficult for the audience to consume and interpret. I have also seen small, young companies that have successfully implemented powerful business intelligence tools. The value FP&A brings to the company is linked to the tools available for the team to quickly identify trends and pull together the storyboard for each quarter-end and forecast cycle.
Graphs are a powerful form of communication if designed properly. The litmus test for a compelling graph on a slide is this: can an executive interpret the meaning of the slide while going down a flight of stairs and only dedicating a portion of her attention to the slide? When designed properly, a graph will take no more than ten seconds to interpret. By contrast, tables with 6-point numbers are necessary for analysis but ineffective for presentation material. Slides with powerful graphs are much more powerful to convey a message compared to busy tables and bullet point slides. Those belong in the appendix of your presentation.
Punchline first works best for most executives. Very few, if any, rational people enjoy delivering difficult messages to others. When financial results are not as expected, it is the job of FP&A to deliver very difficult messages to an audience full of overachievers looking to ascribe blame. Was the forecast realistic? Did the forecast contemplate the impact of potential geopolitical or weather events? Did FP&A clearly describe all the risks and opportunities to the forecast in the prior meeting?
Delivery of financial results matters just as much as the content of the presentation. Communicating positive or negative financial results should not emulate a convoluted Star-Wars movie storyline keeping the audience on the edge of their seat until the end of the meeting. Adopting a “punchline first” approach gets the audience to align on the most important variances to discuss. Furthermore, it helps to focus the conversation on what levers need to be actioned to improve the results in future periods.
Glossophobia is real – grab your prepared remarks “by the horns” for your mental health. According to the National Institute of Mental health, 74% of people suffer from Glossophobia or speech anxiety. Most people get anxious when asked to present complex, difficult information that you know is not going to be pleasant for the audience. Do yourself a favor and lead the conversation by getting the unpleasant message out quickly in the first minute or two of the meeting. Then you can guide the meeting to a discussion on how the executives can help improve results for the next period. This will make the conversation less painful to deliver and more productive for the meeting attendees.
Future of FP&A with artificial intelligence (AI). Is AI going to take over finance jobs? While it is wise to “never say never,” in the foreseeable future AI is more likely to become an enabler for timely, meaningful, accurate predictive analytics and forecasts that FP&A can use to help guide decision-making. Those who are trained in tools that can leverage AI will have a valuable, high demand skill. AI on LinkedIn already knows how to rewrite paragraphs in LinkedIn messages to make them more professional or friendly. Imagine the power that AI can bring to an FP&A leader pondering what questions may be asked at the next Board Meeting or the next earnings call with Wall Street Analysts. The future is bright for FP&A teams that embrace technology as a powerful tool to deliver timely, meaningful insights for the C-level team and Board Members.
