Technological advances are fueling the convergence of once-disparate FP&A and accounting processes, as they are both charged with aligning the organization's strategic and financial objectives
The connection between the two teams is critical if your company is aiming to make smart capital-allocation choices based on data-driven insights like reliable forecasts of cash, scenario planning, and P&L.
Yet, accounting and FP&A organizations are often impeded by the lack of collaboration between two critical teams. Unless we find more effective ways of partnering, accountants and FP&A analysts will struggle to implement their reporting, planning, and forecasting tasks.
Now, more so than ever, it is important for FP&A and accounting teams to work with a collaborative mindset and the right technologies to drive insights and create the most value for the organization.
Understanding the differences between FP&A and accounting teams
In a nutshell, the accounting department is focused on analyzing what happened. While the FP&A department uses the information provided by the accounting team to forecast what might happen.
Here’s a story you would likely relate to:
How do data requests between FP&A and accounting teams happen traditionally?
- The FP&A team requests data from accounting. When accounting teams take time to generate this data, the FP&A team gets frustrated with the lengthy process.
- Accounting teams do not like being micromanaged. Also, they feel the FP&A function does not understand how painful it is to close books and manage other operational items.
- Since most FP&A professionals are not accountants, they often experience difficulties absorbing the numerical implications in the accounting team’s analysis.
- The FP&A presents a forecast that often is disconnected from the actual numbers the accounting team provided.
- The result? Both teams get blamed for inaccurate forecasts or when things go for a toss in the organization.
Relatable, right?
What do you think is the reason for the discrepancies in the projections and operational efficiency?
Silos.
You heard it right. In all effect, both the finance and accounting teams prepare analyses in different formats, lowering productivity and causing operational inefficiencies.
Largely, disparate skill sets and processing tasks of each team are to be blamed. Each team has a different style of working, they use different tools, and that limits their successful collaboration.
The next generation of finance and accounting teams need to revisit each one’s talents and tasks and promote more efficient collaboration for the production and development of real-time analysis.
Here’s how.
Data requests and finding autonomy
The FP&A team requests data from the accounting team. This data is shared over email or team collaboration software. There is a high possibility that this request will be lost in email threads.
What if there was a better way to streamline data requests and find autonomy using integrated business planning software?
This platform serves as a single source of truth, breaking down the silos and helping align both the finance and accounting departments. It can help stakeholders understand the numbers that matter.
Also, advanced reporting features can help you create stunning charts and accurate reports to identify trends.
The collaboration becomes seamless as everyone can share inputs, gather feedback and analysis, and answer queries over a single dashboard.
Forecast accuracy and data standardization
In all possibilities, accounting teams compile data from multiple sources and business applications into spreadsheets. Manual data imports are time-consuming, error-prone, and cannot be scaled.
Instead, high-growth companies can use a financial planning and forecasting tool to reduce the time FP&A and accounting teams spend on importing and exporting data and help them focus on actual high-value work.
The software integrates with your existing tech stack and syncs data from ERPs and accounting systems, CRM, data lakes, BI solutions, and spreadsheets, leading to data standardization.
When the accounting and FP&A departments are in sync with each other, the result is more accurate forecasts. Stakeholders gain real-time insights and drive fast and trustworthy decision-making.
Reporting to different stakeholders
The CFO can invest in the accounting staff’s capacity to gather, validate, and clean data at the point of entry. This is way more efficient than having the finance teams address data-quality issues after they have occurred.
In parallel, the FP&A team is better equipped to deliver far more than their financial core skills. Their work guides the functioning of the organization. Next-generation high-efficiency FP&A function can build and report the insights, performance, and planning capabilities that leaders need to support dynamic decision-making.
How can FP&A and accounting teams better collaborate for the future of the company?
In fast-scaling organizations, both FP&A and accounting functions are focused on strategic analysis rather than data processing. To help narrow the time-consuming back-and-forth handoffs, organizations need to ensure that both teams are equipped to collaborate on real-time analysis, by following the best practices shared below.
Automation
Automate your data preparation process using business planning software so that you spend more time analyzing data. The software integrates data from several business applications so that both teams can pull information from a single repository. This reduces friction and aligns everyone on common models and methodologies.
Inconsistent data and models can trigger confusion, undermining the goal of data-driven decision-making.
Business partnership
To improve the efficiency of both FP&A and accounting teams, a strong business partnership is much needed. An FP&A platform can facilitate cross-departmental collaboration, leading to improved productivity and job satisfaction.
For example, the data generated by the accounting teams can be used by the FP&A teams to help the leadership strategically align the company’s goals and available financial resources. This business partnership enables the organization to reduce its operational costs while improving employee productivity simultaneously.
Aligning on data security
When there are multiple teams collaborating on sensitive data like budget planning and forecasts, business planning software gives you peace of mind with enterprise-level security.
To keep your critical data safe, business planning platform Pigment offers fine-grained security controls to manage access rights.
Features like Permissions and Access Rights let you define the security of actions that users can perform, granting them a set of specific rights to access relevant data.
Furthermore, the audit trail lets you manage and track any input or model changes, thereby keeping a track of everything.
Going a step further, finance and accounting departments can preserve data at specific points in time with snapshots to avoid unwanted changes and retrieve historical data.
Reporting on shared KPIs
Capital efficiency plays an important role in the sustained and long-term revenue growth of the organization as it helps align individual efforts with the company’s financial goals. Finance and accounting can share the key financial KPIs with each other, which can determine the future course of action.
Some of the shared KPIs for FP&A and accounting teams are:
- Burn multiple
- Venture capital efficiency ratio
- Customer acquisition cost ratio
- Return on invested capital
The lines separating different financial processes are blurring, as financial leadership that steers the company forward requires a new level of interconnectivity. On this journey to increase operational efficiency, both FP&A and accounting teams need to understand each other’s skill sets and tasks.
No doubt, this transformation requires some heavy lifting, but it is important for the two teams to understand their respective processes and redundancies, and join hands to improve the quality of decision-making for the key stakeholders. For this, the convergence between FP&A and accounting is critical.
The way forward for financial organizations would be through technology innovation and the use of highly efficient business planning software.
We conclude with an interesting question: How would an organization look like, when both teams move forward in sync?
