“In the present economic climate, typified by low interest rates and high risk premiums, financial planning and analysis (FP&A) has never been more important,” says Ash Sharma, head of FP&A at the pharmaceutical wholesale division of Alliance Boots. “The ability to draw insights from data and the emphasis on forward planning in the FP&A function can help to guide the chief executive officer (CEO) – or pilot in my airplane-based analogy – through these challenging times where corporate balance sheets can be bloated with cash but access to traditional capital sources restricted, and where short term survival may be out of kilter with long term growth prospects.”
“FP&A can help to chart the course, evaluate the business and finance opportunities and navigate through these eddies,” says Sharma because it combines so many different skillsets from mastery of the numbers through to organisational and communication skills. You need all three skills in order to get colleagues to buy into your long-term and short-term plans for a corporation and a good analytical brain to interpret the data that is fed back from the systems and procedures you have put in place.
FP&A is not considered as a discipline in its own right yet, in the opinion of Sharma, who started his career in traditional finance manager and controller roles at HCL Technologies and BT in the 1990s before entering the field – but he would like to see it recognised as a standalone career eventually. “I am a member of the Chartered Institute of Management Accountants (CIMA) in the UK and have an MBA from Mumbai University, India, so like many in the FP&A arena I have an accountancy background, but I don’t think that is enough to achieve the breakthrough in FP&A recognition that I’d like to see.
“That is why I’ve become a part of the London FP&A Club advisory board in order to network with, develop from and guide fellow FP&A professionals in the UK. I am also intrigued to find out more about the new FP&A test and certification programme from the Association for Financial Professionals (AFP),” continues Sharma, as he thinks both initiatives could help FP&A become a more recognised standalone discipline. “However, in order for the AFP certificate to be meaningful it must help to develop what I think is the key skill for a head of FP&A – namely, business acumen – and it is too early to say yet if the AFP programme will do this. I am watching it with interest.”
“While there is a growing recognition of the value that FP&A can bring to a business, it is still too often seen as an occasional thing that accountants sometimes do. The CIMA qualification in the UK, for instance, is probably the most closely associated with aspects of financial planning and analysis but it is just one element in what is seen as an overall management accountancy programme. The term ‘management accountant’ is still associated with manufacturing industries from decades ago, and it is this old fashioned viewpoint of FP&A that I want to dispense with.”
“FP&A could be a useful training ground for future chief financial officers (CFOs) as many of the skills inherent in the job are useful for that boardroom level role – but it is the business skills and ability to spot opportunities that will count, not merely number proficiency. Business acumen is what counts in your career as it progresses, and some of that is inevitability down to the individual: it is hard to teach.”
FP&A Career and Recruiting for the Future
“Whenever I have recruited someone for the FP&A function, I make them aware that the job is what they make of it,” says Sharma. “What I mean by that is that FP&A can be the ‘graveyard’ of accountants in that you could end up there forever just reporting numbers, without generating insights or communicating opportunities. Alternatively, you could become a corporate angel on top of the business that takes flight, who always has the figures, plan and analysis necessary to map out future success. If it’s the latter and you’re proactive, then your career will progress.”
Sharma started his career in India with HCL Technologies in 1996 as a finance manager after completing his MBA from Mumbai University. He always wanted to do more at the front-end of the business, however, helping it to plan and achieve objectives and grow. “I think I had a passion for FP&A even back then, although I must confess I had not heard of the term at that stage of my career,” he says.
Within three years, Sharma was in the UK handling HCL’s European finance function but in his quest for more experience he decided to move on from there to controllership roles to strengthen the core and then on to as BT as a head of finance in a front-end P&L management role. “This was the real business-facing financial planning and analysis role which allowed me to hone key FP&A skills. From there, I became the senior director for corporate FP&A at Travelport, a distribution service and electronic e-commerce provider for the global travel industry. It was a challenging time with the credit crunch underway, but I thoroughly enjoyed it.
“I joined Alliance Healthcare, which is a pharmaceutical wholesaling division of Alliance Boots Group, in August 2011. My key responsibilities here are financial performance management across the numerous countries where the division operates. I also coordinate the budgeting and forecasting process across the division and advise senior executives about key trends, variances, performance indicators and growth opportunities.”
Alliance Boots Healthcare does standard budgeting, with a couple of formal mid-year forecast cycles to take stock of where we are at, explains Sharma. “The company is a rather complex organisation which has grown at a tremendous pace over the last few years, so having the certainty of an annual budget as a target helps organise things, but we do still keep a close eye out to identify shorter-term business risks and opportunities as this is a key strength of the FP&A function.” In future years, he would like to explore the possibility of moving towards rolling forecasts and using analytical software and processes to work more dynamically in real-time, but Sharma admits this is still a few years off.
The Power of Data
Big data is talked about a lot, and indeed can be a powerful tool. But within FP&A, apart from data, the two other key enablers are people and technology, says Sharma. “What is more important for FP&A professionals day in and day out is technology that provides the ability to sift through large volumes of data, assist analysis procedures, and most importantly allow for the visualisation of insights. This is how I envisage technology and big data analytical tools – as an aid to people who must still interpret it,” says Sharma, who is also pleased to see that the cost of big data software mining tools is falling as big computing (i.e. an excess of cheap, computing power) comes online.
“The biggest challenge in FP&A today is the sheer amount of data,” continues Sharma. “It creates issues in ‘sorting out the wheat from the chaff’ and secondly, in drawing out meaningful insights, which requires people-skills and the effective planning and use of automated reporting processes. It goes back to my point that while technology is getting better and cheaper, it still ultimately comes back to the person. People with the right commercial and business acumen, who are able to analyse, draw insights and then communicate it to the management team, are harder to find then a new piece of software, and that is where the competitive advantage resides.
Conclusion: There Needs to be More A and less F in FP&A
The future of FP&A rests in the acronym itself, believes Sharma, who points out that Finance is the language of business; Planning is essential to know where you are and where you want to get to; and Analysis shows you the tactical choices and strategy. The latter is where the value-add is but it will take some time to get there.
“Given that financial planning and analysis is a relatively new standalone discipline, the proportion of the three letters in the acronym is not quite right yet,” he continues. “At the moment there is far too much ‘F, some ‘P’, and ‘A’ for analysis tends to lag behind – perhaps due to technological issues or because of skilled people deficiencies – or even management apathy. All of this needs to change.”
There are winds of change blowing through the finance profession, however, believes Sharma that could allow his vision to become a reality, helped by businesses post-crash asking themselves how the global recession came about, why there wasn’t more forewarning and what can be done to rectify this in the future. “Back in 2007 pre-crash, most companies knew what was ‘normal’ for their business but today that comforting sense of normalcy has disappeared. ‘Why didn’t we see it coming?’ was a common question after the collapse of Lehman Brothers and the onset of recession, allied to ‘what can we now do to survive, improve performance and start growing again’? The answers to these questions lie within the FP&A function, particularly the ‘A’ for analysis,” says Sharma. “The analytical capability, harnessed by skilled good people with effective training, is the best response to ensure growth and opportunity in the future, enabling companies to fly high.”
• If you would like to find out more about FP&A and the plans for the Association for Financial Professionals’ (AFP) certification programme please follow the highlighted link for more information, sign up to the AFP FP&A e-newsletter or visit the FP&A website. There are also gtnews FP&A Interviews available with Lewis Girdwood, head of FP&A at easyJet; Jeremy Dahdi, director of planning and reporting at Pearson; Fabrice Domange, senior vice president (SVP) and head of financial planning and analysis (FP&A) for Europe, Middle-East and Africa (EMEA) at AIG Property and Casualty, and Ricardo Losada Revol, director of corporate finance at World Fuel Services – for those interested in reading more about the subject.
• To contact the London FP&A Club about the free membership for finance professionals, or to find out more details about forthcoming events, please email Larysa Melnychuk or join the LinkedIn FP&A Group. The next staging of the London FP&A Club will be in January 2014 when the topic will be implementing rolling forecasts.
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