Interview: Why FP&A is the Breeding Ground for Future CFOs

Girdwood started his career at Racal telecommunications in 1989 in the audit department before earning his crust at Hovis bread and moving into the UK food industry as an accountant and financial controller before joining easyJet as head of operational finance in August 2010, rising to head of FP&A just a year later at the European low-cost airline. Throughout all that time Girdwood has always been a fan of collaborative working and gathering useful information from a wide range of sources in order to formulate effective action plans, something that he believes financial planning and analysis (FP&A) allows him to do more easily, prompting him to call the function “the breeding ground of the future for chief financial officers (CFOs)”.

“FP&A is not just about finance – the p for planning is too often forgotten in the job title – it’s about combining the numbers with good growth plans and strategy, and developing business acumen,” says Girdwood. “It’s not purely about the stats, so isn’t necessarily the ideal job for traditional accountants, treasurers or other finance professionals as there is a requirement to interpret the figures, plan and demonstrate clear business thinking. That synthesis is its strength, however, and why you’re seeing FP&A teams springing up all over the world. It’s a growing area that is becoming more and more accepted.” 

In his opinion FP&A will grow and grow and there is a need for programmes like the Association for Financial Professionals (AFP) plan to introduce a new FP&A test and certification programme next year – as long as they are tailored to serve the specific needs of the developing discipline.

“There are too many qualifications at the moment so the AFP programme has to be really good to find its niche,” he says. “I want the AFP to take the best elements of all the FP&A modules in the various general accountancy and finance qualifications that are out there, and create a specific global programme and a certificate that provides a provable standardised set of skills that emphasises planning and collaboration. For instance, as a small example there is often a misunderstanding between what is a key performance indicator (KPI) and what is a measurement. Rectifying common mistakes like that via training, and bringing clarity and good practice to the field can only be of benefit.” It might also assist that progression towards being a CFO and a boardroom executive. 

Maintaining the Cost-base At a Low-cost Airline 

In terms of practical everyday usage Girdwood finds FP&A to be a very useful tool in maintaining and understanding the cost-base. The necessity to control operational expense at a low-cost, high volume airline such as easyJet is a constant challenge for Girdwood and his 20-strong team, but good FP&A procedures, staff and technology allows his team to understand where the key pressure points are around the price of flights, airport landing fees, fuel and so forth.

“The treasury department looks after the initial financing of the planes, but we look at the ownership, long-term leasing arrangements, maintenance, landing fees, and all other operational matters to ensure a low cost-base,” he explains. “FP&A is there to give surety around the numbers, but also to make suggestions, find optimum solutions and to plan future growth avenues via expansion or cost control.

“We do a weekly profit before tax (PBT) exercise that is the most powerful tool we have to control costs, reviewing expenses, forecasts and all other data to help ensure an efficient airline and to fully update our CFO for the boardroom.”

According to Girdwood his 20-strong FP&A team of accountants and airline professionals – split into commercial, operational finance, aircraft ownership and planning sub-teams – see shapes and trends that the business owners may not. FP&A acts as a spotlight for current business performance and for outlining future growth opportunities. 

Future Plans: Rolling Forecasts and Technology

“I want to move towards a rolling forecast framework over the next 18 months, building upon our present weekly PBT exercise, and away from the traditional annual standard budget and half-yearly review that we do at the moment,” states Girdwood as he outlines his plans for the future. “It’s not easy, however, as we need to make assumptions on the flying schedule to go further out, if we are to move towards rolling forecasts by year end 2015. At the moment the airline flying schedule is only detailed six months ahead, or 12 at best for budget purposes, and this is no good for me as I want to link it up with our annual budget and beyond, creating a really effective rolling forecast procedure. We are not there yet but I’m confident we can move to this framework.”

You also need the technology infrastructure, reporting and ‘big data’ analytical capabilities to support such a framework, which is why easyJet is already working on a three-year business intelligence (BI) project which Girdwood is heading up to find out how they can deliver better business information in the future. “A ‘BI no regrets’ programme is already underway to ensure any quick wins we can pick up are enacted fast, with longer-term planning then taking over as ultimately I want to move towards having our own interrogatable data warehouse that provides ‘one version of the truth’ to everyone easily, quickly and reliably.

“I think there is a massive opportunity for technology to aid FP&A. Big data analytics, harnessed to FP&A skills and staff will help us improve the business.”   

This will be where the business of the future succeeds, believes Girdwood, by marrying big data analytical capabilities to good procedures and structures to deliver timely data and insight. It can be used to proactively keep costs down and devise long-term growth plans, and it’s where the CFOs of the future will be able to differentiate themselves from their peers. 

 

• 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 this link for more information, sign up to the AFP FP&A e-newsletter or visit the FP&A website. There are also two gtnews FP&A Interviews – with 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 on 1 October 2013, when Rupert Merson, a professor at the London Business School will discuss the interaction between FP&A and organisational culture.

 

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