One of our top blogs of all-time, FP&A Trends: Experts Discuss Pivoting and Persevering in 2020, is popular for obvious reasons.
FP&A professionals were looking for much-needed moral support as they navigated that final quarter in 2020. So in that blog, we asked seven FP&A experts to talk about how FP&A changed permanently as a result of the pandemic and how they managed to pivot and persevere—and to share their perspectives on FP&A trends.
As we’ve all seen, 2020 was a challenging year…but 2021 is a continuation and an extension of these challenges.
Today we’re welcoming back Finance Leader Terrell Turner of TL TurnerGroup, who shared his insights with us in October’s FP&A trends blog. He’s joined by Collectiv’s Senior FP&A Consultant Chris Ortega.
Together, Terrell and Chris will focus on FP&A trends and lessons learned in 2020 that are still relevant this year, how these trends and lessons will play out in 2021, and their recommendations for FP&A teams.
Translating Financial Information to Non-Finance Teams
From an FP&A perspective, it becomes even more important to get better at translating financial information into something that is actionable by non-finance teams. If you hand a salesperson financial statements, they won’t know how to translate the numbers so they make sense in their world.
There’s a ton of value in the FP&A world. But if there’s no person to translate that value to the non-finance and accounting teams, it’s almost useless because they’re not going to know what to do with it.
One of the most common things I heard in 2020: “Business is down and revenue isn’t flowing as much as it was before.”
A lot of non-finance people were asking: “Well, what do we need to do to improve cash flow and profitability?”
Look, when times are good…people don’t ask a lot of questions. When times are bad, people tend to ask a lot of questions. This happens because a good economy hides some of the shortfalls, but a bad economy exposes all of them.
After looking at the numbers, non-finance professionals realized they needed to change or do something new—but they didn’t know what that “something new” should be. Truthfully speaking, there were shortcomings in the way that the numbers were presented. Unfortunately, these shortcomings negatively impacted and shut down a lot of businesses.
The FP&A function is where you have the ability to get a line of sight to those things and fix them before they become an issue. But you need to be fluent enough to translate these technical financial perspectives into something that makes sense for people who don’t live in the finance world.
Terrell’s Recommendations for FP&A Teams
To truly understand the non-finance world, go to some of the regular meetings that other teams in your organization are having.
I used to sit in sales meetings because I wanted to understand the business from their perspective. I listened to their questions and challenges, and their decision-making process. Then I was able to figure out how to translate the financial information to connect to the metrics they’re already paying attention to.
After sitting in these sales meetings for two weeks, light bulbs started going off. When it was time to go through the financial results with the sales team, I would explain financial metrics that were related to things that they could take action on. This also helped us redefine metrics where client success was being measured against metrics that were relevant in prior years but not as applicable to the current year.
You have to step out of the CFO’s office and see things from the operator’s perspective. If you don’t take the time to learn what matters most to non-finance teams, you don’t really know how to give them the right level of data they need to go improve the results they care about.
Empowering Empathetic Data-Driven Decision-Making
The FP&A challenges we experienced in 2020 are here to stay in 2021. If you haven’t found a way to connect and collaborate with your indirect and direct teams yet, you’re in really bad shape. And if you haven’t adjusted to a culture of empowerment versus a directive-driven culture, then you’re in really, really bad shape.
Can you still do business as usual without a culture of empowerment? Of course. But, you will lose the most important thing…your people.
These changing times have brought an uprising. People don’t want to be forced to go back to an office or micromanaged virtually when they’re working from home. People want to be treated like people.
We’re not talking about FP&A trends here, we’re talking about themes. Themes are longstanding and monumental. These pandemic changes mean we should stop holding onto the way things were because the baseline will never go back to the way it was before.
Communication and C-suite alignment are important. But another key aspect of finance leadership in 2020, 2021, and beyond is leading data-driven decisions with empathy.
Think of the airline industry or the hospitality industry. These organizations had to make decisions that impacted millions of people’s lives. They had to get creative and explore every possible business strategy to avoid laying people off.
During these times, people’s livelihoods are going to be affected by every decision. FP&A decisions are intertwined with people’s livelihoods like never before.
Chris’ Recommendations for FP&A Teams
FP&A teams have to carry that badge of empathy to know every business decision we make is going to have a collateral impact on people. We need to allow empathy into the data-driven decision-making process around budgeting, reductions of boundaries, and structuring.
A lot of people in finance leadership roles have been thinking this is just a trend or a wave that’s going to subside. They get stuck in this “I’ve seen it all before” mentality because they have 20-30 years of experience. These people are putting million-dollar bets down at the roulette table and a lot of people’s lives completely depend on the bets they’re making.
Finance leaders who led with empathy in 2020 will need to keep driving empathetic data-driven decision-making in 2021. We can’t force, we have to adapt and evolve. This is the only way organizations will be ready for whatever this next age is going to be.
If you’re a CFO, you have access to the resources. You are the one who makes the resource decisions. You are the one planning how the business will perform. You are the one leading the charge. So, lead the charge…just lead it with empathy.
In Collectiv’s FP&A Visioning Program, our experts identify successful strategies and tactics to accelerate your team’s progression. Learn more about the program here.