Financial planning and analysis: Also known as FP&A, it's what provides businesses with critical information needed for decision-making and future planning. And guess who's uniquely positioned to provide these advisory services to businesses? You!
CPAs and accountants have been doing this for a while already, but likely haven't called it FP&A. As a result, most firms don't really understand how to use it as a strategic advisory tool.
"It's moving from historical information to future planning and involves creating a dynamic financial forecast to make sure businesses are on track to meet their financial goals," said Mike Triantos, head of partnerships at Jirav.
Accounting firms can start offering (or refining) their FP&A services once they understand what makes them different from how they've operated up until now.
Dynamic future planning
The heart of FP&A is a dynamic financial forecast. First, you set long-range financial goals that are 12, or maybe 24 or 36 months out. Then you go back to the current year and work on the annual operating plan or budget to support it.
From there, you "forecast against that budget to make sure [everything] is on track," Triantos said.
Adjustments can be made every month, quarter or period as needed.
It's really the forecasting that allows businesses to see what's happening operationally. And this is a different perspective than what most external accountants have had in the past. In a way, you want to adopt the viewpoint of an internal accountant.
Your goal is to understand the client's revenue drivers and how to optimize them. You also have to consider the people strategy. With all these components gathered together, you can help clients with cash flow optimization.
Real-time financial advisory services like these are a lot more beneficial to businesses than offering a little bit of analysis on current or prior-year financial statements.
Benefits of FP&A
Being in the client's business day to day has so many benefits. For one thing, you're going to get a much deeper, richer relationship with your client.
"It's pretty cool to be in a position where you understand what drives their business," Triantos said.
And despite a huge increase in the number of firms that are offering FP&A services, it's still not so widespread that you can't differentiate yourself in this area. Only around 20% to 30% of firms use FP&A as a core service offering, so there's definitely lots of room in the market.
FP&A is also a growth opportunity for your firm. Tax and audit are no longer where the money is at. The money is in advisory. FP&A gives firms a framework to offer better advisory services.
Tech and talking
Technology is the vehicle to tell the stories of FP&A. Real-time dashboards, key performance indicators, and different reporting tools and packages give you all this great data to pull from. You can use your knowledge and expertise to dig in here and tell the financial story of the client.
Storytelling for accountants can be scary. It's a totally different skill. The good news is that you can keep things pretty simple, according to Triantos.
CPAs often undervalue themselves and don't realize what they can offer to these conversations. With just a little bit of coaching around these discussions, CPAs and accountants can really excel and deliver so much value.
You already know this stuff. You just might not realize it because you've been used to looking at the historical data. What you need to do is just translate that into the future.
Putting FP&A into practice
Once you decide to offer FP&A advisory services, the next questions to address include hiring, training, what to train or hire for, and how to build out that internal expertise.
In smaller firms, the owner should be the one setting the strategy. Roll it out to a couple of friendly clients. Troubleshoot. Document the processes. Productize the service offering into a couple of different bundled services.
Triantos recommends starting with the first and most often overlooked client — your firm itself. It's a good way to "get a better optic of their own business," he said.
If you think about it, that's a great place to test this out. FP&A is a great client benefit, sure, but it's also a revenue driver for your firm, something that will increase your firm's value.
Once you have a few real live prototypes to work with, then it's time to look at the staffing model and a broader roll-out.
Firms that set the bar lead with FP&A, not their accounting and bookkeeping practices, Triantos explained. These firms are having more strategic conversations with their clients and then, along the way, they start helping those clients with standard accounting and bookkeeping services.
FP&A is basically the opposite of how things are done now: Lead with advisory and fall into compliance
This is the next level of a CAS practice. So many people talk about becoming advisory, but they don't tell you how. FP&A provides that framework. There are software tools out there to help you implement a stronger strategy.
For those firms thinking about launching their own FP&A practice, make sure that you are committed — there has to be a leadership commitment. Furthermore, don't get caught up in short-term with tactical distractions, and be sure to think long-term and scale.
You can create a roadmap within your firm to achieve FP&A and ultimately, advisory. This is really interesting work. It's what gets people excited to come to work. FP&A is a force multiplier; a win-win.
