What sets apart world-class finance teams?

As it turns out, everything modern finance teams need to succeed at financial planning boils down to eight capabilities.

It all started in a board meeting years ago.

“Wait, that can’t be right”, I remember thinking.

I was halfway through presenting our forecasts in a board presentation when I realized the numbers were off. A specific number, which I knew couldn’t be valid, revealed it.

Was I presenting the correct version? Was it a copy-paste error? Had someone else updated the file? I wasn’t sure, and despite double-checking everything, something had gone wrong. What do I do now?

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I first stumbled upon the problems with financial planning in Excel and Google Sheets when I started my first finance role as Head of Finance. Commonly, my responsibilities included:

• Creating an annual budget

• Tracking actuals vs. budget every month

• Maintaining an updated cash flow forecast

• Preparing monthly KPI reports to investors

• Creating scenarios for strategic initiatives on an ongoing basis

• Creating fundraising models with 3-year financial outlooks

It seemed straightforward at first glance. With a McKinsey background, I figured I was set up for success.

I wasn’t.

Operational complexity quickly made my job difficult. The business had entities across multiple countries with different general ledgers and base currencies. Simultaneously, many colleagues required access to the model but couldn’t view each other’s figures. For instance, a country manager responsible for their country's profit and loss should not have access to other countries' salary details.

To tie it all together, I had to do a lot of currency conversion, copy-pasting, actuals import, file merging, and formula building. It all left room for error. If there is one wrong copy-paste, one wrong file merge, or one obsolete formula, the forecast might be completely off.

I’ll tell you, that will make you paranoid.

Even worse, it could be justified if it had been a one-time thing, but I had to revisit the work every month. It wasn’t sustainable. We needed the work to manage the business properly, but the resources required seemed disproportionate.

It got me thinking: How do the best finance teams approach financial planning and analysis (FP&A)?

In 2020, I returned to study at MIT. While many of my peers dove into crypto and COVID modeling (after all, it was 2020), I became increasingly preoccupied with what ‘good’ financial planning looks like. This intrigued me because it bridged two of my passions: finance/accounting and digital product development… though admittedly, it wasn’t as glamorous as crypto.

That’s when I set out to understand how top finance teams approach financial planning and how smaller teams can achieve the same thing.

At a high level, at Francis, we think of FP&A as creating and following up on plans. When we started, we knew that FP&A spanned many different areas, including controlling, consolidation, collaboration, strategic planning, and reporting, all of which require various capabilities.

Talking to 100s of people, it became clear that there was no definition of where FP&A starts and ends. Some addressed accounting automation, others broad reporting needs. Because much of the work had historically been done in Excel on an ad-hoc basis, there was no need to define the specifications.

This presented a problem. How were we supposed to explore what it takes to succeed in an FP&A role if we couldn’t agree on what it means in the first place?

Initially, it was chaos. A big part of this came from speaking to too many different types of customers. Initially, we’d meet with all the actors with a stake in financial planning. This included business owners, accountants, finance teams, and investors. At one point, I even found myself in a meeting with a bank executive discussing personal budgets for mortgage planning. However, we learned that they had different prerequisites for planning and solved for varying needs. Investors wanted standardized reporting, accountants wanted out-of-the-box budgets, and finance teams wanted more powerful planning and collaboration. Following startup 101 advice, we eventually narrowed our focus to only supporting finance teams in mid-sized companies, which, to our relief, brought a lot of clarity - more on that in a future post.

As we focused our efforts on one target segment, patterns emerged. Users asked for the same things, and it became clear which feedback to prioritize. We could now begin defining the capabilities of the future. Over the years, we’ve honed in on eight key capabilities, summarizing the hundreds of feedback items we receive. The capabilities are a great way to frame conversations with finance teams who want to do more. We’ve published them on our website and here to help finance teams articulate their needs better:

We see that the best finance teams pursue these capabilities. Think of them as a menu of items you can incorporate into your FP&A operations as you grow. Advanced FP&A teams do all eight.

For example, I can share how we approach financial planning internally at Francis.

We have two entities (USA + Denmark) and do our bookkeeping in Quickbooks Online and Visma e-conomic. For starters, I created a financial model that suits our needs. From day one, I also needed integrations to import actuals from our two accounting systems. Unusually, we started with two entities and consequently needed consolidation and currency conversion right from the start. Even though we’re a small team, I collaborate on plans with management. I use version control to forecast KPIs and cash flow/runway monthly. I use variance analysis for internal performance tracking and reporting for external investor reports. Once we expand our team, we’ll need to implement restricted access so department heads can view their plans

In my first finance role, I might not have presented the wrong forecast if I had automatic data imports, robust version control, and more governed collaborative workflows. We’re now trying to ensure that other finance teams don’t make the same mistake.