business – FP&A Expertise

Why Process Discipline Is So Important In FP&A

Featuredby Laryssa Reifel: FP&A Expertise

If you follow my writing about FP&A best practices, you will recall that I have often commented on how I see the FP&A world in terms of systems, talent, process, and institutionalized discipline. You might also be familiar with my FP&A presentations that show this illustration:

The seamless and elegant interaction of each of these FP&A components is what creates a center of excellence inside an organization. It becomes a “go to” department for C level and VP GM level decision making. Moreover, each component expands into a clear understanding of the requisite personnel, key deliverables, performance measurement for effectiveness and leadership nuances that drive success in that particular component.

But there is one thing that runs through each component and is the absolute determining factor in organizational success. That component is PROCESS.

What is Process?

I asked Perplexity AI and here is what it told me:

In a corporate FP&A (financial planning and analysis) context, a process is the repeatable, structured set of activities, inputs, and outputs that a finance team follows to produce a specific management outcome—such as a budget, forecast, variance analysis, or management report.

More concretely, in FP&A, a process typically:

Has a clear purpose and deliverable (for example, “build and approve the annual operating plan” or “produce monthly forecast and variance commentary”).

Follows defined steps with owners and timelines, such as data collection, validation, analysis, review, and sign‑off.

Uses standardized inputs (actuals from ERP, drivers from business units, assumptions about market conditions) and produces standardized outputs (P&L, cash flow, headcount plans, dashboards).

Repeats on a regular cadence—monthly, quarterly, or annually—and is governed by documented policies and calendars.

Is designed to support decision‑making by turning raw financial and operational data into insight and recommendations for management.

It’s not a bad definition. The focus here on inputs and outputs along with references to ownership, accountability and cadence is accurate.

The next logical question is why is process important? This of course means “other than because finance people tend to be organized, type A personality types who need everything lined up properly”. Process is important because it is the lynchpin in getting the most out of your FP&A organization. Said differently, process is what allows you to get your money’s worth out of FP&A. These are the pieces that need to be healthy:

Data Collection and Assembly

Calendar management

Systems Installation/Maintenance

Deliverable Execution

To get what you are really paying for when it comes to FP&A you must have:

Analysis that Supports Decision Making

The only way for organizations to get what they pay for (Item number 5) is to do items 1-4 very well. Institutionalized discipline and process separate good FP&A teams from mediocre FP&A teams and paving the way for the analytical thinking that FP&A leaders provide.

When pushed through the lens of the distribution of resources here is what it looks like:

When data collection and deliverable execution command 80% of the team’s time, it is difficult to get at the heart of what FP&A people are hired to do. Identifying how much of the FP&A team’s time is spent on analysis that supports decision making is a first step toward making positive improvements.

How are your FP&A processes? If you need some organizational diagnostics, FP&A Expertise is here to help.

Contact Me, Forecasting, Strategic Planning

2026 Annual Operating Plan

Featuredby Laryssa Reifel: FP&A Expertise

Avoid These Common Pitfalls For A Successful Annual Operating Plan

It is that time of year again. Summer is over and most FP&A departments are in full swing getting ready to close out the quarter and simultaneously prepare for the build out of the Annual Operating Plan.

In this post I offer some common pitfalls to avoid going into planning season.

Bottoms Up of Tops Down – Solve the Chicken/Egg Problem First

Some of the most important participants in the Annual Operating Plan process, besides the CFO, are the leaders of a company’s business units. These are SVPs or VPs of a business unit, line of business or the leader of a group of business segments. The one complaint nearly all business unit leaders have is this:

WHY SHOULD I GO THROUGH THE PROCESS (AND USE UP VITAL DEPARTMENT RESOURCES) TO GO THROUGH A BOTTOMS UP BUILD OF A FINANCIAL PLAN IF IN THE END YOU ARE GOING TO GIVE ME A NUMBER AND TELL WHAT I NEED TO DELIVER IN TERMS OF TOP LINE, MARGIN AND OI FLOWTHROUGH?

My fellow FP&A professionals are chuckling right now because those of us who are seasoned have navigated this question on more than one occasion. Most often the response is crafted around the desire for the C-Suite to make sure they understand the details and can feed scenario models for more effective decision making. The truth is often that the leadership team wants to see, if left unchecked, what could the businesses deliver and what that looks like on a consolidated basis. The result is never extraordinary top line growth and lower expenses.

Each organization operates within a set of boundaries such as lead analyst expectations (for publicly traded companies), 3 statement models developed by investors or a set of financial objectives laid out by the C-Suite. Regardless of the bumpers a company has, the important part is the communication around these topics.

Therefore, establishing “the why” during any planning season kick off is important for the whole leadership team and paves a much smoother path for any FP&A team.

2. Alignment on Initiatives/Investments

Before any work is done in terms of schedules, meetings, expense reviews and model builds, all organizations ideally have a set of strategic initiatives that are either serving or accomplishing in the coming 12 months. When these are clearly understood by the C-Suite and business unit leaders, annual operating plan development automatically has a set of boundaries. Having those boundaries sets an effective framework for the way forward.

Lack of clarity on strategic initiatives leaves the leadership teams and those developing plans with a blank sheet of paper. Like an architectural build without any general scaffolding, planning efforts quickly fall into disarray without internal alignment on objectives. As plans roll up department by department they should each sit in the context of key objectives and investments for the coming year. This allows everyone to sing from the same song sheet and avoids large exercises in plan development that are ultimately discarded.

3. Make a plan for the plan

Making a plan for the plan is the easiest part of any planning process but is the most often overlooked. Beginning with the end in mind, teams target a board meeting where the annual operating plan is approved. FP&A leaders must work backward from a “pencils down” date in order to get the organization to work in harmony for the deliverable.

What on its face appears to be a simple calendaring exercise is often quite challenging. Aside from all of the system level preparatory work that FP&A teams need to do, there is highly customized prep work that has to be done in order for FP&A to talk to departments across the organization. This is a combination of pulling and presenting historical information along with a general understanding of the strategic objectives of the business unit.

When engaging with leadership what ultimately tends to be the wrench in the process is travel, conferences, PTO and customer meetings. Capturing the attention of key stakeholders across the organization by getting on their calendar and having them understand the overall objective is a crucial aspect of the process.

A common mistake is not getting ahead of this calendaring and not building in enough time for missed deadlines, schedule changes, new information and system problems. There is an amount of cushion that each organization must have in its planning process in order to land the plan om time.

4. Dependencies

Making a plan for the plan also includes understanding the internal dependencies and including the inclusion of those into the schedule.

The prime example of this is commission planning. Any revenue model requires an understanding of how sales are going to be achieved – everything flows from this point. This is why the FP&A partnership with sales leadership is so crucial. Sales targets and commission plans require a great deal of time to develop especially in large organizations. Nailing down this dependency too early (not enough information) or too late (after the vision for the top line is decided) can derail the whole annual operating plan process.

5. Understanding Headcount

Headcount is central to all operating plans.

Where organizations face challenges is keeping track of headcount. On its face, headcount should be an easy exercise. In all most all companies, headcount is actually quite challenging. The reason is because the systems around headcount management are lacking in the presence of fixed position numbers and titles. Without them and inside a fast-moving organization, people and open positions move around quickly and from department to department – think of three-way trades in the NHL (a three-way trade in the NHL involves three teams exchanging players, draft picks, or other assets in a single coordinated transaction, often designed to address salary cap, roster needs, or contract limitations).

If you are moving names around an organization or the term “open position” around an organization, whenever there are changes to the name or the location of the open position(s) you quickly lose sight of what your planned expense basis was going to be for the annual operating plan. Position numbers with fixed titles help to keep sight of what the planned investment was even when there is turnover or a departmental transfer.

6. What Did You Say Before?

Long range business plans typically cover a 3-5 year time span. When done well, year two of that plan should become the starting point for the next years’ annual operating plan.

The only constant of course is change, and that starting point will be affected by the actual results in year one. Boards of Directors understand this reality. What is key for leadership teams presenting a new operating plan to the board is to address changes from the last time the story of the business was shared. This usually involves an understanding of the drivers of missing an EBITDA or Net Income target through an analysis of variances to top line and operating expenses along with any unusual events.

Not having a bridging exercise completed prior to any conversation with the board can impact the C-Suites credibility.

Are you looking for leadership in your FP&A organization or an extra set of hands to achieve your plan on time and strongly built out? Feel free to contact me

#AOP #Budgeting #AnuualOperatingPlan #Strategy #2026

Process

Weekly Cash Forecasting versus Cash Flow Modeling: What’s the Difference

Featuredby Laryssa Reifel: FP&A Expertise

I have had a number of clients request cash flow forecasting models. This invariably leads to a deeper conversation around what is truly needed to manage the business. Here are FIVE key questions I typically ask and client coming to me for cash forecasting needs:

Do you have an effective, repeatable and tightly controlled close process? This question may seem obvious but no forecast can be done for a three statement model without a solid understanding of historical actuals. Similarly, a weekly cash outlook without an understanding of historic inflows and outflows makes the projection on cash position difficult to nail down.
Why is the cash forecasting needed? It can be the case that cash is tight and has to be closely controlled as on a weekly basis. Or, the answer might be that management wants a high-level understanding of the company’s expected cash position on a quarter by quarter basis. Is the information needed for day to day operational decision making or is it for a longer term outlook reflecting the health of the balance sheet?
Who is the target audience? Is the target customer for this information the C-Suite (CFO’s office in particular) or is the data being developed as a part of formal three statement modeling for investor or board of director consideration?
What Stage is your company in? One of the dependencies of three statement modeling is having a business that has enough maturity to have predictability in accounts receivable, prepaid expenses and accounts payable. To have that you need an accounting organization that closes the books regularly and has consistency of process in booking entries. Said differently, if your top line has no predictability and your expenses are erratic, it is pretty hard to build three statement models with a cash flow output that is accurate. Early-stage companies struggle in this area because of a lack of understanding in key cash flow model assumptions such as DSO and DPO. Such organizations are likely better off with a more simplistic weekly cash flow modeling comprised of projected invoicing, estimated collections and expenses.
How is your company capitalized? If your organization is capitalized by a very large parent company at an advanced stage, it is likely that you need to have three statement model that is updated on a rolling forecast basis. More formally, if you are publicly traded then it is expected by shareholders and investors that you have a good handle on all three financial statements. If you are small and newly growing however, weekly cash forecasting may be more appropriate for your needs until you have some stability in A/R and A/P (the primary drivers for your understanding of working capital and cash flow from operations).

Using the questions above as a filter allows me to judge what the true needs of the business may be. In the end, some CFOs (if they have the requisite resources) might want both a weekly cash forecast model and more formal three statement modeling. Even if the company is early stage, more formal cash flow modeling is achievable with a list of key assumptions, but the results in terms of accuracy can be limited.

If your business is in need of a review of your cash forecast that’s where FP&A Expertise can assist.

#financialplanningandanalysis #modeling #fpa #finance #companystages #budeting #planning #strategy #process #systems #leadership #management #annualplanning #financialconsulting #executive