The function of the CFO organization is evolving from being a support organization to driving the strategic decision making in the organization. The financial planning and analysis (FP&A) function plays a key role in this evolution, helping the business navigate the turbulent macro-economic environment as well as the demand shift with its competitive pressures. FP&A is not about stating the obvious; it’s about finding the reality, analyzing it and then telling the organization what to do; these are critical tasks organizations need to drive organizational growth. In other words, a robust FP&A function is critical because it not only analyzes the past numbers but also identifies the rationale behind the numbers, providing deep insights for future strategy. A robust FP&A function is the first predicator of whether a company’s performance will be consistent and repeatable.
At the basic level FP&A provides reporting, but it also produces vital inputs by analyzing, planning and forecasting for the future. To do this, it’s critical for the FP&A team to have deep understanding of the domain, the clients and the industry to provide holistic inputs to the business. Here’s where the outsourcing of the FP&A functions become complicated.
While companies have outsourced transactional FP&A functions for more than a decade now and the industry has reached high levels of maturity, they did not outsource FP&A functions as extensively. However, FP&A has a direct impact on an organization’s performance and market credibility. So, to mitigate risks, organizations look for a credible partner to perform the FP&A roles.
Reaching maturity in the outsourced FP&A function requires the partner organization to gain significant business acumen. TCS recommends addressing this issue by breaking down the processes over a time frame. It’s fairly easy to outsource functions such as macro-level reporting in standard formats and rule-based analysis driven by overall guidelines in the initial six months. As the team matures over the next 6 to 18 months, it starts doing variance analysis and reporting and analyzes the extraneous factors affecting the organization’s performance. The final stage is about cause and effect, which helps forecasting and budgeting. It takes about 18 to 36 months to get to a stage of doing proactive, real-time analytics. With this level of comfort and familiarity with the client organization, the outsourced FP&A services can help the organization make decisions.
However, it’s not just the passage of time that helps a client mitigate risks in an outsourcing relationship. Clients want a partner with proven skills in knowledge transfer and a robust and best-in-class transition plan to mitigate risks. FP&A functions are not easily documented in many organizations and pose a challenge to outsourcing partners. There are risks in areas like people, process and technology. Intensive training can mitigate the risk of people not having the adequate knowledge or not having done something similar before. At TCS, we have robust evaluation methods to ensure that the trainees actually learn from the analysts.
As said before, it’s all about the numbers. Many organizations have disparate applications that lead to variations in the reported numbers. However, there is always “one single truth.” A platform or technology approach based on a single instance eliminates the need for multiple systems and makes reporting and analysis easier. Since FP&A is not about the transactional elements, standardizing processes becomes difficult. TCS’s processes take care of the dynamism too, yet are standard and scalable.
FP&A outsourcing has a strong value proposition and can provide key support to the CFO team in any organization. With the right skills, effective technology and proactive insights, FP&A can provide tremendous value in growing the business and mitigating risks, which helps the organization be better prepared to face the future in these uncertain times.
Vijay Damle manages service delivery for F&A, Procurement, SCM and HRO processes in TCS BPO, and is responsible for delivering the Certainty Experience to customers globally. Vijay has held diverse roles over his career – starting as a Finance analyst, and over time has managed Finance, Production Planning, Transitions and Sales/Relationship Management