Why Involving Department Stakeholders is Essential for Forecasting & Financial Close Success
Financial Planning and Analyses (FP&A), when implemented effectively, really serves as a company’s GPS for financial success. It formulates a path to a company’s financial goals and helps inform its stakeholders, or “drivers”, how to best direct the wheels and throttle the engine of the firm (or “car” in this metaphor) to propel it in the right direction.
When a company’s stakeholders are not tightly interwoven into the FP&A process, not only are operations not maximized and KPIs not met, but the company may ultimately never arrive at its desired financial destination.
Without each department’s stakeholder fully involved and contributing to the FP&A process, a company’s financial path is likely to run astray.
In the remainder of this blog, DLC Finance and Accounting Consultant Kenji Nightingale explores why involving department stakeholders is crucial for success and offers some expert advice for helping them stay engaged.
Why Involving Department Stakeholders is Essential for Forecasting & Financial Close Success
Especially for large, established companies, producing financial reports can become viewed simply as part of the conventional FP&A process, often resulting in the audience feeling detached and as if the reports lack real relevance.
Sales, Marketing, Operations, and other company “wheels”, if you will, may not pay critical attention to FP&A reports believing the reports are just products isolated to the Finance department.
However, involvement and collaboration with all of the other groups is crucial. Each of the departments function as a component of the metaphorical car.
FP&A is the GPS. Without seeing where one is pointed and without relaying to the rest of the car its location status, the vehicle as a whole cannot efficiently move towards its destination.
This is why it is incumbent on the FP&A function to integrate each department into the planning and forecasting process, as well as into the reporting on the results of each period.
The department needs to be responsible for formulating its vision, via a financial plan, for what it can accomplish, and then be held accountable for delivering on that plan. Otherwise, the department may overspend, miss key revenue targets, and not course correct in time to meet its goals.
The best results explanations for actuals reporting come from the stakeholders with their “boots on the ground” and their fingers on the pulse of the market. This is another compelling reason why they need to be involved in assessing actuals in the close process.
The ability to gain understandings of how a variance occurred, its root causes, and how best to either remedy the situation or capitalize on it is invaluable. This holds the stakeholders accountable to follow up with actions to keep the car moving in the right direction.
How to Ensure Stakeholders Stay Engaged in the Forecasting & Financial Close Process
The process for properly involving stakeholders begins with the planning and forecasting process. FP&A needs to work with each department lead to establish guidance for success and a path for profit growth.
This is done by creating financial plans for each department and assigning milestones to hit those departmental targets.
In doing so, we identify the specific drivers, metrics, and timing goals to hold the operators accountable to hit those targets. This also creates trackable KPIs and dates that can be measured to which all parties can refer.
As an example, for the Sales team, one goal may be to increase the subscriber base by 15% in the next 3 quarters. For the Customer Service team, it could be to reduce churn by 3 percentage points, and for the Marketing team, to reduce costs 5% by transitioning to a new advertising platform. These are all goals tied to performance metrics that can be tracked and monitored.
After the plans are built and signoff is gained, it is during the close process when a firm’s progress is tracked. It is this time when we FP&A professionals come together with the departmental leads to deliver clear financial and operational decision-making insights to course correct based on a period’s results.
This is done by gathering the actuals metrics, comparing them against the previously provided stakeholder guidance, and presenting them in the month end report. It is a collaborative process with stakeholders to quantify the impacts and identify the root causes of variances.
Additionally, a discussion on what the most pressing risks and opportunities to be aware of, as well as market headwinds and tailwinds, should be conducted, documented, and included in the month-end report.
Each department will be deeply involved by providing these inputs to Finance, and in turn, receiving a department-specific month-end report for themselves from Finance.
By comparing the actuals against previous guidance through month-end close variance analyses, we can illustrate to all divisions how the company as a whole is veering from or exceeding goals and recommend how to course correct or capitalize on these realizations.
Final Thoughts on Why Involving Department Stakeholders is Essential for Forecasting & Financial Close Success
Without tightly incorporating departmental stakeholders into the planning and close processes, companies may impinge on their ability to reach their goals.
Viewing the FP&A function as the GPS to financial success and closely involving each department — and simultaneously holding each accountable to their financial targets — will steadfastly lead the company to its financial goals.
DLC consultants are adept at and have a long track record of helping clients achieve this essential form of communication between FP&A and departmental stakeholders, so feel free to reach out if you have any questions on this topic.
About Kenji Nightingale
Kenji Nightingale is a seasoned Finance and Accounting Consultant at DLC with expertise in driving profit growth and delivering strategic financial insights that empower decision-making. He specializes in implementing scalable systems and processes while distilling complex data into actionable solutions, helping clients achieve efficiency and clarity. Kenji’s experience spans startups to Fortune 100 companies across industries such as SaaS, e-commerce, digital advertising, CPG, and entertainment.
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