FP&A is growing more attractive to accountants. FP&A has fewer regulations to follow, making it less of a bureaucratic maze. FP&A is more conceptual, making it attractive to accountants who seek an intellectual challenge of forecasting and planning. So how can you switch from accounting to FP&A?
FP&A is growing more attractive to accounting personnel—with good reason. FP&A has fewer regulations to follow, making it less of a bureaucratic maze. That leads to the second reason, which is that FP&A is more conceptual, making it attractive to accountants who are seeking the intellectual challenge of forecasting and planning while reducing compliance burdens.
For accountants interested in switching to FP&A, many questions remain: What skills do they bring to their new role? Which new skills do they need to acquire? How can you make the switch?
The transition is not always a seamless one. When Rachel Yau, CPA and head of finance, ASEAN, joined the FP&A team at Boston Scientific, she brought with her an understanding of accounting concepts such as revenue recognition criteria, knowledge of the ERP system, and her orientation toward detail. “I could go into the ERP system and find out the detailed posting in the cost centers or expense line driving any abnormality,” she recalled.
Of course, that alone was not enough. After she switched to FP&A, Yau found that she needed to improve her financial modeling skills as well as increase her product, business and industry knowledge and develop better soft skills.
WHAT ARE THE DIFFERENCES BETWEEN ACCOUNTING AND FP&A?
FROM CAPITAL REPORTING TO CAPITAL ALLOCATION
Historical to forward-looking. Accounting provides an account of what happened and creates a clear record of resources available. FP&A asks where to allocate that money in order to create the most value for the company.
Change in audience: Investors to business partners. Accountants provide information to management, shareholders, creditors and regulators. FP&A serves management and the business leaders who want a blend of financial and operational metrics.
Financial reporting to management reporting. While both functions report, the format for accounting is standardized and must comply with set rules, such as GAAP or IFRS. Management reporting is not bound by these rules, and therefore FP&A can create reports that suit management and are tailored to different users throughout the organization.
FROM CERTAINTY TO AMBIGUITY
From exactly accurate to directionally right. Accounting requires a very high level of accuracy, especially for publicly traded companies. Meanwhile, according to Tom Russell, FP&A, CFO of Fresh Products, “FP&A, a forward-looking discipline, can never be 100 percent accurate. Answers that are ‘directionally correct’ and meaningful are more important.”
From the granular to the big picture. Russell, who went from FP&A to accounting and back into FP&A, said that people who can focus on the big picture make the most successful transition from accounting to FP&A. “Additionally, a person must be nimble, able to switch priorities quickly and distill important data from noise,” he said. “The least successful ones are those who can’t draw conclusions and analysis from the data.” Lastly, accountants may dismiss small variations that do not meet their materiality thresholds. However, FP&A may see small variability and identify it as a potential start of a trend or business change.
From internal function to building business partnerships. “FP&A needs to have the ability to sit across the table from a marketing or operations executive and align him or herself with their interests,” said Jason Logman, principal of Digital Enterprise Analytics at The Hackett Group. “The challenge for FP&A is how to better lead and influence, how to talk about the business and better relate and connect with the business partners.” Whether that effort is successful or not depends on the person’s personality. Many accountants struggle at this point in the transition.
The “What” vs. the “Why.” In FP&A, it’s more about identifying opportunities than reporting what happened, Logman said. “You need to understand the business drivers and care less about the 50th decimal point.” To be successful in FP&A, executives must have a certain level of intellectual curiosity to ask the questions about what’s behind the numbers or the situation, added Larry Maisel, founder DecisionVu Group.
HOW TO TRANSITION FROM ACCOUNTING TO FP&A
According to former CFO Michael Trzupek, when accounting professionals decide to switch to FP&A, the first step is to engage in formal continuing education programs. Right now, the only corporate FP&A-specific certification program is offered by AFP. “It gives accounting professionals a chance to delve into the FP&A world and learn the required skills in a very concise and organized manner,” Trzupek said.
The second piece is acquiring skills through training—internal and external—and developing the necessary soft skills through leadership courses. According to Trzupek, the third piece is identifying mentors within the organization. “A mentor can talk through some of the difficulties early in the career,” he said. Trzupek said he had several mentors throughout his career, and now he happily mentors others.
The Hackett Group’s Logman said that going through the certification process is “a good start to get your critical core skills.” The other piece is developing the softer skills that allow FP&A professionals to put themselves inside the business partner’s framework. “You start with figuring out where you can add value,” he said. To figure that out, Logman suggests getting into the business—visiting the store or the manufacturing plant.
David Buley, CFO of the Association of Independent Schools in Australia, believes in the process of continual learning. “I think it is imperative for your career to not only keep ‘sharpening the saw,’ but occasionally ‘change out the blade’ or even ‘replace the saw with an improved model,’” he said. “What this means is continually scanning your industry and exposing yourself to new things, attending conferences you might not ordinarily go to and contributing to forums and blogs to test out your ideas.”
Buley has attended two AFP Annual Conferences and found that he was exposed to new concepts and themes he could not have found in his home country. “Australia and the U.S. are at different stages of maturity with respect to concepts such as mobile payments, fintech, and even the ongoing use of checks” he said.
While accountants bring plenty of knowledge to FP&A, there are many skills they must acquire to make the switch successful. They need to learn to be comfortable with ambiguity and learn to turn their gaze forward, and to develop strong ties with business partners.
Thinking about switching from accounting to FP&A? Here is a skill set checklist:
Learn more by downloading the guide, Orchestrating the Mindshift: The Transition from Accounting to FP&A.