Strategic finance is an evolution of Financial Planning and Analysis (FP&A) that sees the finance function as the heart of effective decision-making and planning for the entire organization. Decisions are happening fast. Business leaders need accurate data from across the organization at their fingertips ready to leverage when opportunities arise. This approach helps the whole business to connect insight to action by enabling the two-way flow of financial and operational insights in real time.
Learn more: 7 FP&A Trends to Watch
Strategic finance is an approach to FP&A that focuses on how the finance team can become a vital partner to the business and drive success. Strategic financial planning and analysis views the process as an opportunity to:
Operational engagement is often the missing link that holds teams back. Without FP&A leading the way and fostering connections, business units tend to lose sight of how their individual plans fit together and affect each other.
“A key differentiator of strategic finance is the ability to predict downstream outcomes and the possible impact of big decisions.”
- Brian Camposano, CEO at Stratify
Strategic finance embraces these critical components of organizational success:
FP&A, or the Financial Planning and Analysis function, sits within the finance department of a business. FP&A works alongside other finance teams like accounting & governance, and risk & compliance. The FP&A leader and team analyze financial and operational data in order to evaluate past performance. They incorporate those insights into future planning, budgeting, and revenue forecasting to inform business leaders and bolster the overall financial health of the business.
The FP&A function typically focuses on:
In general, strategic finance describes an FP&A function that has become more forward-thinking, operationally focused, and proactive in partnership with the business. Some organizations may have a dedicated strategic finance leader or team separate from FP&A, who report to the CFO or Head of Finance. But any finance team can evolve to become more strategic over time, whether or not they have a dedicated team. When you approach strategic finance as a mindset and priority shift, opportunities to be more strategic will pop up everywhere in your process.
In a strategic finance future, FP&A takes a more central role in the business. Strategic FP&A unlocks the vital connection between finance and operations to build the future of the business, not to just keep the day-to-day running.
When you approach strategic finance as a mindset and priority shift, opportunities to be more strategic will pop up everywhere in your process.
Here is a general comparison of the two:
They are similar. xP&A, a term coined by Gartner, stands for ‘Extended Planning and Analysis’. Think of it as company-wide planning that is orchestrated by Finance. Typically, workforce planning and sales planning–two operating areas that have the most impact on financial outcome–are the first to be integrated as an extension of financial planning.
If strategic finance is the overarching approach to corporate financial planning, xP&A is like the detailed strategy to apply those strategic finance principles to every department’s plans using advanced tools. It is an evolution of FP&A that takes a modernized, leadership approach to improve on established processes and effectively manage the complexity of modern business datasets and operations.
xP&A incorporates advanced analytics, operational data, and continuous forecasting to help the entire organization synchronize its plans and share real-time data.
Much like strategic finance, xP&A aims to:
There’s a lot at stake if finance teams are unable to become more strategic. Here are some top challenges finance teams are facing:
A strategic finance function is a powerful asset to any business. Here are the top benefits of becoming more strategic:
Finance can only be the heart of the business if it works hand-in-hand with other departments. Strategic finance teams are uniquely positioned to have a detailed understanding of operational KPIs and the challenges and opportunities for each business unit. A strategic finance team focuses on collaborative planning. They form plans and scenarios that are informed by real-time data from ERP, HRIS, and CRM systems and business intelligence directly from other stakeholders.
A strategic finance leader has a seat at the table and helps to direct the business. Other leaders acknowledge and appreciate the impactful and accurate guidance that finance can offer. Strategic finance teams are relevant, collaborative, and vital to success.
No more blind decision-making – strategic finance teams bring insights from real-time access to operational and financial data so that the full picture is in view when options are on the table and time is of the essence.
Leveraging modern, SaaS-based tools, strategic finance teams are able to spend less time on data reconciliation and modeling. Instead, they are free to be more proactive and focus on analysis and partnership with other business leaders to make better predictions.
Strategic finance teams adopt next-gen FP&A tools to reduce the likelihood that errors and stale data will muddle up or delay their reporting and planning processes.
Break the process down into smaller steps and keep your goals in sight for each stage. Taking clear steps to streamline your processes, you can help shift your finance team to be the financial heart of the business.
An FP&A platform can automate many of the time-consuming and manual elements of data-gathering and reporting. This frees your time to improve agility, reporting frequency, and stakeholder partnership.
For example, Stratify will automatically join your business data from disparate systems (general ledger, HRIS, and CRM), enabling faster analysis. Most importantly, an FP&A tool gives access to real-time data, which is an essential part of strategic finance. You can’t bring unique insights to the business if you’re modeling and forecasting with stale or incorrect data.
FP&A tools can also offer increased forecasting sophistication, helping you identify possible operational changes that could translate to efficiencies and financial gains for the business.
Rethink your communication frequency, build real relationships with stakeholders, provide them with access to data, and make an actual plan for how to include them.
Emerging tools have dramatically reduced the time FP&A teams need to spend on the reporting and planning process. To be more effective, you must have access to real-time data from ERP, CRM, and HRIS systems, plus insight into operational KPIs.
Many finance leaders have stacked multiple tools to achieve this. Or, you can opt for a platform like Stratify to join all that data together and then use configurable business logic and driver-based planning models to start forecasting with ease.
Here are three categories of FP&A tools you should consider to find the best fit for your organization.
Software solutions that streamline the work of FP&A generally fall in one of these three categories. Understanding these approaches can help you understand which vendors might be a good fit for your needs.
These are bespoke models created to your specifications, and serviced by a professional services team. Generally, these solutions require significant setup time, training, and implementation fees. They offer the ultimate in customization for complex organizations, but often changes to models must be implemented by the provider for a fee.
With these solutions, you continue to model and create your plans in MS Excel or Google Sheets. They augment Excel and Sheets by making automation, report sharing, and queries much easier. Best for organizations that place a high value on the modeling skills of their analyst team.
These solutions deliver configurable, driver-based models, and can significantly reduce time to value. You populate your business’ data and assumptions in the platform, and start generating forecasts and analysis right away. You no longer need to create and manage business logic, improving both speed and accuracy. Some solutions, like Stratify, make it easy to collaborate with business partners right in the platform. Best for organizations that want their analysts to focus on business partnership and delivering strategic insights that aid in decision-making.
The Finance Leader
Director or VP of Finance, or CFO, based on organizational structure & size.
The Financial Analyst
What are the top areas FP&A teams should focus on?
Here are five key areas to focus on as you become a more strategic FP&A team.
What challenges can FP&A software solve?
How do I know if my finance function is strategic?
It’s helpful to imagine a progression from the early stages to becoming a mature strategic finance team. An honest assessment of your team’s strategic level will sharpen your focus on what habits to implement next and where to challenge yourself as a finance leader.
Our FREE Ebook, The CFO’s Guide to Scaling Strategic Finance, identifies three stages of strategic finance maturity and is full of practical tips and inventory questions to help you assess your level and take proactive steps to the next one. Download your copy.
What will FP&A look like with the growth of AI?
There are definitely rumblings of a future where AI and deep learning take FP&A to a more strategic level. An AI-enabled FP&A tool can digest all of your data inputs and begin to notice trends. It can then bring insights to your attention and highlight areas to focus on. At least to start, AI automation features can streamline tasks like data entry, report generation, and trend analysis.
FP&A Trends & Practices:
Financial Planning & Analysis Top 7 Trends Worth Watching in 2023 - This article covers top trends and best practices that are prevalent in 2023.
How to Increase the Strategic Value of Your FP&A Reports: Overcome These 4 Challenges - Start out mired in manual processes. Move to analyzing performance metrics, identifying key insights, and making strategic decisions.
Overcoming Challenges of Headcount Reconciliation with Best Practices - This article explains the importance of collaboration between finance and HR to support accurate and timely headcount reconciliation.
eBook - The CFO’s Guide to Scaling Strategic Finance - This comprehensive and practical guide helps you to assess your starting point and take confident next steps to grow as a strategic finance leader. We’ve taken your challenges and responsibilities into account at each stage, laying out a roadmap to greater alignment and agility.
Becoming a Strategic Business Partner: The New Financial Analyst Skillset - This article summarizes the opportunities for financial analysts to pivot and improve their ability to partner with the business by investing in key skills.
How Finance Can Get Stakeholders Involved in the Planning Process - Put an end to your frustration with 5 practical ways to meet stakeholders where they are and get the collaboration you need. Plus, we share a template for creating your stakeholder engagement plan.
What It Means to Make FP&A the Financial Heart of the Company - What do FP&A and a heart have in common? Answer: delivering vital resources to help the whole system thrive. Our CEO Brian Camposano unpacks how your FP&A team can be the financial heart of your organization.
The Top Three Challenges to Becoming a Strategic Finance Team - Messy manual processes, stale and inconsistent data, and a lack of collaboration…sound familiar? We outline 3 strategic solutions to your biggest FP&A challenges.