Why 'FP&A LABS' name?
In common understanding, Labs, Laboratory, represents following a methodical approach to achieve a desired outcome. Laboratories operate in a field, where a desired solution to an objective doesn't have a standardized ‘one fits all’ process. Therefore, requiring tailored, innovative approach to provide it.
FP&A stands for Financial Planning and Analysis, which is a cornerstone of the current financial management standards. Statutory financial reports can tell ‘what has been’ and ‘where you are’. This cannot be changed. It can be analysed and optimized to meet ongoing business objectives, though.
Every business is unique. Even, if they operate in the same field, services, products, supply chains, teams, corporate structure, culture, management style, ect. might be different. Therefore, all that needs to be diligently analysed, quantified and reflected in financial management to provide transparent insights into performance and develop strategic plans.
Combining these three together is what FP&A LABS stands for. Innovative, tailored, forward looking financial services that reflect your business.
Is finance data?
Many thinks it is. Management experts are repeating a phrase 'data informed decisions’. Even though, it’s an obvious enhancement to business management, due to lack of a standardised definition, the understanding of what it actually means varies from a simple P&L analysis to advanced manipulations of millions of operational data points.
It's good to elaborate on the hierarchy pyramid.
Accounting and finance function has been around for centuries. Throughout time it has been evolving to become more comprehensive and standardized with a few principles in mind. To fully and accurately reflect financial performance and financial position, by quantifying and disclosing all of company’s related circumstances in monetary terms. Achieving this goal is easier said than done, thus the framework become complex and gave raise to multiple industries around it. Accountancy, tax, compliance, assurance, risk management, advisory, M&A, banking, investments, ect.
On the other hand, data mostly refers to nonmonetary information. While fundamentally carrying explanatory power to company performance, standalone it provides fragmented insights only. Suffering from multiple shortcomings such as lack of clear definitions, utilisation of various units, disperse systems, reconciliation issues, ect. challenges its value added or even creating confusion. Eliminating all these obstacles, would simply take as back to accounting data. Thus, in some sense, finance can be seen as an ultimate data, with a very complex set of mechanics, driven by vast and detailed operational data. Synchronising these two together gives enormous business evaluation and planning advantage.
Desired analytical insights vs what companies really work with?
It’s usually quite low. Many businesses only monitor top line (revenue) and bottom line (net profit), with ad-hoc analytics coming from other systems. Struggling with reconciliations challenges.
The problem originates with most accounting software not supporting complex entries or complex reporting, therefore, financial information might be too fragmented or too aggregated. Usually, some entries are based on other systems or excel spreadsheets as one or few numbers, derived from complex set of previously processed data. Revenue recognition, payroll, raw material, depreciation are the usual suspects. Also, recording costs by kind (where costs are presented by type, not function), eliminates cost/benefit evaluation advantage. Aggregating revenue, blurs customer fluctuations or pricing impact.
With past performance explanation challenges, it automatically becomes very difficult to estimate and plan future months and quarters.
In most cases ensuring qualitative synchronisation of information between various systems generates enormous leap to transparency and efficiency.
What do you mean by 'Boring Finance'?
On a strategic level finance is steady... Objectives are simple. Have money, don't waste resources, earn profit... Repeat.
Financially well managed company, has all those objectives properly analysed, planned out and continues to operate in this manner. Every month, each team member knows his mission, performance objectives and works towards contributing to an overall business objective. Properly set up financial management system utilise operational data, quantify relations between costs and benefits and draw up a feasible action plan. On day-to-day frame, there is nothing exciting about it anymore. No ad-hoc questions, no surprises, no business conundrums, just a steady climb to the peak. Boring Finance can be visualized, as taking a brief glimpse on GPS from time to time, to make sure we are on track. Nobody gets excited about that.
What is needed to achieve it?
On a personal skills level, it requires architect mindset, researcher curiosity, analytical depth and narrator clarity.
On a technical level, it covers multiple disciplines. Starts with understanding accounting, three financial statements, finance, math, followed by business acumen, ending with technology utilization.
Combining these fields is quite uncommon, but very powerful. The efficiencies can be found everywhere. Costs, time, efforts, quality. All improve. On a contrary, in common reality, where teams operate in silos, business follows its objectives, accounting adheres to generally accepted financial standards, IT maintains systems, in total, resulting in continuously ongoing ‘management reporting improvement’ project.
What are the benefits?
Introducing out approach has a long list of quantified benefits, some of which were already mentioned.
The ones I value the most are unquantifiable, though. Using an accurate forward-looking financial approach, choosing the right path or avoiding mistakes creates the most value in the long term. Achieving it requires teamwork and inviting multidisciplinary minds to the table. But it all starts with transparency, accuracy and unbiased narrative to financial and business information.
What are your desired clients?
On a geographical level, we work with clients across Asian and European time zones. Mostly remotely.
On a cooperation level, finance gives unparalleled insights into current business performance and its future, therefore we value customers that are eager to develop this quality in their businesses. Utilising years of experience, multidisciplinary skills and insights we provide data based financial management based on both in-depth insights or simplified extract, explaining the business from grounds up on every level. As much, as we put in effort into providing accurate picture and making sound recommendations, we take pride in seeing company successfully utilising it.
Matt Gon, CFA