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January 31, 2024
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9
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Data and Empathy: The Keys to Great Accounting and FP&A Relationships

The backbone of all Finance organizations is a healthy FP&A and Accounting relationship. We walk through practical tips to reduce friction and align both teams.
Parker Gilbert
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Let’s start things off with a joke.

Question: What happens when an accountant and an FP&A professional get creative?

Answer: The accountant goes to jail while the FP&A professional gets promoted.

As trite as that joke sounds, it captures some of the essence of the accounting versus FP&A schism. 

Accountants deal with historical data while FP&A projects it forward. Accounting adheres to GAAP and IFRS while FP&A calibrates reporting needs more flexibly to the specific business context. Accountants live in the GL while FP&A spends time in forecasting tools.

Illustration of the differences between FP&A and accounting
Differences between Accounting and FP&A

Technology is now blurring the lines between these functions, creating more friction. For instance, accountants are tracking expenses in real-time and offering more strategic input to CFOs than ever—a task that was once solely FP&A's.

Both departments are critical to your company's success and must work together. But how do you erase friction?

Here are a few ways accounting and FP&A teams can collaborate and deliver the insights their companies expect.

Start with Empathy

We promise this isn’t going to turn into a couples therapy session. But, understanding what the other department is going through is critical. 

Fail to do this and process improvements won’t stick. Here are a few empathy-based actions both departments can take:

  • Understand FP&A deliverables
  • Understand Accounting deliverables
  • Give each other access to reporting and presentations

Understand FP&A Deliverables

As an accountant, understanding what your FP&A colleagues experience will help you work with them better. You'll also understand the context behind those annoying ad-hoc data requests.

Chris Martinez, Finance Analytics Manager at The Kraft Heinz Company suggests a few steps you can take.

"I think accountants and controllers must learn at least at a high level what are the key processes in the FP&A function," he says. "From forecasting, budgeting, and analyzing financial data to inform strategic decision-making."

Ask FP&A to walk you through their deliverables and deadlines. Have them explain their KPIs to you, what they mean, and their context. 

Especially in the early days in a new Controller role, showing an active interest in quick wins for both teams sets the tone for better collaboration moving forward. 

It'll also open the door for FP&A to understand your world while you understand theirs.

FP&A can seem like a never-ending stream of work. The function is also unstructured right now, with professionals having to figure everything out on the fly. Then there are managerial expectations.

An image of an FP&A professional detailing their frustrations with the role on Reddit. The user states they cannot take time off during close and budgeting seasons, have several managers to report to, and each manager has different data requests—all of which creates frustration.
An FP&A professional detailing their frustrations on Reddit

Kirk Kappelhoff, Director of Strategic Finance at Drivetrain, says uncertainty is built into an FP&A team’s processes. 

“In FP&A, we’re dealing with a band of likelihood,” he says. “So it’s a complete shift in mindset. When you look historically, you want to get the most accurate numbers possible whereas when you look ahead, you want to get the best forecast possible.”

“What I would like accountants to know,” he continues,”is that accuracy at the ‘cent’ level isn’t expected or as important in FP&A.”

Understand Accounting Deliverables

As an FP&A professional, you spend most of your day building models and creatively playing with data. You're also on your CFO's speed dial, giving them insights using sophisticated analytics tools.

Accountants can feel neglected in comparison. 

Finance management tells them they need to be "strategic," but manual processes can eat up the day. They're constantly fixing and reformatting department data for accuracy. Also, they're constantly adapting to new changes in automation and AI. 

An accounting professional listing their frustrations with the role on Reddit. The user notes they receive unrealistic deadlines, poor tools, and have to work in an uncoordinated environment.
An accounting professional listing their frustrations with the role on Reddit

What can you do to alleviate this situation? For starters, learn some accounting basics, like accruals. That alone will put you in accounting's good books. 

You'll also understand that accountants aren't being unhelpful when they reject your revenue recognition methods—they're restricted by GAAP and IFRS guidelines.

Accountants are rewarded for sticking to rules. They don't get rewarded for rethinking them, unlike you. Remembering accounting fundamentals and the constraints of their role goes a long way toward helping you communicate effectively.

Give Each Other Access to Reporting and Presentations

Martinez believes Accounting presence in strategic FP&A presentations goes a long way toward bringing both departments on the same page.

"I would invite them [Controllers] to strategic meetings and encourage them to contribute their insights," he says. "It would give accountants and controllers first hand exposure to the types of strategic questions and challenges that management presents to FP&A."

Kappelhoff says access opens the door to more strategic collaboration. “Both functions report at different levels [of granularity,]” he says. “If both teams can streamline line item reporting, the entire organization becomes more streamlined.”

“When management looks at FP&A reports and they see, say 10, line items, they’ll match up with the same line items for a particular KPI or metric from accounting,” he explains. “The more aligned they are, the easier it is for everybody to interpret.”

If accounting participates in FP&A sessions and understands which line items go into projections and how those projections are built, it leads to more cohesion. Kappelhoff notes this collaboration is extremely helpful when comparing reporting from complex line items like Research and Development (R&D.)

Technology plays a crucial role here. For instance, one Numeric customer realized the benefits of sharing monthly close progress and its impact on collaboration.

"It's great having real-time visibility on how month close is tracking and what items require immediate attention," they say. "Our team was able to find what was causing friction in our close cycle and tackle those items head-on."

Avoid reclasses and back and forth with a shared month-end close checklist

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Use Technology to Learn Each Other's Languages

Accounting and FP&A speak different languages—something no one outside finance picks up on. This might cause you to feel as if you’re on your own when dealing with differences. 

Fixing this issue is as simple as shifting how you communicate. Here's how you do it:

  • Recognize different classification priorities
  • Share viewing access to close checklists
  • Hold Close post-mortems

Recognize Different Classification Priorities

FP&A teams view data differently compared to accountants. They routinely zoom in and out while accounting stays on a relatively flat plane. 

Connor Foran, our Solutions Lead, and former Controller at Squarespace, lists an example. 

"Our accounting team used to clump all marketing expenses under a single classification called 'Marketing'," he says. 

This was a problem for FP&A.

"FP&A's forecasts had a different focus," he continues. "They needed marketing expense data classified by sub-department for their projections."

By actively asking FP&A how they’re using accounting data and what classification looks like for common items, accounting teams can identify quick wins that have a huge quality of life impact for FP&A teams. 

For instance, Numeric helps FP&A teams locate data in NetSuite by department, search memo fields, amounts, locations, etc.

This helps FP&A teams unfamiliar with ERP features locate and work from the same data source as Accounting and better understand classification norms. 

Share Viewing Access to Close Checklists

The month-end close is stressful for both Accounting and FP&A. Instead of going back and forth over emails for status updates, grant the other team access to your monthly close checklists.

Sharing of this kind creates better questions that birth innovative solutions, says Melissa Kullander, VP Finance at Workday

Writing for Financial Executive International, she says, “Real-time status visibility results in far more productive conversations between our two teams. Instead of asking if something has been posted, we’re now connecting to problem-solve specific or recurring issues.”

One of Numeric's customers expands on the "Is something posted?" theme. 

"My team maintained a Close checklist in a Google sheet and spent a lot of time communicating between teammates to inform them that a task was completed or whether something needed to be revised," they say

Numeric's close overview dashboard with progress tracking and outstanding items has removed this back-and-forth, providing full visibility across both FP&A and accounting. When FP&A teams do have one-off questions about month-end close items, they add comments in line or can clarify on their own with transaction-level searches of synced GL data within Numeric.

Hold Close Post-Mortems

A post-mortem held between both departments will help you bring more efficiency to your close.

"I believe conducting monthly close post-mortems with accounting is crucial for continuous improvement and alignment," Martinez says. "In my perspective, a structured framework should be in place for these sessions."

He says both departments must openly discuss challenges, discrepancies, and areas of improvement. 

"This collaboration can lead to streamlined processes, reduced errors, and a better understanding of each department's contributions and constraints," he adds.

Kappelhoff notes that there’s no “right” framework to follow. “I’ve worked with organizations that have a three day Close and some with a 45 day Close.”

He says that the 15th day after the close makes the most sense, as a rule of thumb. But he stresses this isn’t a set-in-stone process.

“What works for your company is the best answer,” he says.

Reconfigure Processes with Strong Accounting Data as a Focus

Every FP&A forecast or analysis is dependent on the underlying accounting data. Without strong accounting data, both teams are handicapped in their ability to add value to the business. 

Here's how you can reconfigure processes that align Accounting and FP&A with accounting data as a focus:

  • Avoid reclasses
  • Consider a modular Close
  • Lean on advanced technology

Avoid Reclasses

Reclasses typically occur due to little or faulty information. Accountants can avoid them by being proactive and learning more about the company's key vendors upfront.

Ask the FP&A team regularly about any anticipated large spend increases, investments, timing or seasonality to be wary of, and new projects. 

This will help you understand the context behind the data and stay ahead of reclasses. 

Additionally, you can use tech to flag data that falls outside the norm. 

For instance, teams using Numeric set up "Monitors" on GL data that may result in a reclass during or after the close, ex. monitoring for a set of vendors that should always be tagged to a specific department.

Collaborate with FP&A during close post-mortems to set up the right Monitors and you'll avoid reclasses down the road.

Consider a Modular Close

The hand-off of financial data from accounting to FP&A each month can feel like a relay race — upping the stress on both teams. 

One strategy to start FP&A deliverables earlier without adding pressure to accounting? Consider a modular close. 

Instead of FP&A waiting on Accounting to close the books, Accounting can notify FP&A when it closes one portion of them.

Martinez thinks a modular Close has many benefits for both teams. "By closing different sections of the books in stages and then handing them over to FP&A, it allows for a more manageable and continuous flow of information," he says.

"This can lead to earlier start times for FP&A analysis, reducing the end-of-period crunch and improving the quality of financial insights."

Kappelhoff cautions that modular Closes make sense if there aren’t any cascading effects on other portions of the company’s financial picture. “A modular Close is definitely a dynamic way of closing the books,” he says. “If both teams can handle it, then great.”

Lean on Advanced Technology

Technology will help you automate manual processes. But it can also shortcut the need for urgent emails and meetings back and forth between FP&A and Accounting.

While Accounting team members may have mastered reporting in NetSuite or similar ERPs, FP&A teams can think that getting to the right transactions they have questions on can be near impossible. 

This causes a cascade of emails or Slack messages frantically sent to accounting teams. 

For teams leveraging Numeric, FP&A has access to quick reference reporting on the underlying transaction-level data in the GL. 

By simply searching for software spend or grouping transactions in a period by vendor or by department, FP&A can locate the information they need — without a NetSuite license or the need to interrupt accounting.  

Additionally, AI (like Numeric's AI Copilot) can increasingly help both teams retrieve and write explanations.

Instead of spending time digging through what’s changed month over month, AI writes drafts of monthly variance analysis explanations.

A Better Accounting and FP&A Relationship

"Encouraging a culture of open communication and proactive problem-solving between accounting and FP&A will lead to better financial management and strategic decision-making within the organization," Martinez says.

Kappelhoff notes that collaboration boils down to understanding the drivers behind the line items each team works with. “If you’re aligned on the line items, you’re pretty much going to be aligned on the rest of your reporting,” he says.

“Get grounded at the foundational level — that’s my best advice.”

While both departments' objectives differ, aligning around strong accounting data is critical. Technology built on ensuring high-quality data & adding visibility frees both teams. It also erases several friction points around the monthly close.

Curious how Numeric can cut monthly close times, offer visibility, and ensure accurate accounting data? Get started for free.

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