Navigating the Transition from Accounting to FP&A
Although they both require high levels of similar financial acumen, accounting and FP&A are not the same.
Accounting is responsible for tasks such as handling and closing the books, reconciling transactions, controllership, tracking assets, managing accounts payable and receivable, budgeting, and preparing taxes. Therefore, accountants need to have a record-keeping, transactional mindset.
In contrast, FP&A is responsible for financial forecasting and projections, strategic financial planning, data analytics, project valuation, M&A, capital raises, and more. Therefore, an FP&A professional needs to have an analytical mindset that looks to the future to determine how, when, and to what extent a company should spend money.
These differences don’t mean that someone currently working in accounting can’t transition to an FP&A role. In fact, accountants are among the best-positioned professionals to deliver business insights and add value as FP&A. This is because they have such a deep understanding of the business.
Why Accountants Transition to FP&A Roles
There are several reasons why someone might make this specific career transition. One of the more common reasons is that an accountant’s employer has a gap in its capabilities and needs someone to grow into the role of FP&A.
This scenario happens most frequently in mid-sized and smaller companies where FP&A functions have not yet been established. These companies have the most to gain from an accountant’s involvement in planning and analysis. After all, their accounting team has in-depth knowledge of the company’s financial history and is familiar with its accounting software and processes.
And so, as small and midsize companies grow, their leadership teams start to recognize the need for strategic financial professionals. It is these professionals who are best equipped to leverage historical financial data and blend it with future expectations, to make informed financial projections for the short- and long-term. Thus, the people who were initially hired into the company as an accountant or controller morph into FP&A leadership roles.
Another reason accountants might make the transition to FP&A is because they want to be more involved in the strategic aspects of business planning. Accounting tends to be backward-looking and objective, as it requires reviewing historical data and creating reports based on what the company has already done. In contrast, FP&A is far more about looking to the future to help company leaders decide where funds should be going to move the business forward.
Often, people go into accounting only to realize that their interests are more aligned with FP&A. For these professionals, making a transition to FP&A will allow them to maximize their skillset and pursue their passion for strategy, problem solving, and planning.
Key Differences Between Accounting and FP&A
Larger corporations are well aware of the roles their accounting, controller, and FP&A teams play.
However, at smaller companies, accounting and FP&A roles tend to fall under the same umbrella of “finance.” When interviewing CFOs, Directors of Finance, or Accounting Managers at these smaller organizations about their FP&A function, some of them may even ask, “what’s FP&A?” It isn’t until they understand the elements of the function that they recognize they don’t have one and instead roll everything up within finance.
However, there are several distinct differences between accounting and FP&A.
These differences highlight the varied skillsets and knowledge one must acquire to move from accounting into an FP&A role successfully.
Reporting vs. Storytelling
To start with, accounting teams are generally more responsible for financial reporting. This includes creating standardized, periodic reports that are shared with management teams, shareholders, investors, regulators, and creditors.
These reports are standardized and need to comply with GAAP (Generally Accepted Accounting Principles) or IFRS (International Financial Reporting Standards). So, there is little room or need for creativity. Accountants’ reports are fairly uniform and unaltered in terms of the facts – focused on (a) what, where, and how funds were spent over a period of time, (b) how balances have changed, and (c) noteworthy developments in operations that impacted historical reporting periods.
FP&A still does reporting, and sometimes a lot; however, FP&A often reports directly to management, offering more flexibility to create reports specific to management’s needs. For example, these reports may include visual models that incorporate scorecards, variance reports for certain managers or locations, and dashboards that tell a story around customer or product metrics.
FP&A teams are generally less concerned with how funds have been spent in the past and more focused on expressing how an organization should spend capital in the future to realize strategic objectives and higher returns. It isn’t that the past doesn’t matter – it’s that the past offers data points and insights into what the future may hold. Thus, FP&A reports often take the form of storytelling to help stakeholders visualize what the future will look like if strategic plans are followed and realized.
Hard Facts vs. Ambiguity
For some accountants, moving from a mindset of objectivity and certainty to one of subjectivity and vagueness is the biggest hill to climb when making the transition to FP&A.
Accountants can be supporters of hard data and facts. Support is for reporting with precision, focusing on granular details to ensure accuracy. As a result, there is little room for error when it comes to tracking and reporting financial data.
In contrast, FP&A professionals need to make decisions for the future based on data. But sometimes, that data is clean and reliable while at other times it is not. While FP&A may make those decisions with relative confidence and support, it won’t know whether those decisions were correct until a later date. Thus, strategic finance professionals need to be comfortable making decisions in a state of ambiguity.
Internal Teams vs. Business Partnerships
A final critical difference between the two roles of accountant and FP&A is who they work with.
Accounting teams have a greater tendency to stick to their internal teams within the function. This is especially true for accountants who are early in their careers. They will likely spend most of their time working with other accountants on specific tasks that benefit the organization. As accountants become more senior in their roles, they’ll likely have stronger relationships with other managers and directors in the larger finance function.
Conversely, because FP&A is tasked with deriving insights and moving the company forward toward strategic objectives, FP&A is more likely to work with other business teams.
In fact, in small and midsize companies that are just forming an FP&A team, the FP&A leaders will need to partner with other department leaders to analyze their operations and help make important business decisions. In some companies, this responsibility is called financial business partnership.
How to Make the Transition from Accountant to FP&A Professional
Accountants have exceptional technical expertise, yet they frequently lack experience working as business partners and financial analysts. And yet, they are increasingly expected to serve in these roles as advisors to clients, organizational leaders, and operating partners.
So, although most accountants have the base knowledge required to succeed in an FP&A role, they won’t be able to do so overnight. There needs to be a transition phase in which the accountant becomes more involved in the financial analysis and planning aspects of the business.
In particular, accountants who are making the transition to FP&A can prepare by doing the following:
Learning the core elements of forecasting and projection scenario planning
Identifying key factors impacting the macro environment and long-term risks
Developing/improving non-technical skills, such as written and oral communication
Discovering techniques for crafting, delivering, and defending financial, strategic, and operational plans
Understanding the difference between near-term rolling forecasts, strategic annual budgets, and long-term projections
Preparing to Become an FP&A
Companies need to recognize that an accountant can’t immediately switch over to FP&A. Because of the considerable differences between these two roles, accountants should be placed on FP&A-style projects prior to the move to FP&A. This will encourage a change in mindset and a greater awareness of strategic objectives. They should also undergo some formal training to equip them with the technical and non-technical skills they’ll need to thrive. And finally, they should be offered mentorship and ongoing support to ensure their development continues.
Dozens of Fortune 500 and midsize companies rely upon my training and development programs to guide professionals making the transition from accounting to FP&A. Register for an upcoming program or course to sharpen your skillset and discover everything you need to become an effective leader in FP&A.