The finance profession has changed dramatically over time. In the past, accounting functions were key players in the majority of the finance world; they were growing substantially faster than any other area. As we see today, however, FP&As are appearing everywhere - in all types of organizations (e.g., industries), countries (e.g., geographies), and sizes (e.g., company). This transformation reflects the evolution of business from being able to operate using established practices (how they used to) to a more fluid approach to how businesses operate, make decisions, and compete within today’s rapidly changing and uncertain business environments.

 

While accounting remains a key function within finance, it has transformed into something more than pure accounting. New technologies, processes, and ways of completing tasks have made it easier for organizations to automate (replace) the function of accounting with large groups of people. With this new capability, FP&A s have also been recognized for their ability to support the business in determining which types of data to use (for forecasting), how to communicate that data in a business context, and the role that FP&As play in the overall strategic plan of the business.

 

This blog will describe the reasons behind this transition simply and will provide an overview of how technology has transformed the finance profession and the increasing value of FP&A skills.

 

Understanding the Difference Between Accounting and FP&A

 

The growth rate of FP&A positions is only explained by comparing it to standard financial reporting or accountancy, and understanding its unique focus on both analysing and predicting the future financial performance of a business.

 

To put it differently, accountancy (i.e., what has occurred to date) contains all the historical activity of a company while FP&A's analytical foundation allows the organisation to study the present and forecast future activity, enabling better management of resources and increasing business value.

 

While FP&A is not meant to replace Paul's role as the primary financial reporting source, it does enable business owners to better utilise their knowledge and experience in making decisions that will lead to increased value for all. Therefore, the demand for forward-looking FP&A positions will continue to rise as more businesses find themselves dealing with increased market volatility and competition.

 

Business Environment Has Become More Uncertain

 

The increasing uncertainty associated with doing business today is one of the biggest reasons FP&A personnel are in greater demand. As a result of rapid technological advances, increased global competition, rising inflation rates, fluctuating interest rates, evolving regulations, and unforeseen events such as a pandemic or geopolitical conflict, the business environment has become very turbulent.

 

Under these circumstances, reliance on historical financial data provides insufficient information. Management wants to learn about potential scenarios that could arise in the future, how changes in price, cost, customer behaviour, or regulation could impact the profitability and cash flow of their business. FP&A provides information to management regarding all of these areas and, thus, supports management with scenario analysis, sensitivity analysis, and forecasting within uncertain circumstances.

 

While accounting is primarily concerned with accuracy and compliance, which are both important functions for any business; however, accounting cannot assist management in dealing with uncertainty. Instead, FP&A provides management with a means to prepare for the various outcomes that can occur and therefore assists with the decision-making process. As such, FP&A has become an important function for businesses operating in today’s marketplace.

 

Shift From Compliance to Decision Support

 

Historically, finance departments have primarily focused on compliance and statutory reporting requirements - i.e., closing books on a timely basis, preparing financial statements and ensuring compliance with regulatory requirements. Although these functions are still very much required, they are no longer adequate.

 

Today, modern businesses expect finance to serve as a partner to the business. It is now expected that finance teams provide support for decision-making, improving profitability, and achieving organisational strategic goals. The area of FP&A has been identified as the area that will support this transition.

 

FP&A professionals typically work closely with the sales, marketing, and operations teams, as well as the Executive Leadership Team. The role of FP&A professionals involves evaluating potential projects and pricing strategies, expansion plans and cost-saving initiatives. The role of FP&A professionals creates a much closer relationship between FP&A and the core of the organisation, driving demand for these roles.

 

The transactional accounting roles still have an important role, but the role of transactional accounting does not play a significant part in the daily decision-making process. As effort continues to shift from compliance towards value creation for the organisation, the growth of FP&A roles will expand significantly.

 

Automation Has Reduced Demand for Traditional Accounting Work

 

Due to the number of repetitive rule-based tasks within accounting, technology has been the biggest contributor to the decline of traditional accounting roles. The majority of these functions are now completed by software without the need for human interaction. For example, journal entries, reconciliations, invoice processing, and even some parts of financial reporting have become automated through software.

 

Cloud-based systems, RPA, and AI have reduced overall requirements for large groups of employees performing routine tasks in accounting departments. In addition, many companies utilize third-party service providers or shared service centers for outsourcing their accounting functions and often do so from lower-cost labor markets.

 

On the other hand, FP&A functions are often less routine in nature and typically require greater judgment in decision-making. Although tools can be useful in supporting FP&A analysis, FP&A personnel are required to possess the necessary critical thinking and business acumen to properly interpret data and provide management with actionable recommendations based on their interpretations. Consequently, FP&A positions are generally going to experience much less impact from technological advancement than accounting positions and therefore offer much greater opportunity for long-term growth.

 

Data Explosion Has Increased the Need for Analysis

 

Today, businesses gather huge amounts of data from their sales systems, customer platforms, supply chains, and other digital sources. Collecting all this data is not enough—organisations need to employ professionals who can effectively analyse data, identify trends and convert it into actionable insights.

 

Fp&A teams are responsible for turning raw financial and operational data into useful information. They analyse revenue trends, cost drivers, profit margins, customer profitability, and cash flow. They also integrate all financial data with additional relevant non-financial information to create a holistic view of business performance.

 

Accounting involves ensuring the accuracy of financial information and the classification of data, while Fp&A focuses more on interpreting the data to derive insights and making decisions. As the volume of data continues to grow, the demand for analytical positions outpaces the demand for record-keeping positions. Hence, Fp&A positions are growing at a much quicker rate.

 

FP&A Supports Strategic Planning

 

Strategic planning has become much more complicated than in the past due to increased competition. Companies have to be very careful about where they invest, what markets they go into, what products they create, and how they allocate their scarce resources.

 

FP&A professionals provide critical support for strategic planning through the creation of financial models, long-range forecasts, and scenario analysis. They analyze the potential financial effects of different strategic choices and assist management in understanding the benefits and trade-offs associated with each option.

 

Typically, the accounting function will not directly impact the development of a company's corporate strategy. Rather than influencing future direction, accounting focuses on reporting on the financial results of actual business activities. As companies increasingly focus on the planning and execution of their corporate strategies, FP&A roles will continue to receive greater levels of importance and visibility.

 

Management Demands Real-Time Insights

 

Management prepared these reports on a monthly or quarterly basis. Based on today’s offices, there is an increased demand to see performance of a business n̶o̶w̶ rather than waiting weeks for the information to be published. Management wants insight into how a business is doing at any given time. For example, as of today, management is looking at business performance.

 

Organizations use dashboards, rolling forecasts and near real-time analytic tools in order to fulfil this need. FP&A professionals are constantly monitoring performance, identifying problems before they would escalate into significant issues.

 

Accounting departments are primarily focused on producing accurate financials as well as maintaining effective controls, thereby working to achieve the highest level of accuracy and control possible. While these systems have the greatest degree of reliability, they do not necessarily result in the capability of making real-time decisions. As FP&A is able to provide timely performance insights, thus enhancing concern for quicker and better performance by fast-paced corporations.

 

Closer Interaction With Leadership

 

The Skill Sets Needed for FP&A Positions Have Increased, Leading to Faster Growth of FP&A Position

 

As the finance industry becomes increasingly globalized, companies need finance professionals who understand both the finance aspects of their business as well as how their organization operates. The FP&A Function provides a unique opportunity to develop financial analyst careers while gaining insight into how other businesses operate.

 

Whereas entry-level Accounting positions typically require knowledge of technical rules, standards issued by regulatory bodies and technical knowledge about how to perform the responsibilities of an Accountant, FP&A positions require a much wider breadth of knowledge than just the technical aspects of accounting. Thus, as companies seek Finance professional who can provide a more holistic approach towards developing and implementing their financial business strategies, the demand for FP&A positions will continue to accelerate.

 

FP&A Careers Align With Future Finance Leadership

 

FP&A is becoming a good training ground for future finance leaders as many organizations view this type of position as one of development for skills like financial modeling, forecasting, business partnership and strategic thinking that are needed to move into positions such as Director of Finance and CFO.

 

Companies continue to invest in the development of strong FP&A teams, resulting in greater opportunities and faster advancement than that offered in traditional accounting roles, which many of the jobs available in FP&A have already been viewed as being highly specialized.

 

 

Globalization and Complexity of Business

 

As companies expand into multiple global markets, business complexity increases dramatically. The need to have advanced planning and analysis capabilities to support managing both multiple currencies and different business models adds complexity to the planning and analysis function.

 

FP&A provides companies with the ability to manage this complexity. FP&A teams consolidate information and performance from multiple regions and evaluate investment decisions. Although accounting provides organizations with a level of compliance across all jurisdictions; a large portion of this work will be able to be automated or outsourced.

The increasing complexity of running a business globally will create a greater need for FP&A talent than an increase in accounting roles.

 

Accounting Becoming Specialized and Not Broader

 

It's important to realize that accounting will always be an important function in companies, however, accounting roles will be more specialized than in the past. Specialized areas such as tax planning, internal audit and regulatory compliance will still require a high degree of expertise.

FP&A roles will continue to grow and will provide more insights, forecasts and strategic support.

 

Key Differences at a Glance

 

·        Accounting is concerned primarily with what has already happened, ensuring compliance, and providing accurate financial records.

·        FP&A is focused on supporting future business activities through plans, analyses, and decision support tools.

·        The impact of automation on accounting is far greater than it is on FP&A.

·        FP&A typically supports management and its long-term strategy.

 

Conclusion

 

As FP&A positions expand and evolve at a greater rate than Accounting positions do, it’s clear that the difference between these two functions can be equated to increasing complexity in a rapidly-changing global marketplace; thus, when looking at demand for professional service jobs versus non-professional service jobs within the same organisation, one would see much higher demand for FP&A positions than for accounting-related jobs. With FP&A having a greater emphasis on strategy and insight development than Accounting and being the key driver of decision-making and performance management, it would appear that as long as there is continued demand for insight-driven decision-making within organisations, FP&A will continue to grow at a faster rate than accounting jobs will.