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As your tech startup grows, you’ll begin to wonder when it’s time to start honing your business in addition to simply growing it. Cutting spending in the right places and boosting revenue where it’s most attainable; these questions and others are answered by your company’s Financial Planning and Analysis (FP&A) team. 

Implementing this function can be intimidating, though. How do startup finance leaders know who to hire first? Should you cordially “suggest” your accountant handles the job? What amount of the role can be automated? And, quite simply, when does it actually make sense to bulk up on your FP&A team? 

I’ll answer all these questions and more to equip you with the info you need to boost your business efficiency with this indispensable, but easy to flub, business function.

Building An FP&A Strategy

Before even thinking about making staffing decisions, it's critical that you lay down an effective strategy. Go into this process with your eyes open to the needs of your entire organization, not just your finance function, and consider the following points:

  1. Why are you looking into setting up an FP&A function? Do you have specific budgeting or forecasting needs or are you hoping to make general improvements to efficiency?
  2. What kind of support do the stakeholders in your organization need? How can your marketing, people ops, and other business units take advantage of in-house financial analysis and decision-making support? 
  3. Can you provide the necessary budget and attention it takes to get an FP&A team working properly? As I’ll describe later, you’ll need the right people, processes, and technology to make FP&A work its magic; these things don’t typically come cheap.

Benefits Of A Tech-Enabled FP&A Team

According to a survey of small and midsize businesses by Airbase, a provider of accounts payable and spend management software, 71% of respondents said they have an internal FP&A team with an additional 8% working on setting one up. Companies see value in this function because it owns important functions like forecasting and modeling different strategies for your company without putting stress on other members of the finance team. 

Benefits include:

  • An in-house think tank to tackle meaningful business decisions, instead of leeching hours from finance professionals with different skill sets, such as your accountant
  • Uniting real-time data from across the entire organization, giving each function in your company an analytical business partner to help with their own decisions
  • Providing a persistent eye on goals versus performance, freeing your senior management for higher-level strategic questions and setting those goals in the first place
  • Addressing important capital considerations and scenario planning, like the need for more fundraising
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Current Challenges In FP&A

Despite its usefulness, FP&A teams face a range of challenges due to rapidly evolving market, tech, and global forces. 

Goal Ambiguity

For many companies, success means more than simply boosting revenue, cash flow, or profitability. Companies today need to hit a plethora of goals, such as turning a profit while relentlessly pursuing growth and hitting ESG (Environment, Sustainability, and Governance) metrics. Particularly if your company has involved investors, you may wind up feeling like you’re juggling knives just to keep up.

This can make it harder for FP&A teams to focus on their core objectives. In response, consider triaging your FP&A’s efforts to the most important goals of the moment:

  • Have product problems? Consciously target them there.
  • Facing a big decision between a couple of marketing campaigns? Point them in that direction. 

Poor Data Sources

Your FP&A team will only be as effective as the financial data and other information it draws on. For them to be able to share information about sales, marketing, product, and forecasting, you’ll need to ensure that they have complete visibility into each of these areas. Even when you have data sources to work from, is the data clean and coherent?

This is the roadblock that prevents companies from starting their FP&A team too early. Until your house is truly in order, FP&A won’t be able to generate meaningful insights to save your (company’s) life. You should wait to deploy this team until you’ve set up the right data regime and collection tools necessary to provide a constant pipeline of data directly to your FP&A office.

Need for Good Tools

As FP&A becomes more data-centric, it also becomes more reliant on having the right tech tools in place. We’re way beyond just Excel these days. This can create a challenging feedback loop between your finance and IT teams, as the process of identifying and onboarding the right tech partners can become time-consuming. It also means your FP&A people need to be properly skilled in the right technologies. 

Dedicating time to train staff in the tools you use may seem like a cost center activity, but it will pay off manyfold down the line. 

The Critical Components

Your team’s success is reliant on the connection of people, processes, and technology.

People

Whether it’s one person or a team, staff with the right skills and experience can make or break your FP&A function. Some backgrounds are more suited for tech startup FP&A roles than others. 

Great financial modeling skills are necessary but insufficient for this role. If you’re just starting to build out your finance team, you may want to find someone whose skill set touches on a few different areas. In this case, hiring someone with a mix of finance office and fundraising experience may be beneficial. 

FP&A employee target profiles should include veterans of other FP&A teams and well-pedigreed early-stage professionals, with a track record of financial experience in the startup world. Regardless of the profile you choose, the writing is on the wall that FP&A is a tech-enabled position. Candidates with a history of using or even building tech tools will help greatly in the long run.

Don’t feel the need to jump into scaling your team too quickly. Better to bring on one great person and work with them to set up the right processes and technology than jump into the deep end with a whole new team too early.

Process

Enabling these team members with well-planned processes is the difference between FP&A success and failure. 

Remember, FP&A means Financial Planning & Analysis. This function is not typically responsible for overall organization goal-setting, so it’s important to provide the proper context and KPIs (Key Performance Indicators) for your FP&A team to operate within.

In addition to proper goal-setting, it’s also important to set and periodically update the way your FP&A function actually works. Are there outdated processes that waste time or create duplicate work? Periodically analyze - and listen to your FP&A team members’ feedback about - every step in your recurring FP&A processes to keep your saw sharp and your team engaged on work that counts. 

Technology

Beyond having the right butts in seats, equipping these staff members with the proper tech platforms can equip them with the ability to leverage all your company’s data and make better-educated strategic decisions. These platforms are frequently cloud-based and may leverage AI and machine learning to augment your staff’s capabilities.

For some direct inspiration, check out our articles on the 12 best financial reporting tools of 2023 and top corporate performance management tools to consider. 

Connecting Your Components

Coordinating these three components is just as important as selecting the right ones. I want to take a second to address that the way you set up your FP&A team will also, to some extent, depend on your own role. CFOs are typically not the first hires at startups, so if you hold that position, it’s likely that you’re at a company with a decently developed bench of talent. In this case, you may already have been around the block on setting up internal teams. If a process or procedure is working already, no need to reinvent the wheel for your FP&A group.


On the other hand, if you’re a founder or co-founder at a smaller startup, be sure you’re ready to actually address each of these three core elements. Without the right technology and data, your FP&A team won’t be able to get to work, and without the proper processes, they won’t be able to function efficiently.

Be sure that you’re setting up this function with the right future-focused mindset, curiosity, and emphasis on working alongside the other teams in your business. Also, ensure that your FP&A team doesn’t get mired in difficult-to-execute or endless busy work tasks. Periodically screen for low-effort tasks that can be automated or removed from their workload and assess whether your people, processes, and technology are working in concert, or opposition, to one another.

Frequently Asked Questions

Here are some of the most common questions startup CFOs have about FP&A

What’s the difference between an FP&A leader and a CFO?

Let me address this one right off the bat, in case you’re wondering what separates FP&A from the CFO, since both are engaged in financial planning. The job of your FP&A leader will be more specific than that of your CFO.

While an organization’s Financial Planning & Analysis leader will be responsible for heading up forecasting, tactical planning, and related efforts like budgeting, its CFO will also typically be responsible for daily operations like accounting and treasury. The CFO will be a decision-maker, more heavily engaged with long-term strategic planning than the FP&A, who will be preoccupied with gathering data and insights from throughout your organization to drive better decisions.

FP&A supports and enables the CFO, but is only one part of the bigger picture.

How to improve an existing FP&A team

If you’ve already set up an FP&A team but are looking at ways to enhance its effectiveness, consider specific ways to upgrade your people, processes, and technology.

  • Do the skills and experience of your team members match the profile of the challenges your organization is facing, or can you upskill?
  • Are there new ways to do things, either from other teams or perhaps other companies, that could improve your financial performance?
  • Are there newer tech platforms that could further extend the abilities of your people or give them entirely new ones? Perhaps this would itself be a good project for your FP&A team to handle.

How much to automate

Another common question is how much of your FP&A function can you automate. The answer is an entirely unsatisfying, though probably not unexpected, “it depends.” As fellow CFO Club writer Christian Martinez laid out in another article, there are three steps to assessing automation opportunities:

  1. Map out your financial processes
  2. Quantify the financial impact of automation, with support from tech teams at your company. Consider metrics like time saved across each process, number of staff members affected, and impacts to profitability and valuation
  3. Develop an impact versus effort matrix that allows you to identify high-impact, low-effort automation opportunities

This three-step process, further explained in the full article, will give you a sense of how much automation can help.

When to hire

So you know you want to set up an FP&A team. When is it finally time?

The answer here has two elements. First, when will you be in a position to derive value from FP&A? If your own organization is not developed to the point that you have a multitude of impactful financial analysis projects and questions of budgetary priorities, adding the FP&A role may not bear much fruit.

Second, your FP&A team should follow the development of its prerequisite functions. In particular, without a well-developed and systematized accounting team and the data collection capabilities to track performance across every department in your organization, your FP&A person won’t have much to work with.

Forecasting A Profitable Future 

Building a fully functional FP&A team is a process that takes careful planning ahead of time, but it can be the key to unlocking much greater efficiency across your entire organization. I’d love to hear about your own experience setting up an FP&A function, or even an entire financial team.

Interested in sharing your own story and getting your company profiled by The CFO Club? Comment down below! 

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Logan Nagel
By Logan Nagel

Logan Nagel is a writer and marketer focusing on commercial real estate and PropTech. He draws on a background of firsthand experience in real estate investment and brokerage with firms like J.P. Morgan and Cushman & Wakefield.

You can find his work featured in publications such as Commercial Observer and Propmodo.