April 24, 2020
FP&A Plays a Critical Role for Cannabis Companies During COVID-19
Posted by Chris Lee
During the current COVID-19 disruption, cannabis companies are relying heavily on analysis and reports from their financial planning and analysis (FP&A) teams to make crucial business decisions. Some are making decisions on a weekly or even daily basis due to market changes or new legislative measures.
Needing to pivot quickly is not uncommon, as the cannabis industry is always changing. But given the added market volatility caused by the pandemic, it is more important than ever to have the ability to see your data from an FP&A solution.
FP&A is one function in corporate performance management (CPM) platforms. CPM provides critical data for all aspects of the organization and includes reporting and analysis, planning and budgeting, and forecasting and financial modeling. FP&A is a critical area that directly impacts business decisions and creates business value. But due to inefficient processes, disparate systems, lack of accurate information and lack of a robust FP&A tool, many companies aren’t achieving the full potential from their FP&A activities.
More specifically, FP&A provides senior management with a forecast of the company’s profit and loss and operating performance on a 13-week basis (for proactive decision making), monthly, quarterly or annually. These reports apprise management about the current health of their organization and allow leaders to make the most informed and accurate decisions. Additionally, these reports play an important part in external communication to investors or external stakeholders.
While aspects of FP&A may seem simple, such as budgeting or monthly variance reporting, they are all links in the chain of the complex value-creation process. Being able to analyze opportunities and risks and react quickly is important for any financial analyst, CFO or controller.
Collecting the information is the easy part in FP&A. The difficult part is the analysis and being able to recognize gaps in the data to identify triggers/drivers needed to make business decisions. If there are any issues in a company’s internal process for the collection and analysis of this data, future business decisions will be impacted.
Having an established FP&A process with appropriate supporting tools allows business leaders to:
- Develop a strategic short-term and long-term plan for projects and areas of focus
- Quickly identify business reasons behind plan-to-actual financial variances
- Understand operational plans and how they will drive results
- Identify gaps in the plan and quickly pivot when falling behind on financial or operational goals
- Focus the organization on more specific targets
- Hold team members accountable for delivering financial and operational results
- Identify and monitor business drivers to establish key performance indicators (KPIs)
The right FP&A solution can help cannabis businesses transform their budgeting and planning processes so they can adapt quickly to their rapidly changing environment.
Read here how Cannabis Investors can Minimize their Risk.
We have partnered with Solver Global to provide cannabis companies the cloud-based tools to collaboratively plan and forecast expenses, headcount, inventory and revenue – all in real time. Email [email protected] to learn more. For the latest regulatory updates or other information on running your business during disruption, visit our COVID-19 Resource Center.
Chris works as a Strategy and Transformation Consultant for Armanino helping clients drive innovation and change to meet the company’s goals and objectives. He works with a variety of Cannabis clients, helping them navigate issues surrounding accounting, cloud solutions and risk management practices as they grow. Additionally, he is part of the 2018 Spring Evening MBA cohort at Santa Clara. In his free time Chris loves to golf, watch sports, stay active, and hang-out with friends.