This article will focus on FP&A Tools for Banks.
So what does a FP&A manager do? – Here is a position description for a Manager of Financial Planning and Analysis for a bank in Atlanta.
The FP&A Manager will be a key finance and analysis partner for multiple lines of business within the organization. Duties will include providing support for strategic and tactical planning, understanding financial and operational results, and supporting management decision making. Key responsibilities include:
• Budgeting and Forecasting
• Monthly Analysis
• Business Scenario Planning
• Dashboard Preparation
• Ad hoc Analysis
Let’s take a look at each of these responsibilities in a little more detail.
Budgeting & Forecasting: The FP&A manager will work with senior management of the bank to understand key drivers, trends, and develop financial plans for all Selling, General and Administrative (SG&A) and other expenses. They will need to present summarized plans to finance and senior executives.
• Key drivers would include number of checking accounts opened, amount of home equity loans originated, amortization rates of existing loans, non-performing loans as a percentage of assets, full time equivalents (FTE’s).
• Trends would include the direction of interest rate changes by the Federal Reserve Board (FRB), past due percentages on mortgage loans, hiring activities by commercial customers.
• Develop plan for the SG&A departments would include loading historical expenses into MS Excel spreadsheets along with existing budgets of forecasts with instructions on how to update forecasts for future months.
• Presenting summaries is just not sending spreadsheets via e-mail. They will need to add commentary on what has been entered along with thoughts on how to improve the numbers.
Monthly Analysis: This role will actively participate in the close process to make sure that monthly results are complete and accurate, providing variance analysis and summarization of results for senior executives.
• Close process includes the monthly reporting and analysis of current performance versus last year, budget, and current forecasts on a timely basis.
• Complete and accurate reporting involves the use of checklists and well documented processes be put in place and constantly updated for improvements in approach and technology changes.
• Variance analysis and summarization is not just conditional formatting on your Excel spreadsheets. Variances need to be investigated to see if they will be a recurring issue or one-time anomalies. If ongoing, what is being done to address (change in forecast or process to fix the issue)?
Business Scenario Planning: The manager will perform scenario planning in order to assess high-side, low-side, and best case estimates for the business plan. This involve a lot of what-if cases.
• Having just one plan in place is never a good idea. You will need a plan where revenues are rising faster than expected. In that case, you will need to hire more FTE’s for increased sales and service needs.
• If revenues plummet, you will need a plan to cut costs quickly.
• If you plan on acquiring a bank, what impact will it have on operations?
• If the FRB rapidly raises interest rates, what will be the impact on loan and deposit pricing and net interest margins. How quickly can the bank react?
Dashboard preparation: They will be creating and distributing dashboards to monitor key performance indicators (KPI’s) and provide analysis of any variances observed.
• FTE measures such as loans, deposits, and revenues per full time equivalent will need to be tracked.
• Loan, deposit, and customer profitability measures will need to be created and tracked overt time.
• Balanced scorecards that support senior management’s goals and objectives will need to be developed and maintained.
• Dashboard results need to be available to senior management on a timely basis and easy to understand.
Ad hoc Analysis: The financial planning and analysis manager will be a key analytical partner for the management team to help with data-driven decision making.
• What will be the impact on total revenues if the bank increases the insufficient funds fee from $35 to $39? How many customers will leave as a result? What is the elasticity of demand?
• How many FTE’s can be eliminated from operations as a result of a competitor in-market acquisition?
• If the company buys back 10% of its shares, what will be the impact to earnings per share?
• If you create a commission structure for your bankers on new deposits, loans, and services sold, what will be the impact on revenues as well as personnel expense?
So many demands! What tools should I be using? As you can see, being an FP&A manager for a bank has many, many demands. If you are just getting into financial reporting, budgeting, and forecasting for your bank, you might want to consider Oracle Hyperion Financial Management, SAP Business Planning & Consolidation, IBM – Cognos TM1, and Solver’s BI360. These tools will allow you to extract and report your general ledger data in an Excel friendly environment.
When you are ready to go after your non-financial data such as loan, deposit, trust, CRM, teller items, and other data points, you are going to need a data warehouse with a decent reporting engine. A few good tools that will help you are IBM Cognos, SAP BusinessObjects, Oracle Business Intelligence Enterprise Edition, and again BI360 by Solver.
Whether you are new to financial planning and analysis (FP&A) or an old professional with many years of experience, BI360 by Solver is a tool that will grow with your analytical skills and requirements as the solution is very scalable. Solver, Inc. is happy to answer any questions and review BI360’s easy-to-use, Excel-based reporting and forecasting solution for banking FP&A users. When you apply for that next FP&A manager job of your dreams, make sure that you have the right financial planning and analysis tool for banks to ensure your success.