PART 2: COST ACCOUNTANTS AND FP&A ANALYSTS HAVE A RENEWED IMPORTANCE IN A GLOBAL PANDEMIC
By: Madeleine Quinn, Senior Executive Search Consultant at 3P Partners
Last week’s blog post discussed the pandemic’s impact on consumer buying behavior and the renewed value of demand planners and sales analysts. COVID has pushed businesses into new sales channels to mitigate risk in the supply chain. Today we will highlight the increased importance of cost accountants and FP&A analysts in the COVID era.
The global pandemic has been a critical time for cost accountants as companies have needed greater insights into how they track, analyze and control costs in an uncertain environment. These market shifts have caused manufacturers to re-examine, and in some cases, reconfigure their costing models to better support their strategy and performance.
While strong cost accountants are always difficult to find, the 3P team has noticed an increased demand this year with the changing needs in how companies track and control costs. A capable cost accountant will search for ways to diversify the underlying cost structure to ensure profitability in the long term. Beyond selecting a standard vs. average costing model, cost accountants today take a variety of changing considerations into account when building costing models, including overheads and unforeseen labor costs.
Generally, companies select average costing models when there is significant variation in costs from item to item or the existing labor force is not familiar with a standardized costing models and its complexities with moving costs. An average costing model is also a favorite of companies working with commodities. Companies that select a standard costing model are looking to eliminate the lag in data on cost variances that can occur with an average costing model.
Costing models adapt as companies change and grow, highlighting the benefit of using a cloud system for easy transitions and the need to develop a strong internal costing function. A strong cost accountant can be the deciding factor in developing successful costing models in a changing business world.
Pat Garrehy’s article Shifts in Cost Accounting highlighted the importance of tracking in order to maintain flexibility, as systems have become more sophisticated and are able to monitor and report on at least 10 costing factors. Additionally, some businesses are considering hybrid costing models, particularly in multi-site manufacturing environments.
Financial Analysts (FP&A Analysts)
Financial analysts play a critical role in providing decision-makers with predicative insights that can help organizations navigate volatile markets. Financial analysts with the ability to be a step ahead and develop real time projections will allow companies to be agile and survive the economic swings of the pandemic.
According to Jack Alexander’s article, FP&A priorities during the COVID-19 crisis,
“The sudden and severe disruption that the Pandemic brought to most businesses has rendered even the most effective budgets and operating plans obsolete.”
A strong financial analyst will develop a comprehensive understanding of the company’s business model and its critical processes. They will use this context and access to data to build projections and plans based on various scenarios, enabling companies to better adapt to significant and abrupt changes in cash flow, revenue and supply chains. Such projection models should be constantly tracked and easily amenable to market changes. In extreme cases, analysts and the FP&A team as a whole have the ability to keep business afloat during these uncertain times.
2020 has been the most tumultuous economic time for most businesses since the Great Depression. Cost Accountants had to quickly adapt to changing structures, especially concerning the rapid changes that arose in manufacturing. Financial Analysts saved their companies by remaining a step ahead in their forecasts and flexible to the rapidly changing times. As we emerge from these extreme times, these roles will continue to be vital to their companies’ growth and survival.
To discuss the value that strong cost accountants and FP&A analysts can contribute to your business, please contact me: firstname.lastname@example.org or 530-255-4481.