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Should You Build, Buy, or Outsource Your FP&A Platform?
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December 4, 2024
December 4, 2024
12
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Should You Build, Buy, or Outsource Your FP&A Platform?

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Financial Planning and Analysis (FP&A) is no longer a nice-to-have for consumer brands; it's an essential element in driving sustainable growth. In fact, 72% of senior finance executives report they now use an FP&A platform to inform every strategic business decision — not just the ones that pertain to budgets and forecasts. 

This begs the question: What’s the best way for you to meet your FP&A needs? Should you outsource them to a fractional CFO, build your own FP&A platform in-house, or perhaps buy one off the shelf? 

In this comprehensive guide, we’ll dive into the four most common FP&A platform options that will help your brand transform strategic finance from a burden to a competitive advantage.

What is an FP&A platform?

An FP&A platform is a software solution that gives companies 360-degree visibility into their financial health. This visibility — usually realized through capabilities like budgeting, forecasting, reporting, and scenario planning —  helps them make decisions that mitigate risk and drive sustainable growth. Many companies use these platforms in lieu of traditional solutions, like fractional CFOs or even fully stacked internal finance teams.

In contrast to people-driven options, FP&A platforms tend to be much more automated. Their greatest value add? Empowering companies to manage all their financials in a single place. But this data consolidation doesn’t mean companies have to sacrifice the systems they know and love. The best FP&A platforms offer integrations with legacy tools like Excel or Google Sheets so teams can build out the most accurate models and reports on their own terms.

In short, FP&A platforms don’t replace existing processes and tools entirely; they supercharge them.

Why an FP&A platform is a must-have for consumer brands

When we hear “finance,” we typically think of bread-and-butter accounting functions like bookkeeping and expense management. While these activities are essential for staying solvent, they won’t bring you to the next stage of scale.

For that, you need an FP&A platform — and more specifically, the strategic financial capabilities that one provides. In contrast to the more backward-looking accounting functions, strategic finance refers to the forward-looking initiatives that make businesses more profitable and valuable down the line.

Strategic finance consists mostly of forecasting and scenario modeling. Forecasting is when your brand uses data to make educated assumptions and decisions that will impact future performance. Scenario modeling helps brands visualize and prepare for upside and downside occurrences while setting contingency plans. Both of these activities help companies quantify the risks and rewards associated with every business opportunity so they can make decisions that drive growth and keep cash flowing.

FP&A platforms — with their native forecasting, scenario planning, and many integrations — make strategic finance simple. With an FP&A tool, you don’t have to worry about manually building out all these functionalities because they’ve already been built for you. You can simply sync all your data sources and start generating models and forecasts in a matter of clicks.

While having an FP&A platform to automate your strategic financial work can be a game-changer for any company, it’s especially essential for consumer brands whose risk calculations are a bit trickier. Unlike in industries without physical products, in the consumer goods industry, you have to buy inventory and outlay cash on the basis of your plans. And, without the rigorous inventory and demand planning functions that an FP&A platform provides, you could find yourself facing overstocks, stockouts, or any number of cash-incinerating scenarios.

Fortunately, FP&A platforms have the automations to take most of the tricky math — and manual spreadsheet wrangling — off your hands. The best FP&A platforms even integrate with all your sales channels, including DTC, Amazon, and wholesale retailers, so you can manage all your separate inventory and cash needs side by side in the same interface. With everything automated, you’ll be able to get more accurate insights much faster to stay nimble.

But FP&A platforms don’t just help you drive hard ROI; they neatly package your success into user-friendly reports you can whip out in a pinch. And, if you’ve ever fundraised before, then you know what a difference this can make when you’ve got inquisitive investors to answer to.

What functions should you look for in an FP&A platform?

Of the many functions and features FP&A platforms provide, we recommend keeping an eye out for the following criteria during your search:

Seamless data integrations

Your FP&A platform should serve as a single source of financial truth for your internal and external stakeholders. To give everyone a holistic view of your business, the platform will need to integrate with all your core data sources. This includes accounting, commerce, retailer and offline channels, supply chain, plus your marketing platforms.

Real-time reports and forecasts

To track how your performance is stacking up to your plan, you’ll need a platform with granular, on-the-fly reporting capabilities. The best FP&A platforms will provide shareable weekly updates on your progress towards North Star metrics like revenue performance, margins, and order economics.

Your platform will need to be just as agile when it comes to forecasting. It should empower you to create accurate, data-driven forecasts for everything from inventory and revenue to cash. The best platforms also enable instant re-forecasting when necessary. Should a supply chain disruption create an unexpected bottleneck, for example, you’ll need a way to instantly update your retention and re-order forecasts to account for the potential revenue hit.

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Advanced scenario planning

Uncertainty is all but inevitable when you’re scaling a business; that’s why scenario planning is a crucial element of any FP&A platform. One with strong scenario planning capabilities will show you the impact of every strategic decision you make before you make it. If you want to know how switching to a new 3PL will affect EBITDA, for instance, scenario planning can model that for you.

The sturdiest scenario planning function will likewise help you model the effects of changes beyond your control — like economic downturns. If you’re unsure just how much a recession could affect business, you can use this function to model upside and downside economic scenarios and start setting contingency plans.

Immediate time to value

If you’re looking to drive immediate ROI, you don’t want an FP&A solution that’s going to take months to build out or customize. The gold standard is a platform that only takes 2-4 weeks to onboard.

On-demand financial expertise

Unless you’re doing $100M+ in sales revenue and can justify adding a full in-house team to your finance stack, you’ll want an FP&A platform that comes with access to experienced analysts. While the most robust options will be plenty intuitive, an on-demand support team can help you build out any necessary customizations, plus call out any key findings that a less finance-savvy eye could miss.

With sufficient external support, you can even run on a lean finance team through every stage of scale. In fact, some late-stage companies still use top-of-the-line tools to power their entire FP&A functions.

The 4 most viable paths to obtaining an FP&A platform

There are several FP&A paths growing consumer brands can take, from DIYing to buying bespoke software. Here’s what to know about each option and whom it’s best for:

Build your FP&A platform in-house

Two groups tend to take the building route: scrappy early-stage startups with straightforward financials and enterprise-level brands with fully loaded finance teams. For fledgling companies, building doesn’t require much more than Excel and a few free apps and templates. But, for enterprises, it typically means allocating vast in-house resources to developing complex infrastructures. 

Pros

  • Your platform will be highly customizable.
  • It’s cost-effective for early-stage brands reluctant to invest in more than they need.

Cons

  • DIY jobs tend to be very cobbled together and error-prone.
  • Their homegrown nature makes them inaccessible to most team members, preventing collaboration.
  • Building can be expensive for companies beyond the early stage.
  • Requires a lot of time and resources to maintain, especially as financials grow more complex.

Bottom line

Building is the best option for early-stage companies with simple financials, but it can be a considerable time and resource drain for any brand beyond this stage. While ambitious enterprises may be able to support a complete FP&A platform build, many will find that the level of investment such an undertaking requires is better allocated to other growth initiatives.

Hire a fractional CFO

Unlike other more specialized solutions, hiring a fractional CFO involves outsourcing your entire finance function — including the backward-looking accounting side and the forward-looking FP&A side — to a third party. This usually means going through an agency and paying your fractional CFO hourly.

Pros

  • A great approach for brands looking to bundle FP&A and accounting.
  • Offers extensive access to generalist financial expertise.

Cons

  • Talent can be a mixed bag, especially since most CFO agencies specialize in accounting.
  • CFOs tend to rely on manual processes, making real-time models and reports harder to generate.
  • The manual nature of CFO work can also drive up hourly rates, sometimes forcing SMBs to pay as much as $12K/month.
  • CFOs’ attentions and energies can be strained across multiple clients, often at the expense of their investment in your company’s success.
  • When your fractional CFO leaves, their model and expertise go with them — which could put you in a bind when you owe regular updates to your investors.

Bottom line

If your number one priority is a full-service solution that bundles FP&A and accounting, then hiring a fractional CFO is your best bet. However, companies looking to strengthen the FP&A arm of their finance function may not find everything they need in a fractional CFO. Plus, entrusting all this financial knowledge to a third party forces you to relinquish some control and take your fractional CFO’s insights at face value.

Buy an FP&A platform

Companies aiming to outsource their FP&A work without ceding as much control to an outsider may opt for a tool. Off-the-shelf FP&A platforms are a low-lift way to manage your company’s financials while also increasing the financial literacy of everyone on your team. While there are plenty of solid FP&A platforms out there besides Drivepoint, most of these options are industry-agnostic and less focused on the specific needs of consumer brands.

Pros

  • Gives cross-functional teams complete financial visibility via integrations with core data sources.
  • Eliminates the need for large corporation-sized strategic finance teams, empowering companies to scale on tools and optimized headcount.

Cons

  • Most aren’t tailor-made for consumer brands, requiring companies to build out the business logic and customizations in-house.
  • Either very affordable or very expensive without much middle ground. 

Bottom line

Off-the-shelf FP&A platforms can be great for companies working outside of the consumer goods industry — and even for enterprise-level consumer brands with more resources. But they’re less ideal for mid-market consumer brands who may not want to spend months building out the necessary customizations. And, even if you do decide to take this time, you still may never achieve the tailored look, feel, and functionality of a solution specifically designed for a brand in your industry.

Automate your strategic finance work with Drivepoint

Drivepoint is an FP&A platform that is purpose-built for consumer brands. Its accurate, data-driven forecasts, comprehensive scenario planning capabilities, and a team of financial analysts help an expanding roster of high-growth companies drive profitable financial outcomes. 

Notable features

  • Data consolidation via integrations with QuickBooks, NetSuite, Shopify, Amazon, Stripe, and countless major retailers.
  • Drivepoint SmartModel™ delivers easy scenario modeling.
  • Granular, data-driven forecasts available in minutes.
  • Snapshots of your financial health and progress toward KPIs.
  • Round-the-clock Slack support with access to a financial analyst already familiar with your business.
  • Quickstart demo that syncs your company’s data and creates an instantly operational financial model.

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Benefits

  • Caters specifically to consumer brands with highly specialized forecasts and models.
  • Provides an easy on-ramp for those with zero financial know-how thanks to sleek UI and an Excel add-in.
  • Accelerated time to value (2 weeks to onboard).
  • Offers sophisticated modeling capabilities for more financially inclined customers.
  • Streamlines communications between internal and external stakeholders via centralized data and shareable reports.
  • Comprehensive omnichannel support.
  • Turns around a full private-equity-grade model in just 2 weeks.

Bottom line

When it comes to FP&A platforms, there’s a seemingly endless sea of options to choose from, and each of the four popular paths still promises to deliver great value to your business. But if you’re a growing consumer brand looking for a platform carefully crafted to meet your specific needs, Drivepoint is the way to go.

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How Oats Overnight, Dose, and Ibex simplify FP&A with Drivepoint

While the benefits of using Drivepoint to power your FP&A platform are plentiful, you might still be wondering what bottom-line impact we can drive for your brand. Let’s share a few success stories from our top customers:

Oats Overnight drove a $4M increase in EBITDA

As this celebrated breakfast brand entered a period of hypergrowth, it knew the only way to maintain the momentum was to open a new manufacturing facility. The problem? Determining what time was best to take the plunge.

Drivepoint’s data-driven forecasts yielded a surprising insight: Opening a new facility immediately would be the most profitable path forward. Upon launching the new facility, their margins skyrocketed, ultimately leading to a $4M EBITDA increase.

‍Dose unlocked a 3-4% boost in gross margins

As a subscription-based business, leading wellness brand Dose needed an especially sturdy predictive model to understand cash flow and payback periods. That’s why they partnered with Drivepoint.

Our predictive models were up to the challenge. One of their sharpest insights? Most of Dose’s cash was tied up in inventory. Now aware that making this adjustment could move the needle, Dose secured working capital financing. This immediately freed up that cash and resulted in a 3-4% boost in gross margins.

Ibex saved 190+ hours and $314K annually on strategic finance

Leading outdoor apparel brand Ibex wanted to optimize operations for scale without sacrificing its eco-friendly mission. But their lean team didn’t have time to build an FP&A infrastructure agile enough to juggle both goals.

So they turned to Drivepoint. Our FP&A platform helped them seamlessly lock in budgets and build more accurate forecasts in a fraction of the time at a fraction of the cost. Now, they save 190+ hours and $314K a year.

Are you ready to level up your strategic finance strategy?

See how Drivepoint’s end-to-end FP&A platform can help your brand unlock sustainable growth.

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