Building an FP&A Function from Scratch

Most companies under $50 million in revenue do not have a dedicated FP&A function. The CFO or controller pulls together budgets in Excel once a year, and forecasting is essentially educated guessing. As the company grows, this breaks down.

Building FP&A from scratch requires three things: the right people, the right process, and the right tools. Here is how to approach each.

People: Start with a senior analyst

Your first FP&A hire should be someone who can model in Excel, understands accounting, and can communicate with non-financial leaders. They do not need to be a CPA, but they need to be analytically rigorous and commercially curious.

Process: Annual budget, rolling forecast, monthly review

The annual budget sets targets. The rolling forecast updates those targets based on actual performance. The monthly review compares actuals to both, explains variances, and adjusts the forecast. This three-layer system creates accountability and agility.

Tools: Excel first, then upgrade

Start with Excel. It is flexible, everyone knows it, and it forces you to understand your model. Only upgrade to dedicated FP&A software once your Excel model is stable and you know exactly what features you need.

The metrics that matter

Focus on a small number of KPIs that drive the business. Revenue growth, gross margin, customer acquisition cost, lifetime value, and cash conversion cycle are usually the right starting set. Everything else is supporting detail.

A well-run FP&A function does not just report numbers. It shapes strategy by showing leadership where to invest, where to cut, and where the biggest opportunities lie.