This month, we look at the number of employees engaged in synthesizing financial data to develop budgets and forecasts, expressed in terms of full-time equivalents (FTEs) per $1 billion revenue. Keeping this ratio in line with industry standards and organization-specific conditions is an important tool business leaders can wield in their efforts to reach performance goals.
Across all industries, firms employ 3.4 FTEs per $1 billion in revenue at the median, according to benchmarking data collected by the American Productivity and Quality Center (APQC). At the higher end (75th percentile), 5.4 employees per $1 billion revenue, on average, are responsible for budgeting, planning, and forecasting. Organizations at the lower end (25th percentile) employ an average of 1.9 FTEs per $1 billion.
Service companies and those in the consumer goods industry tend to have more FTEs in these roles, which can range from CFO to finance director, manager, analyst, modeler and planner. In the services industry, middle-of-the-road companies employ 4.2 FTEs per $1 billion revenue; in the 75th percentile, an average of 6.2 FTEs; and in the 25th percentile, an average of 2.5 FTEs perform these duties.
Factors to consider in identifying a target number of FTEs per $1 billion revenue
In addition to helping finance leaders right size their planning and forecasting teams, this metric can be used alongside related data points to assess the overall health and efficiency of the finance function.
Knowing how peers are performing on this metric is helpful, but understanding what’s right for your organization requires deeper analysis. A good first step in assessing whether you need more talent in this area involves first looking back at past forecasts to determine the accuracy of predictions. If the results are mixed, it could be a sign that increased investment is warranted.
Multinational organizations generally require more FTEs to build and monitor complex financial models that include changing commodity prices and exchange rates. They might also use multiple financial software systems that require manual integration to compile periodic plans and forecasts.
Effective communication regarding inputs to financial models, including through collaboration with other department heads and operational teams, as well as sharing the outputs with senior leaders, can also necessitate more personnel. In addition, the financial data must be validated, not only across functions and business units but across geographic regions.
Business goals can also influence headcount decisions in finance. If your company is going through a growth cycle, whether increasing sales volume or expanding to new locations, adding finance experts might help you achieve the desired performance. Conversely, shifting economic conditions such as an oncoming recession or other shocks that stimulate rapid downsizing may signal the need for greater investment in the accuracy and reliability of financial plans, budgets, and projections.
Budget cycles, seasonal fluctuations or other periods of low and high financial planning and forecasting activity can also prompt leaders to add or reduce finance staff. Ultimately, you need to assess your specific industry, business and situation to make the best staffing decisions for your organization.
The role of automation in financial planning and forecasting
Many organizations have an automated system or set of systems in place that produce timely financial data and other outputs, such as visualizations. When these systems are optimized and produce reliable data that finance professionals and senior leaders trust, then automation can reduce the number of FTEs needed in this area, even during busy seasons.
If instead financial systems that are meant to increase efficiency generate inaccurate or unreliable results, it might be time to add personnel to improve system inputs and performance.
Any finance professional must have the required accounting or actuarial know-how and related technical skills to do the job. Interpersonal skills are also important, as analysts and modelers can be tasked with communicating complex financial data to colleagues in other functions or locations, or with quickly educating senior leaders. They might also need to lead tough conversations about resource allocation.
In this area of the organization, resilience is another important trait. Staff members in finance experience notoriously high rates of turnover and burnout.
Looking back at the accuracy of past budgets and predictions is critical for determining whether current processes and staffing levels are adequate for achieving business success. Business leaders should monitor this performance closely because the forward-looking financial information these team members produce is ultimately used to steer the organization.
Perry D. Wiggins, CPA, is CFO, secretary, and treasurer for APQC, a nonprofit benchmarking and best practices research organization based in Houston, Texas.
