Financial Planning and Analysis (FP&A)

What is financial planning and analysis (FP&A)?

A corporate finance function, financial planning and analysis (FP&A) collects and analyzes an enterprise’s financial data to facilitate the right business strategies and decisions. This, in a nutshell, the FP&A definition.

Planning, forecasting, budgeting, and analytical activities form the core of FP&A, and together they drive the overall financial health of companies.

How does FP&A fit in the finance organization?

FP&A is an integral part of the finance function, reporting directly to the CFO’s office. FP&A in finance analyzes current and past financial performance to predict the best strategies, actions and investments that will achieve outperformance for the future.

What are the core responsibilities under financial planning and analysis (FP&A)?

The core FP&A responsibilities comprise the following:

• Collect and consolidate data from internal systems and external sources, verify its accuracy and cleanse it for analysis
• Create financial models to support the financial planning process and financial forecasting process
• Draw up the master budget, on completion of the finance planning and forecasting exercises, to document spending across the organization
• Continuously monitor, analyze and create FP&A reports for relevant stakeholders

What are the key FP&A outputs that drive decisions?

The FP&A process delivers the following key outputs for decision-making:

• Balance sheets
• Cash flow analysis reports
• Income statements
• Rolling forecasts
• Financial scenarios modeling
• Variance analysis reports

Why is FP&A critical for business performance?

FP&A empowers organizations to execute informed decisions on the right financial strategies, operational plans, revenue and risk management, profit margins, effective business and technology investments, etc.

It also analyzes market and competitor trends to identify new growth and expansion opportunities.

What are the common challenges faced by FP&A teams?

Common FP&A challenges include:

• Fragmented data collection and consolidation
• Inaccurate forecasting leading to wrong decisions and uncertainty
• Ineffective communication between FP&A functions and stakeholders
• Non-compliance to regulatory standards and mandates
• Skill gaps and inability to adapt to emerging technologies

What is the role of technology and automation in modern FP&A?

Businesses today are implementing smart and AI-powered FP&A tools and FP&A solutions. Additionally, FP&A automation and the Cloud streamline processes and make forecasts and budgeting very accurate. This sets the stage for a future of autonomous planning.

How is FP&A different from traditional accounting functions?

FP&A vs accounting is essentially the difference between financial planning and accounting.

As the financial planning and accounting definition reveals, it focuses on the future performance of an organization, utilizing financial modeling, forecasting and analysis to predict outcomes and guide insight-driven actions.

Accounting involves the drawing up of financial statements for organizational leaders, management teams and regulators that provide an accurate account of the company’s financial performance and related transactions.

How can organizations strengthen their FP&A capabilities?

In a business landscape of growing financial complexity, partnering with organizations that provide expert FP&A services and FP&A consulting can future-proof organizations.

This would provide access to expert and experienced finance professionals to design and implement the right processes and leverage emerging technologies without significant internal investments.