Financial Planning & Analysis (FP&A) Checklist

Without careful financial planning and cash flow management, it’s difficult to grow your business and be consistently profitable.

Typically, companies hire CFOs to handle these all-important tasks. But lately, CFOs and their teams have been under pressure. 

Business leaders expect them to deliver meaningful business insights, provide rapid, organization-wide decision-making, and steer the business profitably and sustainably.

So it’s no surprise they’re focusing on value-added activities such as strategic planning, risk management, treasury, policy setting, and financial planning and analysis (FP&A).

Curious about the latter? Then understanding its purpose, elements, typical responsibilities, and how to improve it in your organization is key.

This guide shares an overview of FP&A along with a checklist to help you understand how the process can improve your company’s financial health.

What Is Financial Planning and Analysis?

Financial planning and analysis, or FP&A, refers to activities—planning, budgeting, reporting, forecasting, and modeling—and processes that support an organization’s corporate strategy, decisions, and financial health. 

As a discipline, FP&A combines a deep analysis of internal financial and operational data, and external data (demographic and economic trends) to uncover valuable insights for future forecasting and profitable decision-making.

FP&A solutions link business strategy to execution, which enhances the finance team’s ability to manage the company’s performance.

FP&A vs. Accounting: What’s the Difference? 

Accounting is foundational to the FP&A process but focuses on record-keeping and financial reporting. 

FP&A goes beyond accounting tasks to analyze operational and financial data and the financial statements (balance sheet, P&L, cash flow statement) derived from the accounting process.

For instance, an FP&A analyst monitors, analyzes, and manages working capital for short-term business obligations based on the figures in the balance sheet. 

Likewise, they can track and analyze cash flow recorded in standard accounting tools like the general ledger. This makes it easier to spot good or bad trends affecting the company’s financial health and make recommendations for improvement.

What is The Purpose of FP&A?

Compared to a decade ago, typical finance organizations today spend roughly 10% more time and resources on FP&A activities. That’s because FP&A helps finance professionals: 

• Get accurate financial analysis, precise forecasts, and decision-ready insights so business leaders can effectively drive enterprise strategy.
• Predict the impact of possible business decisions on the company’s cash flow and overall financial health.
• Build confidence among stakeholders that their decisions will consider the right financial priorities and variables. 
• Create integrated, agile, and solid financial plans from multiple scenarios.
• Measure and track early warning signals to navigate the business. 
• Collaborate with other departments to prepare and consolidate budgets.
• Support corporate strategy development and execution.

What Are The Typical Responsibilities of FP&A?

Gone are the days when your entire corporate finance team was tied to traditional processes involving spreadsheets and outdated expectations. 

As businesses enter a new era of finance transformation, the FP&A job description will take on a more strategic, forward-looking, and digital-first approach. 

FP&A professionals need the right breadth of skills—crunching numbers, communication and collaboration, business partnering, and problem-solving—and capabilities to perform their role, which typically involves: 

• Collecting, verifying, and consolidating data from financial statements and reports to calculate key financial indicators.

• Assessing the company’s working capital and investments to uncover new opportunities for efficiency, savings, and investment. 
• Reviewing financial statements to break down the cost and revenue/profit each department generates and understand the product or service with the highest profit margin or that contributes the most to net profit.
• Parsing through financial reports for budget planning and allocation of funds. 
• Creating financial models that account for trends in the business, industry, and economy that may impact revenues and profits. 
• Plugging in different sales and order volume numbers to map out the expected, best-case, and worst-case scenarios and how they’d impact the company’s financial position.
• Identify steps required to respond to different outcomes based on the mapping and forecasting process.
• Pull numbers from various on-demand reports to unearth data and provide accurate, timely, and actionable insights to business leaders, financial controllers and CFOs.

If you’re looking to add the FP&A function to your business, you can move an existing accounting leader and add personnel to it as the organization expands its operations internally and geographically.

What Are The Elements of FP&A?

As your business grows and expands geographically, the FP&A process becomes more complex owing to rapid changes and market volatility. 

However, some aspects at the core of the FP&A process do not change despite the increasing complexity. These are: 

• Data management: This involves collecting, consolidating, standardizing, and verifying financial, operational, economic, demographic, and market data for accurate planning, forecasting, budgeting, and analysis. 
• Financial planning and forecasting: Analysts use the prepared data to create financial forecasts (sales, cash flow, etc.) that predict the company’s future performance and whether it’s on the right track.
• Budgeting: FP&A professionals create corporate plan expenditure expenses based on the revenue from the company’s strategic plan, then allocate expense budgets for each function or unit and their corresponding expected revenue and cash flow.
• Performance monitoring and analytics: Here, the FP&A teams regularly analyze the data while monitoring the company’s working capital, sales, expenses, and profit performance while supporting decision-makers to understand different situations and take the required actions.

How to Improve your FP&A Process

We’ve covered what FP&A is, why it matters, and the typical responsibilities of an FP&A analyst. 

But that’s not where it ends. You still need to ensure your FP&A processes work effectively so you can generate critical business insights and empower decision-makers to make bold moves.

Several trends—economic volatility triggered by labor shortages, supply chain disruptions, ever-increasing business data, and other factors—have changed the FP&A playing field, putting pressure on analysts and finance teams to transform themselves and their organizations.

Leading FP&A teams use market and economic trends as a catalyst to modernize their practice and turbocharge their operations by:

• Installing new technologies: These include cloud-based solutions, built-in planning orchestration and collaboration tools, business analytics software, and AI-powered FP&A tools. These help companies automate rote tasks in their financial processes, save money, and ensure business continuity in the new normal.
• Tapping new data sources and talent: Equipping staff in critical FP&A roles with the necessary leadership mindset, experience, and authority to influence business enhances their ability to steer the company’s financial trajectory.
• Launching new reporting processes: This helps businesses work smarter, faster, and more flexibly.