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Gone are the days when your entire corporate finance team was tied to traditional processes involving spreadsheets and outdated expectations.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