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A Comprehensive Guide To Financial Planning and Analysis

Lately, there has been a demand for CFOs and their teams to evolve into strategic business partners. The C-suite relies on them for meaningful business intelligence, decision-making support, and steering business toward profitability and sustainable growth. That’s where Financial planning and analysis (FP&A) appears. FP&A is a unit within a company’s finance department that equips senior management with a projection of the company’s earnings and loss and working performance for the future. These projections inform the improvement and efficacy of the company’s strategic goals and investments. They also help managers share with external stakeholders.

Guide to financial planning and analysis

What is Financial Planning and Analysis (FP&A)?

Financial planning and analysis (FP&A) specialists handle financial planning, budgeting, and forecasting procedures to advise chief decisions made by the board of directors and the administrative team of a business. These employees gather, organize and interpret financial data from across the institution to produce reports that deliver data-driven solutions to business questions. The FP&A role is becoming increasingly constructive. It uses the best methods to concentrate on what happened or what is happening, why it is happening, and what is probable to happen tomorrow.

An FP&A analyst or director should be a business associate for the entire institution, operating closely with various business teams and a strategic consultant to the controller or CFO. These specialists help chiefs of the finance division sustain and mitigate extra costs by recognizing possibilities for savings, efficiency, and investment.

The role of FP&A has evolved in recent times. In the past, FP&A analysts concentrated on recording and documenting financial outcomes and drawing historical financial data to figure future sales and profits. But the abundance of data known today and the technology that enables analysts to use it has empowered FP&A to shift from a more reactive position to delivering insightful forecasts and analytics that precisely influence the business’s path.

FP&A is different from accounting because it concentrates on forward-looking data and predicts future outcomes, while accounting studies past and historical data to decide a company’s present financial state.

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The Job of a Financial Planning and Analysis Professional

As you might guess, forecasting the financials of a firm demands both an awareness of its historical performance and the significant assumptions and trends that may affect its forthcoming performance.  It demands one to have a broad comprehension of accounting & business operations.   The FP&A units are in regular contact with all fields of the industry, including accounting, marketing, operations, sales, and treasury.

FP&A’s function as the eyes and ears of the institution makes it a central intermediary between the operations and corporate units.  In itself, FP&A connects with the CEO and the CFO as well.

Also read A Guide To Certified Financial Modeler

Basic Steps in the FP&A Process:

The Financial Planning and analysis function is a constant cycle of data compilation and analysis. As companies grow and develop into fresh markets and in periods of market volatility and quick change, the process becomes more challenging. More data is collected, and the need for analysis increases – which is why many big and midsize businesses have created devoted FP&A branches within their finance divisions. But regardless of increasing complexity, at its heart, the FP&A function includes the exact four basic steps:

  • Data Collection, Consolidation, and Verification

The first action in the FP&A function concerns gathering economic and operational data from ERP systems, data warehouses and added business solutions. Also, data from beyond the industry – such as more general demographic, financial, and market data – may also be gathered.

After collecting all required data, it should be reduced, standardized, and confirmed. Precise plans, projections, budgets, and studies all rely on the rate and totality of the data they employ – so this stage is important. It’s also very time-consuming, so companies are now shifting to AI-powered answers that can automate many of these jobs.

  • Planning and Forecasting

In this stage, FP&A analysts employ the organized data to develop financial forecasts that indicate how the company will perform hereafter and whether it is progressing in the correct direction. Financial forecasts the cash flow projections comprise sales forecasts and more. Financial forecast models are also employed to experiment with various scenarios, simulate the effect of separate variables, and choose the most suitable course of action to drive the correct results.

The most generally used financial planning strategies include:

  • Predictive Planning:

Financial Planning and Analysis professionals make a model based on extensive data collections of past execution. They then use this time-series forecasting model to forecast coming performance. Predictive analytics boosts planning devices, especially when incorporated into a single solution and supplemented with machine learning and AI.

  • Driver-based Planning:

In driver-based planning, analysts determine a firm’s key business drivers (the items that are most critical to its success) – and then develop a series of plans that mathematically demonstrate how different variables would affect the business drivers.

  • Multi-scenario Planning

Scenario planning and research is the planning process employed increasingly by companies today. In multi-scenario planning, analysts make inferences regarding what might occur in the future. They predict outcomes and then make a plan for responding to each likely scenario.

These models and financial projections help develop the financial & operational plans required to reach the business’ overarching strategic objectives. The Senior Management, with information from FP&A, creates the strategic plan, including noteworthy targets like earnings and net income over the short and long period.

Collaboration across units is essential for all sorts of planning. It confirms plans handle all data, expertise, and variables into account – and it helps improve precision and engagement. Partnership fetches more validity to projects– and helps create agreement around them. This is also where xP&A shows up, connecting and synchronizing plans across units so the company can eradicate silos and advance effectively.

  • Budgeting

In the budgeting phase, FP&A professionals assess the expenses needed to achieve the corporate plan based on the income from the strategic program. They then assign an expenditure budget to each company unit or process – and the revenue and cash flow they are anticipated to develop. Corporate teams with every division then accrue the agreed-upon allocations into one master budget.

The corporate budget is an annual product, with quarterly updates as financial circumstances vary. Nevertheless, to handle volatile market situations better, many companies have now embraced continuous budgeting cycles that frequently update with undulating predictions and projections. Some institutions have also assumed zero-based budgeting, which bypasses bloat & overspending by constantly assessing which expenditures are required and which are not.

  • Performance Monitoring and Analytics

To inform the business and deliver decision support, FP&A teams interpret financial data and watch the performance – including sales, costs, earnings, working capital, cash flow, and other Key Performing Indicators – constantly. They respond to ad hoc queries and summarize numbers into a report – or data story – to enable decision-makers to understand a problem and take action.

Also read: Financial Analysis and Forecasting

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Financial Planning and Analysis Responsibilities

  • Profit and Loss: 

The FP&A unit is accountable for assembling board reports, profit and loss (P&L) statements, and management reports like variance reports, tracking budget and actual spending by division, and cash flow statements. Statement finalization demands collecting data from various branches and then confirming and consolidating that data. The FP&A unit utilizes that to estimate significant financial indicators occurring in these statements like debt-to-equity ratio and current ratio.

  • Profit Margins: 

FP&A specialists usually explore financial statements to comprehend which product lines or benefits contribute the most to net earnings or deliver the highest profit margin. Also, they may split the expense and gain or profit generated by each unit within the organization. Another typical responsibility of FP&A section members is evaluating a company’s investments with its working capital and discovering new investment options.

  • Budgeting:

More progressive responsibilities of FP&A comprise preparing the budget and predicting the company’s coming financial performance. Budgeting demands analyzing financial reports to decide how to allot money.  A smaller business may forecast four or eight months out, while a bigger enterprise could examine one to three years henceforward. Forecasting and planning are not only a yearly or quarterly affair—more companies have turned to continual planning and rolling projections, regularly assessing the latest digits to make alterations.

  • Scenario Planning: 

Scenario planning is a type of financial modeling in which FP&A specialists decide best-case, anticipated, and worst-case scenarios by intersecting separate numbers for order volume and deals examining their effect on a business’s financial situation. Founded on those outcomes, the group can determine actions it would take to respond to different impacts, and better organize a company for tomorrow.

  • Ad-hoc reporting: 

On-demand reports, generally ordered by the CFO or controller, usually deliver a more thorough look at a specific KPI or business unit. A director or analyst may require to draw numbers from different broader reports to locate the exact information the head wants. This reporting & modeling give the FP&A unit the data to provide timely, precise, and actionable suggestions to senior management, especially while done often.

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Financial Planning and Analysis vs. Accounting

Financial Planning and Analysis moves beyond the financial reporting and record-keeping of accounting and preferably concerns studying the financial statements delivered by the accounting procedure with different economic and operational data.

For instance, an FP&A analyst probably monitors, analyzes, and helps control working capital – the reserves required to complete short-term commitments. The analyst estimates the working capital by deducting existing liabilities from current investments,  both figures seen in the balance sheet, a traditional financial statement in accounting. The analyst might warn colleagues of a destructive downward tendency in working capital and suggest ways to enhance it, such as reducing inventory or accelerating the collection of accounts receivable.

Also, the FP&A division has significant duties in following and interpreting cash flow, an estimate of money coming in and going out within a specific time, as documented in accounts maintained in the general ledger, another standard device in accounting. FP&A is concerned with examining cash flow data to notice favorable and adverse trends that impact the overall financial health and suggesting methods for improvement, like borrowing to fulfill short-term requirements.

Financial Planning and Analysis Skills:

An FP&A analyst or director ought to excel at mathematics and should have an appetite for crunching digits. It’s, therefore, no wonder that many individuals in this position are former accountants. But specialists in this area also should be relaxed about diving into complicated and various data sets from human resources, sales, marketing,  and operations.

Spreadsheets are an indispensable tool in interpreting that data, so FP&A employees require to be proficient with Microsoft Excel or similar devices. They need to understand the formulas and techniques that will let them aggregate and manage raw data to deliver critical reports. They should understand how this software automates reporting, comprehend the fundamentals of ERP systems, and help with more complicated reporting and research.

Since Financial Planning and Analysis team members ought to share and collaborate with associates from across the institution, they should have healthy business partnering aptitudes. Business partnering aptitudes include

  • The capacity to function well with others
  • Comprehend their business preferences and objectives 
  • Create a deep understanding of the organization and its operations
  • Turn droves of data into readily understood reports. 


Eventually, FP&A requires good problem-solving skills, as these specialists must crush the challenges intrinsic in consolidating and negotiating financial data.

Building an Efficient Financial Planning and Analysis Team

All businesses have an accountant, but many do not have an individual committed to FP&A. FP&A unit structure differs considerably. At a small business, this process could be just one part of an individual’s work as the controller. A more extensive organization might include dozens of FP&A workers.

FP&A is generally a position an institution adds personnel to as it evolves more omplicated with numerous locations, subsidiaries, divisions, or international functions. That describes why some businesses are just starting to make FP&A resources and census while others maintain high-performing units that regularly provide strategic information to the C-suite.

A business looking to count this process could drive an existing accounting manager hungry for a fresh challenge into FP&A. That individual’s knowledge of the unique elements of the business and historical learning should provide them a lead in their new position.

If a company takes this course, it should deeply contemplate paying for this individual to evolve into a Certified Corporate Financial Planning & Analysis Professional via the Association for Financial Professionals (AFP). Most FP&A directors hold this certification, and if an external employee makes more sense, search for somebody who has this certification.

A standard FP&A group structure at a company with one or two FP&A employees keeps them reporting to the Chief Financial Officer. As an institution builds out its group, it may count as a leader of FP&A who notifies the CFO and numerous FP&A analysts reporting to the head.

Positions of Financial Planning and Analysis Teams

Although job tags and positions of FP&A group members will change by business, here are standard titles and their respective obligations:

Corporate Financial Analyst

  • Interpret financial data and employ Financial models for forecasting
  • Trace income and gross margin by company unit and expenditures by cost center
  • Draft reports on financial performance custom-made to the demands of leadership.
  • Assess financial performance by corresponding and examining actual outcomes with strategies and forecasts.
  • Research and analyze tendencies and projections to report recommended actions.
  • Set policies and practices that drive cost analyses.

FP&A Manager

  • Operate closely with the administration team to develop short- to long-term economic and strategic projects.
  • Examine financial and functional results to comprehend the organization’s general economic health better
  • Consider previous budgets and cooperate with business team leaders to create their yearly budgets and projections.
  • Build models to launch long-term development, accounting for elements that influence performance.
  • Deliver detailed research and analysis on the implementation of a product or unit.
  • Display results and suggestions to senior management leading to income generation, price reduction, and efficient operations.

Director of FP&A or Vice President of FP&A

  • Own the procedure for preparing financial statements and models, like scenario planning
  • Determine quarterly, monthly, and annual financial budgeting, projections, and long-range planning strategies.
  • Drive and enhance existing leadership reporting to be more precise and punctual
  • Interpret financial results to choose significant takeaways and suggestions for senior management.
  • Conduct ad hoc financial modeling and notifying for particular projects.
  • Associate with IT and the broader institution to enhance forecasting via automation & system optimization.

Need for FP&A in Business in the Present Times

COVID-19 has had an impact on many businesses. No individual or company’s functions have been unaffected by this pandemic. Most firms have had to replan to expand or, in some circumstances, to stay in operation.

It is crucial to recognize the significance of FP&A in this setting. Historically, the FP&A process exists only in big institutions with complicated financial functions. Nevertheless, the upheavals suffered by Micro, Small, and Medium Enterprises because of the pandemic are undeniable. Many have had to halt operations indefinitely. Those with the finances to thrive are also reducing costs,  refining or restrategizing their business model to survive this pandemic. The FP&A function of monitoring and initiating the reassessment of company processes is now a higher preference.

In many institutions, the accounting or finance department performs FP&A. While overseeing the daily financial needs of a company and drafting financial statements, the FP&A process is usually hurried and sometimes even forgotten. The pandemic has shifted the direction of finance teams, and statutory due dates have been extended in some circumstances to permit organizations to make adjustments in controlling the consequences of this pandemic. FP&A talents are currently at the forefront as institutions need to examine their functions and reconsider their business model.

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The Future of Financial Planning and Analysis

CFOs and senior leadership need proper forecasting from their FP&A group to make dependable data-driven decisions. As we join a fresh era of Financial transformation with institutions looking to incorporate, manage and study their enterprise data, the FP&A job description will assume a strategic, digital-first strategy.

FP&A specialists are moving away from forecasting and planning in Excel spreadsheets, which are too frequently created in an ad hoc fashion and siloed across business divisions. A digital-first approach to planning implies that the organization embraces strategies concentrated on process automation, transparency, agility, and data-driven decisions.

FP&A units now embrace solutions that allow them to change plans, make projections, or change budgets in real-time and combine planning across business teams to hasten decision-making. All these thus enhance the precision and dependability of techniques and predictions.

A dedicated financial model is required to make a reliable business plan. This needs solutions developed especially for FP&A reporting that improve operational efficiency and yield insights. Choosing the answer is a significant decision that may affect the chief financial officer, FP&A manager, and corporate stakeholders.

Frequently Asked Questions:

  1. Is FP&A difficult?

Public enterprise FP&A units, in particular, manage to work more extended hours, especially during the quarterly financial close cycle, when the job can be severe and time-sensitive. Unlike skilled services like consulting or investment banking, there is generally no fixed time frame or up-and-out approach. The majority of finance leaders consider FP&A jobs are the most difficult to fill.

  1. Is FP&A a bright career choice?

FP&A can be a very thrilling career path. Analysts perform excessively comprehensive and significant financial modeling employed for administrative decision-making.

  1. Do you need a CPA for FP&A?

Having accounting knowledge or a CPA is very beneficial in some circumstances. Nevertheless, you can move up the levels without a CPA degree. Yet, it is easier to advance with a CPA certification.


The position of an FP&A professional or role is to deliver precise, punctual financial analysis and guidance to the business leaders. While that sounds general and additional to number crunching, the position brings much more weight. Recently, FP&A has come to the forefront as a strategic and appropriate advantage to institutions, specially provided the high speed at which businesses move today and the intricacy of the business conditions.

FP&A isn’t just for large corporations — any size business can benefit. FP&A concentrates more on looking ahead than looking around and counting what has already occurred in history. If you like to include more design in your long-term financial planning, you should integrate FP&A into your planning cycle. An outsourced CFO can assist you to benefit from the same cutting-edge FP&A practices of large corporations.

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