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Financial Planning & Analysis

Financial Planning & Analysis: A Helpful Overview

Introduction

Financial planning and analysis (FP&A) is a crucial function for companies and organizations of all sizes. It involves budgeting, forecasting, performance reporting, and data analytics to support financial decision making [1]. Having a solid FP&A process is key for understanding costs, identifying opportunities, and planning for the future financially. This article will provide an informative overview of FP&A best practices, considerations, and resources to help with financial management.

FP&A Basics

FP&A teams are responsible for preparing budgets, financial models, variance analysis, forecasting, and reporting. This provides vital visibility for making strategic and operational decisions [2]. Some of the core FP&A activities include:

  • Budgeting – Developing an annual operating budget and financial plan based on the company’s goals and growth assumptions. This establishes targets to measure performance against.
  • Forecasting – Making regular forecasts of revenues, expenses, and cash flow to update budgets and plans as actual results come in.
  • Reporting and analysis – Tracking key performance indicators (KPIs) and analyzing variances to understand what’s driving under or overperformance.
  • Modeling and analytics – Building financial models and tools to evaluate the potential impact of business decisions and economic factors.

Having robust FP&A is especially important for startups and high-growth companies that need to manage cash flow closely while scaling rapidly [3]. But companies of all stages and sizes can benefit.

Here are some examples of common FP&A deliverables:

  • Monthly/quarterly/annual financial reporting packages
  • Rolling quarterly forecasts
  • Operating budgets
  • Capital expenditure budgets
  • Cash flow projections
  • Scenario analysis
  • Management dashboards

FP&A Team Structure

FP&A teams can be structured in a few different ways depending on the size and needs of an organization [4]:

  • Centralized model – A centralized FP&A team handles budgeting, modeling, forecasting, and reporting for the entire company. This works well for smaller companies with under $100 million in revenue.
  • Distributed model – Larger companies may have FP&A professionals embedded into business units or regions that report up into a centralized group. This helps scale FP&A across a complex organization.
  • Outsourcing/hybrid model – Some functions like report production or technical accounting may be outsourced to third parties so the internal team can focus more on high-value analysis and insights.

The head of FP&A may hold titles like Vice President of FP&A, Finance Director, or Chief Financial Planning Officer. FP&A team members often start as FP&A analysts before moving up to senior analyst, manager, and director roles with more responsibility.

FP&A Software Platforms

FP&A teams rely on a mix of software tools and systems to automate data collection, analysis, and reporting [5]:

  • ERP systems – Core source systems like NetSuite, Oracle, SAP, Workday, and Microsoft Dynamics provide critical financial data.
  • BI tools – Dashboards, visualizations, and self-service analytics from BI platforms like Tableau, Power BI, and Looker.
  • Planning tools – Specialized CPM/EPM software like Anaplan, Adaptive Insights, and Planful for budgeting, forecasting and modeling.
  • Excel – Despite limitations, Excel remains an ubiquitous FP&A tool for analysis and data manipulation.

Leading FP&A teams leverage technology to eliminate repetitive manual work so their time can be spent identifying key insights and opportunities.

Developing an FP&A Career

FP&A offers an excellent career path for finance professionals looking to move out of accounting and into more strategic roles. Some tips for getting into FP&A:

  • Gain 2-4 years experience in audit, financial reporting, or other accounting roles to build an essential foundation in technical accounting [6]
  • Develop Excel modeling skills and familiarity with BI/analytics tools
  • Understand FP&A concepts like budgeting, forecasting, variance analysis and KPIs
  • Consider getting an MBA or specialized FP&A certification
  • Be proactive in networking and searching for FP&A analyst roles to make the transition

Once in an FP&A role, well-rounded analytical skills, communication abilities, and business acumen are vital for continual career growth.

Resources

Here are some helpful sites and communities for learning more about financial planning and analysis best practices:

Articles and Guides

Online Communities

Video Content

Books

Conclusion

In today’s fast-changing business environment, solid financial planning and analysis is a must for data-driven decision making. This overview summarizes key aspects of FP&A including common processes, team structures, enabling technologies, and career development tips. For companies looking to upgrade their finance function, investing in FP&A talent and capabilities pays major dividends through improved visibility, resource allocation, and operational performance.

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