The role of FP&A in an organization is essential to operational execution, strategy, and performance. Financial teams work of historical results recorded through accounting processes, converting them into insightful reports, and carrying out predictive analysis for quantifiable future expectations.

Financial Planning & Analysis allows senior management to identify critical paths to achieve outlined corporate goals and measure the performance of the business using key performance indicators (KPIs). An effective FP&A process reassures business leaders about successful practices while redirecting them in alternative paths to achieve set goals and objectives.

What is FP&A?

The financial planning and analysis process involves the analytical use of relevant data to review the current financial state of a business, plan for future performance, and forecast the possible future state of profitability while accounting for possible scenarios.

Every successful business thrives on the ability of finance professionals to carry out accurate financial planning, budgeting, and strategic planning and analysis.

Generally, the financial planning and analysis process entails financial professionals budgeting for operational activities, forecasting future financial performance, and analyzing current business finance strategy. The end goal of financial planning and analysis is to provide management with the best possible solutions for operational, financial, and strategic business challenges as well as insight on business performance.

Gartner defines financial planning and analysis as a combination of four functional business activities that are intended to support the financial health of an organization while connecting operational strategy to overall organizational goals and objectives.

The activities of an FP&A team cut across four major processes:

● Planning and Budgeting

● Integrated Financial Planning

● Management and Performance Reporting

● Forecasting and Modeling


Functions of the FP&A Team

The finance team has, and will always be a major contributor to the success of an organization’s operations and strategy. The financial planning and analysis function is one part of the finance team that collaborates with the core accounting team and treasury team to gather data and provide meaningful insights for key critical decisions. FP&A professionals act as business partners to help departments and the entire organization achieve their financial goals.

Previously, the core process of traditional financial planning and analysis depended heavily on historical data and reports to provide meaningful insights for executive management. However, with the evolution of technology, cloud solutions, and real-time data tracking, the FP&A team is now able to apply key business intelligence and data analysis skills to extrapolate and visualize current and projected financial metrics.

Key responsibilities of the financial planning and analysis team have grown beyond simple analysis and reporting, they have evolved to include these core business functions.

Financial Planning and Budgeting

The FP&A is responsible for putting together a comprehensive financial plan for the organization. Through an operating plan and budget, the team creates a working budget for total sales, revenue, cost of sales, operating expenses, and profit margins.

Planning and budgeting is the practice of setting targets and generating a budget to give management a foundation on which to evaluate business activities and financial targets.  Financial planning involves identifying the goals of the organization, while budgeting focuses on the resources needed to accomplish those goals. This means that financial budgets are shaped by the entire financial plans of an organization.

The process of planning and budgeting starts with defining the objectives of the organization over the planning period. Clear objectives are then supported with a plan. For example, the objective might be to grow revenue by 10%. The plan would then include clear steps on how to achieve this, perhaps through targeted marketing campaigns, aggressive sales tactics, or incentives. A budget would then be drafted to support the plan. EPM systems can be used to automate financial planning and budgeting processes.

Strategic Business Planning

Business planning goes beyond reporting financial numbers, it involves the integrated planning for other departments, business operations, and the organization as a whole. The FP&A team plays a fundamental role in ensuring that the different units including project management, operations, commercial, sales, which have goals that are congruent and beneficial for the entire organization.

When there are variances in the financial plan for the entire organization, the financial planning and analysis team identifies discrepancies and collaborates with the different business units to reconcile variances to the business plan.

Financial Modeling and Forecasting

Financial modeling is a key skill that every FP&A professional should possess. This is because financial planning and analysis involves gathering data and information from different sources and modeling reports from financial statements such as the income statement, balance sheet, and cash flow statement. Additionally, effective financial planning requires assessing multiple scenarios and outcomes based on changing internal and external variables in the business environment.

Forecasting is the process of considering and preparing for the future by attempting to outline expectations of future results. Financial modeling is the process of breaking down the assumptions used in a forecast and quantifying them into values used in financial reporting.

Every forecast impacts various functions of the business, the most common being the sales forecast, which extends beyond the expectations of future sales into expenses and other considerations that are impacted by sales growth. A forecast is intended to behave as a sort of corporate crystal ball, giving leadership an idea of the current trajectory of a business.

Financial forecasts are generally incorporated into a model for maximum functionality. A financial model is always flexible and should include the assumptions of a forecast, allowing them to be changed in a dynamic way to visualize the outcome of decisions.

Scenario Planning and Risk Analysis

The FP&A team performs analysis to help organizations identify the impact of certain risks such as production cuts or demand shortfalls. While historical data is indeed useful for forecasting and planning, this form of planning is insufficient in the modern business world. The business environment is impacted by various internal and external factors, some of which are uncertain.

Due to the massive amount of unknown information and uncertainties, scenario planning is a useful tool for financial planning and analysis professionals to assess the impact of changes in certain business inputs on the company’s financial plan. 

Scenario planning takes into account real-time changes to a business and creates a variety of scenarios that are then used to make decisions quickly, making a business more agile and allowing it to pivot quickly as new information comes to light.

Product and Customer Profitability

Despite making sales, the associated costs of a product or service may outweigh the revenue generated. The FP&A team provides key insights to identify profitable customers and products for businesses.

FP&A teams perform in-depth margin analysis to identify the costs of specific products and compare these costs to their associated sales. This allows the business to understand which customers and products, or services generate the highest profit margins. Without these detailed analyses, financial managers and the executive management team do not have insights into customer profitability or product profitability.

Cost minimization

Financial planning and analysis experts identify the top cost drivers and provide solutions to drive down costs for businesses. Periodic reviews of departmental costs and expenses highlight the top business spend areas. This allows finance professionals to recommend cost minimization strategies to senior management in a bid to improve performance and profitability.

Process Optimization

FP&A teams are sometimes responsible for setting up procedure documents for planning and analysis processes. Finance professionals in FP&A engage in finance process analysis to reduce rework, redundant processes and ensure that bottlenecks in the financial reporting process are eradicated. FP&A technology drives automation and helps to streamline finance processes.

How Can You Build an Effective FP&A Team?

Most organizations have an FP&A team structure that consists of financial analysts, a finance manager, and a finance director. The size of an FP&A team usually depends on how big an organization is and what the departmental needs are.

FP&A personnel generally have years of experience in accounting, financial analysis, business analysis, or data analysis. Some organizations require FP&A professionals to have industry certifications such as the Chartered Professional Accountant (CPA) certification, the Chartered Financial Analyst (CFA) certification, or a Masters in Business Analysis (MBA).

A good FP&A team is built on three important pillars, an effective communication channel, professional expertise, and technology.

Effective Communication

The financial planning and analysis team thrives when there is effective communication and collaboration across business units in the organization. Acting as business partners, FP&A professionals gather information from different sources to provide board management reports and analyses that are crucial for key business decisions. Effective communication across teams promotes accuracy and timely reports for effective business solutions.

Professional Expertise

Financial planning and analysis require core financial skills and expertise that allow for accurate and quality insights. The teams are expected to be analytical, with absolute attention to detail. Key business insights are drawn from data, therefore finance professionals should be able to obtain relevant data, identify anomalies, and clean data to produce accurate reports. Financial reporting and analysis also require high modeling skills which every FP&A team should possess.


The evolution of technology and continuous innovation cuts across the finance function regardless of the specific industry. Industries such as manufacturing, retail, telecommunication, financial services, e-commerce, transportation, and even public sectors are equipping their FP&A teams with relevant and effective technology solutions for business success.

Artificial intelligence, robotics, and cloud science are no longer restricted to core technology teams. Ground-breaking technology complements the financial skills and competence of finance teams and fuels quality predictive analysis for possible business growth and expansion.

Financial Statements the FP&A team Work With

FP&A professionals use the three financial statements, the profit and loss (P&L) statement, balance sheet, and cash flow statement to analyze and plan for overall business financial strategy.

Profit and loss statement

Also known as the income statement, a profit and loss statement shows how well a business makes money and is profitable. FP&A analysts and managers use the line items in a profit and loss statement to derive key performance indicators that measure the performance of the organization.

A profit and loss statement will show the following:

● Revenue

● Cost of Sales

Gross Profit

● Operating Expenses

Operating Profit

● Other Income/Expenses

Net Income

FP&A professionals use the information in a profit and loss statement to calculate margins such as gross profit margin, operating profit margin, return on assets, net interest margin, or contribution margin, amongst other KPIs.

profit and loss statement

Balance Sheet

A balance sheet or statement of financial position indicates the performance of an organization at a given period. The components of a balance sheet usually consist of:

● Current Assets

● Non-current Assets

● Current Liabilities

● Non-current Liabilities

● Total Shareholders’ Equity

Using a balance sheet, FP&A experts analyze the cash and cash equivalent position of a company, they are also able to review changes in accounts receivable and payable to measure how well customers pay when due or how vendor obligations are settled.

Other key KPIs that financial planning and analysis experts derive from the balance sheet include return on assets, debt-equity ratio, working capital ratios, current ratio, cost of capital.

balance sheet statement

Cash Flow Statement

One of the three main financial statements that an FP&A team uses to analyze the profitability and performance of an organization is the cash flow statement. A review of the cash flow statement shows the cash position of the business, how much cash was generated from operating activities or spent running the organization.

Financial planning and analysis professionals report on cash flow from operating activities, financing activities, and investing activities to senior and executive management.

5 FP&A Best Practices

To function effectively as business partners, an FP&A team will need to adopt certain best practices. Here are five best practices in financial planning and analysis:

1. Convert Goals into Actionable Plans

To effectively execute the strategy of leadership, it is critical to create clear, actionable plans directly from the strategy. This ensures that every plan is realistic, achievable, and directly related to accomplishing the organization’s goals.

2. Integrate Operations and Financial Planning

Understanding how the financial plan interacts with operations is critical. The more the two functions are integrated, the greater the chances of executing a plan successfully.

3. Ensure Data Validity and Accuracy

At the core of every plan is data. Data ensures that the plan is realistic and achievable. Data is used to measure adherence to the plan. Data is used to report to management for adjustments to the plan. Ensuring accuracy and completeness of data, as well as keeping data current, is imperative for a successful FP&A process.

4. Develop Meaningful KPIs

Developing meaningful key performance indicators is important for management to measure the success of a plan and whether adjustments to a plan are needed. Ensure that all KPIs aren’t just relevant to your industry, but also ensure that KPIs are relevant to your organization.

5. Create Dynamic Plans

Creating plans that can be adjusted with ease will allow for better adaptation and less time spent on adjustments. Each subsequent plan will be faster and more efficient, shifting the focus to higher-reward tasks, like the analysis.

What Tools Do FP&As Need?

The quality of reports and analysis that FP&A teams provide is highly dependent on the tools and resources they work with. To equip your FP&A team, the following tools should be made readily available.

Data Analysis Tools

Data analysis involves various processes which include recording, storing, querying, cleaning, and transforming data to provide insights for business decision making. Data analysis tools help FP&A experts to analyze historical data while carrying out predictive analysis to draw inferential results and actionable insights.

With data analysis tools, financial planning and analysis teams carry out analysis for product profitability, pricing models, customer profitability, market demand dynamics and so much more.

Business Intelligence Tools

Big data analytics using structured and unstructured data is more effective with business intelligence tools that allow FP&A professionals to carry out comprehensive data mining, predictive analysis, and detailed reporting using charts, graphs, tables, and dashboards.

An effective business intelligence software provides a foundation for finance professionals to provide ground-breaking insights that can drive competitive advantage for businesses.

Data Visualization Tools

Financial dashboards and data visualization tools help in creating reports that show a clear tabular, or graphical representation of key company financial and operational results. An effective data visualization tool pulls in real data to analyze trends and patterns and identify outliers.

Additionally, financial planning and analysis teams create self-serve data visualization reports for users such as executive management, business managers, analysts, and board of directors to view dynamic insights based on specific reporting periods, business units, or locations.

Modeling and Reporting Tools

An everyday working tool for FP&A professionals is a spreadsheet. Spreadsheet software such as Excel and Google Sheets are the go-to solutions for financial modeling and reporting for most organizations.

An effective spreadsheet software integrates with your organization’s enterprise resource planning software to access databases and data warehouses seamlessly. This enables finance experts to access data, perform analysis and provide insightful reports for senior management.

What is FP&A Software?

FP&A software is an important tool for forecasting, reporting, budgeting, and planning. The purpose of it is to make financial planning and analysis processes more effective. An effective FP&A software streamlines finance processes and reduces the amount of time spent to access and analyze data. A customized cloud-based FP&A software allows firms to become more efficient by providing an integration between reporting tools and databases.

Management and performance reporting are at the forefront of modern FP&A software advancements and ERPs and CRMs have allowed for better monitoring of performance metrics. Software applications are beginning to offer real-time data analytics that gives advanced insights into how departments are performing in comparison to their plans.

Historically, the management reporting process was a time-consuming one, however, new software applications give users more flexibility and better data interaction. Customizable dashboards and data management tools now create better ways for departments to monitor their performance and make ad hoc adjustments when needed.

DataRails FP&A dashboard

What makes the best financial planning & analysis software?

When choosing the best FP&A software for your business, it is important to ensure that the software is effective, easy to use, adaptable, reliable, and allows for seamless data integration.

Effective and Reliable

To assess if the software is effective, an organization will need to evaluate the ability of the software to enhance the financial reporting and analysis process. Also, the reliability of an FP&A software depends on its ability to function in the required environment with the least probability of failure. A good FP&A software should have high standard functionality.

Easy to Use and Adaptable

When your organization implements new software, there is usually a learning curve for employees. A good FP&A software should be easy to use and adaptable.

ERP Integration

A seamless data integration allows financial professionals to access accurate information on time. The best software allows the FP&A team to pull data from centralized databases into an analysis tool such as Excel. This eradicates manual processes and optimizes performance across teams. With an effective ERP integration, finance professionals can drill down into data and perform a deep dive analysis to provide data-driven reports such as variance analysis on operating expenses.

How DataRails Can Help Your Organization Create More Agile FP&A Teams

Advanced analytics such as DataRails FP&A software has the power to transform FP&A processes by managing risks and running scenario analyses and what-if forecasting models. Analytics such as DataRails can help improve the performance measurements of the organization, without changing how finance professionals work. Finance professionals keep working as they’re used to in Excel while leveraging the robust analytics capabilities and automation that DataRails has to offer.

DataRails can help your company implement automation that can help your FP&A team operate more efficiently and effectively. DataRails is helping financial teams all over the globe reduce the time they spend on traditional reporting and planning.

By replacing spreadsheets with real-time data and integrating fragmented workbooks and data sources into one centralized location, you can work in the comfort of Excel with the support of a much more sophisticated data management system. Build beautiful budgets, track and monitor business performance, and give users stunning and easy-to-use dashboards with DataRails.

Additional Reading on FP&A

Andres Liu Lindberg about the 10 Biggest Trends Impacting FP&A in 2022

Top Recommended FP&A Books

6 FP&As who rose to CFO