A career in Financial Planning and Analysis ( FP&A) is an ideal choice for problem solvers with an innate or a cultivated talent for financial analysis, forecasting, and modeling. FP&A analysts are analytical individuals with in-depth knowledge of the accounting process.
FP&A professionals are essential for an organization as they advise senior management and business executives on the most effective ways to utilize financial resources to increase profitability. An FP&A analyst also proactively identifies operational and financial risks by carefully analyzing a business’s finances and carrying out scenario analysis.
FP&A analysts possess specific hard and soft skills that enable them to support business units and the entire organization. To perform effectively, they should have the following skills:
- Attention to detail
- Excellent communication
- Research skills
- Presentation skills
- Financial modeling
- Analytical skills
- Ability to manage internal stakeholder
- Financial analysis
- Data analysis
- Business analysis
Who is an FP&A analyst?
An FP&A team comprises individuals within a company’s finance department/organization who provide management with forecasts of income statements (Profit and Loss statements) and operating performance for the upcoming year or quarter.
Among other talents, an FP&A analyst should be able to formulate different growth scenarios for an enterprise by deciphering the various puzzle pieces that fit together to constitute its finances.
It is the financial analysts’ job to research macroeconomic and microeconomic conditions along with all company fundamentals to make predictive budgeting predictions about businesses, sectors, and industries. By doing so, they are then able to recommend a course of action. The FP&A analysts may then suggest to upper management to buy or sell the company’s stock-based upon its overall performance and outlook.
Most financial analysts have research and analysis skills that enable them to use numerical data to evaluate the cost-benefit efficacy of various business strategies. This allows organizations to make the right investments and thrive in the present and future business environment.
The Different Roles of FP&A analysts
The responsibilities of a financial planning and analysis profession can vary. Businesses need to understand how much revenue they have generated, and the expenses incurred over a period. FP&A analysts help companies to analyze their financial results, identify cost-cutting opportunities, and advise on future capital expenditures.
Small Business vs Corporate FP&A (corporate financial analysts)
Your responsibilities as an FP&A analyst may vary based on the size of the organization you work with. Larger corporate organizations usually have various levels of financial planning and analysis roles. For example, a typical organizational structure in a large company can include an FP&A analyst, an associate, a senior analyst, and a manager.
However, for small to medium size companies, the responsibilities of the FP&A team are usually shared across a lean team which can consist of only an FP&A analyst and an FP&A manager.
Additionally, in a large organization, the tasks of the financial planning and analysis professionals are delegated based on business unit functions and corporate functions.
An FP&A analyst can be responsible for the financial planning of a single business unit or product. On the other hand, another corporate FP&A analyst may focus on corporate financial planning that consolidates the finances of all business units in the organization.
Senior FP&A analysts vs Junior FP&A Analysts
Junior FP&A analysts are usually in charge of data gathering and consolidation, as well as building financial models. Depending on your years of experience, you can also carry out financial analysis and provide recommendations to senior management. As you progress into your FP&A career, your tasks may become more complex and demanding.
Senior FP&A analysts generally have over five years of experience building financial models, analyzing financial results, creating financial reports, and working as business partners to proffer financial planning recommendations. As a senior FP&A analyst, you will be responsible for reviewing financial models for completeness, reasonability, and accuracy. You will also use data visualization tools to create dashboards and reports that simplify financial results.
FP&A Managers lead multiple analysts and senior analysts to ensure that processes such as variance analysis, budgeting, and efficiency improvements are carried out regularly.
An FP&A manager presents the P&L statement budget and forecasts to business executives and works with departments during the financial period to ensure that business units stay on track and meet their budgets for revenue, expenses, profit margins, and net income.
In general, FP&A analysts are tasked with the ability to:
- Constantly monitor portfolio performance
- Be up-to-date with global economic trends
- Generate high-quality and timely forecasts and reports for investment decisions
- Have an intellectual eye for investment opportunities
- Analyze risk and industry opportunities
How to become an FP&A analyst
Most financial analysts have a Bachelors degree in an analytical or statistics program such as finance, accounting, mathematics, or economics. FP&A analysts require a working knowledge of financial statements and reports for creating a balance sheet, a profit and loss statement, and a cash flow statement.
While most organizations do not require an MBA to hire an FP&A analyst, this can give you an advantage when applying for a financial planning and analysis manager role. Other skills and disciplines that can help you get an FP&A job include data analysis, business analysis, and statistics.
Your ability to excel as an FP&A analyst can also depend on your knowledge of sourcing and consolidating data, building data visualization reports, and developing insights from data analysis.
FP&A certification examinations
There’s more than one way to become a certified FP&A analyst. There are certification exams that are available for those who do not have an MBA or did not major in Economics as undergraduates. These include:
1. Participating in the Chartered Financial Analyst (CFA) program
The CFA Program benefits individuals with backgrounds in economics, business, finance or accounting. It is a three-part exam that tests the fundamentals of investment tools, valuing assets, portfolio management, and wealth planning.
A CFA certification equips individuals with real-world skills and the right expertise in investment analysis that help you move forward in their careers.
2. Series 7 and Series 63 certifications
The series 7 was formerly known as the General Securities Representative Qualification Examination and it enables the holder of this certification to sell all types of securities products except futures and commodities.
This exam focuses on investment risk, taxation, equity, and debt instruments; packaged securities, options, retirement plans, and interactions with clients for prospective securities industry professionals.
The exam and consequent licensing is administered by the Financial Industry Regulatory Authority (FINRA). It is an introductory-level exam that tests the candidates knowledge of basic securities industry information.
The series 63 exams on the other hand was developed to qualify candidates who want to work in the securities industry within a state. It allows them to sell investment products, such as variable annuities, mutual funds, and unit investment trusts.
The 60 multi-choice questions exam is administered by FINRA and it requires one to get a score of 72% and above to pass. Candidates of this exam should familiarize themselves with the Uniform Securities Act of 1956 and the North American Securities Administrators Association(NASAA) Statement of Policy and Model Rules.
What do FP&A analysts do?
FP&A professionals in general oversee a wide array of financial affairs that include financial statements, capital expenditures, expenses and taxes etc. financial analysts in particular are tasked with evaluating, examining and analyzing a corporation’s financial activities and mapping its financial future.
Data consolidation and Analysis
FP&A analysts use data from different sources and databases that need to be cleaned, organized, and consolidated.
Regardless of the size of a business, the financial planning and analysis function requires an in-depth analysis of large data. An accurate and effective financial analysis requires quality data from various business units or departments, and for this reason, data consolidation is relevant for FP&A teams.
The revolution of technology has improved the process of data consolidation. FP&A analysts now have the ability to pull in data from different sources seamlessly. Financial planning and analysis experts can now perform data consolidation and reporting using business intelligence and artificial intelligence tools.
General and customized FP&A software makes data integration and reporting more accessible and faster, and analysts can easily access data for modeling, reporting, and variance analysis.
Business Planning and Forecasting
While junior to intermediate level FP&A analysts consolidate data and build financial models, senior FP&A analysts and FP&A managers are in charge of business forecasting and planning. Managers are responsible for coordinating with other department managers and the FP&A team to forecast the business finances of the organization. FP&A managers review financial plans, models, and reports to ensure that financial results and trends are captured accurately.
The business forecasting function relies heavily on the FP&A team being analytical with utmost attention to detail. Businesses depend on financial reports and analysis to make critical business decisions that impact operations, business expenses, capital investments, and employees. When carrying our business forecasting, FP&A professionals need to provide insights that reflect the accurate situation of a company to aid effective decision-making.
Profit and Loss Statement Analysis
FP&A analysts prepare financial budgets and operating plans for monthly, quarterly and annual periods. These budgets cover total revenue, expenses, capital costs, and bottom line.
A typical expectation of an FP&A expert is to prepare financial budgets, consolidate data on actual financial results, and carry out variance analysis to identify why a company either met, exceeded or fell short of financial targets.
FP&A analysts review the variance analysis for the business and present the final report to business executives concisely and clearly. When FP&A experts carry out financial analysis, the corresponding output provides top management with the information needed to lead the company towards profitability.
The role of an FP&A manager may be streamlined to a ‘profit and loss (P&L) statement finance manager. In this case, the FP&A manager will be in charge of forecasting, planning, monitoring an entire P&L, and reporting on the business’s net income to senior executives.
Financial planning and Analysis
FP&A analysts can be referred to as corporate financial planners. They conduct research to get business, and economic information that impacts a business’s performance, and they extrapolate financial outcomes using financial models, scenario analysis, and what-if analysis.
A financial planning and analysis professional uses historical data from previous periods to identify trends and patterns. FP&A analysts combine insights from their analysis with current and future levels of operations to plan and forecast the financial performance of an organization
Financial models produce financial analysis, insights, and reports. FP&A analysts are usually skilled in financial modeling as this forms the foundation of their analysis. Most financial planning and analysis professionals need data visualization tools to present their financial results clearly and concisely for senior management and business leaders.
FP&A analysts need to have basic to expert skills in data reporting tools and enterprise resource planning (ERP) software such as SAP, Oracle Hyperion, Oracle Essbase, and spreadsheets such as Excel or Google sheets to be more effective with financial modeling and reporting.
More recently, FP&A analysts also require data manipulation skills, they are tasked with using tools such as SQL or Power Query to clean and sort data, which can be used to derive insights for decision-making. Financial planning and analysis professionals also utilize data visualization software such as Power BI or Tableau to present data and insights using graphs, tables, charts, and other visualizations tools.
The specific roles for an financial analyst are:
- Liaise with individual departments to prepare and consolidate budgets into overall corporate value proposition budgeting. This task requires the analyst to develop the operating and financial plan needed to achieve its strategic plan.
- Evaluate whether the company’s investments and current assets are the best use of its excess working capital.
- Identify the company products that have the highest and lowest profit margins.
- Identify and determine the company products and product lines that generate the most income and profits.
- Create, update and maintain financial models and detailed forecasts of the company’s future operations.
- Perform variance analysis to explain the differences in performance and suggest improvements as the company moves forward.
- Map out growth plans which include investments and capital expenditures, giving the company options to consider for growth or expansion.
FP&A tools that FP&A analysts use that eases their loads
A company’s ability to navigate an ever-changing business environment is dependent on tools that enable proactive planning and effective risk management.
An integrated financial reporting system allows departments to review financial reports in real-time. This fosters an environment for frequent communication, collaboration, and swift responses to critical business needs.
Previously, Chief Financial Officers (CFOs) relied on historical events and numbers to create financial forecasts; this led to a more reactive approach towards business needs. A more proactive and forward-looking solution to business opportunities and risks involves using software and tools that help FP&A analysts to consolidate data and analyze results faster.
The different tools that aid the financial planning and analysis process include:
1. Financial Planning and analysis software
Every enterprise needs an FP&A software. A cloud-based solution such as Datarails is ideal as it allows the owners to be more accurately informed and make faster decisions. Cloud-based solutions have certain features that allow for accurate and fast budgeting and forecasting which makes businesses achieve significant benefits over those that use on-premise solutions.
The FP&A software is by far the most important tool that an analyst requires. It has a set of functions that work cohesively to simplify the FP&A process. These are:
- Budgeting and forecasting
- Regulatory reporting
- Financial and management reporting
- Integrated planning
2. Accounting Software
Modern accounting software helps accountants keep track of a business’s revenues, expenses, and capital costs. The Accounting function is connected to various FP&A duties as financial planning and analysis experts rely on data generated by the accounting team. As such, good accounting software which centralizes data in one system gives the FP&A analysts easy access to the data.
For example, accounts payable software integrates a company’s purchasing needs and historical vendor payments and consolidates them together in a centralized database. This improves expense and vendor management and provides a database for financial analysts to pull data for analyzing accounts payable projects.
3. Data Consolidation and Visualization Software
An effective data consolidation software enables FP&A analysts to pull data from different sources for periodic or one-off analysis. Financial reports are then easily created using data visualization tools that enable busy executives to have a clear picture of the business’s financial situation.
The FP&A team is an integral part of any business. The typical day in the life of a financial planning and analysis analyst is filled with data manipulation, forecasting, modeling, and analyzing financial results. Newly improved software and tools provide more effective ways for FP&A analysts to assist businesses in making critical financial decisions for growth and profitability.