FP&A: Financial Planning & Analysis, Everything You Need to Know

Today, in addition to traditional responsibilities, finance teams are also expected to create strategies informing business decisions. It has even been proposed that CFOs should adopt “a guideline that at least 80 percent of analyses focus on prescribing future courses of action.”

Modern finance means charting the course and acting as the enterprise’s GPS. CEOs, CFOs, and stakeholders work as business partners.

FP&A teams budget, forecast, analyze, and ultimately help the board make the corporate decisions necessary for the longevity of a company. No matter the size of your organization, from mid-size to large, FP&A helps the enterprise navigate predictable and unpredictable market conditions and streamline processes, so your company is prepared for whatever the economy throws at it. 

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

Financial planning and analysis “is one of the primary functions of corporate finance” and should not be confused with accounting.

FP&A is all about the what if? At its core, it is financial modeling and nuanced data analysis to predict future outcomes and inform decision-makers. 

On the other hand, accounting analyzes historical data to determine a company’s current financial state. Accounting is all about what was. 

Accounting has CFOs looking backward to understand where their company stands at the moment. At the same time, FP&A functionaries are looking to the future. 

What Are the Core Responsibilities of FP&A?

For the FP&A function to operate as partners to the business there are core responsibilities. 

1. Performance Reporting

Performance reporting and KPIs (key performance indicators) are the best way to measure how effectively your organization meets its goals. Performance reports “can be used to provide relevant information regarding sales, expenses, profit, cash flow, and financial health. This information is then used to make decisions on how to better optimize a business’s operations to reach its financial targets.” 

Performance reporting is a good indicator of how the organization is doing internally, but you can also use it to measure your performance against others in your industry. Performance reporting is a core responsibility of FP&A because it helps keep a company’s internal and external operations accountable and viable. 

2. Forecasting and Modeling

Financial forecasting is done alongside budgeting, but they are not the same thing. Forecasting helps to decide “how an organization should allocate resources.” 

Forecasting and what-if scenario modeling helps the decision-makers understand how to allocate funds in the “now.” In FP&A, budgeting acts as a guide, but forecasting acts as the storyteller, and with financial modeling and forecasting, you get to write your own ending to this adventure… 

3. Scenario Planning

Different scenarios are projected and played out to keep everyone prepared for almost anything. Scenario planning “is an important part of enterprise resource planning and is one way business leaders attempt to manage risk.” 

Scenario planning is unique because it is also considered strategic planning and/or risk management. Scenario planning assumes multiple possibilities and outcomes that could impact a business in the future. 

Unlike other core responsibilities and skills of FP&A, scenario planning is not limited to finance and is considered best practice in almost every industry. 

What Are the Key Skills for FP&A?

More than just being good at math, FP&A professionals are expected to analyze complex data sets that range from marketing to sales to operations and human resources. Therefore, there are specific skills that make for an excellent FP&A analyst.

1. Spreadsheets

More than three-quarters of US FP&A jobs require Excel, an analysis of 500 top FP&A listings revealed. FP&A practitioners need to know the formulas and processes to aggregate and manipulate raw data to produce critical reports for decision-making. This is why every FP&A professional you know is probably well versed, if not fluent, in Microsoft Excel.

2. Planning and Budgeting

Budgeting “is a critical aspect of financial planning that provides a roadmap to achieving financial goals.” FP&A teams prepare the company’s budget while also evaluating senior management’s business plans. Then, with budget and business plan in hand, FP&A teams counsel their boards and stakeholders on how best to execute their plans based on budgetary requirements or restrictions. 

3. Enterprise Resource Planning (ERP)

Understanding the basics of enterprise resource planning and ERP systems is crucial for finance functions. An ERP system “maximiz[es] efficiency by automating transaction flow across various business functions.” Automating transactional data flow throughout an organization ensures accuracy and consistency in understanding and applying data. 

ERP software automates reporting and assists with more complex reporting and analysis. As data sets and organizations grow, finance teams need to be well versed on how automation can assist them and what software is available to address their specific company’s needs. 

4. Business Partnering and Collaborating

Because financial planning and analysis is modern finance, FP&A professionals must collaborate with colleagues from across an organization. Therefore, they must possess strong business partnering or collaborating skills. Unlike accounting, FP&A isn’t performed alone and hunched over a computer screen, crunching numbers. Instead, FP&A teams are actively researching and trying to gain insight into the business. 

How Does FP&A Improve Operations?

Financial planning and analysis supports an organization’s financial health through budgeting, integrated financial planning, management, performance reporting, forecasting, and modeling. 

FP&A solutions enhance the finance department’s ability to manage performance by linking corporate strategy to execution. 

Forecasting and Modeling

To ensure the longevity of an enterprise, processes need to be in place that prioritize forecasting and modeling. Without data integrity and forecasting accuracy, the viability of an organization is at stake. 

The best way to ensure data integrity and forecasting accuracy is to reduce the number of manual processes your FP&A team uses.

Use Case: Comfy 

Comfy is a workplace app that creates relationships between people and their workplaces.

  • Problem: Comfy struggled with data integrity, time management during reporting quarters, and forecasting accuracy
  • Solution: An FP&A tool that runs quality checks, offers drill-down lists, and reconciles booking data with the journal entries in QuickBooks 
  • Outcome: Comfy has cut down on its manual processes saving the company five full days of work a month and allowing for higher-level analysis of the data they collect (and now trust) 

Read more about Comfy’s forecasting and modeling journey here

Performance Reporting

Chief financial officers need improved reporting capabilities employing the data they continuously collect so that stakeholders can grasp the financial aspects of the business. 

The ability to share key metrics with the executive and strategic planning teams (with minimal manual effort) is like a CFO’s dream come true. 

Use Case: Bedrock Quartz

Bedrock Quartz is a Utah-based supplier and installer of high-end granite countertops. Rob Anderson, the CFO, needed to create dashboards to distribute KPIs to the executive, sales, and operations teams.

  • Problem: A way to disseminate information easily and automate the dissemination of KPIs
  • Solution: An FP&A solution with visualization capabilities and dashboards for different departments, including dashboards for each sales channel
  • Outcome: Today, Bedrock Quartz has the capability to monitor trends, reward sales managers and departments who hit their KPIs, and forecast the future of their business with confidence

Read more about Bedrock Quartz’s performance reporting journey here

Planning and Budgeting

For some companies, their FP&A needs are strictly planning and budgetary related. 

In other words, they lack budget control, have no budget restrictions, and definitely do not have any version control when it comes to their financial documents and statements. What they need is collaboration and a single source of truth.

Use Case: FeraDyne

FeraDyne, a manufacturer of outdoor goods and equipment, needed an FP&A solution to help it better plan its budgetary process.

  • Problem: The company needed a collaborative base where change could be tracked, and it also wanted to create an active touchpoint with specific individuals and department heads
  • Solution: A platform that allows FeraDyne to have its expenses pulled together, planned out for the year, and on a collaborative dashboard that is constantly updated and reuploaded
  • Outcome: FeraDyne now spends its time analyzing data instead of trying to pull it together. In addressing its planning and budgeting needs head-on, FeraDyne has saved itself time and frustration and can now take a dynamic look at the business and its strengths 

Next Steps: Automating Your FP&A Processes to Optimize Your Outcomes 

FP&A professionals are responsible for a lot. 

Today, there are software solutions and tools available to help CFOs and their FP&A teams streamline their processes and offer even deeper insights to the decision-makers. 

Datarails is an FP&A solution for Excel users and any FP&A team looking to level up. Datarails helps with data manipulation, forecasting, modeling, and analyzing.

Datarails is a cloud-based solution that keeps an entire corporation accurately informed so that the business decision-makers can make faster and better decisions. Cloud-based solutions offer features like real-time dashboards, ad hoc reporting, budgeting, and forecasting tools that are superior to on-premises solutions which rely on manual updating.

Read more to learn about how Datarails helps with:

  1. Business budgeting
  2. Regulatory reporting
  3. Financial and management reporting
  4. Integrated planning

Or check out more of Datarails’ success stories, learn about pricing, or request a free demo