In mature organizations, FP&A also takes ownership of KPI development, ensuring metrics are both measurable and aligned to financial impact. Beyond reporting results, FP&A is responsible for evaluating how well decisions contribute to financial and operational performance. For example, a B2B SaaS company revises its sales hiring every quarter based on pipeline health, not last year’s fixed budget. Continuous planning gives leaders timely insights for smarter, faster decisions aligned with actual business conditions. Financial Planning & Analysis (FP&A) is a central finance function that enables organizations to make strategic, data-driven decisions regarding the future. FP&A delivers the form and vision leaders require to properly allocate resources, respond to change, and remain aligned with long-term objectives.
Gathering and Validating Data from Across the Business
Strategic Finance professionals work closely with senior management and other business leaders to provide insights and recommendations to support strategic decision-making. With a broad spectrum of responsibilities aimed at driving financial health and strategic decision-making, Financial Planning and Analysis (FP&A) roles are pivotal within an organization. Professionals in this industry are tasked with budgeting, forecasting, and analyzing financial data to provide insights that help steer the company toward its financial goals. FP&A responsibilities often involve scenario planning and risk assessment to prepare the organization for potential financial challenges. Ultimately, FP&A roles are critical for maintaining organizational agility and fostering long-term financial stability. Financial modeling is another cornerstone of corporate FP&A, providing a framework for analyzing the financial implications of various strategic decisions and scenarios.
Ad-hoc financial reporting
These forecasts reveal predictions on the future performance of the business. A financial forecast model includes insights on things such as cash flow projections and sales forecasts. Effective financial planning and analysis is no longer a luxury; it’s a business imperative. Investing in FP&A software is crucial for transforming financial processes and empowering decision-makers. By automating routine tasks, improving data accuracy, and providing real-time insights, these tools enable organizations to stay ahead in an increasingly competitive business environment.
Performance reporting
FP&A’s primary responsibility is to connect senior management’s long term “strategic plan” to reality. The strategic plan is a top-down, senior management driven document that sets high-level targets (revenue, net income, core strategic initiatives, etc.) for the firm anywhere from 2-10 years in the future. FP&A’s job is to develop the operating and financial plan required trial balance to achieve management’s strategic plan.
Importance of FP&A for businesses
The clean data can then be consolidated into a unified dataset for later analysis. Stay up to date on the most important—and intriguing—industry trends on AI, automation, data and beyond with the Think newsletter. Elevate your finance career with Wharton’s globally recognized FP&A Certificate Program.
- A value driver tree (aka DuPont analysis) is used to show managers where a company is losing or generating value.
- Return on capital employed is the measure of the efficiency and profitability of a company’s capital investments.
- An FP&A (Financial Planning & Analysis) role is responsible for financial planning, forecasting, and analysis to support the organization’s overall strategic goals.
- Their strong base in accounting and financial statements provides a good foundation for an FP&A career.
- Because there are FP&A roles underneath the FP&A manager position, it’s important that anyone interested in becoming an FP&A manager develop their leadership skills.
FP&A makes sure your resources are allocated efficiently to support your business goals, whatever the environment. This allows you to make resilient choices about investments, expansions, and other critical moves, ensuring that each decision is aligned with your long-term goals. FP&A provides the data-driven insights that guide strategic decision-making.
Free Cash Flow
As another example, suppose customer success has been trying a few initiatives to reduce churn and increase NDR. FP&A can create more accurate forecasts to measure the impact of each initiative—and even advise which one to focus on. For example, if Sales has a budget for ten sellers and expects each to win $10,000 in new business next month, the sales forecasts for new revenue would be $100,000. AI and automation will reduce operational costs and help organizations allocate resources Financial Planning and Analysis effectively. Automation of routine financial tasks and the use of AI-powered financial tools will increase efficiency in FP&A processes, reducing manual errors and saving time.
Other FP&A skills
The 2021 FP&A Trends Research Paper provides valuable insights into how FP&A can shift from a task-driven, traditional management accounting to a purpose-driven, multi-disciplinary function. Given the critical nature of FP&A, one might assume that we have mastered this function over the years. Despite the growing importance of FP&A as a function, many teams still struggle to deliver the value expected. Moreover, we will shed light on the practical aspects of FP&A work, providing a clearer understanding of its impact on a company’s success in M&A activities.
Despite possessing the above robust skillset, even the most experienced FP&A professionals face a number of inherent challenges that can hinder their ability to deliver optimal results. In a well-integrated organisation, data should not reside in isolated subsystems. Instead, it should be part of a master data setup accessible across the company. Whether you’re a recent graduate, accountant, consultant, or investment banker, there’s a path for you.
What is FP&A (financial planning & analysis)?
Uses insights from FP&A to make high-level decisions on investments, capital allocation, and risk management. Ensures that financial planning aligns with the company’s risk tolerance and market conditions. CFO communicates financial plans, forecasts, and results to stakeholders, including the board of directors and investors. They provide a narrative that connects financial performance with strategic goals. Small and medium-sized companies with only one finance function may refer to that team as either FP&A or Strategic Finance.