FP&A: What is financial planning & analysis?

Jocelyn Ho

Published on January 25, 2024


As companies grow and scale, developing a well-structured strategic finance team is crucial. Effective financial management ensures that budgets, cash flow, and revenue are balanced and well-documented.

But reaching and maintaining business profitability takes more than just impeccable accounting.

In addition to keeping accurate transaction and investment records, good finance teams also need to determine the best opportunities and strategies to take to push the company forward.

That’s where FP&A teams come in. This analysis gives executive leadership teams the tools to drive the company in the right direction. Let's explore.

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What is financial planning & analysis (FP&A)?

FP&A stands for "financial planning and analysis," an especially important role for scaling businesses. These teams focus on strategic finance through analyzing, budgeting and forecasting to provide the executive team and board of directors with actionable insights.

The ultimate goal: to make better-informed decisions for the company.

Accounting and FP&A both fit within a company’s finance team. Accountants and financial controllers are responsible for documenting company spend and budgets. Meanwhile, FP&A professionals evaluate both past and present company finances, behaviors, and data, to advise executive management on how to make the best decisions for the company going forward.

FP&A teams are responsible for calculating and analyzing data and trends. But they also aid in transforming this knowledge into the groundwork for long-term financial growth, stability and success for the company.

Practically every business has an accountant, but surprisingly few finance teams have dedicated FP&A professionals. Studies show that only 3% of companies have strategic, operational and financial planning processes that are fully aligned and integrated.

The biggest needs for these skills come when companies grow very quickly. When your business model and revenue are fairly stable and predictable, there's not too much to learn from forecasts and analysis.

But when you're launching new products, targeting new market segments, or even expanding internationally, you need to know that your money is well invested.

Key goals for FP&A teams

Financial forecasting exists in companies of all sizes, though to different degrees of complexity. As startups scale to SMEs and beyond, it’s advantageous to bring on certified FP&A analysts and advisors. These professionals perform more advanced financial planning and modeling to nurture and accelerate growth.

Every organization must have a goal, a raison d’être. It is the role of Financial Planning and Analysis to express the steps towards that goal in a specific, measurable, achievable, realistic, and timely fashion, to measure success, and to apply data-driven insights to constantly refine the plan and keep the goal in sight.

- Anders Liu-Lindberg, A history of planning: How did we get here?

Great FP&A teams are skilled at problem solvers and risk managers. Their main objectives are to:

  • Support company leadership in making the best decisions for scaling company growth and reaching financial goals.

  • Evaluate how the results of past and present financial activity affect future investments and assets–and communicate this to executives and stakeholders.

  • Improve overall business performance by reducing financial risk, optimizing cash flow, and increasing revenue channels.

FP&A team structure and functions

FP&A professionals make up part of the company’s finance team, led by the CFO (Chief Financial Officer). Strategic finance teams are structured differently depending on the size of the company–with one or many analysts, managers, and often an FP&A Director in larger companies.

The team’s main functions include financial analysis, planning, and decision making support for executive management. Here’s a breakdown of the types of roles you can find in a FP&A team and what they do:

Financial analyst

  • Analyze and track the company's financial data, including tracking all revenue, spending, and expenses

  • Measure financial performance and identify patterns and trends by comparing forecasts with actual results of past spending behavior and investment decisions

  • Create P&L statements and other reports on financial performance for executive management to review

FP&A manager

  • Collaborate closely with the company’s executive team and board of directors

  • Analyze the results of business decisions to assess financial health and determine short and long-term financial strategy

  • Forecast budgets for different scenarios, with modeling to identify risk factors that could affect long-term business growth

  • Advise company executives on how to improve investment strategies and allocation of resources, new revenue channels, and cost savings

FP&A director

  • Head the FP&A team and manage the overall system for strategic finance analysis and reporting

  • Establish the processes for financial planning, allocating quarterly and annual budgets, and forecasting of company finances

  • Analyze and communicate key financial insights and high-level recommendations to leadership to scale the company effectively

  • Improve and optimize the strategic finance system and planning process

Core responsibilities of FP&A teams

So what do FP&A teams do? They evaluate the executive management’s business plans and advise on how best to execute them. As expert financial advisors, they generate detailed action plans for management, often with the use of financial tools and automation software.

In order to provide stakeholders with a comprehensive view of the company’s financial performance and help reach their targets, FP&A teams are required to prepare three key financial statements periodically throughout the fiscal year:

  • Profit and loss (P&L) statement. Also known as an income statement, this document calculates company revenue, costs, and expenses as profits and losses over a specific reporting period.

  • Balance sheet. This summarizes the financial fitness of a company and how much has been invested into it and by who. It reveals whether the business is profitable based on the ratio of business liquidity to its debts. All business assets and stockholder equity should balance out with the company’s financial liabilities in order to guarantee an accurate balance sheet.

  • Cash flow statement. Complementary to the P&L and balance sheets, this document measures the exact intake and output of cash transactions in the business over a specific financial reporting period.

Beyond financial reporting and statements, FP&A teams are also in charge of taking this data and interpreting it into actionable insights for future strategy.

These core responsibilities of FP&A teams include:

  • Strategic financial planning. Defining both short and long-term financial strategy, and creating concrete proposals to optimize operating expenses and business performance.

  • Budgeting and forecasting. Projecting and analyzing budgets for different scenarios, and forecasting what internal and external factors would influence results.

  • Risk management. Minimizing financial risk by identifying and averting potential negative consequences from certain investments or business decisions.

  • Decision-making support. Advise company leadership on operational finance processes like resource allocation for team budgets, as well as guidance with major business decisions like mergers and acquisitions.

A key part of this process is building financial models to predict future income, expenses, and cash flow. One such model is the 3 statement model, which integrates the income statement, balance sheet, and cash flow statement into one dynamic model.

Smart spend management accelerates FP&A

There’s no doubt that financial data is crucial to effective financial planning, and tracking how your company spends is an important part of that. For companies that use corporate cards and traditional accounting methods, finance teams don’t have much visibility over cash flow until they close books at the end of the month or quarter.

Simply put, these manual financial processes make it very challenging to proactively distribute smart budgets.

Automated spend management tools like Spendesk solve this by giving you greater control and real-time visibility over all company spending, employee expenses, and reimbursements. With enhanced cash flow management, finance teams can allocate budgets more effectively throughout the month and support spend that truly scales company growth.

Greater control and clarity over budgets in real-time also lets financial analysts plan and forecast financial projections with more accuracy–so they can guide company leadership to make even better business decisions.

Spend management software can further accelerate your accounting and FP&A teams’ productivity by consolidating and automating financial data and processes into one centralized platform. Spendesk empowers every member of finance teams to work more confidently, while enhancing collaboration with non-finance employees and executives alike.

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