Financial planning & analysis (FP&A)

Main responsibilities of FP&A

FP&A teams vary in size depending on the maturity of the company. Start-ups and small businesses may not even have a dedicated FP&A professional, whereas businesses that are scaling up, and medium to large size enterprises often have several members of the finance team specialized in financial planning and analysis. 

As a general rule of thumb, FP&A professionals perform the following responsibilities: 

Prepare financial statements

Public companies are legally obligated to distribute annual financial reports to shareholders every closing period. The P&L statement, cash flow statement, and balance sheet help company leadership understand the financial performance of the business throughout the fiscal year. 

Track and analyze company finances

All company finances and expenses–including assets, payroll, revenue, investments, and liabilities–are documented in detail and analyzed for cost savings optimization and  strategic financial planning.

Forecast financials and model budgets

Actionable insights are drawn from past and current business activity to inform future strategy. FP&A model different scenarios and budgets to forecast potential outcomes and understand the possible risks and opportunities of each. 

Evaluate financial performance

FP&A teams compare forecasts with the actual performance of budgets to measure campaign success, as well as to maximize returns and continuously improve financial models.

Roles in a FP&A team

Depending on the size of the company, FP&A teams can range from one expert who covers multiple responsibilities, to several finance analysts and finance managers who each cover specific functions. There are three typical roles that make up a robust FP&A team, which reports to the chief financial officer.

Financial Analysts

• Track, measure, and analyze company finances and performance

• Prepare financial statements on monthly, quarterly, yearly basis

• Identify trends and patterns in financial activity of forecasting vs actual budget results

FP&A Managers

• Support company executives and leadership on major decisions that impact business finances and growth

• Advise on strategies for improving asset allocation, cost savings, and revenue streams

• Model budgets and forecast scenarios to mitigate investment risks 

• Analyze overall business performance to develop long term financial strategy

FP&A Director

• Lead the FP&A team and establish process for financial reporting and analysis

• Allocate company-wide budgets and assets for the fiscal year

• Provide CFO and executives with key insights and high-level strategy to scale and expand the business 

Why financial planning & analysis is important

Every business performs accounting as part of its standard operations. For companies that want to grow and scale exponentially, investing in strategic corporate finance is equally as important. Great FP&A professionals support and strengthen numerous aspects of the business, including:

Faster and smarter growth

• Identifying new revenue channels and cost savings

• Helping executives and shareholders make smarter investments

• Improving the allocation of budgets and resources within the company

Risk Management

• Evaluating risk by assessing consequences of past and projected financial behavior and transactions

• Proactive budgeting with expert understanding of company finances

• Ensuring company finances and accounting are audit-ready at closing

Strategic financial planning 

• Using advanced financial modelling to plan and prepare for different outcomes

• Developing a strategic finance roadmap that supports rapid company growth

• Analyzing projections and results to set the right financial goals for the business

Key FP&A terms

A few phrases or terms related to the financial planning & analysis processes:

Budget modelling

Also known as financial modelling, FP&A teams use budget modelling to support leadership in making the best business decisions–especially when it comes to investments, M&As, and pricing. It combines accounting, finance, and business data to create a representational model of the company, which is then used to predict the results and consequences of hypothetical budgets, investments, and corporate transactions.

Forecasting

A method of financial planning that analyzes the past financial data of a company to predict possible future outcomes. FP&A teams use financial forecasts to estimate the costs and returns of potential investments and business operations, in order to measure the likelihood of profitability. Forecasting also helps businesses improve risk management by reducing highly volatile factors in their decision-making and operations.

Profit and loss (P&L) statement

One of the three key financial statements that FP&A teams prepare every closing period, in addition to the cash flow statement and balance sheet. Also known as an income statement, it calculates business revenue, income, and expenses to determine profit or losses over the fiscal period.

Cash flow statement

This documents the exact amount of cash that has moved into or out of the business over the financial period, excluding any pending credits (in double-entry accounting). This provides executives with a quick assessment of the business’ financial health–and whether it’s succeeding or not. 

Balance sheet

The annual balance sheet essentially gives a detailed overview of what the company owns and what it owes. This includes the company's investments as current and noncurrent assets, current and noncurrent liabilities, and shareholder equity from the current reporting period.