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Financial Planning & Analysis (FP&A): Practices, Roles, Responsibilities, and Functions

author Rami Ali | Sr. Product Marketing Manager and
authorIan McCue | Sr. Associate Content Manager

financial planning analysis

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

Financial planning and analysis (FP&A) professionals own the financial planning, budgeting and forecasting process at a company to inform major decisions made by the executive team and board of directors. These employees collect, prepare and analyze financial data from across the organization to create reports that provide data-driven answers to business questions. The FP&A function is becoming increasingly forward-looking. It’s using best practices to focus not only on what happened or what’s happening but on why it’s happening and what is likely to happen in the future.

An FP&A director or analyst should be a business partner for the entire organization, working closely with various business units, and a strategic advisor to the CFO or controller. These professionals help leaders of the finance department maintain and mitigate additional costs by identifying opportunities for efficiency, savings and investment.

The role of FP&A has evolved in recent years. In the past, FP&A analysts focused on recording and reporting financial results and leveraging historical financial data to extrapolate future sales and earnings. But the flood of data available today and the technology that helps analysts use it has empowered FP&A to move from more reactive work to providing insightful predictions and analytics that directly influence the business’s direction.

FP&A is distinct from accounting in that it focuses on forward-looking data and attempts to anticipate future outcomes, while accounting reviews past and historical information to determine a company’s current financial state.


FP&A Skills

An FP&A analyst or director needs to excel at math and have an appetite for crunching numbers. It’s therefore no surprise that many people in this role are former accountants. But professionals in this field also need to be comfortable diving into complex and varied data sets from sales, marketing, human resources and operations.

Spreadsheets are an essential tool in analyzing that data, so FP&A employees need to be skilled with Microsoft Excel or a similar tool. They need to know the formulas and processes that will allow them to aggregate and manipulate raw data to produce key reports. They should know the basics of ERP systems, understanding how this software can automate reporting and assist with more complex reporting and analysis.

Since FP&A team members need to communicate and collaborate with colleagues from across the organization, they should have strong business partnering skills. Business partnering skills include the ability to work well with others and understand their business priorities and goals, build a deep knowledge of the company and its processes, and turn droves of information into easily understood reports. Finally, FP&A demands exemplary problem-solving skills, as these employees must overcome the challenges inherent in consolidating and reconciling financial data.


FP&A Responsibilities

  • P&L: The FP&A team is responsible for putting together profit and loss (P&L) statements, board reports and management reports such as variance reports, which track budget vs. actual spend by department [and business unit and product line?], and statements of cash flow. Finalizing these statements requires collecting data from different departments (thus the business partnering skills) and then verifying and consolidating that information. The FP&A team uses that to calculate key financial indicators that will appear in these statements—like debt-to-equity ratio and current ratio.
  • Profit Margins: FP&A professionals often dig into financial statements to understand which product lines or services have the highest profit margin or contribute the most to net profit. Similarly, they may break down the cost and revenue or profit generated by each department within the company. Another common duty of FP&A team members is assessing a business’s investments with its working capital and finding new investment opportunities.
  • Budgeting: More forward-looking responsibilities of FP&A include planning the budget and forecasting the company’s future financial performance. Budgeting requires parsing through financial reports to determine how to allocate money. Forecasting requires creating financial models that account for trends within the business and in the broader industry and economy that may affect revenue and profit. A smaller business may forecast 4-8 months out, while a larger enterprise could look 1-3 years into the future. Planning and forecasting are not just an annual or quarterly event—more businesses have shifted to continual planning and rolling forecasts, regularly evaluating the latest numbers to make adjustments.
  • Scenario Planning: One type of financial modeling is scenario planning, a process in which FP&A employees map out best-case, expected and worst-case scenarios by plugging in different numbers for sales and order volume to see how it would impact the company’s financial position. Based on those results, the team can identify steps it would take in response to different outcomes, better preparing a business for the future—“extremely or very effective” FP&A teams were more likely to have predictive capabilities, according to a survey from AFP/APQC. These projections can also help plan capital expenses and other investments.
  • Ad-hoc reporting: These on-demand reports, typically requested by the CFO or controller, often provide a more detailed look at a certain KPI or business department. An analyst or director may need to pull numbers from various broader reports to uncover the specific information the executive wants. This reporting and modeling, especially if it’s done frequently, gives the FP&A team the information it needs to provide timely, accurate and actionable recommendations to senior management.

Building an Effective FP&A Team

Every business has an accountant, but many don’t have someone dedicated to FP&A. FP&A team structure varies greatly—at a small company, this function could be just one aspect of one person’s job, like the controller, while a larger organization might have dozens of FP&A employees.

FP&A is typically a role an organization adds personnel to as it becomes more complex with multiple locations, subsidiaries, departments or international operations. That explains why some companies are just beginning to build up FP&A resources and headcount, while others have high-performing teams that regularly feed strategic reports to the C-suite.

A company looking to add this function could move an existing accounting leader hungry for a new challenge into FP&A. That person’s understanding of the unique aspects of the business and historical knowledge should give them a head start in their new role. If a company takes this approach, it should strongly consider paying for this person to become a Certified Corporate Financial Planning & Analysis Professional through the Association for Financial Professionals (AFP). Most FP&A leaders have this certification, and if an external hire makes more sense, look for someone who has this credential.

A typical FP&A team structure at a business with one or two FP&A employees has them reporting to the CFO. As an organization builds out its team, it may add a director of FP&A who reports to the CFO and multiple FP&A analysts reporting to the director.


Three Roles of FP&A Teams

Although job titles and roles of FP&A team members will vary by company, here are common titles and their respective responsibilities:

Corporate Financial Analyst

  • Analyze financial data and use financial models for forecasting.
  • Track revenue and gross margin by business unit and expenses by cost center.
  • Prepare reports on financial performance tailored to the needs of leadership.
  • Evaluate financial performance by comparing and analyzing actual results with plans and forecasts.
  • Study and analyze trends and forecasts to inform recommended actions.
  • Establish policies and procedures that guide cost analyses.

FP&A Manager

  • Work closely with the leadership team to formulate short- to long-term financial and strategic plans.
  • Analyze financial and operational results to better understand the company’s overall financial health.
  • Evaluate previous budgets and collaborate with business unit leaders to build their annual budgets and forecasts.
  • Produce models to project long-term growth, accounting for factors that will impact performance.
  • Provide detailed analysis and commentary on the performance of a product or department.
  • Communicate results and recommendations to senior management that will lead to revenue generation, cost reduction and more efficient operations.

Director of FP&A/Vice President of FP&A

  • Own the process for preparing financial statements and financial models, including scenario planning.
  • Define processes for monthly, quarterly and annual financial budgeting, forecasting and long-range planning.
  • Drive and improve existing management reporting to be more accurate and timely.
  • Analyze financial results to determine key takeaways and recommendations for senior management.
  • Lead ad hoc financial modeling and reporting for special projects.
  • Partner with IT and the broader organization to improve forecasting through automation and system optimization.

Key FP&A Functions

Short- and Long-term Planning

  • Gather and compile data for P&L statements.
  • Consolidate plans from various departments and communicate finalized plan.
  • Perform scenario planning based on different assumptions.

Budgeting & Planning

  • Create a fixed budget for a specific period (typically one year).
  • Monitor the month-to-month execution of the plan, including revenue and expenses, expected cash flow and debt reduction.
  • Adjust plan based on actual performance and other developments.

Management Reporting

  • Pull together monthly, quarterly and annual reports on budget vs. actual and cash flow.
  • Aggregate and analyze financial and operational data to glean insights that direct decision-making.
  • Present reports to executives and/or Board of Directors.

Forecasting

  • Use historical data to forecast financial performance over the next 4-12 quarters.
  • Re-forecast the next 12 months at the end of each quarter for rolling forecast.

Ad-Hoc Reporting & Analysis

  • Quickly gather data for ad-hoc analysis and reporting throughout the year.
  • Make recommendations to management based on findings.

What Tools Does FP&A Need?

The primary challenge FP&A teams face is data collection. FP&A teams spend 75% of their time gathering and processing data, per the AFP survey, in part because many don’t have access to source systems. They’re still drowning in a tsunami of Excel spreadsheets, which are error-prone, often slow to process data and limit collaboration. Additionally, many senior executives who should draw strategic positions from FP&A insights don’t trust the data or analysis enough to let it guide their decision-making.

FP&A teams that rely on spreadsheets to manage planning, budgeting and forecasting struggle to keep up with their growing list of responsibilities. A planning and budgeting solution that pulls real-time data from the ERP and keeps all this information in one, accessible place makes FP&A professionals’ jobs easier while increasing their value.

The less time FP&A spends searching for and aggregating data or sending emails, the more time it can spend analyzing and creating reports. It’s no surprise that the AFP survey indicated “very or extremely effective” FP&A organizations were “significantly more likely” to have automated reporting and data visualization tools. This results in faster planning cycles, more sophisticated modeling, more accurate forecasts and better predictive planning that drives lasting success.

NetSuite Planning and Budgeting is integrated with NetSuite ERP, so it automatically pulls accurate, up-to-the-minute information and eliminates the FP&A team’s dependence on spreadsheets. Since all this data is in one place and visible to everyone who needs it, there are no concerns about looking at outdated data or reports. This accessibility boosts collaboration and accountability, making it easier to get meaningful input and facilitating company-wide and departmental planning.

Features of the NetSuite Planning and Budgeting solution include revenue and expense modeling, approval workflows and management reporting. The solution offers powerful predictive planning that uses historical data and industry-specific statistical models to predict future results, improving the accuracy of forecasts. Ultimately, NetSuite Planning and Budgeting enables FP&A team members become the valuable business partners they should be.

For more information on planning and budgeting, download the ebook, High Impact Planning and Budgeting for all Types of Growth and a Scenario Planning Template.


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