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What is Financial Planning and Analysis?

What is Financial Planning and Analysis?

According to Waren Buffett, “Financial planning involves understanding the past, assessing the present, and making predictions about the future based on sound financial principles.”

Financial planning and analysis (FP&A) does a lot to keep a company strong and growing. It plans, budgets, predicts, and analyzes. FP&A handles regular tasks like sorting out finances, tracking cash flow, and making reports. It also deals with big projects like planning budgets, thinking about different possibilities, predicting finances, and making models.

When FP&A is done right, it’s like looking back at history and looking ahead to the future. It helps understand what happened before and get ready for what might happen next.

Financial Planning and Analysis Functions

Financial Planning and Analysis Functions The FP&A process involves constantly analyzing and gathering data. There are four main steps:

1. Gathering, combining, and checking data

This means collecting all financial and operational data from different parts of the business, like Enterprise Resource Planning systems and internal departments. It also includes getting data from external sources like market trends and economic data. After gathering the data, FP&A organizes it and checks for any mistakes.

Verification is important because all following steps depend on accurate data. Since this step can take a lot of time, FP&A might use automation or AI to help speed it up.

2. Planning and Predicting Finances

Once we’ve gathered all the necessary data, the next step is to make predictions about the company’s financial future. We ask questions like:

  • How will things look next year if we keep doing what we’re doing?
  • What if we change something specific next year, how will that affect us?
  • What about in five years from now?
  • Are there any economic trends we need to consider that could affect our growth?

To make these predictions, financial analysts use various methods:

  • Predictive analytics: This involves looking at past performance data to predict how we’ll do in the future.
  • Driver-based planning: Here, we first identify the main factors driving our success, then figure out how changes in those factors could impact us.
  • Multi-scenario planning: We prepare for different possible futures by making assumptions about what might happen and planning how to deal with each scenario.

No matter which method we use, it’s important for analysts to work closely with leaders from every part of the company. Keeping everyone on the same page is key to success. 

3. Planning Expenses

Once the FP&A team understands their data, they need to figure out how much money the company needs to spend to carry out its financial plans. This is based on how much money they expect to make from their strategic plan and how well they’re actually doing. This plan for spending money is called the budget.

Using the budget, the FP&A team decides how much money each part of the company can spend. They also estimate how much money the company will make. They work with the top executives in each part of the company to put together all the budgets into one big budget for the whole company.

Different companies use different ways to make their budgets. But most FP&A teams use something called zero-based budgeting. This helps them keep an eye on spending so they don’t spend too much or too little.

Sometimes, when the market is unpredictable, FP&A teams use something called continuous budgeting. This lets them keep updating their plans as things change.

4. Watching How the Money Moves and Understanding It Better

In a company, there’s a group called FP&A that keeps a close eye on how well things are going financially. They don’t just make a plan and leave it at that. They’re always looking at data and checking how different parts of the company are doing.

Besides figuring out financial stuff, they also make reports and pictures to show everyone else how the company is doing.

These FP&A folks also make budgets for the big bosses in each part of the company. This helps make one big budget for the whole company.

Financial Planning and Analysis Responsibilities

Financial Planning and Analysis Responsibilities

1. Profit and Loss Statements

The FP&A team has a job to create profit and loss (P&L) statements, reports for the board and management, like variance reports which compare what was planned to what actually happened in terms of spending in each department, and statements about cash flow. 

Making these statements means gathering information from different parts of the company (which is why teamwork is important), checking it, and putting it all together. 

The FP&A team uses this information to figure out important financial numbers that will show up in these statements, like how much debt the company has compared to its value, and how much money it has right now compared to what it owes.

2. Profit Margins

FP&A experts usually look closely at financial papers to figure out which products or services make the most profit or add the most to the total profit. They also might look at how much money each department brings in compared to how much it spends.

Another thing they do is check out how a business uses its money and see if there are any good chances to invest it in new ways.

3. Budgeting

One of the main jobs of FP&A is planning how the company will spend its money and guessing what might happen with its finances in the future. Furthermore, planning the budget means figuring out where to put the money. Guessing what might happen in the future involves making models with numbers to predict how much money the company might make.

For small companies, this might be 4-8 months ahead, while bigger ones might look 1-3 years into the future. Planning and guessing aren’t just done once a year or every few months. Nowadays, many companies do it all the time, always checking the latest numbers to make changes if needed.

4. Planning for Different Situations

One way of figuring out money stuff is called scenario planning. In this process, people in FP&A draw maps showing the best, expected, and worst things that could happen by putting in different numbers for how much stuff the company might sell or buy. 

This helps see how the company’s money situation might change. Based on what they find, the team can decide what to do if different things happen, getting the business ready for whatever might come. 

A survey found that FP&A teams who were really good at this were also good at guessing what might happen in the future. These guesses can also help decide on big spending and other investments.

5. Special Reports When You Need Them

Sometimes, the boss, like the CFO or controller, asks for specific reports right away. These reports dig deeper into things like how well a certain part of the business is doing. However, someone from the team might have to gather numbers from different big reports to find the exact information the boss wants.

Doing this kind of reporting often helps the FP&A team give the bosses quick and helpful advice based on accurate information.

Master Financial Planning and Analysis with Sam SEO Philippines

Knowing about Financial Planning and Analysis (FP&A) matters because it helps people and businesses handle money well. FP&A gives important information about how a company is doing financially, so everyone involved can make smart choices.

Become an expert in Financial Planning and Analysis (FP&A) with guidance from Sam SEO Philippines. Discover how businesses manage their money wisely and make smart decisions about the future. 

Final Thoughts

Finance is everywhere in a company. The Finance department handles tasks like keeping records, managing accounts, paying salaries, and dealing with investors. Financial Planning & Analysis (FP&A) is different because it looks ahead, predicting how well a company will do financially. 

The FP&A team’s real value comes from studying financial and operational data to give insights to executives and the whole company. In addition, FP&A affects things like how many staff a company should have and what budget choices to make, shaping the company’s culture, growth, and success. FP&A teams must understand the company’s financial needs for both the short and long term.


What’s financial planning and analysis?

FP&A is all about helping businesses improve and grow by looking at patterns in information and making smart guesses to guide decision-making.

What does someone in an FP&A job do?

In FP&A, you predict, manage budgets, plan for the future, prepare for different scenarios, and advise leaders. In addition, the aim is to help the company achieve its goals and do even better.

Is someone in FP&A an accountant?

Nope. FP&A is different from accounting. Even though they both deal with money stuff, FP&A looks into the future for planning and strategy, while accounting mostly deals with keeping track of past money stuff.

How do you do well in FP&A?

To do well in FP&A, you need to be good at analyzing, know a lot about making money models, understand the business well, think ahead, be good at talking with others, and always be ready to learn more.


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