What is Financial Planning and Analysis

Financial Planning and Analysis (FP&A) teams play a crucial role in companies by performing budgeting, forecasting, and analysis that supports major corporate decisions of the CFO, CEO, and the Board of Directors.

Very few, if any, companies can be consistently profitable and grow without careful financial planning and cash flow management. The job of managing a corporation’s cash flow typically falls to its FP&A team and its chief financial officer (CFO).

What is FP&A? Diagram

Corporate financial planning and financial analyst professionals utilize both quantitative and qualitative analysis of all operational aspects of a company in order to evaluate the company’s progress toward achieving its goals and to map out future goals and plans. FP&A Analysts consider economic and business trends, review past company performance, and attempt to anticipate obstacles and potential problems, all with an eye toward forecasting a company’s future financial results.

FP&A professionals oversee a broad array of financial affairs, including income, expenses, taxes, capital expenditures, investments, and financial statements. Unlike accountants who are in charge of recordkeeping, financial analysts are charged with examining, analyzing, and evaluating the entirety of a corporation’s financial activities, and mapping out the company’s financial future.

Here is a brief list of the Top 10 responsibilities that lie on the shoulders of financial planning and analysis (FP&A):

  1. Evaluating whether the company’s current assets and investments are the best use of the company’s excess working capital, by looking at return on investment (ROI) and comparisons with other ways the company might utilize its cash flow (e.g., other possible investments, increased stock dividends, etc.)
  2. Gauging the company’s overall financial health, primarily by using key financial ratios such as the debt to equity ratiocurrent ratio, and interest coverage ratio
  3. Determining which of the company’s products or product lines generate the largest portion of its net profit
  4. Identifying which products have the highest profit margin (and which have the lowest) – This is a separate inquiry from the one listed above, as product(s) that carry the highest profit margin may not necessarily be those that generate the greatest amount of total profit – A simple example: Product A may carry a higher profit margin than Product B, but the company may sell substantially more units of Product B
  5. Examining and evaluating the cost-efficiency of each department of the company, in light of what percentage of the company’s financial resources each department consumes
  6. Working with individual departments to prepare budgets and consolidate them into one overall corporate budget
  7. Preparing internal reports for executive leadership and supporting their decision making
  8. Creating, updating, and maintaining financial models and detailed forecasts of the company’s future operations
  9. Comparing historical results against budgets and forecasts, and performing variance analysis to explain differences in performance and make improvements going forward
  10. Considering opportunities for the company to expand or grow. Mapping out growth plans, including capital expenditures and investments. Generating three- to five-year financial forecasts.

In the end, a company’s financial analysts are expected to provide upper management with analysis and advice regarding how to most effectively utilize the company’s financial resources to increase profitability and grow the company at an optimal rate, while avoiding putting the company at serious financial risk.


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