Financial Planning and Analysis (FP&A)
Financial Planning & Analysis (FP&A) Analysts are the eyes and ears of enterprising CFOs. Their unique understanding of financial markets and commercial movements means they are vital in securing their firm’s economic health and future.
A Financial Analyst provides financial planning analysis to assess businesses’ financial health and profitability. They gather economic and business indicators and produce forecasts.
The FP&A team must ensure that forecasts are correct in managerial accounting. The group’s primary function is planning, producing the Budgets, and periodically forecasting to help management to make decisions.
FP&A Job Description
Understand Financial Planning and Analysis
Financial Planning and Analysis or FP&A are groups of financial organisations where senior executives provide a financial plan for the business’s profit and exploitation. These forecasts guide management in evaluating the company’s strategy. Aside from facilitating communications, the direction can access external stakeholders.
Financial Performance – Trading Packs, Analysis and Reporting
FP&As consistently ignore reporting as a pillar of their predictive analysis. Trading “packs” are best described as concise collections of figures over set periods (weeks/months/quarters) that analyse and provide critical insights into financial performance.
FP&As must be communicatively confident, as the reporting audience could be anyone from other financial department heads to non-financial senior management. The language employed to your ends has to be adaptable to your intended audience.
Brand/Trend/Commercial Insights and Analysis
FP&As almost play a dual role – insightful and targeted financial analysis and trend forecaster to provide CFOs and business decision-makers with actionable information.
An FP&A is vital for the financial manager’s role – making decisions relating to security, budgeting, risk management, payroll, investment and senior financial reporting.
Such work is vital regarding broader financial trends, legislation, changes and movements and how they may impact business.
FP&A focuses, in particular, on transforming the firm’s overall strategy into an annual operational and capital budget.
Forecast Operational and Profitability Performance
The system uses financial modelling to forecast operational and profitability performance and sets monthly targets for key performance indicators (KPIs). Successful FP&As are very adept at financial modelling.
FP&As Are Futurists
Whether through explicit 3-statement modelling or M&A models and sensitivity analysis, FP&As are futurists.
Modelling is the core of your analysis, similar to what equity researchers and corporate development professionals do.
However, FP&As have to have a broader knowledge base, including an understanding of the following:
- Acquisitions, Business valuing, Selling or divesting assets, Capital allocation, Management accounting, Ratio analysis, Budgeting and Raising capital
Another type of financial modelling is scenario planning, a process whereby FP&A employees map the best-case and predicted worst-case scenarios based on different numbers of sales and order volumes.
A study by AFP/APS suggests that the FP&A teams with “extremely effective” predictive capacity had higher predictive power than those without. This projected income will aid the plan to make capital expenditures more efficient.
Stakeholder Management and Risk Management
The value of an FP&A’s work is at the end user point, and that is when analysis sits in the hands of the intended stakeholder.
Understanding broader stakeholder goals, risks, and needs will to a degree, drive the direction of analysis and commercial research and knowledge.
Risk management, then, becomes an essential tenet of the role. Although analysis takes stock of trends, futures and market movements and where best to invest/divest or adjust business practices, this has to occur under the financial umbrella of risk management.
Trust, Teamwork and Communication
Trust, teamwork and communication are essential to delivering concise financial risk assessment, especially to non-financial stakeholders.
Financial Health – Budgeting and Forecasting Process
FP&A teams increasingly work on rolling forecasts in parallel with a traditional budget or entirely as a replacement for financial planning. The primary responsibility of this organisation is to link senior managers’ long-term strategic plans with the real world.
Strategic plans are written and implemented in a top-down senior management document that establishes strategic objectives over two years.
The task of the FPA is to develop the operating plan necessary for achieving management’s strategic goal. Often called performance planning, business processes are known as corporate management.
Building an Effective FP&A Team
All businesses have accountants, but not all have a dedicated person dedicated to FP&A. In small companies, the role may consist only of one part of a person’s job, like the supervisor, but larger organisations could have dozens of FP&A staff.
An organisation generally focuses on adding FP&A roles as it becomes more complicated with numerous locations, divisions, or international operations. Some have highly productive teams feeding strategic reports frequently to the C-level.
FP&A Qualifications & Skills
As we described in our Qualifications and Skills page for FP&A Analysts, financial professionals in this line of work have to be decision-makers, commercially minded and always have one eye on stakeholders.
Although FP&A Analysts’ work revolves around financial modelling, prediction and risk assessment, they have to think like accountants and have the same core training to do the job successfully.
What Is the FP&A Role in a Company?
FPAs are becoming essential for businesses, providing crucial performance analysis. They, therefore, play a significant part in business success, ensuring qualified candidates become highly sought after.
Data Reconciliation and Consolidation
The field is proliferating. The ability to manage financial information and strategy is essential, and usually, FP&A tasks require extensive data reconciliation and consolidation as well as variance analysis.
It, too, requires business insight so the management team can formulate effective strategies.
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