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Financial Planning and Analysis (FP&A)

Practices, Roles, Responsibilities, and Functions

FP&A teams are vital to organisations, offering planning, forecasting, and analysis to aid the CFO, CEO, and Board of Directors. These teams help the management in making critical corporate decisions. A company’s financial resources are forecasted and managed according to these expectations. It is done through financial planning and analysis (FP&A). FP&A specialists make budget suggestions, create accurate financial models, and examine past financial results to spot patterns and make modifications. FP&A is a crucial component of the body of knowledge in management accounting.

Professionals in corporate financial planning and analysis analyse all areas of a company’s operation. It is done to assess progress toward objectives and plan for the future. To anticipate a firm’s future financial outcomes, FP&A analysts examine economic and business trends, past company performance, and prospective impediments. Their efforts enable top management to make the best business choices. Many organisations lack or underutilise financial planning and analysis despite its strategic importance. Gartner estimates that “just 3% of businesses have fully aligned and integrated their strategic, operational, and financial planning processes.”

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Financial Planning and Analysis Professional

A financial planning and analysis analyst or director must be proficient in mathematics and have a strong willingness to crunch numbers. Consequently, it’s unsurprising that many individuals in this role have prior accounting experience.

For their part, employees in this industry must work with large and varied data sets relating to sales, marketing, human resources, and operations with relative ease. An FP&A professional makes successful business choices and accomplishes a variety of objectives by utilising data, tools, and procedures such as budgeting, planning, forecasting, analysis, and reporting.

However, the role has risen in importance throughout the organisation’s departments, with FP&A managers and directors now working in departments other than finance. An organisation’s revenue, costs, taxes, capital expenditures, investment returns, and financial statements are within the purview of financial planning and analysis specialists. Financial analysts are tasked with reviewing, analysing, and assessing a company’s whole financial operations and projecting what that company’s financial future may hold.

Responsibilities

The following are significant FP&A activities and responsibilities:

Planning

Planning is critical for establishing a business’s economic and operational goals. Throughout this phase, FP&A teams work closely with executive teams and stakeholders to unify departmental objectives, culminating in a single model of goals and expectations.

Profit and Loss Statements

The FP&A team is responsible for generating profit and loss (P&L) statements, board reports, and management reports such as variance reports that compare planned to actual spending by department and cash flow statements. Thus, data must be acquired from multiple departments (hence the necessity for business connection skills) and then verified and merged. The FP&A team utilises this to generate crucial financial indicators in these statements, such as the debt-to-equity ratio and current ratio.

Budgeting

FP&A’s more forward-thinking responsibilities include budget planning and financial forecasting. Budgeting is poring through financial data to determine how monies should be spent.

Forecasting

Forecasting is the process of estimating and adjusting a company’s expected future performance in light of past performance, current conditions, and anticipated future conditions. Scenario predictions provide expected changes in business conditions while rolling forecasts include continual updates beyond the fiscal year. In contrast to a static budget, forecasting enables firms to better prepare for changing circumstances and enhance their ability to forecast the future.

Ad-hoc Reporting

These reports, which the CFO or controller commonly requests, provide a more in-depth examination of a particular KPI or business department. An analyst or director may have to cherry-pick numbers from other larger reports to get the precise data requested by the executive. This reporting and modelling, when performed consistently, equip the FP&A staff with the information necessary to give senior management timely, accurate, and actionable recommendations.

FP&A Team

The chief financial officer (CFO) of a business is the senior executive in charge of monitoring the company’s financial operations. They are in charge of cash flow monitoring, budgeting, financial planning, and reviewing the company’s financial health. A CFO must rely on their FP&A personnel to advise their financial decisions to execute their task efficiently.

Every business needs an accountant, yet many lack someone specialising in finance and accounting. The FP&A team’s organisation varies significantly in a small business. This function may be limited to one component of one person’s work, such as the controller; this role may include hundreds of FP&A experts in a larger company. FP&A is often a position where a corporation adds people with several locations, subsidiaries, divisions, and international operations.

Mindset

The shift in FP&A attitudes starts with framing FP&A as a value creator (profit centre) rather than just a value guardian (cost centre). It should be about a drive to find what is underneath the numbers and the foresight to create economic relationships. Financial planning and analysis experts must have the confidence to teach stakeholders by asking the appropriate questions to validate business assumptions and get a sense of the numbers.

Skillset

To thrive as a dependable and trustworthy business partner, finance and accounting must possess a unique set of soft and hard skills. These skills are classified as analysis and decision support.

Digitalisation

Finance digitalisation integrates several technologies and processes that enable the finance function to provide value in the digital world. Finance and accounting must use digitalisation to thrive as business enablers across several areas.

Capacity

Even if you hire the greatest talent and use the best technology, FP&A will not provide value to the business unless they are given the time to interact effectively and extensively with other departments.

Culture

Forming an appropriate culture inside the organisation is a critical component of FP&A’s success. When examining cultures, three dimensions should be considered: ethics and compliance, collaboration, and variety.

The most critical is an ethical and compliant culture. It encompasses integrity, trust, concern, and respect, which are critical components of every organisation.

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Roles of FP&A Professional 

Although the job titles and duties of FP&A team members vary per company, the following are common titles and associated responsibilities:

Junior Analysts

They make the shift from an accounting job or after earning a bachelor’s degree in finance or economics. Moreover, they typically aid with database system setup and maintenance.

Senior Financial Planning and Analysts

Successful senior financial planning and analysis analysts possess excellent critical thinking ability and a keen understanding of the company’s overall financial goals. A skilled senior analyst can establish strategic financial roadmaps based on multiple projections and models and provide managers with performance- and data-driven recommendations and analyses that will aid in the direction of the company’s overall strategy.

Financial Planning and Analysis Manager

Develop short- and long-term financial and strategic initiatives in collaboration with the leadership team. Analyse financial and operational data to get a complete picture of the company’s financial health. Analyse previous budgets and collaborate with business unit leaders to produce annual budgets and estimates. Create models that estimate long-term growth while considering performance-related factors. Conduct in-depth examination and critique of the performance of a product or department. Notify senior management of findings and recommendations that will result in greater revenue, cost savings, and more efficient operations.

Finance and Administration Director/Vice President

Assume responsibility for the financial statement and financial model development processes, including scenario planning. Define monthly, quarterly, and annual financial budgeting, forecasting, and long-term planning strategies. Improve the accuracy and timeliness of existing management reporting by driving and enhancing it. Analyse financial results to find key takeaways and recommendations for senior management. You are in charge of ad hoc financial modelling and reporting for one-of-a-kind projects. Collaboration with IT and the rest of the organisation is critical for forecasting enhancements via automation and system optimisation.

Functions of FP&A

CFOs must deal with various issues daily, including fierce competition, stringent government requirements, significant market volatility, and increased corporate complexity. Today’s CFOs are expected to deal with everything and everything. They are expected to give useful insights to other decision-makers within the business and manage the operational and financial risks of the firm in the most effective manner possible. The following are some of the most prevalent issues and concerns that the FP&A team faces:

  • Intermittent and Disjointed Operations
  • Inadequate Business Insights
  • Manual tasks consume an excessive amount of time
  • The firm continues to struggle with data collection.
  • Budgeting and Forecasting Inaccuracies
  • Inadequate Collaboration
  • Inconsistency in structures, systems, and processes impairs the effectiveness of decision-making.
  • Inadequate Access to Real-Time Information

NetSuite FP&A Tool

The primary issue that finance and accounting teams face is data collection. The AFP survey found that FP&A teams spend 75% of their time gathering and analysing data. But they’re still swamped with error-prone Excel spreadsheets that process data slowly and hamper cooperation. Financial planning and analysis teams that use spreadsheets to handle planning, budgeting, and forecasting are overwhelmed. A planning and budgeting system that gets real-time data from the ERP and saves it centrally increases the FP&A professional’s value.

NetSuite Planning and Budgeting

Owing to the integration between NetSuite Planning and Budgeting and NetSuite ERP, the FP&A team no longer needs to rely on manual data entry. There is no need to worry about viewing out-of-date data or reports now that everything is centrally kept and available to everybody who wants it. Collaboration and accountability are fostered by ease as it streamlines planning for both the business as a whole and individual divisions.

Revenue and expense modelling, approval processes, and management reports are all included in the NetSuite Planning and Budgeting system. Predictive modelling based on historical data and industry-specific statistical models increases the precision of estimates produced by the system. With NetSuite Planning and Budgeting, FP&A staff may realise their full potential as strategic business partners.

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Final Thoughts

FP&A is a critical, strategic, and useful role in every firm, regardless of its size, industry, or growth stage. By delivering accurate financial information to expedite and enhance decision-making, this tool allows organisations to stay on pace to fulfil their objectives. Finance departments at organisations that utilise corporate cards and standard accounting systems have no insight into cash flow until the end of the month or quarter. NetSuite, which automates the process of tracking and reimbursing employee expenditure, is a fantastic option. With increased cash flow management, finance departments may better allocate monthly budgets and stimulate spending that contributes to their businesses’ speedy development. With the assistance of Folio3, a certified NetSuite partner, you can integrate and implement NetSuite that’s fully customised to meet your business needs seamlessly and reap the numerous benefits it has got to offer.

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