By CFO Brew Staff
less than 3 min read
Definition:
Also known as FP&A (if you’re sassy), financial planning and analysis is the process finance staff use to help leadership make data-driven decisions, such as whether to cut costs or deploy more capital. FP&A professionals crunch the numbers to determine how financially healthy an organization is. Unlike traditional accounting, which is more involved with reporting historical data, FP&A is more concerned with predicting what may happen in the future.
What are some of the main components of financial planning and analysis?
Consolidating and verifying financial data: This data can be both internal (sales figures, expenditures) or external (how the stock market is performing).
Forecasting and scenario planning: Examining the potential effect of different variables or situations (a new marketing campaign, a supply chain disruption, or the zombie apocalypse) on an organization’s finances. These days, FP&A staff often use data analytics and/or AI in their forecasting.
Monitoring performance: Evaluating how well or poorly the organization is doing in relation to set metrics (often called key performance indicators, or KPIs) related to its goals.
Budgeting: Creating a yearly or quarterly budget and making adjustments to existing budgets. This usually involves collaboration with other departments.
Making ad-hoc recommendations to management: Leadership may ask FP&A personnel to make rapid predictions based on emerging situations.
