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| Capitalstars Investment Advisor |
Financial Planning and Analysis teams are responsible for supporting their business partners in achieving optimal financial performance as reflected in metrics such as profitability, cash flow, return on capital, economic value added. Their responsibilities include the financial planning process and performing analytical decision support.
Financial Planning
FP&A teams are responsible for establishing and maintaining financial and operating plans in collaboration with their business partners, and reporting on the progress of the business in achieving these plans. This includes creating an annual budget and establishing regular forecasts that show expected future performance of the organization. Many organizations have moved beyond the most simplistic annual budget by implementing rolling forecasts and other more advanced planning techniques.
In order to develop financial plans, FP&A professionals perform a range of activities including analyzing business trends and past performance, developing growth forecasts for product categories or brands and exploring potential growth scenarios. Delivering accurate forecasts is fundamental to business success.
In working with business partners, FP&A teams provide the analytical capability, a deep understanding of the financial implications of business decisions and awareness of how departmental or business unit operational plans impact the overall financial position of the organization.
Planning Activities & Description
Budgeting : Development of a financial plan for a fixed period, often 12 months.
Forecasting : Creation of a forecast that shows expected business performance over future periods.
Rolling Forecasts : Forecasts for a time horizon that is updated on a regular cadence. For example, an 18-month rolling forecast updated quarterly.
Financial Analysis
FP&A teams are the primary business partner responsible for providing analytic services in support of the business. Analysis can be performed on a recurring basis, for example delivering insights into monthly management reports, as well as in support of ad hoc requests or initiatives.
Reporting is a key aspect of financial analysis. FP&A teams are responsible for management reporting that gives executives and managers visibility into their performance by comparing actuals with budgets, plans, and forecasts. Modern FP&A teams communicate progress against targets using dashboards and other visually digestible visualization techniques as well as traditional formatted reports.
Type of Financial Analysis & Description
Actuals vs. Budgets: Reporting on performance against agreed budgets and plans, on a regular basis, often monthly. Variances compared to prior periods are also reported as an indicator of business health. This analysis is used to support monthly and other periodic business reviews.
Ad Hoc Reactive Analysis: Business conditions are constantly changing. FP&A teams are often called up to perform ad-hoc analysis in response to changing market conditions such as new competitors entering the market, disruptive competitive pricing changes, macroeconomic changes or changes to the global trading environment.
Strategic Analysis : FP&A teams are intimately involved in planning for strategic initiatives, for example, evaluating the financial impact of major new product introductions, entering or exiting markets, acquisitions or divestitures.
Proactive Analysis : Strong FP&A teams provide business partners with provocative proactive analysis, observations, and recommendations. By proactively discovering problems and collaboratively exploring solutions, they help to optimize financial outcomes.
Common Challenges of FP&A Teams
FP&A teams have a broad mandate and a significant potential impact on the financial success of their organizations. Most organizations consider the budgeting and planning aspect of FP&A to be mission-critical, so more strategic analytic activities are performed with whatever time or resource remains after baseline planning activities are complete.
Efficiency and automation of the core budgeting, planning, forecasting and reporting processes are therefore keys to a successful FP&A function. Too often, FP&A teams waste time because the systems they use do not adequately support their baseline business processes. Excel spreadsheets can be useful as a productivity tool for FP&A teams but result in inefficiencies when used to support the budgeting, planning, forecasting, and reporting processes. In many organizations, FP&A teams are less able to support the business due to time spent chasing after spreadsheets.