Accounting tells you what happened.
Financial Planning & Analysis, commonly called FP&A, helps you understand what may happen next and what you can do about it.
FP&A is the finance function responsible for budgeting, forecasting, financial analysis, scenario planning, and helping leadership understand the financial impact of business decisions.
As organizations grow, this forward-looking perspective becomes increasingly important.
FP&A connects financial information with business strategy and operations.
Common responsibilities include:
The specific responsibilities vary depending on the organization.
Accounting and FP&A work closely together, but they serve different purposes.
Accounting is primarily responsible for accurately recording and reporting historical financial activity.
FP&A uses historical information along with operational assumptions to help leadership plan for the future.
Consider a revenue shortfall.
Accounting can show that revenue finished below budget.
FP&A asks additional questions:
Both functions are essential.
FP&A depends on accurate accounting data, and accounting information becomes more valuable when organizations use it to make forward-looking decisions.
If your team is also evaluating how reporting fits into planning, see How Can CFOs Automate Financial Reporting Without Replacing Their ERP?.
There is no specific revenue or employee threshold.
The need usually becomes apparent when financial decisions become more complicated.
Common signs include:
An annual budget provides an important baseline, but business conditions change.
A forecast allows leadership to incorporate actual results and new assumptions throughout the year.
What happens if sales decrease 10%?
What if we hire 20 employees?
What if labor costs increase?
Can we afford a new location?
What happens to cash if a major customer pays late?
These are FP&A questions.
Receiving an income statement is different from understanding the drivers behind performance.
FP&A can help connect results with operational activity and identify meaningful trends.
As organizations add locations, products, services, employees, customers, or funding sources, planning becomes more complicated.
A spreadsheet that worked at one stage of growth may no longer provide enough visibility.
In many organizations, the CFO or Controller personally handles budgeting, forecasting, financial analysis, board reporting, and scenario modeling.
As responsibilities grow, there may not be enough time to perform all of those activities consistently.
Not necessarily.
Some organizations have enough recurring work to justify dedicated FP&A employees.
Others need the capability but not multiple full-time positions.
Alternatives include:
The appropriate model depends on workload, complexity, internal expertise, and how frequently leadership needs support.
For organizations weighing outside support, Outsourced FP&A Services explains how that model can work.
Outsourced FP&A provides access to financial planning and analytical capabilities without building the entire function internally.
Services may include:
An outsourced model can also work alongside an existing CFO, Controller, or finance team.
Organizations that need broader leadership support may also consider virtual CFO and Controller services.
Strong FP&A requires more than general ledger information.
Depending on the business, useful data may come from:
Combining financial and operational information can help leadership understand the drivers behind results.
Modern FP&A increasingly relies on analytics.
Instead of manually assembling information in spreadsheets, finance teams can use reporting and analytics platforms to bring together financial and operational data.
This can allow FP&A professionals to spend less time gathering information and more time analyzing it.
Technology does not replace financial judgment.
It can give finance professionals better information with which to apply that judgment.
For a practical example of this reporting layer, see Business Analytics and What Is Finance Transformation?.
ProNexus provides FP&A and analytics support designed to complement an organization's existing finance team.
Depending on the need, support can include budgeting, forecasting, financial modeling, reporting, analytics, profitability analysis, dashboards, and strategic decision support.
ProNexus can also help organizations connect FP&A with broader accounting, finance, and technology needs.
FP&A stands for Financial Planning & Analysis.
No. Accounting focuses primarily on recording and reporting historical financial activity. FP&A uses financial and operational information to support planning, forecasting, analysis, and future decisions.
No. FP&A is a finance function. A CFO has broader leadership responsibilities that may include FP&A as well as accounting, treasury, strategy, risk, financing, and other areas.
Yes. Organizations can outsource or co-source FP&A responsibilities when they need planning and analytical capabilities without building a full internal team.
Reliable accounting tells leadership where the organization has been.
FP&A helps leadership determine where it may be going.
As organizations become more complex, developing a stronger planning and analytical capability can help leaders make decisions with greater financial visibility.
ProNexus can help organizations build or supplement FP&A capabilities based on their specific needs.