FP&A Meaning: A Look Inside Financial Planning and Analysis

Financial planning and analysis (often shortened to FP&A) is an ongoing process in which an organization collects and reviews financial data to assess the current economic health of the company, which helps inform future business decisions and the development of the financial planning process.

Many companies have a dedicated FP&A team, which reports to the CFO or other C-suite executives. The team may work closely with other related departments, including the accounting and corporate finance departments.

A FP&A professional or team is a vital part of a company’s financial health because its primary function is active rather than reactive—it aims to forecast financial trends and anticipate the business’s direction to create the healthiest long-term financial plan.

FP&A teams are responsible for the financial management of a company:

• Gather and report financial data: The FP&A team works with the accounting team to collect and present a business’ finances to the C-level executives. This data includes profit-and-loss statements (P&L statements); balance sheets (analyzing net income); variance analysis; income statements; annual, quarterly, and monthly reports; financial models; cash flow statements; and other financial statements.
• Present and compile findings: The team presents their data findings in financial reporting meetings and documents. FP&A analysts may also need to compile ad-hoc reports or reports on specific business areas that higher-ups request.
• Make budget recommendations: The FP&A team may also be responsible for budgeting for the entire company—creating fixed yearly budgets with a strategic plan in mind and regularly assessing the business’s budgeting against key performance indicators (KPIs) and other metrics to increase profitability.
• Forecast business performance: Historically, FP&A teams focused more on the company’s current financial health. Advances in forecasting technology and automation have encouraged FP&A teams to take a more active role in predicting upcoming financial developments. They also recommend decision-making approaches, often informing business planning in the short-term with rolling forecasts and the long-term—up to three years in the future. The FP&A uses its financial projections to strengthen the company’s future performance.

An FP&A team has a straightforward structure:

• CFO: FP&A teams typically report to the chief financial officer (CFO), who communicates with other C-suite professionals (like the CEO), major stakeholders, and business partners. In smaller companies, the CFO will also lead the FP&A team in day-to-day operations.
• Director of FP&A: In larger companies, the FP&A team will have a director—or an FP&A manager—in a senior management role who leads the department in day-to-day operations and reports to the CFO.
• FP&A analysts: The financial analysts are primarily responsible for collecting and reviewing data surrounding the company’s financial performance, creating financial modeling for the general field, forecasting future trends, and keeping the C-suite informed about any major financial decisions.

In contemporary business, FP&A and accounting differ in one major area: timeframe. While FP&A teams take a forward-looking approach, predicting major trends and decisions for the company’s future, standard accounting teams excel in the present day, keeping accounts of the company’s current spending and working capital.

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