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Learning Objectives
What is Financial Planning & Analysis (FP&A)?
Common FP&A roles, and responsibilities.
Identify where and how FP&A fits into a company organization.
Type of companies that benefit most from FP&A
Crucial technical and non-technical FP&A skills
1. Importance of FP&A
FP&A plays a crucial role in providing analytical insights and strategic intelligence that support decision-making and problem-solving across an organization. It ensures that financial data is effectively used to guide the company’s strategic initiatives and operational efficiency.
2. Roles of CFO, Controller, & FP&A
CFO
As the head of the finance team, the Chief Financial Officer is a key financial expert and business strategist. Reporting to the CEO, board, and external stakeholders, the CFO understands the intricacies of company operations and their impact on financial performance, overseeing major projects, expansions, and reorganizations while possessing deep industry knowledge.
Controller
Reporting to the CFO, the Controller manages the accounting team and is responsible for preparing financial statements and ensuring compliance with regulatory requirements and Generally Accepted Accounting Principles (GAAP). They act as a liaison with external auditors and oversee tax management and annual reporting.
FP&A
The FP&A team aids both financial and non-financial departments in making informed decisions. Their focus is on strategic planning, providing essential data insights, and supporting various organizational functions.
3. FP&A Reporting Structure
The FP&A function is typically led by a Head of FP&A (Director/Manager) who manages senior FP&A managers. These managers may oversee specific customer channels, product lines, or regions, or focus on functional areas like data analytics, financial forecasting, or procurement planning. An effective FP&A team acts as a central liaison across all company functions.
4. Select FP&A Focus Areas
Planning
Involves strategic operational planning and financial forecasting, identifying key performance drivers for departmental leaders.
Specialized Expertise
FP&A professionals may have specialties in areas such as risk management, mergers and acquisitions (M&A), and best practices in financial operations.
Analytics and Decision Support
This encompasses capital project planning and managerial accounting, emphasizing data-driven decision-making.
Management Reporting
Involves assessing working capital, profitability by customer/channel, and providing insights into operating performance for executives and board members.
The Financial Control Tower
FP&A serves as an oversight body, facilitating data exchange across departments to ensure all functions are aligned and informed.
Financial and Business Partnership
FP&A teams often collaborate with other business units like marketing and procurement to drive performance.
5. Key Roles and Responsibilities of FP&A
Strategic Planning
Annual and quarterly reports align with the company's strategic vision, with Management Discussion and Analysis (MD&A) clarifying objectives and future directions.
Financial Planning and Analysis
- Establish clear organizational goals (e.g., product manufacturing targets).
- Develop strategic focuses like revenue growth and customer targeting.
- Conduct gap analysis to identify necessary actions to reach strategic objectives.
- Set financial targets and monitoring processes, including key performance indicators (KPIs).
Strategic Financial Mapping
Map key financial metrics such as gross profit and identify all financial and non-financial drivers that impact this metric, including revenue and cost of goods sold. Analyze the operations that affect these drivers, particularly the various components of cost of goods sold. For example, purchase and sale orders have a direct impact on the direct costs of materials as well as the direct costs of labor by influencing production forecasts and production runs.
Scenario Feasibility and What-If Analysis
Collaboration with financial controllers on budgeting and forecasting is essential for assessing different financial scenarios.
Monitoring Financial Conditions
Continuous assessment of financial health, capital project planning, and cost accounting practices are vital.
Others
Strategic Planning and Efficient Management of Large-Scale Capital Projects
Comprehensive Approaches to Managerial Accounting and Cost Management Strategies
6. Benefits of a Formal FP&A Function
A robust FP&A function benefits organizations of all sizes, from small businesses to large enterprises. As companies grow, the sophistication of their FP&A capabilities evolves from informal and ad hoc functions to well-structured and mature processes.
7. Modern FP&A vs. Traditional Corporate Finance
Level 1: Immature and fractured; basic accounting functions in early-stage companies.
Level 2: Immature but connected; increased data extraction and analysis capabilities.
Level 3: Mature and connected; a formally structured FP&A team with integrated systems for enterprise planning management.
Level 4: Mature and integrated; large organizations with advanced ERP systems and a single source of truth across all departments.
8. Traditional to Future Finance and FP&A
The transition from traditional to future-oriented FP&A involves:
- Shifting from a reactive to proactive mindset.
- Moving from cost and process focus to strategic focus.
- Transitioning from simple reporting to scenario analysis and risk management.
- Upgrading from Excel and basic ERP systems to advanced Enterprise Performance Management (EPM), Business Intelligence (BI), and data analytics solutions.
9. Key Skills for FP&A Professionals
Technical Skills:
- Proficiency in accounting, finance, and economic principles.
- Strong data analysis capabilities.
- Expertise in financial modeling.
- Competence in forecasting and budgeting.
- Knowledge of strategic financial planning.
- Familiarity with industry and economic trends.
Non-Technical Skills:
- Excellent communication abilities.
- Objectivity and impartiality.
- Assertiveness combined with approachability.
- Balanced perspective—neither overly pessimistic nor optimistic.
- Strong organizational skills and process orientation.
- Ability to manage multiple projects effectively.
- Problem-solving mindset.
- Detail-oriented yet capable of big-picture thinking.
- Analytical and creative thinking skills.