What is Financial Planning & Analysis (FP&A)?

By Jeff Plowman, Praction Group founder

Financial Planning & Analysis (FP&A) is a set of planning, forecasting, budgeting, and analytical activities that support major business decisions and overall financial health. FP&A starts with corporate financial planning, which involves drawing up detailed plans based on specific financial objectives. This enables the controller to capture, analyze and plan all the important financial aspects of the company.

FP&A coordinates the company's financial resources in such a way that investments in performance will lead to an increase in value. It includes financial consolidation, which enables precise group reports, fast financial statements and comprehensive financial control.

How is FP&A Different from Accounting?

While FP&A and accounting are both financial functions, they have some key differences:

FP&A is concerned with laying the groundwork for future transactions, while accounting manages past business transactions.
FP&A looks towards the future, while accounting ensures the financial past is accurately recorded.
FP&A takes a proactive approach to mold reality toward favorable business outcomes, while accounting reactively captures the financial reality as is.
FP&A is more concerned with internal stakeholders, while accounting deals more with external stakeholders like investors.

In essence, FP&A and accounting complement each other - FP&A plans for the financial future while accounting manages the financial past and present.

Examples of FP&A Projects

Some common projects that FP&A teams undertake include:

3-5 Year Business Planning: Encompassing sales, marketing, operations, HR and strategic planning to facilitate long-term thinking
Rolling Forecasts: Implementing 3, 6 or 12-month rolling forecasts to navigate volatility and align the business
Researching & Implementing Business Intelligence Technology: Leveraging AI, machine learning, predictive analytics to strengthen business partnership
Developing detailed budgets and accurate forecasts to allocate financial resources strategically
Analyzing financial statements to identify cost reduction opportunities and boost revenue

Benefits of Hiring an FP&A Consultant for Small Businesses

Small businesses can gain significant advantages by engaging an FP&A consultant:

Technical Expertise: Consultants are well-versed in the latest financial tools, technologies and best practices for FP&A.
Industry Insights: Many FP&A consultants have cross-industry experience and can provide valuable benchmarks.
Objective Perspective: External consultants offer an unbiased view free from internal politics and preconceptions.
Time Savings & Efficiency: Consultants can implement FP&A processes and systems faster, allowing the business to realize benefits sooner.
Scalability & Flexibility: Engaging consultants on a project basis provides access to high-level expertise without long-term commitments.
Network of Resources: Consultants bring a vast network of industry connections that can open new doors for the business.

The Importance of FP&A for Small Businesses

Hiring an FP&A consultant is crucial for small businesses looking to make informed, data-driven decisions to drive growth, increase resiliency and lay the foundation for long-term financial success.

Effective FP&A helps small businesses navigate challenges, capitalize on emerging trends and achieve sustainable growth by improving financial performance, optimizing investments, and aligning strategy with financial goals.

As businesses grow in complexity, it becomes difficult for owners to excel in every area. FP&A consultants fill this gap by providing the specialized expertise needed to manage these complexities effectively and avoid costly mistakes.

In conclusion, FP&A is a forward-looking, proactive financial function that is distinct from, yet complementary to, accounting. By hiring an FP&A consultant, small businesses gain access to invaluable technical expertise, industry insights, and strategic guidance that can propel them to new heights. In today's competitive landscape, the specialized knowledge of an FP&A consultant is not just beneficial, but crucial for the long-term success and growth of small businesses.

Contact Praction Group to learn more about how a fractional Financial Planning & Analysis professional can help your business.