Financial Planning and Analysis

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

Financial planning and analysis (FP&A) is the process of budgeting, analyzing and forecasting the financial data which can help the organization to be aligned to its financial goals and also to support strategic business decisions of the company, it also helps an investor to know if the company is stable and profitable enough for the investment.

Explanation

Financial Planning and Analysis

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Purposes

Importance of FP&A

Financial Analysis and Planning vs. Business Analysis and Planning

There are factors that differentiate these two ideologies, let us discuss them further in our article:

  • In this, finance-related arrangements are centred around planning and determining inside a financial year, with a concentration on meeting the quarterly or YoY target. Other functional teams intend to reduce expenses as opposed to foresee up and coming business issues. The analysis is fundamentally centred around recorded revealing, and standard reports joined with worthless models. Reports and data are regularly obsolete and not adjusted to key business drivers. Whereas, in business analysis approach includes exercises from capacities that are critical to pushing the business ahead – for example, marketing, sales, and operational management – all lined up with the organization’s key vision. As opposed to focusing on only budgetary or financial valuation, the organization coordinates key useful regions that straightforwardly impact business results.
  • While evaluating the financial numbers, it reflects the financial picture of any company. However, some executives feel that the reality of new and changing business trends are not included in these numbers. This puts out a whole picture for making any management decision for the company. Basically, it is based on available data, and Business analysis helps the management to know the vibe in the market about any particular business.
  • Some corporates are also of the opinion to change the FP&A to Business planning and analysis due to the wide horizon it covers for analysis, numbers from Financial analysis might help any company to make a decision, but it might be from a short term perspective while business analysis will create a more realistic report based on the ongoing trends in the economy.

Conclusion

FP&A forms an integral part of any firm’s operations; this kind of analysis and forecasting helps the business to know the historical trends and can also anticipate the upcoming trends. Having said that, this is a pure number-driven process where business analysis also provides some qualitative output for the management, depending on the need and requirement, the company can decide which type of analysis needs to be considered.

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