Please or Register to create posts and topics.

What is FP&A? The Complete Guide to Financial Planning and Analysis

Years ago, accountants were jacks-of-all-trades responsible for everything from historical financial data analysis to compliance to forecasting. But just as specialized tools have made finance teams more nimble, their roles have become more specialized. Projecting future performance and monitoring historical results is now too important to weigh on one team or person. Thus, the financial planning and analysis (FP&A) function was born.

Forming a team of FP&A-specific experts is increasingly becoming table stakes for forward-looking companies, especially considering the risks of underperformance or missing a forecast. As a result, FP&A is the thirteenth fastest growing role in the U.S. Yet, the job is not without its challenges, and many FP&A-adjacent employees still struggle to navigate the waters of financial forecasting.

We’ve developed this guide to help accountants, executives, and anyone new to FP&A understand:

  • The purpose of financial planning and analysis
  • The difference between FP&A and similar roles
  • Why FP&A is absolutely critical in an increasingly competitive landscape
  • The technology required to generate the most accurate, profit-advancing financial forecasts

guide to financial planning and analysis

  • Data consolidation and analysis
  • Business planning and financial forecasting
  • Profit and loss statement analysis
  • Financial modeling

FP&A teams

FP&A teams live at the intersection of performance and potential, monitoring their relationship with one another. They ask questions like “What will X do to our revenue?” or “How will executing Y improve profitability?”

Companies, after all, are assets. It’s the CEO’s job to increase the value of this asset by examining new markets, driving revenue, or cutting costs. Their go-to group to get these answers? FP&A.

In this way, FP&A professionals are more like advisors or allies than those in other financial reporting functions. That’s why it’s crucial to keep information in constant flow between any and all relevant stakeholders.

FP&A is part of a larger ecosystem of corporate finance that can include accounting, treasury, financial reporting, tax, and governance, risk, and compliance. It is most often compared to accounting considering accountants were some of the first FP&A pioneers—yet they operate using two distinct lenses.

While accountants focus on past results, FP&A looks toward the future.

Accounting and financial reporting professionals’ strengths lie in data analysis, compliance, and gap analysis. They use data to generate financial statements and compliance disclosures on a monthly, quarterly, or annual basis. FP&A applies the same data to the future. They use the information accountants create to predict future performance, such as how cash flow will change or whether current pricing structures will produce the desired revenue.

Despite the distinct roles, accounting and FP&A should never operate in silos. That’s because financial reporting is too important to be left to guesstimates. To make the most accurate, well-informed decisions, FP&A must have all pertinent data—from new product releases to changes in accounting standards—at their fingertips. This requires an ironclad partnership between accountants and FP&A professionals to minimize surprises and manage risk. For the best companies out there, the relationship between accounting and FP&A could not be more important.

1. Acquire baseline information.

Accurate FP&A requires data from every relevant source—from internal data like ERP transactions and accounting reports to external considerations like market fluctuations and economic stability. Gathering this data can be very time-consuming, however, making cross-departmental relationships and automated technology even more important.

2. Make calculated assumptions.

After consolidating the necessary data, FP&A must assess it, making assumptions about how performance and outcomes will change based on company goals like revenue growth or reducing expenses. But educated guesses aren’t enough when it comes to the financial future. FP&A teams typically rely on financial models to turn (sometimes) qualitative data into mathematical representations for objective analysis. The financial model used often depends on what is being predicted.

Learn more: Discover models for every situation, from advanced financial reporting to uncertain economic times.

3. Forecast budget and performance.

Financial modeling then allows FP&A analysts to build a forecast that includes revenue and cash flow projections, expenses, and more. From there, executives and company leaders can use the projections to create financial and operational plans for achieving set goals and outcomes.

As accounting closes the books every month or quarter, FP&A has new data to update the forecast. For public companies in the U.S., this process is even more rigorous, as it requires an earnings release, a 10-Q SEC filing, and other legal reporting. Annual forecasts also include budget recommendations, which become the North Star for all departments and company operations throughout the year.

Try it: Check out 9 steps to simplify your FP&A process to learn how greater efficiency affected one global conglomerate’s corporate FP&A team.

While all financial professionals must have a knack for analysis and making inferences from available data, FP&A leaders excel at:

Business acumen

FP&A professionals must be able to take the data they gather and not only analyze it but also draw conclusions from it. They must be able to translate their assessments into operational recommendations that will drive results. This is typically a key differentiator between FP&A and accounting, as accountants excel in analyzing historical financial data rather than proposing changes in direction.

Company familiarity and relationship-building

FP&A’s success is often based on how much people are willing to share with them. If they don’t have strong relationships with key company stakeholders—spanning everyone from executives to sales and HR leaders—they will likely be less privy to organizational changes as they occur. People with strong personnel skills are more likely to remain in the “circle of trust” and hear important updates from across the business as they occur.

Corporate strategy and accounting (Bonus!)

Possessing corporate strategy and accounting skills helps FP&A think more like their cross-functional counterparts to work more seamlessly and gather the data they need. Good at asset valuation and understanding accounting disclosures? Even better. An FP&A leader with a well-rounded business and financial education will have the context to make better recommendations for the company’s future.

With tremendous advancements in AI over the past five years and emerging best practices like extended planning and analysis (XP&A), the FP&A sector may still be in its infancy. At its most basic use, FP&A can apply AI to financial modeling to make simple updates each week or month. But generative AI, or the ability to create completely new data and content using generative models and machine learning, could be used to make more accurate predictions and recommendations for business growth. AI could help fill in the gaps and connect the dots between data points that humans may not see.

XP&A takes traditional FP&A a step further by incorporating metrics that don’t appear on financial statements. This may include operational readiness, customer satisfaction, employee engagement, churn, and acquisition—metrics that greatly affect future business performance but don’t always have a quantitative measure.

FP&A software is crucial for streamlining and automating much of the data the team must assess. In a corporate setting, this typically comes from an ERP system, which manages day-to-day business and transactional activities across accounting, procurement, project management, risk management and compliance, and supply chain.

Other tools, like Anaplan and Planful, are purpose-built for FP&A functions and designed to help drive more impactful business decisions using financial reporting data. Often, these tools are integrated with an ERP to ensure real-time accuracy across the business.

The problem? Not every employee—particularly CEOs and other execs—has access to these systems or knows how to use them. Yet, sharing the full context of the data with key stakeholders, leaders, and board members is absolutely critical to ensure accuracy, reduce risk, and optimize future outcomes.

FP&A software from Workiva

That’s where Workiva comes in. Workiva makes FP&A data and reports more useful and actionable for everyone involved. Manually assembling disconnected spreadsheets and slide decks is cumbersome (and frankly, quite risky). Workiva helps teams connect more data directly to charts, graphs, tables, and text across all working files, including documents, spreadsheets, and presentations—and automatically update that information in real-time with the push of a button. Teams gain a single source of trusted data, more time to analyze it (instead of simply collecting and updating it), and the ability to efficiently deliver a picture of the health of the business to the board and stakeholders that they can stand behind every time.

Consider too that there may be other, non-FP&A data that’s important to share with leadership teams like compliance disclosures or ESG strategy. Rather than compiling this information manually, a platform like Workiva can automate it and let approved users review it all, collaborate, and share it in one place. After all, if FP&A teams spend the majority of their time manually compiling reports, how much time do they have for true analysis?

Regardless of new technology or tactics, companies must adopt a forward-looking mindset that prioritizes the constant flow of information to FP&A teams for analysis of business impact. When FP&A teams are known and included in conversations and reporting across the company, forecasting is more accurate and beneficial to the entire enterprise.

Try Workiva yourself! Request a demo to see how Workiva connects FP&A with stakeholders across the business for increased productivity.