Financial Planning & Analysis | Massive Data

In current times, even a small size company generates tons of data. The data comes in all shapes and sizes as the saying goes. Financial Planning and Analysis is one of the ways to look at the data and see how it makes sense for the business.

There's two parts to Financial Planning and Analysis (aka FP&A). The Planning part is past oriented, usually referred to as Budget. The Analysis part is future oriented, on how things are moving forward, usually referred to as Forecast.

There are various sources of Financial information within the Accounting system. Payments, collections, cash, debtors, creditors and fixed assets. FP&A helps bring this all together in how this makes sense for the business.?

For example, collections increased, is that good or bad. Payables have increased, is that good or bad. Cash has increased, is that good or bad. FP&A helps analyse these trends and see what caused these and translate them into actions that result in better outcomes for the future.

With the vast amount of data generated by organizations, finding the relevant data is the place to start. FP&A is the foundation of this aspect. It helps organizations focus on what's relevant and important, rather than getting lost in meaningless irrelevant stuff.

Historically, accountants have been seen as..... Accountants only. Bean counters as some called them. One of the reasons was the level of accuracy needed and that they were expected to be meticulous. They were also expected to provide answers that were black or white. This meant that it was easy to lose sight of the bigger picture and get lost in mundane details.

This provided an opportunity to have a similar role, that stemmed from finance, could look at the numbers and then make sense for the bigger picture. For example, if any accountant tells the management that it'll take them 10 days for 90% accuracy in closing and monthly results and that if given 15 days, the accuracy would go up to 95%, then it's very obvious that the Management would be happier to get the results earlier rather than later at the marginal cost of accuracy.

FP&A is an extension of accounting in many ways. It's when the accountants speak business language. It's when the accountants are able to translate numbers to events and opportunities. So this needs far in depth knowledge of business rather than just the debit and credit side of transactions. Specially now that most of accounting systems are automated and financial information is integrated, this provides an opportunity to observe and discover trends that were otherwise not visible.