What does an FP&A team actually do?

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

Financial Planning and Analysis (FP&A) teams play a crucial role in companies by performing budgeting, forecasting, management reporting and analysis that support major corporate decisions of the CFO, CEO, and the Board of Directors.

What do FP&A teams do?

The key role is to help the executive team and board of directors make informed decisions.

“FP&A team collects, prepares, and analyses financial data from across the organization to create reports that provide data-driven answers to business questions. The FP&A function is becoming increasingly forward-looking. It focuses not only on what has happened or what's happening now but also on why it is happening and what is likely to happen in the future”        

FP&A can be thought of as a function involving three basic processes and one mindset of Finance Business Partnering:

1. Budgeting: FP&A teams work with different departments in the company to prepare budgets. Once they collect all the information next, they work on consolidating them into one overall company budget.

2. Forecasting: This involves creating, updating, and maintaining financial models and detailed forecasts of the company’s future operations. This can be done in a spreadsheet software like Microsoft Excel or a sophisticated budgeting tool.

3. Management Reporting: This involves preparing and analyzing internal reports for senior management to support their decision-making.

FP&A professionals analyze financial data, identify patterns and trends in their companies' financial processes. They are also responsible for recommending strategies to improve the companies' financial and operational success.

The role of an FP&A is multifaceted, but again the ultimate purpose is helping the organization to make better financial decisions.

How does FP&A Team fit in the Finance function?

Let's break down the organization structure:

·????????The CFO reports to the CEO

·????????The VP / director of FP&A and Controller both report to the CFO.

FP&A sits in the CFO function. The CFO is the steward of the company’s capital.

·????????Controller’s job is to ensure proper accounting and controls and

·????????Treasury’s job is to efficiently move that capital

·????????FP&A’s job is to think about where the next dollar of capital is to be deployed.

The CFO is the financial mastermind of the company. He or she oversees all the major projects, expansions, reorganizations, fundraising and other strategic initiatives. It’s important for the CFO to have the financial acumen to manage both the Controller and FP&A functions.

Traditionally, the chief financial officer (CFO) is responsible for tracking the company’s past and present financial situation and ensuring on-time and accurate financial reporting.?

Today, the CFO is expected to inform strategic decisions that drive the success of the company. This function is called financial planning and analysis (FP&A). Depending on the size of the company, the FP&A function can look very different.

The Controller is responsible for accounting and financial reporting. It is responsible for generating the three main financial statements (The Income statement, the Balance sheet, and the Cash flow statement) and ensuring these statements comply with generally accepted accounting principles (GAAP – For example US GAAP, IFRS or Ind AS) and other regulatory requirements (For example the company law, laws relating to stock markets etc.)

The Treasury’s role is to manage the working capital and have a clear sense of the short-term cash position. It should be able to forecast future cashflows with a high level of accuracy and confidence.

FP&A is responsible for strategic planning, decision support, and financial modelling. The FP&A function helps all groups within the company make better decisions by taking historical data, forecasting future performance, and running scenario and sensitivity analyses.

“CFO is the steward of company capital and separates that responsibility among various roles. Accounting records how money was spent and reports externally to shareholders, while FP&A is concerned with how the next dollar will be spent”        

Why does a company need FP&A Department?

FP&A Teams act as a bridge between the Business teams and the leadership team by collecting information from various business teams, analyzing that information, and presenting it to the senior management to help then make business decisions.

On the left side we see the Business Teams like Sales, Marketing, Product, Operations, Supply chain etc. While on the right-hand side we have senior management or leadership.

The FP&A team is a bridge between the two in coordinating inputs from business teams and presenting the analysis, recommendations, or outcomes to the management.

Do you want to get notified whenever I post on LinkedIn??Then?go to my profile?and click the small bell icon ?? below the front page banner on the right-hand side.

This is the channel?"FP&A Professionals". Click "Subscribe" to receive a notification and an e-mail when I publish new articles on this channel every Saturday (sometimes Sundays!).