Scaling a business offers significant opportunities but also presents financial challenges. Approximately 20% of small businesses fail within their first year, and nearly 50% within five years, often due to financial mismanagement.
As companies expand, building a well-organized strategic finance team becomes important. Proper financial management ensures budgets, cash flow, and revenue are effectively balanced and clearly documented.
However, achieving and sustaining profitability requires more than accurate accounting practices. Beyond maintaining precise records of transactions and investments, finance teams must identify the best opportunities and strategies to help the company progress.
This is where Financial Planning and Analysis (FP&A) teams play an important role. Their insights provide executive leadership with the information needed to guide the company toward success.
What is Financial Planning and Analysis?
FP&A teams help the CFO, CEO, and Board of Directors make important decisions by handling budgets, forecasts, and financial analysis. They focus on managing cash flow, keeping the company profitable, and supporting growth.
Led by the CFO, FP&A professionals study economic trends, past performance, and possible challenges to predict financial results and plan for the future. They manage areas like income, expenses, taxes, investments, and financial reports. Unlike accountants, who focus on keeping records, FP&A teams analyze and guide the company’s financial direction.
FP&A Responsibilities
The FP&A team helps businesses understand their finances and plan for the future. They handle tasks like creating financial reports, budgeting, and planning for different scenarios to support better decisions.
Budgeting
FP&A teams plan budgets and forecast future financial performance. Budgeting involves deciding how to allocate funds, while forecasting uses financial models to predict revenue and profit based on business and economic trends.
Smaller businesses may forecast a few months ahead, while larger companies often plan for 1–3 years. Many organizations now use rolling forecasts to adjust plans regularly.
Profit and Loss (P&L)
The FP&A team prepares profit and loss (P&L) statements, board reports, and management reports like variance reports (comparing budgeted vs. actual spending) and cash flow statements.
This involves gathering, verifying, and consolidating data from different departments to create final reports. These reports include key financial indicators like the debt-to-equity ratio and current ratio.
Scenario Planning
FP&A professionals use scenario planning to prepare for various outcomes, such as best-case, worst-case, and expected scenarios.
Adjusting key numbers like sales or order volume determines the financial impact of different situations. This helps the company plan for capital expenses, investments, and future challenges.
Ad-Hoc Reporting
On-demand reports provide in-depth insights into specific metrics or departments, often requested by the CFO or senior executives. FP&A professionals extract data from larger reports to deliver tailored, precise information, enabling accurate and timely decisions.
Profit Margins
FP&A teams analyze financial statements to find the most profitable products or services and evaluate the cost and revenue contributions of individual departments.
They also assess how working capital is being utilized and explore new investment opportunities to improve the company’s financial position.
Examples of FP&A in Action
FP&A teams analyze data to provide insights for better decision-making. Below are examples of how they approach common financial scenarios:
Common Size Analysis
This method examines the breakdown of expenses on an income statement. For example, in Year 3, some expenses were favorable, while others were not. By identifying these differences, FP&A professionals can investigate root causes and recommend solutions.
| Category | Year 1 | Year 2 | Year 3 |
| Revenues | 100.0% | 100.0% | 100.0% |
| Cost of Goods Sold | (46.8%) | (43.5%) | (42.6%) |
| Gross Profit | 53.2% | 56.5% | 57.4% |
| Distribution Expenses | (7.2%) | (7.4%) | (6.6%) |
| Marketing and Administration | (28.9%) | (30.6%) | (33.1%) |
| Research and Development | (2.2%) | (2.2%) | (2.2%) |
| Depreciation | (3.6%) | (3.2%) | (3.1%) |
| EBIT (Operating Profit) | 11.3% | 12.9% | 12.4% |
| Interest | (1.5%) | (1.4%) | (1.3%) |
| Earnings Before Taxes | 9.8% | 11.5% | 11.0% |
| Taxes | (3.4%) | (2.8%) | (1.7%) |
| Net Income | 6.4% | 8.7% | 9.4% |
Corporate Spending Analysis
The table below highlights a company’s spending on consulting projects. It shows that 50% of the budget was allocated to KPMG, indicating heavy reliance or higher charges compared to other vendors.
| Vendor Name | Spending (USD million) | Percentage |
| KPMG | 15.4 | 50% |
| EY | 5.1 | 17% |
| ANZ Consulting | 3.1 | 10% |
| DBS Synergy Ltd | 2.4 | 8% |
| Others | 4.7 | 15% |
| Total | 30.7 | 100% |
Revenue Generation by Team
This table compares employee distribution with revenue contribution. In this example, 44% of employees work in R&D, but this team generates only 27% of total revenue, suggesting inefficiencies or overstaffing.
| Division | Number of Employees | % of Revenue Contribution |
| R&D | 130 | 27% |
| Consulting | 100 | 53% |
| Other | 65 | 20% |
FP&A teams analyze such data to uncover inefficiencies, recommend adjustments, and ensure resources are used effectively.
The Backbone of Business Success
FP&A isn’t just about numbers—it’s the backbone of a growing and successful business. Without a plan, running a business is like driving without a map. FP&A teams provide that map, helping leaders see where money is wasted, where profits are hiding, and where opportunities can grow.
They dig deep into data to find answers and help make smart decisions that keep the business moving forward. Whether planning for challenges or determining which investments will succeed, FP&A ensures firms stay on the right path.
The truth is that half of businesses fail within five years without good financial planning. If you want your business to grow and succeed, focus on FP&A. It’s not just about staying afloat—it’s about aiming higher. Start building a strong financial plan today and take control of your future.
FAQs
What is corporate FP&A?
Corporate FP&A (Financial Planning and Analysis) involves managing a company’s budgeting, forecasting, and financial reporting processes. It helps the business make informed decisions by analyzing financial data and trends.
What is the FP&A analyst job description?
An FP&A analyst is responsible for preparing financial forecasts, creating budgets, analyzing performance, and offering insights to improve decision-making. They often work with data, reports, and presentations for leadership teams.
Why FP&A?
FP&A is important because it helps businesses plan for the future, track financial performance, and identify areas for improvement. It supports decision-making by providing clear financial insights.
Which financial tool causes higher favorable results when the company is doing well?
When a company is performing well, tools like variance analysis or rolling forecasts often show higher favorable results. These tools highlight areas where performance exceeds expectations, helping businesses optimize their strategies.