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

There’s never been a better time to work in financial planning and analysis. What was once seen as strictly a back-office function filled with budgeting gatekeepers has increasingly become the strategic partner to the rest of the business it was always meant to be.

But FP&A is a loaded term encompassing so many skills, workflows, processes, and responsibilities.

Don’t let a decades-old definition of FP&A cloud your judgment about what this function is capable of. Here’s what FP&A means today and how it takes shape in organizations as they scale.

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

Financial planning and analysis (FP&A) is a subset of a finance function focused on forward-looking tasks such as budgeting, strategic planning, and analysis of both operational data and financial data to drive growth.

Traditionally, FP&A efforts have revolved around analysis and forecasting with a three-statement model, using insights from the balance sheet, statement of cash flows, and income statement to enable decision-making.

But while FP&A has been “forward-looking” by definition, the function has historically struggled to keep pace with business change. Consider how Bob Iger, CEO of Disney, describes the company’s FP&A function from the early 2000s (what they called “strat planning”) in his memoir:

The modern FP&A function has to be a strategic finance function instead — an agile unit acting as a true partner to each department in the business and enabling data-driven decision-making about the company’s future.

Why FP&A Is Crucial to Business Success

Despite any traditional stereotypes about the role, no modern CFO aspires to build a function of budget gatekeepers for the organization. That’s not how you unlock your strategic potential in the business.

Instead, the modern FP&A function becomes crucial to business success when it leverages its unique skills to create value for the organization and each department within it.

Here are a few ways those unique skills come to life.

Integrate and Analyze Business Data Proactively

Anyone in FP&A has an underrated position in the business at the intersection of all data. Whether it’s pipeline data in your CRM, billing data in Stripe or Chargebee, cash inflows and outflows in your ERP, or headcount data in your HRIS, you can see it all — and that’s not something anyone else in the business can say.

The FP&A team becomes crucial to business success when it effectively stitches together all that data to surface cross-functional insights and outcome-based reporting that drives strategic decisions.

Translate Qualitative Insights into Quantitative Data

Most people and departments across an organization don’t speak the same language as finance.

Whereas financial analysts think in terms of Excel spreadsheets, financial statements, and budget variances, your partners across the business speak their own languages. Marketing thinks in terms of campaigns that drive traffic, MQLs, and SQLs. Product speaks in terms of sprints, epics, and feature requirements. And sales thinks in terms of quota, ramp times, and meetings booked.

Your ability to listen to the goals and objectives of those departments and translate them into financials is crucial to business success. That translation back and forth between departmental knowledge and the numbers is the foundation for effective planning.

A Balance Short-Term and Long-Term Planning

High-growth companies move quickly, which means most departments are focusing on what’s coming up next week and next month more than they’re thinking about two quarters from now or next year. You care about short-term financial performance as well. But you also help the company maintain a healthy balance with long-term planning.

When you maintain a rolling forecast and continue projecting how today’s actions will impact the business next quarter, next year, and two years from now, you can push the rest of the company to make smarter decisions.

FP&A Process and Responsibilities Explained

The FP&A process is more like a large collection of interconnected responsibilities. While there are step-by-step guides for the different responsibilities, the FP&A function as a whole has to be ready to bounce between many different workflows on a daily basis.

These are some of the most crucial responsibilities and processes any FP&A team has to tackle.

Build Relationships with Business Partners

The biggest difference between an FP&A team perceived to be a gatekeeper and one that’s seen as a true strategic partner is the commitment to building relationships across the business.

On The Role Forward, we ask every guest what they know now that they wish they knew at the start of their career. The answer is never about the technical skills necessary for a career in finance — it’s always about the ability to interact and build relationships with partners in marketing, sales, product, people, and the executive team.

Make a point of consistently interacting with senior management so when the time comes to run a planning cycle or review budgets, you’ll be seen as a trusted partner rather than what Bob Iger called “an internal police force.”

For more about how to go about business partnering, check out our article on embracing a customer service mindset in finance.

Create and Maintain the Company’s Operating Model

If you’re the first finance hire at an earlier-stage company, there’s a good chance you’ll have to build the first operating model for the organization. And even if the company is more mature, you’ll need to step in and get a handle on the model because it’s the foundation for so many FP&A workflows.

The operating model is essentially the FP&A translation of every inner working of the business. It blends top-line revenue goals with headcount plans, expense plans, and cash flow forecasts to create the best possible representation of how the company makes and spends money. And it uses that representation to project future financial results for the next one, three, or five years.

According to Jenny Jao, Head of Finance at Sprig, the ability to build a flexible operating model is what can make FP&A a more strategic value driver in the business. Listen to her explanation of the process for building that kind of model.

Lead Consistent Planning and Budgeting Processes

Once you have an operating model in place, it’s your job to use it for monthly, quarterly, and annual planning cycles.

On a high level, that might mean making adjustments to the model on a monthly basis to maintain the rolling forecast and allocating company-wide budgets on a quarterly and annual basis.

But the nuances of the planning process are much more complicated than that. At whatever intervals make sense for your company’s needs, your planning processes will include the following. Click through to learn more about each individual process.

• Revenue forecasting
• Balance sheet forecasting
• Spend forecasting
• Headcount planning
• Scenario planning
• Budget allocation

Partner with Accounting on Financial Reporting

One of the most critical aspects of your job in FP&A is to forge a strong bond with the accounting side of your department, ensuring efficient P&L management and creating smooth handoffs for regular financial reporting.

While accounting will close the books and prepare the GAAP financial statements, your job is to customize reports for broader consumption. That may mean customizing the P&L to include non-GAAP metrics your business needs to see and adding variance analysis. It might also mean taking the financial statements and turning the data into insights necessary for a board deck (ideally with the help of financial reporting software). Click through for more information about executing FP&A’s role in financial reporting.

• Budget variance analysis
• Build your SaaS board deck
• Custom financial reporting

And check out this podcast episode with Howard Katzenberg, Founder and CEO of Glean, to learn more about creating a strong partnership between accounting and FP&A.

Conduct Ad Hoc Financial Analysis

Ad hoc financial analysis is one of the more unpredictable aspects of FP&A. On any given day, someone in the business may come to you asking for answers to some of the most complicated questions about company performance or strategy.

This is where your company-wide perspective is so valuable. Your ability to pull in data from across the entire organization powers financial analytics and helps you answer questions like:

• How do we shorten our average sales cycle?
• What changes can we make to maximize our profit margins?
• How can we improve our net revenue retention?
• What opportunities do we have to drive down marketing spend and optimize customer acquisition cost?

The more proactive FP&A analysts can be about analyzing these kinds of critical business concerns, the easier it will be to surface insights to stakeholders and gain a reputation as a strategic partner.

Common Challenges for Financial Planning & Analysis

The main challenge for financial planning and analysis is that you have to spend 80% of your time on tedious, manual tasks, leaving just 20% to be the strategic partner your company needs. With limited time to do all the tasks and workflows listed above, traditional FP&A teams struggled to elevate to a strategic seat at the table.

There’s more demand than ever for finance to be a more proactive, agile, and strategic partner. But a few core challenges stand in the way.

Your Data Is Siloed

It’s true that you have a unique vantage point for business data — but only if you can access it all. In reality, the explosion of SaaS-based point solutions has created multiple data silos across every organization. And unfortunately, some of the numbers you need live inside of tools you don’t own or even manage in some cases. These data silos leave you with an incomplete view of business information, limiting your ability to drive strategic planning and analysis.

You’re Stuck with Manual Data Entry and Reconciliation

FP&A teams have never had an easy way to make all business systems talk to each other. That’s a major issue when your entire job relies on having a holistic view of operational and financial data.

Instead of focusing your time and energy on proactive analysis or collaborating planning, you have to sink the majority of your hours into data aggregation and manual reconciliation. And even if you’ve become as efficient as possible at manual data entry, the process still leaves you susceptible to human error. One mistake in data aggregation can have ripple effects across all your planning and analysis workflows, ultimately making it difficult for partners to trust the numbers.

You Can’t Break the Cycle of Reactive Analysis

The FP&A team is supposed to be the forward-looking partner in business decision-making — the magic eight-ball for strategic questions. But with data silos and manual processes, you can’t keep pace with the demand for answers.

By the time you get all your data in order and update dashboards, the answers you generate are often stale. This reactive cycle is what hurts any FP&A team’s efforts to claim a strategic seat at the table.

Turning Traditional FP&A into Strategic Finance with Mosaic

Strategic finance is the modern version of FP&A.

It’s the philosophy and structure needed to break through the common challenges finance teams have faced and unlock:

• Unified data from all areas of the business
• Forward-looking insights based on real-time data
• Connected platforms that act as intelligent building blocks for financial models
• The ability to accelerate business decision-making
• A focus on packaging financial data in a way the whole business can understand

But the truth is that point-solution integrations and monstrous spreadsheets won’t get you there — Mosaic can.

Our Strategic Finance Platform acts as the connective tissue for all data in your organization. It integrates with critical source systems like your CRM, ERP, HRIS, and billing systems to automate the data aggregation and cleansing processes that take up so much time. The platform helps you flip the 80/20 rule on its head, giving you the ability to focus 80% of your time on strategic partnerships with your business.

Want to learn more about how Mosaic’s FP&A software can enable you to be a more strategic finance leader? Get a personalized demo of the platform.