Cherry Bekaert offers corporate and strategic finance services to companies seeking support with financial planning and analysis (FP&A), financial operations and strategy, and data analytics.
These services focus on such areas as financial and operating model development, cash management, budgeting, forecasting and operating expense benchmarking, all of which can deliver significant advantages.
Read on to learn more about FP&A, what it entails and how these functions can benefit your business in both the short and long term.
What Does FP&A Mean?
The abbreviation FP&A refers to financial planning and analysis, a core function within finance that supports strategic decision-making by combining forward-looking planning with data-driven analysis.
Financial planning involves creating a roadmap to achieve your business’s financial goals. This includes:
- Assessing current financial position
- Identifying potential financial, operational and risk-related barriers
- Setting business goals
- Developing a strategic plan to reach goals
Financial analysis is the process of evaluating financial data to make informed decisions and monitor performance. It typically includes:
- Ratio Analysis: Evaluating profitability, liquidity and efficiency metrics
- Trend Analysis: Identifying patterns over time in financial performance
- Comparative Analysis: Benchmarking against budgets, forecasts or peers
- Cash Flow Analysis: Understanding the inflows and outflows of cash
Together, these elements help organizations align financial resources with strategic priorities.
Key Components of Financial Planning and Analysis
Good corporate FP&A begins with goal setting. The other key components of financial planning and analysis also include:
- Goal Setting: This involves setting specific financial targets that align with the company's overall strategic objectives. These goals should be measurable, achievable and time bound.
- Budgeting: Budgets are a month-to-month plan for the next fiscal year. Creating an effective budget for a company requires strong goal setting, accurate forecasting, strategic planning and efficient cash management.
- Forecasting: Financial forecasting is the process of predicting future financial outcomes based on historical data and current trends. It is used to estimate future revenues, expenses and profits. You can think of forecasts as fiscal year updates to the budget based on actual year-to-date activity, typically updated on a monthly or quarterly basis by the FP&A team.
- Cash Management: Cash management is the process of controlling company costs while optimizing revenue sources to create a strong cash flow.
- Capital Planning: Capital plans typically have a three- to five-year outlook, consider the long-term direction of the company and financing needs.
- Key Performance Indicator (KPI) Monitoring: KPI monitoring is the tracking of business metrics to help review the organization’s performance. This allows you to evaluate the success of your FP&A efforts.
- Risk Management: Managing different types of risk is vital for any company. This can include third-party risks, financial risks or operational risks. By planning preventative actions, businesses can prepare for possible disruptions and setbacks.
- Financial Modeling: Financial modeling is the process of creating a mathematical representation of a company's financial situation. It is used to simulate different scenarios and predict the impact of potential decisions on the company's financial performance.
- Variance Analysis: Variance analysis is the process of comparing actual financial results to the budgeted or expected results. It is used to identify areas where actual performance differs from expected performance and to determine the reasons for the variance.
What Are the Benefits of FP&A?
FP&A helps organizations achieve their financial goals by providing a structured path towards your strategic objectives. It supports more effective financial management, reduces financial uncertainty and enhances long-term financial stability.
Most importantly, FP&A enables businesses to be proactive, rather than reactive, when navigating key inflection points, allowing for more informed and timely decision-making.
Can You Explain the Differences Between FP&A and Accounting?
While both accounting and FP&A are essential finance functions, they serve different purposes.
Accounting focuses on recording and reporting historical financial data. Accountants are responsible for tasks such as booking journal entries, performing reconciliations and preparing financial statements.
FP&A focuses on analyzing current trends and forecasting future performance. Professionals in FP&A prepare budgets and forecasts, conduct variance analyses, and support strategic decision-making through management and board presentations.
In short, accounting looks to the past and present, while FP&A is more forward-looking.
How Much Does FP&A Cost?
The cost of FP&A services can vary depending on several factors, including the size and maturity of your organization, whether you have the capacity for an in-house team, the complexity of your existing processes and tools and your specific business needs.
FP&A can be delivered through a fully outsourced model or a co-sourced approach. In a co-sourced model, experienced professionals work alongside your internal FP&A team and can scale their involvement up or down based on your evolving requirements, offering both flexibility and cost efficiency.
Financial Planning & Analysis Frequently Asked Questions
Financial forecasting can help companies to plan for future growth, identify potential financial problems and make informed decisions about investments and strategic initiatives.
Depending on the unique needs of your company, there are common financial modeling techniques to help better analyze, predict and plan for future objectives. These techniques include:
- Discounted Cash Flow Analysis
- Scenario Analysis
- Sensitivity Analysis
- Historical Financial Statements Analysis
- Seasonal Analysis (looking at cash Inflows with historical data, new customer projections)
- Gross or Net Burn Rate Analysis
- Cost-Benefit Analysis
- Return On Investment (ROI) Analysis
- Off-Shore and Near-Shore Analysis
Variance analysis can help companies identify areas where they are over or underperforming and to take corrective action. It can also help companies improve their budgeting and forecasting processes.
Data analytics plays a crucial role in financial analysis. From time-saving automation techniques to identifying trends in key performance indicators, skilled analysts can streamline processes and reporting to enable more strategic reporting and decision-making.
Co-sourcing the FP&A function by having a trusted advisor and advocate working alongside your accounting and finance organization is valuable. FP&A requires accurate and reliable data to make informed decisions. Poor data quality can lead to inaccurate forecasts, incorrect budgeting and flawed analysis. A well-executed FP&A plan should align with the company's overall strategic objectives. If there is a disconnect between FP&A and the company's strategy, financial planning decisions may not support the company's goals.
How Cherry Bekaert Helps Guide You Forward
Cherry Bekaert’s CFO Advisory practice offers a comprehensive suite of corporate and strategic finance services, from financial planning and analysis to data analytics and variance analysis. Our team of professionals can help you achieve your financial goals and identify potential growth areas. With scalable pricing and the ability to outsource or co-source services, we offer flexibility and affordability for businesses of any size.
Through our collaboration, you can trust that your financial analysis will be accurate and aligned with your company's overall strategic objectives. Contact us today to learn more about how we can help you meet your business goals.
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