- P&L: The FP&A team is responsible for putting together profit and loss (P&L) statements, board reports and management reports such as variance reports, which track budget vs. actual spend by department, and statements of cash flow. Finalizing these statements requires collecting data from different departments (thus the business partnering skills) and then verifying and consolidating that information. The FP&A team uses that to calculate key financial indicators that will appear in these statements—like debt-to-equity ratio and current ratio.
- Profit Margins: FP&A professionals often dig into financial statements to understand which product lines or services have the highest profit margin or contribute the most to net profit. Similarly, they may break down the cost and revenue or profit generated by each department within the company. Another common duty of FP&A team members is assessing a business’s investments with its working capital and finding new investment opportunities.
- Budgeting: More forward-looking responsibilities of FP&A include planning the budget and forecasting the company’s future financial performance. Budgeting requires parsing through financial reports to determine how to allocate money. Forecasting requires creating financial models that account for trends within the business and in the broader industry and economy that may affect revenue and profit.
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- Analyze financial data and use financial models for forecasting.
- Track revenue and gross margin by business unit and expenses by cost center.
- Prepare reports on financial performance tailored to the needs of leadership.
- Evaluate financial performance by comparing and analyzing actual results with plans and forecasts.
- Study and analyze trends and forecasts to inform recommended actions.
- Establish policies and procedures that guide cost analyses.
- Work closely with the leadership team to formulate short- to long-term financial and strategic plans.
- Analyze financial and operational results to better understand the company’s overall financial health.
- Evaluate previous budgets and collaborate with business unit leaders to build their annual budgets and forecasts.
- Produce models to project long-term growth, accounting for factors that will impact performance.
- Provide detailed analysis and commentary on the performance of a product or department.
- Communicate results and recommendations to senior management that will lead to revenue generation, cost reduction and more efficient operations.
- Own the process for preparing financial statements and financial models, including scenario planning.
- Define processes for monthly, quarterly and annual financial budgeting, forecasting and long-range planning.
- Drive and improve existing management reporting to be more accurate and timely.
- Analyze financial results to determine key takeaways and recommendations for senior management.
- Lead ad hoc financial modeling and reporting for special projects.
- Partner with IT and the broader organization to improve forecasting through automation and system optimization.
ORDERNOW3: Establish proximity to the overall business Although FP&A functions can be structured differently, it’s important for Finance teams to operate as a true advisor to the business. Strategic planning and forecasting require agile working styles across teams. First, Finance needs to establish a greater partnership and receptive buy-in from senior management, and then develop an organizational structure where business CFOs and forecast analysts have enough proximity to the business. Building this acceptance and strong linkage can be beneficial for organizations, helping them to enhance communication and decision making and further drive profitability. Results: To help our Finance clients improve organizational infrastructure and Finance’s proximity to the business, it is important to develop a common view of how the FP&A function should operate and support the business. We have worked with numerous organizations on the operating model aspects of FP&A, either alongside a broader Finance transformation or independently as an operating model/organizational design project. In either situation, the result is establishing a model that has Finance positioned to better support the business in the decision making they need, while internally structuring operations to be more efficient. Achieving more dynamic insight through financial planning and analysis allows Finance to have a greater impact and improve business results. FP&A teams can focus on challenging the forecasts and ultimately developing better plans with richer ‘what if’ capabilities and a clearer view into the drivers of revenue and expenses. Improvements in FP&A should focus on developing processes, infrastructure, systems and teams that are: (1) Technically seamless to meet rapidly changing market demands; (2) Agile and drive better decision making when underlying conditions change; (3) Strategic with improved driver- based monitoring and business proximity; and (4) Well-integrated within the business so that insights are delivered in a timely manner and well-structured for the business to utilize them. Role of Strategic Financial Planning and Analysis Essay Paper
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