Jun 01, 2021What is FP&A? Roles and Responsibilities
FP&A is one of the business world's favorite new buzz topics. But what is it? Why is it useful? In this article, we'll dive into what FP&A teams are and why you might want one.
What is FP&A?
Financial planning and analysis is a group within a company that provides senior management with a forecast of a company’s profit and loss for the upcoming quarter and year. The team assists in planning, budgeting, forecasting, and modeling. By definition, the FP&A team is future-focused. Their work enables management to make strategic decisions and communicate with external stakeholders.
Growing a company without an FP&A team, or at least an individual who fills that role, is near impossible. Many companies rely on their accountant for in-depth forecasts and evaluation, but accountants are primarily responsible for record keeping. Unlike accountants, financial analysts are in charge of examining, analyzing, and evaluating the financial activities of a business, allowing them to supply timely information for decision makers. Although you may be able to get away with an accountant playing the role of a financial and planning analyst, it shouldn’t be a long term move.
The FP&A professional is in a unique position to be able to act as a liaison between operations and corporate. Since the team understands the future success of the company, they can report to management with confidence, but also guide the operations team to know how to proceed forward. Here's what the day-to-day would look like for this type of position:
- Maintain an in-depth knowledge of historical company performance
- Understand key assumptions that may impact future profitability
- Monitor market trends and assess their impact on the business
- Determine which of the company’s products are contributing to the largest portion of net profit
- Identify products that have low profit margins
- Work with individual teams to product budgets and consolidate them into a comprehensive company budget
- Prepare internal reports for leadership teams
- Create, update, and maintain financial models and forecasts for company operations
- Evaluate discrepancies between past budgets and actual spending and suggest areas of improvement
- Consider areas for the company to expand and grow, including capital expenditures and investments
What to look for when hiring
When hiring an FP&A team or individual, there are a few key characteristics to keep an eye out for. Good analysts are capable of handling a mountain of different types of data and data analysis platforms.
They are also excellent problem solvers. They can take an obscure problem and use data to piece together the important metrics to create a useful solution. Without an analytical brain, an FP&A analyst is just a number cruncher and may lack the ability to create real change in the organization.
Should I invest in an FP&A team?
If one of your next goals is to advance your budgeting and planning within your business, an FP&A team may be the right choice for you. By having increased insight into the trajectory of your business, you’ll be better able to make decisions and create the future with reliable data.
If you’re not quite ready to invest in a full-blown team, consider partnering with Nimbl. We meet you where you’re at and offer planning services at any stage of your growing business.