What Is Financial Planning & Analysis Role?
Working in multiple companies and roles (eg. finance, accounting, budget controller, and financial planning) gives you broader knowledge as a finance person to support business growing. The amount of accumulated experiences help you to translate any financial metrics to various business unit that are usually so technical (for them).
Quoted from Geetanjali Tandon, a SVP of Financial Planning & Analysis (FP&A) at Ceridian, “A weekly commentary on some of the latest news is an example of where FP&A teams are part of the strategic business decision making” (paraphrased). This statement is one way of how to describe the important role of FP&A is.
Right away, I summarize the role into having only some responsibilities and evolving around them. They are:
Constructing financial budget
It’s very often, this role build a not only financial budget, but also helping a lot business unit in preparing operational budget. The main skill required in this area is financial modelling and financial analysis. It is required to prepare not only incorporating operational KPI, as a source of operational budget or target, but also consolidating it to the financial report such as profit and loss, balance sheet, and cash flow.
Monitoring budget utilization and budget target
It means this role overseeing the actual spending of allocated budget and doing variance analysis. Variance analysis mostly covers actual spending versus allocated budget (both month to date and year to date) and actual spending versus previous year in the same period.
Monitoring budget means also reviewing or checking any spending transactions booking is correct. This role makes sure the cost center, general ledger account, tax calculation, amount of transaction are correct.
Doing analysis to support business, either increasing revenue or optimizing operational expense
Many kinds of financial operation analysis need to be done to keep the business running and growing. They are break even analysis, head count movement analysis, cost per head count, profit and loss analysis in opening new centralized warehouse, receivable aging analysis, working capital requirement, onboarding new vendor profit and loss, cost saving initiatives, etc.
Another level of analysis is revenue analysis with its own revenue driver. In here, fluctuation analysis is required. Last but not least, competitor and market analysis are usually being added in order to compare both revenue and profit and loss performance.
Constructing forecast
It might be almost same with budget construction but in shorter period and more “accurate” numbers. It is usually started in Quarter 2 (Q2) of running fiscal year and constructed by including actual achievement or spending of Quarter 1 (Q1). In this scenario, the full fiscal year consists of Q1 of actual numbers and Q2 until Q4 of a forecast figures.
Improving the finance process
This activity can be making a dashboard report for management or periodic analysis, making more streamlined receivable collection, automation project in either tax reporting or real time reporting dashboard, making standard operational procedure (SOP) and its implementation.
Reference:
An article based on personal and professional experience
https://www.linkedin.com/pulse/financial-planning-analysis-fpa-news-matters-week-july-tandon-3e/
