Close the Skill Gap -> Enroll to be a Certified Financial Modeling & Valuation Analyst (FMVA)® Today!

FP&A Role

The roles and responsibilities in financial planning & analysis

What is the FP&A Role in a Company?

The Financial Planning & Analysis (FP&A) role is gaining greater importance today as it helps bring out crucial analysis on business performance. The FP&A role is no longer limited to management reporting – it also requires lots of business insight so that the top management can formulate an effective strategy.

FP&A has a critical role in business success, and qualified candidates are in an increasing demand for the area. Knowledge of Finance, Accounting, and Strategy are crucial for those who work in this department.

 

FP&A Role

 

Typically, the FP&A role requires extensive data reconciliation & consolidation as well as variance analysis. Additionally, coupling the use of scenario and sensitivity analysis to forecast possible outcomes, and use this theoretical information to create key metrics for monitoring. They are not only in charge of the Income Statment but are also responsible for forecasting the company’s bottom line (net income). Most importantly, it can be said that FP&A continues on the work produced by Accounting.

FP&A main function is to transform the overarching company strategy, into a long-range plan with annual operating and capital budgets. With the use of financial modeling, it forecasts operating and profitability performance and sets annual targets for Key Performance Indicators. By providing an annual budget, it provides management a clear picture of future performance while giving employees a direction to work towards.

 

To learn the required skills for Financial Planning and Analysis check out CFI’s FP&A Courses

 

FP&A Role & Responsibilities

 

  • Analyze the trends of Key Performance Indicators (KPI), especially relating to financial metrics such as sales, expenditures, and profit margin.
  • Monitor KPI, and identify the cause of any unexpected variances
  • Develop and continually improve budgeting, financial projections, and operating forecast
  • Ad-hoc business performance reporting
  • Present the monthly and quarterly financial reports of various units and departments
  • Implement a business intelligence tool and dashboard reports
  • Develop financial models and analyze them to support strategic initiatives
  • Support management team and the Heads of Department with data-driven analysis

 

 

Examples of FP&A

Below are some examples to give a better understanding of how to analyze data and derive business insights:

 

Example 1

 

FP&A Role - Example 1

 

Analysis

The above graph shows the annual spending on logistics for FY16 and FY17. It shows that the spending on logistics increased by 25% annually in FY17 (assuming that sales increased only by 12%). It indicates that there is a possible misuse of logistics and a cost control mechanism must be implemented to control the cost.

 

Example 2

 

 Vendor NameSpending (USD million)Percentage
1KPMG15.450%
2EY5.117%
3ANZ Consulting3.110%
4DBS Synergy Ltd2.48%
5Others4.715%
TOTAL30.7100%

 

Analysis

The above table shows the company’s spending on several consulting projects during the year. From the information provided, KPMG got 50% of the company’s business, which highlights the fact that it is highly dependent on KPMG or KPMG’s charges are significantly higher compared to other firms.

 

Example 3

 

FP&A Role - Example 3

 

Analysis

The above graph shows the employee profile in a technology company. Here, the maximum number of employees can be found in the R&D division, which is around 44% of the company’s workforce. However, if you look at the revenue from the R&D division (right graph), it shows that it contributes only 27% of overall revenue. Further analysis needs to be done to find out the reasons for the discrepancy. One of the reasons can be that the R&D is overstaffed or they are not able to generate enough revenue for the company.

 

Additional Resources

Thank you for reading CFI’s guide to the FP&A role. For more learning, CFI offers a wide range of courses on financial analysis, accounting, and financial modeling. To keep learning and advancing your career, the following resources will be helpful:

  • Analysis of Financial Statements
  • Five Highest Paying Jobs in the Financial Industry
  • Guide to Becoming a Financial Analyst
  • Top Finance Certifications

FMVA certification program

Advance your career in investment banking, private equity, FP&A, treasury, corporate development and other areas of corporate finance.

Get certified as a financial analyst with CFI’s FMVA™ Program.