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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 but it also requires lots of business insights so that the top management can formulate an effective strategy.

 

FP&A Role

 

Typically, the FP&A role requires lots of data consolidation and variance analysis – the ability to think into the future and weigh several possible scenarios, and then combine all that theoretical information with tangible reports on key metrics. They are not only in charge of the Profit & Loss Statement but are also responsible for forecasting net income, or the company’s bottom line. Most importantly, it can be said that the FP&A function picks up where accounting leaves off.

The FP&A function links the strategy to a long-range plan and annual operating and capital budgets. It provides multiyear financial modeling and annual target-setting processes. It employs the process of interpreting the strategic targets into the company’s budgets. Also, it leads and oversees the financial management function to ensure delivery of annual budget results and strengthen cash flow predictability.

 

Roles & Responsibilities in FP&A

  • Analyze current and past trends of key performance indicators, including all areas of revenue, cost of sales, expenses and capital expenditures
  • Monitor performance indicators, highlighting trends and analyzing causes of unexpected variance
  • Oversee and manage the continued development of budgeting, financial forecasting, operating plan and modeling tools
  • Ad-hoc business performance reporting
  • Present the monthly and quarterly financial reports of various units
  • Implement a business intelligence tool and dashboard reports
  • Develop financial models and analyze them to support strategic initiatives
  • Support senior management team and departments heads with in-depth analysis
  • Prepare presentations to board of directors and senior management team

 

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 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 Consulting 3.110%
4DBS Synergy Ltd2.48%
5Others4.715%
TOTAL 30.7100%

 

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 pretty higher compared to other firms that the management would like to know.

 

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 on roles and responsibilities in FP&A. 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:

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