Financial planning and analysis overview

To compete and thrive in today’s business world, you must be able to pivot quickly – and develop a streamlined and resilient business strategy. Financial planning analysts and professionals are being asked to see around corners and to provide accurate, data-driven insights to help inform confident planning and decision-making across the entire enterprise.

FP&A Meaning and Definition

Financial planning and analysis (FP&A) is a set of planning, forecasting, budgeting, and analytical activities that support a company’s major business decisions and overall financial health. With a corporate FP&A software, finance teams can combine financial data, operational data, and external data (like market trends) in one place. Finance can analyse it all – and uncover the in-depth insights they need to plan for the future and guide more profitable decision-making.

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FP&A tools can help finance professionals:

  • Provide fast and accurate financial analysis and advice to business leaders
  • Predict the impact of potential decisions on cash flow and profitability
  • Assess and monitor the company’s overall financial health and investments
  • Build and maintain detailed financial models and forecasts
  • Create agile, integrated financial plans that account for multiple scenarios
  • Collaborate with departments to prepare and consolidate budgets
  • Align corporate strategy with execution and track performance
  • Identify and assess new revenue opportunities and risk
  • And much more

Financial planning and analysis is typically part of a broader financial management system – which also includes functionality for accounting, revenue and cash flow management, governance, risk, and compliance (GRC), and other core financial processes. Alternatively, FP&A can be part of a standalone analytics solution that integrates with other business systems, like ERP. Either way, FP&A has grown from basic spreadsheets and manual calculations into modern, cloud-based solutions that use artificial intelligence (AI), automation, and advanced analytics to meet the financial challenges of a rapidly changing world.

The emergence of xP&A

In 2020, Gartner launched the concept of xP&A – which stands for extended planning and analysis. xP&A takes the best of financial planning and analysis (FP&A) capabilities like forecasting, continuous planning, advanced analytics, and performance monitoring – and extends them across your entire enterprise, breaking down silos between departments and syncing plans. Cloud-based xP&A solutions connect people and unify data across core operational areas like finance, supply chain, HR, and sales. 

Basic steps in the FP&A process

The FP&A process is a continuous cycle of data collection and analysis. As businesses grow and expand into new markets, and in times of market volatility and rapid change, the process becomes more complex. More data needs to be collected and more analysis needs to be done – which is why many large and midsize companies have formed dedicated FP&A branches within their finance departments. But despite increasing complexity, at its core the FP&A process includes the same four basic steps:

  1. Data collection, consolidation, and verification
    The first step in the FP&A process involves collecting financial and operational data from ERP systems, data warehouses, and other business solutions. In addition, data from outside the enterprise – such as broader demographic, economic, and market data – may also be collected.

    Once all the necessary data is collected, it needs to be consolidated, standardised, and verified. Accurate plans, forecasts, budgets, and analysis all depend on the quality and completeness of the data they use – so this step is absolutely essential. It’s also very time-consuming, so businesses are now turning to AI-powered solutions that can automate many of these tasks.

  2. Planning and forecasting
    In this step, FP&A analysts use the prepared data to create financial forecasts that predict how the business will perform in the future and if it is headed in the right direction. Financial forecasts include sales forecasts, cash flow projections, and more. Financial forecast models are also used to test out different scenarios, simulate the impact of different variables, and determine the best course of action to drive the right outcomes.

    The most commonly used financial planning methods include:

    Predictive planning: With predictive planning, FP&A professionals create a model on large data sets of past performance. Then this time-series forecasting model is used to predict future performance. Predictive analytics supercharges planning tools, especially when it’s integrated in a single solution and augmented with AI and machine learning. As an example, Roche – a multinational healthcare company that operates worldwide – uses predictive planning to streamline and accelerate its financial forecasting process and help direct the company’s innovative drug development.

    Driver-based planning: In driver-based planning, analysts identify a company’s key business drivers (aka the things that are most important to its success) – and then create a series of plans that mathematically show how the business drivers would be affected by different variables.

    Multi-scenario planning: Scenario planning and analysis is the planning method used increasingly by businesses today. In multi-scenario planning, analysts make assumptions about what might happen in the future. They anticipate consequences and then create a plan for responding to each plausible scenario.

    These models and financial forecasts are used to create the financial and operational plans needed to achieve overarching strategic goals such as revenue and net income over the short and long-term. For example, Grupo Aço Cearense streamlined the company’s budget processes and operations and now spends their valuable time on scenario analysis that will help improve sales and margin results.

    Of course, collaboration across departments is critical for all types of planning. It ensures plans take all data, variables, and expertise into account – and it helps increase both accuracy and engagement. Collaboration brings more validity to plans – and helps build consensus around them. This is also where xP&A comes in, linking and synchronising plans across departments so the business can eliminate silos and move as one well-oiled machine.

  3. Budgeting
    In the budgeting step, FP&A professionals estimate the expenses needed to execute the corporate plan based on the revenue from the strategic plan. They then allocate an expense budget to each business unit or function – as well as the revenue and cash flow they are expected to generate. Corporate collaborates with every department and then rolls up the agreed upon budgets into one master budget.

    The corporate budget is usually created annually, and updates are made quarterly as financial conditions change. However, to better cope with volatile market conditions, many businesses have now adopted continuous budgeting cycles that are frequently updated with rolling forecasts and projections. Some organisations have also adopted zero-based budgeting, which avoids bloat and overspending by continually evaluating which expenses are necessary and which are not.

  4. Performance monitoring and analytics
    To advise the business and provide decision support, FP&A teams analyse financial data and monitor performance – including sales, expenses, profit, working capital, cash flow, and other KPIs – on an ongoing basis. They answer ad hoc queries and translate numbers into a narrative – or data story – to help decision-makers understand a situation and take considered action.

FP&A analysts also generate regular reports and data visualisations, and conduct activities like profitability analysis – which includes future profit projections and can answer questions like “Which products and services will be most profitable next year and now?” or “Should we outsource production or keep it in-house?”.


Modern FP&A solutions and technologies

FP&A was a top priority for CFOs and finance leaders in 2020, and it’s easy to see why. Automation, artificial intelligence, and the cloud are changing the game – making plans, budgets, and forecasts more accurate and financial analytics more powerful. Companies that use these technologies in their FP&A activities have a much better crystal ball than their competitors. It’s an incredible advantage. 

Cloud: Traditionally, FP&A software was deployed on premise, but cloud-based solutions offer a lot of opportunity. They can connect to more Big Data sources than their on-premise counterparts, they can be accessed from anywhere, they offer easy collaboration, and they are scalable and cost-effective. Recent advancements in cloud security have also made data more secure, in many cases, than if it were to be stored on premise.

AI and machine learning: Financial planning and analysis tools that are augmented with AI and machine learning are hugely beneficial to FP&A analysts. Not only can they help users analyse more types of Big Data from more sources, they can also uncover trends, patterns, correlations, and insights that might otherwise go unnoticed. AI and machine learning dramatically improve the accuracy of financial forecasts – and supercharge predictive analytics, self-service reporting, and multi-scenario planning. For example, while Gelsenwasser has already achieved agile, real-time planning in sales – the company plans to take their planning capabilities and benefits even further, by using the new platform for AI and predictive maintenance.

Robotic process automation: FP&A analysts typically spend a huge amount of time sourcing, aggregating, and formatting data. RPA, powered by AI and machine learning, automates many of these manual tasks – speeding up processing times and reducing errors along the way. It can also automate analysis, forecasting, predictive modelling, and report generation, freeing up team members to shift their focus to more value-added work, like interpreting results and advising the business. 


The future of FP&A

From supply chains disruptions to economic and political uncertainty, the past few years have shown us that the one thing we can be sure of is change. To face these challenges, today’s finance departments need to have access to the right information and the right data – and get it at the right time.

Modern businesses are feeling increased urgency to implement smart FP&A tools and solutions, powered by AI and advanced analytics. Real-time, data-driven insights help today’s finance and business leaders to automate and streamline their processes and make more informed decisions, and set themselves up for a future of autonomous planning.

As business gets faster and more competitive, companies need the ability to forecast with greater speed and accuracy. They must work with leaner budgets and find new and creative ways to drive profitability, resilience, and business continuity. 

Around the world, the best financial leaders are working hard to knock down barriers to technological adoption – implementing distributed data governance strategies and establishing “sufficient versions of the truth” to move into the future with confidence and strength.



As businesses become increasingly more competitive and complex, expect FP&A solutions to evolve to meet new challenges:

  • FP&A tools will seamlessly integrate with even more data sources and business systems.
  • Cloud-based platforms will become the delivery method of choice for FP&A software.
  • AI solutions will bring greater speed, accuracy, and efficiency to FP&A processes.
  • Extended planning and analysis (xP&A) will help to remove the barriers to collaboration – both inside and outside the enterprise.
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