FP&A is critical to the success of all organizations. It involves analyzing finances to determine fiscal health and inform strategic decision-making. Beyond pure accounting, FP&A encompasses reviewing financial statements to inform budgeting and forecasting processes. It relies heavily on data, both internal (income, expenses, capital expenditures, and taxes) and external (economic trends).
Some of the top roles of FP&A teams include assessing a company’s financial health using fundamental ratios like debt-to-equity and assets-to-liabilities. The teams’ other functions involve determining the best way to deploy excess working capital by calculating the returns of various investments, exploring the cost efficiency of business departments by comparing input and output, and identifying the products or services with the biggest impact on net profit.
FP&A teams also analyze current financial statements to compare them with historical ones, while applying qualitative considerations like market changes to forecast financial needs. The teams continuously update these forecasting models to ensure executives allocate resources when and where they are needed.
