Financial

Planning &
Analysis
the backbone of a
good business
strategy?
 In the ever-evolving
business environment,
organizations strive to
optimize decision-making
and foster sustainable
expansion, with Financial
Planning and Analysis
(FP&A) serving as a pivotal
driver in charting the
course forward through
comprehensive support for
decision-making
processes.
What is Financial
Planning &
Analysis?
Financial Planning & Analysis (FP&A)
functions as the strategic nexus
between finance and organizational
goals, encompassing critical activities
like financial planning, forecasting,
budgeting, ratio analysis, and
reporting, empowering decision-
makers with data-driven insights for
sustainable growth and financial
health.
 Functions
under
Financial
Planning &
Analysis
FP&A professionals, work on
combining financial, external and
organisational data to gain an
understanding of the
organisation and its business
environment. For this process,
FP&A professionals perform
numerous functions as:
1. Financial Planning
FP&A professionals develop
comprehensive financial plans
aligned with the organisation’s
strategic objectives and
mission. It involves forecasting
revenues, expenses, and cash
flow statement to facilitate
effective resource allocation.
There are two approaches to
financial planning.
Strategy-Based Planning:

FP&A professionals develop

comprehensive financial
plans aligned with the
organisation’s strategic
objectives and mission. It
involves forecasting
revenues, expenses, and
cash flow statement to
facilitate effective resource
allocation. There are two
approaches to financial
planning.

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 Mission-Based Planning:

Mission-based planning in
FP&A emphasizes aligning
financial decisions and
resource allocation with an
organization's core purpose
and values, fostering social
impact, financial sustainability,
and growth through
stakeholder collaboration and
incorporation of mission-
driven principles into financial
plans.
2. Budgeting
FP&A professionals primarily
work on the organisation’s
budgeting process. They work
on presenting a detailed
roadmap of the financial plan
by setting objectives,
strategies, measures and
targets for the departments
and the organisation. FP&A
works on building a robust
budgetary framework which
involves operating, capital and
cash budgets.

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 3. Forecasting
Accurate forecasting is essential
for informed decision-making.
FP&A analysts work on building
financial models to forecast
project performance, revenue
growth, cashflows, etc. FP&A
professionals utilise historical
data, market trends, and
predictive analytics to forecast
future financial performance and
identify potential risks and
opportunities. Forecasting helps
in running sensitivity and
scenario analyses to understand
the impact of financial decisions
on the company’s KPIs.
4. Performance
Analysis:
Monitoring and analysing
key performance indicators
(KPIs) is a core responsibility
of FP&A. By assessing actual
performance against
budgeted targets and
benchmarks, FP&A
professionals provide
operational efficiency
recommendations and
highlight improvement
areas.

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 5. Financial
Modeling
FP&A professionals develop
and maintain financial
models to simulate various
scenarios, budgeting,
forecasting, and assess the
impact of strategic initiatives
on the organisation’s
financial performance.
 6. Reporting
FP&A professionals prepare
regular financial reports
and presentations for
senior management, board
members, and other
stakeholders. These reports
provide insights into the
organisation’s financial
health and performance
trends.
Importance of
Financial
Planning &
Analysis
The importance of FP&A in
organisations is not limited to
financial decision-making.
Here are some key reasons
why FP&A is necessary:
 Strategic
Alignment
FP&A ensures that financial objectives
are closely aligned with strategic
priorities, enabling organisations to
pursue growth opportunities with
clarity and purpose.

Risk
Management
By evaluating different scenarios and
sensitivity analyses, FP&A helps
organisations identify and mitigate
financial risks, safeguarding against
unforeseen challenges.
 Resource
Optimisation
Through effective
budgeting and
forecasting, FP&A enables
organisations to optimise
resource allocation,
ensuring that capital is
allocated to initiatives
that yield the highest
return on investment.
Performance
Monitoring
FP&A provides real-time
visibility into financial
performance, allowing
organisations to track
progress towards goals,
identify performance gaps,
and take corrective action
when necessary.
Decision Support
Senior management views
FP&A as a strategic partner
that offers data-driven
insights to support
important decision-
making procedures and
promote company
performance.
Skills of a FP&A
Professional
Excel
Proficiency in Excel is indispensable
for FP&A professionals due to its
versatility and robust features,
facilitating seamless data analysis,
financial modeling, budgeting, and
reporting, thereby empowering
informed decision-making and
strategic planning through precise
forecasting, dynamic modeling, and
intuitive data visualization.
 PowerPoint
Effective communication is
central in the FP&A, and
presentation skills are essential
for conveying financial insights
to diverse stakeholders. FP&A
professionals must be experts
at translating complex financial
information into clear, concise
presentations that the
audiences understand. .
Financial
Modelling
Excel proficiency is
indispensable for FP&A
professionals who use
spreadsheets to build complex
financial models and perform
scenario analysis. From cash
flow projections to investment
valuations. Hence, mastery of
financial modelling techniques
enables FP&A professionals to
simulate various business
scenarios, assess risk
exposures, and optimise
resource allocation strategies.
 Communication
Effective communication is vital for
FP&A professionals to convey
financial insights and
recommendations to stakeholders
and the organisation. It includes the
ability to present financial
information clearly and concisely, as
well as the capacity to collaborate
with cross-functional teams and
senior management. Strong
interpersonal skills are also essential
for building relationships and
influencing decision-making
processes
Financial
Analysis
FP&A professionals conduct in-
depth financial analysis to
simplify complex data into
actionable insights. Whether
scrutinising budget variances,
conducting profitability analysis,
or evaluating investment
opportunities, FP&A professionals
leverage financial analysis
techniques to uncover trends,
identify opportunities, and
mitigate risks.
 Collaboration
Collaboration is the essence
of FP&A, as professionals work
closely with cross-functional
teams to achieve shared
financial goals. Effective
collaboration builds strong
relationships, helps
understand stakeholders’
needs, and facilitates open
dialogue.
Roles of
FP&A
Professionals
The roles of FP&A
professionals vary
depending on the size and
structure of the
organisation. A few roles
and their responsibilities
are as follows:
Financial analysts are in
charge of gathering,
examining, and
interpreting financial
data and statements to
aid decision-making.

FP&A Managers work on

the reporting, forecasting,
and budgeting
procedures to ensure
they align with financial
and strategic objectives.
Strategic Planners create
long-term plans and
evaluate how decisions on
strategy will affect the
bottom line.

Financial controllers oversee

the financial reporting
procedures and make sure
internal controls and
accounting standards are
followed.
 FP&A Tools
Finance professionals use
FP&A tools to build detailed
financial models, identify
revenue opportunities, predict
the impact of financial
decisions on profitability and
cashflows, integrate financial
strategy, etc. Here are a few
FP&A tools used by finance
professionals:
Cube
Cube is a platform for financial
planning and analysis (FP&A)
that simplifies forecasting,
reporting, and budgeting
procedures. Advanced features
including driver-based
modelling, scenario analysis,
and real-time collaboration are
available. Finance professionals
are enabled to boost
organisational performance and
make data-driven decisions
using Cube’s sophisticated
analytics capabilities and
accessible user interface.
 Workday
Adaptive Planning
Worldwide organizations leverage
Workday Adaptive Planning,
previously known as Adaptive
Insights, as a cloud-based FP&A
solution, empowering finance teams
to forecast scenarios, analyze real-
time performance metrics, and
develop dynamic financial strategies,
facilitating agility in response to
market fluctuations and enhancing
strategic decision-making with
flexible reporting capabilities and
seamless integration with other
enterprise systems.
Anaplan
Anaplan is a top cloud-based
platform for connected
planning that helps businesses
link operational and financial
planning for every aspect of
their operations. Finance
professionals may use
Anaplan to undertake intricate
scenario analyses, work in real
time with stakeholders, and
construct integrated financial
models that will help them
make smarter decisions.
 Relationship
between
FP&A and
Share Price of
a Company –
Tesla
Financial Planning and
Analysis (FP&A) functions as a
crucial management
component, shaping investor
perceptions through
transparent communication of
expected cash flow, earnings
forecasts, and strategic plans,
thereby driving investor
sentiment and ultimately
influencing the trajectory of a
company's share price by
connecting internal operations
with market perceptions.
This strategic move can be
better understood with an
example of Tesla:

Recently, the share prices of

Tesla experienced high
volatility. As the results of the
first quarters were released,
Tesla reported a drop of 9% in
its actual revenue. The
company was estimated to
record a revenue of $22.3 billion
but fell short at $21.3 billion.
Despite this revenue miss, the
share price of Tesla bulled by
more than 10%. The question
remains why?
Here we can better understand
the relationship between FP&A
and investors & market
sentiments.

Tesla plans on launching

affordable EVs in 2025, Tesla
also expects continuous
growth in the energy
generation and storage
segment. The company is
working on an AI self-driving
feature, combining the prior
two strategies, we can see a
boost in investors’ confidence
but for a short duration.
 Looking at this, the
company effectively
communicated its
prospects to influence
investors’ sentiments and
the share price swelled.
However, these tailwinds
cannot be sustained for
the long term because of
Tesla’s financial
statements and analysis.

By looking at this example we

can conclude that if the financial
results align with the investors’
expectations, a company’s share
prices rise. This explains how
powerful FP&A is for a company.
 Conclusion
Financial Planning & Analysis
(FP&A) is crucial for driving
strategic decision-making and
evaluating the financial
performance of an organisation.
By utilising data-driven insights,
advanced analytics, and
technology-enabled tools, FP&A
professionals empower
organisations to navigate
complex challenges, seize growth
opportunities, and achieve
sustainable success in today’s
competitive marketplace.
 Ashish Agarwal

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