Over the past few decades, financial planning and analysis (FP&A) has been a crucial part of business strategy, but because of the acceleration of technology and a widespread emphasis on data capture, the function’s importance has grown at a greater pace than many anticipated.
It’s difficult to remember a time when accounting was depicted as merely crunching numbers and balancing books. In today’s climate, it's about strategic foresight, predictive analytics, and driving organisational growth.
FP&A plays a central role in business transformation, empowering businesses to navigate uncertainties and capitalise on opportunities. Going forward, it’s hard to imagine a world where FP&A isn’t integral to company strategy, and the data it generates not becoming one of the key drivers of business growth.
With increased demand for insights, chief financial officers and other senior leaders in the finance space are expected to prioritise long-term value, meaning that FP&A has to do much more than solely measure financial performance.
What is FP&A?
In its simplest form, FP&A is a strategic finance function that encompasses budgeting, forecasting, financial modelling, performance analysis, and strategic planning.
It often involves analysing historical financial data, identifying trends, and leveraging insights to make informed decisions about the future direction of an organisation. FP&A professionals collaborate closely with various departments to align financial goals with overall business objectives.
Unlike accounting which focuses on recording, classifying, and reporting past financial transactions – ensuring compliance with regulatory standards – FP&A is seen as more ‘forward-looking’, designed to support strategic decisions and guide future business performance.
How FP&A continues to transform businesses
Since the pandemic altered financial thinking, scenario planning now holds centre stage across finance departments – meaning that companies are still searching for highly specialised FP&A talent.
Businesses depend on financial reports and analysis to make critical decisions that impact operations, business expenses, capital investments, and employees. But how exactly do FP&A teams demonstrate value?
Enhanced forecasting accuracy
FP&A utilises advanced analytical tools – including the recently launched Vena Copilot, as well as OneStream and SAP ERP – to develop accurate forecasts and projections. Incorporating historical data, market trends, and operational insights allows businesses to anticipate future financial performance more effectively.
This increased foresight enables finance departments, and more importantly senior leaders, to make proactive decisions while reducing risk.
Strategic resource allocation
Effective FP&A enables organisations to allocate resources strategically based on their financial priorities and growth objectives. Whether it's by increasing capital, looking into cost optimisation initiatives, or generating revenue, FP&A provides the framework for prioritising and optimising resource allocation to maximise that all- important return on investment.
Scenario planning and decision support
As uncertainty remains something that businesses need to bear in mind, scenario planning is now of significant importance. Personnel with a strong background in FP&A can help organisations simulate various scenarios, assess their potential impact on financial outcomes, and develop contingency plans accordingly.
This proactive approach enables businesses to adapt swiftly to changing market dynamics – including economic uncertainties and recessions – and emerging risks created on the back of nationwide issues like the Covid-19 pandemic.
Focus on value creation
With financial instability something to be mindful of, organisations are increasingly focused on creating value and shareholder returns for future success. FP&A plays a vital role in this process by identifying opportunities for revenue growth and capital allocation.
As such, FP&A is now one of the top job titles in finance on the market. Having a successful FP&A function both supports the financial needs of a company and acts as a trusted adviser and business partner.
Strategic insights for stakeholders
FP&A has transcended its traditional role as a back-office function and has become a strategic partner to business leaders.
It helps generate valuable insights and actionable recommendations for stakeholders, including senior management, investors, and board members. Alongside providing comprehensive financial analysis, scenario-based projections, and strategic recommendations, FP&A empowers stakeholders to make well-informed decisions that drives sustainable growth.
The future of FP&A
As businesses continue to navigate ongoing challenges and opportunities, the importance of FP&A within finance will only intensify. Advancements in technology, such as artificial intelligence (AI), machine learning, and predictive analytics, will further enhance the capabilities of FP&A professionals, enabling them to extract deeper insights and deliver greater value to organisations looking to grow.
Due to its recent positioning as one of the most important aspects of finance, FP&A is poised to lead organisations towards a future of sustainability and prosperity, with FP&A experts now in even greater demand across all corporate functions. Organisational structures are changing, with the emergence of an ‘on-demand business partner’ now fundamental to business operations.
The next decade will likely see further technological advances enabling finance departments to make more accurate predictions. The evolution of this key business area will continue to be driven by the need for more efficient and effective financial planning, not to mention the growing demand for real-time data and insights.
If you are looking for an accountancy and finance professional, or seeking a new role yourself, get in touch with one of our specialist consultants today.
