A Guide to Financial Planning & Analysis for Businesses | LBMC

Blog / A Guide to Financial Planning & Analysis for Businesses

As the economy continues to tighten, it’s becoming more important than ever for businesses to have an in-depth, real-time understanding of their financial position. Financial Planning & Analysis, more commonly known as FP&A, plays a vital role in this, arming decision-makers with the insights they need to effectively lead their business.

Large corporations tend to have fully staffed FP&A teams with VPs, Directors, Managers, and Analysts all solely dedicated to this branch of financial analysis. But for many small to midsize businesses, that level of resource is out of reach. Instead, these businesses may just have a couple of finance professionals tasked with handling everything from day-to-day bookkeeping to producing monthly financial reports.

An FP&A team is an invaluable asset. And now, with the growing popularity of outsourced FP&A teams, it’s an asset that’s available to more businesses than ever before – particularly those that cannot afford to staff their own full-time FP&A team.

But what exactly can business owners expect when they work with an external FP&A team? In this overview, we answer that question and more. Read on to learn exactly what FP&A is and discover the benefits adopting this practice can bring your business.

What is Financial Planning & Analysis?

Per Gartner, Financial Planning & Analysis (FP&A), includes four key activities:

Planning and budgeting
Integrated financial planning
Management and performance reporting
Forecasting and modeling

Together, these four activities leverage the sum of a business’s financial data to enable leaders to make more informed decisions with increased confidence. With these insights, businesses can better allocate resources, understand performance trends, and take a proactive approach toward anticipating upcoming changes that demand a change in strategy.

Four Benefits of Working with a Financial Planning & Analysis Firm

In today’s ever-more competitive business world, simply reviewing historical financial data to understand business performance is an inadequate approach.

To build for success, businesses must leverage all available data to build a forward-looking perspective on business performance. This insight significantly strengthens strategic thinking, unlocking the potential for improved financial performance. This, in a nutshell, is the role of FP&A, a process that yields a variety of benefits for businesses:

Increased Clarity: an effective FP&A process gives leaders more clarity into every area of their business, creating a single point of truth that everyone can refer to. This eliminates uncertainties over data sources, analysis methods, and more, enabling everyone to operate from the same page.
Accurate, Timely Financial Data: FP&A teams offer businesses the ability to track financial performance in real time. If your business is having a bad month, there’s no sense waiting to find out about it until the end of the month: leaders need to know as soon as possible so that they can correct course.
Responsiveness to Business Issues: by investing in FP&A, leaders can benefit from more granular insights into performance challenges. This enables executives to understand exactly where the problems are and how to fix them, resulting in a more proactive approach to building long-term value.
Create Long-Term Financial Plans: whereas traditional accounting often looks back, FP&A offers a 360-degree view that highlights emerging trends and produces data-backed forecasts to help business leaders prepare for what lies ahead. With this increased preparation window, executives can ensure their business remains sustainable regardless of shifting market conditions or customer behavior.

Of course, the benefits of effective FP&A manifest themselves in slightly different ways in every business. But they all add up to one key advantage: improved financial performance.

What to Expect from a Local Financial Planning & Analysis Provider

Successfully leveraging FP&A in any business requires two key components: a purpose-built FP&A platform and an FP&A team with the experience and skills to utilize it effectively. The right partner will provide both in tandem, working closely with your team to provide meaningful financial insights that can change the trajectory of your business.

An FP&A platform is a software tool, or series of software tools, that automates the collection and processing of financial data from across your business. This could manifest itself in all kinds of ways – from determining the number of days receivables a business has outstanding to determining the profitability of each individual client.

Arriving at these insights is impossible without the guidance of experienced FP&A professionals. There are two key groups involved in this process: accountants and financial analysts.

It’s the role of the accountants to ensure that the data being analyzed is timely, accurate, and easily available to analysts. To ensure that this is the case, many businesses work with outsourced accounting firms that use a tried-and-tested approach to accounting that’s compatible with the wider FP&A process.

Not all data is created equal. Businesses need to develop a clear understanding of what data they have, where it’s stored, and how sensitive that data is relative to operations. This process involves classifying data based on its sensitivity and value.

These accounting professionals are augmented by financial analysts that bring the technical skills required to transform raw data into meaningful business insights. These analysts work closely with your team to help you infer meaning from your data and incorporate insights from your FP&A platform into decision-making processes at every level of your organization.

LBMC: Financial Planning & Analysis

Today, practically every business in sits on a treasure trove of financial data. With the correct structure and analysis, this data can produce insights that could prove game-changing for the trajectory of the business.

Harnessing the power of this data demands a more sophisticated approach to financial analysis – an approach that an outsourced FP&A team can help your business replicate.

At LBMC, we’re proud to provide full-service FP&A solutions to businesses in Tennessee, Kentucky, Indiana, and the surrounding states. We offer clients a turnkey FP&A solution they can deploy in their business, supported by the services of a team of experienced financial analysts.

Together, we’ll help your business leverage the potential of its financial data to drive improved performance. To learn more about LBMC’s FP&A solutions, contact us today.