Working with the FP&A team: Financial Planning and Analysis and how it works

Many of us who aren’t a part of the finance function have a fuzzy view of what they do. We understand that they have an important role in the organization, but we often don’t know what their day-to-day looks like or how and when we’ll collaborate with them. We don’t typically give it much thought until we suddenly find ourselves tasked with a project that requires collaboration with the finance team. 


Financial Planning and Analysis (FP&A) processes often involve a series of interconnected steps, each involving a diverse set of cross-functional stakeholders. Perhaps you’ve been charged with crafting your department’s strategic plan or contributing to the projected budget during annual planning. Or maybe you've just received a departmental performance report with numbers that didn't quite hit the mark, and you're eager to understand why. In these scenarios, you’ll collaborate with the FP&A team. Partnering the right way with FP&A can unlock tremendous value for your team and your organization. 

FP&A's role in finance and the broader business

An effective FP&A team is dynamic and forward-looking. They should align financial goals with strategic objectives and transform raw data into meaningful insights that drive confident, informed decision-making. Their insights should result in compelling business narratives. 

FP&A professionals are financial strategists and advisors, partnering with business units to ensure financial decisions align with the company's overarching objectives. Their role extends beyond number crunching. They provide actionable insights to drive growth and profitability. 

The core functions of FP&A

FP&A is focused on the ongoing forecasting and budgeting of an organization's financial performance to support the day-to-day financial management of the organization. FP&A teams create financial models, analyze historical data, and develop projections for future performance. They also support departmental managers and other functional leaders by providing the information they need to make informed decisions, such as preparing reports and analyzing variances against budget and forecasted results.

FP&A teams may use a variety of software tools to accomplish their goals. These tools include financial planning and analysis software, business intelligence and data visualization software, and advanced analytics and modeling software. Solutions such as Google Sheets and Excel are also commonly used.

With these tools, the FP&A team will ensure that projects align with the broader business strategy and that the results being delivered are in line with the plans and budgets set out for the year. The FP&A team cannot and should not exist in a bubble. They involve leaders from all business units in the planning and forecasting process. This ensures buy-in and enriches the FP&A process with diverse perspectives and specialist insights. FP&A teams should be the ultimate unifier.

A focus on accurate and reliable data

Data integrity is crucial in FP&A, as flawed data can lead to inaccurate conclusions and misguided decisions. High-quality data ensures the accuracy and credibility of financial analysis.

FP&A software like Vareto helps teams consolidate many data sources and collaborate with cross-functional partners while providing an up-to-date, holistic view of the business. Next-generation FP&A software tools help teams increase accuracy and productivity, make more effective decisions using real-time data, and collaborate more effectively.

FP&A software gives finance teams real-time access to financial data and insights. Finance teams can leverage integrations with ERP, CRM, HRIS, BI, and other tools to bring data directly into their FP&A platform, serving as a consolidator and main source of truth for operational and financial data.

Tools like Vareto have the ability to give business partners access to customized, relevant dashboards so that they can self-serve. This ability to independently investigate any anomalies or data issues can reduce the back-and-forth you have with the finance team, allowing for more informed decision-making.

The role of budgeting and forecasting 

Budgeting and forecasting are integral to the FP&A process and organization as a whole, providing a financial roadmap for short-term and long-term goals. Two common approaches to budgeting and forecasting are referred to as top-down and bottom-up. An organization’s budgets and forecasts can be built upon a mix of both approaches depending on business needs. Not every line item of a plan needs the same level of attention and detail. 

The FP&A team is keeping an eye on the budget throughout the year, often holding budget variance analysis meetings regularly with stakeholders. Business stakeholders are often also pulled into the annual planning process. During annual planning, every leader comes to the table with their own requirements or expectations on how they will drive their organization. The finance team then takes those inputs to craft a cohesive plan for moving the company forward.

Performance analysis and reporting

Performance analysis and reporting are the eyes and ears of FP&A. With this, FP&A professionals can see where the company is going, identify any roadblocks, and make informed decisions about how to get there.

Key performance indicators (KPIs) act as quantifiable measures of success and guide strategic decision-making. KPIs, of course, are industry-specific: what one organization tracks may not be important to understanding success in another organization. Here are some general commonly used metrics that help FP&A professionals measure progress:

How it all comes together

You will be collaborating with the FP&A team whenever you're making decisions that could significantly impact your department's financial performance, including strategic planning, project proposals, performance reviews, and more. 

Often the FP&A team can take your big-picture ideas and use the data available to them to present you with a range of potential outcomes. Will Strategy A lead to higher revenue five years down the line? Is Strategy B more likely to preserve margins? With the FP&A team's partnership, you can match your strategic vision with a robust financial plan, aligning your department's goals with the broader organization's financial health and long-term strategy.

The FP&A process consists of more than just boxes to check or passive, required sign-offs. FP&A processes give organizations the advantage they need to thrive in an increasingly competitive world. By taking advantage of what the FP&A team has to offer, everyone wins.

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