Financial Planning & Analysis Basics
FP&A is the operating system of finance. It turns raw accounting data into forward-looking insights that drive decisions—budgets, forecasts, headcount plans, profitability, and strategic choices.
Overview
The best way to think about FP&A:
- Accounting tells you what happened.
- FP&A tells you what's going to happen.
FP&A sits at the intersection of finance, operations, strategy, leadership, and technology. Its output powers every major decision in the business.
The Core FP&A Responsibilities
Every FP&A team, no matter the size, revolves around five pillars:
- Budgeting & Planning: Annual budgets, operating plans, strategic plans. Aligns the business on what "good" looks like.
- Forecasting: Rolling forecasts (monthly/quarterly), scenario planning, revenue outlooks. Allows leadership to course-correct early.
- Financial Modeling: Driver-based models for revenue, headcount, expenses, margins, cash. Transforms complexity into clarity.
- Performance Reporting & Analysis: Monthly/quarterly reporting, variance analysis, dashboards, KPIs. Explains why results are happening.
- Business Partnering: Supporting Sales, HR, Marketing, Operations, Product. Turning finance into a strategic advisor.
Together, these create a full FP&A cycle.
FP&A vs Accounting vs EPM vs BI
- Accounting: Records what happened. Backwards-looking. Closed books.
- FP&A: Explains why it happened and what happens next.
- EPM (Enterprise Performance Management): Technology layer that supports FP&A and consolidation.
- BI: Visualization tools that show data in dashboards.
Why It Matters
Companies today face faster change, more competitors, leaner teams, higher accuracy demands, more real-time data, and tighter cash discipline.
FP&A is no longer a back-office function. It's a strategic weapon.
High-performing FP&A teams:
- forecast accurately
- detect problems earlier
- model scenarios quickly
- partner cross-functionally
- identify growth and cost-saving opportunities
- influence leadership decisions
This is why mid-market CFOs are modernizing their FP&A stack faster than any other finance function.
What Good Looks Like in FP&A
A high-performing FP&A function:
- forecasts monthly, not quarterly
- uses driver-based models
- updates data automatically
- partners with every function
- produces quick, accurate scenarios
- influences C-suite decisions
- can explain the business "in 10 slides or less"
Most Common FP&A Pain Points
These drive tool evaluations:
- Too many Excel models
- Manual consolidations
- Data inconsistencies
- Slow forecast cycles
- No scenario modeling
- No single source of truth
- Inaccurate hiring plans
- No self-serve reporting
- Hard to collaborate across departments
- Can't integrate quickly with ERP/CRM
The FP&A Cycle: How It Actually Works
A simplified version of the FP&A operating rhythm:
- Collect & Prepare Data: HRIS → Headcount. ERP → GL, expenses, COGS. CRM → Pipeline, bookings. Other systems → drivers, volume, units.
- Build the Plan: Budget, targets, hiring plan, revenue plan, cost structure.
- Update Forecasts: Every month or quarter based on latest actuals and insights.
- Analyze Variances: Why did we beat or miss the plan? What changed? What needs attention?
- Present Insights: Dashboards, board decks, management reports.
- Drive Decisions: Headcount approvals, budget changes, investment cases, pricing actions.
This is where tools start mattering. Excel collapses at scale. Modern FP&A tools remove friction and automate the cycle.
How It Fits Into Modern FP&A
The FP&A Tech Stack
Every modern FP&A team relies on five core layers:
- ERP (System of Record): NetSuite, SAP, Oracle, Sage Intacct.
- CRM (Revenue + Pipeline): Salesforce, HubSpot, MS Dynamics.
- HRIS (Headcount + Compensation): Workday, BambooHR, Rippling.
- FP&A Platform (Planning + Forecasting): Pigment, Planful, Vena, Adaptive, Anaplan.
- BI/Visualization (Reporting): Power BI, Looker, Tableau.
FP&A sits on top of these systems, integrating data and turning it into insights.
The Skills Every FP&A Professional Needs
Core Technical Skills
- Financial modeling
- Forecasting & scenario design
- Data analysis
- SQL, Excel, or planning systems
- Dashboarding (BI tools)
Business Skills
- Understanding revenue models
- Understanding cost structure
- Headcount planning
- Cash forecasting
Soft Skills / Impact Skills
- Communication
- Storytelling
- Decision support
- Cross-functional partnership
- Executive presence
This is why great FP&A people are so hard to find—it's a hybrid skill set.
FP&A Tools: From Excel → Cloud → Gen-3
FP&A technology has evolved:
Stage 1 — Excel
Still widely used. Flexible but fragile. Breaks with scale, headcount, and complexity.
Stage 2 — Legacy EPM (OLAP cubes)
Hyperion. TM1. SAP BPC. Adaptive (early). Strong but rigid. Heavy implementation. Expensive.
Stage 3 — Cloud FP&A (Gen-2)
Planful, Vena, Prophix, Workday Adaptive. More flexible. Mid-market friendly.
Stage 4 — Modern Gen-3 FP&A
Pigment, Abacum, Mosaic, Firmbase, Runway. API-first, real-time, more collaborative, faster to model.
Your FP&A process determines which era of tooling actually fits you.
Next Read
More FP&A Essentials
Vendor Comparisons
Evaluating FP&A tools?
I offer a free, vendor-neutral 20-minute advisory call to help teams choose the right platform for their size, complexity and budget.
Book a 20-min Consultation