{"id":32703,"date":"2022-09-28T13:11:19","date_gmt":"2022-09-28T13:11:19","guid":{"rendered":"https:\/\/infosuite.dk\/?post_type=avada_portfolio&p=32703"},"modified":"2025-01-06T12:23:57","modified_gmt":"2025-01-06T11:23:57","slug":"what-is-fpa","status":"publish","type":"avada_portfolio","link":"https:\/\/infosuite.dk\/en\/blog\/what-is-fpa\/","title":{"rendered":"What is FP&A?"},"content":{"rendered":"

What is <\/b>FP&A?<\/h1><\/div>
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Author Mette Skov Jensen<\/a><\/b><\/span><\/p>\n

18.01.2024<\/p>\n<\/div>

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FP&A is an abbreviation of Financial Planning and Analysis \u2013 you may know it as Corporate Performance Management, Beyond Budgeting, or XP&A, which is short for Extended Planning and Analysis.<\/p>\n

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As you can tell, there are several ways of naming the extension of traditional budgeting, but most of the main features are the same. More precisely, it is about basing your planning and analysis on data. By letting data play an active role in the entire planning process, you can optimize operation in your business and implement activities at a factual basis.<\/p>\n

Four advantages<\/b> of working actively with FP&A<\/span><\/span><\/span><\/p>\n

Once you have decided to extend the traditional way of budgeting, there are lots of benefits to reap. Surely, there are more than the ones listed below, but these areas represent some of the most significant ones:<\/p>\n

1.<\/b> <\/span>You run your business in line with the outside world<\/b><\/span><\/p>\n

For some businesses budgeting is an annual, static event, and it may be quite challenging one as well \u2013 especially like now in times of turbulence \u2013 to make plans for the future. By changing tactics and welcoming the financial planning and analysis, you can talk about new perspectives. Instead of viewing your business in retrospect, you now get a real-time perspective from your data, which are now activated to a new level. That is closely related to the next advantage below.<\/p>\n

2.<\/b> <\/span>You are prepared for times of turbulence<\/b><\/span><\/p>\n

Replace static with dynamic \u2013 as simple as that!<\/p>\n

A major part of working with FP&A will typically result in incorporation of rolling budgets and sales forecasting. A rolling budget is a budget that is adjusted successively, as new months are added. Depending on how you budget, you can work with rolling budgets on a monthly, quarterly, or annual basis. By using a budgeting tool, the new months are added automatically, and all relevant data to be used as basis for the budget, such as historical, statistical, or current data, are loaded. The rolling budget is thus more flexible than the standard budget, as it takes variations in income and expenditure into account, and it allows you to react in time when changes occur.<\/p>\n

Sales forecasting is a great tool for indication of your expected sales in a given period. It is essential to base your forecasting on valid data, making it as accurate as possible. Therefore, it may be an advantage to base your forecasting on historical business data. Even better, though, is to use both historical, current, and statistical data for the company sales forecasting. This will allow you to take more different parameters into account, such as social trends here and now.<\/p>\n

3. <\/b>You become a shark at identifying potential<\/b><\/span><\/p>\n

It may strike you as evident, but once your planning is based on data, identifying business potential becomes much easier. For example, the opportunity to reduce cost or increase earnings. Once familiar with sales forecasting, you can plan the production in your company based on the valid sales forecasts, and you will also be able to integrate algorithms that automatically present proposals based on trends and history. In this way you can keep up to date with what is the smartest action at this point and thus be updated on identifying potential.<\/p>\n

4.<\/b> <\/span>Your financial team becomes a larger part of your business<\/b><\/span><\/p>\n

Once data form the basis of the company plans, it becomes even more evident, how the different departments interact and how their efforts affect each other. It may create an even stronger cooperation between departments \u2013 and if they used to be considered isolated units, they certainly do not now. They will be closely related through their data being analysed by the FP&A team.<\/p>\n

Furthermore, a certain transformation takes place with the financial team, who \u2013 if resources are available \u2013 can fulfil its full potential. It can contribute with much more than just entry and reporting, as it possesses comprehensive knowledge and understanding of the company\u2019s financial status. The financial team may very well be used as an active sounding board involved in planning the future.<\/span><\/p>\n<\/div><\/div><\/div><\/div><\/div>

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Want to read some other articles?<\/b><\/h1><\/span>
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