What Is Financial Planning and Analysis (FP&A)?
There are two parts to FP&A: financial planning and financial analysis.
Financial planning is the process of creating a complete account of an individual’s or business’s plan for long-term security. It will include detailed savings and investing strategies that align with the outlined goals of that individual or business. A financial plan may be created by an individual or with the help of a financial planner.
Financial analysis is the method of evaluating individuals, businesses, budgets, and transactions to discover if their performance is sustainable. Financial analysis is typically used to examine whether an individual or business is stable, profitable, liquid, or successful enough to assure an investment or loan if needed.
What Is the Purpose of FP&A?
Financial planning and analysis work together to create a thorough evaluation of the individual’s or business’s current state and projections. Typically, financial planning is more relevant for individuals while analysis is more important for businesses.
When analyzing a business’s finances, an internal accounting department will conduct research in order to improve business decision making. For example, by researching a company's past performance, accountants are able to foresee what the future of the company’s financials may look like. Seasonal trends are apparent when created over the years by tracking data.
One purpose of FP&A is to create a projection based on past performance. It may be conducted by an internal accounting team, as discussed, or by a professional FP&A analyst.
What Is an FP&A Analyst?
The process of FP&A investigates both operating and financial data in an effort to align business processes and strategies with the financial goals of a company. As such, a background in accounting, finance, statistics, or data science is necessary.
A professional FP&A analyst will often focus his or her studies and career toward this discipline for many years before being awarded the certification. FP&A analysts often go on to be corporate Chief Financial Officers (CFOs).
Personalized Financial Plans for an Uncertain Market
In today’s uncertain market, investors are looking for answers to help them grow and protect their savings. So we partnered with Vanguard Advisers -- one of the most trusted names in finance -- to offer you a financial plan built to withstand a variety of market and economic conditions. A Vanguard advisor will craft your customized plan and then manage your savings, giving you more confidence to help you meet your goals. Click here to get started.
Read This Next
Updated: June 18, 2013 Real Estate Investment Trusts (REITs) have traditionally offered many advantages to investors looking...Read More →
Many of us invest for one reason: to build a big enough nest egg for retirement. Good old-fashioned fund picking is the preferred route for many 401k and...Read More →
As a financial planner, I am all about sharing your financial success. However, if one more person walks into my office asking to buy stock...Read More →