As a business executive, 95% of the decisions you make will directly impact the financial performance of the company.

Making decisions that will have such a significant impact on an organization can often feel like a tough, pressured and isolated task. And one that rests on your shoulders, and your shoulders alone.

But, one of the best pieces of advice I’ve ever been given was: “You can’t make a decision until you know all the facts.”

For instance, you can’t make a decision to buy a house until you know how much it is, if you can afford it, and if it satisfies all your fundamental needs.

The same goes for any business decision. You can’t make a decision about what new products or features you should develop; what new markets you should enter, or what new pricing strategy you should roll out until you have all the solid facts, right there in front of you.

But what if all the facts keep changing all the time? With competitors continuously launching new solutions, customers becoming fickler and more expectant by the day and the economy in constant turbulence, how can you even begin to get your facts in a row and use them to inform key growth decisions?

With Financial Planning and Analysis, or FP&A as it’s often called.

I know what you’re thinking: FP&A is simply something the finance and accounting teams use to help them deliver forecasts and budgets, right? How can FP&A help you collect real-time facts that enable you to make fast, flexible and agile decisions in such an unsettled space?

Allow me to explain as we go through:

• What FP&A is (compared to what it used to be)
• How businesses use modern FP&A to make better decisions
• The 4 key reasons to invest in FP&A  

Ready to start collecting facts and making the right decisions?

What FP&A is (compared to what it used to be)

Traditionally, an FP&A team's main responsibility within an organization was to collect historical financial data from across the organization and analyze that data to help the business make budget and forecasting decisions, based on past performance.

FP&A teams would usually perform tasks such as:

• Pulling together Profit & Loss statements
• Reporting on profit margins
• Providing a detailed look at a certain KPI or business department
• Gathering information to support budgets and forecasts

These sorts of tasks were, and still are, an important part of FP&A because they provide substance for crucial business decisions to be made from.

But back when FP&A was first introduced into organizations, departments tended to be incredibly siloed which made it difficult for FP&A professionals to collate data to analyze. Plus, the data that was captured was usually manually added to spreadsheets and analyzed using basic excel formulas.

FP&A was, therefore, prone to human error and inaccuracies. FP&A teams couldn’t rely on consistent or high-quality data and they didn’t have sophisticated reporting and analytical tools that provided useful insights to help shape decisions and future direction. This meant that data was often quite retrospective in nature.    

All FP&A teams could really do back then was to give an overview of the company’s past performance, which was then used as a basis for future decisions.

“In the past, FP&A analysts focused on recording and reporting financial results and leveraging historical financial data to extrapolate future sales and earnings.”

- Netsuite, Financial Planning & Analysis (FP&A): Practices, Roles, Responsibilities, and Functions

This would be fine if life still moved at a steady pace, markets were less crowded and there were fewer fluctuations in the economy.

But businesses nowadays, especially those in the fast-paced SaaS space, need more from FP&A. They need insightful predictions in addition to historic performance data analysis. They need to know what the up-and-coming trends are and they need to be able to anticipate future outcomes so they can adopt an agile strategy and pivot on a moment’s notice.

And, thanks to advancements in cloud software, technology and the accessibility of Big Data, this is now something that FP&A teams can and are doing.

How businesses use modern FP&A to make better decisions

“FP&A combines the financial close process with budgeting, forecasting, reporting and analytics to predict what investments, resource allocations and other decisions will best achieve a company’s objectives.”

- Vena, Financial Planning and Analysis: Roles and Best Practices

FP&A used to play, an almost secondary role within a finance team: Simply collecting, analyzing and presenting historic data to help guide budget and forecast decisions. Now, it’s a strategic tool that’s used to inform decisions and shape the future direction of a company.

In addition to the traditional forecasting and budgeting duties that we covered earlier, FP&A teams or experts also perform other tasks such as:

• Scenario planning to map out best-case and worst-case financial scenarios
• Developing strategic plans, budgets, and forecasts using the insights and data they’ve gathered from across the business
• Looking at corporate activities and performance so they can report on the financial health of the organization and independent departments
• Analyzing financial performance and providing guidance on key corporate decisions and direction
• Guiding the allocation of resources, assets and investments to achieve financial goals and business objectives

Data is still a key focus for FP&A analysts, teams and departments. And the ability to collect it from all areas of the organization such as marketing, sales, operations, and HR is still a key requirement.

But the difference is, FP&A professionals now have access to FP&A software and tools that allow them to collect, consolidate and analyze better quality data from across the entire business, in one single place.

This type of sophisticated software enables FP&A experts to perform in-depth analysis, pull out significant financial insights, spot significant trends and allow the business to plan their operational and financial resources and goals better.

The quality of data that’s now accessible to FP&A teams and the analytical tools that they can utilize to provide insights and predict outcomes has turned FP&A from a simple data collection and reporting function into a strategic force that drives key decisions.

The 4 key reasons to invest in FP&A

Whether you’re thinking about hiring an FP&A expert, pulling together a dedicated FP&A team, or conducting FP&A within your own job role, the reasons to invest in FP&A are tenfold.

Here are just four reasons why you should give FP&A a seat at your business table:

Reason #1: FP&A keeps the business lean and agile

FP&A professionals have a range of sophisticated modelling, monitoring and analytical tools at their disposal, which allows them to keep track of performance across the entire business in real-time, and create forward-thinking budgets, forecasts and strategies. Insightful predictions and access to real-time data can help the organization to allocate the right resources to the right places at the right times. This means that they can remain lean and agile as the business and industry landscape changes from day to day.

Reason #2: FP&A drives strategic planning  

Working with different departments across the organization, FP&A teams can define what the business should prioritise and provide accurate budgets and strategic plans to help the business reach its strategic goals.

For example, through access to high-quality data and in-depth transactional details, they can:

• Determine what resources should be allocated where for peak performance
• Translate forecasts into detailed departmental plans which are aligned with key business objectives
• Create what-if  scenarios to prepare for potential changes in internal or market conditions

Reason #3: FP&A encourages sustained business growth  

With access to data from across the entire business, and sophisticated analytical software at their fingertips, FP&A teams can create ‘what if’ scenario models to give them accurate projections. Scenario modelling enables businesses to clearly see what they need to do to stay on track and allows them to plan for unforeseen situations that will help them sustain long-term growth.  

Reason #4: FP&A ensures executives understand every business cost

Modern FP&A now gives businesses an in-depth insight into expenses which allows them to make even better decisions on spending and create more accurate budgets and forecasts. For instance, If you use Amazon Web Services, you’ll know that costs can escalate quickly, without warning. You’ll also know that the only real data you have access to is the bill totals. You can’t really do much with a bill total, can you? For instance, if the bill comes out more than you expected one month, there’s no way of knowing why. You can’t, therefore, accurately predict or plan for future AWS costs or needs, or stick within your allocated AWS budget.

To help control unpredictable costs like web hosting, FP&A experts can make use of software like Aimably for example.

Aimably is a dedicated AWS bill management platform. It pulls insightful data from AWS accounts and consolidates this data into one, easy to use platform. It’s designed to help organizations keep track of and plan for their future AWS usage.

Sign up for a free consultation and product demo, and you’ll see that you can utilize features such as:

• Aimably Insight, which enables you to analyze and track sources of AWS spend in detail, to get a clear understanding of why your AWS bill is changing
• Aimably Pulse, which sends out email notifications with daily, weekly and monthly trend data for your specific AWS accounts so you can predict future needs and spending
• Aimably Warn which sends out a warning when the systems that are likely to escalate costs are activated.

It’s the perfect data source for your FP&A tool, ensuring you have gathered together all the facts so you can make better, more informed business decisions.

Conclusion

“A digital-first approach to planning means organizations are adopting strategies that are focused on process automation, agility, transparency and data-driven decisions.”

- IBM, What is FP&A?

As we’ve established, modern FP&A has moved away from planning and forecasting in Excel spreadsheets, which were often created in an ad hoc manner and siloed across business units, towards slick cloud-based solutions and tools that offer automated data collection, modelling and analysis functionality.

While some larger Enterprises opt to implement all-singing, all-dancing FP&A systems like Workday Adaptive Planning or Anaplan, these can sometimes be complicated to use, expensive and time-consuming to set up.

Others prefer to use a suite of department-specific FP&A tools that can help them gather and analyse the data they need to help their business meet its business objectives.

In the past, FP&A was all about using historical data to report financial results. But, with the access we now have to data, FP&A has developed into something better that enables companies to be much more reactive. It helps organizations to produce insightful predictions that can really influence the direction of the business.

The in-depth financial insights that FP&A bring to a business is key to controlling costs, planning ahead, achieving sustained business growth and remaining agile in an ever-changing business environment.

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