What is Financial Planning and Analysis (FP&A) Software?

Scott Samios 0

Financial Planning and Analysis Software (FP&A) allows a team to manage the financial planning, budgeting, forecasting, scenario modeling, reporting, and analysis in a company…all in one platform. Whether one person or an entire department, the role of FP&A is to help the business make better financial and strategic decisions that protect the financial health of the company and optimize future financial results.

What is Financial Planning and Analysis (FP&A)?

Financial Planning and Analysis (FP&A) is exactly that: the team that manages the financial planning, budgeting, forecasting, modeling, analysis, scenario planning, and financial reporting in a company. Whether one person or an entire department, the role of FP&A is to help the business make better financial and strategic decisions that protect the financial health of the company and optimize future financial results.  

FP&A typically reports to the Chief Financial Officer (CFO), who is ultimately responsible for managing the finances and financial health of a business. The CFO has several functions within his Finance team. Accounting, for financial record keeping and accounting, payables and receivables, payroll, compliance and control, and risk management. Treasury, for managing, protecting, and growing cash. Investor relations, for managing financial communications with investors and the board. And FP&A, for analyzing past, present, and future performance and applying context, managing the allocation of company resources (people and money), and building forward-looking financial forecasts that support the strategic goals and priorities of the business. 

Who Should be Thinking about FP&A?

The CFO is ultimately responsible for, and highly dependent upon, FP&A. It is the FP&A team that aims to provide the CFO with a clear picture of the company’s financial past, present, and future. This ranges from granular details down to the department, project, and expense levels, as well as a top-level view of financial performance and expectations at the strategic, company-wide level. 

Business managers and departmental leaders

Business managers and departmental leaders rely on FP&A to help them make better financial decisions. This requires deep collaboration between FP&A and the business to align on corporate metrics and goals, build corporate and departmental strategies, and balance the needs of each department against those of the broader business. FP&A must help them understand the broader financial context of the business, why certain resource constraints exist, and advise on how they can still achieve their goals.

IT leaders

IT leaders are also dependent upon FP&A to help determine the best ways to evaluate the various company and departmental technical initiatives. IT spend is frequently significant and potentially transformational, which makes close collaboration with FP&A critical to building the business case for large IT projects and ongoing IT support and maintenance.

The C-suite

The C-suite and business executives are dependent upon FP&A to, again, turn financial concepts, terms, and numbers into reports, plans, and projections the business can use to guide the company. This is true during times of growth, but especially so during times of economic contraction and market turmoil.

What is Financial Planning and Analysis Software (FP&A)?

When done right, FP&A thrives on deep collaboration with the business, both to align insights and in their use of company-wide data. FP&A needs data from across the company to do their job. Over the past several decades, these teams have relied on spreadsheets as the foundation of their work. What began as simple financial tables designed to quickly sum rows and columns has morphed into complex, interconnected, formula-driven workbooks that invite errors and consume an inordinate amount of resources. 

Today, running FP&A on spreadsheets introduces huge risks to a business. From manual errors to copy-and-paste mistakes to security risks, spreadsheets lack many of the integration, collaboration, and ease-of-use capabilities we all take for granted in modern software. The lack of these capabilities leaves spreadsheets lacking. 

To provide a better mechanism for FP&A, software developers have been working diligently to create FP&A-specific solutions. Some are components of larger, enterprise operations or financial software packages. Others are dedicated FP&A solutions that offer broad functionality and help larger businesses build unique and customized platforms. Still other, more modern financial planning and analysis software solutions empower FP&A to utilize the flexible spreadsheet experience while also adding new and powerful cloud-based capabilities to expand FP&A agility, speed, alignment, and more. 

The 5 Best Financial Planning and Analysis Software Solutions (FP&A)

1. Cube

Cube provides a simple and intuitive experience that makes it a great choice for small and mid-market companies that want to get started fast with scalable, enterprise-grade technology at a reasonable price.

2. Workday Adaptive Planning

Workday Adaptive Planning offers strong capabilities outside of Finance and FP&A, which makes Adaptive Planning a good choice for large enterprises seeking a transformational, company-wide FP&A solution. Read our complete Adaptive Planning review.

3. Planful

Planful is ideal for larger companies with big FP&A teams that want to expand their scope of influence beyond Finance.

4. Anaplan

Anaplan is great for large enterprise customers that have a strong IT team ready to lead an enterprise-scale transformation initiative.

5. Vena

Vena is ideal for companies that need the fixed process and planning guidance of pre-built FP&A solutions, or that have the resources to uniquely customize those pre-built solutions for their own needs.

Read more about the 10 best FP&A software tools.

Common Pitfalls of Financial Planning and Analysis

1. Laborious Data Collection and Aggregation

FP&A needs data from across the business to execute their role. This financial, operational, human resource, sales, and other data typically comes from dedicated software solutions managed by each department. Also typically, these solutions are rarely connected with FP&A systems or integrated into an easy-to-access central data source. That forces FP&A to work across the individual responsible teams to identify, download, gather, format, aggregate, upload, and consolidate much data from many different sources. Worse yet, this manual, slow, labor-intensive exercise must be repeated each month, sometimes more often. However, FP&A software solutions are available to integrate and automatically collect all of the required financial data. 

2. Slow Financial Close and Consolidation

Although manual data collection is usually a culprit behind slow close and consolidation cycles, many other pitfalls can derail this seemingly straightforward financial requirement. Bringing the data together and merging it into the proper formats for close and consolidation also takes time. When working in spreadsheets, it also takes time to revise tables, update formulas and ranges, highlight gaps and areas of concern, and analyze and understand each new period’s financial performance and ramifications. FP&A then must generate the required financial reports for external agencies, such as state and federal tax agencies, any appropriate regulatory bodies, and others. FP&A also then must generate internal reports using the proper formats and templates to help the business understand the financial implications of their past period actions. Obviously, this is a lot of work, much of which can be automated and streamlined with modern, cloud-based FP&A solutions. 

3. Inaccurate Forecasts and Financial Projections

Accuracy is a key imperative of every FP&A action. Not only does regulatory, tax, auditing, and other financial reporting impact a company’s bottom line, but also internal reporting of financial insights, forecasts, and plans impacts how the business moves forward. Errors, omissions, and data gaps can lead FP&A, executives, and business managers to make bad decisions. This can impact a company’s financial health in many ways, from being ill-prepared for market opportunities to wasting money on initiatives that never reach their expected ROI. 

4. Short-Lived Financial and Business Plans

Each of the above pitfalls leads to financial projections, forecasts, and plans that are quickly rendered meaningless and largely ignored. When it takes months to develop an annual plan, for example, much of the data on which the plan is based is out-of-date before the plan is even published. This not only reduces the accuracy of the plan itself, it raises questions about the plan’s accuracy and pushes the business and executives to discount or even ignore the plan as they make decisions and run the business. The result is a significant amount of wasted time for the entire business but especially FP&A as the plan was developed.

5. Weak Internal Controls

Finance is generally responsible for internal compliance and control, particularly where financial rules and regulations apply. FP&A depends on adherence to these controls to ensure the accuracy of their eventual reports to government and regulatory agencies. When weak internal controls lead to sloppy tactics and frequent mistakes, it consumes more time as FP&A attempts to locate the impact from those mistakes. Furthermore, financial and compliance audits are put in peril as outside parties discover and demand corrective action to mitigate the errors and omissions from the lack of internal control over financial processes and data. 

6. Incomplete Reports and Metrics

Many teams and decision-makers within the business depend on FP&A output, such as financial reports, presentations, analysis, forecasts, plans, and budgets, to develop their own plans, budgets, and decisions. When FP&A is hamstrung with a lack of speed, inaccuracies, and guesswork, these other parts of the business then use that questionable data to calculate their own metrics and develop their own departmental reports. The stream of gaps and errors can flow throughout a company to create an environment where either FP&A financial insights are always in question, the business lacks the accuracy needed to make good decisions, or worse.

Financial Planning and Analysis Best Practices (FP&A)

FP&A can be the secret weapon of any business, as long as they solve the common pitfalls listed above and move towards implementing these following best practices:

Automate Reports and KPI Tracking

Reports are how FP&A communicates financial data while KPIs help everyone understand financial and business progress towards goals. Reporting, however, requires much manual effort to format, prepare, and revise every period, especially if FP&A is required to customize reports across different business and executive audiences. And KPIs often depend on FP&A first gathering and formatting data before KPIs can be calculated and published. 

Automation gives FP&A the power to update reports and KPIs instantly, usually with just one click. FP&A software then automatically generates template-driven reports and KPI dashboards so every stakeholder sees the information exactly how they need it. Modern FP&A software also provides interactive reports, where anyone can drill down on data to compare with prior periods, see transactional data, or develop ad hoc reports. 

Move to Real-Time Planning and Forecasting

Today’s world is moving faster than ever, and it’s riddled with uncertainty and chaos. That makes for difficult planning and cash forecasting, especially when using data that’s weeks or months out of date. The legacy FP&A practice of publishing static plans and occasional forecasts is fast disappearing for modern FP&A teams. Today’s agile companies require reporting and analytics to make informed decisions to see what’s ahead and keep the company on track throughout the year. Implementing real-time or rolling plans and forecasts provides current information based on recent data. That makes for better, more informed decisions because FP&A is providing the business with the most accurate insights possible.

Modern financial planning and analysis software is developed to enable the proven benefits of real-time, rolling plans and forecasts. Automation helps bring the most recent data into plans, reports, budgets, and forecasts. That eliminates most of the traditional FP&A work of chasing the business to gather data and transforming it into the right formats, and let’s FP&A work in collaboration with the business to make better financial decisions.

Accelerate Close and Consolidation

Financial close and consolidation is a fundamental FP&A responsibility. But, even though it’s completed monthly for most companies, few have turned it into a fast, repeatable, painless process. Again, using automation to eliminate data gathering and improve data accuracy can cut much of the recurring effort required for close and consolidation. Giving FP&A and the business faster access to drill-down and rollup reports also helps provide better insights for better decisions. It’s relative table stakes for modern FP&A software solutions provide this speed, simplicity, and accuracy to the periodic financial close and consolidation process. 

Improve Collaboration with the Business

FP&A provides the analysis, modeling, and financial insights necessary for the business and executives to develop and reach company-wide goals. But, simply publishing and disseminating FP&A reports and dashboards to the business fails to communicate the story behind the numbers. It’s important to help non-financial executives understand why a decision was made, how long an investment might take to generate an acceptable return, where different what-ifs could change potential plans, and much more. This requires close collaboration between FP&A and the broader business, from executive leaders to tactical decision makers. Today’s FP&A software provides easy-to-use, intuitive solutions that build proactive bridges with the business while also empowering the business to work more confidently and collaboratively with FP&A. 

Conclusion

FP&A has been reliant on spreadsheets and manual efforts for decades, even though this team offers immense business value beyond just generating financial reports. Empowering FP&A with modern software and cloud-based solutions is the only way to bring more financial insights and better overall decisions out to the business. 

To learn more about FP&A, financial planning and analysis software, and how FP&A can gain faster, smarter insights and the agility to quickly scale with flexibility and power, visit cubesoftware.com.

Scott Samios

Scott enjoys leveraging his 25 years of experience to help founders, executive teams and enterprise brands tune their go to market strategies for higher growth. He has built, scaled and optimized the sales and marketing functions of a number of innovative SaaS tech startups.