CA Garima Mittal

Financial planning and analysis, often abbreviated as FP&A, is the very important function of finance. It’s very closely monitored by management as generally majority of business decisions are taken basis the analysis done in FP&A. FP&A function not only covers analysis on the information pertaining to all the streams of accounting and finance function, like accounts payable, accounts receivable & Record to report, but it is much more than that like we can do pricing analysis, project analysis, activity based costing, Budgeting and forecasting, M&A analysis, risk analysis, ratio analysis etc, all part of FP&A.

Now a days, technology playing a major role in performing FP&A function. The advert of databases and modern analytical tools have smoothen the entire process. Few of them are Hyperion frequently used for forecasting purpose, Backline for reconciliation purpose, for reporting, we can pull information from accounting software like SAP & PeopleSoft, Business Intelligence like tools can be used for reporting purpose wherein we can customise the reports as per our requirement in the required format. Use of advance Microsoft function like VBA, dashboards, MS-Access etc made the life easy and helps us in not only maintaining huge database easily and playing with them but also it helps in eliminating the repetitive task.

In today’s scenario, management generally like outsourcing MIS reporting part to enable getting time to focus on “A” i.e. analysis. Since majority of time consumed in reporting information & so outsourcing becoming very popular & have become a trend. It also helps in keeping the low cost & more time devoted to A & gets time in anticipating the impact of specific positive and negative events and in monitoring the previous decisions and taking corrective actions if necessary. Though major A part can also be outsourced and companies are doing so but it all depends on business relations and trust factor which companies gradually develop. However, initiation starts with outsourcing the reporting part of the FP&A.

In nutshell, FP&A is very important for a company. By analysis the variances, company could figure out whether it deviate from its strategy. Monitoring & tracking the decisions and accordingly taking necessary steps is the first most thing in any competitive environment. Capital structure decisions also taken on the basis of FP&A analysis. FP&A also include Management Discussion and Analysis (MD&A) as well which is a part of communication package for external reporting purpose now-a-days. MD&A, so called management commentary, management’s report, operating and financial review is a section of company’s annual report in which management discusses its past performance, future outlook, current scenario etc. Automation, ERP & consolidation softwares supports the management in running the entire process without any difficulties as they can drill down the data very easily in depth and can figure out the variances & can do the different analysis from different perspective as per the requirement of company. Indeed, FP&A is very close to the heart of management and one of the core finance function for strategic planning and analysis viewpoint.

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