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The solutions you need to tell the whole financial story.
FP&A is a specialized function related to financial planning, forecasting, maintaining financial models, decision-making, and analysis. The role of FP&A is to provide strategic insights that drive business performance and strengthen the overall financial health of an organization. Who uses FP&A, and how can you leverage its capabilities to increase efficiency across your business?
The Director of Finance, in collaboration with the Chief Financial Officer (CFO), typically uses FP&A to help determine, review, and update the company’s business goals as part of the corporate financial planning process. FP&A teams are commonly composed of the Director of Finance, CFO, controller(s), accountants, financial analysts, business analysts, data analysts, and other analysis professionals. These teams work closely with other departments including accounting, sales, marketing, and operations, to develop and execute financial plans that align with the company's goals. These plans use financial models, data analytics, and forecasting tools to unlock insights into the company's performance, trends, and future opportunities for growth.
Corporate financial analysts have several key responsibilities that can benefit from FP&A:
With FP&A, you’re empowered to make informed business decisions while achieving your big-picture goals.
FP&A began in the early days of late-1970s spreadsheet software, progressed through the development of more sophisticated analytical capabilities in the 1990s, to emerge in today’s cloud-based solutions offering greater scalability, advanced analytics, machine learning, and artificial intelligence (AI). From the beginning, the goal of FP&A has always been to help provide finance teams like yours with real-time insights and enhanced decision-making capabilities.
Today’s FP&A uses several key tools to streamline processes, analyze data, and deliver clear, informative results:
Business intelligence and analytics tools can process vast amounts of information more efficiently than humans—enabling deeper business performance insights, more informed forecasting, and better decision-making.
Advanced analytics help you identify everything from patterns and trends to data anomalies, allowing you to mitigate risk proactively and protect your company’s bottom line.
Cloud-based platforms offer flexible, scalable solutions that support collaborative planning and analysis across your organization. Powerful integrations help you consolidate data from multiple applications, revealing relevant processes and workflows.
With the right tools and tech, your finance teams can operate efficiently and access important data, regardless of their physical location. Moving to the cloud will allow you to better support both remote workers as well as other teams across your organization.
Artificial intelligence (AI) and machine learning (ML) enable you to automate routine tasks like data collection and processing, helping ensure more accurate forecasts while preparing for any unexpected risks.
Knowing the basics of financial planning is only the beginning. The next step is using that knowledge to go through the actual planning process, starting with these key steps:
Collecting lots of clean, accurate data is the first step in financial planning. This means gathering everything from accounting documents to operational information, along with other external data like customer demographics and market trends.
Remember, too, that high-quality in equals high-quality out—if you input top-level data, your analytics reports will be useful and complete. You’ll be able to make decisions based on sound intelligence, which can help your business hit financial targets and meet its goals.
Next, decision-makers need to identify the organization’s long-term goals and how to achieve them. You can’t set realistic goals unless you understand the market, the competition you’re facing, and the internal capabilities of your workforce.
It’s vital to identify important milestones, which help determine whether the company is on pace to reach its goals or whether you need to pivot. Plans shouldn’t be rigid, but they should be clear enough for you and your team to execute.
Now, it’s time to create a budget, which involves setting concrete targets for various business units, departments, or projects. Allocate these resources in alignment with the strategic priorities of your business, helping ensure that you direct funds toward those areas with the highest potential to create value.
The finance team and key department heads should collaborate throughout the budgeting phase, enabling the final budget to reflect both strategic goals and operational realities.
Forecasting involves predicting future outcomes based on current trends, historical information, and external factors. It allows the organization to anticipate changes in revenue, expenses, and other key financial metrics, helping drive proactive decision-making and allowing your business to capitalize on potentially fleeting opportunities.
However, creating effective forecasts requires an abundance of quality data, as you’ll have to account for potential market shifts, economic conditions, and internal factors that might impact performance.
A variance is anything that doesn’t align with your predictions. The greater the deviation, the bigger its impact on your company’s performance—that’s why it’s critical to analyze all figures that don’t match your initial predictions. Identifying what went wrong allows you to determine what happened and why, so you can quickly adjust and get your business back on track.
Your final step involves generating the reports and insights that can inform decision-making. Your team will summarize this financial data, analyze performance metrics, and report their findings—transforming complex information into digestible content.
Through reporting, you can obtain a holistic view of the company’s fiscal health. These reports deliver value as you prepare for the next revenue cycle, allowing your company to make strategic adjustments that keep you moving forward toward your long-term growth goals.
Current user-friendly solutions, like Epicor FP&A, offer several advantages over manual or outdated financial planning and analysis tools:
FP&A software offers manufacturers a way to make their businesses more profitable through accurate data collection, budgeting, forecasting, real-time tracking of metrics, risk modeling, and a range of other analytical tools.
This software helps you target where to make better use of your resources, reduce cost outlay, improve cash flow, cut waste, and make better decisions.
Distributors use FP&A solutions to help them stay ahead of the competition by tracking sales data, monitoring inventory levels, analyzing customer behavior, and forecasting future sales and revenue. Detailed reports offer real-time insights into business performance, allowing you to identify areas of improvement and make strategic decisions.
By automating routine tasks like data entry or report generation with FP&A software, distributors can streamline financial processes and reduce the risk of potential errors.
Using data visualization tools and enhanced reporting, FP&A solutions help retailers make better decisions about inventory management and pricing. These critical insights will help you identify trends and unlock opportunities to add product lines or expand into new markets.
Leveraging the power of FP&A software, retailers can improve their financial performance and maintain a competitive edge in today's dynamic retail landscape.
Many exciting new technologies are reshaping how businesses will engage with FP&A in the future:
These innovative tools have the potential to change your financial planning strategies while guiding your business forward.
Understanding a shared set of common FP&A terms is important for both internal and external collaboration, communications, and planning:
Budget: A financial plan that outlines a company's expected revenues, expenses, and profits over a period of time.
Capital expenditure (Capex): The funds a company invests in fixed assets such as property, plant, and equipment.
Cash flow: The amount of cash coming in and going out of a company over a period of time.
Cost of goods sold (COGS): The direct costs incurred in producing and delivering a company's products or services.
EBITDA: An acronym meaning Earnings Before Interest, Taxes, Depreciation, and Amortization—a measure of a company's operating profitability.
Forecast: A prediction of a company's future financial performance based on past performance, market trends, and other factors.
Gross margin: The difference between revenue and COGS, which represents the amount of money left to cover operating expenses and generate profit.
Operating expenses: Expenses that a company incurs in day-to-day operations including salaries, rent, utilities, and marketing—commonly called "overhead."
Revenue: The income a company generates through the sale of products or services.
ROI: An acronym meaning “return on investment,” measuring how much profit a company generates from its investments.
Variance analysis: The process of comparing actual financial results to budgeted or forecasted results, in order to identify and explain any differences.
Working capital: The amount of cash and other liquid assets a company has available to cover its day-to-day operating expenses.
Epicor Financial Planning & Analysis (FP&A) is our licensed FP&A software that allows you to streamline financial processes and make faster, smarter decisions. FP&A is built specifically for businesses that make, move, and sell the things we all need every day: manufacturers, distributors, and retailers.
An additional solution, Epicor Financial Planner (EFP) allows you to leverage the combined power of advanced reporting and consolidation, dashboarding, machine learning-powered budgeting, rolling forecasting, what-if analysis, and more.
You can use EFP on the Web or in Excel, where you can integrate data from various sources, perform detailed analyses, and collaborate with your team in real-time. EFP offers both templated financial statements and the ability to quickly create customized reports.
In the end, Epicor is all about ease, efficiency, and visibility. If you’re ready to move from spreadsheets to streamlined forecasting and quick decision-making, let’s talk.
Contact an Epicor sales rep today to see how we can cut through the complexities and make FP&A a whole lot simpler to manage.
