What Are the Key Roles and Responsibilities of FP&A?

Financial planning is a procedure to formulate a well-organised plan taking into account the current financial situation of your business in order to achieve your targeted goal in future. It is necessary to manage the potential costs and finances of your business in a systematic way. To create your business financial plan in an efficient manner, hiring a certified monetary planner is a great choice. To understand the roles and responsibilities of FP&A, keep reading.

There are lots of responsibilities that a financial analyst takes over, and some of them are as follows:

• Gathering and recording relevant monetary data for conducting an analysis that may influence the financial decisions of a business.
• Proper management of databases comprising financial statements and records.
• Understanding and maintaining a proper track record of every factor affecting the micro and macro economy of the business. 
• To formulate and prepare detailed financial reports.
• Evaluate and establish profit plans.
• Coordinate with the finance team in order to check the financial information and forecasts.
• Explore various investment opportunities.
• Conduct financial data analysis and provide forecasts.
• Supervise financial functions, like auditing, assessing, budgeting, planning, taxes, consolidation, and so on.
• Evaluate capital expenses, depreciation, investment opportunities, expected returns, financial statements, etc.

Being a businessperson, you can expect a financial planner to offer you the following services as stated below: 

• Implementing Financial Planning, Budgeting and Forecasting: The foremost role of a financial planner and analyst involves comprehensive monetary planning, budgeting as well as forecasting that help in determining the short and long-term financial goals of a business. In this phase, they also formulate some necessary strategies enabling a business to reach those goals. 

• Evaluating Current Assets and Investments: They evaluate whether the present assets and investments of the company are properly used after having adequate funds to support its working capital needs. They also analyse the return of different investments, suggest other investment options, and study the statements of cash income and expenditure as well as balance sheets.

• Measuring the Financial Health of the Company: Analysing the financial health of a business is essential for different purposes. A financial planner and analyst determine this by adopting the vital financial and statistical ratios that comprise the current ratio, debt-to-equity ratio, interest coverage ratio etc. 

• Generating Variance Analysis Statements: A variation report refers to a statement which is made to compare the actual financial outcome alongside the planned financial outcomes. Comparing earlier performance to budgets and forecasts and performing a variance analysis helps clarify the differences in the performance of the business and, accordingly, helps bring future improvements. 

• Assessing the Departmental Cost-Efficiency: Reviewing and gauging the cost-efficiency of every department within the organisation in terms of how much each department consumes out of the overall financial resources of the company. 

• Preparing Overall Corporate Budget: They work in conjunction with every department separately in order to prepare their individual budget. Accordingly, by combining the individual budgets, they create an overall budget for the enterprise. 

• Forming a Financial Model: Financial modelling is basically a procedure to represent a summary of expenses as well as earnings of the company in its past, present and estimated future. One of the basic roles of a financial planner and analyst is to generate a financial model which is used as a great decision-making tool for the executives of the company. 

• Identifying New Opportunities to Expand: One of the major roles of a financial planner and analyst involves identifying new areas of opportunities for growth comprising investments and capital expenditures. They often generate 3 to 5 year monetary forecasts of the company.

• Categorising Profit-Making Products or Sources: They identify which products or services offer the highest margin of profit and which one offers the lowest profit margin. This helps figure out the products or services that contribute the maximum to the net profit of the company. 

• Recommending Strategies: They recommend different strategies to the higher management to uplift the financial performance as well as upkeep financial models. They recommend the management about how to utilise the financial resources of the company most effectively, enabling them to increase the profitability and maximise the company's growth. 

• Preparing Reports: Last but not least, the role of a financial planner and analyst is to submit a comprehensive report to the top management to help make correct strategic as well as financial decisions. Future growth plans involving capital expenditure, investments and other expenses as well as financial forecasts for the upcoming 5 years.

Mentioned below are the top five challenges faced in FP&A:

1. Financial planners hold a conflict of interest alongside their investment advice.
2. Often, financial planners do not think ‘Out of the Box’.
3. Few financial planners do not have proper education and certification. 
4. Sometimes, they possess poor communication skills and fail to discuss problems when they arise.
5. Several financial planners are not capable of bringing their desired expertise that enables you to reach your goals.

Having a comprehensive idea from the above discussions will help you understand the main roles and responsibilities of FP&A, and how important financial planning is for your business. Now, if you wish to make a plan and achieve certain goals in future, you can go through the above steps and consult a financial planner to get desired results.