It seems like Financial Planning and Analysis (FP&A) is the jack-of-all-trades and the master of most others. FP&A answers strategic questions, forecasts for the future, ensures a timely accounting close, prepares board reporting packages, preps the executive team, divests a division, analyzes product line profitability, performs due diligence on an acquisitions and oh yeah does the budget. Understanding what an FP&A professional does on a daily basis is hard enough, let alone explaining it to someone else.


Although the FP&A function has been a key component of the office of the CFO for decades, with the increasingly faster pace of change, its prominence has vastly increased in the past 4-5 years. Even with this greater prominence, and now even a designation, I find the vast majority, outside the world of corporate finance, still don’t understand what FP&A does. Therefore, I decided to do some research to find out how others define the FP&A profession.


An article from the CPA Insider defines FP&A as:

The provision of economically sound concepts and tools that will enable an organization to formulate an effective business strategy and then translate that strategy into results.


This sounds about as clear as mud, so I kept searching and came across an article by Ventana Research that defined FP&A as follows:


People who perform the financial planning and analysis (FP&A) function in the finance organization put together and update the budgets and forecasts.


This appeared grossly lacking in many ways, so I continued on and found a discussion and definition from Josie K., President of Innovation Enterprise as part of a Linked-In forum where others also contributed at length with their interpretations of FP&A. She defines FP&A as follows:


Accountants record the historical results as accurately as possible, and then FP&A takes this information and analyzes and explains the historical performance (the A in FP&A). Then they forecast future period results using the insights learned from this analysis (the P in FP&A).


I honestly thought that this definition was pretty darn good and it is followed-up with 22 comments that provide additional clarity, but that definition is certainly a mouth full and not something that can easily roll of the tongue at a cocktail party. In the course of my research, I found many other definitions of FP&A but none of them really seemed to hit the mark.


One group I was hoping had a definition was the Association of Financial Professionals (AFP), the organization that created and promotes the FP&A Certification, unfortunately, the AFP sets forth a series of standards and definitions but I was unable to locate a clear and easily understandable definition that I felt fully represented what FP&A does. (If someone from the AFP reads this and is able to point to the definition of FP&A on their website, I would greatly appreciate it.)


I have run across many people, both inside and outside the profession, which have had this same confusion. Therefore, the best way I know how to define FP&A is not by a pure definition but a dialogue between an FP&A professional and complete stranger at a cocktail party. Below is this made-up dialogue, between two strangers at a cocktail  party where one is a FP&A Professional who works to explain what he/she does for a living.


FP&A Professional: Hello, what brings you to this wonderful cocktail party?


Stranger: I attended XYZ University in the 80s and I always like to support the school when I can. So what keeps you busy when you are not attending events like this?


FP&A Professional: I work in Financial Planning and Analysis at a Fortune 500 company.


Stranger: Oh, so you help people with retirement planning and stuff, you know I have been meaning to focus on finding someone to help me with that, are you any good?


FP&A Professional: You are talking about personal financial planning and I do not do that. The vast majority of a company’s value is derived from its future earnings. I manage a team that develops various financial forecasts that plan how the company will achieve those earnings. In addition, I work as a business partner on various projects to increase revenue, decrease cost and optimize company performance in support of achieving those future earnings as well.


Stranger: Oh, I see you are like one of those Wall Street Financial Analysts who analyze different stocks and predict their earnings. So you have any hot stock tips?


FP&A Professional: No, I do not do that either. With the speed and complexity of business moving faster ever year, I have my hands full supporting my own company’s senior management, like the CEO, CFO, COO and other C-suite management, providing financial transparency and helping them make better decisions about the future.


Stranger: So you are a hatchet man brought in to cut costs, got it. My brother is a controller for a company and he is always complaining about how he has to force people to cut back and fire people because they don’t have enough money. Hard job, I don’t envy you.


FP&A Professional: No, that is not what I do either. Although I manage the budgeting and financial forecasting process for my company, I pick up where accounting leaves off. While a controller is primarily focused on looking at historical performance, I look forward and focus on what may happen in the future, make assumptions and explain variances to the forecast so management can make better decisions.  Many times, I recommend that underfunded areas receive more resources because they have higher potential future returns than slower growth or declining areas.


Stranger: Ok ,ok….So what is the difference between what you do and what a CFO does?


FP&A Professional: I could become a CFO someday and I do report to the CFO of my company but a CFO’s role is much broader than what I do. A CFO oversees all the financial functions of a company including FP&A such as accounting, treasury, tax, financial reporting, etc… Although I use all of the information that these other departments produce and more, I am a specialist within the CFO office providing needed insight that he/she does not have the time to focus on exclusively.


Stranger: I see, a corporate finance specialist. So what is the difference between what you do and what a fancy investment bank or management consulting firm would do?


FP&A Professional: Not much, in fact many people who do what I do come from those same professional services businesses, we simply choose to work for one company as opposed to multiple companies.


Stranger: Now that all makes sense, thanks for explaining it.


FP&A Professional: No problem, happy to. So, what do you do for a living?


Although played out in different ways, generally this is the path that I found conversations like this go. Many times, I can circumvent any additional explanation by giving a generic titles such as consultant, or I work in corporate finance or accounting and I would say 90% of people are satisfied with that.


The people that dig deeper tend to be professionals is some capacity (like a lawyer engineer or sales person) and simply did not realize that there was more to finance then just accounting.


I hope you are able to take the definitions I have found above, leverage the cocktail dialogue that I created and develop your own definition based on what you do on a daily basis to come up with a better way to communicate all the value that you, as an FP&A Professional, bring to the table.

Kenneth Fick

President, CEO of and Senior Manager at MorganFranklin Consulting, Inc, Mr. Fick is senior finance leader that brings ideas from concept to execution. A frequent speaker and author on topics such as budgeting, forecasting planning, technical accounting, business improvement, and optimization.

1 Comment

  1. Machila February 19, 2018

    Interesting article on financial planning and analysis. Will be sure to apply these tips in my next proposal on a business proposition I am working on.

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