What is financial planning and analysis?

For any business tracking its performance and making growth-generating decisions is a must. So, corporate financial planning and analysis software help make accurate data-driven decisions and growth plans.

You cannot just make any change or take any decision out of the blue. There has to be a financial analysis and calculation to support your move. Reckless decisions lead to ruin, whereas well-planned and analyzed decisions are beneficial for a business.

Understanding how your business is performing, what factors are contributing to the growth, at what percentage, which aspects are leading to drain, etc., everything is essential for evaluation.

If you are considering borrowing some money for further investment., a financial planning and analysis software will determine the various finance section before you.

According to your company, spending behavior and revenue numbers will be calculated by the system. Once you have this in hand, you can decide whether you want to buy credit cards or go for debt financing or equity sharing.

Naturally, whoever will lend you this money will ask for the numbers for their risk analysis.

You cannot just pick up some numbers and make sense of them. The first step is to collect data. This data includes information related to company finance, ERP system numbers, operational statistics, and third-party software or location data.

All this collected information is then sorted, standardized, and verified. You can also gather information related to the elements that affect the business operations, like economic marketplace situation, competitors' numbers, customer behavior patterns, etc.

Once you have everything and it is sorted, forecast, plans, budgets, strategies, and analysis all start. Anything missing in data collection can hamper the effectiveness of these processes. This is why FP&A software tools are utilized.

Step two is planning and forecasting. The gathered and organized data is used for forecasts and predictions. These are related to driving the business towards development.

Cash flow projections, sales forecasts, marketing experiment results, and more; everything comes under financial forecasts. One of the most common financial planning methods is predictive planning.

Financial forecasts are used to build different scenarios or modules to see how the business would perform. So in the predictive planning methods, a model is created using the given data sets showcasing business performance history.

This is then used to predict the future numbers and performance of the business so that the right steps can be taken toward it.

Using FP&A software tools is an aid in this procedure, as the system can put everything together and draw a predictive presentation without much human involvement. Decisions can be made from thereon.

You might be interested to read: Everything you need to know about cash flow statement

The next step of the process is budgeting. After creating a plan using the statistics and data, professionals move forward to draw up a budget for it. All estimated expenses and revenue are calculated for this strategic plan.

Different departments have different spending needs and budget requirements. All the totals are added up together to create a main budget.

Usually, an annual budget is created; however, some companies adopt a more continuous budgeting cycle that frequently updates the projections and forecasts. According to the ever-changing market condition, budget lines and cycles are amended.

Continuous evaluation of your project progress, revenue generation, and expected result reach helps to prevent overspending.

To analyze the performance and analytics of ongoing projects, FP&A professionals use the data gathered by software to draw up performance analysis that includes expenses, profit, sales, cash flow, sales, and other metrics regularly.

Reports and visualization of data and analytics are built to put forwards a clear picture of the project. Profitability analysis, total revenue generation, etc., all such metrics are included in it.

Ad hoc queries are converted into easy-to-understand data formats that can help the decision-makers consider all available options and choose the best step for the future. 

These performance monitors can be used to pinpoint which teams or projects are working the best, which area is a money drain, which areas would flourish and bring more results with more funding, and many more.

Responsible for laying the groundwork for reporting and analysis. Plus, the director is also given the duty to allocate budgets throughout the company and answer to the CFO directly. This executive provides information on strategies and important insights for the growth of the company.

FP&A managers are accountable for creating long-term financial plans, looking over revenue generation opportunities, and helping in cost control with forecast scenarios and budget models.

These managers are also an integral part of the company’s future decisions.

Financial analysts are people who do the actual tracking, sorting, and analysis of business finances. They look over the company’s performance and prepare statements.

Observing financial and performance trends and patterns is also included in their job description.

Identify any upward or downward trend in the cash flow that might be fatal for the company. To avert any problems and meet the company goals, they also suggest measures.

Financial planning and analysis teams scrutinize the historical data, which consists of all internal and external factors affecting the business’s finance.

Forecasts are drawn up according to which further speculations and essential steps for the company are suggested.

For any plan or strategy that is implemented, FP&A analysts are responsible for monitoring it. Subsequently, if any loss or fall is observed in any financial metrics, they inform the respective department to take necessary action.

Recording in a particular period, the company’s balance sheet shows liabilities, assets, and shareholders' stake.

Cashflow statements shows the amount of cash inflow and outflow generated by business operations, investments, and financing.



Profit and loss statements evaluates the profitability of the company. So it shows the cost of goods, different business expenses, revenue, and net income.

The most basic and essential corporate financial planning and analysis tools benefit is accurate and timely reporting. The system easily picks up all the data from the accounting books and gets on to processing it.

The results can be seen and accessed within a few minutes. You get easy accessibility to updated reports that contain precise information so that important decisions can be made quickly and on the go.

If the financial planning and analysis process is done manually, it is bound to be inefficient and sometimes might have errors.

Processing data from different sheets and metrics, comparing it to the goals and required results, and finally making forecasts, predictions, and strategies is a huge task. It is normal that data-heavy tasks can be overwhelming for financial analysts.

This is why FP&A software tools are in place. No overlooks or errors exist in the reports or results created by these systems.

With progressing time comes increased competition and difficulties to survive in a cutthroat market. This is where FP&A software tools specialize. These tools are designed to do all the analytical processing and evaluation of your company numbers and present the best-case scenarios. This happens with advanced analytics and insights.

Presentation of how the business performance has been, how it will survive, what areas are crucial, etc., are made by these systems.

Financial planning and analysis software compares historical data, looks at the business performance trends, and according to the goals that have been set, draws up what-if analysis.

Different situations are put forward, and it is checked how the business can run in those with the current strategies. For example, what if there is stark inflation in the market, so with the current cash flow and net income, will the business survive or be in loss?

Another amazing benefit of FP&A software tools is their feature of collaboration and communication channels. Different departments collaborate together with this software. The results, budgets, and other outcomes of the department's work are combined together for further data analysis.

For example, to determine future marketing and sales initiatives, data from these departments plus other related parts are combined to reach a solution.

With the feature of scenario planning and what-if analysis come compliance and risk management as well. All the plans and strategies are also built to keep together the rules and basics of business functions.

Also, possible risks of any action or decision are also calculated by the FP&A software. This gives you a fair chance to see the pros and cons of any scheme.

With quick data collection and processing, increased efficiency is a natural outcome. Where a human would take days to compile the necessary data and another few days to process and make it into documents or numbers that can be used to make decisions, FP&A software tools complete the same thing within seconds.

Plus, there are no errors in the provided results of the processing, so any decisions or plans can be implemented quickly. The consequences of these implemented strategies will also be recorded on the go. Hence, it is a cycle of efficiency and time-saving.

The major purpose of adopting corporate financial planning and analysis software is to get accurate results and consistency. Hence, the feature which cannot be overlooked is data integration and connectivity.

Any FP&A software tool you choose must be able to seamlessly integrate with any existing automation systems like ERP, CRM, accounting, etc. This integration and connectivity ensures that your data is being properly transported from one system to another for precise results.

Financial planning and analysis are done to check the performance of the business and to make better future decisions. This is not possible if you are not able to create different marketplace situations and test your business against those.

Hence, your FP&A software tool must provide you with features for financial modeling and scenario analysis so you can anticipate the company’s reaction to various what-ifs and make future amendments accordingly.

Another crucial feature required in financial planning and analysis software is forecasting and budgeting.

Your tool should give you accurate forecasts and budget division so that, at the management level, members can consider these insights for further discussion. Technologies like machine learning and artificial intelligence aid this feature.

The system will be able to make quick calculations and present options in real-time using these technologies.

Related read: How to do business budget planning for new fiscal year?

Even if your FP&A software tools process all data and have the results, till the time those results are not in proper reports and visual formats, there is no chance the company head will be able to make any sense of it.

So, not just data collection and analysis but also framing that information is easy to understand reports, and visual statistics are equally important.

It makes no sense to adopt software where your financial team employees still have to do the grunt work. Everything from data collection to organizing, sorting, and presentation should be done by an FP&A software tool.

This means complete workflow automation. Hence, look for a tool that requires minimal human interference and gives your financial team members the space to focus on other human-centric tasks.

Planful is a great FP&A software that is best for reporting, visual analytics, and performance analytics. The software helps you automate performance tracking and helps streamline all plans and strategies.

Along with this, Planful is committed to tight security measures and compliance needs. You get access to customizable financial reports and a web-based user interface.

However, there are a few downsides of the software, which include maintenance difficulty, the requirement of tech expertise, MAC operating systems are not supported, and to access FP&A in all its glory, you will have to integrate other third-party technology.

Anaplan is another effective FP&A software tool best used for planning and financial modeling. It collaborates real-time data from different departments and shows results in the form of forecasts and possible scenarios.

All departments can easily be managed using this tool. As the organization scales, the software grows with it. Anaplan can quickly do all complex calculations in various situations.

But again, this software also has some drawbacks, like being complex to handle and maintain, and learning to use modeling and configuration is colossally challenging.

Prophix is an amazing platform offering corporate performance management (CPM) software. This software automates all the major business analysis processes like reporting, budgeting, and forecasting.

Plus, any risks while processing are instantly mitigated. Mid-size organizations can highly benefit from this tool. Making custom reports and analyzing multiple user scenarios are the USPs of the software.

The only limitations of this software are constricted Excel integration, rigid workflow, not-so-smart machine learning, and business intelligence features.

Workday Adaptive Planning is a smart collaboration and insights software that businesses of all sizes can use. Customization for different scenarios, accurate analytics, and modeling functions are strong pursuits of this tool. This is a well-known FP&A tool with huge customer loyalty and offers great flexibility for all processes in different use case scenarios.

However, the only downside here is that this software does not support Excel integration, and learning how to use the system can be difficult.

Cube is another practically functioning FP&A software tool that specializes in real-time data access, reporting, and strategic planning. It is flexible to use and supports working with spreadsheets.

It is a dedicated FP&A platform, and establishing data analysis and planning with this tool is quick. Also offers excellent customer service.

However, Cube is not such an advanced tool and still has to mature its technology as it offers only a few features. Plus, you cannot restrict who can access what, which means lax security.

Any new system of software is established only when you know why the system is needed and what the goals are expected to be achieved.

Hence, before integrating with any tool, one of the smart financial planning and analysis best practices is to establish clear objectives.

Make a list of all the pain points of the business’s financial processes and performance, and then see how the FP&A software features can help mend it.

Positively effective strategies can only be built when you have precise and reliable data. So, always make sure that the processing numbers and information in the system are accurate right from the point of origin.

Whether it be your accounting software or ERP, or any other third-party system that processes any numbers for your company, it should be ironclad when it comes to data accuracy and stopping unauthorized activity.

Another financial planning and analysis best practice is to have a rolling forecast approach. For example, your company planned a cost-cutting strategy at the start of the financial year, but now it seems to be failing.

This is because you are not processing the current numbers. Hence, it is advised to adopt a rolling forecast approach, where the system continuously processes historical data and forecasts future numbers.

Financial planning and analysis do not stop after implementing a strategy or a decision. You need to measure the results of the same as well. This is where Key Performance Indicators (KPIs) come into play.

List down all the important measurement metrics and indicators which will help to judge how a particular campaign or decision rolled out for the company. Without this, you will never know what is good and what does not work for your organization.

The next one out of the financial planning and analysis best practices book is implementing scenario analysis and sensitivity testing. Predicting the possible risks and performance levels of the business in different marketplace situations is essential.

What if there is a stark drop in the value of some of your business investments, and this affects your routine functions? Now what? How should the business respond? What strategies should be used to stay afloat and make the best of the situation?

Scenario analysis and sensitivity testing is the way to answer all these questions.