Financial Planning and Analysis (FP&A)

1. What is Financial Planning & Analysis (FP&A)?

Financial Planning & Analysis (FP&A), in general, converts long-term strategic plans into detailed business objectives for specialised departments in the company. To do this, at first, the FP&A team will conduct quantitative and qualitative analysis to evaluate business performance, map out future goals and plans. Then, they advise the CFO and the Board of Directors on how the company can improve and explore its potential growth. Besides, they deliver these plans in the form of detailed objectives.

Financial Planning & Analysis (FP&A) is a segment within corporate finance, together with Controller and Treasury. The team is in charge of four main roles: analysis – planning – forecasting – reporting. FP&A conducts quantitative and qualitative analysis to evaluate business performance, map out future goals and plans, and advise the CFO and the Board of Directors on how the company can improve and achieve its growth potential.

FP&A, generally speaking, converts long-term strategic plans into detailed business objectives for specialised departments in the company. Therefore, the FP&A team is, could be said, the central contact point between the company leaders and other operation teams, including Sales, Marketing, Accounting, Treasury, Operations.

2. What Does FP&A Do?

Typically, the main responsibilities of the FP&A team include: budgeting-forecasting and decision support. Budgeting-forecasting is to which focuses on analysing company performance, while decision support, which gives advice based on the data.

2.1. Budgeting and forecasting

FP&A is responsible for connecting long-term strategic management plans to detailed business objectives, by converting high-level strategic targets (revenue, net income, core strategic initiatives, etc.) into more detailed business tactics, in the form of an operational plan and a financial plan. 

Regarding the budgeting process, historically, FP&A professionals would develop a static budget for each year and update it annually. However, as the budget gets stale quickly, now they must create a regularly updated budget, called the “rolling forecast”, which can be used either alongside the traditional budget or as a replacement.

Meanwhile, in the forecasting process, FP&A teams conduct variance analysis to compare the difference between projected numbers and actual performance.

2.2 Decision support

Talented FP&A crews do more than just forecasting: they provide valuable advice on performance improvement, risk minimisation, and acquisition opportunities from both inside and outside the environment. They do the monthly report for CFO and senior management team, called the “CFO book” or the “Senior Management book”, covering historical financial analysis, variance explanations, forecasts with updated risks and opportunities, and KPIs. The report provides data-driven answers to business questions from external stakeholders, and identifies various levers that can pull to optimise performance and meet goals.

3. Career Path and Progression in FP&A

The FP&A career path starts at the analyst level and progresses to the director of FP&A:

4. FP&A Exit Opportunities

After the Director/VP level, most FP&A professionals tend to stay within FP&A, either in their current organization or at other companies. At large companies, directors can progress internally by taking on responsibility for larger P&Ls.

Besides, another option is to become a CFO, however, this is uncommon with only one vacancy available. Those FP&A professionals looking for this progression usually turn to other key functions in the association, such as Controller, Business Development, Corporate Development, and Operations, in order to get the well-rounded skill sets to meet the requirements of the CFO position.

A small percentage, about 10%, of FP&A goes to investment banking or private equity, or moves to other areas of corporate management, for example, sales and marketing or human resources.

An exit option is to start their own business or become a private business consultant. FP&A professionals are analytically minded and curious enough to start up in a vast range of industries.

5. FP&A Salary – 2021 Updated

FP&A professionals earn a decent amount of compensation at $100,000 on average, according to the US Bureau of Labor Statistics, higher than those working in insurance and related fields with only $77,000. 

Disclaimer: The bonus and total compensation is not listed due to the unavailability of data, not it is excluded from FP&A salary.

This compensation rate varies substantially between different industries and companies. And bonuses are also very dependent on the company’s size. 

Several variables affect compensation, in which cost-of-living factors and analyst’s performance are the most significant two. For example, the big tech company in an expensive city will be more likely to offer higher compensation than a company in another less hybrid region. Besides, the FP&A analyst’s ability to help the company achieve its business goal decides his/her salary. However, this might lead to problems if an analyst creates overly conservative growth strategies designed primarily to ensure that profit targets are merely hit rather than maximized.

6. Is FP&A a Good Career?

Working in FP&A is an exciting career path, critically important to the company’s growth and financial survival, with great exposure in financial modeling, close contact with CFO and seniors supporting their decision-making, and better work-life balance.

FP&A professionals are exposed to extremely detailed and important financial modeling used for executive decision making, making it the perfect match for those who love to play around with data and management tasks. Besides, they meet up directly with board members and C-level executives, making it a great opportunity for non-technical skill development, such as clear communication or people management. 

Furthermore, FP&A jobbers have a reasonable work-life balance compared to investment banking or consulting, with a working span from 45 to 55 hours per week. 70 hours is their peak in intensive seasons, like quarter/year-end close and planning sessions.

7. What Skills Are Needed to Do FP&A?

7.1. Financial skills

Nearly half of FP&A analysts’ time is spent on quantitative tasks – building financial models, analysing a variety of data sources (including sales, marketing, human resources, and operations), and drawing valuable insights from them. Therefore, they must excel at math and have an appetite for crunching numbers. That is why, usually, many people in this role are former accountants, or at least have a background in finance or economics.

7.2. MS Office skills (especially Excel)

Junior analysts are rarely expected to have strong work experience but certainly are required to be proficient in MS Office tools. Despite the buzz around automation, artificial intelligence and machine learning, FP&A reality in many companies is still linked to handling numerous Excel spreadsheets.

7.3. Problem-solving

FP&A are also outstanding problem solvers, deciphering the financial puzzles of the company to formulate business growth potentials. They must have the ability to consolidate and reconcile financial data, then provide value-added insights to assist the company in improving its performance and exploring opportunities for growth, supporting major corporate decisions of CFO, CEO, and Board of Directors.

7.4. Communication

Strong communication is the key to talented FP&A professionals. Working with busy high-level executives, like CFO and senior managers, FP&A team members must have the ability to explain financial details and concepts in lay terms, deliver clear communication to give projections of what is the next step. Besides, they also collaborate closely with other operational departments with revenue and expenses targets, convincing them to stay on task.

8. How to Get a Job in FP&A? 

8.1. Common pathways to land a job in FP&A

FP&A professionals have a less standardized career path than investment bankers or consultants. Usually, it would be similar to the career map below:

Besides, the FP&A position is also open to those who have non-traditional backgrounds, such as not majoring in Accounting. For your profile to be competitive, however, you must enhance your skills and knowledge.

8.2. FP&A recruitment process

Getting into FP&A is quite difficult, but the good news is: by the mid-2020s, the Corporate Finance industry has 20% more vacancies available, which means now you have a better chance.

The recruiting process goes from Resume, Fit Interview, and Technical Interview. However, to maximise the acceptance rate, the preparation to get into FP&A will include 4 steps:

Step 1: Network and find mentors

Step 2: Have an internship or relevant accounting/finance experience

Step 3: Prepare Resume & Cover Letter

Step 4: Pass the Technical Interview & Fit/Behavioural Interview

8.3. Network for FP&A offer

Networking is always the can’t-go-without part of an individual on his way to a successful career. There are two common ways to network:

• Networking through the alumni community: Usually the most effective method. You start with acquaintances who are alumni of your university or peers from your banking clubs, contact them and ask for mentorship and referrals.
• Cold-emailing/Cold-calling: You find them through LinkedIn or similar means, send emails to establish contact and request for a meeting. Most of the time, you will be rejected, but if you play the cards right, you will get someone on your side.

The sooner you start networking, the better. Ideally, it should be at least 6 – 12 months before the application begins. We have a comprehensive networking guide that can help do wonders to your relationship settings, please check it out!

8.4. Internship or relevant Accounting/Finance experience

The internship is a great way to showcase your commitment to the industry, as well as your competitive work skills. 

• If you are a student, expose yourself to as many Accounting/Finance related scopes of works as possible. If you are not from a traditional background, gain a designation, i.e CPA, CMA/CFM, FP&A Certification from the Association of Financial Professionals. This helps to lay the foundation for your dream job while enhancing your competitive profile at the same time.
• If you are a graduate or a professional, seek a place in Big 4 accounting firms or Fortune 500 Accounting/Financial companies, stay for 1-3 years before getting admitted as an FP&A Analyst. A more common path is to take an MBA and enter FP&A as a Senior Analyst after graduation. In addition, a switch from investment banking is looked at positively, however, it is less common.

8.5. FP&A resume

Sell yourself with a paper, through two factors:

• Record of past achievements: They could be your GPA/ test scores, awards and honours, leadership experience, high-profile work experiences.
• Passion for Accounting/Finance: This can be shown through your chosen major, extra coursework, past internships, etc.

However, many of you out there still have not figured out a way to differentiate yourself from the heavy crowd with many common mistakes made. We are here to help. Check out our resume to make you shine with your dream employers.

8.6. FP&A interview

This is the toughest element of the recruitment process, as the recruiter now looks at you in a more detailed way. You and the company now also have the chance to understand each other better, to know whether you two are a match!

The interview process may include multiple rounds, depending on the company and your aimed position, but can be divided into 2 solid rounds: Fit/Behavioural Interview and Technical Interview.

• Technical Interview, the most challenging part, is designed to test your knowledge and abilities in accounting, finance, valuations, and practical deals. Besides, knowledge about the market, practical deals and company will also be examined. Your work is to keep abreast of news about markets, imminent IPO, bond issuances, and mergers & acquisitions on a daily basis. 

Fit/Behavioural Interview learns how previous academic and work experience fits into the division/industry you apply for. The questions always surround: (1) Walk me through your resume (introduce a little bit about yourself), (2) Your strengths and weaknesses, (3) Your achievements and failures, (4) Future plan and why FP&A?. The tips are: craft your own stories and back them up with data-driven evidence.