FP&A (Financial Planning and Analysis)

FP&A stands for financial planning and analysis. It is the part of a finance function that plans where the business is going and explains why the numbers moved, rather than the part that records what already happened. A controller closes the books for March. An FP&A analyst asks why March missed the forecast by four points and what that means for the quarter.

The two functions share a general ledger and usually nothing else. Accounting works backward from transactions to a set of statements that have to tie out exactly. FP&A works forward from assumptions, builds a model, and accepts that the model will be wrong in specific, explainable ways. A reconciliation has one correct answer. A forecast has a range, and the range itself is part of the deliverable.

The core FP&A cycle runs in three stages. Budgeting sets the plan for a period, usually a fiscal year, built from revenue assumptions, headcount plans, and cost drivers negotiated with department owners. Forecasting updates that plan on a rolling basis, monthly or quarterly, as actuals come in and assumptions change. Variance analysis compares actuals to the plan or the prior forecast, decomposes the difference into price, volume, timing, and one-off effects, and turns that into a narrative a CFO can take into a board meeting. Flux analysis is the balance-sheet and income-statement specific version of this same comparison, done at close rather than against a budget.

Where FP&A sits in the org depends on company size. At a company with no dedicated finance hire, the founder does a rough version of all three stages in a spreadsheet, usually under pressure, right before a board meeting or a fundraise. Once a company builds a real finance team, FP&A typically becomes its own seat, reporting to the CFO or VP Finance, separate from the controller who owns the close. The data both sides need is identical: the same chart of accounts, the same actuals, the same trial balance. Getting that data from the close into a planning model on time, every period, is the recurring operational problem, and it is usually solved by export and re-entry rather than by anything that actually connects the two sides.

Related terms: Flux Analysis, Variance Analysis, Record to Report

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