7 Best Practices In Financial Planning & Analysis

7 Best Practices In Financial Planning & Analysis

Financial Planning & Analysis

Performance Management

It is no secret that the budgeting process has become time-consuming and inflexible for the modern needs of finance. Not only are finance managers swimming in spreadsheets, every time there is a change to a new are-you-kidding-me-this-is-made-up-number, but employees must also update those spreadsheets again and again and again.

By David Pooley

Vice President

Employees spend more time on getting the updates right in the system rather than thinking thru the impact of each change, where one change results in a downstream impact of many others.

We know CFOs demand forecasts to be accurate, timely, and relevant, and every change adds another delay. Yet, seldom do leaders take a step back and take a pulse on the company atmosphere. A recent AQPC study showed that financial analysts spend 47% of their time collecting and validating data, with another 30% time devoted to administering the process. That leaves only 23% - 23%! - to provide value-added analysis.

Internal systems can drag organizations — and frankly morale — down. How can organizations get the most out of their employees’ time and internal systems? By creating processes that allow your team to make business-forward decisions.

Here are seven best practices in Financial Planning & Analysis:


Fact: 60% of organizations do not link operation plans to strategy.

When companies have a clear plan on the steps they need to take and track and measure their successes to that plan, they are more successful. Find ways for your company to develop a culture of analytics. Set annual targets and measure your success against them. By having these metrics top of mind, your organization can set projects and link operations that will help your FP&A teamachieve these goals. As a result, employees will use analytics and planning to facilitate conversations and evaluate projects against company initiatives. It’s a win-win for everyone.


Unlike the famous infomercial, your organization cannot “set and forget” your forecast. Things change, and a single event could derail everything. Trade tariffs, costs of commodities, changes in tax rules all have immediate and material changes to plans set over the last year. Your organization needs to develop a lightweight process that is not only fast and flexible but also is dynamic and integrated with business drivers. By doing so, your employees can analyze those drivers and can create in-the-moment action plans to address performance gaps. These rolling forecasts allow employees to look at metrics and adjust accordingly.

Keep in mind: rolling forecasts are not just another control system and employees shouldn’t perceive them as just another reporting burden. Make sure your FP&A team understands that these forecasts provide visibility and insight into key metrics.


Focusing on the wrong drivers is a waste of everyone’s time. If employees’ attention is elsewhere, they may miss opportunities that can impact the bottom line is a big way. What current and new drivers should your organization focus on to be successful? There are three types:

  • Logical: valid and coherent relationship

  • Actionable: the ability to influence outcomes

  • Relevant: a strong correlation between the driver and the result

Keeping these types of drivers in mind, your organization should carefully construct relevant models and ensure integration of drivers. The goal of a well-designed driver model should link the right level of detail, the right speed and flexibility, and right mathematical complexity necessary to run fast and frequent scenarios. Over time consider adding additional drivers and/or level of detail aimed at improving forecast accuracy and reducing the level of effort to maintain the planning ecosystem.


Many companies ask, “What do you need to be successful?” However, the question companies should also ask is, “Who do you need to be successful?”

Ensuring that your organization has the right amount of workforce staffed is just as important as ensuring that your organization has the right amount of capital required. As you look at your plan, incorporate as many details as possible into the operations you need to achieve it. Leading organizations invest in purpose-built models aimed at driving accuracy and consistency around both capital planning and workforce planning. Both processes have the potential for large financial variances if common logic, tax changes, assumptions and financial intelligence are not adopted across the corporation. Efficiency and effectiveness of high impact common applications not only reduces effort but also makes for a foundation of a growing organization where consistency of spend is critical to success.


What’s the worst that could happen? Luckily, technology advancements now allow companies to test those very scenarios.

Sandboxes allow business users to test new assumptions. Through technology, employees can go beyond spreadsheets and define the process for extending analytical models. If leadership suggests a proposed change, employees can test the effects of that decision without actually impacting business. Then, once employees collect the data, they can make sound decisions without worrying if these will have negative effects on published scenarios.


In the same line of thinking, if your organization can test those “what-if scenarios,” you can then move from possibly to probably, mitigating risk and uncertainty through testing. Employees can review a full range of outcomes and know the probability of a particular outcome. By having your team review the full range of outcomes, they can understand how certain key factors impact your business.

For example, can your team "dollarize" the impact of rising oil prices on key manufacturing costs and the costs of carrying higher inventory levels to cushion the impacts of rising prices? If so, they understand the financial costs of ‘self-insurance’ or hedging contracts designed to absorb these topside risks to a potential outcome. Having a planned and costed scenario in mind coupled with a playbook versus reacting to the market adds significant value during uncertain times. By quantifying the risk of swings in key costs like commodities and the need to revalue cost of goods sold, your organization will be more stable in the long run through continuous and active planning.


Our friends in marketing and communication always create emergency and crisis communication plans. They have plans in place if “x” happens or “y” occurs.

In the same way, your FP&A team should develop a strategy for governing change in reporting structures. Provide what-if visibility into the new structure before implementation. Management and reporting changes happen at the speed of business and planning and reporting environments should be fast, flexible and accurate to change. Building in business resiliency is critical to high-performing FP&A teams.

The budgeting and planning process in many companies has become inflexible, time-consuming, and lacks additional value beyond adding up the numbers and keeping score. By investing in best practice processes and a modern technology platform FP&A teams can navigate rapid business change, model up possible outcomes and actively manage change at the speed of business to ensure success.