Sensitivity analysis is a method used in financial modeling to examine how various independent variable values impact a certain dependent variable in a given set of circumstances. In other terms, performing sensitivity analysis as an FP&A professional determines how different types of ambiguity in a mathematical model affect the overall level of uncertainty in the model.

This method is used within predetermined bounds that hinge on one or more input variables. Also, sensitivity analysis is one of the best tools for decisions making.

How Does A Sensitivity Analysis Work?

It is sometimes referred to as what-if or simulation analysis, and financial analysts and economists are the most frequent users. Furthermore, you can use it to determine how interest rates impact bond prices and to forecast share values for publicly listed corporations.

Additionally, analysts can identify which factors are more important than others in influencing a choice using this method. As a result, it gives investors perspective on how various factors may affect the prospective returns on their investments. Also, the analyst will observe how the variables change in addition to how the input variable influences the target. Above all, sensitivity analysis enables predicting using previous data, allowing for the making of crucial corporate, economic, and financial choices. Therefore, as a finance professional, you need to learn it.

How to Perform Sensitivity Analysis as an FP&A Professional?

Do you want to master it?

Check these eight sensitivity analysis tables for a perfect illustration of what you can do to help your management. ( Source: FPANDA CLUB)

• Impact of price increase on “Profit in % of Sales.”

Source: FP&A club

• Price increase needed to grow the amount of profit by X%.

*(credits to FP&A club)

• Impact of price discounts on “Profit in % of Sales.”

(credits to FP&A club)

• Compensations of price discounts by volume increase.

*(credits to FP&A club)

• Impact of cost variations on “Profit in % of Sales.”

*(credits to FP&A club)

These tables created by Marina Gorodnicheva and Anna Oblakova, PMP®, Ph.D., from FPANDA CLUB show the impact on profit from:

• Price increase
• Price discount
• Volume increase
• Cost increase
• Cost decrease

My favorite table is the last one, where we can see the effect of the cost decrease needed to reach a certain profit. For example, if your profit is at 20% of sales, decreasing the costs by 3% will increase your profit by 2,4 points (new profit being 22,4%). Therefore, this can be really handy when management is asking for a sensitivity analysis during a meeting, and you can answer straight away by showing this table. Furthermore, with these tables, management and finance can set the appropriate target of cost reduction and/or price increase to reach the expected new profit level.

Advantages and Disadvantages of Sensitivity Analysis

Here are the pros and cons of performing a sensitivity analysis as an FP&A professional.

Pros

• It serves as a thorough examination of the variables’ behavior
• Typically results in more accurate forecasts
• Aids decision-makers in determining where they need to improve the financial model in subsequent versions
• Tests any economic model under a variety of scenarios, giving it more credibility
• Displays how sensitive the outcome is to variations in particular values.

Cons

• All results are based on assumptions about historical data, which renders them prone to error.
• Analyzing the interactions and correlations between variables, as well as any potential effects, is impossible when we consider each element separately

Benefits of Using Sensitivity Analysis

Management can receive a variety of relevant input from financial models that include sensitivity analysis in a variety of situations. Here are some of the benefits of performing Sensitivity analysis:

• Identifying the influencing elements. This covers what and how various outside circumstances affect a particular project or endeavor. As a result, management is better equipped to grasp how input factors could affect output factors.
• Minimizing uncertainty. Comprehensive sensitivity analysis models teach users about the various factors that have an influence on a project, which in turn tells project participants what to watch out for or what to prepare for in advance.
• Detecting mistakes. There could have been some undiscovered flaws in the initial hypotheses for the baseline study. As a result, management may identify errors in the first analysis by carrying out several rounds of the analysis.
• Making the model simpler. Analyzing the inputs may be challenging for comprehensive models. Therefore, users may learn more about what components don’t really important and can be eliminated from the model owing to their lack of materiality by undertaking sensitivity analysis.
• Delivering outcomes. Upper management can already be on the defensive or curious about a project. However, putting together an analysis of many scenarios helps decision-makers learn about other solutions.
• Reaching objectives. Long-term strategic plans may be established by management, and they must reach certain criteria. In other words, a corporation may understand better how a project might evolve and what circumstances must exist for the team to accomplish its metric objectives by undertaking sensitivity analysis.

Conclusion – Understanding Sensitivity Analysis as an FP&A Professional Gives You an Advantage

To sum up, every FP&A professional should include sensitivity analysis in his toolbox. Above all, it reveals the model’s flaws in further detail. Additionally, it reveals how responsive the selected optimal solution is to changes in the input values of one or even more independent variables.

Ultimately, if you want to broaden your financial knowledge and learn new analyses, tips, and insights, you can take my course and emerge in the finance world.

Many of you asked me how to learn Financial Modeling. Even if I considered myself knowledgeable in model construction, I recently discovered that there was much more to learn. Therefore, the last weekend I finally decided to act and took a course on Financial Modeling.

Here, as a result, I will share with you what I learned.

Why I Took a Financial Modeling Course?

First, here is why I took a course in the first place…

In my 14 years of experience, I have built a lot of financial models for audit clients, business cases, and for budgets. But thanks to LinkedIn, I met experts in Financial Modeling who were building models every day and used them in other contexts (company valuation, raising capital, issuing debt, private equity, real estate, etc.).

This is why I finally took the dive and jumped into the course of an expert (Chris Reilly) to upskill myself.

Here is what I learned from my research on Financial Modeling and from Chris Reilly’s course (Chris Reilly authorized me to share the information coming from his course).

When to Use Financial Modeling?

Financial Modeling is used in many industries and in many finance roles.

Here are some of the situations where you need to use Financial Modeling:

• Raise capital
• Grow the business organically
• Sell or divest business units
• Allocate capital
• Budget and forecast
• Value a business
• Financing through debt

Also, here are some of the financial jobs requiring modeling skills:

• Investment banker
• Financial analyst
• Private equity analyst
• Strategy consultant
• Auditor
• FP&A analyst
• Controller
• Credit analyst

Although it’s commonly assumed that Analysts are the ones primarily doing the modeling, I learned nearly all Finance positions at a company would also have some exposure, even CFOs.

Professional Financial Modeling Process

In the course I took, I first learned how to optimize the structure of my financial model.

Here are the five steps I found helpful:

• Start with raw data
• Then build your sub-schedules linked to the raw data and assumptions (headcount, expenses, investments…)
• Consolidate the information in the three statements (Income Statements, Balance Sheets, Cash Flow Statement)
• Build a summary sheet for management communication and executive summary presentations
• Finish with an error check (best practice is to have an error checking sheet)

Standards in Formatting

Ultimately, this is something I was not doing before, and I started doing it when I took the course. Now by using the same standards over and over, I can simplify the way I work with Excel and reduce the number of decisions I have to make on the format.

Here is an example of what standards in formatting can look like:

Another “pro tip” I found in my research was integrating a Loom video recording into the financial model. You can quickly record a set of instructions and create a video link directly inside the model using the =HYPERLINK function.

This is a great way to “humanize” the model and help new users navigate the file when they first open it.

How to Calculate Each Line Item of The Three Financial Statements

If, like me, you have a strong understanding of accounting; you might probably think that you can calculate financial ratios without help. But the template provided (see one example below) really helped me. It had everything in one place.

Each line item is defined in simple terms, and you even get an indication of how to calculate it.

This is something that can make you save a lot of time but also help you ensure that you and your team have the same standards in calculating financial ratios.

How to Proof Check Your Model with A Control Panel

Until this weekend, I rarely saw a relevant control panel in an Excel file.

But now I know I should add this module to nearly all my Excel files.

Here is why it is helpful:

• If you’re building a time series model, an Actual date field (linked to all the dynamic cells you want to be based on your actual date), so your model can quickly update with the latest actuals once they’re available.
• Error-checking cells that flag all model issues are ideally separated into “model issues” (problems with the file) and “business issues” (strategic indicators for the company).
• Link the “Master Error Check Cell” to all other sheets in your workbook, so you’re notified of issues the right way.

In the course, you get great examples of where to have error checks (for example, there is a check about the cash movement in the balance sheet being equal to the cash flow statement).

I’ve included an example below, although this one does not have the actual date field I mentioned above.

Conclusion

These main five points are what I learned thanks to my research and Chris’ courses. Also, to top it off, I learned some great best practices for the models I’ll build in the future. If you are interested in learning professional Financial Modeling, Chris gave me an affiliate link for his course.

My recommendation is to start with this course (that’s the one I took) to master the three statements in under two hours.

Here are three other articles from my blog that could be helpful for you:

• 9 Steps to Prepare Financial Statements
• What is Budgeting
• 5 Sales Forecasting Methods

FP&A analysts are responsible for analyzing and forecasting a company’s financial performance and providing insights to support decision-making.

They may also be involved in budgeting, financial modeling, and preparing reports and presentations to communicate financial results to stakeholders.

FP&A analysts typically work in finance departments and may report to an FP&A manager or director. They may work closely with other finance professionals, such as controllers, financial analysts, and financial planners, as well as with business unit leaders and other stakeholders.

What Is The Role of An FP&A Analyst?

The role of an FP&A analyst can vary depending on the size and industry of the company, as well as the specific needs of the FP&A team. In general, FP&A analysts are expected to have strong analytical skills and be proficient in financial modeling and data analysis tools. They should also be able to communicate financial information clearly and effectively, both in written and oral form.

Overall, the role of an FP&A analyst is to provide financial insights and support informed decision-making to help a company achieve its financial and strategic goals.

FP&A Analyst Roadmap of Actions During The First 100 Days

Here is a roadmap of actions you can take during your first 100 days as an FP&A analyst:

Start: Days 1-10

1. Interview your main stakeholders, including finance team members, other department heads, and your management.
2. Get to know the company and its financial systems and processes.
3. Review the company’s financial statements and key performance indicators (KPIs).
4. Learn how the company’s financial systems and processes work, including budgeting, forecasting, and reporting.
5. Understand the company’s financial policies and procedures.

Days 11-30

1. Build relationships and contribute to the finance team.
2. Build relationships with key stakeholders, including finance team members, other department heads, and external partners such as suppliers, investors, and clients.
3. Participate in meetings and discussions with the finance team and other departments to better understand the company’s financial performance and needs.
4. Identify areas for improvement in the company’s financial processes and systems, and prioritize the topics with your finance colleagues.

Days 31-60

1. Develop a strong understanding of the company’s financial goals and objectives and how the FP&A function supports them.
2. Use financial modeling tools, such as Excel, to analyze and forecast financial data.
3. Stay up-to-date on industry trends and market conditions that may impact the company’s financial performance.
4. Contribute to the development and maintenance of accurate and reliable financial forecasts and budget plans.
5. Communicate financial information clearly and effectively to non-financial stakeholders.

Final part: Days 61-100

1. Work closely with other departments to understand their needs and how they impact the company’s financial performance.
2. Collaborate with the finance team to ensure that financial reporting is accurate and timely.
3. Participate in strategic planning and decision-making processes to provide financial insight and guidance.
4. Identify and analyze key drivers of financial performance, and develop strategies to optimize them.
5. Use data visualization tools to clearly communicate financial information to stakeholders.
6. Leverage technology to streamline and automate financial processes, such as budgeting and forecasting.

And After?

1. Make a self-assessment of your work every 3 to 6 months.
2. Continuously seek to improve financial processes and systems.
3. Then, build a network of financial professionals and stay up-to-date on industry trends and developments.

The Bottom Line – Follow The Roadmap of An FP&A Analyst

In conclusion, the first 100 days as an FP&A analyst can be a challenging but rewarding period of learning and adaptation.

• The main areas of focus of this roadmap should be:
• Get to know the company and its financials
• Meet the key stakeholders
• Learn the FP&A processes and tools
• Understand in the budgeting process
• Develop financial models
• Revamp the financial results presentations
• Seek out opportunities for improvement

Therefore, by following this roadmap,  you will be well-prepared to make a meaningful contribution to the company’s financial success.

Furthermore, if you continue to build your knowledge and your skills, you will be well-positioned use your expertise as an FP&A analyst and make a lasting impact on the company’s financial performance.

This is why it is important to invest in yourself and learn the key skills needed to be an efficient and valuable FP&A analyst. If you want to steal everything I learned over the last 14 years, start with my course. If you need more specific help, feel free to email me.

Finally, if you want to get a new job but you don’t feel prepared for interviews, I combined the 50 most asked interview questions for finance jobs in a 64 pages guide. For each question I also explain how to answer these questions. Here is the guide to prepare yourself for Finance job interviews.

A valuable FP&A analyst is a professional who is responsible for providing financial analysis and support to an organization. In addition, this can include tasks such as creating financial models, developing budgets and forecasts, analyzing variances, and supporting decision-making processes.

Also, a valuable FP&A analyst often works closely with other finance professionals, such as controllers and managers, to ensure that an organization’s financial plans align with its strategic goals.

Become A Valuable FP&A Analyst

Here is your skill roadmap to becoming a valuable FP&A analyst.

Master All The Analysis Methods

• Learn Price Volume Mix
• Use sensitivity analysis
• Know how to calculate project variance
• Combine horizontal and vertical analysis to know where to focus on
• Make Pareto your best friend
• Be the best at using B.O.T.E estimations (Back Of The Envelope)

Get The Most Out of The IT Tools

• Make the machines work for you and not the opposite
• Identify the IT champions for each software
• Know all the data available
• Automate non-added value tasks to free up more time for analysis

Know The Accounting Basics

• Understand the general accounting principles (especially revenue recognition)
• Know your accounting policies
• Be comfortable with your cost accounting methods
• Speak the accounting language to communicate with the accounting team

Manage The Budget Process

• Be the person in charge of setting up and run the budget process
• Frame the assumptions and methods
• Know the different budget and forecasting methods and use the one bringing the most value
• Be the link between all departments as well as the link between the top and middle management to ensure consistency between the strategic and operative goals

Be The Best Finance Business Partner

• Understand your operational business partner goals
• Bring non-finance data with finance data to create more insights
• Manage priorities and demand
• Be able to explain Finance to Non-Finance People

Use Storytelling to Be A Valuable FP&A Analyst

• Get the right data
• Know how to visualize ideas
• Be confident when leading finance presentations in front of executive management
• Get your message clear (“The world rewards the people who are best at communicating ideas, not the people with the best ideas” – David Perell)

The Bottom Line – Become A Valuable FP&A Analyst Soon

It took me 14 years to learn all these skills, and I am still learning every day. With strong analytical and problem-solving skills, as well as a deep understanding of finance and accounting principles, an FP&A analyst plays a crucial role in the success of an organization.

But you don’t have to wait so long to become a valuable FP&A analyst.

If you are looking to move into FP&A or just looking to be a more valuable FP&A analyst, you can take my course.

How can you identify the reasons for the differences between your actual and budgeted sales?

There is one method that you need to know if you are an FP&A analyst: it is the PVM analysis. Thanks to this method, you can break down changes in revenue or margins into their constituent parts.

As a result, this analysis displays the discrepancies between projected and actual sales, along with the three key elements that may play a huge factor:

• Price effect
• Volume effect
• Mix effect.

Here is a detailed analysis of the best analysis method for FP&A.

Definition of PVM Analysis Method

PVM stands for Price Volume Mix. This analysis helps you compare two periods or actuals vs. budget. Therefore, it gives you the origin of variance.

Also, PVM helps you to know how much change comes from:

• Price
• Volume
• Mix

Prerequisite

You need to have the same level of detail in the two periods you compare.

The level of details could be:

• product
• country
• distribution channel

You need to know the price, volume and % of total (weight) in each of the period, at the level of details you choose to analyze.

Price

The effect of price keeping quantity constants. For example, if volume and mix are constants, increasing the price by 10% on all products, will increase the revenue by 10%.

Volume

Selling more products, even at the same mix and price, will increase sales. For instance, if you sell 5% more of all products, with a constant price, you will have 5% more revenue.

Mix

Even keeping total quantities and prices the same, sales can increase if we sell a higher proportion of expensive products. For example, if you have 2 products:

• Standard desk: 500$ x 10 = 5,000$
• Electric desk: 2,000$ x 5 = 10,000$
• Total budget: 15,000$

Also, if in actuals, you sell:

• Standard desk: 500$ x 5 = 2,500$
• Electric desk: 2,000$ x 10 = 20,000$
• Total actuals: 22,500$

Consequently, the increase of 7,500$ comes 100% from a better mix as we sold more of a more expensive product. But we didn’t change the price and we sold the same volume of desks in total.

What Can You Detect with The PVM Analysis Method?

You detect an increase in volume with negative mix effect
Next step: Check if the changes in volume is really aligned with the product portfolio strategy and why we decide to sell more of the cheaper products.

There is a new or one-off business event
Next step: Investigate business events and take measures.

You notice product cannibalism
Next step: Review product portfolio strategy and prioritize.

Impact from new and discontinued products
Next step: Revalidate business case assumptions.

Price changes
Next step: First, validate the prices. After that, perform elasticity & sensitivity analysis to choose the best price and supply chain combination.

Discount effects
Next step: Verify impact on profit and revisit discount strategy if use and results are not aligned with goals of the organization.

Exchange rate impact
Next step: Check for hedging strategies if the effect is significant.

Here is a summary of the

Conclusion – PVM Analysis Method Is Crucial for FP&A

PVM is the best method to understand the origin of your variance. Additionally, you can use it on other lines than revenue (margin, cost, payroll…). Furthermore, with visualization you can use a waterfall chart to show the origins of the variances.

Did you learn something with this free guide? It’s extracted from my video course.
For each topic, I proceed the same way:

• Methodology
• Example
• Practical application

Finally, to continue learning, you can take my course.

Financial planning and analysis (FP&A) is a critical function within any organization, as it involves forecasting, analyzing, and providing insights into the company’s financial performance. Those who are good at FP&A are able to provide valuable guidance to management on key financial decisions and can help drive the company’s growth and success.

If you are interested in pursuing a career in FP&A, there are several steps you can take to become good at it.

If you want to be good at FP&A, here are my five recommendations.

#1: Link Financial Data with Non-Financial Data

To get more value from your financial data, find a common identifier with non-financial information. For example, link sales with a sale document where you will get information about the client. Like the method of distribution, the contract, etc. Also, you can link the value of one product with its production order to have information about how many hours were spent to make the product. Also, when it was done, how much material was used, etc.

#2: Extend Your Data Analysis to Longer Periods

Usually, people make comparisons over one or two years. But if you extend your analysis over five years, you reduce the effects of one-off events, and you are able to validate trends.

#3: Create Groups of Items

Identifying trends if you sell 100s of products to 100s of clients can be tricky. However, if you group your items into three to five categories (not more), you will be able to quickly perform a Pareto analysis (80/20) and make more sense of the detailed data.

#4: Use Visualizations to Become Good at FP&A

Comparing figures is not the simplest exercise. You will have difficulties with it when you start having more than three data points to compare. But, if you convert the data into a graph, you can easily spot trends and outliers. Even better, you can compare two sets of data if you use a secondary axis. For example, comparing revenue with the number of store visits.

#5: Ask Your Operational Business Partner for Hints

Use your network and ask around what the issues people are having are. Ask which questions are often asked but never answered because nobody took the time to make a proper analysis. Get advice from your operational business partner on where to look to find insights. As a result, with their experience and their non-financial background, they will have topics in mind which are worth investigating. In addition, if you make combine hints from two different departments, you might identify something that was in the front of the eyes of everybody but was not visible due to siloed organizations!

The Final Verdict – It Is Not Hard to Become Good at FP&A

For professional growth and determining the areas where you need to focus more on improvement, it is essential to understand the most essential FP&A skills.

By following the recommendations, you can develop the skills and knowledge necessary to excel in this exciting and rewarding field.

Finally, this article is just the beginning. The information you just read is part of my course to help finance professionals become more valuable. If you are looking for some help, check out my course.

I bet you’ve heard of financial analysis before. Financial analysis is the foundation for any FP&A professional, but it can be hard work to know the different financial analysis methods!

Therefore, as a finance professional, your job is to analyze numbers, make sure they add up and provide insights into the business.

This article will teach you the 5 methods most FP&A analysts use in their work today!

Top 5 Financial Analysis Methods

Here are the  top 5 financial analysis methods

#1: Variance Analysis

In this method, you investigate the difference between actual and planned behavior/figure.

#2: Price Volume Mix

Used to analyze profitability. You calculate the impact of price change, volume change, and a combination of both.

Then, with a good visualization, like a waterfall chart showing the effect of the 3, you will be able to identify and communicate insights to your company.

#3: Financial Analysis – Sensitivity Analysis

Gives you different outcomes based on a variation of one input. Moreover, it’s ideal if you want to understand the effect of price increases or reductions on your profit.

4. Horizontal Analysis

Comparison against another period, reference (budget), or another company. In other words, this method is ideal for spotting trends over time.

5. Vertical Analysis

Analysis of financial statements looking at each line item as a percentage of a base figure within the statement. Therefore, it’s ideal if you need to compare units that have different monetary volumes or if there was a strong change in the volume of activity for a company if you compare to the previous periods.

The Bottom Line – The Financial Analysis Need to Be Executed Carefully

You can easily use Excel to carry out all of the aforementioned procedures by using a variety of formulas, operations, and keyboard shortcuts.

Given the immense value at risk and the likelihood for large data sets to include mistakes, analysts need to be certain they are following best practices when executing their work.

Ultimately, are you interested in learning these five financial analysis methods? Check out my online course, where you will find everything you need for your career success.

A company’s important business decisions and general financial health are supported by a collection of planning, forecasting, budgeting, and analytical activities known as financial planning and analysis (FP&A). Therefore, if you want to improve your FP&A skills, you have come to the right place. Moreover, in order to achieve this, you need to learn how to turn data into insights.

As a result, here are my top five recommendations for learning it.

#1: Link Financial Data with Non-Financial Data to Easily Turn Data into Insights

To get more value from your financial data, find a common identifier with non-financial information. For example, you can link sales with a sale document where you will get information about the client, the method of distribution, the contract, etc.

Also, you can link the value of one product with its production order to have information about how many hours were spent to make the product, when it was done, how much material was used, etc.

#2: Extend Your Data Analysis to Longer Periods

Usually, people make comparisons over one or two years. But if you extend your analysis over five years, you reduce the effects of one-off events, and you are able to validate trends.

#3: Create Groups of Items to Turn Data into Inisights

Identifying trends if you sell 100s of products to 100s of clients can be tricky. But if you group your items in three to five categories (not more), you will be able to quickly perform a Pareto analysis (80/20) and make more sense of the detailed data.

#4: Use Visualizations to Turn Data into Insights

Comparing figures is not the simplest exercise; our brains are not really good with it when we start having more than 3 data points to compare. But if you convert the data into a graph, you can easily spot trends and outliers.

Even better, you can compare two sets of data if you use a secondary axis. For example, comparing revenue with number of store visits.

#5: Ask your Operational Business Partner for Hints

Use your network and ask around about the issues people are having. Additionally, ask questions that are frequently asked but never addressed since no one attempted to do a proper analysis.

Furthermore, get advice from your operational business partner on where to look at to find insights. Often, with their experience and their non-financial background, they will have topics in mind which are worth investigating.

If you combine hints from two different departments, you may identify something that was in the front of the eyes of everybody, but was unavailable due to siloed organizations.

The Bottom Line – The Importance of Having Good FP&A Skills

Businesses are increasingly turning to FP&A as a reliable source of direction and assistance. Therefore, expect FP&A solutions to advance as firms grow more competitive and complicated to address new problems.

Finally, this is just one part of my course to help finance professionals become more valuable.

If you look for some help, you can read here more about my course.

I created an FP&A Mega Guide, which is a compilation of my best visual content for FP&A and Finance Professionals. Why did I create it, and why is FP&A important?

The series of strategic tasks known as FP&A—planning, budgeting, forecasting, and analysis—enables a business’s continued financial stability and capacity for expansion. Also, by fusing corporate strategy with decision-making, FP&A improves the finance department’s capacity to oversee performance.

FP&A Mega Guide Content

1. The 12 FP&A Principles
2. How To Be Finance Business Partner
3. Three Principles For Finance Professionals
4. PVM Analysis: Application In Real Life
5. How To Calculate The Exchange Rate Effect
6. Vertical Analysis
7. Infographic Financial Analysis
8. Budgeting Process
9. Zero Based Budget
10. Forecast Method: Risks & Opportunities
11. Sales Forecasting – Opportunity Stage
12. Rolling Forecast
13. CAPEX – Budget and Control
14. Infographic – Sales Forecasting
15. Infographic – 9 Levers To Improve Your Cash
16. CCC: Cash Conversion Cycle1
17. 3 Ways To Improve Cash
18. 3 Ways To Automate Your Work
19. 10 Chart Design Tips
20. How To Select The Most Appropriate Chart
21. Excel Tip 1: How To Make A Combo Chart
22. Excel Tip 2: Link A Textbox To A Specific Cell
23. Excel Tip 3: Reporting Figures In Thousands And Millions
24. Excel Tip 4: How To Solve Circular References
25. Excel Tip 5: How To Repeat Row Labels
26. Top 10 Excel Specialists To Follow
27. 10 Ways To Improve Your Reporting
28. CV Tips For Finance

Mega Guide for FP&A

12 FP&A Principles

Here are the twelve FP&A principles.

1. Develop a strategic long-range plan and identify specific initiatives & projects/ plans to execute it.
2. Identify resources needed to implement projects/plans and put them in the budget.
3. In addition, understand how operational plans will drive financial results and monitor the progress of those plans.
4. Quickly identify the business reasons behind plan-to-actual financial variances.
5. Also, make course adjustments when falling behind on financial or operational goals.
6. Cascade both financial & non-financial operational targets down the organization to more specific targets.
7. Furthermore, hold people accountable for delivering financial results & link to financial incentives.
8. Moreover, hold people accountable for delivering operational results & link to financial incentives.
9. Identify what drives business success and develop KPIs for those drivers.
10. Establish long-term and shorter-term targets for the KPIs.
11. Additionally, develop initiatives and operational projects to achieve KPI targets.
12. Finally, monitor the results of KPIs and link them to financial incentives.

The Bottom Line – The Mega FP&A Guide Will Boost Your Career Immediately

FP&A will continue to grow in value inside firms as it develops; it will always be a part of finance. But the information it offers and the tales it tells will guide choices throughout the firm, even at the highest levels. Furthermore, this mega FP&A guide will help you accelerate your career in no time!

If you are currently thinking of transitioning to a new role and want to grow your analytical skills, discover how my course can help you.

I’d like you to reflect on these 12 FP&A principles and pick two you want to focus on in the next four weeks.

More than 700 businesses from all around the world took part in a survey that Lawrence Serven and the Institute of Management Accountants (IMA) created. The methodology used in this survey set it apart from others.

Previous studies concentrated on a certain approach before going backward to identify success stories. Instead, the IMA survey concentrated on the unique FP&A practices employed by the most profitable firms. Both their goals and their rivalry are routinely met or surpassed by these successful firms.

Do you want to be a better finance professional?

12 FP&A Principles

#1: Principle: Develop a strategic long-range plan and identify specific initiatives and projects/plans to execute it.
#2: Principle: Identify resources needed to implement projects/plans and put them in the budget.
#3: Principle: Understand how operational plans will drive financial results and monitor the progress of those plans
#4: Principle: Quickly identify the business reasons behind plan-to-actual financial variances
#5: Principle: Make course adjustments when falling behind on financial or operational goals
#6: Principle: Cascade both financial and nonfinancial operational targets down the organization to more specific targets
#7: Principle: Hold people accountable for delivering financial results and link to financial incentives.
#8: Principle: Hold people accountable for delivering operational results and link to financial incentives
#9: Principle: Identify what drives business success and develop key performance indicators (KPIs) for those drivers
#10: Principle: Establish long-term and shorter-term targets for the KPIs
#11: Principle: Develop initiatives and operational projects to achieve KPI targets
#12: Principle: Monitor results of KPIs and link them to financial incentives

Here is a recap of the principles

The Bottom Line

In conclusion, the best-managed organizations pay just as much attention (if not more) to operational planning than they do to financial planning because they have a clear knowledge of how operational changes will affect financial performance.

People are responsible for achieving particular operational and financial results in the best-run businesses. They have the resources necessary to achieve those outcomes, and after presenting their case, those resources have been explicitly included in the budget.

Finally, if you want to know more about FP&A and finance, you can take my course.

This article is based on a publication from Lawrence Serven and Kip Krumwiede for the IMA | Institute of Management Accountants.