Learn why modern business operations start and succeed with a robust financial planning & analysis strategy.
If you’ve ever tried to steer a business through shifting markets, ambitious growth plans, or the tricky middle ground between big ideas and stark reality, you’ve experienced the weight that effective financial planning and analysis (FP&A) can carry.
FP&A is about more than just crunching numbers. At its best, it’s the connective tissue between strategy and execution, bringing financial data, operational inputs, and critical insights together. When FP&A works the way it should, it helps finance teams work more efficiently, accurately, and collaboratively. That means everyone from the chief financial officer (CFO) to front-line analysts can forecast with confidence, base key business decisions on actual metrics and market research, and stay agile in the face of perpetual change.
Research from PwC suggests that companies that streamline core FP&A processes like financial reporting, budgeting, and forecasting consistently outperform their peers – and they’re able to spend nearly 20% more of their time on data analysis rather than data processing.
And yet, many organizations still struggle to get FP&A right. Today, finance leaders face an unpredictable economy, fragmented tech stacks, endless “what-if” scenarios, and constant pressure to do more with less, all of which undercut their planning efforts. Ultimately, almost 9 in 10 (87%) feel that their FP&A program needs improvement, leading to missed targets, shortsighted decision-making, and costly operational delays.
To summarize, FP&A is a tough function to understand, let alone to navigate successfully. But that’s exactly what this guide is for.
Below, we cover what FP&A is (and isn't), how core functions like budgeting and financial modeling contribute to larger business strategies, how emerging tech-powered tools are transforming the space, and which best practices you can follow to optimize your process – plus some real-world examples to demonstrate how it all works in practice.
Whether you’re a seasoned CFO navigating macroeconomic headwinds, an FP&A manager looking to modernize your forecasting process, or a financial analyst trying to make sense of sprawling spreadsheets, consider this your go-to resource to refine your objectives, enhance your process, and drive better financial outcomes.
Pigment is the leading FP&A platform for modern finance teams. Learn why.
What is FP&A in finance?
Financial planning and analysis (FP&A) is a set of strategic activities that support a company's financial health and profitability. Among other critical functions, it’s responsible for integrated financial planning, budgeting, forecasting, and reporting, with the goal of making decision-making more efficient and effective.
Put simply, FP&A helps organizations understand where they are financially, where they are (and should be) headed, and what they need to do to get there. It connects the dots between financial data and business goals, allowing business leaders to plan with clarity and confidence.
In an increasingly volatile and competitive environment, reactive financial planning isn’t enough. Per a recent Gartner survey, over 70% of CFOs are now expected to take on high-level business responsibilities beyond finance alone. They need flexible, data-informed strategies to deliver actionable insights that keep them one step ahead of the market – and that’s exactly what effective FP&A provides.
Corporate FP&A and business unit FP&A
At larger, enterprise-level organizations, FP&A is often split into corporate-level and business unit-level teams. While each serves a distinct role, the overarching objectives are shared.
Corporate financial planning and analysis (corporate FP&A) is typically responsible for company-wide financial planning, consolidating data from across departments to build high-level budgets, forecasts, and board-ready reports. The main goal is to ensure every part of the company is aligned with strategic goals and financial targets.
Meanwhile, business unit-based financial planning and analysis (BU FP&A) is typically nestled within a specific division, like a regional office or product line. These FP&A teams partner closely with leaders of local departments, like sales or product heads, to build more operational forecasts, track performance against concrete KPIs, and provide analysis that guides day-to-day decisions. They have a deep understanding of and serve as strategic advisors within a specific area of the business.
To break it down:
- Corporate FP&A looks across a business.
- BU FP&A looks in detail at a specific part of that business.
In other words, corporate FP&A sets the course, while BU FP&A takes the wheel at street level.
FP&A vs. accounting: what’s the difference?
While both FP&A and accounting teams work with financial data, they have fundamentally different aims. The main purpose of an accounting team is to ensure a company’s books are accurate and fully compliant. Meanwhile, an FP&A team uses those books to craft a plan for the future.
Think of it this way: if accounting can tell you where your business has been, FP&A helps you understand where it’s going.
Both functions are essential to a company’s success – and when they work well together, they promote sustainable growth, stability, and agility.
We can draw out the differences and similarities in a simple chart:
Core functions of FP&A
As noted, an effective FP&A program helps businesses plan smarter, respond to change faster, and secure better outcomes. Here’s a closer look at the core tasks and responsibilities that make up an FP&A team’s day-to-day activities and impact.
Budgeting
Budgeting is the process of building a financial plan that maps out a business’s expected revenue, costs, and resource requirements over a given period (typically a year). It sets targets, defines proper guardrails and controls, and sets organization-wide expectations for what is and isn’t possible for the year ahead.
Budgets feed into everything from departmental headcount planning to capital expenditure (capex) approvals and company OKRs.
🔎 For example: If a marketing team wants to double their paid ad spend next year, the FP&A team could work with them to evaluate last year’s ROI, align on a realistic growth projection, and develop a budget that supports acquisition targets without encroaching on company margins.
Learn more about budgeting → [link to budgeting spoke page, once live]
Forecasting
Forecasting is the forward-looking counterpart to budgeting. It uses real-time data, trends, and refreshed assumptions to predict where a business is actually headed (instead of where it hoped to go).
In that sense, it’s a more dynamic, flexible, and responsive process than budgeting, offering leaders a current view of financial performance and helping them adjust plans before any surprises arise.
🔎 For example: Let’s say, halfway through the year, sales is lagging 15% behind target because of a delayed product launch. Through forecasting, FP&A could update revenue predictions, model cash flow impact, and advise a slowdown in hiring to preserve runway – well before the CFO gets a surprise at the end of the quarter.
Two prominent types of financial forecasts are:
- Rolling forecasts, which extend the planning window with each new period instead of being tied to the calendar year – for example, always projecting 12 months ahead. This helps teams stay agile, spot emerging trends early on, and shift resource allocation as needed.
- Driver-based forecasts are built around the critical factors (or drivers) that influence performance – like headcount, conversion rates, or deal size. By adjusting these inputs, FP&A teams can model how changes in strategy or operations directly impact financial outcomes.
Learn more about forecasting → [link to forecasting spoke page, once live]
Strategic planning
Unlike a quarterly or annual budget, strategic long-range planning (LRP) typically looks three to five years into the future and aligns finance goals with broader company objectives.
An FP&A team then uses these plans to assess upcoming capital needs, investment priorities, and growth projections.
🔎 For example: If an organization is considering expanding into a new market in the coming year, long-range planning could help estimate the timeline, cost, and potential financial impact of such a move.
Learn more about long-range planning → [link to long-range planning spoke page, once live]
Scenario planning
Scenario planning (or “what-if” modeling) helps companies envision multiple potential futures, including best-case scenarios, worst-case scenarios, and everything in between.
That makes it a powerful way to stay agile and prepared in moments of uncertainty while testing strategic decisions along the way.
🔎 For example: An FP&A team might ask: What if sales dip 15% in Q2? What if a key product launch becomes delayed? With scenario planning, they could plot out the resulting financial ripple effects across the company, so executive leaders can mount an informed response.
Learn more about scenario planning → [link to scenario planning spoke page, once live]
Variance analysis
FP&A teams don’t just plan; they also track how a business is performing against that plan.
Variance analysis means identifying and explaining the gaps between forecasted and actual results. It helps businesses course-correct in real time and make better predictions moving forward.
🔎 For example: If marketing spend ultimately came in at 10% over budget, variance analysis could dig in to see whether this was due to higher-than-anticipated advertising costs, increased competition, or productivity issues – and whether the ROI ultimately justified the overage.
Learn more about variance analysis → [link to variance analysis spoke page, once live]
Performance management
Proper FP&A helps define and track metrics that matter, from revenue and margins to customer acquisition costs (CAC), churn, or productivity.
The best FP&A teams don’t just report KPIs or treat them as numbers. They see them as signals that tell a business how it’s performing, where to focus its resources, and what emerging trends and patterns indicate areas for improvement.
🔎 For example: Through monitoring, an FP&A team might notice that CAC is rising every quarter despite steady marketing spend. A deeper dive could show that lead quality from a new channel is low, leading sales reps to spend more time qualifying new accounts. Surfacing this insight might allow them to recommend reallocating ad spend and optimizing distribution channels.
Learn more about financial KPIs → [link to financial KPIs spoke page, once live]
Cash flow and P&L analysis
While treasury teams often own cash management – and accounting teams typically report on cash flow after the fact – FP&A plays a role in forecasting and modeling capital inflows and outflows by working with financial statements.
This ensures an organization has the funds it needs to operate, invest, and grow. It often includes analyzing payment terms, invoice schedules, and vendor payments to optimize working capital and avoid unnecessary surprises.
🔎 For example: An FP&A team might notice that accounts receivable (AR) collection times are stretching beyond 60 days, compromising the company’s ability to fund an upcoming marketing campaign. Using cash flow analysis, they could flag this issue early on, model the potential impact on runway, and work with both finance and sales leaders to stagger ad spend and avoid a cash crunch.
Learn more about P&L analysis → [link to P&L analysis spoke page, once live]
Management reporting
FP&A teams are responsible for translating complex financial data into clear, actionable insights for business leaders and board members. Instead of just showing the numbers, they need to tell the story behind the numbers.
This includes building key points into recurring reports like monthly business reviews (MBRs), executive dashboards, and KPI summaries. The best reveal what’s working, what’s not, and what requires further attention, without overwhelming stakeholders with information overload.
🔎 For example: Ahead of a quarterly board meeting, an FP&A team might prepare a presentation showing how, while total revenue is tracking to plan, churn among enterprise accounts has spiked 40%. The report might go on to explore the underlying cause, quantify the impact on annual recurring revenue (ARR), and propose some solutions in a series of simple charts and graphs.
Learn more about financial reporting → [link to financial reporting spoke page, once live]
The business value of FP&A
Rather than a back-office function, forward-thinking business teams treat FP&A as a strategic engine that fosters sustainable growth. It can empower business leaders to act with clarity and confidence – or open the door to costly missteps and delays.
Below, we explore both sides of the equation: what organizations stand to lose without proper FP&A and what they stand to gain when they get it right.
The costs of ignoring FP&A
Ignoring or underinvesting in FP&A can come at a high cost. Some of the most notable consequences include:
- Missed revenue targets: Without precise planning and forecasting, it’s easy for business teams to set unrealistic goals or overlook the warning signs that they’re veering off track.
- Poor resource allocation: Without data-driven planning, teams may over- or under-hire or spend too much in the wrong areas, burning cash without solid ROI to show for it.
- Slow or reactive decision-making: Lacking up-to-date financial insights, business leaders are forced to make decisions based on gut instinct, lagging reports, or incomplete data – leading to delayed or risky choices.
- Lack of alignment: When finance teams aren’t working closely with other departments, planning can become fragmented and disconnected from high-level business needs.
- Cash flow surprises: With no visibility into future inflows and outflows, companies may face liquidity holes, missed or late payments, or delayed investments.
- Inability to navigate change: No FP&A means no scenario planning, which means a company can’t respond quickly when their business model shifts – let alone the market or the economy at large.
Benefits of FP&A
On the flip side, when FP&A is working, it’s not just a safeguard against loss; it becomes a true value driver. Organizations with an effective FP&A strategy enjoy:
- Data-driven decisions: FP&A processes take data sets from multiple sources and distill them into clear, actionable insights, so business leaders can chart a decisive, informed path forward.
- Cross-functional collaboration: By connecting finance teams with sales, HR, product, and other departments, FP&A creates shared goals across an organization.
- Smarter growth plans: Whether expanding into a new market or bringing a new product to market, FP&A can help a business pressure-test big bets with real data and realistic projections.
- Culture of accountability: FP&A sets clear budgets, forecasts, and KPIs, so everyone from team leads to executives knows what they’re aiming for and how success is measured.
- Higher stakeholder confidence: FP&A can equip leadership with accessible reporting and thoughtful analysis, helping them earn trust, secure funding, and defend strategic business moves.
- Proactive risk management: From modeling churn scenarios to stress-testing runway, FP&A gives companies the foresight to address risks before they become crises.
Want to learn more about the business benefits of effective FP&A? Watch our on-demand webinar on how Pigment turns raw data into smart decisions.
How to develop an effective FP&A strategy
Implementing an effective FP&A strategy starts with more than just the right tools and templates; it also requires the right team, processes, and mindset.
Below are the foundational building blocks that can help any organization work FP&A to their advantage.
1. Start with the right team structure.
A fully formed FP&A team typically includes FP&A analysts, managers, and a director or VP reporting directly to the CFO.
At the executive level, FP&A leaders act as key strategic business partners, working alongside the CEO and other C-suite leaders to align financial insights with company-wide goals.
2. Define clear roles and responsibilities.
Productive FP&A teams should focus on five key areas:
- Data collection and hygiene
FP&A analysts gather financial and operational data from across a business, including from sales, marketing, HR, and other departments.
Enforcing data integrity is a non-negotiable first step, low-quality inputs lead to unreliable forecasts. API-driven integrations and modern data connectors can automate much of this process and ensure accurate data sets.
- Reporting and analysis
FP&A teams need to aggregate and analyze raw data sets to identify key trends, track important patterns, and build reports and dashboards that support informed decisions. Outputs should be updated regularly to reflect the latest business performance metrics and market dynamics.
- Database management
With data constantly flowing in, FP&A teams must maintain clean, centralized financial data systems. Among other advantages, strong governance practices help prevent errors, reduce duplication, and enable real-time reporting.
- Financial modeling
One of the FP&A team’s most important duties is building financial models that explore multiple “what-if” scenario plans. These models help forecast revenue, expenses, cash flow, and capital needs, so business leaders can plan confidently even in the midst of uncertainty.
- Operational effectiveness and enablement
Modern FP&A teams juggle multiple tasks at multiple levels. As a result, they need to streamline manual tasks through software adoption and automation, so they can support business units with proactive insights that improve performance across departments.
3. Invest in the right skill sets and tools.
Today’s FP&A professionals are expected to be both analytical and strategic in their work. Core competencies to look for when building your team include:
- Advanced financial modeling abilities
- SQL and data visualization tools (like Tableau or Power BI)
- Business acumen and communication skills
- Experience working cross-functionally with areas like accounting, HR, operations, and GTM
For finance professionals growing into an FP&A role, programs like the Certified Corporate FP&A Professional (FPAC) or Chartered Financial Analyst (CFA) certifications can deepen their financial expertise and accelerate their career path.
Important FP&A metrics and KPIs
Effective FP&A hinges on tracking the right metrics, from figures that reflect business health to those that promote accountability. While exact financial KPIs vary by industry and company stage and size, there are six fundamental categories that every FP&A team should monitor:
1. Revenue metrics
- Total revenue/ARR/MRR calculations, which serve as the main benchmarks of a business’s growth and momentum
- Revenue by segment, region, and/or product, which helps identify key performance drivers and areas in need of improvement
2. Expense and efficiency metrics
- Operating expenses (OpEx), which track cost discipline and efficiency
- Operating leverage, which measures how revenue growth is outpacing cost growth over time
- Spend versus budget, which flags overspending or underspending across departments
3. Profitability metrics
- Gross margin, which indicates how efficiently a company produces its goods and services
- EBITDA/net income, which are key bottom-line indicators used in board and investor reports
4. Cash and liquidity metrics
- Cash burn rate, which is especially crucial for startups and other high-growth businesses in managing their runway
- Free cash flow (FCF), which offers a true indicator of financial health and strategic flexibility
5. Productivity metrics
- Revenue per employee/rep/customer, which shows how efficiently teams or customer segments generate revenue
- Sales pipeline coverage, which tracks whether sales opportunities are sufficient to hit future targets
6. Forecast accuracy
- Budget versus actuals, which measures how well planning reflects reality – a critical metric to assess credibility and agility
Best practices to live by
To make these metrics meaningful and drive lasting impact, high-performing FP&A teams follow a few important steps:
- Aligning KPIs to strategic goals: Don’t just report what’s easy to measure; focus on what truly propels your business forward.
- Partnering cross-functionally: The best insights come from working closely with sales, HR, operations, and other teams – hardly ever in isolation.
- Embracing continuous planning: Replace annual fire drills with rolling forecasts and ongoing scenario modeling to stay agile year-round.
- Telling the full story, not just the math: Use visuals, provide context, and build in recommended next steps to make reports actionable and digestible for business leaders.
- Automating where possible: Free up your team’s time for high-impact analytical and strategic projects by automating routine tasks like data consolidation, report building, and variance tracking.
The key to the best possible FP&A strategy? A modern, integrated FP&A tech stack your team can trust.
The modern FP&A tech stack
FP&A has come a long way from juggling endless Excel files. Today’s teams need a connected suite of tools that not only streamline workflows but also scale with the complexity of their business.
The right tech stack empowers entire finance teams to move faster, keep their data accurate, and deliver sharp insights in real time.
Here’s what a modern FP&A software ecosystem and office of the CFO (OCFO) tech stack typically includes.
Financial planning platforms
Dynamic planning tools like Pigment serve as the keystone of the modern FP&A stack. These platforms allow teams to build complex financial models, run driver-based forecasts, and perform scenario analysis – all with real-time collaboration and version control. Unlike traditional spreadsheets, they also scale easily as your organization grows.
With Pigment’s FP&A solution, finance teams can consolidate data, connect to existing enterprise systems, and build cross-functional planning models that update automatically, reducing manual upkeep and improving forecasting accuracy.
ERP integrations
Enterprise resource planning (ERP) systems like NetSuite or SAP serve as the single source of truth for essential financial data. An effective FP&A stack integrates directly and seamlessly with your ERP to ensure planning models are always in sync with actual figures, minimizing discrepancies and manual data pulls.
Treasury and cash management
Tools like Agicap give FP&A teams real-time visibility into cash balance sheets, inflows, and outflows, which are critical for managing runway and liquidity. Treasury tech also helps bridge the gap between strategic planning and operational execution.
Spend management
Solutions like Spendesk help automate expense tracking, vendor payments, employee reimbursements, making it easier for FP&A to monitor spending against budget in real time and flag any overages before they become a problem.
Billing and invoice management
Automating AR processes through platforms like Pigment (or integrating with tools like Stripe or Chargebee) allows finance teams to reduce collection delays and better manage their working capital.
Business intelligence (BI) and visualization tools
BI platforms like Tableau, Power BI, or Looker enable finance teams to create dynamic dashboards and visual reports for business leaders and boards. When paired with business planning platforms like Pigment, they turn static reports into living documents that track KPIs as they evolve.
A note on automation and AI
According to the PwC study already mentioned, finance teams still spend over 30% of their resource time manually performing core tasks like reporting, budgeting, and forecasting – limiting their ability to focus on more strategic work.
That’s where automation and agentic AI are changing the game.
Machine learning can now help FP&A teams instantly spot anomalies in forecasts, flag unusual variances, and even generate predictive insights based on historical patterns. As these technologies mature, the role of FP&A is shifting from mere data wrangling to true visionary leadership.
FP&A software in action
For a glimpse at how FP&A software helps finance teams transform their planning and operations, consider the story of Loggi, a Brazilian logistics technology unicorn that’s been leading the industry since 2013.
Following a $212M Series F, Loggi wanted to open dozens of new branches and distribution centers, but they lacked an FP&A solution that could support their growth.
Partnering with Pigment for FP&A helped them migrate their finance data from siloed Google Sheets and streamline their budgeting, financial planning, and reporting processes. In fact, they can now automatically create a new cost center with a single click and provide real-time answers to their stakeholders.
Trends shaping the future of FP&A
The future of FP&A isn’t just faster – it’s smarter. Here are just a few of the trends defining what’s next for the industry.
- AI and predictive analytics are becoming standard fare.
FP&A teams are beginning to adopt machine learning models that can forecast trends, identify anomalies, and flag risks early on, shifting the focus from hindsight to foresight.
One recent study found that a large majority (78%) of senior finance leaders hope to increase their investment in AI over the coming year, and 76% have already reduced operational costs since implementing AI tools.
- Continuous planning is replacing static annual cycles.
Rigid, once-yearly budgeting sessions are being replaced by rolling forecasts and nimble, scenario-based planning, enabling teams to adjust more quickly as conditions evolve.
- Data is becoming more democratized.
Self-serve dashboards and other user-friendly planning tools are making financial insights more accessible – not just for CFOs, but for team leads and operators across every business.
According to a recent survey from Deloitte, the most cited transformation priority for finance leaders is developing self-service flows for business users requesting financial information.
- Talent is increasingly blending finance and tech.
The FP&A team skill profile is also shifting. Analytical skills are still essential, but technical fluency, business acumen, and the ability to communicate with non-finance stakeholders are becoming more important by the day.
- FP&A teams are distributed across the globe.
With remote (and hybrid) work here to stay, FP&A teams are increasingly spread across different geographies and time zones. That means cloud-based business planning tools and real-time collaboration platforms are essential to stay aligned, responsive, and working from a single source of financial truth.
In short, the future of FP&A is more agile, more connected, and more tech-enabled – and it’s already here for forward-thinking teams ready to lead the charge.
Next steps
Here are some follow-up actions you can take to continue your FP&A journey and learn more about the next-generation tools and technologies that are leading finance teams into the future.
Deepen your knowledge
Check out these helpful resources to dive into the details of FP&A and uncover insider tips and emerging trends:
- Office of the CFO Report 2025: Learn how other finance leaders are handling economic change and what they see as the most pressing issues in the industry, based on a survey of 2,500 finance executives.
- Advice From Two CFOs on Finance Transformation Projects: Read insights from Cegid’s Bruno Vaffier and Pigment’s Jay Peir on building an effective strategy.
- Five FP&A Lessons From Stacie Faggioli, OpenAI’s VP of Strategic Finance: Discover an expert’s take on how finance is evolving in the age of AI.
- Breaking Silos: Empowering FP&A Performance: Watch this on-demand webinar to learn how Pigment’s AI-powered solution helps you move beyond rigid workflows.
- How to Make Your FP&A Processes Truly Adaptive: Stream this product tour on demand to see how Pigment’s integrated approach to FP&A improves financial modeling, streamlines workflows, and enables real-time decision-making.
Draw inspiration from real-world FP&A success stories
Visit Pigment’s customer page to see how companies like ClickUp, Deliveroo, and Figma have transformed their finance processes with innovative FP&A tools.
Experience top FP&A software in action
You can join the next live, 30-minute product tour to learn how Pigment can enhance your financial planning processes – or, request a personalized demo for a one-on-one look at how Pigment can address your team’s specific FP&A needs.
Remember, our expert team is always here to help.
