Get expert advice on every topic you need as a small business owner, from the ideation stage to your eventual exit. Our articles, quick tips, infographics and how-to guides can offer entrepreneurs the most up-to-date information they need to flourish.
March 7, 2023
Financial planning and analysis (FP&A) is a critical process for businesses of all sizes, at every stage of growth. If you’re not familiar with this role and function, that may be because it’s not all that common — yet.
As of 2022, there were only 78,000 FP&A positions in the U.S. But considering it’s the 13th fastest-growing position in the country, according to LinkedIn, you’ll likely be hearing this title more in the future!
Financial planning and analysis involves analyzing financial data to help companies make informed decisions about resource allocation, budgeting, forecasting, and strategic planning — today, and for the years to come.
For example, nearly two decades ago, Amazon’s FP&A team set out to determine which option would drive greater demand: offering subscribers free shipping or 10% off every order. According to their model, the bigger motivator was free shipping. And Amazon Prime was born!
That’s one highly-profitable example of how FP&A professionals benefit the companies they support. By digging into the data, leveraging modeling tools, and conducting detailed analyses, these professionals can help C-suite leaders make informed, future-focused decisions.
FP&A professionals typically categorize all the valuable information they gather into one detailed periodic report that covers a range of financial metrics, such as budgets, profit and loss analysis, solvency analysis, return on capital employed, and shareholders’ return on investment. The executive team can use this report to stay up-to-date on key metrics, look for opportunities to grow the company or reduce costs, and watch for early warning signs of a market shift.
FP&A professionals do more than send spreadsheets. Today, these high-level analysts have access to a wide range of tools and resources that enable them to create increasingly accurate and beneficial reports. And these advanced reports have the potential to give business leaders, like the team at Amazon, a serious competitive advantage.
| Talk to us about how Escalon’s FinOps services can help you gain financial insights to make informed decisions. |
As a financial planning outsourcing firm, we’ve discovered 5 major ways that leveraging an outsourced FP&A professional can benefit your business, no matter its size or growth stage:
Financial planning and analysis can provide a clear and comprehensive view of your company’s financial performance — more than a traditional financial statement ever could.
The information in your detailed FP&A reports can help your company make better-informed decisions about where to allocate your valuable resources, what departments should be improved, and how you can optimize your financial performance.
An outsourced FP&A professional can help your business develop a stronger strategic plan by analyzing your company’s historical financial data.
For example, your FP&A professional can review historical data to identify areas where your profit margins are greater, then allocate more resources to expanding those profitable sectors.
If you’ve ever faced cash flow concerns, you know how crippling a lack of funding can be. Your FP&A professional can consistently monitor your cash flow, watching for opportunities to free up more cash while balancing your expenses, debt repayment, and potential investments.
Because your outsourced FP&A’s role is to review past data and model the future, they’re able to suggest pivoting opportunities well before the market truly shifts. Just as the FP&A team at Amazon suggested Prime’s free shipping before free shipping was a popular option, your FP&A professional can look for ways to reinvent your product, expand your offerings, or adjust your pricing to take advantage of emerging trends.
Finally, FP&A professionals are experts at scenario planning. They have the data and models needed to predict the best-case growth your company might experience, and the worst-case impact of a negative market shift. Based on the results of their modeling, they can help business leaders manage marketing, supply chains, manufacturing methods, and more, to stay ahead of potential problems.
Businesses have two options. They can hire their own FP&A professionals in-house, or they can invest in financial planning outsourcing.
Hiring your own FP&A professional gives you complete control over who you bring onto your team. Because you’re controlling the hiring process, you can find a professional who is both a good culture-fit, and is fully committed to your team. If your FP&A position is a remote role, your potential pool of talent is even larger.
But adding another in-house professional to your payroll is expensive. You’ll have another paycheck to cover, more employee benefits to offer, and another team member to oversee. Because FP&A is a highly specialized role, you’ll pay a premium price for their devoted expertise.
Financial planning outsourcing offers another favorable solution. By partnering with a financial planning outsourcing agency to fulfill your FP&A needs, you have access to a trained expert with industry-specific knowledge and a higher level of expertise than you may be able to afford in-house. Because these freelancing FP&A professionals work with a number of companies at a time, they have deep experience in the models and assumptions that best fit your business.
Financial planning outsourcing agencies also have access to better tools and more advanced software than your business may wish to purchase in-house. And greater technology (plus the expertise to use it!) means stronger forecasting, more accurate models, and better long-term planning.
This material has been prepared for informational purposes only. Escalon and its affiliates are not providing tax, legal or accounting advice in this article. If you would like to engage with Escalon, please contact us here.
As a professional copywriter in the finance and B2B space, Grace Townsley offers small business leaders big insights—one precisely chosen word at a time. Let's connect!
We provide you with essential business services so you can focus on growth.
