Financial Planning and Analysis

How to Get Valuable Financial Planning and Analysis Results in Less than 3 Months Without Adding Employees

The value of making informed business decisions is priceless. It comes down to mitigating business risk using financial planning and analysis (FP&A). Growth depends on taking risks. The better you understand the risks involved with implementing new ideas, the more likely you will profit from them. This demands you consider those factors that will impact your future. So why do so many companies avoid disciplined financial planning and analysis in their operations? 

Table of Contents

  1. Planning Ahead
  2. What is Financial Planning and Analysis?
  3. Why Do Businesses Need Financial Planning and Analysis?
  4. Using a Financial Model
  5. Historical Financial Analysis
  6. Chart(s) of Accounts
  7. Relevant Key Performance Indicators
  8. Financial Planning and Analysis Activities

Why do so many companies limit their tangible perspective to accounting for making critical business decisions that affect the future? 

Accounting is about the past, finance is about the future

Don’t get me wrong, accounting is important. You must keep track of your financial activities. But technically, accounting is more about tax code compliance than about business analysis and management.  

This is where corporate finance comes into your picture. 

What do you want to know?

I recently gave a presentation on M&A integration and was asked an interesting question: “What is the biggest misperception about your industry?” I thought for a moment and the answer was clear: “The biggest misperception about my industry (what I do: corporate finance) is that there is no distinction between accounting and finance. But accounting is about the past and finance is about the future.” 

Furthermore, accounting has one application: accounting. Corporate finance has many applications:

  1. Management Strategy & Analytics
  2. Mergers & Acquisitions
  3. Investor Relations

Every business must continue to invest in its operations to grow. But revenue is only part of the growth picture. Productivity and profitability are key to sustainability. Sustainability allows a company to navigate uncertainty by carefully managing both the income statement and the balance sheet.  

Disciplined corporate finance enables a business to grow when revenue is abundant, and survive when times are tight. It’s the discipline of planning ahead accurately. The thing is, there is only one true statement about financial projections: they’re wrong. It’s just a matter of which direction they’re off, and by how much.

Any organization could find itself in a difficult situation that demands unique, specialized attention to get on a productive track toward sustainability. The way to leverage financial planning and analysis to measure the health of a company is twofold: 

  1. Financial Statement Analysis: Actual versus Forecast
  1. Key Performance Indicators (KPIs): Variance from healthy target operating levels

Selecting the most relevant KPIs for your business will provide you accurate insights to three business fundamentals:

  1. Product/Market Fit
  2. Organization/Market Fit
  3. Finance/Market Fit

Do you consider efficiency, productivity and profitability a function of good business alignment? 

What I mean by alignment is (1) your product and/or service really solves a problem and is in increasing demand, (2) your organization has the right people in the right positions to execute on an increasingly productive basis, and (3) your financial condition improves over time. 

At its core, business alignment is a measure of your competitive edge. Your competitive edge is a measure of your sustainability and value. 

Planning Ahead

Regardless of what is going on in the overall economy, it can be hard to visualize what things will look like in a year or two. How can you position your organization to take advantage of future opportunities? Economists and industry analysts have been forecasting for years and will continue to pore through data to try to predict future trends to identify what tactics could lead to the competitive advantages that drive innovation.  

How much industry research do you read to help guide your business strategy? What do we do when the unexpected becomes reality? 

Keeping up to date with your industry KPIs and standards is essential to knowing how to make sound financial decisions and maintain a strong finance/market fit. 

Related: How to Reach Your Full Potential with an Alignment Map 

There are several ways of looking at business strategy, but without relevant, accurate measurements and metrics it can be very difficult to reach your goals. A fresh approach to your strategy could be just the way to reinvent your plan and remain relevant as your industry evolves. 

Very few, if any, companies can be consistently profitable and grow without careful financial planning and cash management. Both internal and external factors are always changing, and your strategy needs to adapt to stay competitive. The job of managing a corporation’s cash flow is the responsibility of its Chief Financial Officer (CFO), who relies on the Financial Planning and Analysis team. 

If you run a company, you need disciplined corporate finance.


To stay in the game by achieving the two most fundamental business goals: (1) sustainable revenue growth and (2) quality of earnings, you must maximize your forward-looking clarity. 

So many CEOs are overly focused on sales. Sure, a CEO is an organization’s visionary, and sales are critical; revenues are a company’s life force. But problems are all too likely to arise when an organization’s attention can’t get beyond revenue alone. Every single number on both the income statement and the balance sheet are inter-related; no financial figure is ever in a vacuum.

If you don’t save some portion of your revenue, you won’t last. Profits responsibly reinvested in your organization should be focused on strengthening it. Positive cash flow from operations is the only resource to improve your financial condition in the long run.

Without a healthy balance sheet, your company could hit serious solvency hurdles that may hinder your ability to grow. If you want to position your company for success learn how to design and implement a custom financial planning and analysis program. 

The most powerful people are those armed with facts, data and ethics. 

The more you understand your financial statements and the most relevant operating KPIs, the more prepared you will be to know not only what happened (accounting and the past), but what’s happening (finance and the future) and to make great things happen. 

The big question? How do you know what variables to keep track of? Regression analysis. 

Here is A Refresher on Regression Analysis 

Regression analysis is a way of mathematically sorting out which of those variables does indeed have an impact. It answers the questions: Which factors matter most? Which can we ignore? How do those factors interact with each other? And, perhaps most importantly, how certain are we about all of these factors? 

Let’s start by identifying what data is available, and what data to collect. 

What is Financial Planning and Analysis?

Financial planning and analysis is a function within a company’s finance organization that provides financial statement forecasting, operational key performance indicators (KPIs) and measurement of actual versus projected expectations. These forecasts inform management on the progress and effectiveness of the company’s strategic initiatives, investments and productivity. This function enables management to make informed business economic decisions and avoid foreseeable cash flow issues.

FP&A is a continuous cycle of data collection and analysis, processing and reporting, forecasting and planning and accountability reviewing. Each step informs the next:

  • Collecting financial and non-financial data, both budgeted and actual
  • Analyzing those data to uncover drivers or events behind variances
  • Communicating key insights to management through relevant reporting
  • Re-budgeting and adjusting plans based on reported KPIs and insights
  • Modeling new assumptions and executing on revised plans

As those plans unfold and the books are closed at the end of a fiscal period, the cycle begins again.

Why Do Businesses Need Financial Planning and Analysis?

Leveraging relevant information to help improve business accuracy, productivity and profitability comes with an added benefit – more useful data is available for far more useful analytics. The result is more effective and relevant financial planning and analysis information without a ton of extra work.

Change Happens

Your FP&A team will establish themselves as vital partners to support the entire business and every decision that arises.

By owning and analyzing data, and being able to translate company-wide information into actionable plans, financial planning and analysis helps businesses meet objectives to:

  • Provide management with the reports, insights and KPIs they need to make quick, smart decisions—for planning purposes or in response to changing external factors
  • Increase the confidence management have in their budgets and forecasts, as well as the decisions and plans based on them
  • Streamline operations and maximize profitability and growth by identifying where resources are most effective
  • Anticipate roadblocks and risks to existing plans
  • Align and clearly define business goals and strategies
  • Determine the impact of different resource allocations on short- and long-term objectives
  • Continuously improve forecasting accuracy
  • Perform scenario or what-if modeling to be prepared for any change in company or market conditions

Properly implemented, financial planning and analysis often means the difference between profit and loss. That’s why disciplined organizations are increasingly reliant on FP&A to provide the insights for achieving broad operational goals. Coupled with financial playbooks companies can improve communication, operating with agility to keep up with ever-changing market conditions and competitive challenges—and to take advantage of new opportunities as they arise.

Now you know what financial planning and analysis is and why businesses need it. So how do you get started designing and implementing the right FP&A program for your specific business?

The first step to designing and implementing a financial planning and analysis team is to identify at least one person that has accounting experience and knows how to use a spreadsheet well to make relatively complicated calculations. Multiple people is favorable because there is no substitute to checks and balances than having people double check each others’ work.

Using a Financial Model

The best way to start organizing the relevant financial, operational and functional data is inside a well-designed and functioning financial model, probably in Excel. At some point, if you feel constrained by the limitations of a financial model in a spreadsheet, you may consider enterprise scale software to manage your financial planning and analysis program.

The reality is, if more than one person is working on your financial planning and analysis program you will need more robust software than a spreadsheet or you will start encountering data integrity problems.

I have one rule about financial models: “financial models are like toothbrushes—everybody should use them; nobody should share them.” 

But this poses a major organizational problem! It doesn’t have to. Every financial model should have a unique purpose, unique features, functions and benefits; and it should have a unique owner, author. 

Effective financial models are developed with a tremendous amount of style. More so than function. After all, a functional financial model is the first criteria; it has to function properly to deliver accurate, relevant information otherwise its useless. It’s the style factor that determines its elegance—it’s ease of use, ability to use data efficiently, all without grinding down. A well designed model is also easier to debug, when questions arise about calculation sequences.

Your financial models, respectively will become unique algorithms, or individual software programs that perform a valuable operational function. So why don’t just find third party software to do this for you? 

The caveat about jumping into a software product before you really understand your numbers, and run an analog process, over and over again, is that you may not use it effectively or understand how to interpret the results. In my experience the more adept you and your team are at the fundamentals, the better you will be equipped to select the right software for your specific needs and use it properly without over-paying for the tool. 

Let’s get back to your financial modelling priorities. 

Financial Model Inputs

Naturally you have to start somewhere and with financial modelling its usually with inputting the data you already have: historical financial statements. Balance sheets and income statements.

You may want to color code the tabs (in excel) where these functions exist in your financial model. You also want to seriously consider sequencing your tabs for ease of use; e.g. from start to finish move left to right.

In my experience you want a specific level of detail, but not too much. For example, keep your revenue line items to five max. Also, match each COGS line item to its respective Revenue line item to present accurate Gross Profit for each Revenue category.

When it comes to operating expenses I recommend keeping the total line items to 30. Categorize these as either (1) Fixed or (2) Variable expenses for sensitivity and regression analyses.

Build your input sheets to match the respective financial statement output format for ease of use and troubleshooting when numbers don’t tie. What I mean is start with Revenue inputs at the top, then COGS inputs will reveal automatically calculated Gross Profit (and margin) and Operating Expense inputs will reveal EBITDA. Next you will include the inputs for “Other Operating Income/Expense”, “Gain/Loss on Sale of Assets”, Depreciation and Amortization to reveal EBIT. And so on until you have an automatically, and correctly calculated Net Income that matches your accounting software report.

Financial Model Calculations

This is where the magic happens; where you turn the input data into useful information that you use to make informed management decisions. 

Financial Model Reports 

In relational database nomenclature outputs are called reports. Reports present the desired information including financial statements, variance analyses, tables, charts and graphs. 

Historical Financial Analysis

Start with an honest look in the mirror by analyzing the past three fiscal years and current year-to-date (“YTD”) or trailing twelve months (“TTM”) to identify operating trends. You are going to dig deep into both your historical balance sheets and income statements. For each statement there are a number of steps to get a good look at what you have to work with.

  1. Four period side by side comparison on one page with one consistent chart of accounts
  2. Normalize the historical periods by adding back any non-recurring or discretionary expenses and reclassify inconsistent items to their appropriate line items (footnote everything)
  3. Normalized, or Adjusted four period common sized side by side comparison on one page
  4. Descriptive Key Performance Indicators (“KPIs”)
  5. Management Discussion & Analysis (“MD&A”) to explain the relevance of the historical financials and operating performance insights

Chart(s) of Accounts

Having completed your historical financial analysis you can stress test the relevance of your chart of accounts, for each the income statement and balance sheet. You want to make sure your financial statements most accurately reflect the economics of your operations and activities of your organization.

Relevant Key Performance Indicators

Every business has numbers. This is the universal language of business. Find the numbers that are most relevant to your business and put them in a format and context that makes sense in conveying a realistic look at operating performance. These are your Key Performance Indicators, and they will provide you valuable insights to all the internal and external factors that impact your financial performance.

Which Analytics are Right for You?

Product/Market Fit

The most basic measure of your product/market fit is your sales. Sell a lot of products or services and you’ve probably got a reasonable grasp on how to solve a problem for your customers.

  • Internal and external reporting

Organization/Market Fit

The obvious analogy for organization/market fit is sports. Or more specifically, team sports. The single most important factor in success in team sports is the quality of your team, and its ability to work well as a team.

  • People and organization structures;
  • Performance management, budgeting and forecasting capabilities;

As Michael Jordan said:

Talent wins games, teamwork wins championships


Finance/Market Fit

  • Cash flow optimization and the use of capital
  • Maintenance and building of cost-effective controls
  • Demonstrated proven extensive ability and success to contribute to the development of business vision
  • Manage implementation efforts with complex project management capabilities

Financial Planning and Analysis Activities

Once you’ve selected your team and assigned responsibilities, created a working financial model and selected you most relevant KPIs (at least for now) you are ready to start the process of performing FP&A activities.

You will have a range of stakeholders that may want to know specific information relevant to their specific function within your organization. Generally speaking, your financial planning and analysis efforts will provide the following:

  • Support Director(s) of Operations and assigned units/departments with the development and management of budgets of varied degrees of complexity for various types of performance metrics
  • Develop budgets based on appropriate data analysis, historical budget assumptions, expenditures, trends, economic and social impacts, and other factors that will result in an effective financial plan aimed towards prescribed goals or objectives
  • Confer with Director(s) of Operations and/or department leaders with respect to development, management and controls of budgets
  • Develop budgetary control processes to ensure units/departments actual revenues and expenses adhere to the established budgets
  • Identifies variances and trends, and recommends suitable action to appropriate personnel
  • Ensure data integrity
  • Provide Director(s) of Operations and units/departments accurate and timely budget analysis, financial reports, and account reconciliations
  • Identify irregular and unusual financial activity and make recommendations and/or assists with necessary modifications aimed towards a positive resolution
  • Research, compile and update budgetary and forecast data aligned with shifting priorities and impacts
  • Prepare or coordinate preparation of financial reports for varied and ad hoc administrative planning needs
  • Work with administrative and financial support team members to ensure an effective understanding and implementation of financial plans
  • Monitor outcomes and provides guidance to support team members as needed
  • Participate in team projects and group process improvement assignments

If getting valuable financial planning and analysis results in less than three months without adding employees is more than you are ready to take on, we’re here to help. ALIGNMT works with companies of all shapes and sizes, in a bunch of industry verticals to do just this. We can design, implement and train your staff how to use a custom financial planning and analysis program suited to your stakeholders.

We can help you optimize the structure of your finance functions and improve your contribution to the business. We support our clients by addressing the challenges of achieving appropriate standards of control, efficient back office opportunities and support to the business through insight and challenge. Our team helps our clients maximize their available liquidity position and manage financial risk, such as interest rate changes and commodity price fluctuations, as well as make decisions around funding the core business operations and making investments to increase the value of the organization to the shareholders.

To really stand out and make us fit for the future in a constantly changing world, each and every one of us at ALIGNMT needs to be an authentic and inclusive leader, at all grades/levels and in all lines of service.

Work as part of a team of problem solvers, helping to solve complex business issues from strategy to execution.

  • Arrange appropriate assignments and experiences to support others’ learning and development.
  • Seek out different ways to use current and relevant technological advances.
  • Analyze marketplace trends – economical, social, cultural, technological – to identify opportunities and create value propositions.
  • Deploy methods to keep up with, and stay ahead of, new developments and ideas.
  • Offer a global perspective in stakeholder discussions and when shaping solutions/recommendations.
  • Drive and take ownership for developing networks that help deliver what is best for stakeholders.
  • Proactively manage stakeholders to create positive outcomes for all parties.
  • Uphold the firm’s code of ethics and business conduct

©2023 ALIGNMT LLC | Financial Management | Mergers & Acquisitions | Investor Relations


We're not around right now. But you can send us an email and we'll get back to you, asap.


Log in with your credentials


Forgot your details?

Create Account