Posted in Finance, Accounting and Economics Terms, Total Reads: 303
FPA stands for Financial Planning and Analysis. It refers to an activity in finance that involves budgeting, monitoring of expenditures, reporting and analysis of financial data. Unlike transactional work in finance area, it requires functional knowledge and experience to make judgment. It’s one of the major activities performed by Chief Financial Officer (CFO).
FPA can be categorized into following four categories:
• Planning: It involves two activities:
a) budgeting and
b) monitoring of expenditures on ongoing basis
• Management Reporting: It involves creation and updation of reports. It’s main driver of cost in FPA.
• Decision Support and Controls: it involves financial analysis e.g. pricing analysis, M&A analysis, ABC, ad hoc financial modeling etc and gives inputs for decision making.
• Analysis: It involves specialize analysis like actuarial analysis, risk analysis etc and requires specialized experience.
Many consultancy firms are building capabilities to perform the functions of FPA and look towards FPA as an area of expansion in future.