FP&A is a set of processes that includes budgeting, forecasting, scenario modeling, performance reporting and more. It provides a framework for analyzing financial data and trends so you can make decisions based on comprehensive insights rather than your gut instincts alone.
A small business can use FP&A for the same reasons a larger company would — to protect its long-term financial health and sharpen its competitive edge.
When you combine FP&A with the expertise of a small business consultant, you can gain strategic insights that will help you prepare for different possibilities that create risk, opportunity, or both. With effective FP&A, you can navigate challenges, capitalize on emerging trends and achieve sustainable growth more effectively while:
Improving financial performance
The detailed budgets and accurate forecasts FP&A processes generate will allow you to take a more strategic approach to how you allocate your financial resources. By combining historical data and predictive analytics, you can make data-driven projections that can help you manage cash flow, drive sales, control costs and optimize investments.
Tracking progress toward business goals
FP&A helps you keep your financial goals aligned with your strategic objectives. Through ongoing FP&A — whether you do it annually, quarterly or monthly — you can monitor the performance of your small business against your targeted goals and quickly identify and address any deviations.
Surfacing and managing risks
Enhanced risk management is another benefit of effective FP&A. You can use FP&A processes to identify financial risks early so you can develop appropriate mitigation strategies. You can also create contingency plans to weather potential financial disruptions, including unexpected challenges.
Increase operational efficiency
By establishing and monitoring key performance indicators (KPIs), FP&A helps a company not only track progress toward goals, but also make data-driven improvements to how they operate. Analyzing your small business’s financial and operational data can help you identify inefficiencies and areas where costs can be reduced — without compromising quality.