financial planning software

 

Financial planning and analysis (FP&A) refers to the processes designed to help organizations accurately plan, forecast, and budget to support the company’s major business decisions and future financial health. These processes include planning, budgeting, forecasting, scenario modeling, and performance reporting. FP&A is not merely accounting, but accounting is foundational to the process. CFOs purchase specialized FP&A software to help them perform these critical tasks.

In many large enterprises, the Director of Financial Planning and Analysis reports directly to the CFO. Perhaps the most important duty of FP&A teams is to use both current and historical financial data to produce financial forecasts that accurately predict future revenues, expenses, profits, and cash flows. CFOs then use these assumptions to make long-term decisions regarding the future of their business.

When FP&A is performed properly, it helps CFOs answer many important questions about a business. Should we raise debt or equity financing? What impact will an acquisition or divestiture have on the bottom line? How much should we invest in property, plant, and equipment (PP&E), and when? What is our break-even point? If revenue declines by 10%, will the company still be profitable? If revenue increases by 15%, will net income increase by the same percentage?

While often tied to accounting systems, FP&A software complements accounting software by providing management insights in addition to financial and operational data. In other words, accounting systems operate the business—the day-to-day transactional activity—and FP&A systems manage the business—analyzing, understanding, and reporting on the business performance.

Today, FP&A software has evolved to manage all types of enterprises by linking financial and operational metrics to insights—ultimately driving strategies, plans, and execution across the organization. With FP&A software, finance and operational managers can drive improved performance by monitoring financial results against forecasts and goals and using analytics to recognize key trends and predict outcomes.

 financial planning software


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