Financial Planning & Analysis

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FPA HAND BOOK
SESSION 1 - TOPICS
SESSION 2 - TOPICS
ASSIGNMENT REVIEW FORECAST FORECAST INPUTS
ROLLING FORECAST DATA ANALYSIS DATA HANDLING DATA
WRANGLING DATA REVIEW MANAGEMENT REPORTS COMMON
EXCEL FUNCTIONS ASSIGNMENT
FPA BASICS FPA ACTIVITIES FPA TERMINOLOGIES
TRANSACTION CYCLE FPA TIMELINE
BUDGETING BUDGETING TECHNIQUES BUDGETING
APPROACHES BUDGETING PROCESS FORECAST VS BUDGET
ASSIGNMENT
SESSION 3 - TOPICS
ASSIGNMENT REVIEW FINANCIAL ANALYSIS FACTORS TO
CONSIDER COMMENTARY PRESENTATION FINANCIAL
MODELING DASHBOARD PREPARATION EXCEL FUNCTIONS
FOR DASHBOARD PRESENTATION
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WHAT IS FPA
FPA HAND BOOK
Finance Business Partner Planning and Strategy
implementation
FPA is that department of Corporate Finance that
helps in organization growth through effective
strategic planning, forecasting and assessing the
target achievement by performing ?nancial
analysis. It aims to support company's business
decision and overall ?nancial health.
FPA Activities Secondary Pricing Month close
reporting
Primary Budgeting Forecasting
Management Reporting Strategic Planning Financial
Modeling
Contract Management Revenue Recognition Risk
Management
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FPA TERMINOLOGIES
FPA HAND BOOK
Budgeting Estimating expenses and revenue over a
speci?ed future period and expressing them in
numerical terms,after getting the inputs from
other departments Forecasting This involves
creating, updating, and maintaining ?nancial
models and detailed forecasts of the
company's future operations. Management
Reporting This involves preparing and analyzing
internal reports for senior management to support
their decision-making Rolling Forecast -
forecasting over a set period of time Actuals -
Current period amounts Variances - Difference of
actuals with budgeted, forecasted or previous
years' numbers Narratives/Commentary - Brief
summary statement which explains the reasons
behind the variances Dashboard - Management
reporting (usually in PowerPoint) highlighting
the variances along with commentary Financial
Modeling/Simulation - Projecting the results
basis a given
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FPA and other departments
FPA HAND BOOK
AR AP R2R
Audit
Tax Reporting
Actuals - Incomes and Expenses
Actuals Forecast Narratives
ACTUALS
Collect Analyze Forecast
Decision Making
AP/AR/R2R deals with recording the dollar
spent/earned by the company. FPA's job is to
think about where the next dollarof capitals is
to be deployed.
FPA Activities and Timeline
Q1
Q2
Q3
Q4
Financial Analysis Ad hoc Requests Forecasting
Reporting Budgeting
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Budgeting Process
FPA HAND BOOK
FPA AS A DECISION-MAKING PLATFORM

• PLAN
• Planning Budgeting
• Annual operating plan (AOP)
• Budgets
• Headcount planning
• Long-range planning

• Financial Modeling
• What-if analysis
• Scenario analysis

• EXECUTE MONITOR
• Reporting G Analysis
• Operational reporting
• Financial reporting
• KPIs
• Dashboards
• Variance analysis
• Drill through/roll up/drill across

• RE ASSESS
• Forecasting
• Rolling forecasts Trend analysis
• Predictive analytics

Budgeting Process
Budgeting
Annual Operating Plan
Strategic Plan
Forecasting
Rolling Forecast
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Budgeting Process
FPA HAND BOOK

• Finalize approach and technique
• Contact department heads
• Gather business information

Deffine Goals

• Gather inputs
• Remove Outliers
• Review and Sanitize data

• Make revision
• Adjust budget if necessary
• Get it approved by CEO, CFO

Modify Budget
Gather Data
as per Requirements
Analyze Variance Create Budget
Reconcile Goals and Data

• Remove Outliers
• Prepare Budget Compare ?nal budget with inputs

• Analyze Data
• Compare it with Plan
• Check feasibility of plan

FPA -Budgeting Techniques
Zero-Based Budgeting The current year's budget is
prepared from scratch without the input of the
previous year
Incremental Budgeting The budget is made by
changing the previous year's budget
while considering the in?ation factor, quick and
easy method of Budgeting
Activity-Based Budgeting The budget is prepared
after considering items that drive costs
in-depth analysis of activities and costs
Value Proposition Budgeting Review costs to
determine whether it brings value to the company
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Top down vs Bottoms up approach of Budgeting
FPA HAND BOOK

• Top Down Budgeting
• Prepared by Senior Management
• Passed on the Department Heads for Implementation
• No Inputs from Lower Level Management
• Saves Time

Bottoms Up Budgeting

• Prepared by Lower Management
• Consolidated at higher level
• Vital role of department heads
• Time consuming but more closure to reality

Budget Files Budget Journal Budget Activity
Tracker Budget Template
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FPA Terminologies
FPA HAND BOOK
YTD - stands for Year To Date and covers period
from starting of the year to the current
period MTD -stands for Month To Date and covers
period from starting of the month to the current
period YTG - Means Year to Go (not to beconfused
with YTD). It covers period immediately starting
after the current period to the end of the
current year. It is also referred as ROY (Rest of
the Year) in some companies Full Year -
combination of YTD and YTG will give you the full
year number
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Forecast
FPA HAND BOOK

• What is Forecast - Adjustment to budgets/plan
  basis the actuals What should be forecast
  frequency - Depending on the actuals and
  management requirement - can be quarterly,
• monthly or even weekly
• What is the difference between budgeting and
  forecasting -
• Budgeting is done annually, forecasting can be
  quarterly, monthly or weekly
• Budget numbers do not change, forecast number do
  change frequently
• Budgeting is the initial plan, forecasting is
  adjustments made to
• that plan to assess the ?nal picture based on
  actuals
• What are essentials of effective forecast
• Does not change the full year numbers to a large
  extent except due to unavoidable reasons
• Made only after careful and comprehensive study
  of actuals
• Made after considering inputs from all the
  stakeholders

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Forecast
FPA HAND BOOK
Management Inputs
Department Inputs
Actuals
Variance
Forecast
Rolling Forecast
Always 12 months for forecasting
Rolling Forecast - 12 months
ACT ACT ACT FOR FOR FOR FOR FOR FOR FOR FOR FOR FOR FOR FOR
202101 202102 202103 202104 202105 202106 202107 202108 202109 202110 202111 202112 202201 202202 20220
Revenue 78,456 75,318 88,875 80,883 81,692 83,817 82,130 82,546 82,831 82,503 82,627 82,653 82,594 82,625 82,620
Direct Costs 39,679 37,695 42,972 40,115 40,261 41,116 40,498 40,625 40,746 40,623 40,665 40,678 40,655 40,666 40,661
SGA 26,311 29,468 27,627 28,547 28,087 28,317 28,202 28,260 28,231 28,245 28,238 28,242 28,240 28,241 28,241
Net Income 12,466 8,154 18,276 12,220 13,344 14,383 13,431 13,662 13,854 13,634 13,724 13,734 13,699 13,718 13,710
Forecast only to end of current year
Static Forecast
ACT ACT ACT FOR FOR FOR FOR FOR FOR FOR FOR FOR
202101 202102 202103 202104 202105 202106 202107 202108 202109 202110 202111 202112
Revenue 78,456 75,318 88,875 80,883 81,692 83,817 82,130 82,546 82,831 82,503 82,627 82,653
Direct Costs 39,679 37,695 42,972 40,115 40,261 41,116 40,498 40,625 40,746 40,623 40,665 40,678
SGA 26,311 29,468 27,627 28,547 28,087 28,317 28,202 28,260 28,231 28,245 28,238 28,242
Net Income 12,466 8,154 18,276 12,220 13,344 14,383 13,431 13,662 13,854 13,634 13,724 13,734
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Data Handling
FPA HAND BOOK

• Asking Questions -
• Checking the sanctity of data
• Verifying the credibility of data provider
• Assessing the validity of the data
• Data Wrangling
• Bringing the data in the desired format
• Identifying outliers and removing them
• Consolidating and compiling the data in case of
  multiple sources
• Data Review
• Ensuring data consistency
• Ensuring the right tool (SQL/PeopleSoft/MS Excel)
• Ensuring that data makes 'Sense'
• Data Analysis
• Exploring the data
• Uncovering patterns and trends
• Gaining insights keeping in the mind the goal of
  Data Analysis
• Drawing conclusions
• Drafting recommendations

Financial Modeling

• A financial model, in simple terms, is a
  computerized representation of a company's
  financial performance. It's like a digital
  crystal ball that allows you to predict and
  analyze how a company's finances will change
  under different circumstances.
• A tool built in spreadsheets (like Excel) or
  specialized software, containing formulas and
  equations that replicate the financial
  relationships within a company.
• It considers factors like revenue, expenses,
  assets, liabilities, and cash flow.
• Can be used for various purposes, like
• Forecasting future financial performance
  Predicting revenue, expenses, and profits under
  different scenarios, like launching a new
  product or entering a new market.
• Valuation Estimating the fair market value of a
  company or an asset.
• Budgeting Setting financial targets and tracking
  progress towards them.
• Mergers and acquisitions Analyzing the financial
  impact of potential deals

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Common FPA Reports
FPA HAND BOOK

• Budget Vs Actual Report
• to report variance of actuals with budgets and/or
  forecasts
• to track how close or far a business is in terms
  of achieving financial goals

• 2) Cash Flow Forecasting
• to predict the financial future liquidity
• to drive cash collection

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Common FPA Reports
FPA HAND BOOK

• 3) Consolidated Financial Report
• includes information from all the
  branches/departments
• gives bird's eye view of overall financial
  performance

• 4) Flash Report
• to report liquidity, profitability and efficiency
• to highlight outliers and exceptions

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