Financial planning and analysis (FP&A) and accounting are two instrumental pillars of effective financial management. In a typical business, approximately 23% of finance spending is dedicated to financial planning and analysis, while 26% is dedicated to accounting and reporting (Gartner).
As such, being able to pinpoint the key differences between the two functions is crucial for any business to manage its financial health successfully and plan for a profitable future.
In this article, we’ll delve into:
- What is FP&A?
- What is accounting?
- FP&A vs accounting: What’s the difference?
- What’s the difference between an FP&A manager and an accounting manager?
- Can you go from accounting to FP&A?
- How to improve collaboration between FP&A and accounting
What is FP&A?
Financial planning and analysis is a function that focuses on budgeting, forecasting, and analyzing financial performance to support a company’s planning and decision-making processes.
FP&A professionals collect and analyze data to identify trends, answer financial questions, and develop strategies to help businesses improve results and plan for future growth.
FP&A also provides insights that can help businesses anticipate future financial scenarios. It involves undertaking frequent reporting to identify and resolve potential issues quickly and early.
What is accounting?
Accounting is the process of recording, reporting, and summarizing financial information. Its job is to keep track of all financial transactions, ensuring accuracy and compliance with regulatory standards.
Accounting also provides insights into a company’s financial health and overall performance, which informs crucial decision-making. It’s responsible for the preparation of cash flow statements, income statements, and balance sheets, which helps key stakeholders understand financial outcomes, profitability, and liquidity.
Ultimately, accounting helps businesses understand what’s working and what’s not so they can make the necessary improvements.
Sabrinthia Donnelly
FP&A vs accounting: What’s the difference?
You might be reading this and thinking that FP&A and accounting sound like pretty similar functions so far. But in fact, there are a number of key differences that distinguish the two.
Let’s take a look at a few:
FP&A
Forward-looking: FP&A focuses on the future performance of the company. It utilizes financial modeling, forecasting, and analysis to predict financial outcomes and guide organizational alignment. According to Battery Ventures, approximately 31% of finance departments carry out forecasting every quarter, while 6% do it every six months or more.
Strategic insights: FP&A professionals analyze key trends to determine how their company will perform in the market compared to competitors, and use these insights to guide the organization to success.
Decision-focused: FP&A teams provide valuable insights and recommendations to support decision-making regarding the allocation of resources, investment, and risk management. They help businesses understand the financial impact of strategic options through planning, forecasting, performance management, and financial analysis.
Business-oriented: FP&A typically builds relationships with the business to establish themselves as reliable and trusted advisors. They earn credibility and contributions to key decision-making through their strategic and operational insights.
Frequent reporting: FP&A reports are typically prepared on a monthly or weekly basis to identify any potential issues and resolve them quickly.
Cross-functional collaboration: An FP&A analyst often works closely with various departments, including sales, marketing, and operations. They help them to manage their budgets and align financial objectives with the targets of the business.
Metrics: FP&A is more focused on capital allocation, so it looks at both quantitative and qualitative metrics, KPIs, and analytics to stay up to date with any changing requirements.
Accounting
Financial reporting: Accounting and financial reporting involves preparing accurate financial statements for owners, regulators, and management teams that summarize the company’s financial transactions and overall performance. Reports are prepared on a quarterly and annual basis.
Compliance: Accounting must possess a strong attention to detail to remain compliant with standardized principles and regulations.
Routine tasks: The responsibilities of an accountant are usually transactional, routine tasks such as bookkeeping, invoicing, accounts payable, and reconciliations.
Control-focused: Accountants also ensure that the appropriate financial controls are in place to govern and report on transactions to investors, regulators, and other relevant parties.
Relationships: Accounting teams mostly interact with other accountants, and provide information to management teams, shareholders, regulators, and creditors. Plus, the end-users of their work are usually other finance practitioners.
KPIs: As accounting concentrates on reporting capital, they adhere to standardized, quantitative KPIs for comparison over time and with competitors.
What’s the difference between an FP&A manager and an accounting manager?
The titles of FP&A manager and accounting manager are often used interchangeably, when in fact, they differ significantly in their responsibilities:
FP&A managers
Focus and objectives
FP&A managers look at the future financial performance of the company by analyzing business and economic trends, evaluating corporate activities, and then mapping out potential outcomes.
Responsibilities
- Forecasting and financial models
- Creating budgets
- Looking for data trends and irregularities in financial records
- Developing strategic plans for achieving company objectives
- Estimating financial health through key metrics
- Preparing internal reports to support decision-making
- Evaluating and ensuring the company optimizes its use of assets and investment opportunities
Accounting managers
Focus and objectives
Accounting managers develop a plan of action for analyzing and reporting on financial information. They also ensure that the company adheres to legal and regulatory requirements, and identify improvements to existing business processes.
Responsibilities
- Recording company invoices and transactions, including sales, purchases, bills, cash flow, and disbursements
- Checking short-term and long-term financial models
- Keeping track of financial planning
- Preparing annual budgets
- Producing, analyzing, and reviewing financial reports
- Analyzing key financial metrics in company reports and implementing improvements to existing processes
- Managing financial reporting such as tax information, budgets, audits, and cost reports
Sabrinthia Donnelly
Can you go from accounting to FP&A?
Many accountants become interested in transitioning to FP&A, which is a completely viable career change. Many FP&A professionals have accounting qualifications and previous experience in accounting or auditing before moving on to FP&A.
Here are some top considerations and steps to take to make a smooth transition from accounting to FP&A:
Develop transferable skills
FP&A roles require you to have strong analytical skills to identify trends, patterns, and anomalies in financial data, as well as forecast and model financial outcomes.
Effective communication is another vital skill of FP&A, as they need to coordinate with key stakeholders from various departments and be able to explain complex information clearly and concisely.
You also need to be confident in making recommendations and decisions based on financial information.
Familiarize yourself with FP&A technology
To successfully manage financial data in FP&A, you should become proficient in the use of tools such as Microsoft Excel, Power BI, and Tableau.
Seek opportunities within your organization
Gain that all-important experience by volunteering to work on FP&A-related projects. You can gain familiarity with FP&A processes and tools and enhance your skills.
You could also apply for internal FP&A job postings and transition within your current company if this is a possible option.
Consider additional education or certification
Pad out your resume by taking an additional qualification like an MBA or a CFA. You could also consider FP&A-specific certifications. For example, Association for Financial Professionals offers globally recognized FP&A courses.
Finance Alliance
How to improve collaboration between FP&A and accounting
Being able to foster successful collaboration between FP&A and accounting is critical for driving insights and strategic decision-making, as well as maintaining the overall financial health of the business.
Here are some top strategies to improve collaboration between FP&A and accounting:
Regular communication channels
Set up regular communication channels through meetings and workshops to discuss current projects, challenges, and other business operations to keep teams aligned.
Joint planning and goal-setting
Involve both FP&A and accounting teams in planning and goal-setting processes to ensure they understand how they each contribute to the organization’s financial goals and can work together to achieve them.
Collaborative projects
Create opportunities for collaboration between the two departments. This could be projects involving financial reporting, analysis, or budgeting, where insights from both teams are highly valuable.
This will result in better business outcomes and a stronger relationship between FP&A and accounting.
Shared KPIs and metrics
Develop shared KPIs and metrics to align the efforts of FP&A and accounting and determine future outcomes.
Some shared KPIs for FP&A and accounting include:
- Profit and loss
- Time to close
- Venture capital efficiency ratio
- Customer acquisition cost ratio
- Return on invested capital
Integrated systems
Use integrated financial systems that both teams can access. This way, the teams can easily pull information from a single source. This reduces friction, makes it easier to share information, and aids in seamless, data-driven decision-making.
Conclusion
Understanding the key differences between FP&A vs accounting is essential for any finance professional. While accounting is all about recording and reporting on past financial transactions, FP&A looks to the future, focusing primarily on forecasting and strategic planning.
Despite the differences of accounting vs FP&A, it’s clear how crucial both roles are in steering a company toward financial success, and how they can effectively collaborate to achieve key business objectives.
FAQs
What’s the difference between FP&A vs accounting?
Accounting focuses on recording, classifying, and reporting past financial transactions, whilst ensuring compliance with regulatory standards. FP&A is more forward-looking, concentrating on budgeting, forecasting, and analyzing financial data to support strategic decision-making and guide future business performance.
Is FP&A an accounting role?
FP&A isn’t strictly an accounting role, although it’s closely related to the field. FP&A focuses more on future financial planning and strategic analysis, helping businesses forecast revenues and expenditures, and make strategic business decisions.
Is FP&A well-paid?
FP&A roles are generally well-paid. Salaries in FP&A can vary depending on factors like the individual's level of experience, the size and industry of the company, and the location of the role. Senior roles in FP&A typically have higher salaries due to their strategic importance in guiding business decisions and financial planning.
Can accountants do FP&A?
Yes, accountants can transition into FP&A. A background in accounting provides a solid foundation for the analytical and strategic requirements of FP&A. With some additional training in areas like strategic planning and financial modeling, accountants can effectively make this career shift.
What skills are important for FP&A vs accounting?
In FP&A, key skills include strategic planning, financial modeling, data analysis, forecasting, interpreting financial data to predict future trends, and supporting business decisions.Accounting requires meticulous attention to detail, proficiency in accounting principles and regulations, bookkeeping financial reporting skills, and accuracy and compliance in completing financial records.
How can FP&A add value for accounting?
FP&A can add significant value to accounting by providing forward-looking insights and strategic analysis that complement traditional accounting functions. While accounting focuses on accurately recording and reporting past financial transactions, FP&A uses this data to forecast future trends, analyze financial performance, and guide strategic decision-making.
How does accounting support FP&A?
Accounting plays a crucial role in supporting FP&A by providing accurate and timely financial data. Historical financial information prepared by the accounting team, such as income statements, balance sheets, and cash flow statements, is essential for FP&A professionals to analyze past performance, understand current financial positions, and forecast future trends.
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