Financial planning and analysis (known as FP&A) is an essential component of any business, whether starting a new company or being established in India. It helps ensure the organization’s future success by mapping out various paths for achieving both short-term and long-term goals. In this guide, we’ll explore everything you need to know about financial planning and analysis in India, including its definition, objectives, benefits, critical components, and usage in global business. (Read also: Retail store audit: A guide for brands)
What is Financial Planning and Analysis?
Financial planning involves mapping out various paths to achieve short-term and long-term goals and ensuring the organization’s future success. On the other hand, financial analysis involves researching market trends, economic conditions, growth opportunities, cost projections, and more to evaluate a company’s current financial situation and project it into the future with some degree of accuracy.
Objectives of Financial Planning and Analysis
Financial planning and analysis objectives are to provide comprehensive information on the company’s current financial position, future performance, and capital requirements. The financial analysis also helps identify trends, patterns, or relationships from financial statement data, which is used to make well-informed decisions about allocating resources.
Benefits of Financial Planning and Analysis
Financial planning and analysis are a systematic process of gathering, organizing, analyzing, interpreting, reporting on, and monitoring financial data. It offers several unique benefits, including:
- Playing a significant role in the integrated planning process
- Reducing uncertainties throughout the economic cycle
- Saving time and adding value to operations and productivity
- Offering the analysis of variance
- Creating rolling forecasts, and
- Offering a knowledge gain that impacts financial performance.
Critical Components of Financial Planning and Analysis
Financial planning is an ongoing procedure that requires measuring performance against objectives, setting new goals, or modifying the strategy. It has two components: strategic and operational. Strategic analysis is part of business strategy development, while functional analysis is done when evaluating the organization’s ability to achieve its strategic goals.
Usage in Global Business
Financial planning and analysis are used as a tool for organizations to measure the financial health of their business and make predictions. In India, where the economy is booming, companies must balance their budget by having a good understanding of their incoming and outgoing finances and available assets.
The Parting Thoughts
Financial planning and analysis is an advantageous way of determining how to invest business resources best to achieve set roadmaps, objectives, and broad goals. It’s crucial to remember that this process should be done in various circumstances, not just when starting a new business. For better results, connecting with an experienced corporate consultancy company with expertise in this niche is advisable.
This content is meant for information only and should not be considered as an advice or legal opinion, or otherwise. AKGVG & Associates does not intend to advertise its services through this.