This document discusses financial planning and analysis (FP&A), including what FP&A is, where it fits in an organization, typical education and skills needed, common reports and techniques used, and the future of the field. It provides examples of monthly budget reports for revenue and cost of goods sold for a company, including line items for sales, discounts, returns, expenses, variances, and more. It also lists typical FP&A data and reports such as trial balances, budgets, cash flow projections, business models, and reconciliations.
1. 1. What is FP&A
2. Position in the Organizational Chart
3. Education background / Foundation for FP&A
5. Examples of FP&A Reports
4. FP&A Consists of . . .
5. Examples of FP&A Reports
6. FP&A – techniques and methods
8. Starting FP&A
7. Future of FP&A
call Cliff (949) 813-1349
2. 1. Data store • Trial balance(24 mths)
• Changes to Trial balance (Mthly Revenue/COS/Expenses/Int/Taxes)
2. Budgets • Revenue > Forecasts
> Targets
> Previous
• GP(Margin reports)
• Expenses & Interest & Taxes
• EBITDA
3. Cash flow projections (incl DCF model)
4. Complete business model
5. Recons (EG: Cash flow v Net Profit)
5.1 Typical FP&A Data and reports
5. 4.3 Actuals v forecast:
Report - YTD Comparison 2020-March
YTD Actual 2020-March YTD Forecast 2020-March
US UK Total US UK Total
OPERATING EXPENSES
Advertising & Promotion 9,179 1 9,180 14,866 2 14,868
Product Advertising 700 1 701 14,866 2 14,868
Product Promotion 8,479 8,479 - -
Marketing 154,554 - 154,554 77,870 - 77,870
Software license fees - - 21,570 21,570
Technology resources - - 14,200 14,200
Digital marketing resouces 154,554 154,554 42,100 42,100
Selling (samples/trade shows) Expense 152,908 - 152,908 32,299 - 32,299
Product Development Costs 16,644 16,644 3,484 3,484
Samples Net 35,279 35,279 5,500 5,500
- - - -
Trade Shows - Fees, Booth & Other 100,985 100,985 23,315 23,315
Product Development Costs/Trade Shows - - - -
Complete report:
Extract
6. We will penetrate the market by distributing our product for free – this will bankrupt the competition who are
dependent on selling theirs (EG: Netscape)
We will provide a ‘free’ version and charge for the ‘premium’ version (WinZip – Nico Mak Computing)
We will allow our product to be hacked so that we penetrate the market – after a base is established, we will
‘fix’ the security (EG: Lotus 123) – this was probably not the intended strategy but that was how it worked out
Henry Ford – Model T “Any color as long as it is Black!”
Winston Churchill (Paraphrased) “We won’t let them know we have cracked their Enigma code”
Sears Robuck “You can buy anything from our catalogue”
Other example strategies include:
Cross selling Innovation
Expand our product line Improve customer service
Target the ‘young’ market Product differentiation
Pricing strategies Tech advantage
5.2 Examples of Strategy/Tactics
7. 5.3 Typical FP&A Basis for Reporting
1. Basis • Linear projections
• Prior period comparison
• Zero-based
• Scenarios
2. Additional Reports > KPI’s - Dupont model
- other
> Best/Worst/Likely
> Custom
> Departmental/Divisional
> Group
8. 1. No consistency of presentation
2. Different ‘pictures’
3. Confusing
5.4 Some Problems with FP&A Reports
4. Communication - ineffective
5. No rules
6. Every Co has different
9. Financial modeling is a quantitative analysis commonly used for either asset pricing or general
corporate finance. It is the process wherein a company’s expenses and earnings are taken into
consideration (commonly into spreadsheets) to anticipate the impact of today’s decisions in the future.
The financial model also turns out to be a very impactful tool for the following tasks:
Estimate the valuation of any business
Compare competition
Strategic planning
Testing different scenarios + optimization
Budget planning and allocation
Measure the impacts of any changes in economic policies
Rolling forecasts/updates
Variance analysis + reasons/causes (interpretation)
KPI’s
Since financial modeling is one of the most important primary skills, you can also share your experience
through different financial models including the discounted cash flow (DCF) model, initial public offering
(IPO) model, leveraged buyout (LBO) model, consolidation model, etc.
5.6 Explain ‘Financial Modeling’
11. 5.8 Forecasting techniques
3 types of forecasting methods:
1. Qualitative
2. Time series
3. Causal models (eg: Scenario Planning)
6 statistical methods
1. Linear regression
2. Moving average
3. Multiple linear regression
4. Productivity ratios
5. Time series analyses
6. Stochastic analysis (a random probability distribution)
Of course there is
always the Crystal Ball
Remember that these are mostly mathematics
– the real expertise is to choose the
appropriate method
- the technique, any techy can handle that
12. Return on equity (ROE) is evaluated:
Net Profit Margin: = Net Income /Revenue
Asset Turnover Ratio: = Net Sales (or Revenue) / Average Assets
Financial Leverage: = Average Assets / Average Equity
5.9 Components of the Dupont Model?
Here are the chapters in this set of presentations – aimed at answering some of the obvious questions about what is being termed FP&A
The red colored chapter is the current section
The Blue lists the rest of the presentation
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While looking at these examples I thought I would include a ‘yesterday’ format to provide a comparison with current presentation formats