Financial Planning & Analysis
Frequently Asked Questions
FP&A involves budgeting, forecasting, and analyzing financial data to guide strategic decisions. It includes creating financial models, setting performance targets, and evaluating business scenarios. For example, FP&A helps predict revenue growth or assess the impact of new investments. Your business needs FP&A to align resources with goals, optimize cash flow, and make data-driven decisions, ensuring long-term profitability and resilience in dynamic markets.
A fractional CFO designs a tailored budget in several steps. It’s an iterative process that typically starts by analyzing historical financial data. A budget also needs to reflect future changes in revenue and expenses that align with strategic initiatives. Budgets can’t be formulated in isolation. They require input from key business stakeholders who understand the various facets of the company’s operations. Budgets are a means to measure future performance against expectations, but they need to be flexible when business situations change unexpectedly.
A fractional CFO builds financial models, such as discounted cash flow (DCF) with scenario analysis, to evaluate investment opportunities by forecasting revenues and expenses within a range of possible outcomes. A model might show the return on investment (ROI) of a new product line while also calculating net present value (NPV) under different growth scenarios. By stress-testing assumptions and aligning models with strategic objectives, they enable data-driven decisions that maximize value and minimize risk.