A Guide On Financial Planning And Analysis (With Functions)

By Indeed Editorial Team

Published 7 September 2022

The Indeed Editorial Team comprises a diverse and talented team of writers, researchers and subject matter experts equipped with Indeed's data and insights to deliver useful tips to help guide your career journey.

Organisations use financial planning and analyses to attain their financial and operational goals. It is a collection of actions that support a company's important business decisions and overall financial health, including budgeting and financial planning. Knowing the nuances of conducting financial planning and analyses can help you decide whether it is a suitable career path for you. In this article, we define financial planning and analysis, list the job responsibilities of the analysts, share essential skills for this role and also provide some requirements for the position.

Related: Finance Associate Vs. Analyst: Definitions And Differences

What Is Financial Planning And Analysis?

Financial planning and analysis is the process to evaluate whether a company can achieve its strategic financial objectives and expectations. This helps facilitate a company's key business decisions and financial position, such as budgeting and financial planning, to grow the wealth. These analysts help monitor investment performances, income and expenditures by overseeing different financial affairs, including income, expenses, capital expenditures, taxes and investments, along with different finance statements.

Related: How Much Do MBA Finance Graduates Make? (Top Jobs Explained)

Roles Of Financial Planning And Analysis Analyst

These analysts help to determine a company's current worth and future business capabilities. The financial analyst's responsibilities include assessing financial data to provide projections for a company and assist it in making educated and right choices. Apart from managing financial analysis, here is a list of responsibilities that these analysts may undertake:

  • Conduct financial planning, forecasting and budgeting. Planning, budgeting and forecasting are three key steps that can help determine and strategise a company's short and the long financial objectives.

  • Evaluate current investment and assets. Evaluating organisations' current investments and assets by studying their cash flow statements, income statements and balance sheets.

  • Create a financial model. A firm creates a financial model to summarise its earnings and expenses conveniently to calculate the impact of a future event or decision.

  • Create variance analysis reports. Variance is the difference between the planned outcome and the actual outcome project in the budget. Comparing past accomplishments to budgets and projections and doing variance analysis to explain discrepancies in performance and achieve future improvements.

  • Determine financial health. Determining the company's financial health using important financial statistics, such as the debt-to-equity ratio.

  • Evaluate the cost-efficiency. Studying and analysing the cost-efficiency of each department of the organisation based on the company's overall financial resources that each department utilises.

  • Create a corporate budget. Collaborate with various departments to prepare individual budgets for them and then consolidate these individual budgets into one overall budget for the organisation.

  • Identify profit-making sources. Identify products or services which have the highest profit margin and which products generate the most profit and also determine which products contribute the most to the organisation's net profit.

  • Recommend strategies. Recommend to management ways for improving financial performance and maintaining financial models and provide precise projections of the company's future activities.

  • Prepare reports. Prepare detailed reports for the top management and assist them in making strategic and financial decisions. Plan for future growth, including capital spending, investments and expenditures and generate financial projections for the next five years.

Skills Required For Financial Planning Analyses

To perform these tasks effectively, analysts use a combination of particular skills to be efficient at it. Here is a list of 10 skills that you may find useful as a financial planning analyst:

Quantitative and financial skills

An important skill financial planning analysis analysts possess is excellent quantitative and financial skills. They solve risk management and financial problems using statistical and mathematical methods. They also implement and create complex models that help the organisation make financial and business decisions.

Accounting skills

These analysts often have extensive knowledge of accounting practices and are proficient in accounting software. The accounting programme automatically extracts sales transactions from receipts and creates sales records. Financial planning analysis analysts can analyse these records accurately and prepare financial statements accordingly as and when required.

Related: Top 20 Finance Interview Questions And Sample Answers

Communication skills

Another essential soft skill financial planning analysts frequently use is excellent communication ability. Financial planning analysis analysts often communicate with members of the accounts, finance, marketing and production department to make their reports. This makes it important that they can collaborate with different departments to prepare the financial reports for which they require significant communication and interpersonal skills.

Presentation skills

The analysis analysts also employ their presentation skills when they present their reports and analyses to the top management. They create engaging presentations using graphics, text and voice inflexions that effectively convey their message. They can give presentations that are compelling, captivating, informative, educational and enlightening.

Problem-solving skills

To solve problems, financial planning analysts may use analytical and observation abilities. Critical thinking is essential to turn the insights gained from data and analyses into action through strategic decisions. Financial planning analysts address issues consistently and try to assess the best possible solutions that can maximise the investment returns and profitability of the organisation.

Related: Finance Skills To Include On Your Resume (With Tips)

Social skills

Financial planning analysis analysts often have excellent social skills, as they focus on fostering cordial relationships with team members along with the members of other departments. These analysts may also frequently work in groups to reach organisational objectives. They can also collaborate with relevant personnel and recognise the essentials of a meeting or conversation and provide pertinent information to deliver effective assistance.

Organisational skills

Organisation skill is another important soft skill for financial planning analysis. The analysts frequently work with large amounts of unfiltered data and assess the important ones to make their reports and forecast successfully. To reach the intended result, they use their organisational skills to stay focused on various activities and utilise their time and resources.

Leadership skills

These analysts use their leadership abilities to make informed decisions, speak with their team members and members of other departments and resolve any issues and concerns that may hinder organisational strategies and their success. These analysts frequently act as a guide or voice of authority because they have the knowledge, skills and experience to set realistic developmental goals for the future that align with the company objectives.

Learning skills

Financial planning analysis analysts use their learning skills to educate themselves on new technology and software. They keep themselves updated with the growing technology and demand of the market to remain employable and efficient at their jobs. Learning new skills helps them to improve their social skills, such as teamwork and self-control, to be successful professionals.

Critical thinking skills

Financial planning analysis analysts use critical thinking skills to build customised reports for different products and services provided by the organisation. They gather and assess data using their critical thinking skills. They draw conclusions after analysing those data.

Functions Of An Analyst

Here is a list of functions that a financial planning analysis analyst may perform:

  • Monitor growth and revenue, manage operational data and perform financial forecasting

  • Provide trend and forecast information along with optimisation recommendations

  • Compare and analyse actual outcomes with projected plans and estimates to assess the financial success

  • Evaluate financial data and develop investment strategies to aid management in decision making

  • Perform variance analysis, analyse previous data, detect patterns and offer improvement recommendations to management for improvement

  • Create and implement process improvements, such as the development of standard and informal reports

  • Establish and enforce policies and procedures to guide the cost analysis process

  • Improve productivity by creating automated reporting and forecasting tools

  • Perform data analysis, draw inference and recommend changes for the improvement

  • Collaborate with the accounting team to ensure accurate financial reporting and develop forecasting methods for a strong financial analysis

Related: How To Become A Finance Analyst: A Step-By-Step Guide

Education And Experience Requirements

Here are the basic and preferred qualifications for this role, which may vary depending on the organisation:

Basic qualifications

The basic qualifications for this role can include:

  • Bachelor's degree in commerce, finance, accounting or economics

  • Good analytical and data processing abilities

  • Computer proficiency

Related: How To Get An Internship In Finance: A Complete Guide

Preferred qualifications

The preferred qualifications for this role may also include, depending on the role and associated responsibilities:

  • Master of Business Administration (MBA) with specialisation in finance, statistics, accounting or economics

  • Certified public accountants (CPA)

  • Chartered financial analysts (CFA)


Explore more articles