This pandemic has uncovered several shortcomings in our way of planning, managing, and organizing societies and businesses. Now that the future looks predictably uncertain, there is a dire need to understand, react to, and learn from it and other unexpected events.
In this article, we will look at why Financial Planning and Analysis (FP&A) tends not to be involved in Cash Flow and why that can be dangerous and short-sighted.
We will also look at what are some of the key elements of a good Cash Flow-focused mindset that FP&A can develop.
This article applies to all private sector firms, not just Mergers and Acquisitions (M&A) and Private Equity (PE) firms. The technique described here can also be used to rank the profitability of five financial planning alternatives to the traditional budget.
This article focuses on why there is a risk of too much focus on the profit and loss (P&L) or income statement and too little focus on the Balance Sheet among FP&A practitioners.
FP&A departments are able to track and manage financial plans. But can FP&A help manage the execution of a strategic plan? Is there value in integrating these two processes?
To unite the firm on a single planning foundation, FP&A must adopt the planning frame that drives value for its customers. That platform is the Operational Budget (OB) and it brings many benefits to the firm.