How can you use FP&A reports to identify business risks and opportunities?

1 What are FP&A reports?

FP&A reports are documents that summarize the financial and operational data of a business, and compare them to the budget, forecast, and historical trends. They help to measure the progress, performance, and profitability of the business, and to identify any gaps, deviations, or anomalies. FP&A reports can cover different aspects of the business, such as revenue, expenses, cash flow, profitability, growth, customer acquisition, retention, churn, etc. They can also be customized to suit the needs and preferences of different stakeholders, such as management, investors, board members, or employees.

2 Why are FP&A reports important?

FP&A reports are essential for understanding the current state of your business and planning for the future. They can help you assess the health and performance of your business, monitor and evaluate the results of your initiatives, identify and analyze any variances or discrepancies between actual and expected results, adjust and revise your budget, forecast, and assumptions, and communicate and report your findings to stakeholders. All these activities can provide valuable insights into any strengths, weaknesses, opportunities, or threats that may exist in your business environment.

3 How can you use FP&A reports to identify risks?

Risks are any factors or events that can negatively affect your business performance, profitability, or reputation. These risks can be internal or external, and they can vary in their likelihood and impact. Examples of risks include market changes, operational issues, financial challenges, compliance risks, and reputation risks. To identify these risks, FP&A reports can be used to compare actual results to budget and forecast, as well as look for any outliers, anomalies, or patterns in the data. Additionally, a sensitivity analysis or a scenario analysis can help test how results would change under different assumptions or conditions. Moreover, a SWOT analysis or PESTEL analysis can evaluate strengths, weaknesses, opportunities, and threats.

4 How can you use FP&A reports to identify opportunities?

Opportunities are any factors or events that can positively affect your business performance, profitability, or reputation. These can be internal or external and can vary in their attractiveness and feasibility. Some examples of opportunities include market opportunities, such as new customer segments or gaps in the market; operational opportunities, such as improvements or innovations; financial opportunities, such as revenue growth or cost reduction; compliance opportunities, such as compliance with laws or incentives; and reputation opportunities, such as positive publicity or customer satisfaction. FP&A reports can be used to identify these opportunities by looking for any signs that suggest something is right or could go right in your business. For instance, you can compare your actual results to your budget and forecast to look for any favorable variances; drill down into the details of your data to look for trends; perform a benchmarking analysis to compare your results to peers; and use a SMART analysis to evaluate your opportunities.

5 How can you communicate your FP&A reports effectively?

Communicating your FP&A reports effectively is essential for ensuring that stakeholders understand your findings and recommendations, and take the necessary actions or decisions. To do this, you should consider your audience's level of knowledge, interest, and involvement in your business, as well as their expectations, objectives, and concerns. Additionally, you should select the best format for presenting data and insights, such as tables, charts, graphs, dashboards, or narratives. Moreover, you should use clear and concise language that avoids jargon and technical terms. Finally, you should use a professional tone that builds trust and rapport with your audience.

6 Here’s what else to consider

This is a space to share examples, stories, or insights that don’t fit into any of the previous sections. What else would you like to add?