At its most basic, financial planning and analysis is the process of creating a company’s long term financial strategy based on its strategic goals and through an analysis of assets, liabilities, expenses and income. Often, it involves forecasting financial realities and analyzing long term objectives from a financial point of view specifically in order to sure that those are objectives are viable and within the scope of the financial reality.
Financial planning and analysis involves:
- An analysis of the business environment and financial trends, both internally and externally by looking at the market
- The process of identifying and allocating the costs and resources needed to meet vision and objectives
- A budget and managerial reporting mechanism for tracking progress and to gauge future decision making
- Analysing and forecasting cash flow
- Looking at a company’s financial data in order to spot trends and anomalies in order to improve financial planning in the future
- Asking “what if” of financial data and play out financial scenarios in order to understand the effects of business decisions