In a rapidly changing business environment, companies turn to financial planning and analysis (FP&A) reports for a holistic understanding of business conditions and performance. For FP&A teams to be most effective, they need powerful, easy-to-use tools that help them quickly analyze data, create financial reports and distribute that information among stakeholders.
Learn more about the major types of FP&A reports and how to leverage them to monitor your business’ financial health and performance. You’ll also learn how to streamline financial planning and reporting with a financial planning and analysis (FP&A) solution.
Financial statements are foundational reports that provide an overview of a company’s financial position and performance. FP&A teams are responsible for creating financial statements, particularly at the end of an accounting cycle as part of the financial closing and consolidation process.
Commonly used financial statements include balance sheets, income statements and cash-flow statements. These statements serve multiple purposes, including providing information for investment opportunities, creditworthiness evaluations, regulatory compliance and strategic business decisions.
For regulated and publicly traded businesses, financial statements are formal documents that must adhere to Generally Accepted Accounting Principles or International Financial Reporting Standards rules. These statements are audited by independent firms for reliability and accuracy.
Here are seven common financial statements.
A balance sheet provides a snapshot of a company’s financial position at a specific point in time. It shows a company’s assets, liabilities and equity. To maintain this report at a “balance,” the company’s assets must be equal to the sum of its liabilities and equity. Balance sheets are an effective way to evaluate a company’s liquidity, solvency and overall financial health at a high level.
An income statement, also known as a profit-and-loss (P&L) statement, shows a company’s revenues, expenses and net income over a specific period, such as a quarter or a year. Income statements are useful for investors, creditors and management as they make future-facing decisions about the company. Income statements can also be used to assess a company’s efficiency, identify cost-saving opportunities and evaluate pricing strategies.
A statement of cash flows lists the cash inflows and outflows of a company over a specific period. This statement offers insights into a company’s liquidity and solvency, both of which indicate its capacity to fulfill financial obligations in a timely manner.
During the cash flow forecasting process, you’ll want to evaluate these three sections of the statement:
A statement of changes in equity, also known as a statement of shareholders’ equity or statement of retained earnings, shows the changes in a company’s equity over a specific period. This statement outlines the company’s capital structure, shareholder returns and the impact of dividends on equity. Retained earnings are the portion of a company’s net income that isn’t distributed as dividends but is instead held by the company to be reinvested in the business.
FP&A teams should track this report to gain insight into the allocation of profits, whether they are being reinvested in the business or distributed to shareholders. It helps to understand the company’s capacity to generate cash from its operations and sustain growth and expansion.
Some transactions and events aren’t reflected in a company’s consolidated income statement. These can include foreign currency translation adjustments, changes in the market value of securities, and gains or losses from pension plans. A statement of comprehensive income encompasses all gains and losses — realized or unrealized — that affect a company’s financial position.
In combination with an income statement and balance sheet, the statement of comprehensive income provides a fuller picture of a company’s financial performance.
Revenue and expense breakdown provides a detailed analysis of a company’s revenue and expenses. The report typically includes information such as total revenue, revenue by product or service, total expenses and expenses by category. This report helps business leaders understand where revenue is coming from and where it’s spent.
A detailed account transactions report lists transactions by account or accounts over a specific period. This report usually includes when a transaction occurred, how much it was and what it was for. This report helps businesses track spending and identify suspicious activity or account discrepancies.
Financial key performance indicators (KPIs) are metrics used to measure and track a company’s financial progress against specific business objectives. FP&A KPIs help teams evaluate company performance, identify areas for improvement, and make informed decisions regarding financial strategy and planning.
While KPIs are important, FP&A professionals can easily find themselves with too many KPIs, some of which aren’t relevant to their business objectives. Not every KPI has the same purpose, either — some report on the general financial health of the business, while others measure efficiency, productivity or the bottom line.
Reports and KPIs each help FP&A analysts do their jobs in different ways. Reports provide an in-depth analysis of business performance, while KPIs offer a quick overview of progress against business goals and objectives.
For example, gross profit margin calculates the percentage of revenue in excess of the cost of goods sold. This metric highlights the profitability of the company’s core operations. Return on sales, meanwhile, measures the efficiency of a company’s sales operations and strategies by comparing net income to net sales.
Revisit your performance reporting to prioritize the KPIs most relevant to your strategic goals.
Financial statements and KPIs are just some of the ways FP&A teams forecast and monitor company performance across different departments. Here are eight examples of financial reports that help FP&A teams analyze the business, make financial forecasts, and compare projected outcomes against final results.
Driver-based planning reports focus on the key drivers of a company’s financial performance, such as sales or production. FP&A teams create these reports to understand how changes in these drivers will affect financial performance. The report typically includes information about sales, production and revenue projections, among other key performance metrics.
FP&A teams use cash flow forecasting to estimate future cash inflows and outflows and predict cash balance at a specific point, such as the end of a month or quarter. These forecasts also help management identify and mitigate potential cash flow issues.
This type of report compares sales projections against actual sales in a given period. It helps leaders understand real-time sales performance, consumer purchasing behavior, emerging trends and possible growth opportunities.
Capital expenditure (CapEx) planning and performance reports provide a detailed analysis of a company’s planned and actual investments in long-term assets such as machinery, buildings and equipment.
FP&A professionals use these reports to break down expected costs, returns and payback periods for each capital expenditure. This report also compares actual Capex spending against the budget and forecast, providing valuable information for decision-making and financial planning.
Sales and operations planning (S&OP) involves collaboration between sales, marketing and operations teams on synchronized planning that balances customer demand, supply chain capabilities and business objectives.
FP&A teams use S&OP reporting to align sales and operational goals and evaluate their performance. As a result, these reports are essential for strong business operations, meeting customer demand and maximizing operational efficiency.
FP&A teams work with department managers to understand how actual performance compares against budgeted targets. Each month, FP&A teams send out budget variance analysis reports (also called department budget vs. actual reports). These reports analyze variances and elicit commentary from department managers to explain discrepancies.
Many FP&A teams offer reviews and reporting on company operations. These operational review reports highlight performance against forecasts and provide recommendations to improve operational efficiency and productivity. Such a review might also address areas such as process flow, resource utilization, compliance and risk management.
Besides recurring reports, FP&A teams will be called on to create one-off reports as needed for decision-making.
For example, an ad hoc inventory report might detail what stock is on hand for a particular product and how quickly it is moving.
FP&A teams are only as effective as the tools they have to do their work. Here are three categories of tools used to create and share financial reports.
Spreadsheets (such as Microsoft Excel and Google Sheets) are a common tool for consolidating financial statements and generating reports. Excel, in particular, is established, familiar and flexible, making it an easy default for many individuals.
However, as FP&A initiatives broaden to encompass other operational and strategic aspects, the limitations of spreadsheets are obvious. Gathering data from many sources, merging it into a spreadsheet and constructing formulas is a labor-intensive process with a high risk of human error.
Because most corporate financial data is in accounting databases and applications, it’s not surprising that many vendors offer reporting features. However, their analytical capabilities are usually limited, without advanced features like scenario modeling. Because these tools store the actual, real-world values in their datasets, it’s difficult or impossible to forecast “what-if” scenarios.
To use accounting software effectively, you need to integrate a comprehensive database that forecasts potential values and evaluates probable results. For this reason, finance teams may find themselves unable to perform advanced analysis and forecasting using these tools alone.
FP&A professionals are increasingly using advanced corporate performance management (CPM) solutions to monitor and report on their company’s financial health. These solutions can easily connect with any data source, extract data, optimize data models, and produce accurate and sophisticated financial reports — all within the same interface.
Some CPM solutions use Excel and Power BI on the front end with a robust data modeling and planning engine at the back end. These solutions extend beyond financial reporting by leveraging data across domains, such as operations, sales and marketing.
If you’re looking for a better way to do financial reporting, Acterys can take your financial consolidation, reporting, planning and forecasting processes to the next level. Acterys is an integrated platform for CPM and FP&A that’s built with Power BI and Excel in mind.
Trusted by 700+ organizations worldwide, Acterys empowers customers to gain a clear understanding of their financial performance now and in the future. The solution effortlessly integrates with all data sources and, within minutes, can provide valuable insights through interactive dashboards.
As FP&A needs evolve, so do the tools they use. Organizations now require xP&A solutions that leverage the power of data beyond the financial. Leading tools like Acterys get your teams the information they need, whenever they need it.
If you want to see how Acterys streamlines the financial reporting process, start a free trial today. You can also book a meeting with our solution experts to get a personalized demo for your specific needs.
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