Financial planning and analysis (FP&A) software is where a company builds its budget, revises its forecast and explains the difference between its plan and what actually happened. FP&A is also the name of the finance team that does this work. Some products link the finance plan to the sales and supply-chain plans on one engine, which the industry calls connected planning.
Three words matter here. The budget is the plan for the year, agreed before the year starts: how much the company expects to sell, spend and earn. The forecast is the latest estimate for the same year, updated every month or quarter as things change. Variance analysis explains the gap between the plan and the actual figures, which come from the closed books in financial close software.
In many companies, these plans live in separate spreadsheets. The sales team has one, the factory has another and finance has a third. When one changes, the others stay out of date for weeks.
Imagine a company in Faridabad that makes air coolers. In March, its sales team raises the summer forecast from 40,000 coolers to 48,000, because the India Meteorological Department has predicted a hotter summer than usual. Each cooler sells to dealers for ₹9,000. In connected planning software, the change is made once. The revenue forecast rises by ₹7.2 crore. The supply-chain plan shows that 8,000 more motors and pumps must be ordered. The cash plan shows that the company needs about ₹3 crore more for six weeks, to pay its suppliers before the dealers pay the company. The finance head sees all three results the same afternoon. She asks the bank to raise the company's working-capital limit.
The software is a model, not a record. The ERP records what has happened. FP&A software calculates what will happen if something changes. Each forecast can be saved as a version, so the team can compare "hot summer" with "normal summer".
FP&A software receives figures from many systems. The cash forecast comes from the treasury management system. The deals that salespeople expect to win come from revenue intelligence. Each salesperson's quota, the amount he or she is expected to sell, is planned here and passed to incentive compensation management, which calculates commissions. Statistical forecasts of demand can come from time-series forecasting models. The results are shown to managers in business intelligence (BI) dashboards.
Its part financial consolidation adds the figures of every company in a group into the group's figures.