Imagine you’re building a complex structure.
The architect is responsible for creating the blueprint, much like FP&A teams create a company's strategic financial blueprint. Doing so maps out how each piece will come together to support the building’s vision and long-term function.
This architect isn’t new to the field—they’ve designed dozens of buildings and know what elements are critical for success. They see what the market is looking for, and the most efficient way to construct a stable, high-quality structure.
They understand the “why” behind every design choice and know how each component contributes to the overall structure.
Now, imagine the project inspector working alongside the architect. The inspector’s role is to observe and report on the progress of construction. They’re focused on accuracy and compliance, noting where every wall, support, and foundation element is placed.
However, they don’t determine if each piece is correctly positioned or aligned with the intended design—that’s the architect’s responsibility. The inspector’s job is to provide a clear, accurate report on what’s been built. Meanwhile, the architect assesses whether it meets the blueprint and adjusts as needed to achieve the overall vision.
How FP&A and Accountants Function
In finance, FP&A (Financial Planning and Analysis) functions much like the architect. They focus on strategic financial planning & analysis and aligning resources with the strategic plan. They create the blueprint for the company’s financial strategy and ensuring that resources align with business goals.
Accounting, meanwhile, plays the role of the inspector. It provides a vital layer of oversight to ensure the numbers are accurate, compliant, and correctly reflect what has happened.
For early-stage and growing companies, understanding the difference between these roles can be critical.
As companies grow, they often need more than accounting—they need FP&A expertise to help drive strategy, financial planning, and accurate financial forecasts. These are all needed to make sense of the numbers necessary to make informed decisions about the future.
What is Accounting?
Accountants are essential for maintaining the financial health and integrity of a company, focusing on compliance and accurate financial reporting. Their focus is on ensuring that every transaction is recorded correctly and that financial statements meet regulatory standards. Accountants are responsible for:
Bookkeeping and financial statement preparation: Accountants track every dollar in and out. Doing so maintains the integrity of financial reports by categorizing expenses and maintaining an accurate record of financial activity.
Tax filing and regulatory compliance: Ensuring the company meets tax obligations and adheres to accounting standards.
Managing payroll and expenses: Overseeing employee compensation and reimbursable expenses, ensuring they are processed accurately and timely.
Accountants follow established standards like GAAP or IFRS to ensure every transaction is accounted for accurately. Their work is retrospective—they’re concerned with capturing what has already happened in the business. They do so by verifying the data and making sure financial records align with reality and that at the end of the month, every change in the company’s bank accounts is accounted for.
Accountants are experts at providing a reliable financial snapshot of the past but aren’t focused on guiding the company’s future direction.
What is Financial Planning and Analysis?
Financial Planning and analysis, or FP&A, is sometimes misunderstood as a purely forward-looking role. In reality, FP&A professionals are deeply engaged with understanding the company's past and present performance (Analysis). These insights are essential to planning for the future (Planning).
An FP&A professional starts with a detailed analysis of past performance to understand trends, strengths, and weaknesses. They then monitor current performance closely, assessing real-time metrics and variances from expectations. Only with a solid grasp of both past and present can FP&A speak to the future and guide strategic decision-making effectively.
FP&A professionals with backgrounds in advising or scrutinizing investment transactions bring a unique set of skills that elevate their role. In both fields, a significant part of the job is financial due diligence; scrutinizing financials to assess their accuracy, understand the accounting methodologies, and gauge the “quality of earnings.” Investment bankers and investment professionals look beyond reported numbers to assess whether they paint an accurate picture of a company’s strength. They work closely with accounting teams to ensure that the reported financials tell the real story about a company’s performance.
This diligence is invaluable in FP&A, where professionals act as internal in-house investment analysts. They examine the company’s performance to guide strategy and resource allocation. Just like an external investment banker would question and critique financials before recommending an acquisition, FP&A professionals analyze internal results to recommend operational action items to ensure alignment with strategic goals.
They conduct Budget vs. Actual (BvA) analyses, providing financial analysis insights into performance and gaps. They review variances to ensure that financial statements and reported numbers align with strategic objectives.
Why you want to hire an FP&A professional with a background in Fundraising and Acquisitions Advisory and Analysis
Mastery of Financial Modeling: Investment banking and private equity professionals build dynamic, flexible models to assess various scenarios and support M&A or other investment transaction rationales. The volume of financial models they build as analysts and associates is unmatched in any other domain as they are constantly assessing different complex transactions. In FP&A, this skill enables them to project outcomes, stress-test assumptions, and provide a reliable foundation for planning. Also these models are used to communicate results, which means they are organized and presentable vs just used for internal purposes.
Critical Assessment of Reporting Quality: In due diligence, investment professionals dig into financial statements to understand how numbers are reported. They question accounting methodologies to ensure accurate representations of revenue and profit. This experience helps FP&A professionals assess internal data quality, looking beyond numbers to understand their implications for the company’s health and strategic direction.
Strategic Insight: Private equity professionals, in particular, are trained to create value within portfolio companies by identifying inefficiencies, optimizing operations, and prioritizing high-return areas. This focus on value creation translates to FP&A, where the goal is not just to understand numbers. The goal is also to use them to support growth and profitability.
A Market-Driven Perspective: Investment professionals view a company’s financial performance in the context of industry benchmarks and trends. These are invaluable in FP&A, where aligning strategy with market conditions is key. This knowledge helps FP&A teams prepare executives for competitive decisions and align with industry trends.
FP&A teams work with companies to:
Forecast and budget: Creating projections for revenue, expenses, and cash flow with finance teams. These help to align with business units based on historical and current data. These are so that businesses can plan for future growth and manage resources effectively.
Build financial models: Conducting scenario analysis, financial modeling, and testing assumptions for a reliable financial strategy. They do this while building models that help the company understand potential outcomes of different strategic choices.
Analyze market trends: Providing context on how the company’s performance aligns with industry trends, helping identify opportunities or risks.
Prepare for fundraising or expansion: Supporting initiatives like fundraising, where investors expect detailed financial projections and an understanding of key metrics.
Unlike accountants, FP&A professionals don’t just track numbers; they interpret data to offer financial insights to support finance leaders and senior management in decision-making. They understand how financial metrics align with broader business goals. Then, they use this knowledge to help executives make informed decisions about where to allocate resources and how to prioritize initiatives.
Key Differences Between Accountants and FP&A Professionals
Accuracy vs. Insight: Accountants prioritize accuracy. They make sure that every transaction is recorded correctly, and financial statements comply with regulatory standards.
FP&A professionals focus on interpreting data. They ask questions like, “What do these numbers mean for our strategy?” and “How should we adapt to improve performance?”
Compliance vs. Strategy: Accountants are concerned with compliance and maintaining accurate records, which protect the business from legal and regulatory risks
FP&A drives strategy, helping executives understand what the numbers mean for growth and future planning.
Record-Keeping vs. Analysis: Accountants keep detailed records and ensure everything adds up.
FP&A professionals analyze data, building models and projections that provide insight into where the company is going and how it should allocate resources.
Past, Present, and Future: Accountants primarily focus on past transactions to verify accuracy.
FP&A professionals analyze both past and current data for financial performance insights. They guide future strategic financial plans for what’s next and support decisions that will shape the company’s future.
The Importance of Keeping Accounting and FP&A Separate
These roles are not only different but should also remain separate to create a system of checks and balances within an organization. Here’s why:
FP&A helps create the company’s strategic blueprint. Because they understand the goals and priorities of the business, they can assess how monthly results align with the broader vision. When accountants close the books each month, FP&A reviews these numbers, performing Budget vs. Actual (BvA) analysis to identify variances, strengths, and weaknesses. This structure provides accountability—FP&A double-checks the financial data from a strategic perspective, ensuring the results align with the business’s goals.
Why Early-Stage Companies May Need FP&A More Than They Realize
For early-stage and growth-focused companies, having both functions is critical.
Accounting provides the foundation. They accomplish this by ensuring accurate records. Meanwhile, FP&A builds on this foundation by providing strategic insights that help drive growth and strengthen communication with business leaders.
As companies evolve, simply tracking financial transactions isn’t enough—they need a partner who can help interpret the data and guide decision-making.
Conclusion
While accounting and FP&A may seem similar, they each play a unique role in a company’s financial health. Accounting provides accuracy, compliance, and stability, while FP&A offers insight, strategic direction, and adaptability. For businesses that want to do more than maintain their financial records, FP&A is essential.
