FP&A and accounting are crucial functions in an organization that are closely related yet have distinct functions, roles, and processes. While both deal with numbers and financial data, they have several key differences.
But, did you know that
- Based on research by the Association of Finance Professionals, 2020, 77% of finance professionals agree that FP&A delivers significant value to their business.
- According to AICPA, 72 percent of finance professionals believed that strategic accounting and financial analysis had become more important in their roles.
These statistics highlight the importance of having a clear understanding of FP&A and accounting, and how they differ from each other. So, without further ado, let’s dive into the seven key differences between FP&A and accounting.
Purpose
The primary purpose of accounting is to provide accurate and timely financial information to stakeholders, including investors, regulators, and management. Accountants prepare financial statements, such as balance sheets, income statements, and cash flow statements, which help assess a company’s financial performance and position.
On the other hand, FP&A focuses on planning, forecasting, and analyzing future financial outcomes. The main objective of FP&A is to support strategic decision-making by providing actionable insights into business performance, identifying areas for improvement, and recommending data-driven solutions.
Time Horizon
Accounting is primarily concerned with historical financial data, focusing on reporting past performances. It provides a rearview mirror perspective, allowing stakeholders to evaluate what has happened in the past.
In contrast, Financial Planning and Analytics look forward, concentrating on predictive analytics and scenario modeling. It helps organizations plan for future scenarios, make informed decisions about resource allocation, and identify potential risks and opportunities.
Scope
Accounting is responsible for preparing financial reports that comply with legal and regulatory requirements. This includes maintaining general ledgers, accounts payable and receivable, inventory management, and payroll processing.
FP&A, while still considering financial data, has a broader scope. It encompasses sales forecasting, budgeting, cost analysis, and strategic planning. FP&A professionals work closely with cross-functional teams, including marketing, operations, and finance, to ensure alignment with overall business objectives.
Data Focus
Accounting involves transactional data, ensuring the accuracy and integrity of financial records. They rely heavily on systems like ERPs (Enterprise Resource Planning), AP (Accounts Payable), AR (Accounts Receivable), and GL (General Ledger).
FP&A leverages both financial and non-financial data from various sources, such as CRM (Customer Relationship Management), HRIS (Human Resources Information System), and supply chain data. They usually make use of FP&A solutions to analyze and visualize data.
Decision Making
Accounting plays a critical role in compliance, taxation, and auditing purposes. Their primary goal is to accurately report financial results, ensuring transparency and adherence to regulations.
FP&A, though, is focused on supporting strategic decision-making it’s different from strategic finance. By analyzing trends, patterns, and variances, FP&A professionals provide recommendations to optimize resources, improve profitability, and drive growth. They collaborate with executives, line managers, and other stakeholders to develop action plans based on data-driven insights.
Skillset
Accounting requires strong technical skills, attention to detail, and knowledge of relevant laws and standards. Professionals in this field must possess expertise in financial statement preparation, tax compliance, and internal controls.
FP&A demands a combination of technical, analytical, and interpersonal skills. Professionals in this area must be adept at data analysis, statistical modeling, communication, and collaboration. A strong understanding of business fundamentals, industry trends, and strategy development is essential.
Career Path
The career path for accounting professionals typically progresses through senior accountant positions, followed by controller or chief accounting officer roles. Opportunities may also exist in specialized areas like taxation, risk management, or internal audit.
FP&A professionals often start their careers in entry-level analyst positions before advancing to senior analyst, manager, or director roles. Many FP&A professionals go on to become CFOs (Chief Financial Officers) or take leadership positions in corporate strategy, operations, or consulting. You can choose to read our detailed guide on FP&A for business.
Conclusion
Both accounting and FP&A are pillars for the financial management of a business. As we have discussed they have different roles and processes, but they both still aim to help a business meet its financial objectives. By understanding the key difference between FP&A and accounting businesses can meet their financial needs without any hassle.
