Financial Analysis and Planning


Financial analysis and planning are one of the fundamental activities and responsibility for the finance department. Financial analysis and planning help an organization in achieving strategic tasks and objective within available resources.

The key responsibility of financial analysis and planning team is facilitate management in formulating short and long-term objectives, carrying out cost-benefit analysis and ensuring targets are met through periodic reviews.

Another responsibility is to ensure that management’s actions create profitability for organization by providing relevant financial information.

Financial analysis and planning are essential divided into four parts forecasting, budgeting, reporting and analysis.

Information technology and systems have made a big impact on financial analysis and planning. The advent of databases and modern analytics tool have smoothen the whole process.


The first major step in management planning is formulating future sales strategy and assessing the financial requirements to execute that plan.

Organization needs to analyze the current and future internal business scenario as well as external developments, which impacting the business.

Forecasting tools such as Hyperion Planning Tool is apt in helping organization achieve this task.

Forecasting module of the tool provides information happenings of previous financial years, broken down various cost elements. This provides organization with a trend with past results.


The second major step is budgeting for management objectives. After analyzing the past trends, organizations are able to asses’ trend of expense within various cost elements.

The next step is to expense all the cost account on a monthly basis. This will bring about financial requirements of organization for given financial year.

For example, Hyperion Planning Tool’s budgeting module facilitates organizations to enter financial information on a monthly basis in all relevant cost accounts. It creates a scenario of financial requirement for the given year.


The third major step is reporting financial information at every end of the month. Essentially reporting can be defined as providing financial information for decision making at a periodic interval of time.

Financial reporting could be for internal stakeholders' as well external stakeholders. The internal stakeholders could be the business owners and the management team. The external stakeholders could be investors and financial institution.

For example, Financial Data Mart kind of system pulls in information from different payroll, accounting and payables/receivable modules to provide accurate monthly financial information.


The fourth major step in financial analysis and planning is the analysis part. When there is over spend scenario, we need to analyze what is causing overspend, which factors are driving over spend.

A further analysis needs to be done whether factors driving over spend can be controlled or not.

Financial analysis requires studying of liquidity, profitability and long-term sustainability. Financial ratios play an important role in financial analysis.

Financial ratio analysis module helps in creating analysis about financial performance of company and compare with organization within the same industry.

Module has templates for current ratio, production costs, cash conversion cycle, etc.

Financial analysis and planning function comes within the purview of the chief financial officer.

Hence it is important to develop financial systems, which support executive decision also.

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The article is Written By “Prachi Juneja” and Reviewed By Management Study Guide Content Team. MSG Content Team comprises experienced Faculty Member, Professionals and Subject Matter Experts. We are a ISO 2001:2015 Certified Education Provider. To Know more, click on About Us. The use of this material is free for learning and education purpose. Please reference authorship of content used, including link(s) to and the content page url.

Management Information System