Difference between Financial Reporting and Financial Planning & Analysis
Difference between Financial Reporting vs Financial Planning & Analysis
What is Financial Reporting?
Financial reporting is the process of documenting and communicating financial and other information with external stakeholders through financial reports. These reports are essential for stakeholders to understand and review the financial status of a company over a period of time. Sometimes, the reports are also generated to satisfy the needs of internal stakeholders whenever necessary.
External stakeholders — Investors, Government, Stock exchanges, Banks, Insurers, etc.
Internal stakeholders — Board of directors, Management, Employees The financial information is recorded in various statements where the form and the structure are regulated by the Government or Accounting standards prescribed by Professional Accounting bodies. The time period can be quarterly, Yearly, or both depending on the requirements
The following are the primary statements that are generated under this process
- Profit & Loss statement
- Balance Sheet
- Cash flow statement
- Notes to Accounts
- Board of directors’ report
- Management Discussion and Analysis report
- Presentation to investors for the Earnings call
- Auditors report (as issued by the Auditors)
What is Financial Planning and Analysis?
FP&A or Financial Planning and Analysis refers to the collective activity of analysis of financial results, budgeting, and forecasting financial performance. The FP&A team collects the information from the reporting team, analyses the trends in results with respect to past periods and budgets/forecasts, gathers meaningful reasons for the variations, and presents them to the management for business decision-making. There are no specific formats or structures prescribed by any regulating body here since the process mainly caters to the needs of the internal stakeholders.
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