Note: this was originally published at https://alexoppenheimer.substack.com/
This is a continuation of my earlier post, The Purpose of Business Modeling, and is meant to illustrate the FP&A process at a high level.
- Start with building a model that accurately represents the business. It should highlight the key levers (independent and dependent) and key output metrics.
- Develop a forecast based on the model. Commit to top line targets for a given month, quarter, and/or year.
- Build budgets based on the forecast on a department level - S&M, R&D, G&A. These include details on spend and headcount.
- Collect actuals at the end of the period. Compare actuals to forecast.
- Refine model based on actuals. This is done with respect to the ratios that drive the model outputs and business function/model mechanics as they map to the business operation.