Some people confuse financial planning with financial analysis, even though each plays a distinct role in business management and decision-making.

What Is Financial Analysis?

Financial analysis focuses on understanding current and past financial performance by examining revenues, costs, profits, cash flows, and various financial indicators.

What Is Financial Planning?

Financial planning focuses on the future by setting financial goals, estimating funding needs and cash flows, and formulating the plans required to achieve the company’s objectives.

How Do They Work Together?

The results of financial analysis provide valuable information that helps management create more realistic financial plans. Conversely, financial plans help establish targets against which actual performance can be measured.

Summary

Financial analysis helps you understand where you stand now, while financial planning helps you determine where you want to go and how to get there.