FP&A vs. Accounting: what’s the difference?

FP&A and accounting both deal with numbers, but the rationale behind is different.

Accounting focuses on past performance (think: with pre-accounting you're looking at the invoices from the previous month). It answers the question: What did we earn and spend last month? Are our books in order?

FP&A focuses on the future performance. It answers the question: How much will we earn next quarter? Can we afford to hire now? 

Accounting ensures compliance, reporting, and accuracy. FP&A helps you steer the business.

Think of it as your accountant tells you that last month’s profit was €20,000. Your FP&A forecast tells you that you’ll lose €40,000 next month, because of planned hires and a delayed payment. That insight changes decisions. 

So FP&A looks forward, while accounting looks back. But what exactly is the outcome of doing FP&A well? Let’s see what it helps you achieve in practice, especially as a startup or small business.

FP&A goals for startups and SMEs

With startups or small SMEs, FP&A has four typical goals:

1. Maintain cash runway

Especially if you’re VC-backed or pre-profit, FP&A helps you understand when you’ll run out of cash, and how to extend your runway without last-minute funding rounds.

2. Enable smarter decisions

Should you spend €10,000 on paid ads or a new hire? FP&A models both options and shows the impact on cash and growth. It brings structure to tradeoffs.

3. Support growth with clarity

Scaling without financial control is risky. FP&A helps you grow with a model. If you know that every €1 in CAC returns €3 in 12 months, you can invest confidently.

4. Create alignment

When the team understands what’s in the budget, what’s forecasted, and where performance stands, you avoid surprises and second-guessing. 

FP&A is not about getting it 100% correct. It’s about direction. You won’t nail every number. But even a simple forecast helps you see what’s coming, and you can avoid the mistakes that stall startups and small companies.

In the next section, we’ll show you when a company should start with FP&A, and what manifestations and triggers to look for.

When should you start with FP&A?

FP&A doesn’t begin with a big team. It starts with a signal: your business is growing, your decisions matter more, and the stakes are rising. Here’s how to know you’re ready. 

Signs your business needs FP&A

Your cash runway is under pressure

Your cash runway is under pressure? You’re tracking burn rate, but not adjusting fast enough? When a one-time hiccup (like a delayed invoice) puts your short-term plans at risk, it’s time for FP&A.

You make decisions based on hunches

Hiring a developer? Launching in another country? If those feel like leaps of faith rather than data-driven moves, FP&A can ground them in numbers.

You’ve tried to model something, but it didn’t work

Maybe you built a spreadsheet once, but updating it felt painful (think: a lot of manual work) or irrelevant. That points to missing forecast discipline.

Someone’s looking for funding or wants runway clarity

You're a startup and looking for your next funding? Whether it’s investors or lenders, they want clear milestones and evidence of financial discipline. A proper forecast tells that story.

Real-world triggers for getting started

If you browse through communities like Reddit, you’ll find real-world events where startups and SMEs often put FP&A live:

• First hire in finance: fractional CFOs or senior analysts can set up a forecasting rhythm without costing like a full-time CFO.
• Funding round: building FP&A early helps your pitch deck match your internal discipline.
• Model went stale: when your forecast is stale, it’s time to update your infrastructure (e.g., look into software tools like re:cap).
• Sustained headcount or revenue growth: once you bring on full-time hires or cross €1-2M revenue, it’s harder to track your burn informally.

The first steps in FP&A

Starting with FP&A doesn’t mean building a perfect forecast from day one. It means laying the right foundations so you can grow into it. Here’s how to begin.

1. Understand your current financial setup

Before you can improve, you need to know what you’re working with. What tools are you using today? Who’s responsible for maintaining financial data? Are reports up to date? Are they reliable?

Whether you rely on dedicated software or just use a spreadsheet, you need clarity on how money is tracked today, and where the blind spots are.

Take this example: If you close your books two weeks late every month, your budget will always lag behind reality. That’s a data problem before it’s a forecasting one.

Once you have that baseline, you can define what you want to change or improve.

2. Set clear goals: what do you want FP&A to help you with?

Don’t try to solve everything at once. Good FP&A starts with a few clear questions:

• How much cash do we have left?
• Can we afford to hire?
• What happens if we miss our targets?
  

Your goals will shape everything: model, metrics, meeting cadence. Set goals that are tied to your stage.

Example: "We want to understand if we can safely grow headcount by 30% without shortening our runway below 6 months."

Once your goals are clear, you can figure out who needs to be involved to make it happen.

3. Identify key stakeholders

FP&A is a team effort. You need input from across the business to create realistic plans, and alignment to act on them.

• Founders/CEO set strategy and make investment decisions.
• Finance or accounting manages the books and updates forecasts.
• Department leads contribute assumptions, like headcount plans or marketing spending.
  

A lightweight FP&A process with regular input and review keeps everyone on the same page. When people are involved, they’re more likely to identify with the goals, which increases ownership and alignment. Once the people are aligned, it’s time to build the structure.

What are essential building blocks with FP&A? (+ examples)

With your goals, tools, and team in place, FP&A becomes about building a system that helps you plan, decide and adapt. These are the core components every startup or SME needs.

Financial model: what it is and why you need one

Your financial model is the engine behind all forward-looking finance. It's where you simulate what might happen, based on what you know today. It doesn’t have to be complicated. Start with top-line revenue, key expense categories, headcount, and cash flow. Think of it as your “what-if” machine.

Why it matters: a good model helps you run scenarios. What if churn increases? What if your sales cycle slows? You can’t predict the future, but you can prepare for it.

With the model in place, you can translate those plans into concrete spending limits.

Budgeting process: setting up a basic budget

A budget gives structure to your strategy. It turns broad goals, like “grow revenue by 50%”, into specific numbers for each team. Start simple:

• Break your model into categories (salaries, tools, marketing).
• Assign ownership: who’s responsible for each area?
• Allocate amounts based on forecast and runway.
  

For example: if your forecast says you can safely spend €100K/month, budgeting helps divide that across teams in a controlled way.

Once your budget is agreed with your investors and live, the next challenge is staying on track, which is where forecasting comes in.

Forecasting: looking ahead

While your budget sets the plan, your forecast shows how reality is unfolding. You can combine actual and budget figures for the next months or use a rolling forecast. 

A rolling forecast is a dynamic planning method. Instead of setting a fixed plan for the year and revisiting it only once or twice, you update your forecast continuously. It combines actual results from past periods with updated assumptions for future months. This allows you to extend your visibility: as one month ends, you add another at the end of the forecast horizon.

The process blends actual and budget figures: actuals for the completed months, and projections based on revised expectations for the months ahead. You’re not locked into the original budget but adjust based on what's actually happening. This makes rolling forecasts especially valuable in fast-changing environments, where agility and early signals are crucial.

Overall, forecasting helps you stay agile, especially in fast-changing environments. 

The process is simple:

• Start with the current budget or model.
• Plug in actual results monthly.
• Adjust assumptions going forward.
  

Example: If your ad spend produces fewer leads than expected, the forecast will show a revenue dip in the coming months, so you can act before it hits cash flow.

Forecasting brings your model to life. But models and forecasts only work if they’re tied to the right metrics.

KPIs: tracking what matters

You don’t need a dashboard with 50 metrics. Just track what matters most to your goals.

• Cash runway: your financial breathing room
• Burn rate: how fast you’re spending money
• MRR/ARR: recurring revenue, if applicable
• Gross margin: to understand scalability
• CAC & LTV: for marketing and growth efficiency
  

Example: If your CAC doubles but LTV stays flat, you’ll want to rethink spend allocation. KPIs make these patterns visible.

Once you track the right KPIs, update your forecast, and compare them to the budget, you’ve got the core of FP&A in place, even without a big team. Now, let’s look at the tool stack you can use.

Tools and templates to get started with FP&A

Building FP&A isn’t rocket science, but you need the right tools. Here’s how to equip yourself.

Spreadsheets

For teams who get started with FP&A, spreadsheets are often the easiest way to get going. Excel or Google Sheets give you flexibility to build what you need, from scratch or using templates. You can model headcount, simulate cash flow, and track runway, all in one file.

Templates and resources

If you’re starting from zero, there’s no need to build everything yourself. Dozens of open-source or low-cost templates give you a solid head start.

Here are some useful options:

• Cube offers free templates, from rolling forecasts to KPI dashboards.
• Causal or Brixx provide model blueprints tailored to SaaS, e-commerce, and services.
• Google Sheets libraries and Notion hubs include cash flow models, hiring planners, and board-ready summaries.

Choose a template that fits your business model, plug in your numbers, and adjust the assumptions. Over time, your model becomes your home base for decisions.

But again, the more moving parts you add, the harder it gets to maintain by hand. That’s when software starts to make sense.

FP&A software

As your business grows, so does the complexity. At some point, updating your forecast shouldn't require chasing down or manually updating files. It gets complex and messy. That’s usually when teams start looking at dedicated FP&A software tools. 

Typical signs you’re ready:

• Forecasting takes more than a few days to update
• Budgeting requires input from multiple departments
• You’re repeating manual work, copy-pasting from accounting tools or CRM
• There’s no single source of truth for key metrics or runway
  

That doesn’t mean jumping into a heavyweight system. Many tools now work alongside spreadsheets rather than replacing them.

re:cap, for example, offers financial planning features that make it easy to convert raw data (e.g. bank transactions, invoices) into usable, manually adjustable forecasts. It’s a good fit if you want structure and automation, but don’t want to give up the flexibility entirely. 

Once you’ve picked your tools and built a basic model, the next step is to turn FP&A into a habit. Good planning is about creating a process that runs every month, involves the right people, and leads to smarter decisions. If tools are the engine, process is the fuel.

The FP&A process: how to get started and what to improve once implemented

Start by defining a simple rhythm. Who does what, when, and how? Even the best model loses value if no one updates it or looks at the results. Think of the process in three stages:

1. Input: collect data from your accounting system, CRM, and team leads
2. Review: update your forecast and compare it to budget
3. Decide: share insights, make adjustments, and document key takeaways

Keep it lightweight. With early-stage teams, this might be one spreadsheet, one finance lead, and one monthly meeting. The goal is to create a regular habit.

Example: In a €3M SaaS startup, the CFO updates the forecast monthly, discusses changes with department heads in a 30-minute sync, and flags risks to the CEO via a short video.

Monthly cadence

Monthly is the gold standard. It's frequent enough to stay close to reality, but not so frequent that it becomes a burden. Here’s a basic monthly FP&A rhythm:

• Week 1: Close books, gather actuals
• Week 2: Update forecast and KPIs
• Week 3: Share insights with heads
• Week 4: Adjust hiring/spending plans if needed 

At an earlier stage, you can stretch this to a 6-week or quarterly cycle. Just don’t let it drift into “we’ll update when we have time.” Time pressure is exactly why FP&A exists. It also depends on the investor reporting rhythm: ideally, startups should be able to send out their reports by the end of week 3 of the following month.

Roles and responsibilities

Even in small teams, FP&A benefits from shared ownership. It’s not about hiring more people but about defining who’s responsible for what.

• CEO/founder: sets strategic direction, signs off on changes
• Heads: provide assumptions (hiring, marketing spend) and use the output
• CFO/finance or operations lead: owns the model, updates forecasts, collects inputs
• Accounting: delivers accurate actuals from the previous month
  

Example: In a five-person team, the founder might wear all four hats. That’s fine, as long as each “hat” gets time on the calendar.

Clarity beats complexity with FP&A. Define roles early, even if the same person fills them for now.

Communication and transparency

The best FP&A processes don’t live in a silo. They create visibility across the company, without overwhelming people with numbers. Here’s how to keep communication clean:

• Summarize the numbers in plain language. “Runway is 11 months. CAC has increased slightly. Forecast shows Q3 hiring might need to slow.”
• Visualize trends: charts work better than raw tables.
• Loop in team leads: share relevant metrics, ask for input and background information on the changes.
• Keep a log of key decisions and assumption changes (Notion or Google Docs works fine).

This turns FP&A from a reporting task into a decision-making loop. 

Next up: What are the most common FP&A mistakes, and how can you avoid them? We’ll look at real-world pitfalls and how to keep your process lean, useful, and mistake-resistant.

FP&A pitfalls startups and SMEs should avoid (+ examples)

By now, you’ve got a rhythm: tools, a monthly process, and people aligned around it. But even a clean setup can go off track if you fall into a few classic traps. Most aren’t technical, they’re strategic. 

1. Overengineering

One of the most common mistakes? Making your model too complex, too early.

• Dozens of tabs
• Hyper-nested formulas
• VLOOKUP chains only one person understands
  

This often happens when someone tries to build a "bulletproof" model – before it’s even clear what decisions the model should support. Reality check: an 85% accurate forecast that’s easy to update beats a 98% one that no one touches.

How to avoid overengineering with FP&A

Start small. Build a lean, 12-month cash flow model. Add complexity only when you hit a clear need, like headcount by department or cohort-based churn. However, more advanced models are necessary at a later stage (Series A+)

2. Lack of stakeholder alignment

Even a great model is useless if no one uses it – or even worse, no one trusts it. Alignment issues often look like this:

• Finance and founders disagree on runway
• Department heads don’t understand their budgets
• Teams keep working from their spreadsheets
  

Without shared understanding, the FP&A process becomes a black box.

How to avoid it lack of stakeholder alignment with FP&A

Bring stakeholders in early. Share the model, explain assumptions, and invite questions. Make it part of decision-making, not a monthly report that gets ignored.

Tip: a 30-minute forecast review with department leads can do more than any dashboard. Show, present, and give background information – don’t just send.

3. Ignoring historical data

Companies often focus only on the future, but skipping the past is risky. If your forecast isn’t anchored in what’s happened, you’ll end up projecting wishful thinking. Common red flags:

• Forecasted revenue growth has no historical reference
• Hiring plans ignore actual ramp time
• CAC and churn assumptions are optimistic but unproven

How to avoid it ignoring historical data with FP&A

Always pull in historicals before forecasting. Look at revenue trends, gross margin shifts, and spending patterns. Use rolling averages or trailing 3/6/12 months as sanity checks. Check if the level of detail regarding accounting data is enough to build a proper forecast or controlling or if there are adjustments necessary.

Example: If your last 6 months show €50,000 average monthly revenue, a forecast that jumps to €100,000/month needs a story and evidence.

History doesn’t dictate the future, but it keeps your plan honest. 

Conclusion: How to get started and improve FP&A as a startup or small business

You don’t need a big team to start with FP&A. You need visibility, discipline, and a process that fits your stage. Start with the basics: build a simple model, track what matters (cash, revenue, costs), review monthly, and adjust when things change.

Keep the process lean. Involve the right people. Use tools that don’t get in the way and work best for you, whether that’s spreadsheets, templates, or software tools.

Regardless of the medium, what matters most is the quality of the underlying data. Your accounting must be meaningful, up-to-date, and detailed enough to reflect the true financial situation. The same standard applies to all other data sources: they need to be reliable, consistent, and accurate.

Careful, realistic planning is more important than the tool itself. Don’t overengineer things at the start. Start simple and build from there. The goal of FP&A is clarity, so you can make better decisions, avoid surprises, and grow with control. This way, you can start simple and improve over time.

Q&A: How to get started and improve FP&A as a startup or small business

What is FP&A and why is it important for startups and SMEs?

FP&A stands for Financial Planning and Analysis. It helps startups and SMEs plan revenue, manage costs, forecast cash flow, and make better business decisions. Without FP&A, it’s easy to overspend, miss targets, or run out of cash without warning. Even a simple model can bring clarity and control to fast-changing environments.

When should I start doing FP&A in a small business?

Start early, usually when your decisions impact runway, hiring, or fundraising. Clear signs include: growing headcount, inconsistent cash flow, preparing for a funding round, or struggling to update forecasts. You don’t need a full finance team, just a basic model and a monthly review process.

What tools do I need for FP&A in an early-stage company?

Begin with spreadsheets like Excel or Google Sheets: they’re flexible and low-cost. Use pre-built templates for budgeting, cash flow, and KPIs. Or consider software that helps automate forecasts and connect to your accounting data while keeping flexibility.

What’s the difference between FP&A and accounting?

Accounting looks backward. It tracks what happened (revenue, expenses, taxes) and ensures compliance.

FP&A looks forward. It helps you plan what’s next: forecasting revenue, managing burn, and modeling decisions.