The Ultimate Guide to FP&A for eCommerce in 2024

Congratulations! You’ve grown your eCommerce business well into the 7 or 8-figure range. Whether you’re a marketing rockstar, have an outstanding product, or a brilliant combination of both, you’ve achieved remarkable success.

However, at these levels, the complexity of your finances grows, and decision-making becomes increasingly challenging without clear visibility. Relying solely on gut feeling to drive your business forward is getting more than a bit tricky.

So it is time to level up your business.

Welcome to the world of Financial Planning & Analysis (FP&A) – it is time to professionalize and start with a proper cadence.

Effective FP&A turns uncertainty into clarity. It enables you to forecast your financial performance accurately, reduce risks, optimize investment, and increase profitability. 

With a solid FP&A foundation, you’ll need fewer cash buffers, can reinvest more strategically, increase your take-home pay, and boost your business’s valuation.

Now, before we dive into the details of FP&A – it is important to emphasize that this only makes sense when the accounting foundation is in place. Your books should be closed accurately and on time. If this isn’t the case, ensure that is your #1 priority

So for the rest of this guide, I’ll assume your accounting is rock-solid.

The Benefits of FP&A (TL;DR Summary)

GOOD FP&A drives good business behavior.

BAD or NO FP&A drives your business with no view or visibility, and you may be driving off a cliff without knowing it.

What is FP&A?

FP&A stands for Financial Planning & Analysis. And, shockingly, it is the cycle of planning your financial performance over the next period (month, quarter, or year(s), and then analyzing what actually happened at the end. 

If you’re good at forecasting your performance – the uncertainty and risk of your business goes down and that has unlimited benefits. You need fewer buffers in the business, you can reinvest more and grow faster, you could pay yourself more, and your exit valuation goes up – just to name a few.

FP&A Cycle

In almost all cases, the best cycle is annual. A shorter period may be better if you run a very early stage or super volatile business. 

In everything below, I’ll work with an annual cycle, starting 01 January (sorry UK owners, you’ll have to translate!).

Components of FP&A: 

  • Long-term plan (where is your business going in the next 3-5 years?) – this is updated 1-2x per year. This is the overall vision and the high-level financial plan. This provides high-level direction and overall financial ideas.
  • Budget – Plan for 1 year, broken down into 12 months. 
    What financial results do you expect to realize in the next year? 
    Where do you spend/invest to realize those plans? 
    The budget also gives your (management) team the clearance to spend/invest in everything agreed upon, without you having to worry about or sign off on every item.
  • Management Accounts – Your bookkeeper/accountant/fractional CFO should provide you with monthly management reporting. If you’re not getting these from your bookkeeper, then ask/push them. 
    Do note I say management accounts – your financial statements should be optimized for management usage! 
    I see most CPAs optimize their structure for taxes. I’m not saying that taxes are not important, but the #1 priority for the monthly reports is for you to use them!
  • Performance reviews – you were off. 100% of the time, you are off. But the question here is – what are you going to do about it? Company-wide – that is the question to you as the owner. If you have multiple companies or teams in your business, the review is with whoever is in charge of that part of the P&L.
  • Reforecasting / Budget Update – Ever made a plan for a year, which lost its value halfway through the year because reality caught up and threw you off course? Exactly. So you want to re-forecast / update the budget throughout the year. From my experience, every 3 months is the best balance between discipline and flexibility.


Translating vision into numbers

Do you plan to raise investment? That shows here. Do you plan to 3x your team in the next 3 years? That shows here. Do you plan to add 3 product lines and enter 2 new markets? That shows here. 

You as the visionary (hopefully) have a plan in your head about where you want to go. Write it down. Share it with your management and your CFO. Put it in a Google sheet, and put numbers to it. This does not have to be a fancy tool or anything sophisticated. It is simple – with few details and just the main steps towards your north star.

High-level planning for the next 3-5 years

  1. Start with mapping out your revenue plans. What revenue do you expect to realize per key revenue stream? This part is easy – we all have our thoughts here. (the first business I set up in China, we forecasted to do $ 40 million by year 4).
  2. Then put in your cost of sales – for most of us that don’t sell digital products, your cost of sales will scale somewhat proportional to your revenue.

Then your expenses. This is where it gets harder. What are the high-level things you need to do to realize your plans? Not much detail is needed here, but it should reflect your growth strategy.
Don’t be too optimistic here (in my first business, we figured we could get to $40m with 1 sales guy and minimal marketing spend. Safe to say I learned the hard way).

A demonstration of long term plan by Insight Matters.


Detailed planning for next year

The long-term plan isn’t highly detailed, because, well, it is a strategic vision for the future. For the next year, you will create a more detailed budget.

I prefer to go bottom up for the budget:

  • What actions do you plan & when? 
  • What results do you expect from them and when? 
  • And if you’re in eCom or another business with cash flows that are very different from revenue/cost recognition – when do you plan to purchase, what are your payment terms, etc.? 

Get as detailed as you can/want. Going deeper means (a lot) more work, but also makes for more detailed analysis later on.

In most eCommerce businesses, I would still recommend doing this in Excel or a Google sheet – simply because it is more flexible, and you can upload (a modified version) in QBO or Xero.

One key thing to note if you want to upload it to QBO or Xero: Make sure the categories you use in the budget are the same as you have in your Chart of Accounts (if you run your P&L, all the lines you see are in your Chart of Accounts (CoA). If you want to change your CoA (and from my experience, you probably should!) – don’t do that yourself, but discuss the changes you want to make with your bookkeeper or accountant! 

Doing it yourself puts you at serious risk of pissing them off really badly.

If you have multiple sales channels, ideally, you do the budget per channel to gain insights into their unique performance and needs. This way you can also identify their specific opportunities and challenges. Once done, consolidate these budgets to get a view of your overall financial strategy and ensure more accurate forecasting and better decision-making across all sales channels.

Here’s a link to our eCommerce budget template. Feel free to make a copy and adjust it for your own usage.

Results and goals of the budget

When you look at the results of your bottom-up budget, you most likely have a gap with the number in the budget in one or, more likely, all of the key items: revenue, operating profit, and cash flow.

And this is where it gets interesting – discuss with your business partner, your significant other, your management team, or your fractional CFO the gap – what can you change in the next year? Where can you push harder? Or where are you too optimistic? The goal is that, in the end, the long-term plan and the budget are aligned.


Importance of monthly financial reports

Every month you get the P&L, Balance sheet, and cash flow statement from your bookkeeper or accountant. The earlier you get them, the better. In my eyes, the 15th of the following month is the latest you should get them. 10th is better, and the 5th would be even better.

As a side note – speed matters here! If you get the May results on June 5th, you have 25 days to make changes. And on the 5th of July, you get the June results and you can evaluate them. If you get the results on the 20th, you have 10 days to act on it. No way you can make a significant impact there. So instead, you take the actions in July, and by August 25th you see the results. A 3 month feedback loop, rather than 1 month!

And a second side note – if you don’t get all 3, ask/push them to send you all 3. They are connected, and you need all 3 to get the full picture!

If you’re not sure what they should look like – here’s an anonymized example.

 Analyzing budget vs. actuals

One key component of the management accounts is the ‘budget vs actuals’ reporting. For each line in your P&L you review – how did you do compared to the budget? Where did the variance come from? 

Bonus points if you do the same for your balance sheet and cash flow statement!

We’ll dive deeper into this in the Performance Review part. 

The easiest way to do this budget vs actuals comparison is to add/upload your budget or to create your budget in QBO or Xero. See here the instructions for QBO and Xero. You may need to upgrade if you don’t see that option on your QBO or Xero. Then in the reporting section, you can simply run a budget vs actuals in QBO or Xero.


This is the fun part. At least, for me it is! Every month, with your P&L and your budget vs actuals (and your KPI dashboard if you have one) – sit down, and analyze the differences. 

I can promise you that you were wrong with your budget. And that is OK. In the beginning, depending on your business, you may be off by a lot. And that is OK too.

 How to do the performance review

Run that report for the last month, last quarter, or YTD – and go line by line – and ask yourself:

  • Where are the big differences (either in USD or in %)?
  • Do you understand why those differences are there? 
  • What assumption in your original budget was wrong?
  • What can you do to correct it?
  • When you do your re-forecast – should this be updated, or will you recover?

If you’re involved in the day-to-day, you will probably do this alone, with your co-founder or your fractional CFO. And you will understand easily what is happening (“link building revenue is 20% behind target because we lost that big client” or “Marketing spend is 10k below budget because I’ve postponed signing the agency contract”.)

If you’re further away from the day-to-day, reviewing this is more triggering the conversations with your sales, marketing, and delivery teams. At a minimum, they should be able to answer where the differences come from.

If they are solid, they have updated you along the way already of anything where they are ahead or behind, and the performance review does not have any surprises. 

The aim of performance reviews 

  1. Get better at budgeting & forecasting. By reviewing the differences, you will learn over time about what levers you have, and how they exactly work (or not). You should increase your accuracy every period.
  1. Drive performance. It is easy to hit a target if the bar is super low. The more accurate you can forecast, the more you understand how your business works financially. You understand more how marketing spending is (or is not) related to your financial performance. The more you understand, the more you can use it to set targets higher and drive performance.

❗ Do keep in mind – financials are reset, with lagging KPIs. They need to be complemented by leading KPIs that are action-oriented. Setting the right KPIs is a whole different topic.

But do note that every leading KPI needs to lead to a lagging KPI that fits your overall (financial) plan.

Benefits of performance reviews

There are 2 other benefits of this process leading to more accurate forecasts: 

  1. More accurate forecasting means lower risk and that means you need fewer cash buffers, and you can take more money out of the business or reinvest more.
  1. In case you plan to sell – a track record of clear budgets & performance will help a buyer gain confidence and make the whole process smoother – and that should lead to an easier process and a higher price.

These conversations are on every level, with every budget owner. So if you have 2 teams, both managers have their own budget – you have your own performance review with them.

And consolidated, or company-wide, you have that conversation with yourself, your business partner, or your fractional CFO.

From experience, I can tell you that these conversations can be uncomfortable – especially in the beginning when you are way off budget. 

We often see that when people are 20-50% off their budget, they dismiss its value. However, after 3-6 months, as they get closer to their target, they begin to understand its importance. A prime example is an online education business that initially didn’t engage with budgeting. Now, as they approach their goals, the owner uses the budget to guide discussions with the General Manager, who handles day-to-day operations, to make informed decisions.

Keep at it – you will get more accurate.


So in November/December, you made the budget, and now it is April. Reality has caught up, and you are (way?) off-budget.

What is the response of most people? This budget is useless now, let‘s throw it out of the window. It becomes demotivating, a cause of frustration or you’re way over budget and it makes you complacent or lazy.

All of those reactions make sense. Therefore, the solution is to update your budget every quarter.

Update your budget for Q1 with the real numbers of Q1, and revisit the plans & assumptions for the remaining 3 quarters. And do the same after Q2 and Q3. This way, your budget remains relevant and useful throughout the year. The bigger you get, the more work this becomes, so, unless you’re small and simple, I would not recommend doing it more often.

Why you need to adopt FP&A 

These are the basic steps, and everyone can do them. It is not scary, FP&A won’t bite. You only need:

  • Excel or Google Sheets 
  • A good bookkeeper/bookkeeping firm (or bookkeeping process) that delivers on time
  • A few hours
  • An honest conversation to challenge your assumptions

Doing this well will open up a new perspective on your business and will increase your profitability, and your working capital efficiency and will reduce risk.

Over the years, our team of fractional CFOs, and controllers have guided dozens of 7 & 8-figure eCommerce businesses through this process with solid results. 

Schedule a free intro call today to discuss how we can help you reap the benefits of solid FP&A.


What is FP&A and why is it crucial for my eCommerce business?

FP&A stands for Financial Planning & Analysis. It is a process that involves forecasting your financial performance and analyzing the actual results. For eCommerce businesses, effective FP&A helps in reducing uncertainty, optimizing investments, and increasing profitability. By implementing solid FP&A practices, you can better manage cash flow, reinvest strategically, and enhance your business’s valuation.

How can FP&A improve my decision-making process in an eCommerce business?

FP&A improves decision-making by providing clear financial visibility and accurate forecasts. This allows you to anticipate financial outcomes, identify potential risks, and make informed decisions. For eCommerce businesses, this means fewer surprises and better resource allocation, leading to optimized operations and increased profitability.

What are the key components of the FP&A cycle for eCommerce businesses?

The key components of the FP&A cycle include:
Long-term Planning: Outlining your business’s financial direction for the next 3-5 years.
Budgeting: Creating a detailed financial plan for the upcoming year, broken down monthly.
Management Accounts: Receiving monthly financial reports (P&L, balance sheet, and cash flow statement).
Performance Reviews: Analyzing budget vs. actual results to understand variances and improve future forecasts.
Reforecasting: Updating the budget quarterly to keep it relevant and useful throughout the year.

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