September 2024 FP&A Roundup
The best FP&A content in September.
Read this post and join the discussion in Plan Buddies - the #1 community for FP&A professionals.
One Big Insight
My favorite quote with some added commentary from yours truly.
Wassia Kamon
From her podcast, Diary of a CFO (emphasis added).
I didn't start learning about the business when I got to the CFO role. I got to the CFO role because I made it a habit early on in my career to learn about the business and not just the numbers and not just the financials.
Something that will help you when you step into a new role is for you to be able to trace how the company makes money all the way to how it ends on the audited financial statements. You should understand how we make money. And when we make this type of money, how does it show on our financial statements?
It's almost like a puzzle. You know the end results. You know what it's supposed to look like. And now your initial goal should be to understand how the pieces fit together and understand why they fit together a certain way.
All of a sudden, it clicked.
For the last few months, we had been missing targets, and it was unclear what the business constraint was. I decided to go through the customer journey myself - beginning with product discovery and ending with checkout.
Throughout this process, I learned that our growth model wasn’t only driven by how much we were spending on ads or the efficiency of the channels where we were allocating that spend.
Rather, there are numerous customer paths and product touchpoints that influence a prospect to buy. And the marketing channels we allocate to acquire different types of customers that require different messaging and buyer journeys than others.
What used to be a two-dimensional problem of spend and ROI became a multi-dimensional problem of customer journeys and conversion rates through multiple steps of the funnel.
Getting a deep understanding of the business and your customers is vital for FP&A for several reasons:
You have more understanding and empathy for your business partners and what they do.
You understand different ways to segment the business and measure performance.
You stop approaching business challenges through spreadsheet math and start looking at them from an operational point of view. The latter is far more impactful for the business.
At the end of the day, we still have to measure the business on financial performance, but having a deep understanding of every step prior to the numbers ending up in the GL is critical for high value FP&A.
Sound Bites
Great quotes with links to the original source.
Secret CFO
From his newsletter article, Investor Relations II: Are you happy now, shareholders? (emphasis original)
There are a few principles for good shareholder management that hold regardless of the capital structure:
Be precise:
Talk in facts. Don’t guess. Once you’ve said it, you can’t unsay it. And never make it up. You should answer questions with “I don’t know, but I’ll find out” before you answer them with “I think the answer is …”
Build trust:
Especially with the key power brokers in your capital structure
Check your work:
Review before you publish. Then review it again. Then give it to someone else to check.
Nothing undermines a CFO faster than a CFO who got their numbers wrong. Beware late changes.
No surprises:
If an investor is surprised by something, the questions they will ask are:
Did that CFO know this was going to happen? If not, why not? If so, why didn’t they tell me?
Tell a story:
Build a story that fits the numbers.
And I don’t mean story = fiction. I mean story = engaging way of sharing the facts.
Keep it simple:
Any investor will take no more than 3 big things away from an IR interaction. Make sure you are clear on what those 3 things are. And repeat them. Just because you are bored of them, doesn’t mean they are.
Paul Barnhurst
From his LinkedIn Post (emphasis added).
“All models are wrong, some are useful”
If you want your model to be useful do the following
➡️ Deeply listen to the customer
➡️ Define the problem
➡️ Protoype
➡️ Validate logic behind the assumptions
➡️ Consult Subject Matter Experts
➡️ Use good design principles
➡️ Consider the risks
➡️ Utilize scenarios
➡️ Test the model
Modeling is not about being right it is about helping decision makers make better decisions. In fact very few if any models outside of modeling competitions have a right answer.
Jason Hershman
From his LinkedIn Post (emphasis added).
Most CFO’s are just so prepared to be confrontational. Sales says up, CFO says down.
Marketing says right, CFO says left. Product says black, CFO says white. HR says checkers, CFO says chess.
I don’t get it. My guess. It’s something within the finance culture. Growing your career at a bank, Big 4, consulting, etc.
But you can literally be a top 1% CFO by simply being – agreeable when people are right - respectful when you think they are wrong - helpful when neither of you know exactly.
You’re hired to be part of the team. Not against it.
Jim Caltabiano
From Paul Barnhurst’s podcast, FP&A Tomorrow (emphasis added).
One of the most important things that we need to do in FP&A is don't just take the report. Because there's a real desire broadly, across business, you want the report to tell you the answer. It generally does not.
And taking that next step to get the insights, what I try to do is always encourage my teams to do is dig a little deeper. And what I mean by that is try to maybe triangulate. I love triangulating data.
I like saying, ‘Okay, I see the conclusion you're drawing from this, which is good. That's good analysis. Now, take a look and are there a couple other data points? Are there a couple other situations, a couple of analyses that can maybe confirm or deny?’ Triangulation is really important because that right answer doesn't just spit out of a machine.
But the insights are going to be more and more and more important. And I think you need to look at multiple datasets to try to triangulate information.
I'm also really a range guy. I love ranges… Your point estimate is probably going to be wrong. Highly likely.
Zane Row
From Jack Alexander’s podcast, CFO Thought Leader (emphasis added).
[The FP&A Team] is obviously one that I'm very close to and always have been throughout my career, being engaged with their partners…
A great FP&A department is engaged with the [people in the business]…
Having great people is still the key fundamental driver of having a good FP&A team…People who question different inputs and look around the corner.
Memes
Just for fun.
