[Adam] Hello, and welcome to Tech for Finance, where we help finance professionals leverage technology to support their ambitions as businesses and as individuals.

I am your host Adam Shilton, and in this episode, we're going to be chatting with Paul Barnhurst who is founder of the FP&A Guy as well as the host of the FP&A Today Podcast.

For those that are unfamiliar with FP&A, this stands for Financial Planning and Analysis.

Paul started his career in the Navy's procurement division, before moving into finance, holding positions as FP&A Manager for American Express, Director of FP&A at Solera and Director of Finance Sales Operations & Analytics at DigiCert.

Paul now runs his own company, but also sits on the Advisory Board for Born Capital who support early stage startups in the CFOtech space.

Thanks for joining me today Paul.

[Paul] Thanks for having me, Adam. I'm really excited to be on your show. Looking forward to it.

[Adam] Thank You. Yeah, so, so we'll, we'll dive straight in. So just, just to start things off, I'm curious to know how you ended up in FP&A after serving your procurement role in the Navy.

[Paul] Sure, let me walk you through that. So, I was civilian, I was not enlisted in the Navy, but I was a civilian. But I worked on a Navy base for four years in procurement and pretty quickly I realized writing government contracts was not something I saw myself doing long term for a career.

So I moved over more to our business analyst office. That's where I got involved in some software projects and different things and decided I wanted to go back to grad school.

So I went back and originally the plan was to get a degree in supply chain with a master of science and information management. Took my finance class and said, No, I'd rather do finance. So I did finance with a, a master of science and Information Management. So I did a dual degree and from there I went to work for American Express. And my first role was more of a financial reporting role, was really a business analyst, but it was called financial analyst. I did a lot of sql, a lot of report writing, and then an opportunity opened up to be in the fp& a side supporting that group. And since I had worked with the guy who headed that and had experience supporting that group, I was able to get that role, it was a promotion and I've been in FP&A ever since.

[Adam] Very good. Yeah. Sounds sounds like it was the right move.

[Paul] I think so, yeah.

[Adam] Well you've been, you've been doing it a while now, right? <laugh>?

[Paul] I have. So it's worked out well.

I can't Complain.

[Adam] Yes, <laugh>, absolutely.

Yeah. So, but before we start delving more into the FP&A side of things, I am curious about the, the, the project that you site when you are working at the Navy.

So I mean I do a lot of work in the SME space, so it's, we're probably not comparing apples with, with apples here, but I'm assuming that the implementation of the software system in the Navy was a, a, a pretty large solution, right?

You were there for, for four years?

[Paul] Yeah.

[Adam] And, and you, you, I don't expect you to go into the detail of course, but I'm interested, you know, some, some of the, well namely what you found most challenging from that project and what you might have done different, you know, specific to an implement implementation like that, if you were to do it again.

[Paul] Yeah, so there's two, two projects I worked on. One was around implementation and one was a little more about software requirements.

So what happened is the Navy said, Hey, we have this contract that uses this software tool that one of our divisions is using, one of the different branches of the Navy, and we want everybody to use it. So my boss said, Hey look, you're gonna implement it for all of the naval air command is what it was called, one of the three big commands within the Navy mm-hmm.

And so I had to coordinate and work with the different branches, work with the team that already put that software in place and figure out how do we use that software within our environment where we were already using one automated tool and we didn't wanna have to go to multiple places to get the data.

So it required things to think about, okay, how do we take this data and make sure we can get it back to the other for reporting purposes? What reporting is available, writing up the documents and training the employees on how to use this tool. And I came up with that for not just our location, but for multiple locations.

So that was one project I worked on. I think the big thing I learned there was just, you know, one, how many different things you touch and how important it is to really involve everybody to make sure you get the data aspect as well as the customer aspect, right.

Because if the people don't wanna use it, it doesn't matter if you're getting good data, you're gonna have problems and if the data's not good, you're still gonna have problems.

And then the second project I worked on, which I learned a ton from, is we had to do an external rotation. It was a three year program, kind of like a leadership program. And I was invited to go back to DC and work on a software requirements board.

So right as I went back, the person who was the Navy representative retired. And so I'm there to do my rotation for three months and learn and they're like, Oh, hey, you're now the head person for the Navy on this project.

Oh, okay. And so they had to air force an army and the Marines and it was working on a software program that they were getting ready to develop for procurement that was DOD wide.

So the entire department of defense for the government. And so I worked with different representatives and with the contractor to help make sure the requirements were right, that it would meet procurement needs.

And that was a really interesting experience cuz there were a lot of things that were done wrong, such as they decided they were gonna use an existing software and just pull out all the financial stuff and add in the procurement instead of starting over.

There was reasons why they did that, but, you know, didn't make a lot of sense. I worked on that project for three months, came back, finished up a few things, went to grad school and later on I was talking with my old boss about the project and they ended up killing it because it just never worked for everybody.

There were so many issues with the way it was developed. So it taught me a lot of the importance of really understanding the customer, and usability, not just, hey, did we meet the requirements to be successful?

[Adam] Yeah. Yeah. And, and it's interesting actually, I've, I've just I've just come off a webinar actually that it was the, the topic of conversation was how technology is having an effect specifically on the CFO and what that change management piece looks like. And

the recurring thing that kept coming back was people, process, technology, data. And if you don't have all of those bases covered, you’re kind of doomed to to failure.

And just come back to your point there about getting buy-in. You know, if you don't have that change management piece sorted, if people don't understand why something's happening or what it means to them because people have got an innate fear of change, they will, they will resist.

Right. You know? So I thought, I think you're absolutely right. You know, it's interesting to hear

[Paul] Yeah. Is It definitely is.

And it’s also interesting to hear that, they’re problems that aren't specific to a particular size of company. You know, they are the same problems, whether you are a, like a micro business, whether you're in the SME space or whether you're in the enterprise space, all of those rules apply.

So, so thanks for talking us through that. That's interesting.

[Paul] You're welcome.

[Adam] Going back to FP&A and I, and I appreciate we, we are rocking and rolling a bit cuz as I say, you don't have all the time in the world, but since you started with Amex, I think it was back in 2008, wasn't it?

[Paul] Yes. Correct.

[Adam] How have you seen specifically the FP&A business function evolve since then compared to to what you are now seeing amongst FP&A teams in 2022 has much changed?

Has, has there been a massive evolution, do you think?

[Paul] I think it's changed in a few ways. I don't know if I'd say a massive evolution, but we're definitely seeing a shift and it was accelerated by Covid.

So, you know, the first thing we're seeing is the change from being a back office function, just viewed as a cost to really being viewed as a strategic business partner.

Financial planning and analysis should really be helping the company and the executives make sure they're best deploying the next dollar to achieve their strategic objectives.

And that requires being a business partner. It's a term we hear a lot these days. It's a lot more than just sitting behind the spreadsheet.

So I think that's the first thing that's changing is just kind of that view and how they're now more viewed as a value add or almost an internal consultant versus somebody who just provided some reporting. And the no police, as I've often heard of finance referred to, No, you can't buy that cup of coffee. No, you can't have that party. No, we're not doing Christmas, whatever it might be. It's not in the budget. Right. We've all heard that. So I think that's the first thing.

The second is, the amount of data that we have to deal with. I think there's been a real change even in just the last 10 years.

So with that is also coming the need for systems. Right? Most CFOs today are having to understand data. That's one of the biggest things they're looking for. They're looking for someone who can be their right hand man for the CEO. It's not just someone who can man who can manage compliance risk accounting.

It's so much more. So I think dealing with data is a big one. And with that comes system implementations, you know, how do you really do analysis?

You got BI, you got tools, So many different things. So I think, you know, those changes, as I like to say, and I saw it even back in 2008 some, but before that used to be fp&r financial planning and reporting.

You were doing your job if you put that a hundred page deck on the manager's desk that he never read, and you made sure the budget and forecasts were done on time. Today, it's really more about the analysis and really helping the business strategically move forward and making sure that they’re the partner that aligns the operational and the financial plan together.

[Adam] Right. That's that's interesting. And, and it's interesting that point about data as well, and I, I'd agree, you know, it's the amount of accessible data now is, is just exploding really.

But there's, there's another query that, that stays at the, the back of my mind and is it is like for all of this. At what point does the responsibility of the finance or the FP&A team start and end when it relates to data?

Because data spans an entire business, right?

[Paul] Yeah, it does. And that's a, that's a great question. Every company will define it a little different.

But you know, I think there's a few key things. You know, ERP is owned by finance in the sense that that's all accounting data, you know, other financial systems, a planning system, a treasury system.

Now, whether you choose to have an actual finance automation and systems team in your company, or if you have somebody in the finance team that can work with IT, is gonna vary.

Just like the whole discussion of where does your data analytics team sit, You know, there's a lot of debate should that be in finance?

Cause the reality is finance is one of the few organizations that needs to look at all the operational and financial data.

It's really critical inputs for everything they do for the analysis, for the budgeting and forecasting.

So to me the, the key is really that there's close alignment, not that it's necessarily owned by finance. You know, my last company before I started my business, the we got a new CFO, One of the first things he did is took the data team and put it back under finance.

You know, and I've seen in other companies where they've done that and I've seen it separated.

But whether you do that or not, whether you have an IT team in finance, you really need somebody in finance, someone in FP&A who can speak that IT language that can serve as a bridge almost kind of, they call it an FP&A architect type of role that can help make sure that raw data, whatever system it's being put into, is done in such a way that they get the outputs that are needed to support the business.

[Adam] And I'd agree. And, and just just to use one quick example. I dunno whether it's the same over in the States, but there's more and more talk now of ESG, which is environment etc....

[Paul] Yes, very Much.

[Adam] Yeah. Yeah. And I suppose because there are financial implications if you weren't to comply that it then sits with the finance team to make sure that that governance is in place because that they may be paying the fine if you do something wrong.

Right? Yeah. But to me, ESG isn't just something that's limited to finance, it's joint responsibility.

But I do agree with your point to say, look, you know, if a lot of data sits with the finance team and you've got an FP&A specialist who's good with data, then there could be branches. Yeah. We're branching out providing everybody's able to work together. Right?

[Paul] Yep.

[Adam] Yeah. So I suppose that, that kind of brings me onto my next question, which is the point I picked up from your podcast with Howard Tunnicliffe, I dunno whether I'm pronouncing that correctly from Tunnicliffe.

[Paul] Yeah. Tunnicliffe

[Adam] From the Economist. There was talk there about the concept of hybrid versus centers of excellence. So hybrid roles or, or a center of excellence. Can you unpick that a little bit? Does it relate to what we are saying here? I mean, the example you use there is, you know, an FP&A data analyst for example.

You know, so I'm guessing they might be an individual that doesn't just do that. They might have, you know, a foot in other processes, you know, periodic activities, month end close, you know, whatever happens to me.

So can you unpick in your, in your terms, what you consider to be a hybrid role compared to what you're talking about here, which is a center of excellence?

[Paul] Yeah. So I think there's a couple different ways to look at this. So first we'll talk about what they found is some studies have shown there's kind of five to seven unique roles in FP&A, depending on when the study was done.

But there's what they call the FP&A architect, which is kind of around that data.

There's the data scientist, there's the traditional analyst, which is, you know, just that fundamental financial modeling and analyzing data.

There's the storyteller, that person who has kind of put that whole story together.

And then there's the influencer, which is really influencing the business.

And beyond that, there's some others. They talk about, you know, in a small company, you're a startup, there's not gonna be five roles.

Yeah. Right. You're filling a hybrid role. You might be really strong at analysis, you may not be doing data science, you better be doing a little bit of influencing and storytelling if you wanna have an impact.

Right? So sometimes you see almost segmented roles. Sometimes what you'll see is somebody who performs all of them. Usually it's a little bit of a mix.

But in addition to that, you see where the center of excellence really comes around is around what we call business partnering.

In a lot of Europe, business partnering is its own role. In the US it's rarely its own role.

It's almost always just a part of FP&A. But sometimes what you'll see is you'll see them split that.

So you'll have planning done by one group and it will be in a center of excellence. Then you'll have the business partnering or decision support, whatever you wanna call it, done by other people who are embedded in the business and they're really helping with the analysis versus the planning.

So that's really where you'll sometimes see center of excellence is a lot of times for planning, centralize it corporately. You could even have a center of excellence for the data or data scientists or different, different pieces.

So that's a little bit of how I think about it and what you see.

[Adam] That's interesting. And as we say, well you mentioned that if it's a smaller organization, you might not have a center of excellence for, for each one of those.

Yeah. It's nice, it's nice to have that ambition. Right. You know, when we get to this size, we'll be able to have center of excellences.

But I suppose if we are talking about a smaller company, if somebody came to you and said, Look, we're a growing organization, we're now at the point where we've got enough data and we are now earning enough money as a business to justify the role of a an FP&A manager, for example.

So if you were recruiting for an FP&A manager, if you are hiring for an FP&A manager, what sort of skills would you be looking for?

And just to set a bit of context in, in other podcasts, we've been sort of discussing the value of industry experience versus tech skills, for example.

So it'd be good to get your take on what skills you think are are valuable in, in an FP&A manager.

[Paul] Sure. You know, for most, most roles for FP&A, I would put a discount on industry. Yes, it's nice to have, but I much more want somebody who's a critical thinker, who's an analyst, who can communicate, who's proactive.

I would like them to have those core financial skills, but as long as they have core math skills, they have those core soft skills and they have the, they show an analytical ability.

I can teach the rest. So I think the most important thing for me is somebody that's proactive. That's a critical thinker. That's a good communicator.

Yes. I want the technical skills and all else equal, obviously I'm gonna take the person with the technical skills and industry experience if I can get it.

But rarely do you get all three at the same time at the price point you're wanting to pay for. Right.

It’s kind of how it works. So that's probably how I think about it is first for me is some of those soft skills along with an analytical ability, you know, next I'd look for somebody who has solid FP&A experience, you know, that, that has that, that and then last would kind of be that industry experience.

[Adam] Okay. Fine. And, and I'm guessing, I suppose all sorts of people could get into FP&A if it, if it fires them up. Right.

So, so you mentioned what was it that you did your degree in again? Was it data science?

[Paul] My master's was in information systems and then I did an MBA in finance.

[adam] Mba. Right, Okay. That's fine. So, so obviously both the sorts of qualifications that could lead quite nicely into a career in FP&A. Right. But I suppose, you know, having a, a qualification in data science or, you know, I suppose related qualifications could still serve that FP&A providing they have the skills that you've mentioned there, you know, the analytical skills, the, the problem solving all of that sort of stuff.

[Paul] Definitely. I mean, you see some people, and I'd say the majority used to be they come through the accounting ranks controller and then might move into the planning or they might do both hats.

So you definitely, accounting is common. You see a lot of people from investment banking, especially companies that have a lot of m and a or they may want fp a to assist with corp dev and some of those type of things.

Consultants are common as well because they've seen a lot of businesses. And if they have that financial knowhow, they can think strategically, which is really so important to that role of FP&A.

Cuz you're helping make sure the strategy is aligned with the financial, with the operational planning. And so I think those are some of the common roles.

You see. You do see people also sometimes coming from data science or, you know, some of the best FP&A people I've worked with are often did engineering undergrads and then somewhere along the line they got some finance skills.

Either they went to MBA school or they did master of finance, or they picked up a finance role because they have really good critical thinking and really good math skills.

[Adam] Yeah, that's, that's very good. And, and I find it fascinating some of these, these transitions that, that people can make.

I was speaking to so I do a lot of work in ERP Right. And I was speaking to another company that also provides ERP solutions. And one of the directors of this business used to be a construction engineer. So, so he worked on big UK construction projects.

And you wouldn't necessarily think, Right, well how does, how does construction translate into technology? But I suppose it's, it is all a process, isn't it?

You know, if you've got a brief to say, I need to engineer this solution with something physical, i e nuts and bolts. It's not too much of a stretch to then say, Right, well actually let's take that and, and make it virtual.

And, and I think we'll see a lot more of that, especially given a lot of the skills shortages we are seeing at the moment. It's, it's incredibly difficult to hire.

So I think at some point businesses are going to have to think more creatively about where they find good people.

I completely take your point about, you know, it's ideal if they do have finance experience and it's ideal if they do have, you know, a bit of experience. But at some point I think, you know, there, there does need to be that, I suppose horizontal view of, of skills rather than just, you know, you are in our industry, you're in finance.

So anyway, that's, that's just my take, you know?

[Paul] No, and, and I totally agree with you. And speaking to that, one of the best hires I ever made, we hired him temporarily and within a month my boss was like, He's doing great work.

Hire him full time, was the data guy. Cause our data was a mess in the company.

And one of the first things he told me, when we hired him, is, I have no interest in being a finance person, I don't do finance, but he dealt with numbers, he dealt with, you know, our data and we had a lot of commissions, a lot of reporting. We needed a lot of operational support to help the business. And he was fabulous for that and was one of the best hires I ever made. But he had no interest in being in finance and he hadn't come from a finance background. Yeah.

So, you know, it's knowing what you need in a person and those skills and then going out and finding it. And sometimes you'll find it in those nontraditional places that you don't expect.

[Adam] Yeah, Absolutely. So we've talked a little bit there around tech skills and, and data.

So kind of a similar question I, I've just said there, you know, if you were hiring for a certain role, what skills would you look like would look at.

If you were equipping a finance team that was a blank canvas. You know, so, so they, they've got somebody in place to manage FP&A, but at the moment, you know, they're pretty limited. They've got a database with information, they're using spreadsheets.

Looking to the sort of tech that you work with, what would an ideal tech stack for, for an FP&A team, and, and I appreciate that there might not be a simple answer to that because it depends on what they're trying to achieve, right?

You know, so, but if somebody came to you and said, We're not using anything, we want some recommendations in terms of tech that we can leverage to up our FP&A game, what way would you think about that?

[Paul] Well, you know, core, in every tech stack, at a minimum, it may only be for edge cases. is a spreadsheet.

Yeah. Whether that's Excel, Google Sheets, or you go one of, one of these new tools that have come out in the market. Equals, Sheet Rocks and others that are spreadsheet options.

I mean, that's the first thing you're gonna have. That's what every company starts on. And then as you start to build, you got your ERP, right?

You got a CRM that the marketing and sales teams using. At some point you start adding an HR system and really your, your, your core is gonna be your planning tool.

And then you may also on top of that, have some kind of BI tool. So when you think of a planning tool, the way I think of a planning tool is really there's, there's four functions to a planning tool.

And why I think it's central to an FP&A’s tech stack is first the data management, almost all tools now integrate at a minimum with your ERP, your CRM system and your HR system.

Sometimes they'll even integrate with Snowflake or Tableau or Looker, you know, and your billing platform if you're a SaaS business.

So, you know, they might be integrating with five or six different tools and bringing all that data into a data model.

So that's the first thing. Within bringing that all in, they allow you to plan using it. How do they allow you to build your financial model, your budgeting, your forecasting, your scenarios.

Then you have the reporting side. How much dashboarding can they do? Can you hook it up to another tool? Do you need to, you know, export it into a warehouse? Or are you gonna do it all out of the tool? And then kind of the collaboration and workflow.

So really I think that heart, once you get to that point where you're no longer gonna use spreadsheets, right? They're too painful,you're not gonna use 'em alone. You then need to add some technology around that. And so I think the core thing is a planning tool.

You know, beyond that you may have a BI tool, you may add a data scientist and you know, additional tech beyond that, most of the other technology you're gonna have is really kind of finance wide, right?

Whether it be your procurement system, Concur, your ERP, your treasury, all those things. And you might need to think about how they speak to each other, but those others tend to be, you know, really the office of the CFO versus core kind of FP&A technology.

[Adam] Very good. And, and thanks for that. I think it makes a lot of sense. Just ask, I'm thinking about it, and we did mention this before we started recording, obviously I saw the, the podcast that you released today.

And, and of course to some people it's kind of scary to some people. It's it's a bit of hype because actually AI can sometimes sound really exciting, but actually in some instances it can be pretty boring. Right?

You, you know, talk about an AI engine that will spot, you know, anomalies in an approval process for example, or anomalies in data. That, that's boring ai, right? You know, that there is more interesting AI.

So my question just whilst we were talking around that is when you talk about planning, you know, when people move away from spreadsheets in that conversation, was that AI embedded within a planning tool that's helping with revenues?

Or is it, have they got kind of a bespoke solution that they've set up that takes in AI and machine learning algorithms?

[Paul] Yeah, that, that is a great question. I would say large enterprise companies, pretty much every planning tool has some AI capabilities.

Okay. Smaller companies, it's kind of hit and miss on who's using AI and how they're using it just because of the fact that many companies aren't using it.

That being said, I do think you want AI, and there's a couple different ways to think about it, but first I'll share FP&A trends released their 2022 study, okay?

And what they found is the satisfaction of budgets and forecasts from last year's study went down 11%. Not too surprising coming outta covid Right? Harder to predict. The further you are off on your predictions, the less happy people normally are.

So, but what they found is there were three things that helped improve the satisfaction. So 49% was the average overall of people who thought their forecast was good or great.

That number went up to 45% when you used key drivers to build your forecast, which pretty much every planning tool is gonna help you do that.

It then went up to 50% if you had a cloud solution, which again, any new planning tool, if you're a tech or a startup or an early stage company, you're not doing on-prem right?

There, there are some that may use on-prem, but you're gonna have cloud, and so that, you know, means you've moved beyond the spreadsheet that went up to 50.

Those who incorporated AI in their planning process went to 61%. And so there's clearly a show, clearly the data is showing that those companies that are using cloud tool, using drivers, using AI are more satisfied with their forecast.

Now there's different ways you can do that. Not every tool's gonna have that. There's complexity of the company and a lot of things that go into that.

But this myth of what is and what isn’t an AI, you know, sometimes people are like, Well it's scary or is it really here?

I mean, the reality is here, if you turn on net, Netflix or Disney plus, you're using ai, right?

If you go to the web, you're seeing AI used all the time to help drive your decision making. Whether it's successful or not is another story. So the first is AI is here, The second is, you know, there's always that myth, I'm gonna lose my job.

The reality for most of us, the answer is no. Could it change some roles? Could it require us to get some additional education? Sure. But it's not gonna eliminate big industries, not gonna take away everybody's job.

And third is AI uses historical data. So AI on its own is not the way you wanna plan. It's something you wanna use with human judgment. And you'll see, you know, there are tools like Prevadere and there may be some others out there that they are a planning tool, but they're strictly at the strategic level really around using external data.

And a lot of companies that use them will also have a planning tool. So they're not your planning tool. They're not bringing in all your ERP data and managing all that data management. They're really helping you figure out what external factors drive your business and helping doing some of that forecasting.

And then you'll also see some tools that have, you know, the native ability to, to ingest that data and do it within the planning tool.

So you can see it both ways. You can have it in the planning tool and you can also see a, you know, a third party tool that you buy as an add-on.

[Adam] I'm, I'm fascinated. I'm just, I'm just coming. Thanks for that. But coming back to your point on level of confidence going from 50% to 61% when AI was, was laid over the top.

I don't know why that's that struck chord with me. Cuz cuz to me, I suppose I still come from a, from a, a generation where there's still a level of mistrust of computers. Di you see what I mean? You know? Yeah. You know, how how can an AI algorithm make me feel better about my analysis?

But as you say, it's here right? Is is is being used every day. And I suppose if, if that algorithm is developed by the best of the best in the industry, then then you sometimes can't really argue.

Can you?

[Paul] Exactly. I'll give two examples. So I was talking to a lady by the name of Kat and she's the founder of Vareto, which is a planning tool out there. And she was head of the FP&A data science division for Facebook. Okay. And so she helped build the algorithms they used to forecast their revenue.

And I believe they got to the point where on most days they were accurate on daily revenue to within, it was either one or 2% using an algorithm.

And then on the podcast, a person I had said, they used a similar algorithm that was developed by Facebook for their revenue and they found it increased their accuracy.

So I think when you see it increase your accuracy, you start to see the benefits then you believe, Right. Cause we all have those doubts.

But I think the second thing is also when you're smart enough to realize I don't just rely on the numbers.

Yes. Right? You always need that business and human judgment. Yeah. Never do you wanna just stick it through an algorithm and be like, okay, here's the final answer and not sense check it.

[Adam] Yeah. Yeah. And, and I suppose that does come a point where more data and more analysis isn't necessarily a bad thing. I mean, you, you can't, you can get to paralysis by analysis. Right. But I suppose a basic level and, and I posted about one specific tool I can't remember what it was called a few weeks ago.

I was just playing around with some Excel plugins, right. And it had all your standard stuff, you know, data management, you know, the, the, the shortcuts and basically the, the speed ups, you know, they're basically just preconfigured formulas that you click a button and that sort of stuff.

Yeah. But there was a section on there that was modelling. So scenario modelling. Sure. Only very basic, you've got some data in a spreadsheet, you know, you select it, you go through your modelling and then it spits out certain scenarios for you.

Yep. But of course that, that requires some sort of manual intervention. We're not talking about any sort of AI there, you know, we are just using, you know, very basic algorithm to say, you know, when we model we are, you know, doing, doing X, Y, and Z.

Of course the next level is, as you say, you get a planning tool and it takes you to the next level. So you can then do different models, you know, and just in a couple of clicks, you know, what would our, in the event of another pandemic, you know, what what would happen

if we were to, to decrease by a couple of percentage points or increase by a couple of percentage points.

But what we are now talking about, there is an AI algorithm that sits on top of that still further and tries to pull in data potentially what from historic trends that we've seen in your system, but then also might look to common scenarios for industry events. Are we getting to the point where those algorithms can look at industry changes and that sort of stuff? Is that still a bit of a way off?

[Paul] No, we're definitely seeing some industry changes. An example was one of the firms I believe was JDocs had an example where one of their companies was bringing in housing starts. So right. Housing developments is a key piece to forecasting their revenue because it had a big impact on the revenue.

You know, we'll see companies bring in, you know, IMS forecast for inflation, you know, things around interest rates.

Some companies are bringing in weather, right? They're very seasonally dependent. If it's a hot day, it's very different than a cold day. So they may be looking at historic weather trends and see how that typically impacts them in each month of the year.

So you're definitely seeing data being pulled in. Would I say most companies? No. Would I say it's mostly at an enterprise level right now? Yes. Bigger companies that have more advanced tools, but you're definitely seeing more and more external data and when they're using it smart.

And the key word I use there is smart. We generally see a higher satisfaction with the forecast because what they've done is they've found what those key external factors are versus just throwing the kitchen sink at it and hoping something finds a correlation and then Yep.

That's what I'm gonna use. Cause we all know if you look at enough numbers and enough variables, you're gonna find a correlation.

Whether there's causation behind it is another story.

[Adam] Yes. Yeah, absolutely. Fab. Yeah, I I think we might need to have a part two conversation at some point, but we, we, we could, we can come back to that. Cause this, this sort of stuff, I mean, it is fascinating. Blows my mind sometimes.

But you know, sticking with the, with the subjects of, of planning there, obviously if we've got a pretty tight plan that enables us to, to budget more easily, right?

So, so obviously planning and budgeting kind of go hand, hand in hand. Yep. On your podcast episode 19, I'm gonna link to all of these in the show notes by the way. So people listening, you know, you don't have to write all of this down, you know, it will be on the, on, on the show notes when, when the, when the podcast released.

But there was talk there and, and again, the point that I picked up was, should we move beyond budgeting? So for those that didn't catch your podcast, can, can you explain a lot bit more? Because I think some of, some of my listeners will probably be thinking, Well, how, how do you not budget? What is beyond budgeting?

So I, I'd love to hear your thoughts on what that means.

[Paul] Yeah, yeah. Great question. There's a website called Beyond Budgeting and a formal method where you basically get rid of the budget.

Okay. How I typically think of it is really, it's more around continuously forecasting, right?

The budget process often takes several, several months by the time it's done, it's wrong if it was ever right to start with.

And it's usually done because we wanna set targets for incentivizing and paying people and for the board to be happy.

That's usually what a budget is. So if you have good technology and good tools, do you really need to do an annual budget? You already have a long range plan.

And if you're doing continuous in forecasting maybe a monthly forecast or quarterly, or maybe you're doing revenue weekly and expenses monthly, whatever the timeframe may be for your business. Does there have to be a formal budget or can there be those strategic long range objectives, some quick numbers, and then you continually roll over and track against whatever is most recent and try to manage to that number.

And so that's what you're starting to see is more companies are waking up to the idea of, is the budgeting process needed?

Is it really worth all the effort and time, the inefficiency, you know, it often takes several months. You get good tools, you do other things, it can be done well, but often it takes the focus off the business, hear people say, I gotta do budgeting, I'm in another budget meeting.

And so it's like, can you come up with ways to quickly do rolling forecasts where you're always forecasting 12 months out, tie it closer to your strategic and your long range planning and just do away with the formal budget processes as we know it today.

It doesn't mean you don't have targets, you're always gonna have to do that. You're always gonna have something to compare against.

But it's kind of, it's challenging the historical notion and saying, is that really the best way? And in my opinion, I don't think historically, what we have done is the best way. You know, I would lean much more heavily on rolling forecasts and the long range planning and those type of things versus the historic budget process as it's been known and implemented for the last, you know, several years.

[Adam] Yeah. And yeah, and, and, and I get it. So, so, so what we're saying there is as, as opposed to what is a massive headache with a lot of companies, whereby they'll set an annual budget and it goes around and around and around, you know, it's got 20 revisions, you know in, in some companies, obviously, you know, you can still be discussing budgets even when the, when the, the anticipated deadline for the budget was Right.

[Paul] Often, a couple months in and you still haven't agreed on.

[Adam] Absolutely. Which is a complete nightmare because if I do wanna spend some money on something that is gonna have tangible value to my business, then I need it now.

I don't wanna be waiting. Yeah. So, so I wholeheartedly agree on that point about if the, the more rolling we can get it, the the better.

But I suppose tech, tech can, I guess, help us there. So, if we are getting to the point where more of our data in the business is becoming live, and we do have a switch on FP&A team whereby we are not having to spend hours and days generating reports if you've got information so readily available, I don't see why that can't be an aspiration.

So if you are, as you say, permanently forecasting to say, Right, well, how are we doing at this moment in time? You know, is there an element of, given the budget, you know, does this need to flex?

I'd say that it's not gonna be ideal for every company, right. But I'd say that, you know, I'd say it's, it's interesting food for thought.

[Paul] It is. And one of the biggest things you have to be thinking about, it's typically the budget process processes where targets and incentives are aligned, right?

We generally, your bonus is heavily dependent on those financial targets. So that's one of, I think one of the biggest reasons we haven't seen more companies move away from the budget is you have to figure out what the target setting process is gonna be without a formal budget, if you're going to some kind of rolling forecast, right?

And so I think that that's one of the things that kinda has to be decoupled in this whole process if you're truly gonna eliminate the formal budget process as it's done today in most companies.

[Adam] Okay. So I've, I've only got a few more questions for you, Paul. And, and then I'll then I'll let you get on.

We've touched on it a couple of bits there. So obviously we, we talked about how AI is improving and that, that example was the planning process.

We've touched on rolling budgets, you know, beyond budgeting as we've just come from there.

Is is that, do, do we see more of that in FP&A looking to the future? Or with your, you know, sort of predicting the future hat on? Are there any other changes that you’re thinking might might change the way that FP&A work in the coming years?

[Paul] Yeah, I mean, I think the biggest things moving forward for FP&A is one, you know, dealing with the amount of data, continuing to find ways to improve that.

Cause we still spend studies show up to 60% of our time on non-value add data activities. Yeah. Data prep, data cleaning. So I think that's the first thing.

Second is just more scenario planning. You know, some people are saying, Why do we have just one number? Why isn't there a range? Which again gets back to, you know, kind of changing the way we budget forecasting. So I think scenario planning is a big one.

And I think the third area we're gonna continue to see more and more of is the business partnering. Making sure that planning is aligned both financially and operationally.

You know, it should have always been, but you hear these terms called XP&A, which stands for extended Planning Analysis was coined by Gartner. And pushes like that of really having a tool that can align it company wide. So I think those are probably the three big areas.

It's around the data, it's around being able to do scenario planning and giving ranges, and then really aligning companywide, really being that value add to make sure strategic financial and operational plans hang together, Which we're seeing a lot of that push now. I think that will just continue.

[Adam] No, that's, that's fair enough. And I did one of my earlier podcasts was a, was an interview with a guy called Christian Frantz Hansen. And he he, he runs a company that is finance business partnering. It’s called the Business Partnering Institute.

[Paul] Yep. I, I know who he is. I know many. I've worked with a lot of people I've worked with Anders there, who's one of the founders.

[Adam] Yeah, Anders and his 70,000 plus LinkedIn followers or however many he's got. So, so yeah, so, so you know, the drill.

But yeah, there seems to be similar chains of thoughts, you know, when it relates to business partnering, when it relates to, you know, data and that sort of thing.

So I think that's fair. And then, yeah today I was having a, a conversation with somebody about, you know, the advent of WEB3 and, you know, we've been having chats about the metaverse and all those sorts of things.

So I think things will build momentum quite quickly. But I suppose if fundamentally, if you've got the right team with the right skills, you've got the right tools in place, then that should position you to be able to evolve.

No, that's, that's fair. So co my last couple of questions are a bit of a tangent.

So coming to your work with Born Capital.

[Paul] Yep.

[Adam] What are, what are some of the coolest startups you've seen coming out of Born Capital in in recent months and years?

[Paul] Yeah, so, you know, I haven't done a ton of work yet with Born Capital, but I can definitely speak to tools I've seen in different things.

A little bit of Born Capital. So I've been with them now I think four or five months. Yeah. The big project I worked on there was, we just released what we call a third generation FP&A market guide.

We, we talked about 19 different FP&A planning tools.

[Adam] Oh wow.

[Paul] In, in that guide. 15 of 'em were in the main section, and four were kind of products to watch.

And these are all tools that were developed. I think the earliest was 2015 and most of 'em are probably 2018 and later, you know, all cloud based.

They're all, most many of 'em are name are aimed at small to mid-size companies.

And from the ones that were on the list, just the ones on the list after today, one of 'em just announced a 65 million dollar funding round for Series B.

They've raised almost 600 million

[Adam] Oh wow.

[Paul] Between these companies. To solve the planning process. So that's been really cool to see that technology.

In addition to that, because I've kind of, in doing that process and speaking about it on LinkedIn, I've become known as the guy who works on tools.

So I talked to a CFO, a CEO, a Founder, a head of product marketing on a weekly basis.

I've demoed probably 50 tools in the last year, if not more, at least 50. And I've seen some really, you know, really cool things from some that have found ways to take the data model from your ERP and systems and not have to do an implementation process.

Usually when you put in an FP&A tool you got a couple week implementation process. Now those are, these are mostly gained at small business, but to where they can take your data in a minute.

And basically with using AI and some of the business logic, it gives you a standard output and allows you to test the product for free.

Right. That's something we didn't have a few years ago. That's really cool. Yeah.

Others, the way they're using algorithms trying to keep, create scores around the healthier business or trade offs or benchmarking, saying, Hey, we've looked at this and you'd be better off hiring three people here.

Like I've seen one tool called Double Fin, that's an investment we have that's done that on plan, which has said, Look, we're gonna use the syntax from Google Sheets, but allow you to work in both Excel and Google Sheets, however you want, and bring all the data management.

So they have a pretty cool tool with some cool technology, a lot of collaboration and flexibility.

So you have seen a lot of, you know, a lot of different tools. You know, everything from the ones like Data Rails that some people refer to as spreadsheets on or steroids. Yes. You know, to Ana, not Anaplan, Pigment, which is one that's raised 160 million, they're the one I'm talking about.

They raised 65 million this morning.

So they've raised, I think 165 or 170 in total, through Series B. You know, and they're, they've built a tool that they believe their planning tool will replace Excel in many places. It's a companywide planning platform and they have some pretty cool technology with what they've done and they've made some things easier.

So I don't know that there's necessarily one tool, but what I enjoy probably most in all these demos is how they think about planning.

One interesting one I saw is called it's called whatifi.io And it was developed by a guy who does visual special effects, and he designed the tool visually, so it's visual scenario planning, and you see all these different nodes, so you enter the data, but it shows it as kind of decision tree paths.

And so it's not something you see very often in modelling. So that was kind of a cool tool to see and see the technology and see how he thought about it and how he built it.

[Adam] Very good. That's, it's fascinating. And what, what did you say that the guide was with all of the tools in it?

[Paul] Yeah, it's the FP&A, I think third generation market guide. I'll send you a copy of it. Yeah. And then, and I'll send you the link on my website as well where people can go download it.

So I'll send you both those so you have it for your show notes.

[Adam] Yeah. Perfect. That's, that's excellent. That's, that's great.

So last question and then you can tell, tell listeners or viewers where they can find out more about you.

So this, this podcast is tech for finance, right.

And, and this doesn't have to relate to finance, but for you, what's one piece of tech? Be it an app, software or, or even a gadget that you, you couldn't live without.

[Paul] All right. So I'll talk professional and personal. Okay. Okay.

So professionally there's actually two, There's Excel, Yeah. Spreadsheets in general, but Excel, you know, I'm in there every day. I love it. I'm a, I'm a spreadsheet nerd. Yeah.

I can live with it a little less now that I've started my own business. Cause I'm not building as many models as I used to. I'm doing more content creation. So one of the tools I've fall in love with is Canva.

I love how easy it is to go in and create graphics and different things I need for all the content I do.

And then probably, you know, in my personal life, it's, it's the smartphone as much as I hate to say it and how many hours I spend on it, I don't think I could live without it now.

Yeah. Like, it's just, it's a core part of every day. Right. Directions, checking an email, messaging, wasting time on it, whatever it might be.

[Adam] Yeah. Very good. And, and, and it's interesting you mentioned Canva there actually, I think I can't remember the name of the founder, but she's a, she's a bit of a success story.

I, I'll see whether I can find the article on, I'll link to that into the show notes as well. But yeah, Canva went from very small to very big in a very short amount of time and it is a good tool. I've, I've used it.

[Paul] Yeah. I think they hit their high valuation. I'm sure it's come down in the current environment, but a year was about a year ago or so. Somebody said they had evaluation of, I wanna say it was like, it was either 20 or 40 billion or I mean it was big. Yeah. It was 40 if I remember like 40, 41 billion. So they've obviously done well for themselves.

[Adam] Yeah. No ab Absolutely. Absolutely.

So go on Paul, where, where can people find out more about you? You know, where would you, where would you say is the best place to learn more about Paul and, and obviously find your podcast and that sort of stuff?

[Paul] Yeah, of course. So the first place people can find me is LinkedIn. I post daily seven days a week. I've posted for almost the last three, Yeah. 300 straight days now. Okay. Haven't missed in almost a year. So that's the first place you can find me.

Second Avenue website called the fpandaguy.com. Okay. And then you can also find me on Twitter and on Instagram as the FP&A guy.

[Adam] Okay. And is that and spelled out or is it in ampersand?

[Paul] I am trying… my website, obviously it's spelled out cause you can't do an ampersand.

So it's the FP&Aguy.com. On LinkedIn you'll find me under Paul Barnhurst, but I have a hashtag there it is spelled out again.

Cause you can't do an ampersand. So I think all of 'em are spelled out. I don't think there's an ampersand in any of 'em.

[Adam] Oh, okay. Just thought I double check for the people that can't see.

[Paul] Yeah, no, no, I totally understand. I think all of 'em are are spelled out.

Even though I would like to do an ampersand sometimes most of 'em don't allow it. Right. It's one of those reserved characters.

[Adam] No, fair. Great stuff. No, Paul, we've covered so much in that you know. That's amazing. So we really appreciate your time and as I say, you know, maybe at some point in the future we can extend this conversation when we've got a little bit more time.

But no, pleasure having a conversation. And once again, really appreciate your time.

[Paul] Of course. Thank you Adam. I enjoyed being on the show and you know, happy to come back and talk to you again about it was a lot of fun. Thank you.

[Adam] Thanks Paul. See you later. Cheers.

[Paul] Bye. Cheers.