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  • Writer's pictureAdam Shilton
    • Oct 24, 2022
    • 18 min read

How to Future-Proof Your FP&A | Podcast | Episode 005

Updated: Nov 4, 2022

In this episode we chat 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.



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Please find the show notes below.


Paul’s background:


  • 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 went back and originally the plan was to get a degree in supply chain with a master of science and information management.

  • 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.

Paul’s Navy Software implementations

  • 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.

  • 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.

  • And then the second project I worked on, which I learned a ton from, is we had to do an external rotation.

  • And I was invited to go back to DC and work on a software requirements board.

  • 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.

  • 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.


How has the FP&A Function Evolved Recently?

  • 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.

  • And the no police, as I've often heard of finance referred to, No, you can't buy that cup of coffee.

  • 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.

  • Most CFOs today are having to understand data.

  • They're looking for someone who can be their right hand man for the CEO.

  • So I think dealing with data is a big one.

  • 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.

  • 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.

At what point does data responsibility for FP&A Start & End?

  • 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.

  • So to me the, the key is really that there's close alignment, not that it's necessarily owned by finance.

  • 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.

Paul’s Conversation with Howarrd Tunnicliffe at the Economist about Hybrid Roles vs Centers of Excellence

  • Howard Tunnicliffe: How FP&A Drives Revenue at The Economist -https://www.podbean.com/ew/pb-79rgf-12c19b7

  • 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.

  • They talk about, you know, in a small company, you're a startup, there's not gonna be five roles.

  • You're filling a hybrid role.

  • 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.

What skills would you look for when hiring an FP&A Manager?

  • 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.

  • You see a lot of people from investment banking, especially companies that have a lot of M&A or they may want FP&A to assist with corp dev and some of those type of things.

  • 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 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.

  • 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.

  • 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.

  • 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.

  • 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.

  • And he was fabulous for that and was one of the best hires I ever made.

  • 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.


What is the ideal Tech Stack for an FP&A Team?

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

  • 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.

  • 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.

  • 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.

Paul’s Conversation with Gabriella Gutierrez on using AI to Predict Revenue

  • Gabriella Gutierrez: Using AI to predict revenues with FP&A - https://www.podbean.com/ew/pb-vj4jt-12d51b7

  • I would say large enterprise companies, pretty much every planning tool has some AI capabilities.

  • 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%.

  • Harder to predict.

  • 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.

  • 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?

  • The reality for most of us, the answer is no.

  • 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.

  • 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.


Can you be confident in AI predictions?

  • 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.

  • 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.

  • You always need that business and human judgment.

  • Never do you wanna just stick it through an algorithm and be like, okay, here's the final answer and not sense check it.

Are we at the point where AI algorithms can use external data to make predictions?

  • An example was one of the firms I believe was J Docs had an example where one of their companies was bringing in housing starts.

  • 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?

  • 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.

  • 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.

  • 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.

What is Beyond Budgeting?

  • Budgeting & Forecasting: All your questions answered - https://www.podbean.com/ew/pb-izvga-12b7a5c

  • There's a website called Beyond Budgeting and a formal method where you basically get rid of the budget.

  • 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.

  • 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.

  • 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.

  • 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. [

  • 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.

  • So, so I wholeheartedly agree on that point about if the, the more rolling we can get it, the the better.

  • 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.

  • 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.

What are some future changes you’re predicting for FP&A?

  • 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.

  • Data prep, data cleaning.

  • Second is just more scenario planning.

  • 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.

  • 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 called the Business Partnering Institute

  • I've worked with Anders there, who's one of the founders.

  • 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.

  • 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.

What are some of the coolest startups you’re seeing come out of Born Captial?

  • 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.

  • The big project I worked on there was, we just released what we call the third generation FP&A market guide.

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

  • 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 to solve the planning process.

  • 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.

  • 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.

  • 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.

  • You know, everything from the ones like Data Rails that some people refer to as spreadsheets on or steroids.

  • 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.

What piece of Tech, or Software, could you not live without?

  • So I'll talk professional and personal.

  • So professionally there's actually two, There's Excel, Yeah.

  • Spreadsheets in general, but Excel, you know, I'm in there every day.

  • 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.

  • Directions, checking an email, messaging, wasting time on it, whatever it might be.[Adam] Yeah.

  • 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'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 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.

Where can you find out more about Paul?

  • 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.

  • Haven't missed in almost a year.

  • So that's the first place you can find me.

  • Second Avenue website called the fpandaguy.com.

  • And then you can also find me on Twitter and on Instagram as the FP&A guy

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