Thinking about making the move from FP&A to CFO?

Well, you’re not alone. Deloitte reports that 47% of CFOs had experience in FP&A before they transitioned to the top executive role… and you can too.

In this episode of the Two Cents: Finance Talk podcast, we had the pleasure of speaking with Paul Barnhurst, otherwise known as ‘The FP&A Guy.’

We talked about what it takes for an FP&A professional to become a Chief Financial Officer, covering topics such as:

• Can you transition from FP&A to CFO?
• Communication tips
• How FP&A professionals can get more involved in strategic discussions
• How to demonstrate leadership skills
• How CFOs can help to standardize data
• Reducing non-value add activities
• Top tips to get closer to the C-Suite

You can listen to Paul’s episode below, or keep reading for Paul’s insights in his own words:

Can you transition from FP&A to CFO?

The ability for FP&A to transition to the role of CFO is completely possible. You're seeing more and more people from FP&A transition to the role of CFO (or to the position of a virtual CFO or fractional CFO).

One of the software vendors out there recently did a study showing that more and more CFOs today are coming through FP&A versus the traditional way.

The vast majority came through controllership. Governance used to be key, and it was all about keeping people out of trouble and making sure the books were right.

Today, the modern CFO is much more about data and commercials and really helping create value for the business. And because FP&A is one of the few organizations that's cross-functional, has a holistic view of the entire business, and works with every part of it, they're well positioned.

At the same time, you need more than just FP&A experience. You need to be well-rounded in finance.

There’s one person I really like, Jeff Marks. His company uses something they call the ‘finance passport.’ He says that if you want to be a CFO, you need to be a finance specialist. A specialist is like an athlete, where you do multiple different things. You’ve got to punch different parts of that passport.

It doesn't mean you have to be in all those roles, but you need projects that show you can demonstrate and lead a group that matches those things, from audit to tax, to accounting, to FP&A, to treasury.

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Improving your communication skills to help move from FP&A to CFO

To improve your communication, I think the biggest thing is practice.

One person who speaks a lot about it on LinkedIn and is a fabulous presenter is Carl Seidman. He often talks about all the practice he’s put in. He used to be part of a comedy group, he did Toastmasters, and now he's part of a national speaking club.

He even had a voice coach at one point. He made a complete commitment to learn how to be able to command a room, and he’s put in hundreds of hours.

So, communication, whether written, verbal or whatever method it may be, really comes down to deliberate practice to get good at it.

How FP&A professionals can get more involved in strategic decisions

To go from FP&A to CFO, you need to be more strategic and there are a couple of things that go into becoming more strategic. First, you’ve got to know the business. For a long time, FP&A was viewed as what I call FP&R, Financial Planning and Reporting. For example, here's this 100-page deck that nobody will read which will end up in the round file basket.

Now you're seeing much more. It's about knowing the business and discussing commercials.

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I remember one time knowing I'd really made an impact in the business when I was sitting in a meeting with our product team. We were working through some new pricing, and they turned to me and asked, well, what should the price be?

I tried to look at it strategically, but my response was:

“Here's what it needs to be from a margin perspective. But ultimately, setting the price should be the responsibility of product, the marketing, and the sales team. With finance, I'll give my input, but you guys need to decide what the market can bear here.”

…and so that was a strategic discussion.

We got to the point where I had that seat at the table, and we were working together. But the only way that happened was because I took the time to learn the business.

That's the biggest piece of advice I can give.

If you want to be involved in strategic discussions, make sure of two things. One, that you've learned the business, and two, that you're providing value and support to the leaders of your organization. You're not focusing on finance needs, you're focusing on business needs.

How to demonstrate leadership skills as an FP&A professional

At the end of the day, whether it's finance or an FP&A role, if you want to be a senior leader, you must demonstrate leadership. That can be done in different ways. There's a manager, and there's a leader.

I've been in roles where I've had a manager, but I’ve had my CFO telling me, “You're the leader of this group right now, even though you have a manager.” And in time, I ended up becoming the manager as well.

Demonstrating leadership comes from working to take control of situations and being proactive. By taking control, I don't mean going in and saying, “Hey, I'm in charge, I'm going to run this.” Instead, it’s showing you can help guide and move it forward and influence it regardless of whether you're the one officially in charge.

There are a lot of ways you can do that. Volunteering for assignments is always a great way when you don't have any leadership experience.

I had someone on my podcast called John Laudie, who's now a CFO. He wanted to get some leadership experience, but there just weren't enough people on the team. So, he proposed a program to bring in some college interns for the summer, and he managed both the program and the interns.

It was low cost, high value, and it gave him some really good CFO leadership experience. And then when a position came up to manage a team, he ended up getting the position.

So sometimes you need to be creative and think of different ways to get experience, even outside of work. For example, you could volunteer to be part of different leadership organizations during school. There are lots of ways you can demonstrate that.

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How CFOs can help to standardize data

CFOs are the ones who are mostly responsible for implementing new technologies in the business, and this is certainly something you can get more involved with to help go from FP&A to CFO.

The reality is that more CFOs are putting the analytics and the data teams under them.

In the last job I had, we got a new CFO, and one of the very first things he did was stick analytics under him and get involved in the system side.

We were working on a CFO transformation and bringing in CPQ, configure, procure, and quote tools. And he immediately asked, “How do we move this forward? How do we get this done quicker?” He brought in a new person to manage the analytics and the operations, and you could see it was very data focused.

So, you're seeing a big push by CFOs because what's one of the few organizations that sees the data across the entire business? It's finance. And often they should be the ones calculating those metrics so they’re standard.

One huge problem is something I dealt with a lot in my last role. I was helping to standardize all our definitions for metrics. I went to marketing and asked how they defined churn. “Well, we're doing it this way.” In finance, we were doing it another way. Then you went over to the sales ops person, and they were doing it a completely different way as well.

And then the CFO says, “I want to see it this way.” Every number is different.

So that's the worst place to be for a leader, to sit in a meeting and spend the first 45 minutes arguing over the data and how it should be defined.

And so, the more a CFO can help with that transformation and push to ensure that systems speak together, and the data is standardized, the better.

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Reducing non-value add activities in FP&A

We’re really in a golden age of software tools. I've talked to around 60 CEOs in the last year. Since I started doing this in the last 14 months, I’ve also demoed 60-70 tools. I talk to a CEO every week, around someone who's built a software tool.

The opportunity to use a tool is better than ever. And despite that, there are still times that Excel or Google Sheets, depending on the size and complexity of the business, may make sense.

But as companies start to scale, they deal with some real challenges such as collaboration, security, and data integration, which a tool such as a spreadsheet can't solve very well because they're not an enterprise platform.

An FP&A tool is great because it can help with collaboration, bringing in all that data, and helping a business automate a lot of things.

The reality is that most finance people spend 50-70% of their time on non-value add activities. Those types of things aren’t what they want to be doing and don't help them to be strategic and a senior leader, but they have to be done.

So, tools will continue to play a big role in making it so that you don't have to spend as much time on the non-value add activities, and you can focus on gaining insight from the data.

3 top tips to help you transition from FP&A to CFO

There are three key things that FP&A professionals can start doing now in their roles to help them get closer to a C-suite position. The biggest thing is to learn the business.

The second is to add value to the senior leaders. Make sure you're meeting their needs.

And the third thing is to be willing to speak up and speak about more than just financial issues. Speak up about strategic things in the business.

Don't take over conversations, but make sure you can add value and your voice can be heard because people will notice that. And when you start adding value, more opportunities will become open to you, and your career can grow from there.

FAQs: FP&A to CFO

The road to digitalization in finance is paved with many pitfalls and challenges, but thankfully, there are ways to make sure the journey is a smooth one.

In this episode of the Two Cents: Finance Talk podcast, you'll hear from Tejas Parikh, FP&A transformation specialist and Lead Consultant/Director at Akshar Business Consulting Ltd.

Tejas talks about why many finance professionals are stuck in the past and how you can implement digitalization in finance successfully within your organization.

Tejas spoke to us about:

• Why it’s time to move on from Microsoft Excel
• Why digitalization in finance is about changing the ways we work
• The importance of embracing technological change in finance
• Drive finance transformation from the top down, but deliver it from the bottom up
• Why the fear of change is preventing finance transformation
• The major pitfalls of digital transformation in finance
• How technology can improve work-life balance
• Top tips for successful digitalization in finance

Listen to Tejas' interview below, or keep reading the full blog version of this episode:

Why it’s time to move on from Microsoft Excel

For anybody who’s still working on Excel, you're stuck in the 1980s. It might be controversial, but people who know me know I never shy away from controversy, and I do like to make statements like this. Not to grab attention, but to stimulate thinking.

We’re finance professionals. And most finance professionals I've worked with are at least partly if not fully qualified charters. And with all their training and qualifications, they’re happy to continue to do things the way they’ve always been done. And I just think, You’re so well qualified, why are refraining from thinking differently? That’s wrong.

The whole idea of educating a population isn’t so they don’t think and don’t challenge themselves. That's not good.

So I tend to make controversial statements very respectfully from the perspective of getting people to think. Do I really need to be stuck in Excel? Is there a better way of doing these things? Maybe I should at least consider the options.

The purpose is not to criticize Excel. I love Excel as well and I still use it. But it has its place. We have to move with the times and use the right tools for the right things.

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Digitalization in finance is about changing the ways we work

The role of finance in most organizations has become much wider because of the fact that it’s responsible for performance management, creating accountability, creating a clear vision of how the business is operating, and how that impacts your bottom line.

The role of finance has expanded, but that doesn't mean you can have 200 or 500 finance people. That's not happening. Nobody out there is saying, “I'm going to quadruple my finance sector.”

So it’s essentially a problem of, ‘do more with less.’ And that’s where finance transformation comes in. Digitalization in finance is about changing how we work and our ways of working.

People talk about different ways of working on LinkedIn and other parts of social media, but in my world, ways of working are how your people, processes, technology, and data interact with each other.

So for me, when I say finance transformation, I mean the ways of working need to be transformed. That doesn't mean you're going to get aliens replacing people. You're still going to have the same people. But the way people are working with the kinds of technology, in the manner and process they're following, in the sequence of events, and with the data they have, that interaction needs to change.

I’ll give you a simple example. To do a board report, businesses take five to seven days on average. The clients that I end up working with say it takes a minimum of five to seven days, but a lot of them take two weeks to create a board report. That needs to change.

Imagine, first of all, that it takes at least a week or 10 days to close your books, and then two weeks to designate somebody to do the report. By the time that report has come out, your second month is over. It’s irrelevant data now.

So digitalization in finance basically means changing the way we operate and challenging ourselves on a consistent basis to improvise and do new things.

The importance of embracing technological change in finance

Why don't we use calculators today? Why don't we do pen-and-paper accounts with calculators? Why do you use an ERP? How many businesses do you know that don't have an ERP and do day-to-day bookkeeping on Excel or with pen and paper and a calculator? Not many. Definitely not in the Western world, I'd say.

What’s happened is that FP&A and your business partners haven’t moved from that Excel book to somewhere else.

In the last 10-20 years that I’ve been in the industry, I've seen a lot of research being done and a lot of offerings in the market emerge to help improve the month-end. Do businesses still have that challenge? I'm not saying it's solved, but that’s been ongoing in business, even implementing ERP, SAP, Oracle, Microsoft Dynamics, you name it.

"FP&A hasn’t kept pace with the change of technological transformation."

Technology was very costly when it started out, and now it’s become a lot more cost-effective. It's a much more competitive landscape, which means it’s not going to cost you $500,000 for every transformation you do. It doesn't need to cost you an arm and a leg... or a kidney.

So modern finance teams need to embrace new technology because the scope has increased and you’ve got to keep up with it. And you either take that on the front foot and own that and say, “Yes, I’ll take on finance as a function. I’ll take up more responsibility and do better performance management and data management, and I’ll do that by embracing new technology.”

Otherwise, you'll become irrelevant, or you’ll become somebody who keeps the books in the back end, and that's about it.

"To sit at the strategic table and be an influence in that boardroom, you need to embrace new technology. And I can say that with confidence because I’ve seen it done right, and I've seen it done wrong."

I’ve sat with a CFO in a boardroom and I've seen how marketing, sales, all operations, and R&D leaders are dominating the conversation. And finance doesn’t get a say in most things because they're not bringing anything new to the table. They’re just not adding value. And therefore, you’re just going to have to sit quietly and listen to what you're being told.

"You’ll either lead or be led. It's not very complicated. To lead, essentially, you need to have your house in order by embracing new technology and making sure that you can go into that boardroom and be at the strategic table, and actually pose the right positive challenging questions to add to the strategy of the business."

Either be part of the change or be dragged into the change. You don't have a choice.

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Drive digitalization in finance from the top down, but deliver it from the bottom up

First of all, for finance transformation, I’d say finance is responsible. There are a lot of times when I’ve seen IT guys try to change finance. It doesn't work.

IT or a CIO can support a finance transformation. That’s critical. Without their support, you can't do it. But they can’t lead finance transformation. Anybody outside finance shouldn’t be leading digitalization in finance. It should be led by finance.

But having said that, whether it’s the CFO or the finance team, the answer is always singular. In my world, transformation is basically driven from the top down, but delivered from the bottom up. And this is basically what most people fail at. Either they try to drive it bottom up, which won’t work, or they try to deliver top down.

I’ve seen some disastrous outputs from it because respectfully, the C-suite doesn't know every Excel book and every manual process out there. It's not a criticism, it's just not what they do.

So the delivery of the final transformation and for it to be able to speak is important. Otherwise, you do a final transformation and the transformation team goes away in three to six months, and then people are like, “Let me go back to Excel because that's how I've always done it.”

"For you to have really sticky finance transformation, it needs to be delivered from the bottom up. But it has to be driven top-down because very few people are going to embrace change."

I've been told a few times that I'm losing my head because I like change. I can't do the same thing over and over again, whereas other people are just unwilling to move out of their comfort zone. So to move from the comfort zone, it has to be driven from the top down because when your C-suite says, “This needs to change,” people listen.

Once people start listening, you need to listen to them as well. That's the second leg, which is very important. If you don't listen to them, you’ll implement a transformation or a change of trust where either you’ll miss something, or people don't have any stake in it.

"This morning, I was reading an interesting LinkedIn post about the IKEA effect. We like our IKEA furniture because we have to build it ourselves. And because you went through the pain, you love it.

It’s the same with transformation. If you involve the last foot soldier in the transformation, they have a stake in it, and therefore they won’t go back to their old ways of doing it."

Fear of change is preventing finance transformation

If I had a pound for every time somebody told me, “We’ve always done it like that,” I'd be a millionaire by now.

It's a fear of change, a lack of clarity, and a lack of visionary leaders. Leaders need to think beyond this week, this month, or even next quarter. They need to think one year, three years, and five years ahead.

• How is my business growing?
• What are my cost or cash flow drivers?
• How am I going to support this business?
• Do I have the infrastructure in place?
• Am I making the right investments today?

There’s a lack of understanding of technology. There’s also a limit to us as people who love technology as well. We need to be able to show use cases of exactly what changes for you tomorrow morning.

There’s basically apathy: “They’ve already done it that way. I don't want to change Why do I need to change? I love Excel.”

Finance transformation is a way of life, even for an Excel lover. Think of it this way. Does he make an Excel book and then leave it like that all his life? No. Most people that I've seen work with Excel will keep improvising upon it, and they’ll work on it as they learn new formulae or new formatting.

Today, new technologies are coming in about every three months, so it's about being able to keep up at least a certain level with the pace.

With transformation as a way of life within finance, that’s the only way. Otherwise, yes, there’ll always be leaders who’ll lead digitalization in finance, and then there'll be people who you'll have to drag across, people who push back. So if you make it a business culture, then it makes a very big difference.

I've seen it succeed, especially at GE Healthcare. If you ever went to your boss and said you had a problem, he'd say, “Don't come to me with a problem. Come to me with a solution or a proposal.”

We were always open to transformational ideas. You’d go to someone with a transformational idea and say, “I want to change this. I don't like this. I can change it like that.” Does it make sense? Will it work? Do a pilot run and see what happens.

Fun fact: 85% of finance teams are currently undergoing or planning a finance transformation. However, 70% of finance transformation initiatives fail to deliver the forecast benefits to the business.

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The major pitfalls of digitalization in finance

Data. People don't have data discipline, so the quality of data is one reason. The other reason is that people are trying to implement change top-down, which doesn't work because your C-suite is telling you what they think about how the business works, and if you don't involve the ground soldiers, then you don't know how it really works. And therefore, you miss a lot of stuff. You have to put people at the heart of transformation.

My transformation philosophy when I work with my clients is that it’s the people who come first. Who are the people? What are they doing on a daily basis? How are they doing it? Things like that.

Then you start going into the process. So people, process, and then technology that can help that process and people, and also generate data that’s the most relevant and well-organized.

It's a very fine-tuned machine. When one piece falls out of place you get a disaster. And I've been a part of a couple of disaster recovery stories. When you point it out to people they say, “How did we miss this?”

You don't have the data organized. Or you made up this model, but the guys were really actually doing the forecast. They don't work like this. They work on a customer level or on a product code level. Forecasting is too high level. It doesn't work. How did you not think of it? Because you didn't ask. You assumed.

How technology can improve work-life balance

Technology doesn’t just mean improved productivity. It also means a better work-life balance. You don’t have to work for 12 hours. Work eight hours effectively and get the hell home. I love my wife and my kid, and I want to come home and feed them. And I’d like that for everybody.

It's all good and well to say we should all talk about mental health and work-life balance on LinkedIn. Make it part of your finance transformation business case and see what it does to the motivation of your people.

You want more dedicated people who want to work for the betterment of the business, but what are you doing for those people?

There’s all this conversation about how people should be better finance business partners. What about if they don't do a month-end properly and they go and talk to the business? Are you going to take that? I don't know if a CFO is going to take that.

So for them to be better finance business partners, have better mental health, and a work-life balance, make your routine tasks small, efficient, and less resource intensive so that they have time for all this. Everybody gets 24 hours in a day, and time is a great equalizer.

Top tips for successful finance transformation

1. Start small

Firstly, start small. I don't like finance transformation programs that sweep over six months with the goal to transform the entire finance team.

Start small, but have a consistent approach. “This quarter, we'll change this and see how that runs while we change that in the next quarter.” Make it an elongated process.

2. Consider a third party

Secondly, get a third party. Let an outsider come in and look at stuff because sometimes you can’t see the wood for the trees.

3. Drive from top down, deliver from the bottom up

Third is, as I’ve said a number of times now, to drive it from the top down, but deliver from the bottom up. Don't forget your bottom guys because otherwise, it’s going to be very difficult to transform your finance functions.

4. Explore technology options

Also, go out and look at technological options. Every business has different ways of working, so at least look at three suitors before you buy something. One of my bosses once said to me, “If it was your money, how would you spend it?” Don't think of it as a business.

So do these basic things, and honestly, the outcome of digitalization in finance can be very different. The first thing is to do quarterly plans for small wins as you go along, because when you do it like that, what happens is that you know what works and what doesn't work. And then you can fix it.

If you try to do everything in broad strokes, what happens is that you miss the detail. But the devil still lives there. The devil is still in the details and you can't miss anything.

About Tejas

Tejas Parikh is a Financial Planning & Analysis Transformation Specialist and the Founder/Lead Consultant at Akshar Business Consulting. With over 18 years of experience in the industry, Tejas has helped businesses significantly improve their forecasting speed and effectiveness, creating connected planning environments and optimizing resource allocation. As an expert in FP&A transformation, he assists finance leaders in overcoming manual processes, disparate systems, and technological challenges.

Tejas is passionate about transforming planning processes, moving from traditional budgeting practices to xP&A models, and revolutionizing reporting by establishing a single source of truth. By leveraging Power BI and Corporate Performance Management technology, he delivers real-time insights and smart visualizations that empower data-driven decision-making and contribute to a company's bottom line.

FAQs - Digitalization in finance

Download the Digital Transformation in Finance eBook

Learn how to master the operational and financial processes that underpin digital transformation success.

Download our eBook, Digital Transformation in Finance: How CFOs can save on software and scale (courtesy of Cledara).

Digital Transformation in Finance | Finance Alliance

Grab our latest eBook and set yourself up for digital transformation success and drive value with proven strategies that you can implement today.

Finance AllianceCledara

Ernie Humphrey, aka, "The Why Guy” is a renowned specialist in this area and the CEO of Treasury Webinars, a company that empowers treasury professionals to own their own career success.

In our latest episode of the Two Cents podcast, Ernie chatted to us about how to create harmony across the enterprise as a finance leader, as well as:

• The need for companies to control all cash movements
• The challenges associated with AP, AR, and treasury departments all working in silos
• How a treasury manager can break down these silos and effectively collaborate with AP and AR
• How to develop a strong personal brand at work
• How to build relationships with people as an introvert
• Other important tips and takeaways for building your brand
  

Tune in:

Check out the highlights of our talk with Ernie below.👇

The importance of controlling your cash movements

Q. I've noticed that you post a lot online about the need for companies to control all cash movements. Why are you so vocal about this topic?

I think a big reason for me is that we're seeing all of these words and technology about AI, and there’s all this talk about financial transformation. And I think people make it too complicated.

To me, the biggest impact of financial transformation should be around controlling your cash movements. Being able to predict and control your cash movements is really what gives you strategic agility to deal with all the things you can control and all the things you can't control, like supply chain, inflation, all of those good things.

So, we need to be able to understand the ‘why’ of our movements. And then once we understand why it's happening, we can move towards controlling our movements and giving ourselves a little business agility.

The challenges associated with working in silos

Q.Do you think that AP, AR, and treasury departments all work in silos? If so, why?

I’ve thought that it's been happening for a while, but I've done survey research in each area and asked AP leaders, AR leaders, and treasury leaders if they work in silos. And the vast majority in all areas say that they do.

Working in silos really puts up inherent barriers. So for AP, even working in silos within their own departments limits the control and predictability we have on how and when we make payments, which is obviously crucial with cash going out and making our cash needs and accounts receivable.

I think this has been a bigger focus for every company for the past couple of years.

We have to look at being able to predict when we get paid and then also how we communicate with our customers. And so it's very dangerous for AR to be working in silos and communication with customers and outreach that's not really productive.

And then for folks in Treasury, what we need to do is be able to forecast things and work with AP and AR to understand the why so we don't get in a little silo as well.

When I was in Treasury, we did work in a little bit of a silo, so we really didn't take control of AP. We didn't have a strategy around how we're paying, the type of payments, and things like that. We also didn't have interactions with AR, but there wasn't enough interaction there.

So in regards to working with silos, it's within the departments, but also that culture goes across the enterprise because all of those areas impact the cash conversion cycle.

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The true value of collaboration between treasury, AP, and AR

Q. How can a treasury manager break down silos and collaborate with AP and AR?

I talk about these topics a lot when I go to AP conferences. I look at it from their perspective, and I ask them, “Do you collaborate with treasury?”

And then they ask me, “How do I collaborate with treasury?”

So I try and look at it from both sides.

From a treasury perspective, it's about getting everyone to understand the value of collaborating together. Treasury success should be aligned with AP success, so we should be saying, “Hey, accounts payable, you actually have a strategic role. This is the way that you're helping us.”

It can start with, “Hey, I was just on this podcast/I listened to this podcast/I was on a webinar and they were talking about accounts payable and optimizing how we make payments and when we make payments. So I think we should work together.”

So it's about creating that common ground. It’s the same thing on the accounts receivable side. It's like, “Hey, we all want to get paid. But we need to understand the predictability.” So telling them that debt predictability in addition to control gives our company our competitive advantage in this world.

It's about communication, and communication depends on the person. When I was in corporate Treasury, I had to give a presentation on how we manage cash. And we invited the AP and AR people. And afterward, they said, “Wow, I didn't know you guys were doing that.” Then they came up and wanted to learn more.

And also, some people just aren't outgoing. But there's someone in your company that has a relationship with a person that's not outgoing. So you’ve got to connect on a personal level with those folks.

How to build your personal brand at work

Q. You mentioned the value of a strong professional brand and work. How does someone build that brand?

What your brand does is empower you to take ownership of your career. And that's the underlying mission of what I do.

I've spoken to hundreds of CFOs and treasurers, and finance and accounting leaders of all sizes, including Fortune 20 companies. Every person I've asked says their success was fueled by mentorS, colleagues, and professional peers.

A strong brand inspires people to want to work with you. You have to be able to offer them value, to collaborate up and down the ladder, and then across your country.

Another thing I'd like to talk about is that people don't understand the dimensions of your brand. So for your professional brand, you have your value proposition, your resume, your LinkedIn profile, and your network.

And your brand is on display at work. So you have a brand with your co-workers. And then in terms of your professional network, you have to look at that internally. How are you connected with people in your department and across the enterprise?

So that's really looking at your network and thinking about all these things: your departmental colleagues, co-workers, customers, suppliers, peers, banks, and consultants. All these people interact with you, so you need to network with them and get them on your team.

And when it comes to building that network with people you need to get in contact with, I tell people, “Think about it this way. Who do you want to know? Who do you need to know? Who do you already know? Who knows what you want to know? And who needs what you need to know?”

There’s a big answer there, but I'm happy to have a conversation with someone about how to actually do these things because nobody talks about that. Implementing a personal branding action plan is important.

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How to build business relationships as an introvert

Q. How does someone that doesn’t classify themselves as an extrovert go about building relationships with people that aren’t known for being friendly?

Part of it is that you have to make yourself do it. You have to be authentic and you have to find what works for you.

Oftentimes, we watch other people and we try and borrow from them, but if you're not a comedic person and you go up to someone and start telling jokes, that's kind of it.

But one of the many great things about introverts is that they listen. So just listen, take opportunities, and also hang out with people that are more outgoing so you can get those natural connections. But it's trial and error.

I think the biggest thing is to be authentic and not be too hard on yourself. I think that's a big part of it. It’s just judging yourself. I’m a big personality. Some people like me, and some don't, and I don't really care if people don't like me anymore. That's just who I am. So you have to be comfortable in your own skin.

And sometimes, you're not going to get a good reaction from someone. They might be having a bad day. But you can't just let it shut you down. You have to give it another try. You have to keep putting the olive branch out there.

And then like I said, if there's someone that you're not connecting with that somebody else knows, you might say, “Hey, John, I'd really like to get to know Mary better. How do I do that?” So those are some of the tips that I share with people.

Closing thoughts

I think for me, the number one thing is that your professional brand matters. That's important. But it's not rocket science. So don't make it too hard.

The other thing is that I'm happy to help people make that journey.

And finally, just realize that you're always on. So make sure you're conscious of whatever your environment is. How you're acting and reacting is all part of your brand. And to this, I always say and I'm not the best at it: Listen, listen, listen.

That's the best career advice anyone can get.

About Ernie

Ernie Humphrey serves as the CEO of 360 Thought Leadership Consulting & Treasury Webinars. Over the past three years, Treasury Webinars has delivered thought leadership webinars to over 15,000 treasury and finance leaders across the globe.

Ernie was a driving force behind Proformative, formerly the largest community of Finance professionals, which grew from 500 to 30,000 during his tenure. He has authored published articles on working capital management, performance management, budgeting & planning, acquisition integration, and bank relationship management in addition to articles dealing with several aspects of professional development.

His e-book focused on career management and was recognized as one of the Top 10 e-books for CFOs in 2018. Ernie was named one of the Top 20 Pioneering CEOs by Tech Magazine in 2020. Ernie has a BS and MS in Economics both from Purdue University.

Resources & mentions from this episode:

• Connect with Ernie on LinkedIn
• Treasury Webinars
• 360 Thought Leadership Consulting

In this post, we're sharing insights from a recent episode of the Two Cents: Finance Talk podcast, where we sat down with Jeffrey Mazza, CFO in the BizOps group at CliftonLarsonAllen.

In the episode, we explored how FP&A evolves and fits within a scalable growth strategy. Jeffrey shared his expertise on the subject, revealing practical insights on how small businesses can use FP&A as part of a scalable business model.

So, whether you're a seasoned CFO or just starting to dive into the world of finance, this one is for you!

Listen to the full episode below:

Or keep reading to see what Jeffrey has to say about FP&A and scalable growth.

Topics covered:

• Where FP&A fits within a scalable business model
• How small businesses use FP&A to help them scale
• How the FP&A function evolves as the business grows
• How the way in which companies use FP&A has changed since Covid-19
• Key traits and skills of a successful FP&A team
• Tips for FP&A teams to help drive business growth

Q. Where does FP&A fit within a scalable growth strategy or business model?

I believe that it's front and center and that’s the way it should be. FP&A has changed over the years and maybe I would’ve given a different answer 10 or 15 years ago. But FP&A has grown, and I think there's been a lot of education around what FP&A is in general.

When you look at what FP&A can do, both internally and externally, it’s powerful. As the business grows and scales, it becomes even more important to not only utilize FP&A but develop good teams around it to interpret data to help the business scale and grow.

Q. How can small businesses use FP&A to help them scale?

A lot of our clients, especially the smaller business, might not know what FP&A is. But once you start to dive into it, their eyes light up and it's so powerful because you can use this both internally and externally.

"What I mean by that is, when you’re looking at your own current scalable processes within a company and provide the analysis, you’ll find critical drivers that help identify even little decisions that have big impacts."

Externally, FP&A helps navigate where a company is going. It puts a financial plan in place to be able to achieve growth goals. And, there's a lot of uncertainty in this current environment, and being able to help navigate through rough waters is very critical nowadays.

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Q. How does the FP&A function change or evolve as the business grows?

This can start off very simple for small businesses, but as FP&A grows, your business grows. I believe that the FP&A function should be able to adapt to that. And, that could involve building out additional teams, but even as you grow, there starts to be a lot more analysis that might take place.

For example, if a company is looking to 5x the top and bottom line over the next few years, it sounds like pretty aggressive growth goals and what does that even look like?

Can your production facility even process the number of units that might be coming through there?

It might lead to performing a deep dive on an analysis of your own current internal processes, as well as production to see if you can even handle that growth. And you might make some decisions based on the analysis such as obtaining another facility, or more staff to help identify what the business needs.

However, you can also look at FP&A as your business grows and ask how we can be more efficient to be able to achieve that growth. From there, you can look at the current processes, and start to make some tweaks along the way.

Then, as you grow, you're going to need some sort of technology, because the technology today is very powerful, and can adapt rapidly.

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Q. Since COVID-19, do you think that how companies use FP&A has changed?

COVID-19 really affected the entire global landscape. It wasn't just directed to one area. So that meant, at least for me, having conversations with fellow financial executives, and realizing that no one was really planning for something like this.

After all, how can you plan for a global pandemic to disrupt the global economy?

But everyone kind of shifted and had to consider things on a much deeper level. When the lockdown happened, we needed to know how much cash we had. Those are some of the discussions that other businesses were having. And as I mentioned, you can't really plan for that.

I think the pandemic really opened the eyes of business owners to say, “what if?” What if one of these scenarios comes around, again, do we have options to handle it? Should another pandemic happen, I feel like people are aware of the real downside of that now.

"It really opened our eyes to better planning and making sure that the business can navigate through rough waters."

In my opinion, the way that FP&A has changed since the pandemic is that it’s really accelerated a lot of businesses to be more open and adapting to not only having FP&A as part of their business, but making it way more robust to be able to help navigate through some of these rough waters that could be around the corner.

Q. What are some of the key traits and skills of a successful FP&A team?

Good FP&A teams have evolved over the years, and you're starting to see more and more focus on FP&A from businesses and people are very interested in that.

To me, a skilled FP&A team is about development as well as looking for that talent that's beyond the core finance capabilities.

"Bringing a good FP&A team together that can think outside the box is important, but it takes more than that. Your team really needs to understand the business, the industry, and how the FP&A team can help identify efficiencies of processes and offer better recommendations using that data to really elevate the FP&A team."

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Q. Do you have any tips or advice for FP&A teams to help drive business growth?

I look at it as three areas you need to prioritize:

1. Internal

You need to look at the internal processes that you can prove helps drive performance. Not only that but evaluate any existing processes that really identify the critical drivers and performance of the company and analyze them.

Are there any efficiencies that can take place? And that's using FP&A to help with the analysis of those processes. Also, consider if there's any automation and if there are any areas in that you can make small tweaks to have big impacts.

2. Technology

The technology that’s out there today is powerful. We went from just moving a lot of manual processes. For example, think about the budgeting process. Everyone's used to Excel sheets with lots of going back and forth, which leaves room for human error.

Recently, we have had more options such as AP automation and RPA. Now, we have AI and that's even a step further than RPA. It’s remarkable that with this type of technology, you can access even deeper insights.

Using AI and ML, you can identify trends that the human eye can’t always see and it's powerful. More importantly, you can use that technology to utilize efficiencies and speed. Nowadays, people want their data in real-time to be able to make better-informed decisions based more on data and less on intuition.

3. Teams

The final piece is developing your core team, which will require some training. But finding that talent that’s beyond the core finance capabilities is so important.

"You need to build a team that really understands the business, the industry, and the drivers that affect the business itself."

And even when a scalable growth strategy is in place, you still need to include solid financial plans to go along with the business growth goals.

About Jeffrey Mazza

Jeffrey Mazza is the Greater Chicagoland Office Leader and CFO in the BizOps group at CliftonLarsonAllen. CLA creates opportunities for businesses, individuals, and communities through our wealth advisory, outsourcing, audit, tax, and consulting services.

Jeffrey brings with him over 20+ years of experience in senior financial and operational leadership roles. He has a measurable history of helping businesses succeed by designing and executing growth strategies and capitalizing on opportunities to accelerate profitability through effective financial planning and analysis. He also brings extensive experience in developing both financial and operational infrastructure in early-stage companies.

Jeffrey serves as a steering committee member at The CFO Leadership Council, a member of the Association of Certified Fraud Examiners, and the CFOrward Group. He is also an active volunteer and a board member of The GALF LLC.

He earned a bachelor’s degree in finance from the University of Massachusetts, Amherst, and attended the MBA program at DePaul University Charles H. Kellstadt Graduate School of Business. Jeffrey also holds the CFE (Certified Fraud Examiners) designation.

In this episode of the Two Cents: Finance Talk podcast, Xavier Gomez, the COO and Co-Founder of INVYO, guides us through the rise of the super app and how this up-and-coming trend will impact the finance industry.

You can listen to the full episode below:

Or, if you prefer, keep reading to learn more about super apps.

Xavier covers topics such as:

• What makes an app ‘super’ and the definition of a super-app
• The rise of super-apps in Asia and whether the US and Europe will also jump on this trend
• How fintech companies and banks will be affected by super-apps

Q: What makes an app ‘super’ and what exactly are super-apps?

The definition of a super app is pretty simple. It’s a single application with multiple functions, often supported by a payment system from the same company. This concept came from Asia, specifically China.

While mobile users typically use dedicated apps for specific tasks, mobile users in the Asia-Pacific region are accustomed to performing multiple functions, often seemingly unrelated to a single super app.

For example, WeChat, developed by Tencent, is a classic example of a super app. Aside from its basic function of sending messages, WeChat can also be used to order food, call taxis, and book plane tickets. Tencent doesn’t offer these additional services itself but instead allows third-party companies to build apps in WeChat.

Officially called mini programs in China, these apps within an app allow mobile users to use services from third-party companies without downloading a separate app. WeChat now acts as its own operating system and reached over 1 million mini-programs in November 2018.

Another big player in this space is Alipay, which is the closest competitor to WeChat with more than 130,000 mini programs. Other successful super apps in China which use the mini program model include Baidu, the Chinese search engine, Meituan, which provides online catering, and Taobao, the C2C and B2C online shopping platform from Alibaba.

This is an extremely interesting creation in terms of user experience, as super-apps go across eCommerce, mobile apps, and FinTech payments.

Previously, most people predicted that the use of super-apps would be confined to Asia and we would never see them used in developed countries. But after COVID-19, we saw big developments in super-apps through a number of different players around the world, especially in Europe.

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Q. Do you think that we have seen the absolute rise of super apps in Asia?

It depends on which way you look at it in terms of consumption. For me, this is clearly the start of the awakening of super apps in Europe and the US.

In terms of players, Chinese players are currently more advanced than others. For example, in France, you have Lydia, which is a non-financial institution with 7 million clients and users. They have apps you can use for retirement savings, payments, financial banking, and so on. But in comparison, Chinese players have up to 300 million customers, which is a significantly larger amount.

I can see super apps being developed in the US and Europe because customer data is becoming more important to control and understand.

For traditional companies and startups leveraging super-apps, the customer data collected is of very high quality, in particular with integrated payments. This makes it possible to obtain key information such as the frequency of purchases, what customers buy, why they buy certain products etc. It's massively helpful in gaining knowledge of your customers and clients.

Privacy is a big issue in adopting super apps, as this is more regulated in the West than in the Pacific region. Integrating multiple services into a single app raises concerns about the processing of storage and use of personal data for which Meta and Google are already under huge scrutiny by different regulators around the world.

Cultural differences are also a huge deterrence to the super-app model globally. Super-apps are used in culturally close regions such as China, India, and South Asia. Uber Technologies recognized this problem when expanding into emerging markets. They didn’t incorporate more functions into their app, but instead split into separate, less cultural apps such as Uber Lite in India, and Uber Bus in Egypt.

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Q. What does the rise of super-apps mean for fintech companies and banks?

It depends on the innovation policy inside the banks. As many know, today’s banks have a problem with IT legacy infrastructure and agility compared to tech companies and startups.

I think the best strategy for banks to adopt this kind of service is by applying competition. This means that banks will have to accept the competition of other players such as non-financial payers or fintech, and they'll have to cooperate with them in order to innovate and learn from this kind of partnership.

For me, this is the only way for traditional banks to move forward and survive. This is because they have a lot of regulations in place to stay compliant, they spend a lot of money in terms of working capital on financial markets, and they have to invest a lot of money in innovation structures. And without any help from big startups or tech companies, they'll really struggle.

In this episode of the Two Cents: Finance Talk podcast, Xavier Gomez, the COO and Co-Founder of INVYO, shares his top 3 predictions for FinTech Trends in 2023.

But that's not all, he also goes into detail about how these new trends in FinTech will impact the global economy.

You can listen to the full episode below:

Or, if you prefer, keep reading to learn more about FinTech Trends for 2023.

Xavier covers topics such as:

• Top 3 FinTech trends to watch in 2023
• Gamification: Linking gaming and finance
• Will blockchain become a bigger part of our everyday lives?
• How new trends in fintech will impact the global economy
• How previous FinTech trends are performing
• The metaverse and why it's top of mind for many professionals
  

Top 3 FinTech trends to watch in 2023

Q. What do you think will be the top 3 FinTech trends to watch in 2023?

1.Blockchain technology

I’d first like to start with blockchain technology. This year has been a rollercoaster for the crypto industry and investors. The market was valued at two trillion dollars and has mostly evaporated.

We are in a transition period today as you can see lots of investment and creation in this particular industry to invest in blockchain infrastructure, mostly in crypto exchange.

This is a new trend because this building of infrastructure has a different application for finance between the banks and the central banks’ equation of digital money.

In terms of business in the gaming sector, there’s a lot of flow from GameFi, gaming, and finance. People like to pay to earn, and younger people are also willing to pay to see other people play games, particularly on Twitch. This is a new business model in parallel with the development of Web3. It's a huge trend and you have big players in a different ecosystem and the creation of different blockchains on Web3.

Blockchain technology aims to address a different issue in terms of increasing speed and security, in particular with international payments. Payments and blockchain are deeply linked with banks to become mainstream in the coming years.

2. Embedded finance

Another trend would be embedded finance, which refers to the integration of financial tools or services within the offering of a non-financial institution. This is a big competitive area for regular institutions because it comes with new infrastructure, more services, and a bigger capacity to integrate into any IT infrastructure.

The ecosystem of embedded finance covers financial services such as banking, credit, and investments, and extends its reach to adjacent areas like payments, processing, and insurance.

The most well-known form of embedded finance is buy now pay later (BNPL). This payment option allows people to buy a product now and pay for it later, usually by splitting the purchase into multiple installments to be paid at set times.

3. Alternative financing

The last trend to watch out for would be alternative financing. The COVID-19 virus has left its mark on almost every corner of the world. According to 2021 surveys, a large portion of bank leaders didn't reduce the amount of capital dedicated to supporting trade.

The global trade finance gap is still steadily widening, and this is where alternative financing comes into play. Alternative finance refers to the business funding offered by non-banking institutions. And some of this funding doesn’t end up becoming a loan at all.

The emergence of non-finance institutions is a big change and means big competition for traditional banks or financial institutions.

Currently, there is not a huge competition against regular financial institutions, but you can certainly see significant growth. The valuation of this market is between two and seven billion and is growing every year from 6%-10%.

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Gamification: Linking gaming and finance

Q. Could you tell us a bit more about GameFi?

A: As I mentioned before, this is the link between gaming and finance. Today, Gamification (GameFi) refers to play-to-earn blockchain games which offer an economic incentive to players. Typically, players can earn cryptocurrency and NFT rewards by completing a task, battling other players, and progressing through the different game levels.

Unlike traditional video games, most blockchain games let players transfer items out of the game’s virtual walls. Players can trade their items on NFT and cryptocurrency exchange marketplaces.

GameFi has rapidly been taking over the traditional gaming industry since the rise of Axie Infinity. It attracts gamers by offering them an opportunity to make money while also having fun.

Now with the development of blockchain, you have a deep link with virtual worlds. And you can see the merger between blockchain, infrastructure, Web3, and a new business model. It’s a new world where people are ready to play to receive rewards on tokens or crypto.

Big brands are also ready to make advertisements in order to attract consumers to these types of games. This is a new concept and new business model to discover in the coming years, and each GameFi project will adopt a different model in the game economy.

In most cases for in-game assets, NFTs run on the blockchain, which means they can be traded on the NFT marketplace. However, in-game assets need to be converted into an NFT before players can trade or sell them.

Will blockchain become a bigger part of our everyday lives?

Q. Just like digital banking has become a part of our lives, perhaps tokenized assets and blockchain will also be used much more in the coming years. What do you think about this?

A: Exactly. We can see that play-to-earn is a revolutionary gaming mode, and it's very different from the pay-to-play model adopted by traditional video games. Pay-to-play requires gamers to invest before they can start playing. For example, famous video games like Call of Duty require players to purchase licenses or recurring subscriptions.

Traditional video games will not generate any financial returns for players, and their in-game assets are controlled and held by the gaming company. In contrast, play-to-earn games give players full control over their in-game assets while also offering opportunities for them to make money. This is a completely new internal business model, and very a interesting one.

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How new trends in fintech will impact the global economy

Q. How do you think these new trends and developments in the fintech industry will impact the global economy?

A: When you manage money today, you have to be regulated. Tomorrow, all the big players will be non-financial companies that manage payments, so they will have to be compliant. With the current trend, money and traditional financial institutions will become a commodity because they will be competing with a whole other player in any industry, particularly gaming because you don't have any friction.

Regulation relies on the values of the young generation such as Generation Alpha and Generation Z. They may not understand compliance requirements in terms of compliance, money laundering, and anti-terrorism action.

This is why I would say to watch out because malicious players have the potential to come into this kind of industry. We have to regulate softly for now as this industry is new, however, it has big growth potential.

How previous FinTech trends are performing

Q. Have any of the trends we’ve talked about in the last five years already plateaued? Are they already part of the new normal and not a subject of excitement anymore?

A: I used to work as a trader and fund manager, where the quants guys used to sit near salespeople and traders on the trading floor. Over time, the salespeople and traders have been replaced by quants on the trading floor. So now you have two or three real traders and the rest are automated with algorithms. The quants are just there to check that everything is working.

Transactions are the same. There is a model in place of ‘do it yourself’. You have an API connected with your client, your client sends you an order, and you don't require any more sales. And behind that process is technology, a quant, and an algorithm.

This change was also good for the banks because they have different regulations in terms of working capital with Basel III. You should drastically reduce the operating cost if you want to stay competitive and if you’re going to work on this kind of operation.

It is the new normal today. Even I have made big moves and replaced most of the sales and traders with a quant, data scientist, and data engineer.

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The metaverse and why it's top of mind

Q. If you had to name one app, platform, or technology that you're going to follow next year, what would it be?

A: It's not directly linked with finance or fintech, but I would say the metaverse. As you know, Meta (previously known as Facebook) made a big bet on the metaverse and invest a billion US dollars per year. JP Morgan has also invested a lot of money to propose some services in different metaverse worlds.

The metaverse should be a good thing, but it could also be risky in terms of society. It is a virtual world, and perhaps some of us will not make the distinction between what you can do in the real world versus the metaverse.

Of course, you have to pay for this kind of service, and we can see from news stories that people spend a lot of money to play with or buy something because there’s no friction, it's very easy. And some platforms even give you credits to consume their content and so on.

From a technological perspective, it's a big step because it requires a lot of machine learning, AI, data, and good user design and definition. But also in terms of the real world and particularly for the younger generation, we have to be careful.

Q. The regulations on metaverse or tokenized assets remain a big question mark. In the future, do you think that it’s going to be more regulated?

A: Yes of course. We’ve already heard stories of bad behaviors happening in the metaverse against women and certain populations. In the real world, this would not be accepted, so of course, we have to regulate it a little bit. What you’re allowed to do in the metaverse will be aligned with what you’re allowed to do in reality.

About the guest

Xavier Gomez is the COO and Co-Founder of INVYO, a data management startup that uses machine learning and natural language processing to help corporations identify tomorrow's opportunities in the financial industry. He is also a regular columnist on the television news channel, BFM Business.

In this episode of the Two Cents: Finance Talk podcast, we’re joined by Janice Hopkins, Director of Finance at Convergence Networks.

Janice is amid a post-merger integration herself and has a lot of useful tips and advice to help finance functions prepare for a post-merger integration and navigate the common challenges that come along with it.

Listen to the full episode below:

Or keep reading to learn:

• What is a post-merger integration?
• The reality of being a finance professional in the middle of a post-merger integration.
• Post-merger integration challenges.
• How to get familiar with new laws, accounting standards, and audit requirements.
• How to ensure your company’s merger is a success.

What is a post-merger integration?

Mergers happen when two or more companies combine. More often than not, a merger occurs when one company is purchased by another. Both companies usually benefit from the merger as it leads to increased shareholder value.

However, merging more than one company isn’t easy because there’s a lot to consider and no guarantee that both companies will work seamlessly together. There’s a steep learning curve and it takes some trial and error before all the moving parts work like clockwork.

A post-merger integration (PMI) is the aftermath of the original merge. Now that both companies have come together to maximize synergies, the merged company (and everyone in it) must learn to work together and ensure the deal lives up to the predicted value of the merger.

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An inside look at the post-merger integration process

What better way to make sure your post-merger integration is a success than to learn from someone who has experienced it themselves?

Janice Hopkins is the Director of Finance for a Canadian firm in the technology sector. She has been with the company for 10 years.

Two years ago, her company merged with another company in the same industry that was based in the US. But the merge didn’t stop there because six months after the initial merge, they merged with another company.

Here’s what Janice had to say about what it means to integrate after a merger:

1. People are the most important part of any merger

Integrating is many things. Your people are the most important. And for the success of any merger, it's going to involve the people.

Being in two countries, you're going to have cultural differences. You may or may not have some resistance to the merger. People may not understand the merger and what it means for them.

"It's about the people because ultimately, that's what's going to make or break a successful merger.”

2. Consider your clients

You must think about your clients and the message you're going to tell them during the post-merger integration process.

Are they going to be nervous?

If you're a smaller entity based in the city and owned by owners in the city, are your clients going to feel like they’re just small clients in a big conglomeration?

You want your clients to continue to feel valued. You also need to make sure they understand how this merger can benefit them and the staff.

If you've merged with another company, you've got more resources and training at your fingertips.

"Everybody, on some level, could be a little insecure during the post-merger integration phase and that can often touch on people's insecurities. So, you really need to make sure you consider all of that to help ensure your merger is a success.”

3. Streamline processes and systems

You have to talk about your systems. Ask questions like... are we all using the same systems? Are we all getting our data the same way? Are our processes the same and do we treat contracts the same?

"For a successful post-merger integration, you want to streamline everything because it just makes sense. You can't do one thing a certain way in one location, and something completely different elsewhere, it just gets too complicated.”

4. Post merger finance integration

Since I'm the Director of Finance based in Canada, it has implications. We must consider the currency we’re reporting, how we report it, and the frequency at which we report it.

Now that we have external owners, we can have much tighter timelines. The timelines get stricter because they apply to everybody.

We also need to think about what systems we should keep, who has the best systems, and how can we pull everyone together.

When we have weekly meetings for all staff, we have to pick a time that suits everybody. You can't have people up at 7am in one location, whereas they normally start at 9am.

"You have to pick a convenient time for everybody and have different people report different responsibilities.”

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Challenges of a post-merger integration

Many challenges come with merging two or more companies. A few examples of possible challenges include having an unclear integration strategy, disengaged leadership, weak synergy program management, etc.

Janice shared some interesting insights about the challenges her finance team faced during the post-merger integration process.

Currency differences (the US and Canada)

I'm based in Canada, so I had to change the currency I was reporting in. With the Canadian and US integration, we both refer to our currency as dollars, but these are two different currencies. So, we must get everyone straight on that and specify which dollars we’re reporting in.

Dealing with extensive audits

Another possible challenge, if you're merging from a smaller firm, is that you might not have been required to have an audit before. And because of the merger, all the offices are now part of the audit.

So, we're working with a new accounting audit team, and an audit is a much bigger deal when you’ve merged because everything is scrutinized more. You have to have all your paperwork in place and we’re subject to more auditing standards.

We had to make some changes to how we record revenue and inventory, etc. because it's much stricter than if we were a non-audit company.

Working with new people/firms

We had to get an auditing firm that is international because they must have an office in Canada because we still have some Canadian tax laws that need to be applied. But they also needed to have a strong presence in the United States for the same reason.

Operating in two different countries (the USA and Canada)

Merging companies in different countries is inherently more difficult because you’ve got a lot more to consider. One of the biggest issues that companies face when merging across borders is various cultural issues.

You’re also likely to face some resistance from within both companies, either by the staff or clients.

Deloitte reports that 64 percent of managers interviewed believe that resistance tends to be low at the top management level and high at the worker level. However, other findings show that post-merger integration projects face resistance at all levels, from regular workers to middle and top management.

Still, one of the biggest issues facing merging companies operating in different countries is the currency differences. Janice spoke about this in more detail:

“Getting the wrong currency can have implications. For example, if I get a journal entry and I assume it's in Canadian currency, that could mess up the Canadian books. So, I need to ensure that I ask what currency they're using every time in their reports and so on.”

Another important factor to consider when merging with a company in a different country is their Generally accepted accounting principles (GAAP). Canadian GAAP and US GAAP are slightly different, which Janice talked about in the podcast:

“I don't know US GAAP. So, I have to defer to the auditors and to our CFO who's based in the United States to tell me about what US GAAP is. And as a result, US GAAP takes precedence because we do report to our US private equity firms and our auditors are US-based."

How to get familiar with new laws, accounting standards, and audit requirements

The number one thing to do when you’re trying to learn about another country’s accounting standards and audit requirements, etc. is to get a good auditor.

Janice recommends seeking an auditor that specializes in or is familiar with mergers. In the early stages of a merger, accounting can be quite complicated. So, choose a good auditor who knows what they’re doing and perhaps has some experience in the industry as well.

“Your audit team is really important because they’re going to have many questions about your processes, how you do things, how you record things, etc. And if they understand your industry, then they can jump to what they need to ask more quickly.

“You have to be open-minded about new processes and new ways of doing things. They might say you can't do that anymore, you can't record inventory, your revenue, or expenses like that.

"And even though you may have been doing it the same way for 10 years, now you have to change it… you have to accept that that's the way it is. And it's probably for good reason because it can make everything more accurate as a result.”

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How to ensure your company’s merger is a success

Here are Janice’s top tips to help ensure your finance team survives a post-merger integration:

Ensure a clean cut-off point

When you first go into a merger, you’ll reach a cut-off point, which is when the old company ends, and the newly merged company begins. It’s best to make sure your cut-off is nice and clean and that your revenue has a nice clean break, etc.

Be open-minded

Try to make your processes as simple as possible and be open-minded to other offices.

What are their finance processes like? They may have a much better process. They may record revenue in a way that you hadn't thought about. They might have a more efficient way to invoice clients or deal with collections, accounts receivable, cash flow, etc.

Document processes

Having processes documented is helpful. And it helps everybody organize their minds and ensures everyone is on the same page in terms of reporting deadlines, etc.

If you have a new CFO post-merger integration, they might be based elsewhere, and that person needs to understand how each entity does things.

"If a company is going through a merger, chances are, more mergers are coming."

So, you need to build processes to help things run as smoothly as possible. You don't want to reinvent the wheel every time you merge with another company but at the same time, you've got to be respectful of the fact that the latest company to jump in might have a better process than any of the existing companies.

Use the same software across all entities

In terms of software, if you can get on the same platforms, it's inevitable that you'll find efficiencies. If we're all on the same platform, it allows the CFO to jump in to say how well Canada is doing in that aspect, they don’t have to go to a whole bunch of different platforms. They can access everything in one place.

Communicate with other departments

In finance, we need to think about what the rest of the departments need to ensure success.

What kind of metrics do they need and what are their deadlines?

What can we do as a finance department to help other departments? Because as finance professionals, we're the holder of the data and the timeliness.

"Communication is important because we're all in it together and other departments need to know that we're willing to talk and help them get the information they need within the required time frame.”

About the guest

Based in Canada, Janice Hopkins has worked as the Director of Finance at an owner-managed IT Managed Services firm, Convergence, for 10 years. The firm recently merged with several US-based IT Managed Services firms, with the head office based in Portland, Oregon.

Janice started her career in public accounting at Ernst & Young and has worked in many industries including construction, health services, and education.

Want to listen to more episodes of the Two Cents: Finance Talk podcast? You can tune into more episodes of the show right here.

CFOs are more than just finance leaders. They’re not only running the finance function and ensuring compliance, they’re shaping the entire company strategy and playing a pivotal role in driving positive change in their organizations.

Traditionally, the roles of the CFO consisted of the Operator and Steward. But now, those roles have evolved, and more responsibilities have been added to the CFO’s plate. The modern CFO position must embrace the more recent roles of a Catalyst and Strategist.

So, how can a CFO master each of these roles? And what does each role entail?

Discover the answers in this episode of the Two Cents: Finance Talk podcast with Amit Singhi, the Chief Financial Officer of the Humanetics Group.

Amit elaborates on the various roles of a CFO. He even provides perspectives and examples of the evolving roles, making this an episode you don’t want to miss.

Listen to the full episode below:

Or keep reading to find out:

• Why the role of the CFO has evolved
• How the Operator role helps to run an efficient finance function
• How the Steward role minimizes risk and compliance
• How the role of Catalyst drives business performance
• How the Strategist role helps shape overall company strategies
• The future role of the CFO

Why has the role of the Chief Financial Officer (CFO) evolved?

The CFO has a great view of the entire business. And since most strategic decisions have financial implications, it’s not surprising that the CFO is involved in pretty much all aspects of a company's operations.

A CFO’s job description typically allows them to connect the dots across different functions. This allows forward-leaning finance professionals to get more engaged with the business.

CFOs have evolved to help operating leaders with critical decision-making and leading and driving operations.

This shift in the role of the CFO is also the reason why many finance professionals end up moving into general management roles throughout their careers.

Now, let’s take a closer look at the four roles every CFO must master:

1. The Operator

The first role of the CFO is the Operator role. The operator traditionally runs the finance function. They’re the leader.

“Every leader is an operator for their function.” – Amit Singhi

The CFO’s objective as the Operator is to run an effective and efficient finance function, which embodies everything you might expect such as budgeting, forecasting, financial planning, managing cash flow, risk management, financial management, etc.

However, the most important asset of the finance function is people. People are at the very center of the finance function because that’s how we get things done. There’s only so much you can do by yourself, which is why the CFO must put people first.

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“People are our most important assets. That's how we get things done. There's only so much one can do by oneself. But when we leverage our teams, we can multiply the effect many times over.” – Amit Singhi

Despite what many people might believe, human resources (HR) isn’t the only function responsible for people's development. As an Operator, people development and talent development are key priorities for the CFO.

“The finance leadership team is focused on ensuring that we’re attracting the best talent, recruiting them properly, onboarding, training, teaching, developing, promoting, and then retaining the best talent – which is one of the critical functions to run an effective and efficient organization.” – Amit Singhi

2. The Steward

The role of the CFO as a Steward involves ensuring compliance and control. The responsibilities under the steward role are classic tasks that have always rested on the shoulders of finance professionals.

Some of the key roles of the Steward include keeping on top of the company's financial information, such as:

• Accounting
• Audit control
• Taxes
• Financial reporting
• Disclosures
• Compliance

But are these enough for the modern role of the CFO to be high-tech finance professional? Here’s what Amit had to say about it:

“When you think about it, it's about protecting shareholder assets. All of these are important functions and mandatory as no other function of grouping the company is responsible for these…

“However, I think that these are necessary, but not sufficient in today's environment to be a high-tech finance professional.” – Amit Singhi

3. The Catalyst

As Catalysts, the role of the CFO is to instill a financial mindset throughout all levels of the organization.

“We teach and promote business acumen. We're driving the operating cycle. This includes monitoring the overall external environment for important global trends, political, economic, and cultural, that could impact the company.” – Amit Singhi

The Catalyst role also includes conducting competitive research and analyzing consumer behavior for insights that can be leveraged.

Finance establishes targets and then works with the operations to deliver those targets and ensure they are the best in class. And if they’re not at that level yet, the CFO thinks about how to get there.

The role of the CFO requires continuous monitoring and adjustment to continue improving the business and maximizing profitability.

“As catalysts, we also partner with operations to come up with a strategy to address any gaps. Here, analytics is our best friend.

"Data is just the starting point. It needs to be translated into analytics.” – Amit Singhi

Solely presenting financial data in an income statement alone isn’t going to cut it. Instead, focusing on identifying the various drivers and the corresponding operating physicals helps pinpoint areas of opportunity. This type of analysis is key for obtaining valuable insights, which enable action and better results.

The role of Catalyst isn’t always easy. You’re going to encounter your fair share of resistance, at least initially, because change causes fear. However, as the CFO, you’ve got to be a catalyst to drive change and you're also responsible for managing the progress of that change.

Amit shared a story reflecting his own experience battling resistance as a CFO of FLIR Systems:

“At FLIR we came up with the idea to increase our payment terms for our suppliers. Our initial response from purchasing was very skeptical. Their point was that our suppliers would respond by raising prices and that a lot of our competitors were getting those terms."

"We had a strong, loyal customer base and we had a sound financial standing and investment grade rating, so why should we?”

“We didn't give up because we believed in our cause and each other. So, we started advocating.

"Finally, we decided that we would contact our suppliers and pitch them the idea. And quite frankly, the results were outstanding. Half of them were fine changing from 30 to 60 days.

"The lesson here is very simple. Never give up and never say never. You've got to keep pushing.” – Amit Singhi

4. The Strategist

The fourth role of the CFO is the Strategist role, which is a very important dimension of what a CFO does.

As a Strategist, a CFO is the right-hand partner of the Chief Executive Officer (CEO) and the board of directors. The CFO helps define senior management’s (and some key stakeholders’) vision for the future of the company, and then develops and drives the strategic direction of the company.

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The CFO is a business partner and takes the lead in developing a vision for the future, and a strategic plan to carry out that vision. They've also got to have a high level of communication skills to help collaborate with various departments effectively.

Here’s an insightful example from Amit on the role of the CFO as a Strategist in action:

“In the case of Ford, when we were in South America, we called our strategy the ‘South America better plan’ and it was our roadmap for future growth.”

“One thing that made South America challenging at that time was that it was somewhere in-between an emerging market with cheap and cheerful low-end vehicles and fully developed markets with very high-end needs.”

“Market research revealed that a segment of the consumers was willing to pay more for bells and whistles and technology features.”

“Based on this trend analysis, we began investing more in technology and higher-end features and scaling up our vehicles, which improved our overall brand perception, desirability, and allowed us to sell vehicles at a premium gain market share.” – Amit Singhi

Amit also discussed how the role of the CFO as a Strategist changes depending on the organization and industry. For example, if you’re the CFO of a high-tech company, strategy is all about capital structure and capital allocation.

You can create significant value by allocating capital to derive the best results and the best returns. Disruption is another key element that can be used to shake up the business and it's something that CFOs can leverage to drive a fundamental shift in the business model and the overall direction of the company.

“At FLIR several years ago, before I joined, 80% of our business came from the military specifically thermal images that enabled helicopters and planes to conduct surveillance and other missions at night. The infrared technology was amazing. But FLIR was too dependent on one market - the defense side.”

“So, we wanted to disrupt the status quo. And one way of doing that was by identifying a new market opportunity and designing new technologies and products to serve new markets and customers.” – Amit Singhi

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“We discovered that thermal technology that was used for long-range surveillance by the military also had commercial applications. This led to the development of a lepton, which is a thermal imaging camera that is smaller than a dime and can fit inside a smartphone, and other handheld devices. It’s 10 times less expensive than a traditional IR camera.”

“This is about bringing thermal imaging technology to the masses, or as I prefer to call it disruptive. As a result, FLIR became a more diversified and balanced company, roughly 50% military and 50% commercial consumer, with thermal imaging applications in a variety of new verticals, including smartphones. So again, these are some examples of how disruption and strategy can be a key part of what finance does.” – Amit Singhi

The future role of the CFO

Aside from adapting the four roles discussed above (Operator, Steward, Catalyst, and Strategist), Amit predicts that the future role of the CFO must focus on enhancing their skill set across all aspects of financial processes.

Not only that, but CFOs must lead the finance team and stay on top of emerging trends and metrics, and capitalize on those to gain competitive advantages.

“I think they will need to leverage Big Data and artificial intelligence for better analytics, provide real-time analysis and insights to operators at their fingertips in a self-serve model.”

“Also leverage process automation to drive further efficiencies and utilize blockchain for distributed data sharing. And improving, monitoring, and leveraging cryptocurrency.” – Amit Singhi

About the guest

Amit Singhi has years of experience and is currently the Chief Financial Officer (CFO) of the Humanetics Group, a leading provider of sensory intelligence, virtual simulation, crash test systems, precision sensors, and cutting-edge photonic solutions through its subsidiaries Humanetics, HITEC Sensors, Fibercore, and OpTek Systems. Its solutions create data from critical environments and deliver precision control to empower people in their connected world.

Previously, Amit was the Chief Operating and Financial Officer of the Piston Group and before that, he was the CFO at FLIR Systems. Amit is also a board member of Big Brothers Big Sisters of Metro Detroit and the Electrical & Computer Engineering Council at the University of Michigan.

He is an executive-in-residence and a guest speaker at the University of Michigan and several international CFO conferences. He was also the recipient of the APACC “Salute to Excellence” Award for Business Leadership in 2018.

Want to listen to more episodes of the Two Cents: Finance Talk podcast? You can tune into more episodes of the show right here.

The role of the finance function has changed massively over recent years. Rather than generating reports all day, finance pros must step into a partnership role and work closely with other functions of the business.

But how can you do that effectively?

In this episode of the Two Cents: Finance Talk podcast, Stewart Houston, Exec. Director of Business Operations Finance at ICON plc., reveals the 3 pillars of a successful finance partner.

You can listen to the full episode below:

Or, if you prefer, keep reading to learn more about what it takes to become a strategic finance partner.

Stewart covers topics such as:

• Why finance business partnership is so important
• How finance professionals can make a greater contribution to an organization
• The three main pillars of business partnering
• How to avoid common mistakes when transitioning to an effective finance business partner role
• How to keep your advice relevant to the changing needs of the business
• How to implement business partnering in your workplace
• Core principles of financial leadership

Why should you care about becoming an effective finance partner?

If you want to make real time impact and solidify your place within a business, you’ve got to be more than just a ‘number cruncher.’

Moving into a business partnering role is a topic that gets a lot of airtime on places like LinkedIn. Finance professionals talk about it a lot and it’s become somewhat of a ‘buzz’ term in the industry.

Yet, many of the people talking about finance business partnerships don’t always get to the crux of it. There's always repetition on what people should be doing, but very little on the why.

Stewart shared exactly why a finance business partnership is so important…

“For finance people, business partnering is about breaking out of the accounting stereotype and meshing ourselves into the business (and business strategy) to become an intrinsic part of how they succeed. If we don't do that, we die on the vine and become nothing more than accountants.”

“Business partnering is the future of finance. However, it’s not new either. I've been practicing it for 10 years, and probably longer than that without realizing what the term is. It’s a natural place for us finance folks to go if we want to do more than just accounting and the mundane processes.”

“Equally, we can expand on it some of the things going on in the business world with sustainability and big data for instance, which finance can add a lot of value. Beyond the self-preservation piece, we can add something to the business because there are things tangibly in our power to improve on.” – Stewart Houston

Businesses rely on the finance team to act as both the interface and translator between finance and operations. Finance teams need to get involved where possible and act as the conduits between various business functions.

“Sometimes, other business functions aren’t as streamlined as you'd expect them to be, and we can step in to become the glue between functions.”

“We don't have to just be the to and fro between the P&L and the operations, P&L, and facilities - we can spread in a more matrix type relationship than just the to and fro to your core financial elements.” - Stewart Houston

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How finance teams can make a greater contribution to an organization

Finance leaders (including CFOs) tend to be comfortable with the content of the P&L. So if you want to start making a difference, Stewart recommends that you start by looking at things in the P&L and then work your way out from there.

Making a greater contribution to your organization and helping with decision-making isn’t just about looking at variances between periods but looking at where the pain points in the organization are – and coming up with solutions to fix them.

“Whilst we recognize something's not working, we look to fix it and it should be a dynamic environment we're dealing with. What we're looking at today may not be what we're looking at tomorrow.

“So, have your eyes and ears open to the landscape to see what's going on and try and tap into where you can help convey what’s going on to the various groups.” - Stewart Houston

Stewart also advises that you work on developing sound analytical skills and communication skills. He talked about introducing metrics where there are no metrics.

If you’re in finance, it’s safe to assume that you are a data-led person. Use this to your advantage by introducing metrics, preferrable a focused operational metric where possible. Or, something with a dollar symbol.

When a metric has a dollar (or pound or euro etc.) symbol next to it, it tends to get more attention. Therefore, if you said, “if we don't do this or if this series of events happen, it will cost us $10 million over the next year” – that’ll get a bigger piece of exposure and attention than if you just said the first piece.

“Look at the getting involved in the areas of greatest impact - not the areas you're most interested in.” - Stewart Houston

3 main pillars of finance business partnering

Stewart shared the three main building blocks to effective finance business partnering.

Watch the video below to hear Stewart explain each pillar in more detail:

1. The first pillar is basic and it’s almost at the transactional level, but not quite. You can have some discussion about what’s going on at the transaction level, such as the outcome of the transaction, and provide necessary financial information.

2. The second step is to collaborate with the business unit on its specific issues. For example, they have a problem where they don't understand why they have erosion on margin in a particular product area. Well, you can pull data and help them understand and construe it.

3. The third piece is the Holy Grail of business partnering for finance, and it’s where we're problem-solving and driving the agenda.

“That's the hardest piece to come across because you're sometimes going to deal with problems in their area that they haven't identified yet so you have to be diplomatic with it. If you're not diplomatic, your shutters will come down and you won't get anywhere.” - Stewart Houston

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How to avoid common mistakes when transitioning to a business partnership role

The first thing you need to do to become a successful finance partner is to see where your existing relationship with the business (and certain roles within it) lies.

This is a vital step because you can’t look at what you can do to improve until you have established a relationship. If you are currently working with them, establish the platform you want to work with them from.

A quick Google search on this topic will generate articles, videos, and podcasts covering topics on how to become a finance partner. Some of it is gold but a lot of it is often misinformation or it lacks substantial advice.

Here’s what Stewart had to say about some of the existing advice out there on the business partnership:

“One of my main objections to the online advice that's out there is that there is this innate subservience from finance to the business unit. We're looking to help them, and we're stuck.”

“But the more you allow yourself to stay stuck, the more it’s going to form what the relationship looks like. That becomes what they expect of you and it becomes more difficult to break out from it.”

“Try and not stay too long at that level and be subservient to what they want to do. Work with them on what's important to them and on what's important to you. That's how it works best.” - Stewart Houston

When working with other functions in the business, remember that they don’t always see the big picture that you’re trying to work towards. Everyone’s focused on their areas of the business.

So, how can you intertwine effectively with various areas of the business – without the whole thing falling apart?

Here are Stewart’s top tips to improve how you work with other people (outside the finance team):

• Take a step back and try not to tell them how to do their job. Instead, talk to them about the implication of how they're currently working with other teams and how they could perhaps work better.
• Don't fast forward to a conclusion without bringing other people in. Take others on the journey with you.
• Once you recognize something that may be problematic and have data evidence to back it up, bring that data to the people you're trying to partner with. And, bring them in as early as possible.
• Whatever you set up, make sure it’s sustainable and maintainable.

“You need the partnership to be as harmonious as possible. So don't just throw a conclusive piece of evidence in front of someone and expect them to work to conform to it.” - Stewart Houston

How to know when you’re doing it right

Want to know how to measure the effectiveness of a finance partner?

Start by asking yourself these three questions:

1. Am I working with the business?
2. Do I have regular touch points with business partners in business units? Or, are they going back to my three pillars and either coming to me for one or two and then disappearing again?
3. Is there an ongoing flow of building on the knowledge together, making improvements together, and maintaining what we've agreed previously?

Take time to consider whether there’s an existing building block for the relationship because if there isn't, something is missing with the partnership. You're just being a service function providing information for them as and when they need it. But if that's it, it won’t work.

Once you’ve figured out the involvement, make sure to include measurable goals with what you've agreed and across the timeline.

“The bigger the initiative, the longer it tends to last. So, get involved in longer initiatives because it will guarantee that you’ll have regular touchpoints with the business unit. Through the various interactions with them, other things will come into play as well.”

“Consistent and active involvement with them is essential and if you're not getting there, reassess your approach. Don't take no for an answer if you know saying no is not the right answer.” - Stewart Houston

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How to keep your advice relevant to the changing needs of the business

Organizations are relying on finance more heavily to help them make strategic and profitable business decisions. This means that you’ve always got to be on top of your game and ensure your advice is relevant to the changing needs of the business.

The problem is making sure you understand what those changing needs are. You may well have to force your way in. Whatever the case, you should know the general runnings of the business and any new waves going on in the industry.

Stewart advises that you avoid setting up a suite of reports. There’ll be a need for reporting and you‘ll likely be the person providing that reporting - but don't just produce project report X forevermore.

“You don't want to get to that point because it’s just a waste of everyone's time and resources. It also probably means the report either wasn't useful in the first instance or the time has moved on and this report hasn't moved with it.” - Stewart Houston

Don't let these things stagnate. During those meetings with the business units, learning what's going on in the model and the industry landscape will keep your reporting fresh.

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How to implement business partnering in your workplace

Assess the work environment you're in. Assess the current relationship between yourself and the business units and the people you want to partner with, and then drive it on from there. If you already have the relationship because you’re doing a lot of transactional type of engagement, then you have one foot in the door. However, if you don't, you’ll have to establish yourself first.

Here are Stewart’s three pieces of advice to implement business partnership in your workplace:

1. Celebrate joint wins.

This is why goals are important because you can't celebrate what you haven't achieved. From the outset, set goals. When you achieve them always go back to your manager (as well as their manager) to let them know about your joint win.

2. Assess your capabilities.

It would help if you had an enthusiasm for it. Be resilient and thick-skinned because you’re not necessarily going to be received particularly well when you're shining a light on someone's performance and saying it has to change. That's not for everyone.

3. Don't blindly follow advice from anyone.

Shape how you forge those relationships and what needs to be done. There's no recipe book about how you can become a successful business partner. It’s something you need to forge yourself. You can cherry-pick pieces of advice, but bear in mind it’s your own journey you have to follow.

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Core principles of financial leadership

Leadership is a massive part of transitioning to a finance partner.

But the question remains... do you have what it takes to be a leader and a finance partner?

Here are Stewart's three core principles of financial leadership:

1. Guiding without micromanaging

“I hate to micromanage, but you have to recognize that sometimes you have to step in if something's not working.”

“However, I prefer people to work their own path without too much interference because if you keep stepping in they become a ‘pseudo you’, which is not what we want. We want everyone to be individuals and have their own input.”

2. Supporting your team’s success

“Another one of my core principles is having anyone who joins my team succeed in some respect.”

“If they leave the team, I want them to be in a better position than they came in, in terms of knowledge and skills. If that hasn't happened, then I've done something wrong. I like to see people growing in themselves and within themselves.”

3. Integrity

“Integrity, acting consistently and equitably is essential. I always try to maintain that, and I think I succeeded.”

“For example, if you set an expectation that you're going to have a certain set of data by the end of Thursday and Thursday comes and goes and you still haven't got it, it drives people crazy because invariably, it's important stuff and they've got plans downstream for it.”

“If you give people a reason as to why it won’t be done on Thursday then they can plan accordingly. I'm increasingly amazed by the number of people who don't do that because it's so simple.”

4. Allow people to have some level of failure

“I’m not talking about people repeating the same mistakes, but about a mistake, people will learn from. Allow people to explore and be creative. It's not always going to work and it might fail, but it's not the failure itself is how you deal with the failure.”

“Once something's gone wrong, I don't spend time castigating everyone but I think about how can we make this better?”

About the guest

Stewart is the Exec. Director of Business Operations Finance at ICON plc. He’s CIMA qualified with 20 years post qualified experience. His main focus is primarily on Financial Planning and Business Partnering.

In his formative years, Stewart worked in the IT\Telco field. But now, he works with ICON plc (formerly PRA Health sciences acquired by ICON plc). He works with a variety of operations teams and Corporate Service functions. Stewart is also 2/3 of the way through an MBA with Henley Business School, which deserves a round of applause.

Whether you’re a Financial Analyst or the CFO sitting at the table with the ‘big players’ – you need a comprehensive understanding of financial forecasting.

Having a financial forecast model in place helps you identify what steps to take for continued growth and profitability. Put simply, financial forecasting predicts the future performance of the business.

But… what does a financial forecast look like? And how can you build one from the ground up?

Ilya Osver is a Financial Analyst with more than 14 years of experience. He revealed his best insider tips for creating a financial forecast model on the Two Cents: Finance Talk podcast.

We covered everything from the basics of building financial models on Excel to navigating frauds in financial standings. It’s a great conversation and one you don’t want to miss!

Tune in to this episode of the Two Cents podcast below:

Or keep reading to learn:

• What financial forecasting is (bringing it back to the basics!)
• The benefits of financial modeling
• What tools should be in your financial forecasting model ‘survival kit’
• How financial forecast models predict the future of the business
• How to create a financial forecast in Microsoft Excel

What is financial forecasting?

Financial forecasting predicts the future performance of an organization. You can build a financial forecasting model in Excel and use it to create income statements, financial statements, balance sheets, cash flow statements, pricing, and more.

Financial forecast models rely on historical data to build projections for the future financial performance of the organization. It’s worth noting that although financial forecast models are based on data, forecasting financial data relies on assumptions.

“It's not like predicting the future, even if it sounds like it. Rather, you're looking at the approval, a historical perspective, and trying to guess what's going on in the future. What you've done before, and what you did wrong before, will lead you to better results in the future.” – Ilya Osver.

The benefits of using a financial forecast model

As you can imagine, there are countless benefits of using a financial forecasting model, including:

• The ability to consider more than one potential outcome. You can test multiple scenarios to help ensure the business takes the right steps.
• A financial forecasting model provides you with insights and data into how the business operates. It also reveals what’s working well, and what areas need improvement. Having this data leads to better business decisions.
• Creates an in-depth valuation of your existing business planning model.
• You can make proper use of your budget and see what’s going on in the future and utilize your sources more wisely.

“With financial forecasting, you can prepare for anything, any crazy scenario that comes to your mind. You push some buttons in an Excel file and see what happens when the disaster comes.” – Ilya Osver.

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What should be in your financial forecast model ‘survival kit’?

To create a financial forecasting plan, you need a balance sheet, profit/loss statement, and a cash flow statement. This is the basics.

You need these things to see...

1. What you have on your balance
2. What you owe
3. Whom you owe

Using this data is the first level to creating an accurate financial forecast model.

The second level is reading the audit reports in full. Here’s Ilya’s advice when it comes to analyzing audit reports:

“Sometimes there's a hidden answer to your questions. So, you should read those audit reports carefully. And not just the tables and numbers! I know I know what people are thinking… people tend to scroll down to the figures and they lose a lot of information…”

“Look at the primary data if it's possible to obtain, meaning the root of your numbers in the balance sheet.”

“If you're a Financial Manager and you're looking at the figures thinking something is suspicious there, go directly to the department. Look at the papers because sometimes people make mistakes.” – Ilya Osver.

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How a financial forecast model can predict the future of the business

When creating a financial forecast model, you take the historical data and try to see if there’s a way to replicate it in the future with some adjustments. Most banks use this approach.

For example, if a bank has a 10% growth last year, they assume that the following year will also see a 10% growth based on company records and financial projections.

However, Ilya warns that you need to be careful. You may think you’re growing because where you are now is 10 times higher than three years ago. But you might discover that you’re actually at a low when you push back 10 years or five years.

Another approach you can take to predict the future is using a driver-based forecast…

“You take the whole balance sheet and the whole P&L and multiply every item on the variable. You manipulate these numbers and figures and from my experience, the real picture is more negative…”

“But this helps you to reduce the risk in the future from also being more negative and using more variable single analysis and being more creative.” – Ilya Osver.

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Tips for building a financial forecast model

You’ve got your blank Microsoft Excel sheet opened up in front of you. You’ve got all the data readily available. And, the mouse cursor is blinking away in the first cell…now what?

Here are Ilya’s forecasting method tips for creating a financial forecast model from the ground up using a spreadsheet:

First, you need an empty Excel file. In this Excel file, create the first sheet which will be your input sheet where you get your numbers inside your future system. The second sheet is where all your calculations and sums come together.

Many companies create separate financial standing and separate sheets. They have assets on one sheet, liabilities on the second, and equity on a third sheet where you’d find income statements.

“This is incredibly inconvenient because you don't want to jump from page to page to see the full picture. From a design standpoint, it looks much better. But my advice is to minimize the design and put it all on one page.” – Ilya Osver.

Emphasize what you want to calculate, why you wanted to calculate those things, and how you interpret it. That’s where you get the third page with an explanation. There, you answer questions about why you're doing this analysis. Then, write your explanations based on the research of your analysis on the previous page.

If you're doing something for your own company, you can have the file, and the third page of the text would be about what to expect. This is where you’ll put the pros and cons of your current financial standing.

Also, don’t forget to put insights on one page. It's very important (when using multiple pages) to link your formulas, otherwise, you could easily get lost. If you make a mistake, you could be spending hours trying to find it.

“The more you make, the more you practice, the better you’ll get. After 10 years, you can make a financial forecast model blindfolded!” – Ilya Osver

How often should you run a financial forecast?

There isn’t one concrete answer to this question. The number of times per year, month, or week, depends on your organization.

Financial analysts who work in the bank, like Ilya, may run a financial forecast every day. It's part of their daily duties. For those who are working as financial managers, once or twice a month seems to be average.

“If you’re a financial manager, I recommend you build a dashboard, which you’ll have in front of your eyes every day. This is an efficient way to know what's going on in your company from a financial point of view daily…”

“By having this information in front of your eyes, you’ll make faster and better decisions and you’ll be able to report to your boss more efficiently. And I'm pretty sure he/she will appreciate having those dashboards on their computer as well.” – Ilya Osver.

The future of financial forecast models

What does the future hold for financial forecasting?

I asked Ilya that question and this was his response:

“Five years ago, I thought there was no place for humans to do the analysis and everything with artificial intelligence…

Now, I can see we are still far away from achieving the proper result using AI. Humans still need to control these things.” – Ilya Osver

Ilya continued…

“The world is becoming clearer and more global as we share information. It’s become easier to predict the credibility of the company's financial standing. The figures are more real…”

Ilya then shared how he’d personally like to see financial forecasting models evolve:

“What we need is some type of automation, so we won't need to retype the data from the papers. This is the most boring part of my job. I'm just taking the paper and retyping it. I put the figures in the correct position, then edit it and relocate it properly.” – Ilya Osver

What advice would you give to aspiring or existing financial analysts who want to grow their careers?

Watch the video below to hear Ilya’s encouraging answer to this question:

About the guest

As a seasoned Financial Analyst, Ilya knows a thing or two about building financial models and forecasts. His current role at Rosbank includes many responsibilities such as overseeing daily operations, supporting the FO, business analysis, supervising core infrastructure projects, and more.

An independent and self-motivated Financial Analyst, Ilya has vast experience in analyzing the Financial Standings of Russian, EU, Japanese, Thai, Philippine and Indonesian companies. In fact, he has analyzed more than 3000 companies (wow!). He's passionate about data, technologies, and solving unsolvable problems.

So, how can FP&A professionals (and CFOs alike) spearhead finance transformation in their organization?

Find out in the first episode of our brand-new podcast, Two Cents: Finance Talk. In this episode, we’re joined by the Principal and Founder of Kalish Consulting, Brian Kalish. Brian shares a wealth of knowledge and insights on the importance of harnessing big data to implement solutions that drive finance transformation.

Listen in to hear from one of the most sought-after FP&A speakers in the world and prepare to take lots of notes!

Key talking points

• How the role of FP&A has changed because of the pandemic
• How more finance pros can get a ‘seat at the table’
• How to embrace digital finance transformation

…and so much more!

About the guest

Brian is the Principal and Founder of Kalish Consulting. In addition to Brian’s robust consulting and advisory practice, he's available as a public speaker addressing many of the most topical issues facing Treasury and FP&A professionals today. He has spoken all over the world to audiences both large and small and has over 25 years of experience in Finance, FP&A, Treasury, and Investor Relations.

Brian is passionately committed to building and connecting the global FP&A community. He continues to host FP&A Roundtables and events in North America, Europe, Asia, and South America. Brian is also an Adjunct Professor at Florida International University (FIU) in Miami, Florida, and the Former Executive Director – Global FP&A Practice at AFP.

Resources & mentions from this episode:

• Connect with Brian on LinkedIn
• Sign up to our FREE Finance Alliance Slack community
• Subscribe to the Finance Alliance Fix newsletter
• Book recommendation - ‘Who Moved My Cheese?’ by Spencer Johnson

Other resources on this topic:

• Best Practices from the CFO Suite
• 6 impactful FP&A trends: A complete guide
• The future of finance: Revamping forecasts with FP&A software

Join the conversation

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Want to be a guest on the show? Get in touch, contact contribute@financealliance.io.