FP&A Secrets

13 Steps to do Financial Analysis Credits to Anders Liu-Lindberg, follow him for more practical finance content. Here's the original post ----- Most financial analysis is pointless. Here's why... We start with the numbers Too often, we dump the numbers in a spreadsheet. We organize it in a pivot and compare it across periods. We investigate every variance and explain why it occurred. Instead, we should start with a business problem This is very inefficient and often a waste of time. Instead, we should identify our business challenges. Then we analyze the issue and propose viable solutions. It's not the analysis approach that's wrong I believe you're great at doing analysis. You follow a logically structured process. The problem is that you start at the wrong place. If we work on our true business challenges we will improve performance. Business challenge -> analysis process -> solution implementation Here are 13 steps for doing a great financial analysis: 1. Financial statements 2. Business understanding 3. Clean and organize data 4. Calculate ratios 5. Analyze trends 6. Benchmarking 7. Assess profitability 8. Evaluate liquidity 9. Cash flow analysis 10. Recommend actions 11. Write the report 12. Present analysis 13. Update regularly ----- Follow our page FP&A Secrets to grow your career in Financial Planning & Analysis

Learn How to Forecast the Balance Sheet Credits to Josh Aharonoff, CPA, follow him for more practical finance content. Here's the original post ----- Learn How to Forecast the Balance Sheet This may be the toughest part in building a forecast… as the Balance sheet is filled with tons of complexity. Each Balance Sheet account has it’s own schedule & method for how the future can look… but there is a PATTERN you can follow to get this right ➡️ Start with the balance from your latest month of actuals Before you can forecast out what the balance for an account will be on Balance Sheet… you need to understand your starting point. And your starting point needs to be the most recent value as shown on your ACTUALS… since you Balance Sheet is CUMULATIVE. This part is so key to a financial model, you NEED to include actuals, and this is just one of the many reasons. ➡️ Forecast the MOVEMENTS in your Balance Sheet accounts It’s less important to get the exact ending balance correct… your focus should be on understanding how the account goes UP… and how it goes DOWN. if you get those 2 things right, the ending balance naturally flows ➡️ Follow this structure Beginning Balance + Additions to this account - Subtractions to this account Ending Balance I know this sound obvious, but it’s key to internalize this structure with each balance sheet account before you can apply this to all of your balance sheet projections ➡️ Examples 1️⃣ Inventory Beginning Inventory ‘+ new amounts purchased (eg: take projected sales in 3 months from now) ‘- COGS 2️⃣ Accounts Receivable Beginning AR Balance + new sales on credit for period - amounts collected 3️⃣ Deferred Revenue Beginning Deferred Revenue Balance + new sales - revenue recorded 3️⃣ Capex Beginning Capex balance + additions (eg: $2,500 per new hire) less accumulated depreciation also important to factor in depreciation expense (capex balance / useful life) 4️⃣ Accounts Payable Beginning AP balance + new expenses on credit for period - amounts paid 5️⃣ Debt Beginning debt balance + new draw downs - repayments also factor in interest expense / accrued interest === There’s so much more I want to share here, but I only have 3,000 characters. Read the full blog article right here: https://lnkd.in/ee2Mn8Cw What is your preferred method for forecasting the Balance Sheet? ----- Follow our page FP&A Secrets to grow your career in Financial Planning & Analysis

Build a Financial Model in 7 Easy Steps Credits to Josh Aharonoff, CPA, follow him for more practical finance content. Here's the original post ----- I’ve built over 100 models in my career… and everytime I do, I walk a client through with this graphic… mapping out every step in the journey of crafting the perfect financial model. While every model is different, they can all be distilled to just these 7 simple steps. Let’s go through each: 1️⃣ Start with our existing data Almost every model has a combination of projections & actuals… and many of your projections are DEPENDENT on your actuals. Here are some examples - P&L - forecasting opex based off of past performance - Balance Sheet - forecasting balances by starting with your ending balance as of your last month of actuals - Headcount - forecasting payroll expense by analyzing who is currently on your team - Sales - forecasting sales from existing customers. Start with importing your existing data, as it will set the foundation for many areas of your model 2️⃣ Interlinking Financial Statements The foundation of any financial model is the output from the 3 financial statements. Once you have your financial statements imported from the prior step, it’s time to connect them… this way cash will be able to be forecasted dynamically with ease. 3️⃣ Projecting Revenue Now, focus on the most crucial aspect of your forecast – your revenue. Begin by examining the transactions from your current clients and those in your pipeline. Utilize the A∙R∙S∙R framework to guide your analysis: Acquiring customers → Retaining them → Selling to them → Recording revenue along with related Profit & Loss/Balance Sheet items. 4️⃣ Headcount Now comes the time to forecast your biggest opex account - your headcount. Be sure to set up your formulas to be as detailed as possible… forecasting for mid-month hire/terminations, bonuses/commissions, and fully loaded costs. 5️⃣ Projecting Operating Expenses With your headcount projections set, it’s now time to forecast all the rest of our opex. Analyze each and every GL account, and set your driver. Some examples are: - 6 month average - fixed schedule - prior months amount and more 6️⃣ Estimating Balance Sheet OK, we’re almost there! This last step may be the most challenging…but is actually fairly simple. Start with your ending balances as of your last month of actuals… then forecast Additions, subtractions, and you’ll get your new balances, 7️⃣ Designing an Engaging Presentation Finally, my favorite part – presentation! This is where all your effort pays off. Whether you're presenting to the CEO… management team… investors, or the board… make your presentation captivating. Your model should be so pretty that people enjoy consuming it, regardless of the data 🤩 ----- Follow our page FP&A Secrets to grow your career in Financial Planning & Analysis

Cash vs. Petty Cash Credits to Nathan Liao, CMA, follow him for more practical finance content. Here's the original post ----- What’s the difference, really? 👇 1️⃣ Cash: Represents the company's readily available funds used to settle debts and is a highly liquid asset. It's the lifeblood that keeps businesses running. Example: Company ABC has $50,000 in its bank account and $2,000 in its cash drawer, so its total cash on the balance sheet is $52,000. 2️⃣ Petty Cash: A small reserve of cash kept on-hand for making small, miscellaneous payments where using the main cash reserve or writing checks might be inefficient. Example: A company might keep $500 as petty cash. If employees use $300 for office supplies and snacks, the petty cash balance is now $200. Once exhausted or near exhaustion, it's replenished to its original amount. —--------------- Cash & Petty Cash are same-same but different Both are liquid assets, but differ in usage 👉 Is keeping a petty cash balance necessary? ----- Follow our page FP&A Secrets to grow your career in Financial Planning & Analysis

FP&A's Future Credits to Soufyan Hamid, follow him for more practical finance content. Here's the original post ----- FP&A's Future: Presentation Skills > Spreadsheets Times are changing And there is no way we will turn back ❌ Crunching numbers ❌ Building reports ❌ Follow up results and budget All that is over 🕰️ With the rise of 𝘁𝗲𝗰𝗵𝗻𝗼𝗹𝗼𝗴𝘆, our human skills are the ones that will still have value Trends are showing that presentation skills will be more important than ever And let's be honest, who wants to be stuck staring at spreadsheets all day anyway? By improving your 𝗽𝗿𝗲𝘀𝗲𝗻𝘁𝗮𝘁𝗶𝗼𝗻 𝘀𝗸𝗶𝗹𝗹𝘀, not only will you impress your bosses, but also have more impact and influence in your decision-making roles And it's more than time because 83% 𝗼𝗳 𝗙𝗣&𝗔 𝗺𝗮𝗻𝗮𝗴𝗲𝗿𝘀 are not happy with their teams' presentations skills And while their teams are continuing to consider Excel or PowerBI as their main learning objectives The ROI of these two is decreasing the more they are heading towards the job of CFO So Managers, help your teams deliver great presentations so they help your company - you'll get already pre-worked insights - they will be more autonomous - your team reputation will grow with your business partners And a simple way to start is to 1️⃣ Help them to take a 𝘀𝘁𝗲𝗽 𝗯𝗮𝗰𝗸 from their detailed analysis 2️⃣ Require to have 𝟭 𝗺𝗲𝘀𝘀𝗮𝗴𝗲 from them instead of details 3️⃣ Ask them to 𝗽𝗿𝗲𝗽𝗮𝗿𝗲 slides and to present their work to your team 4️⃣ When they're ready, have them 𝗱𝗲𝗹𝗶𝘃𝗲𝗿 𝘁𝗵𝗲 𝗽𝗿𝗲𝘀𝗲𝗻𝘁𝗮𝘁𝗶𝗼𝗻 to smaller audiences ----- Follow our page FP&A Secrets to grow your career in Financial Planning & Analysis

How to design your Financial model Credits to Josh Aharonoff, CPA Aharonoff, follow him for more practical finance content. Here's the original post ----- How to design your Financial model Preparing the right schema for your financial models is the foundation to a model that gives you the information you need, when you need it. I’ve seen 100s of Financial Model’s in my career… and while they all can differ from one another, this structure can be applied to ANY business model. The mainly come down between Source Tabs, Inputs Tabs, and Output tabs ➡️ SOURCE TABS Your model often times will start with an export / connection to your a number of source data such as: → your existing P&L and Balance Sheet → your headcount details → your customer details These source tabs should be designed in a way where you don’t need to edit their format, making it easy to refresh / resync ➡️ INPUT TABS Once you have your source data, it’s now time to design your inputs. It’s common to consolidate as much as possible with your inputs into just one tab. This makes it easy for your readers to understand all the assumptions that go into your model, allowing for a centralized location where everything can be tweaked. Sometimes though, you may have too much information to fit on one tab. That’s where your other input tabs come into play, which will then all push to your centralized drivers tab ➡️ OUTPUT TABS Now that you have your source tabs… and you’ve tweaked your assumptions on your input tabs… it’s time to present your findings. The most important findings will be the output for your 3 financial statements It’s also common to divide up your output tabs between DETAILED outputs (IE, your full P&L, Balance Sheet and Cash Flows)… and SUMMARIZED outputs → Summary Tables These tables help you summarize your detailed outputs, such as a summary P&L, summary Balance Sheet, or summary Cash Flows I like to start here and analyze big movements from one period to the next before drilling into the details → Dashboards & Reporting Now comes my favorite part of a model… Your Dashboards & Reporting. This is where you woo your audience with beautiful visuals that summarize the key information 🤩 For more information on how to prepare these dashboards, check out my course on CFO Dashboards & Reporting === It’s common to also include a table of contents with your models so that the readers can understand how everything is laid out, and where the edits can be made. Remember…your models are not just for yourself - they will almost always be reviewed and tweaked by outside parties. The more coherent & clear the structure of your model is, the easier it is for you to manage and nail your projections. ----- Follow our page FP&A Secrets to grow your career in Financial Planning & Analysis

10 Reporting Tips Credits to Nicolas Boucher, follow him for more practical finance content. Here's the original post ----- 10 Reporting Tips I have sent 100s of reports. And overtime I have found what works and what doesn't work. Here are my top 10 tips: 1. Audience Identify Key Stakeholders: Determine the specific individuals or departments who will benefit most from the report. Customize Content: Tailor the report’s content to address the unique needs or interests of different audience segments. Feedback Loop: Regularly solicit feedback from the audience to continuously improve the relevance and effectiveness of the report. 2. Timing Align with Business Cycles: Schedule reports in sync with business cycles, like quarterly financial periods. Anticipate Needs: Proactively adjust the reporting frequency during critical business phases. Automate Reminders: Use scheduling tools to automate the distribution process and ensure timely delivery. 3. Business Data Integrate KPIs: Include key performance indicators relevant to the business operations. Dynamic Data Sources: Use real-time data feeds to enhance the report’s immediacy and relevance. Contextual Analysis: Provide analytical insights, comparing operational data trends over time or against industry benchmarks. 4. Declutter Prioritize Data: Focus on the most critical data points that drive decision-making. Visual Simplicity: Use clean, simple visuals to enhance readability and comprehension. Minimalist Design: Adopt a minimalist design approach to reduce cognitive overload. 5. Reusable Template Design: Develop templates that ensure consistency and ease of adaptation for presentations. Modular Sections: Create the report in modular sections for easy extraction and reuse. Adaptable Formats: Ensure the report can be easily converted into different formats. 6. Format Interactivity in Digital Formats: Utilize interactive elements in digital formats like Excel or web-based reports. Print-Friendly Options: Offer a print-friendly version for those who prefer physical copies. 7. Push vs Pull Automated Alerts: Set up automated alerts for new report availability in pull systems. Customizable Push Options: Allow recipients to customize the frequency and type of reports they receive. Secure Access: Ensure secure, easy access for pull systems, particularly for sensitive financial data. 8. Comments Executive Summaries: Include an executive summary highlighting key insights and decisions. Actionable Recommendations: Offer clear, actionable recommendations based on the report’s findings. 9. Standard Brand Alignment: Ensure the report’s visual elements align with the company’s branding guidelines. 10. Self-Explanatory Infographics: Use infographics to make complex data more understandable. Layered Information: Present information in layers, with summaries leading to detailed analysis. ----- Follow our page FP&A Secrets to grow your career in Financial Planning & Analysis

5 reasons why your company needs an FP&A tool Credits to David Greenbaum, follow him for more practical finance content. Here's the original post ----- 1. As your company grows and more people contribute to the data pool, the chances of human error increase. An FP&A tool helps you track more metrics and answer more questions quickly and accurately. 2. Suppose you dump data from your ERP into a CSV file. This procedure must be repeated for each additional relevant system. FP&A tools can automate the entire process. 3. Your company may have an ERP system, a human resources system, and financial and accounting software. But you must manually enter data into each of those transactional systems on a monthly basis because they are not linked. It takes your accounting team until the third of the month to complete their work and notify you that the previous month’s books have been closed. 4. The company relies on your insights to make quick decisions, but your current system is slow. Your toolset can no longer handle the new level of complexity. That is an indication that something needs to change. 5. If you’re fighting the data rather than analyzing it, and if you’re driving the data rather than the data driving you, an FP&A tool can help you facilitate data-driven decision making and break the cycle of chaos. ----- Follow our page FP&A Secrets to grow your career in Financial Planning & Analysis

9 ways to forecast Credits to Josh Aharonoff, CPA, follow him for more practical finance content. Here's the original post ----- Learn 9 Ways to Forecast 👇 Each time I build a forecast for a client, I work on first getting to know their business. I ask questions like… ❔ How do you make money? ❔ What are your plans for growth? ❔ What is currently happening with your business? From there, I start to formulate a rough idea for how we’re going to build our forecast… but each section of the Profit & Loss and Balance Sheet may require a different approach. While they all differ, almost all forecasts I build include one / all of these 9 methods: 1️⃣ 6 mo. historical average 🤔 How it works → take the last 6 months value. Can take it one step further by adding a buffer (like a 5% increase) 💡 Why it’s useful → The future often times blends well with the past, especially in the first few months of projections 2️⃣ Prior mo. balance 🤔 How it works → Set your projection to last months value 💡 Why it’s useful → extra helpful when forecasting the balance sheet for accounts with minimal movements 3️⃣ % of revenue 🤔 How it works → Set your projection to take a % of revenue 💡 Why it’s useful → As revenue scales, expenses tend to scale as well 4️⃣ $ per hire 🤔 How it works → Set a $ figure for each hire Why it’s useful → Expenses / capex often times scale with each new hire 5️⃣ Fixed Assumption 🤔 How it works → enter in any values or schedules you have on hand 💡 Why it’s useful → for items like insurance or rent where you have a fixed schedule, you can plug them right into your forecast 6️⃣ YoY Growth 🤔 How it works → take the value from 12 months prior and add a growth factor 💡 Why it’s useful → for companies with seasonality, you can match the schedule from the prior year, and add a buffer if need be 7️⃣ Annual inputs 🤔 How it works → Enter in assumptions for the entire year, then divide by 12 for monthly projections 💡 Why it’s useful → simple and quick way to forecast for an entire year 8️⃣ Departmental Intake 🤔 How it works → sit down with each department head, and come up with a bottoms up budget for their department 💡 Why it’s useful → collect valuable information that you may not have insight into, hold each department head accountable to results & performance 9️⃣ Zeroed out 🤔 How it works → forecast 0 going forward 💡 Why it’s useful → can be useful if you don’t expect any future values in this account, or if you project values in another account that relates to this account === each line item on your general ledger should be analyzed as you choose the best forecasting method. As a general idea, I typically start out with making all opex accounts other than headcount a 6 month average…and every balance sheet account other than cash + retained earnings equal to last month. ----- Follow our page FP&A Secrets to grow your career in Financial Planning & Analysis

Top 8 Budgeting Methods Credits to Nathan Liao, CMA, follow him for more practical finance content. Here's the original post ----- Budgeting is key to successful biz planning But with so many methodologies available Which one is right for your business? Let's break them down: 1️⃣ Incremental Budgeting: It begins with the current period's budget and adds/subtracts based on new data. Best for: Stable industries without much flux. Watch out for: May perpetuate past inefficiencies. 2️⃣ Zero-Based Budgeting: Start from scratch each period. Every expense must be justified. Best for: Organizations looking for an overhaul or to eliminate redundant costs. Watch out for: Can be time-consuming and requires a thorough review. 3️⃣ Activity-Based Budgeting: Expenses are allocated based on activities that incur costs. Best for: Service industries or any sector wanting to link costs to performance. Watch out for: Can be complex; requires detailed activity analysis. 4️⃣ Value Proposition Budgeting: Allocate funds based on activities that offer the most value. Best for: Organizations focused on ROI. Watch out for: Requires clear understanding of value drivers. 5️⃣ Rolling (or Continuous) Budgets: Constantly updated by adding a new period (e.g., month or quarter) as the last one completes. Best for: Volatile industries where rapid changes are frequent. Watch out for: Demands regular updates, so can be labor-intensive. 6️⃣ Flexible Budgeting: Adjusts as volume or activity levels change. Best for: Industries with unpredictable sales volumes like retail. Watch out for: Needs frequent recalibration. 7️⃣ Static Budgeting: Fixed budget, unaffected by business volume or activity changes. Best for: Small businesses with predictable expenses. Watch out for: Limited flexibility can cause variances. 8️⃣ Project Budgeting: Specifically designed for individual projects. Best for: Construction, event planning, or other project-based industries. ----- Follow our page FP&A Secrets to grow your career in Financial Planning & Analysis