FP&A Secrets

Is your balance sheet killing your income statement? Credits to Anders Liu-Lindberg follow him for more practical finance content. Here's the original post ---- Is your balance sheet killing your income statement? Let's check out some tricky items. It's the Gain/Loss vs. Financial Income vs. Financial Expense Showdown! 𝗚𝗔𝗜𝗡/𝗟𝗢𝗦𝗦 Gain or loss refers to the positive or negative difference between the amount received from the sale of an asset and its carrying amount on the balance sheet. It can also result from transactions, such as currency exchange rate fluctuations or the disposal of investments. 𝘍𝘪𝘯𝘢𝘯𝘤𝘪𝘢𝘭 𝘚𝘵𝘢𝘵𝘦𝘮𝘦𝘯𝘵 𝘐𝘮𝘱𝘢𝘤𝘵 Gains and losses are reported on the income statement and contribute to the company's net income. They are categorized as non-operating since they are not directly related to the core business activities. 𝘍𝘰𝘶𝘳 𝘸𝘢𝘺𝘴 𝘵𝘰 𝘰𝘱𝘵𝘪𝘮𝘪𝘻𝘦 𝘨𝘢𝘪𝘯/𝘭𝘰𝘴𝘴 1. Asset management 2. Hedging strategies 3. Investment diversification 4. Tax planning 𝗙𝗜𝗡𝗔𝗡𝗖𝗜𝗔𝗟 𝗜𝗡𝗖𝗢𝗠𝗘 Financial income includes interest, dividends, and other income earned from investments, loans, and other financial instruments. It is the revenue generated from the company's financial activities. 𝘍𝘪𝘯𝘢𝘯𝘤𝘪𝘢𝘭 𝘚𝘵𝘢𝘵𝘦𝘮𝘦𝘯𝘵 𝘐𝘮𝘱𝘢𝘤𝘵 Financial income contributes to the company's total revenue on the income statement. It's considered a non-operating income, not directly tied to the core business operations. 𝘍𝘰𝘶𝘳 𝘸𝘢𝘺𝘴 𝘵𝘰 𝘰𝘱𝘵𝘪𝘮𝘪𝘻𝘦 𝘧𝘪𝘯𝘢𝘯𝘤𝘪𝘢𝘭 𝘪𝘯𝘤𝘰𝘮𝘦 1. Investment selection 2. Risk assessment 3. Asset allocation 4. Dividend reinvestment plan 𝗙𝗜𝗡𝗔𝗡𝗖𝗜𝗔𝗟 𝗘𝗫𝗣𝗘𝗡𝗦𝗘𝗦 Financial expenses include interest payments on loans, bank charges, and other costs related to financial activities. They represent the costs incurred from financing operations and obtaining capital. 𝘍𝘪𝘯𝘢𝘯𝘤𝘪𝘢𝘭 𝘚𝘵𝘢𝘵𝘦𝘮𝘦𝘯𝘵 𝘐𝘮𝘱𝘢𝘤𝘵 Financial expenses are deducted from the company's total revenue to calculate net income on the income statement. They are considered non-operating expenses since they are unrelated to core business operations. 𝘍𝘰𝘶𝘳 𝘸𝘢𝘺𝘴 𝘵𝘰 𝘰𝘱𝘵𝘪𝘮𝘪𝘻𝘦 𝘧𝘪𝘯𝘢𝘯𝘤𝘪𝘢𝘭 𝘦𝘹𝘱𝘦𝘯𝘴𝘦𝘴 1. Debt management 2. Negotiation 3. Cash flow management 4. Early debt repayment How are you optimizing your company's gain/loss, financial income, and expenses? Is there anything you'd like to add to this overview or success stories you'd like to share? ---- Follow our page FP&A Secrets to grow your career in Financial Planning & Analysis

Raising FP&A Team Effectiveness Credits to Christian Wattig, follow him for more practical finance content. Here's the original post ---- Raising FP&A Team Effectiveness The best FP&A teams are strategic advisors to the business. They identify opportunities for accelerating growth and profitability, manage risks, and get leaders to take decisive action. 📌#1 The 4 Stages of FP&A Skill Development 1️⃣ Data Focus At the bottom of the pyramid, you focus on data. At this stage, you are just getting started with reporting. Your focus is ensuring you share accurate and timely data. 2️⃣ Story Focus Once you master that, the next stage is to understand what the insights and the stories behind the data are. There are more metrics than any executive could reasonably process at a given time, so you need to separate raw data from insights. ----- 3️⃣ Strategy Focus Finance business partners need to understand how the business ticks. The goal is to take the focus out of the siloed finance function and challenge ourselves to understand how those insights link with broader strategies. 4️⃣ Proactive value-creation The final stage at the top of the pyramid is proactive value creation. Now finance business partners start to make concrete recommendations about risks and opportunities to help improve return on investment and drive the company forward. All of the other stages must be mastered so you can do this. 📌#2 Measuring FP&A Team Effectiveness 1 Efficiency metrics Efficiency means doing things right. - Forecast Accuracy - Time between close and finished management reporting deck - Days to reforecast 2 Effectiveness metrics Effectiveness means doing the right things. - ROI for strategic investments - Avoided risks and realized opportunities (dollar value of each) - Variance analysis items with a concrete recommendation (dollar value) - Scenario planning impact on quality and speed of decisions (dollar value and hours) 📌#3 Creating Variance Analysis that adds value It’s not enough to say WHAT went wrong if you want to influence decision-making. Instead, you must dig deeper, get to the root cause, and recommend what the company should do based on your analysis (the “So What”). 1 What happened “Professional Fees are unfavorable to forecast by $251k.” 2 Why it happened “The increase in Professional Fees is primarily driven by Deloitte ($267k unfavorable).” 3 So What? ---This is a shortened version due to character limits. Full text in the infographic--- -Christian ---- Follow our page FP&A Secrets to grow your career in Financial Planning & Analysis

The Comparison Profit & Loss Credits to Josh Aharonoff, CPA, follow him for more practical finance content. Here's the original post ---- The Comparison Profit & Loss one of the most insightful reports out there Running a comparison profit & loss is a huge value add with financial reporting. There are tons of benefits…such as: 💡 Understanding any anomalies or errors in this months classifications 💡 Driving insights on whether the business is performing better or worse 💡 Revealing how good of a grip the Finance & Accounting team has on their planning There are many different ways that you can run a comparison Profit & Loss… the general idea is that you COMPARE one data set to another… here are the most popular to compare: ➡️ Comparison against budget This one’s my favorite… as you may not be able to get to 0 variances… but you get the opportunity to now tell the story of what happened, compared to what you thought would happen. The better of a story you can tell, the more confidence the team has in your work ➡️ This month vs Prior Year Many businesses are seasonal… cue the words “black friday” and “holiday shopping”. That’s what makes comparing this period against the same time last year ➡️ This month vs Prior Month For those businesses that aren’t seasonal, this metric is great. It reveals any large spikes from what took place last period… sounding the alarm bells for further analysis where needed ➡️ YTD vs Prior Yr YTD Similar to comparing this month to last year… analyzing YTD vs prior year YTD can yield great insights into how this year is trending with each new month adding another datapoint to analyze Here I like to get a line graph, showing how each month performed compared to last year ➡️ This month vs Avg 6 month prior This one is great to smooth out any anomalies that took place historically… allowing you to get insight into how well you’re trending. Most of the time, when I set projections for the P&L, I use a 6 month average with a buffer of some sort === These are just 5 ways in which you can run a comparison P&L… there are ENDLESS variations. The key is to know which variation makes sense / drives the most insight. What has been your experience with a comparison P&L? Let us know by joining in on the discussion in the comments below 👇 ---- Follow our page FP&A Secrets to grow your career in Financial Planning & Analysis

Most businesses stick to outdated budgeting practices. Credits to Aleksandar Stojanović, MSc., follow him for more practical finance content. Here's the original post ----- Most businesses stick to outdated budgeting practices. They only… → Plan once a year → Assume market conditions won’t change → Get stuck when their budget doesn’t fit reality But doing 𝘢𝘯𝘺𝘵𝘩𝘪𝘯𝘨 flexible and dynamic takes an agile approach. Take it from me — I’ve seen businesses struggle with static budgets that fail to adapt to changing markets. But there’s a better way. Enter: Rolling Budgets. Eventually, companies who implement them… → Make real-time decisions with updated data → Gain better control over their finances → Adapt to shifting market demands Until one day, they have a budgeting process that’s always current — supporting their growth instead of limiting it. And here’s the coolest part about rolling budgets: you don’t need to overhaul everything to start seeing the benefits. All you need is… 1. A willingness to update your forecasts regularly 2. A simple template to track monthly or quarterly data 3. The flexibility to allocate resources based on real-time needs Because it’s not about how you budget… It’s 𝘩𝘰𝘸 𝘦𝘧𝘧𝘦𝘤𝘵𝘪𝘷𝘦𝘭𝘺 you adjust your budget to support your business goals. ----- Follow our page FP&A Secrets to grow your career in Financial Planning & Analysis

28 ways to use ChatGPT in Finance Credits to Nicolas Boucher, follow him for more practical finance content. Here's the original post ----- 28 ways to use ChatGPT in Finance I am on a mission to make Finance the champions... The champions of using AI in Business! Because of this I am giving a free webinar on real life AI use cases: Grab your free ticket now: https://lnkd.in/ev466-hZ This webinar is sponsored by Ramp in their initiative to educate finance on how to use AI in a working environment. I believe we can and should all start using GenerativeAI to improve our work. This is why I have made this infographic for you. You can see: 4 ways it can help CFOs 4 ways it can help AR & AP 4 ways it can help budgeting teams 4 ways it can help financial analysis teams 4 ways it can help tax & compliance teams 4 ways it can help accountant and controllers 4 ways it can help internal & external audit teams If you want to finally know how to use AI in your Business, join us in my free webinar (link above). Tell me in the comments which use case are you the most interested in! ----- 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 Manage Cash Credits to Bojan Radojicic, follow him for more practical finance content. Here's the original post ----- Look at quick and efficient income statement analysis. 𝗥𝗲𝘃𝗲𝗻𝘂𝗲 𝗔𝗻𝗮𝗹𝘆𝘀𝗶𝘀 Ensure Revenue GAAP compliance. Look at the growth rate: 3Y CAGR, 5Y CAGR. Compare with operating cash inflows. Compare with budgeted revenues. Compare with industry peers. 𝗖𝗢𝗚𝗦 𝗔𝗻𝗮𝗹𝘆𝘀𝗶𝘀 Compare COGS as a % of revenue. If it’s increasing, it might mean the production is rising faster than its pricing power. 𝗚𝗿𝗼𝘀𝘀 𝗣𝗿𝗼𝗳𝗶𝘁 𝗔𝗻𝗮𝗹𝘆𝘀𝗶𝘀 When gross profit grows faster than revenue, it means pricing power and cost control. Calculate gross margin and analyze during time. 𝗦𝗚&𝗔 𝗔𝗻𝗮𝗹𝘆𝘀𝗶𝘀 Split SG&A into components and calculate as a % of revenue. Check this ratio over time. Compare with budget. 𝗘𝗕𝗜𝗧𝗗𝗔 𝗔𝗻𝗮𝗹𝘆𝘀𝗶𝘀 EBITDA is very important for investors and M&A. Calculate EBITDA margin. Compare it across peers for a better understanding of your position. 𝗗&𝗔 Review D&A to CAPEX ratio over time and compare with peers. Approach useful life of assets. 𝗜𝗻𝘁𝗲𝗿𝗲𝘀𝘁 𝗘𝘅𝗽𝗲𝗻𝘀𝗲 𝗔𝗻𝗮𝗹𝘆𝘀𝗶𝘀 Interest trend analysis. Look for patterns. Look for coverage ratio (EBITDA/Interest Expense). Compare interest rates with market and peers. 𝗧𝗮𝘅 𝗔𝗻𝗮𝗹𝘆𝘀𝗶𝘀 Understand the difference between marginal and effective tax rates. If significant, delve into why. Check any benefits from tax incentives. Review tax base adjustments. 𝗡𝗲𝘁 𝗣𝗿𝗼𝗳𝗶𝘁 𝗠𝗮𝗿𝗴𝗶𝗻 𝗔𝗻𝗮𝗹𝘆𝘀𝗶𝘀 Look at the net profit margin (Net Income/Revenue) and compare it over time and against peers. Compare this with free cash flow to confirm operational cash efficiency. ----- Follow our page FP&A Secrets to grow your career in Financial Planning & Analysis

How to do headcount forecasting correctly Credits to Christian Wattig, follow him for more practical finance content. Here's the original post ---- How to do headcount forecasting correctly You need three things to create accurate headcount forecasts that help leaders make better decisions: #1 A Single Source of Truth #2 The Right Workflows #3 Scenario Planning and Rapid Reconciliation Let’s dive in. #1 A Single Source of Truth You need headcount data (actuals + forecast) that is a) up-to-date, and b) accurate. That means you need a data owner who is as close to the source of headcount information as possible. Typically, that should be the recruiter or HR partner you are working with. It’s their job to ensure headcount, salary, and benefits data is classified correctly and made available to finance and business leaders at the appropriate level of detail. As a Finance leader, it’s not your job to maintain headcount data, but it is your responsibility to make recommendations about improving data quality. #2 The Right Workflows Headcount forecasts are created either top-down by using ratios, such as revenue ratios, employees per manager, or number of customers. Or you run a bottom-up process, where HR keeps you posted about the progress of filling each open role. In either case, workflows around having the right data at the right level of detail and sharing information between functions are key. These processes should be automated as much as possible and changes and decisions need to be easily trackable. #3 Scenario Planning and Rapid Reconciliation There is rarely just one scenario when it comes to headcount forecasting. You are working with several unknowns, including availability of the right talent, time to fill, resignations, and other factors that impact headcount, such as revenue growth. That means you need to be able to quickly build scenarios based on these key variables and model how they impact your headcount plan in the short and long term. Lastly, you need to ensure you can quickly reconcile headcount with budgets. That means translating possible changes to the size of the workforce to the corresponding financial impact of salaries and benefits. The bottom line is this: While you can do all of this in Excel (and I have done so for several years), you may be better served by a modern FP&A tool that automates and simplifies much of the headcount forecasting process. ---- Follow our page FP&A Secrets to grow your career in Financial Planning & Analysis

8 Ways to calculate Budget vs Actuals Credits to Josh Aharonoff, CPA, follow him for more practical finance content. Here's the original post ---- 8 Ways to calculate Budget vs Actuals This is a really important report… in fact, it’s my favorite Why? Because it gives insight into just how much of an understanding that you have on the business. No...you don’t need to have 0 variances But you do need to have a story on each line item, and why there was a hit / miss Let’s dive into each way that you can showcase Budget vs Actuals: 1. TABLE This is one of the simplest and most common ways to showcase Budget vs Actuals The idea here is: → include both a $$ variance as well as a % variance to understand materiality → show good variances as positive, bad variances as negative → use conditional formatting for good / bad variances 2. KPI The KPI box is one of my favorite ways to display data in a pretty manner You can include whatever you’d like here, as long as you don’t crowd the box with too much data 3. DONUT This may be my favorite of them all This is usually the way companys showcase battery life (take a look at your apple watch) I find it a great way to shade in the positive or negative % of your variances, in a manner similar to the KPI box 4. SPEEDOMETER This is just like the Donut…but here you have a dial 5. BAR WITH CUT OFF LINE Here you have a bar chart showcasing the actual numbers you did… with a cut off line chart for where you had hoped you would be 6. CLUSTERED BAR CHART Here you have both your budget and your actuals column… and you can showcase positive or negative variances by stacking a new bar chart to showcase the difference 7. WATERFALL Waterfall charts are neat in that they allow you to see the cumulative impact of values Here, you can showcase the cumulative impact of your net income… or your cash flows 8. THERMOMETER Here, we have similar elements to the Bar with Cut off line chart…only we can see the positive / negative variance more easily with color coding Those are my 8 ways to showcase budget vs actuals Remember…how you display the information is just one part. Having a story with each KPI is where you really get to shine! What has your experience been with budget vs actuals? And which is your favorite? Let us know in the comments below ---- Follow our page FP&A Secrets to grow your career in Financial Planning & Analysis

How to Forecast Revenue using the A∙R∙S∙R Framework Credits to Josh Aharonoff, CPA, follow him for more practical finance content. Here's the original post ---- How to Forecast Revenue using the A∙R∙S∙R Framework Let’s do a deep dive on how you can apply these techniques to ANY forecast ➡️ What is the A∙R∙S∙R Framework? The A∙R∙S∙R Framework stands for A → Acquire R → Retain S → Sell R→ Record Each section is a critical component in your ability to forecast sales Let’s have a look at each: 1️⃣ ACQUIRE The first part of the framework focuses on all the different channels that you use to acquire customers this is a BOTTOMS-UP approach, showing how you can get to an ending revenue with the right inputs The most common channels I’ve seen after building 100+ revenue builds are: 👥 Sales reps → Each sales rep undergoes a ramp period in order to meet their net quota 📊 Digital Marketing → where you take ad spend/customer acquisition cost to get to new customers 🤝 Partnerships → each partner refers customers each month 🏟️ Conferences → each conference brings a qualified lead, which converts to customers 🌐 Organic & Referral → Prospects visit your website, or are referred to by existing customers, which convert to customers 2️⃣ RETAIN Once you have your build-up for how you can get new customers, it’s time to focus on RETAINING those customers Customers typically fall under one of these categories: 🗓️ Monthly Recurring → Customers continue to buy each month 🗓️ Annual Recurring → Customers get locked into annual contracts 🗓️ Month to Month → Customers can opt-out at any point 🗓️ One time → Customers buy one time only Once you have this figured out, you can move onto the next area: 3️⃣ SELL Now’s when you make your money 🤑 Here you can define your average contract value (ACV), or sales price, and structure things a number of different ways… 💰 Sell to new customers 💰 Sell to net active customers 💰 Sell to customers upon renewal 💰 Upsell to existing customers Which now brings us to the last part… 4️⃣ RECORD Sales affect many areas of the business… such as: 📈 Revenue → amounts earned after delivering your product or service 💸 COGS → cost to deliver your product or service 💲Accounts Receivable → amounts owed to you by customers ⏳ Deferred Revenue → the $$ amounts of goods or services owed to customers 📦Inventory → goods held or sale 👛 Commissions & Sales compensation → amounts owed to your sales team Design your revenue build in a way whereupon each sale, the appropriate actions hit each of these accounts, allowing you to understand the full picture === Revenue builds are COMPLEX…I have yet to see 2 business models that are exactly identical… but with the right framework in place, you can forecast ANY business with accuracy and ease ---- Follow our page FP&A Secrets to grow your career in Financial Planning & Analysis