Every single FP&A job interview I’ve ever had ends the same way.

My translation: Our reporting, analysis, and forecasting is late, inaccurate, and confusing. We need someone who actually understands the business and builds better models/insights.

I’ve changed jobs roughly every 18 months - most of that was within the same company and within finance/FP&A.

The reason?

I rebuild reporting, analysis, and forecasting from the ground up, improve the team’s efficiency, then get bored.

On to the next.

I’m knee deep in doing the same thing at a new company. And I’m reminded how messy it feels.

But there is 1 thing that I aim for that keeps me grounded and moving forward…

And it’s the same thing that CFOs value (even if they don’t outright say it)…

Let’s talk about it…

In smaller companies, cash[flow] is king.

In larger companies, reputation is king.

Both are heavily impacted by accurate forecasting for different reasons.

And I’d argue that in larger companies it’s your forecast accuracy that can make or break your reputation. It’s all about your (and your CFOs) credibility.

And when I say forecast accuracy, don’t just think about the numerical output and what % your actual revenue missed from your forecasted revenue.

Instead, think about:

It’s these things that will keep a CFO out of the dog house with the CEO and the board.

But at the end of the day, numerical accuracy matters too.

Here’s where I focus first to improve accuracy and the soft stuff at the same time…

It’s one thing to look at a trend of revenue by month and draw it out 18 months.

It’s another thing to analyze the kinds of customers you’re bringing on, how much their average revenue is, how long it takes them to close, if they repeat buy, or how long they recur…

It’s this level of detail that allows you to predict future revenue by projecting the drivers of revenue.

And what this does in a forecast is shift the burden to the business and off of finance. Here’s what I mean:

In a top-down forecast of revenue, it’s up to someone (usually finance) to draw a trend line of where revenue is projected. 99.9% chance you get that wrong and 0% chance you will be able to explain why it’s wrong.

In a driver-based forecast of revenue, you clearly see in the data that the marketing team’s leads are slowing down, the sales team’s conversion rates are falling for your core product, and the customers who we’re selling aren’t staying as long under the new account manager.

Which means you are justified in picking those poor trends in your model until each team can bend any of those metrics.

Still a 99.9% chance you get it wrong, but now it’s a 100% chance you can explain why it’s wrong.

FP&A is one of those teams where the ROI isn’t perfectly clear.

What value does the business get when they hire a new analyst who can build a better forecast model?

If you ask a CFO, they’ll tell you it’s priceless.

Why?

Because the CFO will:

And most importantly: grow in credibility with their CEO and the board.

It’s why it’s one of the first things I focus on when joining a new team.

Better models = better forecast = more credibility.

Which is exactly how I respond at the end of every interview when the CFO tells me “we’re too reactive…”

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