Paul Barnhurst, The FP&A Guy — The Rapid Growth of Third-Gen FP&A Tools

[00:00:00] Paul Barnhurst: Spreadsheets are the ideal input form, I mean, they’re so incredibly flexible, it’s why you see so many things developed aluminum and it’s probably the most used tool in the world, but I think how to look at it is spreadsheets should be for edge cases. 

[00:00:38] Joe Michalowski: Hello, and welcome to another episode of The Role Forward podcast. My name is Joe Michalowski, and this episode is brought to you by Mosaic, a strategic finance platform that transforms the way business gets done, and today my guess is Paul Barnhurst, The FP&A Guy himself. I’m very excited to have him on, expert in all things, FP&A, Excel, modeling, things like that.

[00:00:55] And so, just wanna get a quick, Paul, thank you so much for joining.

[00:00:58] Paul Barnhurst: Thank you for having me, Joe, I’m honored to be here and excited to just spend a few minutes with you chatting today.

[00:01:04] Joe Michalowski: Amazing. Well, before we get started and we, we have a good topic lined up for the, the tech forward among the, the crowd. Can you just tell us a bit about yourself, your background, and how you ended up starting the FP&A Guy?

Paul Barnhurst Introduction

[00:01:14] Paul Barnhurst: Yeah. So, you know, my background, out of undergrad, I did an entrepreneurship degree and at some point, I always thought I wanted to start my own business, but when I graduated, I’m like, “Hey, I’ll go to work for Corporate America,” ended up taking a government job as I graduated, around September 11th, and the job market was not good.

[00:01:30] So, I took what I could get, did that for a few years, writing government contracts, pretty quickly realized that’s not my career, went back to grad school, did finance, thought, “Hey, investment banking would be interesting.” Graduated in 2008. Not a time to find an investment banking job. I ended up going back to 

[00:01:45] Joe Michalowski: Oh, my God.

[00:01:47] Paul Barnhurst: work for American Express, where I’d done my internship, and I started out doing report writing. So, I did an MBA in Finance and a Master of Science and Information Management. So, I kind of played in both worlds, a little bit of tackle, a bit of finance, and spent about a year and a half doing report writing, some BI development, and then an FP&A role came open that was a promotion, and I said, “Hey, I wanna get promoted.

[00:02:07] I don’t know much about this, but we’ll take the job.” And so, I took it, and I’ve been in FP&A ever since, for about 12 years, I had, uh, you know, a couple different roles with American Express, then I left there to go to a smaller company called Solera in the B2B automotive space, was there for about four and a half years.

[00:02:24] And then, about a little over a year ago, I went to work for a company called DigiCert, and during that time, I’d started to do a few things on LinkedIn. How it started is I was looking for a job, and I offered a guy who ran a website on FP&A, I go, “Hey, if you chat with me, I’ll give you a Starbucks gift card.”

[00:02:39] And he goes, “I don’t want your gift card. No, no thanks. What I want you to do is write an article for my website.” I suck at writing, but okay. And so, I wrote his article, and he’s like, he liked it, and he’s like, “Hey, I’ll pay you a hundred bucks to write, write more for me.” Like, “Wait, you’ll pay me to write one?

[00:02:52] I wouldn’t mind a little bit of money. All right, I’ll go ahead.” And, and I wrote a couple more and actually kind of put some of ’em on LinkedIn and started seeing people comment, and kind of liked it. And so, I started doing a little bit more, I got involved in the FP&A trends, LinkedIn group, and started running

[00:03:07] some of the discussions for that, and started growing that way, started to get know different people, got invited to be on a couple different webinars. One guy right out of Australia invited me to be part of a financial modeling, uh, series that he was writing. So, I wrote a couple articles with him and things started to grow,

[00:03:24] and then I started to get more serious on LinkedIn. Some of it was trying to find a job again, but also finding, “Hey, people like my content.” First, I thought I was gonna run kind of a business around Excel, and over time, what I found is I started to write about tools, as I started to get the attention of other people on tools.

[00:03:41] And they started reaching out to me. I said, “Hey, I can differentiate myself talking about tools.” And so, late last year, a couple vendors approached me wanting to hire me. One wanted me to do some content stuff, another one wanted me to, you know, be an internal employee, doing different things, and another one was looking at an arrangement to do some content forum on a part-time basis.

[00:04:01] And some consulting stuff came up and I went to my wife and I’m like, “Hey, I think I can turn this into a business.” And she looked at me like, “Whatever. You’re crazy.” And about a month and a half later, she’s like, “Yeah, I think you’re right, I think you could do it.” I’m like, “All right, I’m putting on my notice today.”

[00:04:14] And I did, and, you know, I’ve been doing it at least part-time for six months now, full-time since June, so about three months, and I do training, you know, content creation and consulting, and it’s been good so far, you know, I’ve definitely enjoyed it. So, that’s a little bit of my background and story.

[00:04:33] Joe Michalowski: Wow. That’s an awesome story. I, I loved it. What a roller coaster at the beginning, it’s like you hit every, probably worst inflection point of the job market that you could, I dunno, real perseverance on kind of fighting your way through and finding something that works for you, as a content person,

[00:04:49] we’re always looking for, like, true subject matter experts to, like, write the content, and usually it ends up being like a marketer who’s like gathering information, like, writing it anyway. I think it’s amazing that you kind of took that on yourself and you can absolutely start it, there’s a whole industry of people doing that.

[00:05:04] So, really cool, and just really excited to have you on, this is gonna be a good one. So, so, thank you. The story was fantastic.

[00:05:11] Paul Barnhurst: Great.

[00:05:11] Joe Michalowski: I wanna spend today focusing, you mentioned tools and kind of getting a push toward this, you know, new path that you’re on because you got to talk about tools.

[00:05:20] That’s really what I want to talk about today. You and I chatted before, and you mentioned you had this concept of, like, the CFO tech market. And so, I was wondering to sort of set the stage, can you tell me what your, your definition of CFO tech is, and like, how this industry has grown in recent years?

Defining CFO Tech

[00:05:36] Paul Barnhurst: Yeah, no, of course. So, CFO tech, really where that tech term came from is, uh, Wouter Born. So, I’m an advisor for Born Capital, and he called it CFO tech a lot, and that’s all that venture capital fund invests in. And so, he looks at it is it’s technology for the office of the CFO, whether that be, sometimes that can be some, like, you know, SaaS metrics dashboarding tools, it could be cash flow management,

[00:06:01] it can be a planning tool. It can be, you know, some of these different accounting tools to help for small companies managing the contract, the accounting, the deferred revenue, some seen, I’ve seen tools that are strictly around revenue management, right? So, it’s, so, it’s those different tools, it could be a payment platform that the office of, of the CFO needs, and they’re more focused, you know, particularly on the CFO things that he may look at tools around that.

[00:06:26] And so, you know, you have finance tools, and I don’t know, I’d call every one of those CFO tech per se. And it all depends on how you wanna define it, but that’s generally how I think of it is it’s really, those tools that you’re gonna really help the office of the CFO and help strategically move the business forward and understand what’s going on.

[00:06:46] Joe Michalowski: And, you know, at least from, from my perspective, like some of those little, like, bubbles are much more mature than others. Like, you have, like, a spend management with these, like, really big, like high valued companies that are all in like this massive race to be like the one. And then, you have others, which is kind of where I want to take this conversation today, which is like the FP&A section of that CFO tech sort of market, which, you know, companies like Mosaic,

[00:07:12] I know you do podcast with Datarails, like, there are companies that are starting down that path of trying to be, like, as mature as the spend management space, but it’s not really there. Excel has been the defacto tool for this space and all of the other ones for so long, and I’m curious, as an Excel guy, uh, what do you think specifically for FP&A, what is the need for software as either a supplement or replacement for Excel? Like, what are your thoughts on this market in general?

Excel’s Place in the FP&A Space

[00:07:41] Paul Barnhurst: Yeah, no, that’s a great question, you know, first I’d say, Excel isn’t going anywhere, right, you know, it’s the 80-pound gorilla and Excel shouldn’t go anywhere. It’s a great tool, and it should always, at a minimum, be used for edge cases, and frankly, for a startup, it’s sufficient, like, I do my invoicing, I do my budgeting, my, you know, tracking my actuals in Excel. There’s no point as a single business to go out and spend a bunch of money to get QuickBooks and a planning tool. And I’m not spending 150 bucks a month or whatever for that, when I can do it, you know, with the service I already have. So, I mean, that’s the first thing I’d say, but the second is you hit a point where traditional planning, managing your data, you know, your reporting, that Excel just breaks and version control, we’ve all heard the term “Excel Hell.” You hit that point where it’s just a nightmare and that’s where planning tools come in, and they, you know, they can assist with that process, they could assist with managing the data,

[00:08:40] integrating your different sources, they can exist with, you know, workflow, with version control, with collaboration, those areas where Excel struggles, and some tools have decided to integrate with Excel and try to give you the, you know, everything Excel gives you, and also give you a planning tool, and some have said, “Hey, we’ll build our own kind of calculation engine in way for modeling,” and there’s pros and cons to both approach.

[00:09:04] Joe Michalowski: Yes. Well, that’s really what we’re gonna dig into today. And I wanna, you know, just set the stage for the topic, really just dig into like strengths, weaknesses, and really, like evaluating the vendors in this market. But, but before we get there, I’m curious, like, with the background you mentioned, you’ve been at some much bigger companies, been at smaller companies,

[00:09:22] have you been anywhere that used one of like, the legacy players, like an Anaplan or Adaptive that kind of forged this path, like, what are your thoughts on, like, kind of the original state of this project?

[00:09:32] Paul Barnhurst: Yeah. So, you know, most of my career has been spent in TM1, which is one of the original players, right, owned by IBM, they now call it planning and analytics, but it was Cognos, originally, you know, I’ve played a little bit with Adaptive, I, uh, demoed a number of tools when we were looking at implementing one and went through the selection process and never got implemented.

[00:09:51] That’s a long story, we won’t go into here, but the way I kind of think of the planning space, and I’ve talked about this on LinkedIn, is I break it into kind of three generations. There were the first generation of tools, which were on-prem, you know, heavy code, long implementation time, and they could only really be afforded by enterprise

[00:10:13] companies ’cause they’re a hundred thousand plus a year. So, that’s gonna be your TM1, your SAP, you know, Hyperion, there’s some others in there, but that’s kind of your generation two, then you had the our generation one, then you had generation two come along, which I would classify in there kinda, you know, Planful, Adaptive, you know, some other tools like that.

[00:10:32] And, you know, some people may say, hey, some of ’em are plan, or gen three, or gen, there may be some, you know, disagreement, but just as a general rule, and the way I think about that is they tend, they tended to be cloud-based, they serve the mid-market, you know, and mid to enterprise, they were easier to use, you start to see a low, more low code,

[00:10:52] the implementation time came down, but they still tended to be 25 to a 100.000 a year. Now, you’ve seen in the last couple years with the explosion of cloud with so much low code with where technology’s gone, you know, integration is very easy compared to what it was. You use APIs instead of, you know, ETL, all those type of things.

[00:11:10] You see these third-generation tools, which are, you know, all the way down to small business, fractional CFOs, you have some of ’em that, you know, are focusing on under million-dollar companies. The cost of the tools have come down, they’re self-service, they’re much quicker implementation times, and they usually take a little bit more of a user-centric view,

[00:11:29] and when I may say user is not finance user, business user. And so, that’s really what you’re seeing, and obviously, many of, you know, the first and second have done many of those things and added a lot of that user and the cloud and different things, but you’re really seeing all these startups bringing the cost down to where more and more companies, if they wanna use a planning tool, can. That, that’s not cost prohibit.

[00:11:54] Joe Michalowski: That is exactly where, you know, I want to focus this conversation. I, I love the context of gen one, gen two, but gen three is it just feels, like, as somebody working at Mosaic, like the competition gets tougher and tougher, like, seemingly every day, like there’s so many companies entering the space to your point, it feels easier than ever to actually get a product to market.

[00:12:15] And I hear you on like the, the general, like, aim of these tools as like, you know, we’ll make integration easier, we’ll make implementation easier, and things like that. But I’m curious, like, you’ve had a perspective, you’ve gotten to see so many of these tools. What do you think some of, like, the standout, like if you had to name three standout benefits of these tools, what do they really excel at? What are the strengths of gen three of FP&A software?

The Benefits of Third-Gen FP&A Software

[00:12:38] Paul Barnhurst: I think the first thing is the way, you know, couple things, the collaboration, many of ’em kind of, you know, like Mosaic, strategic finance, a couple of the different tools use that terminology. So, I think one area they’ve really excelled at is making sure that it’s a business planning process, that the tool is designed with the entire business in mind.

[00:12:59] They’ve also given a lot of thought to the data model and making it natural, like many of the older tools and the why they take longer to implement, but it’s also why you get some more flexibility is, you know, the data model was a blank canvas, you know, a lot of OLAP cubes and you just figured, that’s why you took three, six months to develop it,

[00:13:18] and you figured out all the different data they needed and you’re pulling it in an ETL or writing an API where, you know, what the third generation has said is we’re gonna create native connectors, we’re gonna create the business logic, and we’re gonna figure out how to integrate from day one, your ERP, your HR system and your CRM system. And in some cases, your billing data, particularly SaaS, Mosaic’s a good example of that. Some might be data warehouse. So, I think that’s one area that’s different is the approach they’ve taken around that, and, you know, the structure of the data model, which allows a much quicker implementation to the tools.

[00:13:54] So, I think user is another area where they’ve really done a good job. And then, I think what you’re seeing is, you know, an increased effort of trying to, uh, continue to create more flexibility, and in particular, you’re seeing a lot of tools trying to bring in Google, you know, the reality is Google Sheets is making progress in inroads against Excel,

[00:14:16] you know, it’s a better collaboration tool, it’s built on a much more new architecture, which gives it some benefits over, over Excel. Excel is still the defacto tool, but you’re seeing more and more realizing Google’s somewhere they wanna integrate, as well.

[00:14:31] Joe Michalowski: Sure. I don’t wanna derail us too much, but I, as somebody who gets to talk to finance people all the time, there’s like a quiet debate of, like, Excel versus Google Sheets, and as somebody who doesn’t live in either of these tools all day, I don’t really know what, like, what does Google Sheets not have that makes Excel so much better?

[00:14:49] I feel like anyone who’s like a real power user is like Excel is the defacto. So, I’m curious, like just off the, off the rip, like what, what is Google Sheets best at, as a tool?

[00:14:55] Paul Barnhurst: Yeah. So, there’s a, there, there, there’s a couple things, you know, it has the, it has power query, which helps with the data, you know, it, it integrates with BI. So, you have power pivot in there, you can create data models, those type of things, you know, VBA users. You don’t have, you know, VBA, which doesn’t work online,

[00:15:14] that’s a little bit of a challenge. And I think also having all the power apps. So, I think that’s one area, but where it lags, there are definitely areas that lags behind Google, Google’s done a better job with some of its query stuff around stocks, which is Excel just added, Google’s done a much better job with collaboration,

[00:15:32] you know, it’s a hundred percent cloud, it’s easier to share, you don’t have to worry about version control in the same way, but they don’t have as many functions, they don’t have quite the flexibility there, and they don’t have the integration across the ecosystem that you get with Microsoft, for Google Sheets.

[00:15:50] Joe Michalowski: Sure.

[00:15:50] Paul Barnhurst: And then, the fact that Excel was there first. And so, there’s just a natural bias, that, that’s what people learned on.

[00:15:56] Joe Michalowski: Yeah. I mean, like you said, at the beginning, Excel, Excel is not going anywhere, it’s basically, there’s that joke that kind of floats around the internet sometimes, it’s, like, if Excel went down for, like, a week, the entire global economy would just crumble, and like, I mean, it’s kind of a joke, but it’s kind of true.

[00:16:12] Paul Barnhurst: No, there’s, there’s, there’s really some truth to it, it’s pretty scary.

[00:16:14] Joe Michalowski: It runs the world, yeah. So, you know, cool to get your perspective on, on what the difference is there, but I, I think it leads us into a conversation I want to have, like, you know, I think a lot of these third-generation tools to your point, they, they will kind of hinge on those benefits of integration and kind of user centricity and, and things like that.

[00:16:36] But, at the risk of, you know, getting a little away from the Mosaic side of this, uh, podcast. I wanna talk about the weaknesses of this market because it’s newer, like, these third-generation tools are not mature yet, and there’s definitely gaps in what they can and can’t do. And so, I would love your perspective on what you think these vendors still need to figure out, uh, just from like a high level.

[00:16:57] Paul Barnhurst: So, let me give you just kind of high level of how I think about the tools, and I, you know, I think of them in four pillars, 

[00:17:03] Joe Michalowski: Please.

[00:17:03] Paul Barnhurst: which I’ve mentioned, there’s data management, there’s your calculation engine, which is your modeling, your budgeting, your planning, there’s your workflow and your collaboration, and there’s your reporting and dashboard.

[00:17:13] The reality is to have a robust tool, it’s a multi-year process to really build everything that’s needed. And, you know, I was talking to one tool that’s entered the market at the enterprise space and, you know, and she commented about, about that, and I had a friend that looked at the tool and he ended up selecting another tool.

[00:17:32] He’s like, “I can see the vision, and if it was a year from now, I’d use that tool.” So, what you’re finding is, and it’s different for each tool, they just don’t have some of the things that those first and second gen have yet, they have some benefits, but there’s just the time it takes. And then, there’s the challenge,

[00:17:47] and I talk to so many companies that are facing this is, you know, obviously, investors wanna return, many of these companies are venture-backed, and one of the things they always like to see is I wanna see that average contract value go up. And so, many of these tools are going upstream. The more upstream you go, the more requirements your customer’s gonna have,

[00:18:09] the more development you need and the more time you need. And so, it’s interesting to watch, many of ’em go, “We’re getting pulled upstream, that’s not where we wanted to be, we wanted to play in the small and mid, but we’re getting customers coming to us, and they’re, they keep pulling us upstream.” And so, it’s, it’s interesting to watch, but, you know, in general, I think the, you know, the biggest thing they have, and it’s different for each tool is just, you know, all the functionality you’re gonna get in a tool that’s been around for 30 years.

[00:18:37] It’s, yeah, each tool is missing something different, like there isn’t one gaping area where I can go, okay, every tool in third-gen is missing this, some are really good on the reporting side, I’ve seen some that are really good, really weak, some are great in integration, like I’ve seen one that has over 300 connectors, right?

[00:18:52] I’ve seen others that have one connector. And so, you know, it just, it’s different on each tool. Some work great with Excel, some work great with Google Sheets, some are really good at, you know, planning across the spectrum, and some have narrowed it down and said, “Look, we do really good with revenue and expense in headcount, but we’re not gonna do your marketing planning, your procurement planning, you know, all the other operational pieces that go around it.”

[00:19:19] Joe Michalowski: I think this is a really great conversation because it, it’s so interesting that you say that there’s no, like, one glaring area because, you know, when, as somebody, like, that’s not in the work all, all the time, like, I think of it in terms of like, “Oh, if there’s just, like, one thing that someone can figure out, like that would be the game changer.” I even wrote it in the question list that I sent

[00:19:36] Paul Barnhurst: Yeah, and

[00:19:37] Joe Michalowski: what would be those, like, kind of game-changing processes. I’m curious, like, it’s crazy

[00:19:42] Joe Michalowski: to hear, like, it’s just, it has to be

The Gamechanger for FP&A Tools

[00:19:42] Paul Barnhurst: There is one area that would be game-changing in general, and this is across all tools. As soon as you build a planning tool, you give up flexibility, Excel is more flexible, and nobody’s been able to create a calculation engine that can give you the structure with the flexibility of Excel.

[00:20:01] You’re always giving a tradeoff. That’s why, you know, some studies say 80% of people who have a planning stool still do some of their planning in Excel or go back to Excel. And so, if you could find a way to get the flexibility of Excel with all the benefits of a planning tool. That would be a game changer in the market. That is the one area that nobody has nailed yet is really nailing the calculation.

[00:20:24] Joe Michalowski: Hmm. Can you give me an, I don’t wanna put you on the spot, but can you gimme an example of like a, a workflow you might go through where, you know, you’re trying to use a planning tool and you find, “Hey, like, I just have to go back to Excel.” Like, it’s just, what’s like a good use case for that?

[00:20:37] Paul Barnhurst: Yeah. So, I mean, an example years ago in one company I was with is they’d build a detailed headcount model, and they’d put all the assumptions in there, and you had to go back to the developer to get the assumptions changed, and they didn’t update ’em for the next year. So, everybody just went back to Excel because it wasn’t updated.

[00:20:55] You do a merger or an acquisition. And so, now you have a bunch of new cost centers or departments, and they haven’t been able to integrate that ERP with the planning tool yet. So, you’re all right, let’s go back to Excel. So, things like that, you know, maybe there’s a new product, and the tool isn’t real flexible of allowing you to model a new pro, product.

[00:21:13] So, you’re like, “All right, well, for that, at least that piece, I gotta do some Excel, we’ll figure out how we get it loaded.” And so, those type of things that often happen, it’s just the business changes and, you know, the tool, there’s always something that comes up where you’re like, “Okay, I could maybe do it, but I know Excel really well, I can do it easy there, I don’t wanna be up till midnight tonight, I’m gonna go to bed at 10 and use Excel.”

[00:21:40] Joe Michalowski: Yeah, it’s, I have a three-year-old and, you know, she kicked the pacifier a while ago, but just think about, like, in parent mode, I’m like, oh yeah, she needs like the, the safety blanket, or like the, the pacifier, it’s like, oh, it’s always, it’s always there for safety, like, I know how it works. I’ve been using it forever, and like, I can always go back to it if I need to, but it’s dangerous for the vendors because, you know, the second that happens, like, it can start snowballing and then they never come back to the product.

[00:22:08] Paul Barnhurst: Exactly. Like, I like to say if you’re not careful, what you end up with is an expensive data repository ’cause you’ll still use it, you’ll put the budget in there ’cause you can use it from reporting like with TM1 at one of the company, you know, one of the companies I was at, we still did 90% of our planning in Excel, but we loaded it all to TM1, and we used TM1 for reporting of variance analysis and for putting together some decks. And so, we used TM1, we still used it regularly, but did we use it the way it was designed or to the extent they intended? Definitely not.

[00:22:41] Joe Michalowski: You know, the difference between like, kind of generic dashboarding tool versus like a true FP&A platform that that gets to, or takes care of that planning side ’cause like you said, if, if they can nail the analytics, like, that’s great, but to your point that planning side is really the game changer that, that needs to get figured out,

[00:22:56] for sure. I’m curious, are there any other, like, wish list items, like if you, I know you’ve done a ton of demos of these companies, like, flexibility on the, the planning, you know, that balance is, is great. Are there any other things that you’re like, I took this demo and I just, I, if it had this, it would’ve been great, but it just didn’t have it?

[00:23:13] Paul Barnhurst: You know, one thing I’m seeing that a couple of different tools are, are doing that I think is cool, that I like, you know, a couple of added, uh, kind of sandbox areas. So, you can kind of do some modeling outside of the data model, see what things look like, you’re trying to give you some spreadsheet interface.

[00:23:30] So, I think that’s a fun way of trying to address some of those edge cases and the flexibility that you get with Excel. You know, other things, I know a few different tools are working on is different kind of query builders to allow you to access the data and do some of your own work with it outside of the model.

[00:23:50] And so, I think that’s another area that we really valuable because the reality is the average FP&A person spends 40 to 50% of their time cleaning data, data normalization, I mean, that’s a huge problem. And so, the more that can be done to help with that, the more people are gonna appreciate the tool, especially when it does a good job of integrating that data, you know, bringing in multiple different sources, and then it makes it easy to clean it, that starts to add up and save a lot of time. So, that’s an exciting area that I’m seeing, you know, a few different tools I know are trying to release things in that, you know, along that vein.

[00:24:26] Joe Michalowski: Yep. Makes a ton of sense. I know that’s been a focus of con, or, uh, topic conversation here a lot, and I’m curious what, we’ve gotten feedback, or I’ve heard, you know, skeptics of moving off of Excel, worry about the transparency of that, the backend data, like, you know, finance, your job is to make sure the numbers are right.

[00:24:45] And yeah, like, it’s great to say my ERP is integrated, and these are your actuals, but like, how do you really trust and see that those numbers are real? I’m curious, like, what are your thoughts on that, concern, or that pain point? Is that as big as, you know, some might say, or is it like just a skepticism?

[00:25:02] Paul Barnhurst: I think it’s a little bit of both, I mean, I definitely think there’s some skepticism because, right, we’ve been using BI tools for 15 years now, and, you know, that data’s been coming, you know, 15, 20 years, the data’s been coming in. I think as long as you build that model right, and your data was clean to start with, then you shouldn’t have a problem, right, ’cause you’re just bringing it across. If there’s a ton of transformation and manipulation taking place, then you better make sure you validate it, which can be done, you can go back to the source and look, right? Like, you can run a financial statement out of your ERP, and if your planning tool doesn’t match to that, obviously I’m not gonna trust the data, you know?

[00:25:42] And so, I think the other area where they worry a little bit is they know their data’s messy, and they know they’re not always using fields consistently, so often they’re doing that massaging, and they don’t have the ease and flexibility to just dump it in Excel and do the massage. So, that’s where the real concern comes from, but that’s where it’s so important,

[00:26:01] if you’re gonna go on a digital transformation, and I love Francesca Valley, she’s an expert in this space. She, uh, studied with London Economics, and then she added her own third thought. There was three things they found key to, you know, a digital transformation, and first is change management, which I boil down to communicate, communicate, communicate, and then communicate some more, right?

[00:26:24] There’s the strategy. And then, there’s the third thing that so many forget is put your house in order, tools are enablers, they’re not gonna fix bad processes, they’re not gonna fix bad data, they’re not gonna, you know, put your stuff in order. You gotta do that yourself, and if you don’t do that, then you’re wasting your money until you do that.

[00:26:44] Joe Michalowski: Yeah. I think there’s a, you know, that, the pain point that I’ve always heard anytime I’ve written about, like, that gen two sort of, the legacy now platforms, it was that blank canvas that you mentioned, it just makes it like so difficult to set up that you, you know, you haven’t done the work to get, to put yourself in a position to, to use it cro, or properly.

[00:27:04] And so, like, yeah, it’s great that it has all these features, and like, you’re mad that it’s not working, but, you know, unfortunately, like, you gotta have your house in order, as you said. So, I think that’s a really, really important point for this conversation, and, you know, one that can’t necessarily be automated, or software fixed, you know?

[00:27:23] Paul Barnhurst: Yeah, no, sometimes there’s some heavy lifting that has to take place for that.

[00:27:28] Joe Michalowski: Yeah, we just wrote, we have a, a data, a data team here that works with a lot of customers, uh, if they do have messy data, like we, we have experts that will help clean that up, and we, we released a, uh, in eBook about CRM hygiene and, you know, making sure that your CRM data’s in order ’cause it’s the, from what I’ve heard is the trickiest point because it’s so flexible. It’s similar to these gen two tools where it’s like a blank canvas. You can do pretty much anything in Salesforce, and if your data’s a mess, like, good luck getting any go-to-market insights out of that.

[00:27:56] Paul Barnhurst: So, I, I’ll tell you. I worked for company where we hit the limit of the number of columns in the account table, we had over, I wanna say 700 columns in our account table in our CRM. Oh, man,

[00:28:09] Joe Michalowski: Oh, my God.

[00:28:10] Paul Barnhurst: trying to get report. I, I was writing all my own code to try to get my reports and it was painful. So, yes.

[00:28:19] Joe Michalowski: I didn’t even know that, that there was a limit to that, that that’s, this is, this is news to me. So, what, what do you even do? Like, what do you do in that situation? How do you get around that?

[00:28:25] Paul Barnhurst: Repurpose old fields, or you tell people to knock it off, they finally put in a new, I think that company put in a new CRM, but what had happened is they were trying to integrate new companies, but not standardized processes, all in the same CRM. Don’t recommend it. Just don’t do it.

[00:28:42] Joe Michalowski: Mm. 

[00:28:42] Paul Barnhurst: Say no.

[00:28:44] Joe Michalowski: Yeah, that’s it. We’ll pull that as a little sound clip from the episode and just plaster it on somewhere, but be like, “Hey, like, you’re thinking about this, it’s, it feels easy now, but good luck in, you know, a year or even, like, eight months down the, down the line. Good luck if you’re trying to clean this up at some point.” I want to get to a little bit of the nitty-gritty of

[00:29:03] evaluating this market, you and I were talking and, and you’re releasing this, this sort of market report that is revolving around a lot of the things we’re talking about. And, you know, you mentioned your, your four pillars, which I think is a really smart way, a really good way to think about this market,

[00:29:18] but you mentioned that like, every company has, there’s no, like, structure to it. So, like, some company might be really good in one area, another company might be really good in that area, but in a different way. So, I’m curious, like, when you’re evaluating these tools, how do you assess, like, what the actual strengths and weaknesses are in those categories? Like, in data management, for instance, like, how do you decide if something is, like, good at data management ’cause I know it’s so different for each company?

The Four Pillars of FP&A Tool Evaluation

[00:29:43] Paul Barnhurst: Yeah. So, a couple, couple things I look at is one, you know, what tools do they integrate with? So, that’s the first thing, do they integrate with what I need? And, you know, it’s gonna, what’s good is gonna be different for one user to another, like, some tools natively integrate with NetSuite, some are only QuickBook, Sage, and Xero, or some, you know.

[00:30:02] And so, that’s the first thing is do they integrate with my tech stack, right? HR system, et cetera. Now, all of ’em will say yes, we can build an integration and they probably can, but that’s gonna increase your implementation time and increase a little bit of risk, and you have to decide whether you wanna do that or not.

[00:30:19] Next is how flexible, how many dimensions do they bring in? How many different, you know, data dimensions can I have in the model? Like, I know one told it allow seven, I know of other that pretty much allows unlimited, you know, do you really want unlimited, do you want your user to add anything and everything?

[00:30:36] Do you want only seven, right? So, you gotta think what’s the right, how much business logic are they writing? Like, does my data, do I have to calculate things a certain way, like, or do I have the flexibility of creating my own metrics and defining those calculations? And so, those are the type of things you have to understand, and how the tool approaches it.

[00:30:54] You know, some would bring in data warehouse is that important, some will even do the data modeling and the planning and a BI tool, you could do it all in Power BI. There’s a few of ’em that do right back there, you know, is that what you want, you want integrate it to that level that that’s important to you. So, in the data modeling, you really gotta think through what systems do I need the integrated?

[00:31:14] How much flexibility do I need around the metrics that I can define, around the attributes and the dimensions? How well can I define ’em? How, how flexible is it in the roll up the hierarchies that I can create for different views, creating a, you know, department view versus a finance view ’cause the way finance looks at is in a chart of account. The business may wanna see something totally different ’cause I don’t care about that chart. It’s irrelevant to me.

[00:31:40] Joe Michalowski: For sure. You know, I, I think it’s a, it’s a good framework to think about and I, can we, do you mind if we walk through the other three pillars,

[00:31:46] Paul Barnhurst: Yeah. Not at all. 

[00:31:47] Joe Michalowski: so, I’m not gonna try to list off your other three pillars, but, so,

[00:31:48] Paul Barnhurst: Yeah. So.

[00:31:50] Joe Michalowski: so, we’ve got data management, like, here’s kind of what you’re thinking about, but let’s walk through the other three and see, you know, how you evaluate like a, a tool.

[00:31:57] Paul Barnhurst: So, I think in the calculation engine, the first thing you know, you probably wanna look at is, do I wanna stay in a spreadsheet and just want data management capabilities around it? If that’s the case, then you wanna look at tools that have chosen not to build their own calculation engine. They’ve chosen to use Excel or Google Sheets.

[00:32:15] Like, I have a friend that was a Google Shop, so he chose a tool that integrated natively with Google ’cause they thought it would be easiest, you know? And so, I think that’s the first thing is deciding that how much do I need the spreadsheet or not. And then, next is, you know, looking at the calculation and trying to decide how much, you know, flexibility you want versus structure,

[00:32:36] do they have a headcount model? Do they have templates? How do they integrate with Excel? Like, some tools may not use it as their calculation engine, but you can build the model and easily load it to the tool. And so, those are the type of things you need to think about, you know, do they, can they support

[00:32:52] the level of planning I want, how easy can it all be shared? Is it easy for the business to go in? Is there easy ways to partition it off, and be like, “All right, it’s easy to give that person their head count, they can go in and they can update it, and then, the finance guy can review it.” Like, I’ve seen some that have, you know, separate kind of sheets, like an Excel workbook for each department, you know, different, different approaches to that.

[00:33:13] So, I think those are some of the things you need to think about in the calculation engine, you know, also, hey, do they have a sandbox? Is that important to me? Do I wanna be able to do kind of edge case type things, you know, or do I want,

[00:33:25] Joe Michalowski: Sure.

[00:33:25] Paul Barnhurst: you know, high-level flexibility with very little of a model? Like, there’s some tools that don’t start with the data model, they start with the financial model, and they can bring in your data, but really the goal is kind of to basically give you more of that flexibility of Excel. So, you just, it is gonna vary by company, it’s gonna vary by leadership, but it’s asking yourself what’s important.

[00:33:45] And then, going out and narrowing down that list of tools that meet your, your criteria. And then, for the next one, you know, reporting and dashboarding, you know, most tools do a pretty good job there. The way I think of it is, you know, the smaller the tool, the more focuses on very small market, the less flexibility you’re gonna get in a reporting,

[00:34:07] typically, the more the school, the tool goes mid-market and enterprise, the more you’re gonna get, but, you know, things you wanna think about is how well does it integrate with PowerPoint? Can I download a PDF? Like, some of the new, you know, third-gen tools don’t have that yet. They haven’t built that download PDF, or they don’t have some of those PowerPoint integrations, you know, they may not have the ability, some do, some have really thought about it, but have that ability to directly share your board of, you know, your board of director’s deck, right from the tool to the investors.

[00:34:35] And they can comment on it. You know, that’s a great, a great thing to have. And so, you know, if that’s important to you, can I create my own, or is it mostly reporting I have to choose from the tool. Like, I’ve seen some that, you know, they give you a little bit of flexibility, but not a ton of customization,

[00:34:51] you know, and so, those are things you need to ask yourself is you need to think in two ways, can it meet my reporting needs today? And this is across all of them, and can it meet my needs in three to five years? And if it can’t meet the needs, is that okay? Am I willing to upscale at that point? Which the answer may be

[00:35:07] yes because, okay, I’m a million-dollar company, and I can get this tool for, you know, 400 a month, or whatever, 5,000 a year, or I can pay 25,000 right now. I’d rather hire, you know, part-time salesperson, or whatever, right? And so, I, that’s the think about, and then collaboration and workflow, I think most tools are pretty good there,

[00:35:25] you know, that’s a pretty standard thing that you’re gonna get in tools, but you wanna understand, “Hey, can I create my own workflow or is it all predefined,” you know, “Can I have multiple levels approval? How easy is to assign them? How easy is it to assign people to different tasks? Can I comment on things really easy, you know, and at what level?” So, those are the type of things to think about, but if I’m looking at a tool, I mean, if they don’t ha, I don’t care how good the workflow and collaboration they’re reporting is if I can’t do the budgeting, the modeling,

[00:35:59] and it doesn’t bring in my data, I can’t manage those parts, I’m not gonna buy the tool. So, that’s why I’ve listed that in the order I do is I think data management has to be right first, then you gotta be able to model, then you do your reporting, and then, hey, last you need to think about it, but I think it’s the easiest to address is that workflow and collaboration.

[00:36:21] Joe Michalowski: That was a really good way to sum it up at the end. There was, like, yeah, I’m thinking, I know you call them like the four pillars, and that was kind of where I was, was going. I don’t wanna ask if, like, one is more important than the other ’cause I know, like, the concept is, like, that they’re all like kind of important on their own.

[00:36:36] But the way you summed it up kind of, to me sounds like a, like a pyramid almost, like if you have that, like, base layer of, like, the data coming in, like that’s great. And then, like, it all stacks, and like, the little tippy top is like, yeah, like, you have the collaborations, like, I don’t know if you’re, if you’re an FP&A tool, and you’re saying, like, our only differentiator

[00:36:52] is that we’re really good at collaboration, and it’s like, you’re kind of, like, weak on the other ones. You’re probably not gonna win this market over as much as you would like, so I think it’s a…

[00:37:01] Paul Barnhurst: Correct. I like how you mentioned that I hadn’t thought of doing it that way, but yeah, you could think of it as a pyramid, and it really, the base is your data management, your modeling, and it kind, and it builds.

[00:37:12] Joe Michalowski: Yeah. Really great. I think, you know, my, the question I was gonna ask that I, that I think you just satisfied for sure with that explanation was like, like what the checklist would be, if you were gonna say like, hey, like here’s like a rubric for, you know, whatever company to go evaluate these tools

[00:37:26] ’cause, you know, as I was listening to, like, the first few things you said at the beginning of this recording, it was like, everything is so nuanced, like it’s so dependent on your, like your own business model, it’s so dependent on, like, the little pluses and minuses, like, in each area, and I wasn’t sure if there was gonna be a way to kind of sum it up as like a, like here’s what to look for, uh, so, I think, you know, the answer you gave, which with each category was really great, so it was helpful.

[00:37:51] Paul Barnhurst: Yeah. And I’ve written an, there’s an article on my website, and I did a series on LinkedIn where I talked to each one of those, and what to think about. So, if people go to the FP&A Guy, they can see that article, it talks about the different things they should think about, and I’ve had a few people suggest creating a rubric.

[00:38:06] I haven’t done it yet. I might get to that one of these days of actually trying to sit down and come up with, you know, a checklist and a rubric that people could use to try to evaluate tools.

[00:38:17] Joe Michalowski: Yeah. I love it. I think that’s why, you know, I wanted to do this topic was that I know, uh, as this market gets bigger, like this is just some, something that’s gonna come up for, you know, a lot of finance leaders. So, I think it’s really great to have your, your insight on that. I’ll link the, uh, the article that you mentioned.

[00:38:31] I, I saw it, before we chat it, I’ll link it in the, the show notes so people can, can find it. I wanna be mindful of time ’cause, honestly, Paul, I, you and I chatted a little bit before, this could probably just, like, chat with you all day, really easy to talk to, enjoy the conversation. So, this has been fun.

[00:38:44] But you’re a busy man, and I need to, to let you go at some point. So, I wanna, I got a couple, two more questions, and they’re a little more like high levels. So, I wanna zoom out a little bit, and I know you’re an Excel guy, we started at the beginning, we said spreadsheets aren’t going anywhere,

[00:39:00] and that’s great. I would love to know what you think long-term, take away, I know you said there’s like a three to five year, it just takes a long time to build one of these tools. In a perfect world, what is the ideal relationship between spreadsheets and FP&A software? Will we ever truly replace spreadsheets, or will it always be kind of symbiosis there?

[00:39:22] Paul Barnhurst: I think symbiosis ’cause spreadsheets are the ideal input form, I mean, they’re so incredibly flexible. It’s why you see so many things developed, and it’s probably the most used tool in the world, but I think how to look at it is spreadsheets should be for edge cases, you know, “Hey, we’re doing an M&A activity, and we need to model something.” “Hey, we need to do this.

[00:39:44] We need to do that.” And what we’re seeing right now is we’re seeing more and more spreadsheet tools start to crop up in the market, and it’ll be interesting to watch how that convergence happens, I mean, I think the first convergence you’ll see is probably more around the data models because you know, you think about it today,

[00:40:03] everything you’re bringing into your planning tool is also being brought into a BI tool in many cases. So, you got duplication and extra cost. So, some point someone’s gonna figure out how to that data management, that data module is really its own tool, its own product, and you hook into it, and I think we’ll see that first.

[00:40:21] Joe Michalowski: Yep.

[00:40:21] Paul Barnhurst: And then I, I do think you’ll continue to see improvement in the spreadsheets. So, maybe some tool, you know, eventually you’ll probably figure out the edge case, and it will be able to, it’s probably going to be some kind of spreadsheet, right? ‘Cause many of the tools you have a spreadsheet type function, even if you’re not Excel or Google Sheets.

[00:40:38] So, spreadsheet’s not going anywhere. I don’t think Excel’s going anywhere anytime soon, but I think the, the way they need to live together is you need to get to the point where you can do all your core planning, your core budgeting, your reporting, your dashboarding, and your planning tool, and you use Excel for edge cases and one-offs and other areas like that, where it excels and shines. No pun intended.

[00:41:03] Joe Michalowski: I love it. I think it makes a lot of sense, like, my, my main concern always, like any time we write about, you know, new features or different use cases, it’s like, will somebody look at this, get stuck, and go back to Excel. So, that idea of, like, having it for the edge cases, and like having it be there, but actually being able to accomplish all of those core functions, like on a consistent basis, I think is really important.

[00:41:26] So, I like the way you frame that up makes a lot of sense to me. I have one last question for you. It, it’s one we ask everybody that comes on, and so I’ll appreciate you indulging me. It’s not related to tools at all. Um, I’m curious, what is one thing you know now that you wish you knew at the start of your finance career?

[00:41:44] Paul Barnhurst: Oh, you know, I think, and it doesn’t have to do with finance, but just in general for career, I wish I had realized the value of networking, you know, I didn’t do an internship in college, I didn’t really network, I was just focusing on school, and it ended up taking me a year after I graduated to find a really career job.

[00:42:04] You know, it took me a while after grad school. Now, as I’ve built a following and, you know, built a network, it’s amazing how the opportunities come to me. And so, I know that’s not finance advice per se, but I think the career advice is put yourself out there, network, and realize it’s a two-way street. A lot of people think of networking as a dirty word, and you’re just asking for a favor, but that’s not what it is. You need to make sure you’re giving, and you’re giving value to the people you’re networking with.

[00:42:32] Joe Michalowski: You know, it’s funny you mentioned it, I, I feel like you’re, it happens every time somebody comes on and asks this question and it’s, I say this a lot, it, it’s never about, like, building models, like the idea is never like, oh, I wish I knew this Excel function like three years earlier, and it was gonna like, change it,

[00:42:48] like, you need to know that stuff, but I think the networking point is a really, really good one. I’ve gotten a lot of value from you on LinkedIn as somebody, you know, trying to make content for a vendor in this space. Like, I need to know what’s going on, and like, without people like you, you know, genuinely just sharing insights and ideas, pain points, things like that.

[00:43:09] Like, I would, I would only have selling context, and you can’t just constantly sell at people like you have to offer that value. So, I, I think the networking point is a really good one, and especially for a profession that has been deemed like the back office number crunchers, uh, you know, that’s how you, you know, for our points, it’s like, you get outta that back office, you do your networking, you offer value, and like, that’s how, you know, I really love the business partnering Institute stuff, like that’s how you become a real partner is you take on that networking stuff, so.

[00:43:39] Paul Barnhurst: And that’s the fun part. The partnering’s the fun part in finance.

[00:43:41] Joe Michalowski: I think it’s, uh, come on Excel’s a, a blast.

[00:43:43] Paul Barnhurst: Oh, I love working in Excel.

[00:43:44] Joe Michalowski: Look at the Excel bible behind 

[00:43:44] Paul Barnhurst: But if you ask me what I like more, 

[00:43:46] Joe Michalowski: you, Paul, like, we love

[00:43:47] Paul Barnhurst: it’s the strategy, it’s the partnering, it’s the relationships, it’s moving the business forward. Now sometimes that can involve some really fun Excel models, but if that’s all I’m doing, I’m gonna get bored pretty quick.

[00:43:58] Joe Michalowski: Rough life. Understandable. I, I think that’s a good way, a good place to, to leave it, Paul, I want to, uh, leave the floor for you. We’re coming up on time. So, where can people go to learn more about you, to follow you on, on LinkedIn, to learn more about the FP&A Guy? Uh, floor is yours.

[00:44:14] Paul Barnhurst: Yeah. No, of course, I appreciate that. Thank you, Joe. And so, you know, first people can go to thefpandaguy.com, that’s my website. I have, you know, a few articles up there and some information about me, some of the courses I, you know, offer a little bit of that, where most people will find me is on LinkedIn, I post content there daily,

[00:44:32] you know, I also do a little bit on Instagram and Twitter, not much, really, probably the primary space to follow me at the moment is LinkedIn, you know, and on my website, you can find the contact information, if you wanna reach me, you can always send me an email. I’ll talk to just about everybody. I think before this call, I talked to a vendor about a planning tool, and I do it about once, twice a week these days, so.

[00:44:53] Joe Michalowski: Perfect. Amazing. Well, Paul, thank you. Thank you so much for taking the time. I know you got a lot of people to talk to, a lot of, it’s not an easy work. I did the freelance job for, for a bit. And so, you’re, you’ve elevated that to a whole business. So, I know, the solo job is not an easy one. So, I really appreciate you taking the time to, uh, share your insight.

[00:45:12] Paul Barnhurst: No, my, my pleasure. I’m happy to do it. I’ve, you know, had a great relationship with Mosaic. I like what you guys are doing, as you know, I had the opportunity to train a lot of people there and have got to know a lot of people at your company and appreciate what you guys are doing. So, keep it up and keep making a difference with the tool that you know can help us finance people, uh, do our job a little easier. So, thank you.

[00:45:32] Joe Michalowski: Amazing. Of course. Well, it’s been great having you on The Role Forward and maybe we can do it again sometime, revisit this when this market blows up even more. So, appreciate it, Paul, and we’ll talk soon.

[00:45:41] Paul Barnhurst: Sounds good. Thanks. Appreciate it, Joe.