The Value of FP&A at Mid-market Companies

Speaker A: So companies maybe don't know what to do with some of the data and how to use data to make informed decisions. So I think a lot of the value that FPA can bring to mid market companies is just around kind of those two things which I would call just greater visibility and then greater predictability to help companies answer questions like if we were to do X, Y and Z, what happens to our financial performance? Or if we want to produce XYZ outcome, what are the levers that we have to think about putting in place to get there and how do we effectively model some of those decisions so we're making the right bets at the end of the day.

Speaker B: Hey everyone, you're listening to the Finance Fireside Chats podcast brought to you by FutureView Systems. I'm um, your host Matt Ziak, VP of Sales and Marketing at FutureView Systems, a Ah, finance solutions provider and that was created by Finance Professionals for Finance professionals. Join us as we uncover the topics, trends and best practices near and dear to finance and accounting professionals. Hi everyone, thanks for joining us again on another Finance Fireside chat brought to you by Future View Systems. Uh, we have a great episode for you today. We're actually joined here by, by Nick and Nick is uh, works in finance at TRG Screen. Nick, thanks for joining us on the show.

Speaker A: Yeah Matt, thanks for having me.

Speaker B: Yeah, absolutely. You know I'd love to give the audience, you know, before we dive into all things Corporate Finance and FP&A, would uh, love to get a little maybe background on your career and kind of where it led you here to TRG Screen.

Speaker A: Yeah, sure. Um, so like you said, I currently lead FP&A at a New York based software company called trgscreen. We help financial services and professional services firms manage their market data, uh, subscription costs. So I've been here for a little over four months now. Uh, prior to that I spent six and a half years at another New York based uh, software company in the marketing technology ecosystem called Wunderkind. Uh, and was with that company as we scaled from 50 million of revenue north, uh, of 150 million of revenue. And then prior to that I spent uh, three years in investment banking at the beginning of my career. But um, I guess you could say I've spent most of my career in the mid market software space.

Speaker B: I know you also have ah, a little bit of a background investment banking. So you kind of seen both sides of the landscape of financial services and corporate finance. Would love to maybe um, just between those two, you know, sometimes people blend financial Services and corporate finance into one. But um, maybe you could start with kind of talking about the nuances and differences between you know, the value add within uh, corporate finance and FP&A versus you know, maybe a traditional finance services that people might be considering or thinking of.

Speaker A: Yeah, I mean I think obviously the main difference is, is just in the, the width versus depth, uh, aspects of both. I think when you're in financial services you have a lot more width, uh, and you're, you're maybe working across multiple different clients and multiple different industries and different client engagements, um, but much more of a surface level understanding and engagement uh, as part of that work. Whereas I think the draw for me and why I wanted to switch over the operating side and I think what you get in more of a uh, corporate finance or in house FP and a role is much deeper understanding of the business, much more heavily involved in more complex internal operations. Because at the end of the day you're working for one company and you're trying to solve problems inherent to that business and that business alone. And so I think it just leads to I think a lot higher intimacy of uh, the business model and how to translate maybe financial metrics to ultimately company performance.

Speaker B: Yeah, absolutely. Now I know you have an athletic background. Uh, what's a day in the life for Nick like? Is it uh, a 5:00am start with a five mile run around the blocks and then getting uh, everything ready to go into the office and start planning and forecasting or, or what's the day in the life like for you in FP and a.

Speaker A: Uh. Well I'm a new dad so I've got, I've got a six month old uh, at home. That has been an adjustment and I think I've had to make some tweaks uh, to the, to the daily schedule and become more flexible. But uh, have really enjoyed uh becoming a father and um, going through that with my wife. Um, but yeah, I mean a typical day try to, try to go to the gym in the mornings, uh, maybe three days a week. I find that if I don't go in the morning, uh, it's hard for me to make it up elsewhere in the day. Uh, so try to do that, uh, get something done for me first thing in the morning and then uh, we're hybrid uh from a company perspective but we do have a New York office that I tend to utilize three to four days a week. Uh, and yeah, um, I guess we can get more into the day to day uh, of the role. But every day is a Little different depending on kind of where we are in the calendar and what's, what's important for the company at that particular point in time. Obviously I'm pretty new to my role, uh, so I think a lot of the last couple months for me specifically has been focused on onboarding and maybe laying the groundwork, uh, and putting in place some of the foundational pieces that I think uh, will hopefully bear fruit over the next couple months and years. Um, yeah, that's ah, a bit about my, my personal life outside of work.

Speaker B: Yeah. And uh, I can relate, you know, similar kind of timelines in life also. I have a five month old son as well myself, our first and so it's an adjustment um, to say the least. But it's always great to have a, ah, place that you work and love working at, uh, to really go from you know, baby time to work time. And it's a, it's a great shift going back and forth. Um, I wanted to talk a little bit about kind of the value that FPA can add, especially for, if we were to characterize kind of like the companies that you've been working with, these sort of mid market growth companies, you know, call them. Everybody's got a whole different definition I feel like of mid market. But let's say the, the bell curve represents, call it 10 to 20 million to a couple hundred million, that kind of sweet spot if you will of the mid market. And so in that regard, you know, FP and A really seems to play a vital role for those organizations that um, are probably either rapidly growing or have at least some sort of roadmap for their growth. And obviously they want to balance that with profitability. But can you talk a little bit about the value that FP&A can provide at those companies?

Speaker A: Yeah, I think you touched on it a little bit. But I think what makes companies in that, in that range of mid market growth, uh, being companies that could benefit from FPA and perhaps are ready for FP and A is probably right around the time where there starts to be more of a predictable growth model. Um, so if you're north of 20 million of revenue, you've eclipsed the point where you maybe just have a couple sales reps selling something and so there's some amount of investment behind go to market and behind product development. Um, you're probably starting to have data, whether it's financial data or operational data. Um, but typically without someone full time dedicated to fpa, there's a lot of data with maybe little insight attached to it and so companies maybe don't know what to do with some of the data and how to use data to make informed decisions. So I think a lot of the value that FPA can bring to mid market companies is just around kind of those two things which I would call just greater visibility and then greater predictability to help companies answer questions like if we were to do X, Y and Z, you know, what happens to our financial performance or if we want to produce XYZ outcome, what are the levers that we have to think about putting in place to get there and how do we effectively model some of those decisions so we're making the right bets at the end of the day. So I think it really just comes down to those two things where I think the value is in heightened visibility into performance and then hopefully uh, once the proper pieces are in place, greater predictability, uh, and scalability.

Speaker B: And you mentioned data and the need to manage data, especially an FPA role in a uh, in a growing company. Can you talk a little bit about, you know, when you think about managing data and maybe you think about on the, on the lower end of an organization's growth curve, they're probably utilizing Excel heavily. Um, they're probably you know, entrenched in manual processes just to, just to get it to work right, just to get a reporting package together, just to get some sort of forecast that's planned out for at least, you know, whether it's quarterly or even an annual budget. And so maybe talk about that need for, you know there's this data management need and integration play that's, that's entrenched in finance and fpa, but um, also the tooling that goes along with it to really unlock that value.

Speaker A: Yeah, I mean I think you, you hit on a lot of it there. But I think data scalability and data pipelines and how you get from question to answer using data is obviously going to be reliant on the systems and processes that you put in place. I think ultimately the goal uh, of any performing finance uh, function is that type of data wrangling work should really take as little time, ah, as possible and it should be as automated and kind of instantaneous to get the right data, um, so that nobody is having to intervene or manipulate data because ultimately what you're trying to do is answer questions with data. So the less time you spend manipulating data and worrying um, about where you're pulling data from, uh, the more time you can spend on value added analysis and conversations that might be sparked by uh, that data that hopefully you can put in place in a streamlined and automated fashion.

Speaker B: Yeah, absolutely. That's well said. And I want to talk about value a little bit more and we talk about where value is derived. When uh, we consider if you're a PE backed company or you have some sort of sponsor or investor group, can you talk about the value that, that FP and A can also provide there and really the, the need for FP and A once those sponsors come into play?

Speaker A: Yeah, um, so I, you know I think there's a lot of very smart private equity investors out there. We're, we're fortunate enough to, to have one in invest equity partners as, as our primary sponsor. Um, and I think anytime that they're going to invest in a business they obviously have a plan and a value creation thesis for what that business can and should look like on a typical hold period for them. And they'll do their own modeling and financial uh, analysis to support that investment and then ultimately monitor the business against that roadmap throughout the whole period. And I think where FP&A can be in house, FP&A can be complimentary to that is in translating what might be a more higher level view of the business into a more granular and distributed uh, financial plan and making sure that the internal stakeholders of a business are engaged uh, in the financial roadmap of the company. And um, that long term plan that the sponsor may have is translated into uh, hopefully an in house long term plan and then ultimately an annual planning cycle each year that ladders up to where the business should be at a different point in that hold period. And then there's the right uh, distributed planning that goes on within the organization to support that. So everyone within the company is bought in on the, on the financial plan of the business.

Speaker B: You know, you touched on that distributed plan and that annual budget process if you will. Um, there's a lot of methodologies out there for how you should maybe best approach budgets. Um, we've seen with FutureView Systems and our solutions that many companies um, can go from two to three months of their budget process timeline to two to three weeks. And so I'm curious on your end, you know, what do you think is the, the best way to approach ah, an annual budget that you're going to be managing with you know, those department heads and the board and, and trying to make sure that everybody's aligned and, and where do you go from taking maybe like as you said, maybe there's a number in mind that, that the sponsor is interested in, but you also have you know, the boots on the ground, if you will, from a department perspective, whether that's on the go to market or development or operations side. You know, how do you balance all of that as you manage your budgeting process?

Speaker A: Yeah, it's a great question. I think it's one that uh, as finance professionals we've all grappled with and um, I've definitely had planning cycles that have gone smooth and some M that haven't gone as smooth. I think what I've learned is planning and annual planning specifically tends to go a lot better when you have an up to date long term forecast model that you're updating and rolling forward throughout the year and you are kind of paying attention to that long term view of the business with the right stakeholders, whether that's the executive team, the executive team and the board or some combination of those stakeholders. Um, and so hopefully in July or August or whenever it is, kind of maybe two to three months before you're going to really kick off your annual planning cycle, um, I think you can do yourself a big favor by using that model to take a higher level view of what you want the next year to look like. Um, and hopefully it's just an output out of that model, um, from a, you know, given we're a software business and I've, I've spent my time in software businesses. I think, you know, I think the next critical piece to a planning cycle to get right is um, going through a product roadmap planning exercise and really understanding, you know, what are the investments you're going to make to maintain and upgrade your existing product suite over the next 12 months, 12 to 18 months. What new bets do you want to make across your product portfolio that you think can drive growth not only next year, but in future years? And what are the different investment size thresholds to support that roadmap and what are some of the trade offs and decisions that you want to make as part of that. Then I think next comes go to market planning. Um, this all assumes you've locked in on the high level operating plan for the next year in terms of the broad shape of the P and L. But then once you start working through more of a bottoms up planning motion, it's thinking through go to market investments. And how do you resource your sales and marketing department to go out and grow and sell new business next year? Um, and then how do you resource capacity support existing customers next year as well? I think those conversations are all things that you need to be doing with department heads and collecting Input from them and where, where do they want to make investments across their teams? Um, what's important to them in terms of priorities for their own organizations that support company goals next year? I think, I think the hope in going through that process in terms of at uh, the start aligning on the overall context and shape of the P and L and then working through different bottoms up place planning motions, you know, the hope is you, you come out the other side, you've, you've probably made some trade offs in your bottoms up planning to, to align back to the high level plan uh, that you started with. But I think the more you can start with an end goal in mind ahead of your planning, uh, it makes a lot of that bottoms up planning easier. But it's, it's very important to have that bottoms up planning motion so everyone feels bought into the plan that you're going to have next year. I think think nobody wants to receive uh, an annual budget strictly from finance with no involvement. That's a recipe for disaster. So um, I think that's why you know, even if you can get the plan done, you know, in a couple weeks, it probably makes sense to spend at least you know, a month or two on your planning cycles just so there is the right level of alignment and buy in. But um, obviously systems and processes can make that go a lot smoother and most of the value can be derived from those conversations as opposed to painful spread sheet modeling.

Speaker B: So if I were to maybe paraphrase it sounds like from a uh, you know, a budgeting workflow perspective you kind of have this thought of a, a hybrid approach where you sort of take the, the top down from the, some of the targets that maybe the executives and the maybe uh, it's the co founders and maybe it's the board and they have their input on what they think at the top line of maybe the P and L. But then you're also getting that input on the lower end, um, from the bottom up. And so you're kind of marrying the two in this hybrid approach. And that maybe allows for not just alignment but accountability across the team, right?

Speaker A: Yeah, exactly.

Speaker B: Um, one of the things you talked about was this idea of a roadmap based on um, maybe there's new products that are being launched and this idea of the success and the projections of those new product launches. Can you talk a little bit about sort of this scenario planning piece of FP&A, and, and how that factors in, especially when you're talking about maybe a relatively unknown thing that you're bringing to market or you're going to build out and bring to market that otherwise doesn't have a whole lot of assumptions to go off of.

Speaker A: I'll say it's a hard challenge. Uh, I think modeling, uh, return on investment for uh, product development investments, uh, is historically a tricky thing to model. But I, I think you're right. I think what's important is trying to appropriately capture the scenarios and be able to sensitize the impact of those. So it's not so much about getting it perfectly right in terms of hey, this product development investment that we want to make will generate X million in revenue. It's more understanding the scenario set and what do you have to believe to be true in order for it to be a good outcome and where is the breaking point, um, or sort of the hurdle rate for some of those investments and what is the range of outcomes that different bets could produce. And I think like you said, I think you get a lot of those answers through scenario planning and scenario analysis. Um, on top of sort of your base case budgeting.

Speaker B: You talked about this kind of revenue planning and forecasting out. Can you talk about how perhaps you might need to look at things from a segmentation level of your cohorts, uh, for maybe your current customers as well as future. Maybe it's a cross selling um, campaign that you'll be launching for that next quarter and next year. Uh, perhaps there's a new revenue model that maybe it's a mix of product and service, um, or anything in that regard from a metrics and KPI standpoint as well that you would want to hit on.

Speaker A: So yeah, I think in terms of revenue planning, uh, also kind of a, uh, tricky subject. But I think you're really, you're trying

Speaker B: to balance FT&A is pretty tricky. I think that's what we're. Right. This is not an easy world. Right?

Speaker A: Yeah, it's not rocket science but yeah, it has some nuance. Um, but I think you're trying to balance two kind of competing priorities where I think on the one hand, uh, there's sort of this maxim that the more straightforward and simple and intuitive you can make your revenue model, um, I think the easier it is to drive alignment and understanding of the financial performance of the company. Um, and so I think on the one hand you want to keep things as simple as possible so you're not getting lost in the details or the weeds and you have a good map of your business from a revenue standpoint. But on the other hand I think you need to segment and you need to introduce dimensionality that increases predictability of your revenue plan. And so if you have SMB customers, those are going to behave very differently than true enterprise customers if you have both. And so you need to think about the ways that uh, you do need to segment so you're not cobbling together revenue streams that happen to be very different. And so I think some of the common ones, obviously if you have different revenue models or charge models, you need to think about breaking those out, uh, which hopefully is done through your financial statements anyway. Um, but then I think you also need to think about your org chart and kind of how ownership and responsibility of different outcomes is distributed throughout your organization. So if you have an international line of business that's managed by one person that's different than your North American business, I think it's important to plan that appropriately so you can cascade ownership of an ultimate revenue number throughout your, throughout your company. Um, and then, yeah, I think you also touched on, and maybe I just mentioned it, but thinking through the ways that segmentation and dimensionality can increase your prediction of the future through your revenue planning, I think is important. So on the one hand, you want to be cognizant of creating a plan that everybody's invested in, but you also want to create a plan that hopefully is as accurate a representation of future performance as possible. And so I call that piece like you're trying to get closest to the pin almost with how you revenue plan. And that's where I think being thoughtful about how you segment and split your business is important. Um, so long as you don't get too carried away with it. I think there's probably some theoretical maximum on the amount of segments that you want to introduce, uh, the amount of dimensions that you want to cut your revenue plan by. So it's like I said, it's a balancing act between trying to keep it simple and straightforward and easy to understand, but also segment appropriately to drive, uh, ownership and accuracy in your forecast that

Speaker B: closest to the pin reference. So, uh, maybe Nick is the, uh, Scotty Scheffler of fpa, we could say

Speaker A: here, I don't know, how about that?

Speaker B: Uh, you know, you talked about predictability and we think about this crystal ball, right, that you're kind of looking at and into. And let's say we're already at mid year 2025. So I feel like we'd be remiss if we didn't talk about AI one way or another. And so I'm curious what your thoughts are on this sort of Evolution of AI in corporate finance and fpa and this now new introduction of agentic AI and AI agents, uh, to help the workflow. Um, really just curious, your input there and what you think and maybe what you foresee if you look into your crystal ball.

Speaker A: But I think the pace of change is undeniable. Lots of people smarter than me, um, uh, have said that and I think at this point it's undeniable. I think everybody is using, or most people in a professional setting are probably using AI and their day to day workflows. I don't know, 3 to 4x more than maybe they were a year ago. And I think that pace of change is even accelerating. When I think about myself and my day to day interactions with AI, even against four months ago, I'm probably up 2x in terms of the amount of time I'm interacting with AI on a daily basis. Um, I think as it relates to finance specifically, um, I think maybe the rate of AI adoption across finance workflows has maybe lagged some other, um, functions across the business. Um, I think maybe that's driven by a couple things. I think one, within finance there's a really low error tolerance and so obviously the responsibility of finance is producing numbers that tell a coherent story and an accurate representation of the facts of a business. And so, um, if you're using AI to run a marketing campaign, it might be okay if you get somebody's email address wrong or you send email, you know, the wrong type, uh, of message to somebody. It's not okay within finance if you produce the wrong number, uh, or if AI produces the wrong number or calculate something wrong. Um, so I think that's maybe been slowing the pace of AI adoption within finance. And then I think the other thing is auditability is very, and traceability is really important within the finance function. Um, it's not necessarily enough to just get an answer or get a number. You know, most companies go through an annual audit every year. Um, you know, if you're producing a number, you want to know how and where it was, where it came from and how it was produced. And so I think we're getting there with some solutions, um, where that auditability and traceability is increasing. But I think that's another thing that slowed AI adoption. Those have been the headwinds to AI adoption. I think what's exciting is I think there's no question that workflows will change. I think most of our time as finance professionals has been spent in spreadsheets for our entire careers and that's been the one UI of financial analysis and a lot of what we do on a day to day basis, whether it's reporting, forecasting, planning, what have you, uh, I think there's definitely an opportunity for new interfaces where the amount of times where I've had a simple question and I've had to go pull a report which doesn't seem like a lot, but if I have to interrupt my workflow to go pull up a dashboard and try to find an answer, it'd be much easier if I could have some sort of interface where I could just ask a question and get an answer back. And it does feel like we're getting closer to that. Um, and I think there's a lot of technology solutions out there, existing vendors that are focused on creating some of those use cases and workflows within their, uh, within their products. And so I think, you know, there's definitely some early traction out there that I think is exciting. Um, I guess, I don't know, it feels like we're still kind of in wait and see mode, but I think it's, I think over the next 12 to 18, maybe two years like we'll see lots of change within the finance function because I think it's ripe for, for AI disruption. There's a lot of things that we do on a day to day basis that can and should be done better by an AI from a workflow perspective. Um, I mentioned error tolerance. I think finance as a category has probably tolerated human error, uh, or the opportunity for human error for too long. So I'm excited for some of those solutions uh, to come out and I think it's, it's an exciting time to try to disrupt your own workflows and question old assumptions for the way things have been done. So yeah, I think it's really exciting and I guess we'll just have to see where it goes.

Speaker B: Well, Nick, it's been a pleasure getting a chance to talk to you and talking about the value that FP&A can provide companies. So I really appreciate you uh, hopping on and joining us on the show today.

Speaker A: Yeah, Matt, it was a blast. Thanks for having me. And uh, yeah, hope to talk soon

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