FP&A Skills for Finance Pros to Master the Sniff Test and Boost Business Success

What is the number one technical skill that FPA professionals should master?

I don't know if this is going to be called a technical skill, but here's the one thing that I see that a lot of people struggle with is learning the art of the sniff test. You do an analysis, especially a new guy, you do a lot of analysis, you produce something, and then if it just doesn't make sense or something's off, you need to be able to realize and learn pretty quickly if it looks right or not, or if you need to go back and challenge some assumptions. Last thing you want to do is produce a report and have people say, yeah, that's not right.

I love that one. And I've been in that situation and I've worked with people that don't have that skill. And it's painful when you're like, okay, our total revenue last year was 100 million. You used a report of 2 billion, and you didn't question why it's wrong. You know, like, I've seen that. And you're like, okay, you just don't have that skill. So, so important. I really like that one. I haven't had that one given as the number one, but I like that one. What about soft skill? What's the number one skill?

Collaboration, especially a lot of times, if you get someone who's not used to the budgeting process or doesn't have the, I call it sophistication to know how to kind of predict their own business or even know what their levers are to help coach them through that, build them up to be a business partner.

I like a collaboration so they can be a better business partner and really work with the business. There are always those times where you got the super optimistic sales guy, oh, yeah, we can do this. And you're just like, we haven't historically, we haven't been close to that. Why could we do that now? So. So how do you balance those two as you're having those conversations and working on the budget?

That's a great question. So a lot of times what I do is when I build these models, I'll build them in such a way I like to try to keep it simple so I don't put complicated calculations in one cell. That's impossible for someone else to figure out what's going on. I try to kind of show my work so that you'll have levers built in. So I say, okay, now if we change this conversion percentage of this rate, it'll flow through this way, right? And it'll kind of also spit out some metrics so that you can have your double checks in there. So I don't just build these models to where you can now have. It's easier to do your variance and operations against your plan to see where you're landing, but also so you can model some what if scenarios. When you identify your big levers, you can kind of build them in there so you can say, okay, now, if our. If our close rate goes from 5% to 6%, what would that happen? And so you have to have a plan how you're going to get from 5 to 6%. But if we were to do that, what does that mean for revenue? And then. So I build it all out and I kind of take the historical and I have everything as a reference kind of built out and ready so that when I sit down with them, it becomes more of a working session. Because you're right. Usually the sales guy is so optimistic. Well, there's. There's a mix. They're so optimistic what they can do, but they also don't want to sign up for more than they. Because, you know, permissions is based on hitting target. So you're trying to balance both those things with them. So what I'll do is I'll sit there and we'll just kind of work through the scenarios and we'll just. So I can show them real time. Well, that means this. We've only ever done this, so let's not sign up for that. It's a little too aggressive. So you're. You're providing them the information they need to make better decisions real time.

I like how you said providing the information they need to make better decisions. But also, you're totally right. Those that are super optimistic, but the majority of them also don't want to sign up for anything because they want to have that high commission. They realize it impacts their salary. But you have that opposite where, oh, it's terrible, I won't be able to sell anything. You know, you kind of. It tends to be extremes. I found with salespeople, you generally don't get a good. Where you're like, oh, yeah, that makes sense. That sounds about right. I still remember one time we had a salesperson, oh, yeah, we're gonna get nothing. They signed up like 10,000 on this deal, I think, per quarter, and ended up being a million dollars per quarter. And I still remember being on the call. I was fairly new in my career at this point. And the head of sales is like, okay, you. The one guy, his name was Joe he's like, joe, you invented sandbagging. Like, there's no more discussion here with that number. It was just kind of funny because it was so far off a learning moment of kind of, you know, trying to understand the game sales plays and how it impacts the numbers.

Exactly. And you know what? I've had really good relationships with sales leadership before, where we'll actually sit down and we kind of work through this together as a team and we get there and it's great. But I've also had other people that view it as a negotiation. And so that's where, by having the whole model and everything built out, I become the sniff test to see if it's reasonable or not. I can temper it and give us a realistic target. And a lot of times, you know, they'll have their higher targets. So if they miss, we don't miss our budget. So you have the official budget plan, you have what they can hit, and then you kind of work all that out with them. But it's got to pass the sniff test.

Yeah, exactly. Like, you know, when you. You tie it all back to quota, the operational. All right, I want a 25% or whatever, the number 20 between quota and what I actually need to hit plan. And then there may be another stretch in there or whatever because, yeah, you got to de. Risk it along the way.

Exactly.

How do you ensure your, your team. So you've talked about, know you come in and look a lot of, A lot of the stuff, but your team, that you have, your FPA people, how do you ensure they take that operational focus and understand the levers and are really being business focused versus, you know, reporting or financial.

Yeah, I think a lot of times it's a training thing. So a lot of times as I'm in these meetings, they're sitting with me and they just kind of go through the motions with me at first until they feel like they can fly solo. But sometimes it's a mind shift of just, here's some metrics and your job's done once you produce a report and you're done to. Okay, now let's really start thinking in terms of partnering and understanding the business. And so more of a. Like an almost a consultant of helping them understand the levers of business and how it all ties together. Because the other thing is you have some departments that are really good at their area of focus, but they don't see how that's going to impact other departments. And they just don't see that the bigger picture, which is our job of tying it all together.

Totally agree. I still remember one time we had had a really rough financial year, and the product person's like, can you come present the financials to our product people? And they didn't realize we were basically losing money. And it was. We were turning a bunch of customers, and it was an extremely challenging time. And a lot of them came. Thank you. Now I understand why they're honest so much to deliver this product. Like, nobody had connected it to them to see, oh, if we don't do something, the company's in trouble. And, you know, it was a really good reminder of the importance of helping connect the overall picture. You don't have to get into all the details. There's times when you can't. But making sure they understand enough that they know how important what they're doing is and how it's impacting the business. Because sometimes people don't even realize that, oh, that's having a material impact. Like, what's the big deal? I'm a couple months late. We have plenty of other products. You didn't see what was in the plan.

Yeah, actually, it's a great point, too. A lot of times companies struggle with siloing, right? Each department's kind of siloed. And that's one good way to get them all together is if everyone understands a plan, they're working on it together, then you can have discussions about how they impact each other department. And sometimes that whole, where do you spend that dollar? Sometimes one department gets it, means another department doesn't. So horse trading and stuff like that. But if you're all working on it together, that helps break down some of those silos as well.