A finance professional explains why CFOs need to master the three statement model. Building it teaches you to think strategically about how income statements, balance sheets, and cash flow statements connect, skills that separate financial analysts from true business partners.
Why do you think finance professionals need to learn how to build a three statement model is because if you understand how to do it, you understand the building blocks of pretty much any business. And some accounting rules will change company to company based on the industry that they're in. But if you know how the pieces fit together, you can modify those accounting structures and you can ultimately give the business guidance. And so once you understand that universe, you go from just becoming an Excel person to a strategic thinking person, more like a CFO and somebody who can give give advice. And if you know in your head how those three statements work together, when somebody says, well what happens if margin is going to drop by a few points? You can do that math in your head and know that it's going to hurt the net income, it's going to hurt the cash. I feel like if you have that grasp then you can be a real business partner. And that in my mind separates junior professionals from more senior ones.
Trust and Leadership Lessons for FP&A From 100+ Top Leaders with CFO Jon Laudie
