The FP&A guide to proactively managing spend

From your perspective as a controller, where do you see this main problem around managing spend?

I think it's definitely on the data. The data is the foundation to every organization or every starting point when we are looking at FP&A.

Today's guest is Rafaela Torres, Corporate Financial Controller at ApprovalMax. She brings over 15 years of experience in finance with a career spanning FP&A, strategic planning, and controllership roles.

Big spends don't just happen. I'm talking about the material things, not the small bits that come, you know, after the fact. That can happen. But big spends don't just happen.

We spend 80% of our time cleaning data and 20% complaining about spending 80% of our time cleaning data.

Finance ends up putting a lot of effort into fixing and cleaning up the data after the fact, as opposed to guiding the spend.

We're all expected to forecast accurately, right? Yet many times spend visibility and spend surprises us. You got lagging, you got incomplete, inconsistent data, often trying to explain variances of things you weren't even aware of. So I'd love your thoughts a little bit more on how this process goes when it's working well. What's the ideal for our audience? How would you describe that?

I would say, first of all, you should definitely look at—

started here in just a minute. Welcome to all those who are out there. The recording just started, so just want to welcome everybody. We're super excited to have you. We'll get started in a minute. We'll give it a minute for people to join, but as we're getting started here, if you could let us know where you're coming from in the chat, we'd love to know. I always have a fun time seeing the different locations of where people join us from. So put your name and your location in the chat and let us know. And real quick, I'll introduce myself, introduce our guests, but before I do that, a couple housekeeping items. If you have questions, you can ask them at any time in the chat. We'll monitor those and keep an eye. We also have some Q&A time at the end set aside. For your questions. Second, the, uh, webinar, the recording will be sent to everybody who registered within 24 hours. So if any reason you might have to drop a little early, or you know somebody wasn't able to attend, they can always go ahead and watch it there. Alrighty, so for those who don't know me, my name is Paul Barnhurst. Many of you know me as the FP&A Guy. I got the hat going today, that's the logo. And I'm thrilled to be joined by Rafael Torres from ApprovalMax. So Rafaela, could you take a minute and introduce yourself?

Sure. Hi, Paul. Hi, everyone. Good morning. Good afternoon or good evening, depending on where you're based. I'm based out of London in the UK, and as Paul said, my name is Rafaela Torres. I'm the corporate financial controller at ApprovalMax, and I've been in finance departments probably for the last 15 years plus. And I feel really, really fortunate and privileged to have gone through probably the majority of the finance departments. And this has given me really good leverage to be able to understand my team, but also understand their bottlenecks and their pain points and across all the multifunctional departments, to be realistic. Most recently, always working on strategy, FP&A, you know, from a controllership side. So I think this webinar in particular really resonates with me because it's something that's very close to heart, but also something we work with every day. And so it's really exciting to be here. Thanks for having me, Paul.

Excited to have you. Just real quick before I say a little bit about ApprovalMax and get started, let's go through some of the locations have. So we have Oliver from Spain, we have, uh, San Jose and Sunny, we have Galen from Toronto, we got Joshua from Jersey City, we have Jack from the UK. So we have a couple, couple joining us from Scotland, England, um, we got one from Israel there. So keep letting us know where you're coming from, we'd love to know as we go throughout the webinar. And before we get into the topic, I just want to share a brief message about our sponsor Approval Max. So First, a huge shout out for them for sponsoring this event. ApprovalMax helps finance teams bring structure and visibility to approvals and spend before invoices hit the ledger. Kind of important. It connects directly to accounting platforms including QuickBooks Online, NetSuite, and Xero to standardize purchase requests, approvals, and coding. So finance teams get cleaner data and fewer surprises downstream. Well, you know, I know many of you out there are FP&A professionals. I'm sure you've all dealt with it. We're all expected to, to forecast accurately, right? It's one of the things everybody wants— see how accurate you can be, especially on things that should be well known, such as recurring spend. Yet many times spend visibility and spend surprises us. You got lagging, you had incomplete, inconsistent data, often trying to explain variances of things you weren't even aware of. How many times have you gone and like, why are my expenses $50,000 higher? And you find out about something you never knew about. I know I've done that more than once, and I'm going to guess everybody on the call has experienced that. So I'd love, you know, that's kind of as I see the problem. Raffaella, from your perspective as a controller, where do you see this main problem around managing spend?

I think it's definitely on the data. The data is the foundation to every organization or every starting point when we are looking at FP&A. And so making sure that that's properly structured, but also that the, the costs are coming through and with correct allocation and, you know, as for your budget or what you've anticipated, I think that's really key. That's where you set the standard there, the bar to, to as a starting point.

Yeah, we'll definitely, we'll talk about data, we'll talk about process and relationships as they all, they all come together here. But before we get into that, we have our first poll question. So you're gonna have a few poll questions throughout. So we're going to go ahead and put that out there. And the question is, what GL accounting platform does your organization use? So you should see that on the screen if you want to go ahead and vote. Unfortunately, Rafaela, they won't let us vote. So we'll, uh, we'll see what we get. We'll leave that open for about another 10-15 seconds. Don't have a good feel here. I'm curious to see. I'm going to guess it's QuickBooks, then NetSuite, but we'll see. All right, why don't we give that about another 10 seconds so we can go ahead and close that poll. All right, we'll go ahead and let that close. We'll share results here in just a second. All right, so it looks like— wow, surprisingly enough, I wouldn't have expected this. 36% say other, and 36% zero. So the, you know, looks like we have some, some out there other than the main tools we thought we'd see today. So great. All right. So let's jump into the whole reason, some of the reasons for why managing spend can be a real challenge, right? Often there's a data problem, as you talked about, there can be a process problem. Here are some of the main issues I've seen over my career. One, surprise invoices. As I like to say, been there, done that, have the scars to prove it. Especially some of those big ones where you're like, wait, how much? Who approved this? And the worst one, they say, well, the CEO told me how to do it. Yeah, oh, now I have to go figure out how I fix this. You know, the next one, and I've definitely had many conversations with accountants, no accruals recorded for anticipated expenses. Like, there's things you've known about and you forecasted, but for whatever reason there's no accrual. Often that's a process issue, sometimes it can be a data issue. It's why I say a good accountant and communication are your best friend there. Uh, poor inconsistent coding. Can't think about how many times I've seen an expense hit one line only to find out the next quarter or the next year the PO got put through and it went to a totally different line, and it just kind of messes everything up.

Mm-hmm.

And then the last one is decentralized purchasing, and this isn't so much a visibility issue as it's a managing spend issue. Often when you have decentralized purchasing, you may have people buying the same thing or similar tools at different prices and, you know, wasting money, which obviously can blow your budget as well. So Would love to get your thoughts. You know, kind of list some of those surprises from your perspective. Where does this, where does it break down first? You mentioned data, but data is usually an output. So where do you see the breakdown?

Yeah, for sure. I think all of those points are pain points that everyone has heard and lived. So yes, I completely agree. I think breakdown typically occurs before the accounting process even starts, right? So it's when you have— you don't have a standardized purchase request process, or if the approvals are happening in Slack and email, or the vendors aren't engaged with finance. So there's no awareness to finance that, you know, something has been signed or that these costs are coming through. I think it's important to say that, you know, more times than not, big spends don't just happen. I'm talking about the material things, not the small bits that come, you know, after the fact or, you know, that can happen. But Big spends don't just happen. And I think communication there plays a huge role, Paul, as you mentioned, because from a controller's reality, finance ends up putting a lot of effort into fixing and cleaning up the data after the fact, as opposed to guiding the spend. And again, that has to do with communication, but also education, right? And so setting that process, but sticking to it, and how can we actually roll it out to the team so we engage them and everybody comes on board? I think if the spend isn't really reviewed upfront, then we're just fixing the problems down screen, and FP&A is going to pay the price because we're going to be starting off with data, right, that's incorrect to start from.

Yeah, I, I think a couple things I really like that you said there. First, you know, it's both education and communication. You could have great communication, but that doesn't mean you're educating people. Like, you could talk to them, say, this is what I need, and feel like you have a really good relationship, but sometimes they need the handholding. And so sometimes they need that education. And then the second, you know, if you don't do it up front, you just have that constant cleaning up on the back end. Right? So as I kind of see it, you need everyone on the same page and you need a process in order for finance to see and approve for it to consistently happen. Need that process and framework. If not, unless you're a really small company, it's really difficult to have control on it. And most small companies want to be bigger companies. So it's going to be a problem at some point as you scale. So you want to get on top of that. What we'd love to know is we're going to do our next poll question here. We'd love to know, as an FP&A professional, when do you usually get visibility into spend at your organization? So kind of want to see how many of you get surprised. You know, the— I hope we don't get a lot to say after the invoice hits the GL. You've never had that happen, right, Raffaella?

No, no, this, this is actually quite common. I think that's the biggest challenge FP&A teams and controllers in reality are trying to nail down, right? It's how we can mitigate this risk because it's there. It's definitely there, especially as you scale. You have more departments, more budget owners, more people making decisions and, you know, in engaging vendors. That's when it becomes Really difficult.

Yeah. No, I, I agree. So we'll give that about another 10, 15 seconds. Let's see. I'm going to try to guess which one I think comes in most. I doubt number 1 is going to be have— we have real-time visibility. I'm going to go when an invoice is received before posting is going to be 1, and number 2 is going to be after the invoice hits. So we'll see. We'll close it here in about 15 seconds, it looks like. I think we're just closing it. So we'll see results here in just a second. Ah, I was wrong. After the invoice hits, not surprising. And then number 2, when a purchase is requested or approved. And only 13% have real-time visibility throughout the process. So that means 87% does not, which just shows how big of a problem it is because ideally With good communication, good process, good relationships, you should have visibility throughout the process. There's no reason you can't. So we'll talk about that and some of that, how you have that process. So before we get into some frameworks and processes, I want to share my thoughts. I think there's 3 things that you really require to manage spend. The first is the open communication. And that communication needs to be between FP&A and accounting, between FP&A and the business, and accounting and the business. This is not a one-way or even a two-way. It's a multi-pronged communication that needs to be there. Two, FP&A and finance in general needs to be a good business partner and have trust. Just because you're communicating doesn't always mean you have trust. That, that's a part of it as well. Because sometimes they may feel like, well, they're just going to say no to everything, even though you're talking a lot. And number 3, you need that structured process to manage it so that your data is clean and so that you have proper approvals. Rafaela, I would love your thoughts on that. Anything you would add to that, or how do you see it?

I agree 100%. I think communication is a key element to FP&A because FP&A comes into the business as a business partner. That's how they act. They have to be there to add value, but they also have to have eyes and ears everywhere. And how we do this is definitely through communication. And in saying that, you know, you have to make the time as an FP&A analyst or even a business partner to have check-ins with your main budget owners weekly or, you know, every 2 weeks if that's the case, because a lot of what we see and where the system starts to break down is where FP&As are working in silos. So they're just looking at the data output. Okay, these are my actuals, I'm going to process my actuals, I'm going to push them forward, you know, just reporting as opposed to adding that value and having that visibility upfront and making opportunity to have those communications. I've been in more than one, you know, call where apparently there was nothing happening. And as soon as we talked to marketing or to sales, they go, oh, actually, by the way, this and this is happening in the background, or you talk to HR and say, actually, you know, we're gonna have to let somebody go and there's gonna be a big spend, you know, to pay for their, for their last payment. So we won't have this visibility. You know, this is, these are things happening in the background. And unfortunately we have to kind of step in and make sure that, that, you know, communication gap is filled there and it's up to us. Yeah.

So we had a question here from Tanya real quick that I think kind of builds on what we've been talking about. Going back to the last poll question, it says, ideally, wouldn't it be at approval if it was not in the budget? Does it really matter before that? On the part, does it matter before that? I would say yes. The reason I say that is you're doing forecasts every month. Budget is annual. Let's say somebody knows they're gonna have a big huge expense, but it's not gonna be till Q2 or Q3. You have time to move things around, to adjust the forecast, to make changes. So for me, it should be anything material. In material spend, I'm not as worried about. But over a certain threshold, anything that's going to move the needle, those conversations should happen before approval. And any thoughts to that, Rafaela?

I agree. And that's where it really comes in, you know, things like purchase orders. You know, if you have that system set up with your company, great. If you don't, something to look at, definitely. There's definitely value in doing annual POs and purchase orders because that gives you that visibility or gives AP and FP&A, finance in general, that visibility that that's to come, right? And so we can anticipate from an AP side to make sure that, you know, we get the invoice and, you know, from the operational side, but from the FP&A side, strategy is when are we getting this cost and we can anticipate for it. So I think just in terms of that, obviously I work with ApprovalMax. Being in the business, I'm fortunate enough to be in a business in a finance function where we use our own product and it's not just engineers in the background creating something. We are the guinea pigs, right? And so finance team is directly feeding, you know, pain points and what, you know, how could my job be easier if I had this tool or this AI capability? And so I think with purchase orders, it's the same. So ApprovalMax gives us this ability, but in reality, you have to look at what you're using today. And maybe today it might work because you're at a smaller end. But as you scale, you have to remember to set yourself up for that because otherwise it's going to break really quickly.

Yeah, and I, I think you said something, you know, really important there. One of what you talked about, you know, kind of recurring, setting those up right, having it in your process where maybe you're approving 3 years and you have it all set up so it's there and it's not, you know, they know on the balance sheet and it can just get expensed every month versus why did it get missed this month, why isn't it there when the new year starts. A lot of that is your setup, so You know, there is a structured process to this. So it's going to start with the whole spend request, and that request then should get turned into approval and commitment process. Okay, got approved, I got it committed, they've approved the timing. Sometimes they'll approve the dollars but say, look, we have to figure out when we can spend it, like let's hold it off till Q4 or next year, just depending on, you know, business needs and priorities. Then you have that whole invoice process, and then at the end of that, really that consistent posting to the general ledger. Which can be extremely difficult. I started a role where we just created a new shared service where they consolidated 50-something acquisitions they'd done over the last decade and started to do all the accounting in one location. And they're all coming from different systems, different chart of accounts, different legal entities. Oh, it was that first year or two, our PO process, everything, it was just a nightmare before we got it all structured and clean. Because there were so many different processes and ways people did everything. And that gave me a real appreciation for the importance of having a well-structured process. We could have had a great communication, great business partnering, and still had a mess because there were so many different processes. So I'd love your thoughts a little bit more on just kind of how this process goes when it's working well. What does it look like to you? So What's the ideal for our audience? How would you describe that?

I would say definitely a clear purchase request process. You know, you have to have estimated amount. What's the seasonality of these costs, these expenditures that are coming through? Are there any OPOs that maybe we can look at as an alternative? The next part would definitely be the structure of how these costs are being allocated and classified right across your budget, how you set out your budget, and then ultimately how they're being recorded into your, into your GL accounts. And so departments, cost center, any tracking categories that you've predefined, you know, within your corporate structure, but also with budget. You have to avoid last minute, you know, whose budget does this go to and where do we put this cost again? Or this vendor who signed up for this vendor, these kinds of things. If you iron them out at process level before the spend happens, then it would just make everything a lot more smoother. The same way that you keep your vendors informed of, you know, which entity are you meant to be billing and if there's a PO or, you know, a person or an email that you should be sending these out to. I think all in all, that's where workflows and approval workflows work really well as well, because when you have approvals happening in email, in Slack messages, or, you know, messaging systems, that's where things start getting lost, you know, in communication and along the way. And the time and efforts to put all of that together is very difficult. And so when the requests are structured and you have your workflows rules in place, It just automates everything and makes everything very beautiful. And AP is definitely one of the departments in finance that I see today that are the most manual in a lot of companies. People haven't seen that, you know, there are tools out there, there are resources out there, there's AI out there, you know, that can help as well. There's lots of opportunity. Approvo Max, for example, it allows you to have very complex workflows. You know, it might be that all of this department's cost goes through the budget owner. However, the budget owner potentially won't have time to look at the small dollars, so he can delegate, you know, up to a certain threshold to somebody else. Or maybe this particular vendor belongs to a different initiative, so it will be delegated or assigned to someone else. And these kinds of workflows are really hard for you to get out of a NetSuite, you know, or a QBO. You really need to outsource to get that. And ApprovalMax has that functionality, for example. So Once the data is captured, it's one, you know, there's the capture system, which is really effective. It captured that, suggests to you where to allocate that based on previous history. And that makes our life so much easier to keep it compliant and consistent across, you know, all months. Yeah.

Next, we're going to talk a little bit more about my favorite topic, data quality. Everybody loves data, right? But before we get there, would love to ask you just one more question, Rafaela. I'm sure we have some people in our audience that, you know, said they don't have any visibility until it hits the GL, as they mentioned. So if they don't really have anything in place, they're just kind of scaling, maybe they're the first FP&A hire or new controller, and they're like, I got to get a handle on this. How would you recommend they start? Obviously, you're not going to bring in a tool on day one. So what are some things they can be doing and that they should be thinking about if they got to go to the business and say, look, We, we got a process here. I can't continue to herd cats or our forecasts are going to continue to be off. And so how should they maybe think about that process? Any thoughts on getting started?

Yeah, for sure. You should definitely look at— this is something I do myself. Sometimes I come into a business and there aren't processes in place, and that's because they're startups and they're scaling. And so that's, it's not how they were prearranged, right? And so there's no structure there in the finance or in the approvals or even a budget in place, to be honest. They were just rolling pulling actuals and maybe adding a percentage as a markup, you know, that was their, that was their forecast. And so definitely have conversations, define the budget owners, define the departments that you are going to be reporting on, what makes sense to your business. It might be that geographical locations make sense. It might be that reporting on the product P&L structure makes sense. So first define what the intention is from a board perspective and investor's perspective, if that's your case. And then start defining how and when you could start integrating. Change management is a lot harder than it sounds, you know, in getting everybody educated and on board with new processes is very, very difficult. And so under— if you allow the budget owners and the team, you know, to engage and understand why that you're, you know, you're putting them through this and why there's a new process and what outcome you're going to get from it, that's normally a great starting point. Another thing I normally do is I probably start with the smaller departments. So the smaller volumes, work my way up, you know, to the bigger so that you can test, you know, use the guinea pigs, maybe the smaller ones, or the alternative, you might want to start with your hardest department, you know, integrating in these new processes, because if they work, everybody else, you know, you would have seen all the variables by the time the other departments come through.

Thank you. Great, great advice there. And if anyone has any questions on anything she said or anything we've talked about so far, go ahead and put those in the chat. We're keeping an eye on the window. We'll also have some time at the end. So let's talk data quality, because I've seen where the process is supposed to work well, and maybe the approval process works well, but that doesn't mean it's always getting coded correctly or the entire process is working well. So I like to joke, Art, that, uh, the way I define an FP&A professional's job when it comes to data is that we spend 80% of our time cleaning data and 20% complaining about spending 80% of our time cleaning data. So anyone who's worked in FP&A can probably relate to that. I've definitely had some roles where I feel like all I'm doing is cleaning data. And the bottom line is you have to have good data for variance analysis. Typically you need good data in your actuals. You also need it in your budget. And I'll share a funny story. It's kind of on the budget side, but it gets to the, to the point of the importance of clean data for that variance analysis. Our business, our corporate office, decided we are too far ahead of plan and they were going to change all our targets in the budget for the second half of the year. So they increased all our targets, but yet they didn't have us submit it. So literally the numbers were so hard to understand that they did one month. I finally wrote in my commentary, I have no idea what's causing the variance because you made up the numbers and I don't know how you made them up. I only did that once. I'm sure they didn't appreciate it, but I finally just gave up. So Bad data, that we just can't do our job right, you know, garbage in, garbage out. The type of things we see here though are those frequent reclassifications. Every month you're going to the accountant, can you move these 10 things? That's a sign something's broken in your process, you know. Missed expense forecasting, expenses are in the wrong line or the wrong company. You know, expenses that are believed to be one-time ending up in recurring, and then the, uh, you know, accruals not happening. Almost all these generally are a data breakdown somewhere along the way in your process. So, you know, I think this gets back to it, Rafaela. How much of this is a data issue versus a process issue in your mind? When you see broken data, where do you immediately go?

Process 100% of the time. Data is the foundation. But regardless of whichever AI resource you have available to you, it's just going to replicate your data. And so it is definitely linked back to your process. I think, you know, you have to have these sessions where you're deep, especially if you're an FP&A and you're seeing that this is consistently becoming a problem when you're going back and you're, you know, reclassing expenditure and it's not tying back to your, you know, maybe your guidance or your outlook or the what was agreed. You have to have debrief meetings with your AP team, with the budget owners, whoever is pushing those bills through. And that's where it's really important for you to try and lock in those processes and also try to find a resource that can help you navigate that, you know, in the beginning while people are learning. And so that's why AP tools, you know, workflows are really, really important because they allow you to have consistency in the booking. And so if something is off, you can go and you correct that allocation, or for this vendor, it's this GL code, it's this department. And once you set that structure in place, you're going to eliminate, you know, probably a lot of your problems, to be honest, you know, and you have to have those debrief ones because we're not talking about one-offs, right? One-offs will happen. And, you know, one-off costs will happen where maybe there's going to be a query on, you know, how is this the best approach to be classified? But if we're talking about recurring, like you were mentioning, and I'm spending all this time, everyone, something is wrong, right? FP&A adds value to the business. It's a commercial, if you like, position. They shouldn't be redoing, you know, management accounts or redoing, you know, bookings and reclassing. That should— that's not their place. They should be focused on more, you know, value-building exercise and function.

100% agree. More value-adding data. Data is necessary. Cleaning data sometimes can give you a better appreciation and understanding, but if that's the 80% of your job, you got a problem. Now, you know, I think one of the things is we talk about process and data, and I'd love to get your thoughts on this. You know, if we have a ton of bad data, should we just go in and clean it all up, or should we fix the process first and then do a data cleanup? Any thoughts on that, Rafael? I have some thoughts, but I'd love to get yours first.

Yeah, sure. This happens, right? I think this happens because sometimes it's not even about the data cleaning. It's about a process restructure. It's about a corporate restructure, if that makes sense. And so, you know, the data is going to change. The cost might be reclassed naturally, you know, within maybe a chart of accounts restructure that you might do or, you know, whatever the case may be. What normally I like to do is first understand the problem, do a design of what you need it to look like, and then go back and make the adjustments because Sometimes if you don't go back and also stipulate how far back you want to go to make these adjustments, right? Because we're limited to that as well from an accounting and GAAP perspective. There's only so much that, you know, that we can go back to and only if it's material. And obviously, depending on your jurisdictions, the period might be locked. You know, there's so many variables, but definitely go back and adjust if you can, maybe even if it's within the year, the financial year, because from a comparison and modeling perspective, you have to be able to compare apples for apples. And if it's the case that your costs were all around and now it's here, how will you be able to manage that and really visualize, you know, what's happening and what's the trend if the costs are going to be every month changing and all over the place? You have to have consistency for that. And I think with the FP&A, when they're seeing surprises, this is, this is really frightening, right? They should be Signals, slight signals. And then we were talking about this before the webinar. You know, we talk a lot about, you know, cash is king. Cash is king. Communication is king as well. There should be a whole book about it. There has to be that communication in place. You have to learn the business. Don't work in the silos, you know, don't get caught up in that. You really have to understand your business because then you'll be able to look through and make sense of what's going on and where the movement's happening.

Yeah, and I, I'm gonna guess there are a few books on the communication for sure. But yes, communication and cash are king slash queen, as we, you know, often say. And you know, my thoughts when it comes to data and process, and I, I had a CEO, CFO, that he's like, look, I'm not going to pay to clean up any of our data. We can do that all— we had about a year or two years back, we had to go— we can do that all as one big process. I'm happy to pay for it. But first I want the process fixed so I know the data is coming in right.

Yeah.

Otherwise all we're going to do is we're going to pay someone to clean it again in 6 months. So there's a couple things you have to decide how far back you're going to go. Often with accounting, you have to sometimes clean it up manually so the books are clean. You have deadlines, but I think some— you need to look at that and say, okay, let's do the immediate cleanups we have to. Let's hold the kind of later stuff if we can until we fix the process. That's what I always think is ideal. As much as possible, always fix the data at the source. Not always possible. Sometimes we have to do it at, you know, where we're at, but that, that's always the way I try to think about it.

Yeah.

And there is a comment here from Sadiq who said, one of the best ways to force getting clean data is to tie every dollar spent with profitability and ROI metrics. If you can do that, yes. Sometimes that can become an exercise in futility depending on the size of the company and how you allocate everything to accurately tie it. So, you have to balance how much work that is. There may be simpler things. But totally agree, the more you can tie it to what they're measured on, what they're incentivized on, as we all know, the more likely you are to get clean data.

Right?

If somebody knows, oh, I'm going to be measured on how often my PO's right, and it impacts their bonus, they're probably much more likely to submit an accurate PO. Yeah, you'll have a few that won't, but then you probably know that's a person you don't want long term. So it's kind of how I think of that, right? You know, as we've talked about the data and, you know, we talked about reclassifications, you deal with a lot of one-time recurring. We have our third poll we're gonna ask Before we move into how do you balance empowering people without losing control, so the question we have here is how often do expenses labeled one-time end up recurring? So would love to know how often you see things that are mislabeled. You know, really is kind of the heart of this question, but one-time versus recurring. So what do you think? Do you have a— which one do you think will win here, Raffaella? Which one do you expect?

Um, I would say more frequently than we would like.

So we're gonna go with just to be different, I'll go with occasionally, even though I probably agree with you on frequency.

Yeah, realistically, I think occasionally. I think if you have more than that, then again, there's an issue there.

All right, well, we'll find out here in a second. And so while we're doing that, we have a question. I'll let the, uh, ApprovalMax team respond, but someone asked, how does ApprovalMax check on budget during approval process? Does it integrate with FP&A where budgets are pre-approved? I, I know a little bit of this answer. They did show me, I know you can load budget and you can have spend go against the budget. Anything you want to add to that question, Raffaella?

That's exactly right. You can upload your budget, which makes it really useful. You can also, when you are approving, if you have a PO in place, even if let's say you don't have a budget in place, but you, you know more or less what you want to spend for that you know, particular vendor or, you know, that particular item, then you can create a PO and it will offset against the PO. So you know how much is, if you're on track or if you're overrunning as well, you know, what's the balance left over on the PO. That's very useful.

Yeah, very, very good to set up POs and expense everything against them versus setting up one every time. I've seen people do that and it's painful. Like, why am I getting one to approve every single month?

Yeah. So yeah, right.

Why don't we go ahead and close poll 3 and we'll see what the results tell us. So I should come back here in a second. All right. Occasionally was one, and not tracked or unsure about a quarter of our people. And so interesting. I would definitely encourage those that voted for that to think about how can we better track that and get that answer? Because if you don't, if you have no idea, it probably tells me it's a problem. Could be wrong. Thoughts, Rafaela, on that one?

If the people are unsure or not tracked, I would say, first of all, thanks for your honesty. I think a lot of, yeah, a lot of times we have problems in-house and we're not prepared to admit them, right? And so we have to look inside. It sounds very poetic, but you have to look at, you know, your business and you have to say, you know, where are we lacking here? Where, where are the bottlenecks? And I think if it's come to a point where you're not sure it is something, you definitely need to have some kind of structure or control in place, you know, for your own good, for the sake of the business. I would say, you know, we're talking about ApprovalMax, but I would even say get something like a trial on ApprovalMax. We have trials available. Have a go and see how much benefit it could add to your process. You know, ask the questions, you know, look, this is my problem. How can How can this support me? How can this help me? You know, because you need a tool that will work for you as well. It'll make your lives easier. So if, if you're unsure, not a good place to start from, but at least, you know, you've acknowledged and now, right, what's the next step?

Yeah, no, I, I love how you mentioned that, the whole idea of acknowledging, because, right, that's the first step. So often we don't want to admit we have a problem. So I appreciate that. All right. So we had another question here. Oh, okay. Never mind that. Doesn't look like that is a question we need to answer. So we're going to keep going here. All right. So this next section we want to talk about is empowering departments. Often finance gets known as the no police. Funny story around that. If anyone knows who Jack McCulloch is, He's been a CFO many times. He runs CFO Leadership Council. And he shares a story very early in his career. He would refer to the CFO, I think it was an intern or first job, he would refer to the CFO as CF No is what he called him. And it got back to the CFO. He found out he was calling him that and called him into his office. And funny enough, the CFO thanked him. He thought he was referring to him as CF No like he had a lot of knowledge, like you know everything. And he didn't correct him. He just said thank you and ran out of the office going, I still have a job. So, you know, kind of funny story, but I think it highlights our reputation. Often we're viewed as, you know, gatekeepers versus those that put guardrails in place and empower departments to manage their money. At the end of the day, they're the ones making revenue. We are not, you know, in finance, I've, I, I've seen a few LinkedIn posts where people say finance is a revenue center, and I always just cringe. I'm like, no, we're not. We don't generate revenue. Can we create value for the business? Yes. We only do that by empowering the business and being there to support them. So I'd love Rafael to get your thoughts from your perspective What's the key to ensuring departments feel empowered while still maintaining control over spend, right? Because we have to have those checks and balances in place. But if they don't feel empowered, we have a problem.

Yeah, I think when you're a smaller organization, it's very easy to keep all of the approvals through finance or through the FP&A team. So if it's not in the budget, you're rejected. And I think we have to change that view a little bit around, especially depending obviously on what business structure, you know, or corporate structure you're in and what industry. But the idea is, like you said, to empower the budget owners. So the budget owners have to have that sense of accountability from the time that they commit to a budget with their management team or their board. They are owners of that budget and they have to be accountable for it and buy it because if, if everything is going to be down to finance to approve, Once you scale, it's going to be impossible to look at everything and be involved in every conversation and understand every marketing and sales initiative. And why are you doing this event or that event? They have to be the owners of their own and also accountable, obviously, for their own budget structure. So with this sense, you know, I think it's important when you have finance in there as a, as a last approval, kind of like an FYI, you know, you're being involved in the process. So you have visibility in case you want to challenge it for whatever reason that's possible. You can create a workflow where finance is part of your workflow, but in reality it's down to the budget owners. It has to be down to them because it might be that from a budget perspective, marketing spend was, you know, accounted for in Q1, but it makes more sense to use it in Q2. And, and finance won't have that knowledge. They won't have that expertise to, you know, void that or, you know, or say no, right? Like you were saying. And so I think guardrails is definitely more the approach as opposed to you know, direct gatekeeping and saying no to particular spends. I think when you have a predefined— and just in terms of how do we push that through, right? I think self-service is probably the best structure. So you have to define the clear approval thresholds and realistic ones. Obviously, you don't want the CEO approving $5, $10, $1,000. You probably want to delegate that and open your structure a little bit more in terms of approvals. But definitely, have a bill approval workflow in place, you know, predefined routing, you know, so there are no email chains, you know, ApprovalMax, for example, you get prompted whenever you have to approve something, which is great. So finance is not handholding the approvals as they go through or down the workflow. It's actually just prompt. It just prompts the next person in line. So really good. And also urgent payments, that's always a complicated one, you know. And so when you have the workflow in place and everybody is prompted for their approvals. Everyone knows exactly what's happening, everybody can engage, you know, and that urgency and push it through quickly. I think in terms of, you know, the key point in all of this is definitely accountability, education, you know, they might get it wrong. And when I say they, I mean departments or budget owners, they might get it wrong, you know, the first few goes, but it's an education process, it will take a few goes or a few budget seasons for them to understand, right, this is how we budget, it's accrual accounting or cash accounting. And getting their heads around it, but they have to think like this is their business, which, because it is, right? It's their business at the end of the day, their, their little business, if you like.

Yeah. So, you know, thank you for that. I, I think thresholds are really important. I worked at a company where we were approving very small transactions, stuff that was very small was going up to the CFO, and this was a global company. You know, 10,000+ employees, was not billion dollars, you know, billions of dollars of revenue. And I'm like, why are we doing this? And so there's that balance. And, you know, thresholds are very important. They need to be high enough that people feel like they can manage their budget, but not so high that finance doesn't get to see things that are big. Because if it's large enough You need that opportunity, especially if you're, you know, you've created a budget, but you're more letting them manage and making different changes. If there's really large spend, that should probably prompt a conversation, even if it is within budget. If it's outside of budget or they're behind budget, you might lower those thresholds. So I think it's— there's some practicality and communication and thought that comes into this. There's definitely not a one-size-fits-all approach. Yeah, the thresholds or the approval delegation, but they have to be there. And, you know, funny enough, I really started to realize how big of the problem, problem is, is I do a lot of training for companies, and it can be finance and accounting staffs, and we try to customize the training. And I still remember we've had it one or two times, in particular in the training, like, can you address how finance or accounting should keep strong relationships while enforcing PO rules? You know, and so one of the sections we have is around, you know, managing tough— not a tough conversation, you know, tough negotiations. How do you manage those difficult conversations? And so that was an eye-opener to me of sometimes it can be really tough because you're going to have— we all have them, we've all worked in company where you have that one person that just no matter what will never follow the process, you know. And how do you manage that? So any thoughts or advice there on kind of Managing those difficult situations or when you feel like the education isn't working.

I would even go a step further, Paul. Finance is my priority, but maybe not marketing, maybe not sales, maybe not R&D. You know, they have something else. Yeah, you know what I mean? So, you know, getting an approval or, you know, make sure you give me your invoice by then, it might not be their priority. So again, I think in these situations, it's coming— it comes down to You know, when we say education, it's communication, right? Is you having that chat where you sit down and you explain the numbers and you, you know, allow them to understand why we're doing it. Understanding the why is really key. Now, if you've obviously explained the why and, and you explain the process and this is recurring, then you might want to have to escalate. And this happens as well. Sometimes we have to escalate to the next, the next person to support us in pushing the message through. In finance, we have that difficult task of, you know, of having these conversations. And I think it never goes away, to be honest. It will always stay there. And some, in some places it'll be a little bit easier because everyone understands and just gets it. But in some places you will have to go that extra mile to get everyone engaged and on board.

100% agree. No matter what, you're always gonna, you're gonna have some challenges. That's just part of it. In some companies it may be little. Some, it may be a lot. And so you're gonna, you're gonna have to manage those. All right, so I saw a question came in. I will leave that to the ApprovalMax team. Someone asked about a potential integration with another software in there, so just let them know that's out there as a question. Come back to our poll question. So let's do poll question number 4. You know, we're getting close to our Q&A here, but we got one more section here. So I'd love to know, where do approvals mostly happen in your organization? So would be curious what you're most, you know, what you're seeing in your company. Any guesses, Rafaela?

I would say emails. I mean, unless they have a system in place, email is, is definitely the big one nowadays too.

Yeah, it's amazing how often things are emailed. Wouldn't surprise me at all. I'll, I'll go with a different one. I'll go with a mix of everything.

Okay. Yeah.

So we'll give another 15, 20 seconds. As I always like to say, just because an email occurred does— it does not mean communication has happened. So often we think, well, I communicated. You don't even know if the person read that. So, you know, without, I think, some kind of interaction, it's not necessarily communication. So that's the one thing I would caution with emails. We wait for it to come in. And JK asked everyone, how do you expedite the close process? So I don't know that that That fits here outside to say, you know, the better you have an approval process, the more you have cutoffs around when you get approvals, when they have to submit invoices, allows you to expedite the close process. So I won't spend more than a few seconds here because I want to kind of keep this on the approval, but also that close part, it's having the proper cutoffs in your approval process to ensure accounting gets things so they can accrue. and you can close the books on time. So it's really just part of your process. You need to set the appropriate dates, work backwards from when you want to close, what are the dates you need the data by, and then enforce those, those dates. That would be my advice there. And so we'll, we'll leave that second part to when we get to Q&A here. All right, let's go ahead and bring up the results for the poll question. Wow, so 54% say they have a system. Next is a mix of everything. Nobody's doing it in spreadsheets. Wow, that might be the first time we didn't get a spreadsheet. Little disappointed there. So, and then we have email came up in third. All right, so let's keep going here. So let's kind of start to bring this all together as we head into wrapping up and Q&A, right? As FP&A professionals, we all know it starts with understanding where things are breaking down. Same with accounting, finance. We need to understand where are we losing visibility. I think Rafaela earlier made a great point. If you have a lot of data issues, map out the process. That will usually help you understand where it's broken, where you're losing visibility, where the weaknesses are. And then, you know, you need to implement, implement processes to address those issues, making sure you're aligning all this with the budget. It's great that you can have the budget in ApprovalMax. You can see that, that's important. And then that next thing is you're kind of really trying to make sure you're doing things you need to is you got to work closely with accounting. Even if you get that all that upfront stuff right, if the coding is a mess, your variance commentary is still a mess. You're creating a lot of work. Reclasses— redoing journal entries are expensive. It takes time, it takes resources, it takes people. So you need to make sure as much as possible that your communicating really closely with accounting in addition to the business. So I'm curious, Rafaela, do you have a checklist, like kind of a controller checklist you like to use for managing this process?

Or— Yeah, for sure. I think, well, I think it goes back to what we started talking about. A big spend doesn't just happen, right? So with, we're not talking about, you know, small dollars, we're talking about big material spend here. And so we have to make sure if these are coming through, Debrief. Why did it come through and we weren't made aware? It might be that you need to implement processes as you go. So processes can't be set and left, right? They have to be always updated and challenged and revised as you go through the process because your business will change, your business needs will change. It might be that you, you know, find out that you have a tax liability all of a sudden. And so negotiations with tax auditors will vary from one week to the next. And so your liability might be going up or down, you know, if that's the case. And so these are just some of the examples where you have to be informed, you have to stay informed, and you have to keep communicating and reassessing that the processes still make sense, you know, and where you can update. And about the coding as well, you know, we talked about debrief sessions after a month and what went wrong, right? And how can we make it right for next time? Are we— is this the third time that this is happening and we're still coding incorrectly? Can we trace these approvals easily? You know, that's, you know, especially for audit season questions. And so this is really important because when you get down to audit season and you have your auditor asking for a huge list of approvals, if you have to go and you fetch these in your emails and your messaging, then, you know, everywhere, it's very messy and it requires a lot of effort. And so having an audit trail, like in ApprovalMax, we have an audit trail that imports into Xero. Amazing, you know, so I can give access to my Xero account, you know, to my auditor. I can say, go ahead and self-service whatever you need. You can just go there and get it yourself. So these extra things, you know, when you're looking forward and all the effort that your team is putting into it, they make a lot of, a lot of, a lot of sense. In terms of how you can start this, start small, like we said, you know, and then you transition over time. You phase You phase your engagement in the other departments on this new process and fix the highest impact first, right? A lot of times what we'll see is if you can nail the big tickets, then everything else will kind of come into place, right? But at least the big tickets you can start reporting correctly and that will really be helpful. I would encourage everyone to definitely look at their approval process. You know, what are you doing today? What's your spend workflow, what processes you have in place, does it still make sense? And assess that with your team, not from a top-down, but also bottom-up, right? Because that's where your pain points from the people that are on the day-to-day, that's where it's going to come out, right? When you talk to the team directly, to the AP, to the FP&A, and what's going on, why is this happening? What do you guys recommend? I'm sure they can put a lot of insight into that conversation as well.

No, thank you for sharing that. I think a lot of, you know, great, great information there. I think we're going to go ahead and wrap up here before we share kind of our final thoughts. We'll open our last poll question. I'll share a few thoughts and then I'll give last word to Raffaella before we move to Q&A. So just let us know if you'd like more information about Approval Act. You can click yes, no, maybe. There would be great to know. So, you know, my final thoughts is at the end of the day, this is, this comes back to the 3 things I mentioned at the beginning. You need open communication. You need it with your accounting. You need it with your business as an FP&A person. You need strong business partnering and relationships as that will limit the surprises. They'll know they should come to you and have those conversations when they're thinking of making changes to big spend. And then you need a good process. Put that process in place, review it periodically, review it for the approval amounts, for the thresholds, for the delegation, for how good the coding is and how structured it is to make things— sure things are hitting the right place. And if you do that, you should be able to manage this. And over time, as you scale, what— how that process works, what tools you use can change. But those 3 things are always going to be really important. So those are kind of my final thoughts on managing to spend. It will make your life a lot easier when you can do the variance commentary with confidence on your expenses versus what surprise am I going to get this month? Because nobody likes that. It's never fun to explain it to the business. So your turn for last words there, Rafaela.

Yeah, thank you, Paul Barnhurst. Better forecast, I would say, definitely happened with, you know, the improved communication with processes. And all of this happens before the money goes out. And I think if you can really look into, you know, the conversation we're having here again and just pinpoint, you know, this is something I need to work on, this is somewhere I can look into, I think you can make great changes in your process overall and get better results.

I agree. And I love that making, making those processes, you know, improvements and getting better results is the goal. Well, why don't we go ahead and we got a few minutes left, so we'll open it up to see if there's any questions here. Someone asked, does having the right reconciliation controls help with the approval? I don't know that it necessarily helps with the approval since it's on the backend, but it does help with your month end. It's definitely important. Any thoughts there from your end, Rafaela? But I don't know that the— to me, reconciliation isn't necessarily improving the controls around your approval.

No, not about the approval directly. I have to agree. Maybe the way it was worded, you know, it could be worded a little bit different, but no, I don't see the link there.

Yep. Okay. So we'll give it just another minute here, see if we get any other kind of questions to come through, and we'll answer those. We have another, I think, a minute or two. And then we'll, we'll wrap up. Go ahead. If you have any questions, throw those in the chat. We'd love to get them. If not, I'll assume Rafaela answered everything perfectly. She's like, all right, we did get— see, We got one here. How much does inconsistent GL coding really impact, impact FPA analysis and variance explanation? So I, I will say a lot. I've had times where we forecast things in one line, it shows up in another, and it's not that any of them are hard. It's not that I can't figure them out. It just adds a lot of unnecessary time and then, you know, every month you're explaining why does this line have a budget of $500,000 and $100,000 of expense, and this one over here has $500,000 of expense and $100,000 of budget, and it grows throughout the year. So I, I definitely can be a real challenge. Any thoughts to that one, Rafaela?

Yeah, I would even like to add, Paul, definitely what you said about, you know, having budgeted in one GL and then having another GL where the extras are actually coming in. But I would even say the inconsistency from one month to the other, let's pretend that some of these costs are going under your cost of sales. And then at some months, they're going under expense, that will significantly change your outcome, you know, on your bottom lines.

Yes.

And, and the biggest problem with that is, you know, you're trying to tell a story with FP&A. And how are you going to tell that story? You know, you know, you can say, yep, there's a variance here. So it looks like maybe this happened. But in reality, if you're going to dig in the numbers, you'll see it was it's an accounting error from the start. So yeah, 100% will impact your, your commentary in your FPA.

100%. And beyond the commentary, it could impact decisions you make around the business. If you have big misclasses, like you have something that's above the line that should be below the line, because then, you know, how you think about cost of goods sold, how you think about other expenses are very different in the decisions you make. And I've seen that. I've seen ones where we've had to make big adjustments because it wasn't done correctly. And so it can also impact decision-making if it's, if it's a big enough issue. Hopefully it doesn't, but it definitely can.

Yeah, it's misleading at the end of the day. So you really got to look into that.

Yeah. Yeah. And, you know, use, use judgment. If it's immaterial, if it's small, let it go. If it's 3 years old, annotate it versus trying to correct it all. So, you know, use your judgment there. But it is important to get it right. All right, I think, I think we're about there. I think we'll, uh, go ahead and, uh, wrap up. So a couple things. First, thank you everybody for joining us. Second, you should get an email with the recording, so if you didn't get to catch all of it or you want to share it or watch it later or whatever, go ahead and do that. And then finally, just a special thanks to ApprovalMax for hosting the event and for Rafaela for joining me. Really enjoyed chatting with you. So any, any last thoughts, any last words from you before we end.

Thanks for having me, Paul. Really appreciate it. It was, it was a lot of fun. And this is definitely a conversation that we could keep going on for hours for. I would like to invite everyone, you know, if you, even if you do have an approval workflow in place or an AP automation in place, have a look at ApprovalMax. You know, there are trials that you can go for and see if it works for you.

All right, perfect. Well, thank you for that. And thank you everybody for joining us. We hope you have a wonderful rest of the day.

Thank you. Bye everyone.