In this innovative episode, Paul Barnhurst experiments with Google’s AI tool, Notebook LM, and transforms previous guest interviews into an AI-generated episode. He explores the insights and best practices in financial modeling, as shared by veterans Scott Rostan, founder of Training the Street, and Ian Bennett, a PwC Australia leader with extensive experience in managing large modeling teams.

By leveraging AI, this episode explores how technology can recreate meaningful conversations with industry leaders, providing an interactive look at best practices, common pitfalls, and the evolving landscape of financial modeling. Paul explores advanced technical skills and the human elements that are essential to successful financial modeling.

Key takeaways from this week's episode include:

• Four essential key pillars for excelling in financial modeling

• Strategies for maintaining simplicity and auditability in financial models

• Emerging tools in Excel and functionality of traditional financial modeling

• How financial modeling expertise goes beyond technical skills 

• Insights on the potential future of financial modeling with AI advancements 

Quotes from the Episode:

• "Even in the world of complex finance, sometimes the simplest approach is the best approach." - Scott Rostan

• "It’s about seeing the big picture, understanding your client’s needs and using your modeling skills to craft a solution, not just a spreadsheet." - Ian Bennett

• "AI will get really good at those technical tasks, cleaning up data, maybe running some basic forecasts, but that just frees us humans up to focus on the stuff that requires creativity, critical thinking, and emotional intelligence." - AI

In this special AI-driven episode, Paul Barnhurst invites listeners to consider how the field of financial modeling is both grounded in foundational skills and evolving with new technologies. It’s about connecting with clients, asking the right questions, and using your skills to drive better business decisions.

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Visit www.fminstitute.com/podcast and use the code “Podcast” to save 15% when you register. 

In today’s episode: 

[01:17] Introduction to the episode
[03:57] Lessons from modeling mistakes
[06:29] Four key pillars of financial modeling
[08:51] Managing large-scale models
[13:40] Excel’s power stack and future enhancements
[15:14] Modeling standards and best practices
[19:38] Excel’s longevity and AI’s role
[22:44] The World of fractional FP&A
[27:38] AI’s place in financial modeling
[33:16] Wrap-up and invitation for feedback

Full Show Transcript

[00:01:17] Host: Paul Barnhurst: Welcome to the Financial Modelers Corner. I am your host, Paul Barnhurst. This week we have a special episode for you that I'll be explaining here in just a minute. But as I've mentioned before, this podcast is where we talk all about the art and science of financial modeling with distinguished financial modelers from all around the globe. The Financial Modelers Corner podcast is brought to you by the Financial Modeling Institute. FMI offers the most respected accreditations in financial modeling, and that is why I earned my advanced Vance, financial modeler from the Financial Modeling Institute, and it made me a better modeler.

[00:02:04] Host: Paul Barnhurst: This week we do not have a guest for the show. We're going to have a little bit of fun. I had a guest cancel and I was trying to think, what could we do that would be different for this episode? What I came up with is notebook LM. That's a learning model that Google has come up with. Notebook LM allows you to load different content, YouTube videos, transcripts, whatever else documents, and you can ask it to create a podcast episode from those documents. So I tried it several times. I did probably 7 or 8 different episodes. They're relatively short. Most of them are ten minutes, maybe up to 20 or 30 sometimes, but I picked two that I thought would be interesting for you as a guest to listen to, and I'd love your feedback. Am I going to be replaced anytime soon or is my job safe based on these episodes? Let me know. Unfortunately, I couldn't train it to do my voice. So you get to listen to a man and a woman that are AI generated. The first episode we're going to listen to is a summary from an episode with Scott Rostan of Training the Street and Ian Bennett from PwC in Australia. So we'll go ahead and roll that clip. And these two guests are talking about the highlights from that episode.

[00:03:32] Male Voiceover: All right. So if you're the kind of person who, you know, practically dreams in spreadsheets, if Vlookup is like music to your ears,

[00:03:40] Female Voiceover: You speak our language. 

[00:03:41] Male Voiceover: This deep dive. This is for you. We are going deep into the world of financial modeling with get this: not one, but two absolute veterans in the field. 

[00:03:52] Female Voiceover: And we're going to uncover those career changing insights that they don't teach you in school.

[00:03:55] Male Voiceover: Forget the textbooks. So our guides on this journey. First up, we've got Scott Rostan. He cut his teeth building models on Wall Street, then went on to found training the street 

[00:04:06] Female Voiceover: To teach the next generation how it's done.

[00:04:08] Male Voiceover: Exactly. And our second expert, we've got Ian Bennett. He leads a team of over 50. That's right. 50 modelers at PwC Australia. 

[00:04:15] Female Voiceover: And if that's not impressive enough, he's also achieved: think of it like the holy grail of modeling certifications. 

[00:04:21] Male Voiceover: Okay. Hit me with it.

[00:04:22] Female Voiceover: The master financial modeler designation. It's like the black belt of spreadsheets.

[00:04:27] Male Voiceover: All right. So we're talking about serious credibility here. From Wall Street hotshot to a master modeler. These two have seen it all. And you know what they say sometimes the best lessons.

[00:04:37] Female Voiceover: Oh, absolutely. You learn from your mistakes. And let me tell you, both Scott and Ian had some doozies to share.

[00:04:44] Male Voiceover: Oh, I bet. Yeah, lay it on me. What kind of modeling mishaps are we talking about?

[00:04:48] Female Voiceover: Okay, so Scott told this story about a model he built. Now, this thing was so complex, so tangled. 

[00:04:55] Male Voiceover: Like a bowl of spaghetti code.

[00:04:55] Female Voiceover: Even worse, trying to track down a single assumption in this thing was like navigating a maze blindfolded. You're clicking through endless tabs, following sell links, just praying for a miracle.

[00:05:07] Male Voiceover: Been there. It's enough to make you tear your hair out.

[00:05:09] Female Voiceover: Tell me about it. And for Scott, it was a real wake up call.

[00:05:13] Male Voiceover: What did he learn from that experience?

[00:05:14] Female Voiceover: Simplicity. Even in the world of complex finance, sometimes the simplest approach is the best approach.

[00:05:22] Male Voiceover: Keep it simple, stupid. It's a classic for a reason. All right, so that's Scott's horror story. What about Ian? What kind of modeling monster did he encounter?

[00:05:30] Female Voiceover: Okay, get this. A 50 megabyte model.

[00:05:33] Male Voiceover: Wait 50mb. That's, like, bigger than some of the programs I use.

[00:05:37] Female Voiceover: No, you heard that right. 50mb. This thing had been cobbled together over years, passed down from analysts to analysts.

[00:05:44] Male Voiceover: Like some kind of digital heirloom.

[00:05:46] Female Voiceover: And the problem was, nobody really knew how it worked, not even the people who were supposed to be using it.

[00:05:51] Male Voiceover: Talk about a recipe for disaster. What happens when a model becomes that unwieldy? What are the risks of letting something like that just fester in an organization?

[00:06:01] Female Voiceover: Well, according to Ian, they were almost paid double their usual fee just to audit the thing, let alone rebuild it from scratch.

[00:06:07] Male Voiceover: Oof! That's expensive.

[00:06:09] Female Voiceover: Can you imagine the chaos? Wrong decisions being made, resources wasted. All because of this Frankenstein model that had spiraled completely out of control.

[00:06:18] Male Voiceover: So a cautionary tale for sure. It makes you realize that a model's purpose, it can really morph over time. And if you're not careful.

[00:06:25] Female Voiceover: Things can go sideways fast.

[00:06:27] Male Voiceover: Exactly. So how do we, as either aspiring or seasoned modelers, avoid these pitfalls? What are the secrets to building models that are not only technically sound, but, you know, actually useful?

[00:06:41] Female Voiceover: Both Scott and Ian agree that a strong technical foundation that's crucial. We'll get into some Excel specifics later. Some other good stuff. But those skills, they're just the starting point.

[00:06:51] Male Voiceover: So it's like having a toolbox full of shiny new tools. But if you don't know how to actually use them, you're not going to build anything worthwhile. So what separates, let's say, the tool user from the true craftsman, the master builder in the world of financial modeling.

[00:07:06] Female Voiceover: Okay. So Scott breaks it down into four key pillars. Four essential skills for aspiring financial modelers. First up, business acumen.

[00:07:16] Male Voiceover: And I'm guessing this goes beyond just, you know, knowing how to read a balance sheet.

[00:07:20] Female Voiceover: Oh, absolutely. Scott stressed that you need to truly grasp how a company actually makes money. You know, what's their business model? Who are their competitors? What are the trends in their industry? It's about seeing the story behind the numbers.

[00:07:34] Male Voiceover: Okay. So connecting those financial figures to real world operations strategy. Exactly. What's the second pillar?

[00:07:40] Female Voiceover: Accounting fundamentals. Now before you tune out.

[00:07:43] Male Voiceover: Yeah. Because not everyone's an accountant.

[00:07:45] Female Voiceover: You don't need to be a CPA to excel at financial modeling, but you do need to understand the language of business. How do assets, liabilities, equity, how does it all fit together? How does money flow through a business?

[00:07:57] Male Voiceover: It's like learning the grammar of a language before you can write a novel.

[00:08:01] Female Voiceover: Precisely. Now for pillar number three corporate finance basics. This is where we get into things like growth rates, interest rates, dividends.

[00:08:11] Male Voiceover: The levers that drive a company's value.

[00:08:13] Female Voiceover: Exactly. Understanding how those factors can impact a business's financial performance. And finally, Scott's personal favorite, we have Excel Mastery.

[00:08:22] Male Voiceover: All right, let's talk spreadsheets.

[00:08:24] Female Voiceover: Now, Scott admits that he's not an Excel wizard in the sense of knowing every single function. But he emphasized the importance of being incredibly fast and efficient. You know, keyboard shortcuts, mastering those core formulas.

[00:08:37] Male Voiceover: Time is money, right? Yeah, especially when you're billing by the hour.

[00:08:40] Female Voiceover: Exactly. So those skills, they free up your mental bandwidth to focus on the more strategic aspects of modeling, the analysis, the insights, the stuff that truly adds value. Now, while Scott focuses on, you know, building those individual skills, Ian's expertise lies in managing large scale modeling projects.

[00:08:59] Male Voiceover: Right, because he's leading this whole team over at PwC.

[00:09:02] Female Voiceover: Exactly. And making sure that those models truly meet the, let's face it, often complex needs of his clients.

[00:09:09] Male Voiceover: Which brings us to what I'm personally most fascinated by that human element, because it's not just about the numbers.

[00:09:16] Female Voiceover: It's about the people behind the numbers. Exactly.

[00:09:18] Male Voiceover: So how does Ian approach that side of things?

[00:09:21] Female Voiceover: Well, he had some really insightful things to say about that. He believes one of the most important skills for a financial modeler is; wait for it. Curiosity.

[00:09:29] Male Voiceover: Curiosity. Okay. I'm intrigued. How does wanting to learn new things translate to, you know, building better spreadsheets?

[00:09:37] Female Voiceover: So for Ian, it's about being eager to explore new tools, new approaches. You know, never shy away from a challenge. For example, he's incredibly excited about some of the recent advancements in Excel, things like Power Query, Power Pivot. Even something called lambdas. 

[00:09:53] Male Voiceover: Yeah. Hold on. You know, our listeners, we can't just drop a term like lambdas without at least a little bit of unpacking. What are those and why should we care?

[00:10:03] Female Voiceover: You're right. We can't just gloss over that. So lambdas, think of them as Excel's secret weapon for making your models super flexible without. Get this without writing a single line of code. Yeah, they're pretty powerful. Maybe we'll save a deep dive into those for another episode. Fair enough, but trust me. Game changer. 

[00:10:21] Male Voiceover: Okay so curiosity about new tools. New techniques. Got it. What else makes a modeler stand out in Ian's book?

[00:10:28] Female Voiceover: He really emphasized problem solving prowess. And I'm not just talking about, you know, fixing a broken formula here and there. Right? It's bigger than that. It's about seeing the big picture, right? Understanding your client's needs. Even those unspoken ones. 

[00:10:41] Male Voiceover: Oh, I See. Reading between the lines. 

[00:10:43] Female Voiceover: Exactly. And then using your modeling skills to actually craft a solution, not just a spreadsheet.

[00:10:48] Male Voiceover: So less Excel monkey? Yeah, more strategic advisor. 

[00:10:52] Female Voiceover: 100%. It's about using your skills to guide better decisions. Got it. And that's where you know those communication skills that client management all that comes into play. And actually Ian shared a really interesting story that kind of highlights this point perfectly.

[00:11:06] Male Voiceover: I'm all ears. Lay it on me.

[00:11:08] Female Voiceover: So he had this client right. And he built this crazy complex model for them. And technically it was flawless. Like it did everything they asked for. Down to the last detail. 

[00:11:20] Male Voiceover: Sounds like a job well done. What's the problem?

[00:11:22] Female Voiceover: The client refused to pay for it. 

[00:11:24] Male Voiceover: Hold on. Wait. Why? What happened?

[00:11:26] Female Voiceover: Because. And this is the key. Ian hadn't fully grasped what success actually looked like for this particular client.

[00:11:34] Male Voiceover: So the model, it missed the mark somehow. 

[00:11:37] Female Voiceover: They had this secondary objective, something they didn't explicitly say, but it was really important to them.

[00:11:41] Male Voiceover: It's like writing a beautiful symphony, but in the wrong key, you know. 

[00:11:45] Female Voiceover: Perfect analogy. And that's why Ian stresses this. Asking the right questions is so important. It's not enough to just be like, okay, what do you need this model to do? You got to dig deeper. Ask them, what does success look like for you?

[00:11:58] Male Voiceover: Subtle shift in language, but it could make all the difference. Because you're right. Sometimes, just by reframing the question. That way you unlock all this work goldmine. This goldmine of information. And it's about understanding, really, their motivations, what's driving their decisions. Sometimes even those things that they're not saying out loud, you know? It reminds me of this one time I was in this meeting.

[00:12:20] Female Voiceover: Oh, you got a story? Tell me.

[00:12:23] Male Voiceover: It wasn't quite as exciting as, you know, running into DMX at Denny's, but it was eye opening. We were talking about this new product launch. Okay. And on paper, the numbers looked fantastic.

[00:12:36] Female Voiceover: Right.

[00:12:36] Male Voiceover: But there was this tension in the room.

[00:12:40] Female Voiceover: Interesting.

[00:12:41] Male Voiceover: This hesitation. And finally, someone just kind of paused the conversation and they're like, hey, what's keeping us up at night about this? And that's when the real conversation started.

[00:12:49] Female Voiceover: There it is.

[00:12:50] Male Voiceover: Right? It turned out there were all these underlying fears about competition, about the market that no one had voiced until that point.

[00:12:58] Female Voiceover: Wow. That's a perfect example of what Ian calls the silence technique. 

[00:13:02] Male Voiceover: The Silence Technique. Okay, now you have to tell me more. 

[00:13:04] Female Voiceover: So it's so simple, but it's powerful. So, you know, after asking a client about their definition of success. Right, Ian? He deliberately pauses. He embraces the silence.

[00:13:15] Male Voiceover: He just sits there quietly.

[00:13:17] Female Voiceover: He lets the client fill that space. And it's amazing what comes out in those moments. You know, the client's true priorities, their concerns, those unspoken needs.

[00:13:25] Male Voiceover: It's like they say, sometimes you have to stop talking to actually hear what someone is saying. So with all this talk about, you know, client whispering and soft skills, we can't forget about the engine that's driving all of this. We got to talk about Excel itself. 

[00:13:40] Female Voiceover: Yes. And buckle up spreadsheet fans, because Ian had some pretty exciting things to say about the future of Excel. He's really hyped about this thing he calls the power stack.

[00:13:49] Male Voiceover: The power stack. It sounds intense.

[00:13:51] Female Voiceover: It is. It's like, imagine Excel as this command center. Okay, right. But now it's hooked up to all of these other powerful tools. We're talking Power Query, Power Pivot, power BI, Power Automate, power apps.

[00:14:04] Male Voiceover: Wow, that's a mouthful.

[00:14:05] Female Voiceover: And now there's this new thing, this potential game changer called fabric.

[00:14:09] Male Voiceover: So Excel's gone from like a solo act to having a full band backing it up.

[00:14:14] Female Voiceover: Exactly. And these aren't just flashy add ons. These tools can fundamentally change how you work automating tasks, visualizing data, even building custom applications all within Excel.

[00:14:26] Male Voiceover: I'm not going to lie, this is getting me kind of excited. What else got Ian buzzing about the future of Excel?

[00:14:31] Female Voiceover: He's a huge fan of those dynamic arrays and lambdas we were talking about earlier. He sees them as transformative for building really sophisticated, adaptable models.

[00:14:40] Male Voiceover: Like Excel's been hitting the gym.

[00:14:42] Female Voiceover: And here's what I love. It wasn't all just, you know, flashy new stuff. He also geeked out about this, like, seemingly small feature, something called the stale formulas indicator.

[00:14:52] Male Voiceover: Stale formulas. That doesn't sound very exciting. I mean, it sounds kind of technical. 

[00:14:57] Female Voiceover: It is. But it's like genius in its simplicity. Imagine this. You can instantly see which cells in your model have actually calculated and which ones haven't.

[00:15:06] Male Voiceover: Okay, now that you put it that way.

[00:15:07] Female Voiceover: Lifesaver for debugging, especially for those massive models Ian's working with.

[00:15:12] Male Voiceover: Right. I can see how that'd be super helpful. Now, I know both Scott and Ian are, you know, bullish on the future of Excel. But they also had some pretty strong opinions about specific modeling practices.

[00:15:24] Female Voiceover: Oh absolutely. Some hot takes in there. Like Ian he has a strict no circular references policy a hard line in the sand.

[00:15:32] Male Voiceover: Seriously, because I know a lot of modelers who swear by a well-placed circular reference. What's his reasoning there?

[00:15:38] Female Voiceover: He's all about keeping things clean. Circular references. They might seem convenient in the moment, but they can make your model a real pain to audit and understand later on, especially when you come back to it after a while, right?

[00:15:50] Male Voiceover: Transparency and auditability are super important, especially with, you know, model risk being a bigger and bigger deal these days.

[00:15:56] Female Voiceover: Exactly. And speaking of things, people have strong opinions about VBA.

[00:16:00] Male Voiceover: Oh, boy. Yeah. Love it or hate it? 

[00:16:02] Female Voiceover: Right. Ian's take it's days are numbered. With the rise of cloud based modeling and things like office scripts, that old school macro language, it's starting to look a little prehistoric.

[00:16:14] Male Voiceover: So maybe if you're just starting out, focus your energy on those newer technologies.

[00:16:18] Female Voiceover: Probably a good bet. Now, another debate that always gets people fired up horizontal versus vertical models. Which layout is king?

[00:16:27] Male Voiceover: Oh, the age old question: what our experts have to say?

[00:16:30] Female Voiceover: Scott being the educator, he leans towards horizontal models, at least for teaching. Makes sense. Easier for beginners to wrap their heads around, you know, but he's not dogmatic about it. Both layouts have their place depending on the model who's going to be using it. All that. 

[00:16:45] Male Voiceover: It's about having the right tool for the job.

[00:16:47] Female Voiceover: Exactly. Speaking of the right tools, those dynamic arrays we talked about earlier, the ones Ian was so excited about.

[00:16:54] Male Voiceover: Yeah. Starting to think those are a pretty big deal. 

[00:16:57] Female Voiceover: They are. Ian is all in on them. Thinks they're game changers. Simplifying calculations, making models more flexible.

[00:17:04] Male Voiceover: It's like the difference between building a house brick by brick versus using, like, prefab walls. 

[00:17:11] Female Voiceover: That's a good way to put it. And you know what else they both agreed on? No external workbook links.

[00:17:14] Male Voiceover: Oh, really? I'll be honest, I've been guilty of using those in the past. What's the issue there?

[00:17:20] Female Voiceover: They introduce way too much risk. What happens if one of those linked workbooks gets moved, renamed or deleted? Your whole model goes kaput.

[00:17:28] Male Voiceover: It's no good.

[00:17:28] Female Voiceover: Plus, auditing becomes a nightmare.

[00:17:30] Male Voiceover: So keep those workbooks self-contained.

[00:17:32] Female Voiceover: Got it. What about named ranges? Ian's a big fan. Says they make formulas way easier to understand, easier to audit, especially in those monster models he's dealing with.

[00:17:43] Male Voiceover: Yeah, that makes sense, especially when you're trying to decipher a formula six months later. Any specific tips on using them effectively?

[00:17:49] Female Voiceover: He did have one of those named ranges for multi-cell ranges, not single cells for jumping between sheets. He's got a whole system with cell references. 

[00:17:59] Male Voiceover: It's those little details that can make a big difference.

[00:18:01] Female Voiceover: For sure. Now how about this formal modeling standards essential or just nice to have.

[00:18:08] Male Voiceover: What do our experts think?

[00:18:09] Female Voiceover: Ian he's all about standards PwC. They have their own whole set of modeling guidelines. Very comprehensive. And he believes in that strongly. Whether it's your company's own standards or an industry recognized one. It just makes everything cleaner, you know reduces errors, makes models easier to understand, easier to audit.

[00:18:28] Male Voiceover: It's like having a common language, right. Makes collaboration smoother.

[00:18:31] Host: Paul Barnhurst: FP&A guy here and as you know, I am very passionate about financial modeling and the Financial Modeling Institute's mission. I have been a huge fan of the FMI for years, and I was super excited when they decided to sponsor the Financial Modelers Corner. I recently completed the Advanced Financial Modeler certification and love the entire experience. It was top notch from start to finish. I am a better modeler today for having completed the certification. I strongly believe every modeler needs to demonstrate they are a qualified financial modeler, and one of the best ways to do that is through the FMI's program. Earning the accreditation will demonstrate to your current and future employers that you are serious about financial modeling. What are you waiting for? Visit www.fminstitute.com/podcast and use code Podcast to save 15% when you enroll in an accreditation today.

[00:19:38] Female Voiceover: Okay, so the big question. Will excel ever die?

[00:19:42] Male Voiceover: Both Scott and Ian agreed. Not anytime soon. New tools will come along. Sure, but Excel has just got so much going for it. It's flexible. Everyone uses it. It plays well with other programs. 

[00:19:54] Female Voiceover: The cockroach of software. It'll outlive us all.

[00:19:56] Male Voiceover: Right. But that got us thinking. What about AI? Will robots be building our spreadsheets for us someday?

[00:20:02] Female Voiceover: Ooh. Getting futuristic.

[00:20:03] Male Voiceover: Right. It's a valid question. Both Scott and Ian, they acknowledged AI is advancing fast. And yeah, it's going to have an impact.

[00:20:11] Female Voiceover: But they don't see it like replacing humans entirely.

[00:20:15] Male Voiceover: Exactly. Yeah. Ian's take is that AI. It'll get really good at those more technical tasks cleaning up data, maybe running some basic forecasts.

[00:20:22] Female Voiceover: But that just frees us humans up to focus on the stuff that requires, you know, that human touch, the creativity, the critical thinking, the emotional intelligence.

[00:20:30] Male Voiceover: Interpreting the data, telling the story. All of that. 

[00:20:34] Female Voiceover: Exactly. It's not man versus machine. It's more like, how can we use these tools to, you know, enhance our own abilities, deliver even more value?

[00:20:42] Male Voiceover: I like that. So a few more rapid fire questions before we wrap up. Cell protection. Yay or nay?

[00:20:48] Female Voiceover: Ian says it depends who's the audience? What's the purpose of the model? If you need tight control over the inputs, lock it down. But if you're collaborating, a little freedom can be good.

[00:20:59] Male Voiceover: Finding that balance. Sure. All right. Last one. Do our experts believe that financial models are the number one corporate decision making tool?

[00:21:07] Female Voiceover: Ian's answer surprised me. He's like, models are essential, but they don't make the decisions. The number one tool in his book, storytelling.

[00:21:14] Male Voiceover: Because the numbers are just part of the equation. Being able to communicate those insights in a way that resonates.

[00:21:19] Female Voiceover: That's what drives action.

[00:21:21] Male Voiceover: Exactly. So as you build your next spreadsheet masterpiece, remember, it's not just about the numbers, it's about understanding the why behind the what. It's about those human connections, but asking the right questions and sometimes just being quiet and letting the answers come to you. And as we look to the future, it's about embracing those new technologies like AI and figuring out how we can leverage them to enhance our own skills and become even better, more valuable financial modelers. So keep learning. Keep experimenting. And who knows, maybe someday you'll be the one sharing your modeling wisdom with the world.

[00:21:55] Host: Paul Barnhurst: Let me know what you thought of that first episode from Notebook LM AI generated podcasts. Will I be replaced? Well, let's roll the second one. I loaded probably 10 or 15 different clips into Notebook LM, sometimes full episodes, sometimes short clips from different guests, and it randomly would just come up with different topics that it thought made a good podcast. Based on the episodes. This one is about fractional CFOs and how that's a growing area, how a lot of finance people and financial modelers are going into work for themselves to be a fractional CFO. It's only about ten minutes long, and so we'll go ahead and roll that clip here and I hope you enjoy it.

[00:22:38] Male Voiceover: Ever feel kind of stuck at work like just going through the motions?

[00:22:41] Female Voiceover: Yeah. That rut.

[00:22:43] Male Voiceover: Exactly. So today we're diving into this world of fractional FP&A. Basically, finance pros are ditching these like corporate gigs for more freedom and apparently more impact too. Right, right. We've got a ton of clips from that FP&A Guy YouTube channel.

[00:23:02] Female Voiceover: Yeah, love their stuff.

[00:23:03] Male Voiceover: So they've been interviewing a lot of these seasoned finance professionals. Yeah, the ones who've actually made that leap.

[00:23:08] Female Voiceover: It's a hot topic. And it's interesting because it's not always just about wanting more flexibility, although, I mean, who doesn't want that for sure. But there's this deeper shift happening, how we view work, especially in finance. 

[00:23:21] Male Voiceover: Yeah. Big time. And we keep hearing about this whole great resignation thing. Apparently finance people are leading the charge. One stat that really blew my mind. 70%: seven 0% of people think the whole budgeting process is, like, totally broken.

[00:23:36] Female Voiceover: Yeah, I've seen that. 

[00:23:37] Male Voiceover: So what's the deal? What's going on there?

[00:23:38] Female Voiceover: Well, it's not just budgeting, right? It's the whole system. Traditional finance roles, they can be so rigid, hierarchical. You know the drill.

[00:23:47] Male Voiceover: Stuck in a silo, churning out reports.

[00:23:49] Female Voiceover: Exactly. You rarely see the impact. Right. And it made me think of Randy Brown's story. You know, he was one of the professionals interviewed.

[00:23:56] Male Voiceover: Oh, yeah. What did he have to say?

[00:23:57] Female Voiceover: So he was talking about, like, literally escaping his tiny office. It was like a utility room. Ductwork in the background, the whole bit.

[00:24:05] Male Voiceover: Wow. So glamorous.

[00:24:07] Female Voiceover: Right? And now he's thriving as a fractional consultant. Loves it.

[00:24:11] Male Voiceover: So instead of feeling trapped, these fractional FP&A folks, they're building their own businesses, right? Choosing their own clients and actually having, like, a direct impact on the bottom line.

[00:24:22] Female Voiceover: Yes. And you know what comes up again and again in these interviews?

[00:24:25] Male Voiceover: What's that?

[00:24:26] Female Voiceover: Even with the perfect financial model, can't force a bad deal to be profitable.

[00:24:31] Male Voiceover: You can't squeeze blood from a stone. Right.

[00:24:33] Female Voiceover: Exactly. Randy Brown, he actually refuses to work with real estate clients for this very reason.

[00:24:39] Male Voiceover: Oh, interesting. Why is that?

[00:24:41] Female Voiceover: He's tired of being the fall guy, trying to make deals, work on paper when the fundamentals are flawed from the start.

[00:24:48] Male Voiceover: Right. I can see that. It's tempting, though, right? Especially with real estate, a financial model can seem like this magic wand. Just make the problems disappear.

[00:24:57] Female Voiceover: And that's where real expertise comes in. You have to understand the business, what drives it. And sometimes you just got to tell the client straight up, this isn't going to work no matter how we model it.

[00:25:07] Male Voiceover: Be the voice of reason. 

[00:25:09] Female Voiceover: Yes. A trusted advisor. Not just a number cruncher.

[00:25:12] Male Voiceover: Speaking of numbers, let's talk about everyone's favorite spreadsheet. Excel.

[00:25:16] Female Voiceover: Ah, yes. Excel. The bread and butter.

[00:25:19] Male Voiceover: But here's the thing. I get the feeling these experts don't just use Excel. They've got these, like, Jedi master skills. Unspoken best practices that honestly, most of us haven't even considered. 

[00:25:30] Female Voiceover: Absolutely. And not your typical format. Your sales tips either. We're talking next level stuff that can make or break your model. Like one expert, he was adamant about never, ever sending VBA code to anyone outside your team.

[00:25:44] Male Voiceover: Oh smart. I've been on the receiving end of some VBA nightmares, let me tell you. What's the work around there?

[00:25:50] Female Voiceover: Create a separate version VBA free just for sharing. It's a little extra work, but trust me, worth it. 

[00:25:58] Male Voiceover: Good tip. And what about linking to external workbooks? That's going to be up there in the danger list, right?

[00:26:02] Female Voiceover: You're preaching to the choir. Never do it. At least not directly to a workbook you don't own. Why is that? The owner, they reformat. Add a few rows, delete some columns, whatever. Boom. Your model is toast.

[00:26:14] Male Voiceover: Makes sense. So how do you avoid that?

[00:26:17] Female Voiceover: Copy the data you need into your own workbook and then link to that. You're in control that way.

[00:26:21] Male Voiceover: Control. I like it. Another thing that stood out was starting with fixed values in your model. Why is that so crucial?

[00:26:28] Female Voiceover: This was a big one for Ian Schnoor, another expert they interviewed. He was all about starting with what, you know, those fixed values and working backward. It gives you a solid base.

[00:26:38] Male Voiceover: Yeah, like building on solid ground, not quicksand. Got to have that foundation. 

[00:26:44] Female Voiceover: Exactly. And once you've got that, resist the urge to overcomplicate things.

[00:26:47] Male Voiceover: Oh so true.

[00:26:48] Female Voiceover: No need for these crazy complex models just to show off your Excel skills.

[00:26:53] Male Voiceover: Keep it simple. 

[00:26:53] Female Voiceover: Exactly. And another thing. Be your own worst critic. You know.

[00:26:58] Male Voiceover: Even experts make mistakes, of course.

[00:27:00] Female Voiceover: Which is why you always got to double check your work, scrutinize your assumptions, and approach your models with a healthy dose of skepticism.

[00:27:07] Male Voiceover: Catch those errors before they snowball.

[00:27:09] Female Voiceover: Yes, and that ties into another key thing: understanding your audience.

[00:27:13] Male Voiceover: Oh, right. Who are you building this thing for.

[00:27:16] Female Voiceover: Exactly. Listen to your users, figure out what they need, and then make sure your model answers those questions clearly and simply. Sometimes that means pushing back a little, offering them a better solution than what they initially asked for.

[00:27:29] Male Voiceover: Be an advisor, not an order taker. Kind of like that 80 over 20 rule. Focus on those key drivers. The ones that actually move the needle.

[00:27:36] Female Voiceover: Couldn't have said it better myself. Speaking of the big impacts, what about AI? David Brown; he even compared ChatGPT to having a really smart personal assistant.

[00:27:46] Male Voiceover: That's the million dollar question these days, isn't it? Are robots going to take over our finance jobs?

[00:27:50] Female Voiceover: It is a big one. And the good news is we've got some answers. But first, well, I can tell you no need to polish up those resumes just yet.

[00:27:59] Male Voiceover: Oh, good. So no robot overlords?

[00:28:01] Female Voiceover: Not quite. Look, AI, at least for now, it's more like a really powerful assistant.

[00:28:06] Male Voiceover: Okay, so what kind of assistants are we talking about here?

[00:28:08] Female Voiceover: Think about this. Instead of spending hours and hours, you know, just gathering data. Historical data.

[00:28:15] Male Voiceover: Right? Painstaking. 

[00:28:17] Female Voiceover: AI tools could pull all that in seconds. Or say you need a basic model, a base build. I could potentially, you know, just generate it well, and then you're free to focus on the really interesting stuff customization, analysis, that kind of thing.

[00:28:32] Male Voiceover: That's amazing. But doesn't all this automation, I don't know, make those core modeling skills kind of obsolete?

[00:28:37] Female Voiceover: That's the million dollar question, right? Finding that sweet spot. How do we leverage AI to streamline things, but make sure humans are still in the driver's seat for critical thinking, the big decisions.

[00:28:48] Male Voiceover: So it's more like humans teaming up with robots.

[00:28:50] Female Voiceover: Exactly. And it's not just AI that's shaking things up, by the way.

[00:28:53] Male Voiceover: All right. What else?

[00:28:54] Female Voiceover: Excel itself is evolving like crazy.

[00:28:57] Male Voiceover: Oh right. We were just talking about all the cool AI stuff, but you said Excel's got some tricks up its sleeve, too. Yeah.

[00:29:02] Female Voiceover: Dynamic arrays, Lambda functions. They're game changers.

[00:29:06] Male Voiceover: Okay, those ring a bell. But remind me, why should I be excited about dynamic arrays?

[00:29:11] Female Voiceover: No more dragging formulas down a million rows.

[00:29:14] Male Voiceover: Oh, hallelujah. Seriously.

[00:29:16] Female Voiceover: Dynamic arrays. They auto resize those formulas for you know, more clunky workarounds.

[00:29:22] Male Voiceover: No more errors either. Okay, but lambda functions, those still sound a little intimidating, to be honest.

[00:29:27] Female Voiceover: It's simpler than it sounds. Think of it as building your own custom formulas. 

[00:29:32] Male Voiceover: Wait. So I can go beyond what Excel already has?

[00:29:34] Female Voiceover: You got it. It's all about building more powerful, more efficient models tailored to exactly what you need.

[00:29:40] Male Voiceover: So we're not limited by Excel anymore. That's huge. 

[00:29:43] Female Voiceover: And that's the thing, right? The whole financial modeling world, it's always changing, evolving. And to stay ahead, you've got to be learning constantly. And it's not just about, you know, keeping up with the Joneses. It's about unlocking new levels of, I don't know, efficiency, insight. Ultimately, it's about having a bigger impact.

[00:30:01] Male Voiceover: Which is what it's all about, right? Making a difference. But before we get too far ahead of ourselves, there's one more thing we got to address a bit of a, I don't know, a hot topic in the modeling world.

[00:30:10] Female Voiceover: Oh, I know what's coming. Circular references.

[00:30:12] Male Voiceover: Buckle up, listeners, things are about to get a little circular.

[00:30:16] Female Voiceover: Some people, they swear by them. Others they're there like the plague.

[00:30:19] Male Voiceover: So which is it? Useful tool or recipe for disaster?

[00:30:24] Female Voiceover: Well, like most things in life, it depends.

[00:30:27] Male Voiceover: So about these circular references. They sound kind of scary, honestly. Like one major spreadsheet is fine. The next meltdown. 

[00:30:34] Female Voiceover: Yeah. You got to be careful. But they can be really useful too. Really, for solving those, like really intertwined problems when the values depend on each other, you know, you mean for example, like calculating interest that compounds on itself, right? Circular reference. That's the elegant way to do it.

[00:30:51] Male Voiceover: So it's not just about being fancy with your formulas. Sometimes it's the best, most efficient way to model something. 

[00:30:57] Female Voiceover: Exactly. But and this is important, you got to use them carefully, like really carefully. Otherwise things can get messy fast. Inaccurate numbers and your models all over the place.

[00:31:07] Male Voiceover: Yikes. So how do you walk that line? How do you know when a circular reference is justified? And then how do you even use it safely?

[00:31:17] Female Voiceover: Think about the why first before you even start building. Ask yourself, is this a situation where something truly depends on itself, or am I just trying to be clever? If it's the second one, find another way.

[00:31:29] Male Voiceover: Don't get too cute with it. Okay, but let's say you've thought it through and you're like, yep, circular reference is the way to go. What then? How do you avoid disaster?

[00:31:39] Female Voiceover: Transparency and control. Document everything. Why are you doing it? How it affects the calculations. The whole nine yards.

[00:31:47] Male Voiceover: So someone else can follow your logic.

[00:31:49] Female Voiceover: Exactly. Plus, it'll remind you later when you've completely forgotten what you did.

[00:31:53] Male Voiceover: Like a trail of breadcrumbs. Good idea.

[00:31:55] Female Voiceover: And don't forget, Excel has those built in tools for this stuff. Iterative calculations. They give you way more control over how those circular references are handled.

[00:32:04] Male Voiceover: So they're powerful, but you got to treat them with respect.

[00:32:06] Female Voiceover: Exactly. And that actually reminds me of like the biggest takeaway from all these interviews. No matter how technical we get with the AI, the fancy formulas, the human element. That's still the most important.

[00:32:18] Male Voiceover: A model is only as good as the person building it, right?

[00:32:21] Female Voiceover: 100%. We talked about AI, dynamic arrays, all this stuff, but nothing replaces really understanding the business, critical thinking, asking the right questions.

[00:32:30] Male Voiceover: Seeing the story behind the numbers. 

[00:32:32] Female Voiceover: And that's a skill that never goes out of style.

[00:32:34] Male Voiceover: So true. Well, that about wraps up our deep dive into fractional FP&A and the whole world of financial modeling. I don't know about you, but I'm feeling pretty inspired. It's like you need that technical side for sure, but you can't forget about the human element.

[00:32:49] Female Voiceover: Couldn't agree more. The future is for those who can do both, you know. Embrace the new tools, but never lose sight of those fundamental principles. That's what drives good decisions.

[00:32:59] Male Voiceover: Absolutely. So to all our listeners out there, we'll leave you this. What's the one question, the most important question, that every financial model, no matter how simple or complex, should be designed to answer. Think about it. Let us know what you come up with over on social media. Until next time, happy modeling!

[00:33:16] Host: Paul Barnhurst: Thanks for joining me for this special episode showing how AI continues to advance and hopefully convincing you that, at least for the time being, it's worth having a host, and actual humans interacting versus the machines. They may be coming for our jobs, but I found it's not there yet. I still kind of found it fun to see how they thought about these episodes. Hope you enjoyed it! And if you enjoy AI and technology, check out Future Finance podcast by Glenn Hopper and myself where we talk a lot about AI and technology. And also remember, these shows are brought to you by the Financial Modeling Institute, the most respected accreditation globally in financial modeling. You want to show your employers that you're a great financial modeler.

[00:34:06] Host: Paul Barnhurst: Go ahead and earn your AFM, the Advanced Financial Modeler and let me know in the comments. Email me. Reach out to me. What you thought of this episode? I'd love to hear your feedback. How did I do? Was it good? Was it terrible? Were there any new takeaways you got from this episode? Or please just don't do it again. Let me know in the comments. And thanks for joining me and humoring me as we tried something new this week. Thank you. Financial Modelers Corner was brought to you by the Financial Modeling Institute. This year I completed the Advanced Financial Modeler certification and it made me a better financial model. What are you waiting for? Visit FMI at www.fminstitute.com/podcast and use code Podcast to save 15% when you enroll in one of the accreditations today.