Why FP&A Professionals Are Struggling in The Age of Al
Show Notes
Welcome to FP&A Tomorrow, where we discuss financial planning and analysis, examining its current state and future prospects, with your host Paul Barnhurst.
In today’s episode, Paul engages in an insightful interaction with Philip Watson, for a discussion on what it takes to excel in financial planning and analysis (FP&A).
Philip, the CFO of Paddle, brings a wealth of knowledge, having led FP&A at ZoomInfo through its rapid growth and IPO. He is known for his commitment to developing talent, Philip's leadership has shaped the careers of many finance professionals. Currently leading Paddle’s financial strategy, Philip is transforming how fintech companies handle complex financial operations.
Key takeaways from this week's episode include:
Here is a concise summary of the key points from the discussion:
Great FP&A extends beyond finance skills, encompassing the ability to communicate with stakeholders, understand the business, and manage relationships. It's about being operationally involved, translating complex financial stories, and driving business insights.
While finance skills are fundamental, the future of FP&A will require advanced technical abilities. Soft skills, like communication and stakeholder management, remain crucial, but familiarity with data science and coding will become increasingly important.
Emphasizing the importance of small, incremental improvements, aiming for 1% better every day. This approach, combined with rigorous measurement and process optimization, helps drive long-term business success and operational excellence.
Sales compensation is a significant driver of behavior and revenue. Aligning incentives with business goals is essential to ensure that sales efforts contribute positively to the company’s financial health and strategic objectives.
Implementing a detailed, three-statement forecast on a rolling 18-month basis provides valuable insights into future business performance. This process requires the right tools, experienced personnel, and a robust infrastructure to ensure accuracy and reliability.
FP&A serves as an excellent training ground for becoming a CFO. Exposure to various business aspects, forecasting, and financial strategy prepares professionals for leadership roles, making FP&A a vital stepping stone in a finance career.
The title sponsor for this week’s episode of FP&A Tomorrow is Plan Buddies. Plan Buddies, where professionals meet excellence. Ready to elevate your career? Visit plan-buddies.com and become a member today. Here's a special treat. Use the promo code the FP&A Guy, that is TheFPandAGuy for an exclusive 25% discount on your first-year membership.
Quotes:
Here are a few relevant quotes from the episode
"Some of the nice stuff, some of the machine learning stuff will probably take care of some of the grunt kind of modeling grunt, grinding through Excel that we have now, and it will automate some of that. It won't replace. I don't think it will replace people. It will change their job."
“I think FP&A is probably the best launchpad for being a CFO. You get exposure to all the business leaders. You get exposure to all other aspects. It forces you to think ahead and not behind.”
“Your job is to go translate numbers, to go communicate to the business, and be out with the business, in the meetings, in the room. It's important to be in the room.”
“Sales comp is a massive driver. I mean, compensation is a massive driver of behavior.”
Follow Philip:
LinkedIn - https://www.linkedin.com/in/philipawatson
Website - https://www.paddle.com
Follow Paul:
Website - https://www.thefpandaguy.com
LinkedIn - https://www.linkedin.com/in/thefpandaguy
For CPE credit please go to earmarkcpe.com, listen to the episode, download the app, and answer a few questions. For AFP FPAC certification answer the questions and contact Paul Barnhurst for further details.
In today's episode:
(01:10) - Introduction
(01:45) - Guest Introduction
(02:00) - Defining Great FP&A
(03:25) - Future of FP&A
(04:20) - Guest Background
(06:04) - Scaling at ZoomInfo
(18:17) - FP&A as a Launchpad for CFO
(27:40) - Sales Commission Strategies
(32:47) - Effective Forecasting Practices
(41:49) - Rapid-Fire Session
(43:20) - Guest’s Personal Insights
(45:30) - Advice for FP&A Business Partners
Full Show Transcript:
Host: Paul Barnhurst:: This week's title sponsor is Plan Buddies. The number one planning community for planning professionals. Check it out at Plan buddies.com and join me in the community today. Hello everyone. Welcome to FP&A Tomorrow. I am your host, Paul Barnhurst. The FP&A guy. This show is where we delve into the world of financial planning and analysis, examining its current state and future prospects. Each week, we're joined by thought leaders, industry experts, and practitioners who share their insights and experiences, helping us navigate today's complexities and tomorrow's uncertainties. Whether you're a seasoned professional or just getting started in your FP&A journey, this show has something for everyone. This week, I'm thrilled to welcome Philip Watson to the show. Philip, welcome to the show.
Guest: Philip Watson:: Paul, thank you so much for having me. Happy to be here. I'm very excited.
Host: Paul Barnhurst:: I'm excited to have you. So we like to start off this question with everybody. What does great FP&A look like in your mind?
Guest: Philip Watson:: Good question. I think great FP&A looks like the ability to communicate with multiple stakeholders in all aspects of the business, and it looks like being very operational in both one's practice and in one's outlook. I think the finance skills, one has to have to be a great funny person or table stakes, quite frankly. So that's why I didn't even put that first. I think it's the ability to just understand the business. That's the most important because as an FP&A person, you're not just running models on a spreadsheet. Hopefully, if you're running a good FP&A team or if you're running the app, you're actually in the business all day, every day, helping to translate between accounting in the business, helping to think about the future, helping to explain the past, understanding how the actions anybody in the business takes impacts everybody else in the business. So you can go model that and help predict that, help forecast. That's what, I think, great FP&A looks like.
Host: Paul Barnhurst:: Thank you. I appreciate that answer. I like how you said the finance stuff is table stakes. Great FP&A goes far beyond that. It gets to knowing the business and managing stakeholders and relationships. I'm curious as you look to the future, last couple of years, we've seen AI, a ton of changes in businesses with COVID, all the acceleration, and different things going on. How do you see FP&A changing over the next few years as we continue to see all these changes in the world?
Guest: Philip Watson:: My sense is, even though we just talked about how important some of the soft skills are, and I'm sure we'll touch on that throughout this conversation, the soft skills are always going to be important, that communication aspect. But my sense is, is that the hard skills will change going forward in the future. As you mentioned, some of the nice stuff, some of the machine learning stuff will probably take care of some of the grunt kind of modeling grunt, grinding through Excel that we have now, and it will automate some of that. It won't replace. I don't think it will replace people. It will change their job. Maybe they need to be a bit more, data science-focused, or at least know how to code lightly. As opposed to now or maybe you don't know how to. You don't have to know how to code. So I think it will be more technical in some senses. so that will require a different skill set of still being able to do the soft skills, but knowing some of the harder, higher-level technical skills as well.
Host: Paul Barnhurst:: Thank you for sharing. Appreciate that. Can you go ahead and tell our audience a little bit about yourself and your background? I know you're coming to us from London CFO at Paddle, but just walk us through your background and how you got where you're at today.
Guest: Philip Watson:: As you said, I'm the CFO of Paddle here in London. I've been CFO for seven months. It is my first CFO job, my first time in fintech as well. So I'm drinking from two fire hoses. It feels like every day. But my career has been in FBA ever since I graduated from business school at the University of Texas. So after undergrad, I did investment banking for a few years and then went to graduate school. When I graduated from grad school, I entered a finance rotation program at a company called BMC Software in Houston. So that was my introduction to FP&A and is my introduction into enterprise software. I've been in that space ever since. So I spent a few years at BMC Software, kind of rising up the ranks then got asked to move over to a company I'd never heard of up in the Portland, Oregon area in Vancouver, Washington, called DiscoverOrg. At the time, DiscoverOrg, eventually, became a company called ZoomInfo that went public in 2020, but I was hired to be FP&A employee number one, Paul. So I started the team. We were about 38 million of ARR back in October of 2015 and built up a team that eventually ended up in double digits, just on the FP&A side, where I think we did 13 acquisitions. We went public, we did debt deals, we did equity deals, it all, all kinds of stuff, and just helped the business grow from 38 million ARR to 1.1 billion whenever I left in February of 2023.
Host: Paul Barnhurst:: That must have been quite the ride to go from employee number one to over ten people on the team. All those acquisitions, I'm guessing, came in very, very early series A, series B, whatever it might have been all the way to the public.
Guest: Philip Watson:: It was a great master class and how to not just run FP&A or be involved in FP&A, but to be involved in a growth company at scale. In a profitable growth company. So we did all that at very profitable margins. So it wasn't like we were just in the boom times burning cash like perhaps some other companies. So it was a great way to learn how to operate a business. I think of all of the things I take away from my time at Zoominfo, and there are innumerable things I can take away, but it is how to operate at a high level, how to operate with rigor every day, how to think, be flexible and change a process on the fly if you have to. Because when you're growing that quickly, there are things that pop up and you need to be nimble. But just remember that the way you advance the ball is not massive steps. It is little bits. Every day you are creating a new process. That process can scale and you're just rigorous about it. There is no substitute for hard work, and there is no substitute for kind of being very operational when you're trying to build a company, Paul.
Host: Paul Barnhurst:: I'm curious, that just leads to a question there. How do you put that rigor in place to be operational? I get the hard work that. Everybody understands what is required there. It's an effort thing. Talk maybe a little bit about how you put rigor around those operational processes and make sure things are able to scale.
Guest: Philip Watson:: I think it starts with the tone at the top, like, hey, we are going to measure things. We are going to measure them on a regular basis, and we're not just going to measure them with, here's a number, but we expect everybody in the business to be able to comment on those measures too. So what it forces people to do is to know their business. It forces people to understand the connections between their business and other parts of the business. It forces everybody to think about if these are the things we're trying to optimize for every day, how am I getting up and optimizing them? So that's the rigor, that's rigor. It's repetition. It's measurement. It's a unified knowledge that if we improve the metrics that will improve the business. That's done not just via guest, but it's done via proof. So it kind of comes back in a circle like that. That's what I think about when I think of that question.
Host: Paul Barnhurst:: I like to explain that the repetition, the rigor, the measurement, and then that improvement, people understanding how that measurement happens, go ahead and making those changes and remeasuring, just kind of following that process religiously as you continue to scale to make sure things don't slip through the cracks, which can easily do when you're growing rapidly.
Guest: Philip Watson:: Then just add that process to every kind of new thing that comes. Again, it's not monolithic. You can't squeeze the square pegs in round holes. But you can measure a lot of things. You can set the cadence that you want certain levels of improvement on many, many things. As long as you're flexible about kind of some of those definitions. The idea just keeps driving every day by making incremental improvements. What Henry Schuck, who is the CEO and co-founder of Zoominfo, and a friend of mine used to say is, we're just going for 1% better every day. Do that. It will compound. That was the attitude that's the rigor and repetition.
Host: Paul Barnhurst:: That's the whole idea of atomic habits. The book there that 1% improvement. It's amazing how much of a difference that makes if you try to live that. Just those little increments. Because rarely can we do it all at once for sure.
Guest: Philip Watson:: It's like you wouldn't try to bite off more than you can chew. It's it's intimidating mentally. It kind of makes you procrastinate a little bit. It's just quite frankly, hard. It's way easier to take small pieces. If you stick with it, there are certainly benefits there.
Host: Paul Barnhurst:: I have to remind myself of that. Sometimes you get to go and you try to do it all at once like, maybe I should slow this down a little.
Guest: Philip Watson:: It's human nature. We all do that I think.
Host: Paul Barnhurst:: I think so. So tell our audience a little bit about Paddle. For those who may not be familiar, what does Paddle do? What industry are they in?
Guest: Philip Watson:: So Paddle is a fintech company based here in London. we stand in between sellers and buyers of digital goods around the world. So, Paul, think about a few, created a digital widget company, let's call it an Excel plug-in that you were like, this is the best thing since sliced bread. Everybody's gonna love it. You go set up your website real quick on Wix or GoDaddy to start selling, and it takes off. If you're selling purely in the States, you're generally fine. You can go get one of the sales tax companies, and they'll calculate your sales taxes and things for you. You can go file those returns and you'll be generally good. But if your product really takes off and you're selling to South Africa in the UK and Germany and England and, Ukraine and wherever else, if you're doing well, eventually you're going to need to take payments from all those countries. You're going to need to do KYB on your buyers, maybe KYC as well. You're going to need to handle subscriptions and billing, and you're going to need to pay the taxes and file and remit the VAT taxes for all of those countries.
Guest: Philip Watson:: So what Paddle does is it does all of that. If somebody goes to check out on your website for your product, Paddle will pop up in an iframe or inline they'll check out through Paddle on the various ways they want to check out card, PayPal, and ways like that. We'll collect the money, we'll handle the forex, and we'll also satisfy the tax liability for you. So we will legally take on the tax liability for you so that you don't have any liability around the world for taxes. You can concentrate on selling your product and developing your product. So it is like some people would say, hey, why can't we use stripe for that? You can sell stripe doesn't do the tax piece. So we can sit on top, and do the tax piece for small businesses that just don't have that knowledge, don't have that expertise in-house, and want a new business around the world.
Host: Paul Barnhurst:: Sure. No, the tax thing is a real challenge. I understand the sales tax. It's amazing how different it is in every country. Here. It's 60,000. Here it's 30,000. Here is from Dollar Zero. I made $500. Do you expect me to file taxes in your country? But how it could be so different all over the world? So I can imagine a lot of work to manage that. Nice to be able to offshore that, so to speak, to somebody else, outsource it, and let them manage it.
Guest: Philip Watson:: It's kind of the whole back end for your digital business. If you need to collect the revenue for yourself, do the forex, and handle the tax, you just kind of focus on developing and selling your product.
Host: Paul Barnhurst:: I have a friend who is using it for his business. He said he went to Paddle. So this has been your first full-time CFO job. Talk us through what the experience has been like. Is it what you expected or quite different? Just give us an overview of the journey.
Guest: Philip Watson:: It's been good. I'm having a great time. I am enjoying it. Obviously, it goes without saying that there's a ton of responsibility ton a ton of pressure on you. But it is fun to be able to come in in shape, the future of a company like this. So Paddles is certainly in the growth stages. We are not a startup. We are a scale-up, as we say. However, I did have the opportunity because there was no CFO here for about two years before I started, kind of came in and put my stamp on the place. That's been fun. It's not just fun to say, like, hey, me and my team wouldn't do new things. What's fun is taking the people who were here who maybe weren't quite sure or were kind of didn't have the leadership that they needed and helping them grow and helping Paddle grow with them, and seeing them blossom and bloom now because there's a bit more rigor, a bit more structure, a bit better strategy put in place. So I think that that's like been maybe the most fun part of this whole journey so far is like getting to these people up to their potential, where they always had it, but it wasn't kind of being taken advantage of.
Guest: Philip Watson:: So that's been a tremendous amount of fun. The other great thing I like about my job is that we sell to CFOs. We sell to the finance. We write because it's kind of a back office revenue and finance product. So, I get to go out and be part of the product discussions. I get to go out on the sales side and go, talk to customers. I've even handled kind of inbound customer support requests sometimes before people want to get to the top. So I've been having a great time at it. I've learned a tremendous amount, particularly about taxes where you're coming up in the FP&A world, you don't necessarily deal with a lot of tax items. I've learned more about tax in the past seven months than I have in the previous whole time of my career. So it's been good. It's been a really good experience, and I'm super thankful to Jimmy, my boss, and the Paddleboard for giving me the opportunity.
Host: Paul Barnhurst:: Great. Thanks for sharing. Curious what was the hardest part of coming into the role? What was the most challenging for you?
Guest: Philip Watson:: It was managing the change management. So coming in, I had literally on my third day there, we had the monthly finance all hands and I didn't have a lot to say at that time. I was still kind of learning who was who and what was what. You have all these people, 30, 40 people staring at you looking for something. What words of wisdom or guidance, and having to kind of just navigate the change because they've been through a lot of change, too. They've been through multiple leaders. Before I was the first CFO, many of them had seen they'd been through multiple other executives. So it was rallying them around the fact that, like, hey yes, I'm new, but we're here to go do this together and rallying around my idea of, like, we're here to build, we're here to build infrastructure, and we're here to get that snowball going. Yes, it's going to be hard, but we're not grinding you down to grind you down. I'm not working you to work you. I'm not trying to work you out of a job. What I am trying to do is elevate our game and get us to a place where I know we can be, and to do that, it's going to require a lot of work upfront so that we can start getting the benefits in the back. I think of things like accelerating, bringing NetSuite live, or do you know other items like that where, yes, a lot of work, but we see the benefits now months later. So it's just kind of getting people to buy into that vision is just, is just hard. I also had some people leave, some people that just decided they didn't want to be part of that journey, and they just kind of walked out essentially, and dealing with that fallout on short notice was also hard to deal with. But we made it through and we were a stronger team for it now.
Host: Paul Barnhurst:: Thank you for sharing that. I understand that change management can be a real challenge. Helping people come along for the journey and getting them all on board and on the same page, especially, if they've been through a lot of bosses, a lot of managers, different roles, lots of change. You're going to have some people that are burned out and like you said, you're going to get some that are like, I just don't want to be part of it, I'm done.
Guest: Philip Watson:: Yes, want to beat a different boat. I want to go in a different direction.
Host: Paul Barnhurst:: So you have to manage that and you want them to be happy. So it's a good thing you don't want people to be there that don't want to be there. But it's hard to manage it in the short term.
Guest: Philip Watson:: It's hard at the moment. I had two people on an FP&A team. They both left within a few weeks of each other. So at one point, I was kind of without an FP&A team. So you kind of dealing with things like that, but this is what you get paid to do. That's management. So, I'm very fortunate that I had planned ahead and had brought a person over that I knew who used to do FP&A for me and made him head of FP&A. He came in and saved the day there. So you just have to roll with the punches sometimes.
Host: Paul Barnhurst:: Is it time to level up your FP&A game? Then join us on the FP&A Guy's Best Practice FP&A Course. Imagine working smarter, gaining greater visibility, and becoming a top-flight FP&A Pro. During the four sessions, we will teach practical frameworks and share real-world examples that will make you a better FP&A professional. Don't take our word for it. Listen to this testimonial. All four sessions added tremendous value to my role in the team, making complex financial stories understandable for everyone. Visit the fpandaguy.com/FP&A-course to learn more and become the FP&A expert your company cannot do without. Use code FP&A100 to save $100 on the course cost. So I'm curious, how did FP&A prepare you for the CFO role? What were those lessons or things that helped you to come in and kind of hit the ground running, so to speak?
Guest: Philip Watson:: I think it goes back to the very first thing we talked about, which is knowledge of the business. So I'm very fortunate in my career. I've always been able to go talk to other people in the business, probably because I just have an innate curiosity about the business. I'm less of like a hardcore finance person. I'm much more of like, I want to know how the business works. I want to see the connections between the teams. I want to know how we get revenue and how the revenue flows through. So having that natural curiosity helped me both as an FP&A person and as a CFO. But I think FP&A is probably the best launchpad for being a CFO. You get exposure to all the business leaders. You get exposure to all other aspects. It forces you to think ahead and not behind. So if you're a good FP&A team, you are always thinking about your forecast. You're thinking about if this happens, what does this mean to my financials? Not just today but tomorrow, next quarter, and next year. I think that's the right mentality for a CFO. You want to be you want to have your house in order. You want to have your infrastructure built so that finance is not a hindrance, and finance is a help to the rest of the business so that the business can build on top of your base. Then you want to be out in the business helping them think through commercial items, With no. Should we structure a contract this way, or do we need to make an investment that way? Or hey, this partnership opportunity is coming through. How should we think about this? Is this better than buying or building? So there are innumerable amounts of questions that I think a CFO or a good finance team can help a business think through or provide advice on. I think FP&A is probably the best training ground for that mindset.
Host: Paul Barnhurst:: I would agree with you. I know in one of the roles I have, I think back where we worked on two large contracts, two of our largest customers for renewal and going through, okay, where do we raise the price? What do we do if we try these? Salespeople coming and going, well, they want to do this. Can you run it and say what this looks like? I can look at it, but it's a bad idea. We know, but we need the numbers and work through it going, it just doesn't make sense. In the end, seeing these contracts have better margins or putting us in a better financial position, you get those opportunities at FP&A if you get involved with the business or in the product to have discussions across all the different businesses and see how that all comes together to different departments. So I'm totally with you. I think it's a great proving ground for a CFO. I think many FP&A people are often like many CFOs or divisional CFOs overseeing parts of the business, working with those leaders, and in a good company, they're seen as kind of that right-hand person for sure, that they want to be there for the decisions. The worst is to be in that role where they just want you to run the numbers and leave me alone.
Guest: Philip Watson:: That's the worst, I know. I asked to be in a meeting. I think the worst I could hear was no. Then I always encourage anybody that I've ever hired for FP&A or then or my leadership now is, your job is not to sit in the back and run numbers. Your job is to go translate numbers, to go communicate to the business, and be out with the business, in the meetings, in the room. It's important to be in the room. Support for your career. It's important for your function. So I very much try to impress upon that team that concept.
Host: Paul Barnhurst:: That's great. I'm glad you're doing that. I wish everybody in FP&A would do that. I think it's huge. I think we're starting to see more and more of that change, more and more of a recognition that FP&A is the front office. It's not a back-office role. Are there times you're going to be in a spreadsheet? Of course. Times you're going to be dealing with numbers, but numbers are just the way we help guide the business. We look at things, we bring that financial lens versus that's what we're doing.
Guest: Philip Watson:: I think if you're a leader in any part of the business if you have some analytical horsepower sitting next to you to help you think through various problems like that, that's why would you not want that.
Host: Paul Barnhurst:: Agreed. So we talked a little bit about Zoominfo earlier, and I know you mentioned you were there for eight years. Maybe if you could share just a little bit more of what that scaling process was like at the different phases, talk a little bit about that.
Guest: Philip Watson:: Sure. So in the beginning, as I said, I came in as a single employee, employee number FP&A, employee number one there, and did that, helped build out kind of the basics. So I helped build out the very first dashboards around the sales funnel, helped build out the first customer segmentation, helped build out the first retention analysis, and not just like build a dashboard and say, here it is, but go, explain it to the business, go, communicate to the business, go, help them optimize for certain areas, go, show them interesting analyses that they had thought about before, and then very quickly, which was a great thing for me, not only did the business love that level of insight, but the C-suite love that level of insight. So I was getting a message directly from Henry, like, show me this, show me that, let's talk about this, come to my office, come join the meetings, be a part of the exec team. Because you're providing all this insight. So that was that was awesome for me, really great for my career. But it also meant that it had to bring in some people underneath me because there's such demand for our services. So I think that's the thing that made me feel great. People wanted more analysis if you're in that spot, then you know you're doing it. I hired two analysts, one of them directly out of college. That's the guy who works for me now who runs FP&A here. So he's been with me since the very beginning of his career. It's been great to watch him, to watch him grow.
Guest: Philip Watson:: I think the way to talk about this is in the first 3 or 4 years, which corresponded with my first CFO in ZoomInfo, FP&A was finance for the business, I would say. So we're very involved in the business with the dashboards, very involved operationally, very involved building funnels and helping people interpret that, very involved in the business like that. That was great, that was a lot of fun. Then as we changed our CFOs and started thinking about doing bigger things, i.e. potentially going public, our role shifted and it became more about what I call finance for finance. So yes, we still stayed in the business, but we also got deep into the PNL, really deep into the balance sheet, really deep into cash flow forecasting. So things that were a little bit more technical, a bit more financial in nature, but that's what the business needed at the time. what it meant, though, Paul, was that I had built up a team of people that could do operational in the business and do financial and speak both those languages. I think those are great skills to have. So we continue building the team. Our method was to hire people right out of college and then train them in kind of the ZoomInfo way. we did that super successfully. We built up a really good team that won awards, was respected across the company, and was there in all aspects of all of the M&A deals we did, the capital raises, the day-to-day operations, and ultimately the IPO. It's the thing I'm proud of actually.
Host: Paul Barnhurst:: I can tell that as you've been talking. One thing I've noticed, I can tell you're proud of is, developing people, watching people grow. You tell the story of the guy who came out of college, he's with you today. What's your favorite part or maybe a story you can share of just watching people develop? What is it you love about it? What's maybe a favorite experience you've had as you've helped develop people over your career?
Guest: Philip Watson:: I mean, my favorite experiences are watching people on my team win awards that I didn't nominate them for. I didn't vote for anything, but it came from the business. So I've had multiple members of my team win the CEO award, which comes directly from the CEO and his directs. They get to vote on what made me happy. But one other cool experience I had was when I hired a person as an analyst. He was like my second hire at ZoomInfo, and he ultimately got asked by the CEO and president of the business to go be his chief of staff and create his analytics department on the go-to-market side. So it's not just, was I developing people or we developing people inside of FP&A but we had alumni essentially out of FP&A into the business, and that just helped us become a better global team, Because we had those levels of communication. After all, they knew how we thought, we knew how they thought, and we were always tight like this with that group of people, which was so helpful as we were growing in modeling and doing all sorts of things that were required to get where we needed to be. So I think that's a good story. It's something I'm proud of is not only do we develop them in FP&A, but we were able to spin people out and have them go start other teams and be well respected across across the company. So people development is important to me. I like teaching, I think it's fun. It feels like that's the best reflection of if you're a good person in what you do, it's like, can you get other people to go do it as well too?
Host: Paul Barnhurst:: Agree. There's nothing, at least to me, as satisfying as seeing somebody develop and grow because of the way you've helped them or taught them, or being even just a small part of it. Often you'll see people you know they'd be successful whether you were there or not, but it's always nice to be able to help them along that journey. Totally.
Guest: Philip Watson:: I, ultimately, like helping people. I think it's what I like to do. I'm a doer like that.
Host: Paul Barnhurst:: Great. Well, thank you for sharing that. I want to switch subjects here a little bit. A subject that comes up a lot in FP&A is sales commission. There's the calculation part. There's building the plans, this whole process. As a CFO and somebody who's been in FP&A, I know in prior roles you've kind of owned sales commissions. How do you think about it and kind of how do you think about that process as far as alignment across the business?
Guest: Philip Watson:: So a little bit of history. When I got to ZoomInfo, there was nobody kind of doing the sales comp side. So we kind of fell to me in FP&A and I knew nothing about sales comp, quite frankly. So I learned and their learning wasn't just running the model, as they say, but I also helped draft plans. I helped talk about strategy, helped think about what is it that we want to accomplish and how much should we comp and I ran that team off and on it kind of had gone away. It came back to me for five of the 7 or 8 years I was there. So it was pretty involved in that process. Why is it important to be connected? Because sales comp is a massive driver. I mean, compensation is a massive driver of behavior. That's human nature. Comp is a mass and, therefore a massive driver of the revenue behavior. I say revenue behavior specifically because there is revenue you want and there is revenue you'll take it, but it is probably less good revenue in a sense.
Guest: Philip Watson:: Hey, did we make a bad deal here? Things like that. So it's important to be aligned because you want to make sure that the incentives are correct for what the rest of the business is trying to do. You want to make sure that obviously, those incentives fit in the plans. Also, I think as most people are aware, sales comp can be pretty variable because it's really hard to model. So you want to make sure that if you get a great revenue performance, did that blow a hole in your budget? Hopefully, not right on the expense side, but you don't want to create a plan like that. So I think the alignment is important for all those reasons, but mainly because the incentives are so strong and so important. You want to know what the people who are driving revenue are incented to do. That way you can kind of trace it through and make sure the rest of the business is prepared to support that.
Host: Paul Barnhurst:: I fully agree, having been in a similar situation to you and having written sales plans, and I like how I put it by the name of Jared Paul. He owns he owns Spiff, which was just bought by Salesforce. He said the way to think of it is your commission plan is the game plan for your sales team. You think of a football team or whatever, they have that game plan and they're going to follow that game plan and they're going to figure out how to exploit it. Just like sports teams, you figure out how to exploit the defense or the offense. You have to make sure you design it in such a way that they're exploiting it in a way that benefits the business versus just benefits them because there's nothing wrong with them taking advantage of the plan. If you designed it poorly, that's on the business. I've seen that where like, why are we paying this type of money? This makes no sense here. You have to go in and correct it. That's never a fun conversation with salespeople because it's always they view it as you're taking money away from me, regardless of what you do with the plan.
Guest: Philip Watson:: The salespeople, I mean, I love them. I was out with them last night. They're a ton of fun. They are certainly different-minded than your average finance person, that they will just say.
Host: Paul Barnhurst:: I would agree with that. I don't know if you know who Steve Young is the football player. I heard him speak and I loved the way he put it. He's like, your wide receivers are your salespeople. You know, think of Deion Sanders or not, Deon Sanders, Jerry Rice or Terrell Owens or whoever, Michael Irvin, they're flashy. They want to be loved. He's like, think of your finance people as your offensive line. It's like they're kind of in the trenches doing the dirty work. He was talking to a bunch of CFOs, and it was just kind of an interesting analogy. He's like the quarterback your CEO and I kind of laugh because I could think of some salespeople. I mean, they're fabulous. You need them, But I could see that personality kind of fitting for a number of people I've worked with.
Guest: Philip Watson:: That's good.
Host: Paul Barnhurst:: It was a fun one. Thank you for that on sales commissions, I'll ask you a question about forecasting, a huge part of FP&A. Do you have maybe a cadence, a timing you like to do or process? Are you a big continuous forecasting arena monthly, quarterly, what have you found generally works for you when you think of that part of the business, that process? Hey there, it's your host, the FP&A Guy. Today I'm thrilled to talk to you about Plan Buddies, one of my passions. It's where professionals meet excellence. This isn't just any community. It is a community run by and for planning professionals. Our Plan Buddies were all about fostering connections, sharing knowledge, and providing mentorship among our members. Ready to elevate your career? Visit Plan buddies.com and become a member today. Here's a special treat. Use the promo code the FPandAGuy, the FPandAGuy for an exclusive 25% discount on your first-year membership.
Guest: Philip Watson:: I think I'd like to tell you and your audience about my time at Zoominfo and what we did. When I started there, there wasn't a forecast. Ultimately, we got, hey, we're going to do the quarterly with the board meeting and such. But when we got humming, Paul, when like we had our FP&A system implemented and it was humming. Well, we had a full team and we were going out. We were getting ready to go public when everything was working. Great. or let me rephrase, whatever we had, everything ramped up how I wanted it to be. ZoomInfo, we did a full three-statement forecast every month, and we did a bottoms-up. So head by head, we did it not just for the next quarter or for the rest of the year, but we did it on a rolling 18-month basis. So it was like a really good in-depth process and obviously like in a month, you know. 15 through 18. You know, you're just kind of making some assumptions. You're not going head by head, but you've built the infrastructure again to allow your assumptions to be useful. We were super proud of that process and super proud that we had it all in our adaptive insights system. You could push a button and change the new sales today and watch it flow through to Unlevered free cash flow 18 months from now. We were very proud that we got there. My boss, at the time, Cameron Heiser, Henry, everybody used it because you had to always know what the business was going to be for your beta rays and your earnings and things like that.
Guest: Philip Watson:: So, let's say at our peak, we were doing it kind of monthly like that, at that level of rigor. That was a really good process. But that was a process that took us years to get to, to build out the planning system, to get there, to build out the people, to enable them to go get there, to build out the timing, to have it happen in a month. And get there. So we're certainly not there at Paddle yet because we've done a full rebuild of our FP&A team. We're still hiring people there. But we're getting actually in our first one right now because we have a board meeting in in May. So we're doing our first forecast, but ultimately we're going to get to the same level here. We're going to get to a monthly, repeatable process that, the business and my boss will be able to rely on. This is the direction we're heading. This is what this means. If we want to invest here or reinvest there or move this around, it will have these impacts. I think think that is super powerful. So I'm a big believer in frequent forecasts. I'm a big believer in three-statement forecasts. I'm a big believer that it needs to always roll out to the future to at least give you an idea of what the world looks like in 18 months, It won't necessarily be right, but it at least tells you if things follow these trends. This is what this looks like. So that's what we're going to get you at paddle, hopefully.
Host: Paul Barnhurst:: I would love to know, what are maybe some key lessons learned? Or how did you think about that process? Because very few companies I will say are doing that level of rigor with a full three statements monthly. That requires having made sure you implemented your system well, and you have the tools in place because if you're trying to do that in a scaling company in Excel with no tools, you're going to burn out your people. I don't think it's sustainable for the average company. Well, maybe walk through a little bit of how you kind of scaled that and got to that point.
Guest: Philip Watson:: I think you raise the tooling and the tooling is important. So let me go back to the ZoomInfo time we had adaptive insights. It it took us it took us a while to build it out. We were able to build most of the PNL, and we were able to build the balance sheet when it came to the cash flow statement. We had to go outside and get some real, specific consulting help to get that, to get that humming. But when we did, we made sure they all linked together which sounds obvious. But everything links together. We focused on what were the important drivers that we could change in the model, and we did it so that you could change your driver here and cash would change over here. That was a game-changer for us. Not just having it up, but then enabling the FP&A team on how to go model inside of it. They enable them to write the formulas. They know what can change and what can't change. As we as we continually added metrics that continually evolve the business. So I do think step number one is having the right tooling that enables you to do that. step number two is knowing what's important, and what's not important. So you're going to go talk to your business. Your business is not thinking 18 months ahead. Your business is not always thinking about the forecast. So it's being able to have the conversation when you're going over their actuals to kind of say, like, hey, so what are your hiring plans going to be over the next few months? Okay, well, I don't know. I maybe I'm going to move this back or not.
Guest: Philip Watson:: And being able to kind of interpret that, to say, fine, they don't really know if they're going to hire this person. So let me put it in the appropriate place kind of in the time scale. If I think that looks funny, then let me kind of apply for a judgment to make things look less funny because they're really not trying to make the business look funny. They just don't know quite how to think about it like that. So having a team that has the experience or the knowledge or the ability to kind of know what looks funny and what doesn't in the forecast and know kind of how to interpret the feedback back from the business is also really important. That comes with experience, that comes with time, that comes with learning. Then the third, I'll just circle back on the it's hard in the beginning. It's a lot in the beginning. But if you build the infrastructure and process and rigor around it, then it's you're doing the same thing every month. You're rinsing and repeating and you're just rolling forward. so once you kind of understand that and once you get the infrastructure built around it, literally to make things easier to load or to know how to take the feedback from HR or the feedback from the business. Then it becomes much easier and you're spending your time not dealing with the complexities of the actual numbers, but you're spending your time thinking about like, does this make sense? Does this feel right? Is what they told me correct? Is this really what I think is going to happen in the business, or should I put some judgment on it?
Host: Paul Barnhurst:: Now, as I listen to that, I couldn't help but think one of the ways I kind of boil this down, what you're talking about is you got to have the right people and the people with the experience that they can use that judgment, not somebody who they listen to everything, just has no idea what to do. They need someone they can go talk to if they're in that situation. So you can have that judgment, have those right people. Then you mentioned the process, just the operational getting that down and then bringing the technology to enable you to make it a repeatable process that doesn't take forever.
Guest: Philip Watson:: It's a very classic finance. People, process, technology. Totally.
Host: Paul Barnhurst:: It's amazing how often that's the answer, even though we sometimes don't want to hear it. But the next question I have for you is I'd love to learn. What's one lesson over your career that you learned that's been the most helpful for you, the most beneficial during your career?
Guest: Philip Watson:: Oh, man. If you can try to make an internal like a business perspective, you can try to make something easier for somebody else. Like that's always gonna go a long way for you. It may sound trite, But like, we all have so much to do. We're all inundated with work, with messages, with deadlines. There's always something coming else. It never gets more simple. It never gets easier. So anything you can do, particularly when you're junior, to not add to that, but to subtract from that from somebody, from your business partner, or from your boss. You can just make something easier and not force somebody to not have it, not force somebody to make a decision if they don't have to because you've already brought them an easy way to look at it. You brought them the answer, and you just need to sign off. I feel like that goes a long, long way. I think whenever you're a junior, I don't think you're looking for answers and that's normal and you should. But I don't think you realize, like, how exhausting it is to have to deal with all of this stuff all of the time, and in any real, anything you can do to kind of just make the burden a little bit easier on anybody around you, peer below you, above you, goes, I think goes a long, long way and helps people say, oh, that person, that person gets it, or that's the person I want near me. Because we can give each other. It's not just a give on my part, he can give to me or she can give to me. I can give it to him or her. We can make a partnership as opposed to I've got to be feeding that person all the time. so I think that.
Host: Paul Barnhurst:: The way we've managed data is perfect for a world that no longer exists. Over half your team's time is spent cleaning data. Imagine a notebook that does the work for you. Turn dirty data into a powerful asset with analyst intelligence. Join modern FP&A teams at analystintelligence.com today. Agree. Having that employee that makes your life easier versus the one you feel like you're constantly having to help bring along. Huge difference.
Guest: Philip Watson:: For sure or even the neutral, I mean.
Host: Paul Barnhurst:: Yes. Either of those. Those ones that you know, you can rely on and they're going to make your life easier are golden. You want to stay with those people.
Guest: Philip Watson:: Totally.
Host: Paul Barnhurst:: So we're going to move into what we call a rapid-fire section. How does this work? Have 5 or 6 questions. You get about 15 20s to kind of answer each of them. Then at the end, if you want to elaborate on something, you can okay. All So here's the first one. What is the number one technical skill that FP&A professionals should master?
Guest: Philip Watson:: Spreadsheet mastery, preferably Excel.
Host: Paul Barnhurst:: What is the number one soft skill that they should master?
Guest: Philip Watson:: You want to translate a spreadsheet to actually what's happening in the business so that a non-finance person can understand clearly and easily.
Host: Paul Barnhurst:: Well, tell that story from the spreadsheet. I like that one. What's your favorite thing about Excel?
Guest: Philip Watson:: The flexibility. You can just do so much with it.
Host: Paul Barnhurst:: It is pretty amazing. I've seen just about everything. How about your least favorite thing? What's something you don't like about Excel?
Guest: Philip Watson:: It doesn't read my mind exactly and do exactly what I want to do all the time. It's like, oh, that formula. I just want to do that. But no, I've got to go code it a little bit. You know, one day.
Host: Paul Barnhurst:: That is true. Sometimes you have to spend some time figuring it out for sure. Are you guys currently using an FP&A platform?
Guest: Philip Watson:: We are. We're using using Pigment.
Host: Paul Barnhurst:: Great. And how does that implementation go for you?
Guest: Philip Watson:: So, we are still kind of rebuilding a little bit when we, when we got when I came here, we had pigment, but we were only using it for the actuals. It wasn't built out for the forecast yet. So, we are in the process of building it out for the forecast going forward. But we are we are optimistic.
Host: Paul Barnhurst:: Great. Well, I hope that all goes well for you. Then are you currently on your own using generative AI?
Guest: Philip Watson:: We're not. I think about it a lot. I'm still looking for quite the use case, inside of finance, but I am optimistic about that as well.
Host: Paul Barnhurst:: Great. Well, I'll have to check back at some point and learn how both of those went. I'll be curious to hear what use cases you find and how the rest of the implementation goes for you. Thank you. All right, so this next section we have is our Get To Know You section. Get to know a little bit about you. So the first one tell me about a favorite hobby or passion that you have.
Guest: Philip Watson:: I think my favorite thing to do is to travel. I'm very fortunate. I've been able to travel to many, many, many different places, and I make sure to go do that.
Host: Paul Barnhurst:: Favorite location that you've been to?
Guest: Philip Watson:: My favorite trip I've ever been on was to South Africa, which was just incredibly beautiful. Safari was amazing.
Host: Paul Barnhurst:: My sister did that and she told me all about it. She loved doing the safari. That'd be a fun one for sure. What is one book that you've read that you could recommend to our audience?
Guest: Philip Watson:: I'm going to say two. I love books, by the way. If I had a different second hobby, you would ask me about it. I'd tell you about reading, but, so maybe two, business one that I like. That was "The Hard Thing About Hard Things" by Ben Horowitz. I thought that was easy, it was really good. Then when I just recommend other people read is, is this guy Oliver Burkeman, who wrote this book called 4000 weeks a few years ago, and 4000 weeks is about the average human lifespan. It talks about kind of how to how to think about that and how to optimize that. what should you do to try to get the most out of your life? I'm not big on self-help kind of things. I would describe it as self-help, as science-based, but very insightful, I thought.
Host: Paul Barnhurst:: Interesting, I'll have to check that one out. I've never heard of that one. You told us the next one. Which was your favorite travel destination? You mentioned the tour to South Africa, the safari. So this last one here, if you could have dinner with one person in the world today, who you are going to dinner with and why?
Guest: Philip Watson:: One person? I like science. I like physics. There's this scientist who I've read a bunch of books about time travel and gravity and string theory and black holes and all these things blow my mind and my level of intelligence people have to be able to think about these things. So this guy's name is Brian Greene. I think it'd be super cool to have dinner with Brian Greene and Jeff and blow my mind on all things.
Host: Paul Barnhurst:: It's good to get your science fix in for the evening. That'd be fun. Well, we're going to go ahead and kind of wrap up here. We just have two more questions for you. The first is if you could offer one piece of advice to our audience to be a better FP&A business partner, something they could start doing today, what would that be?
Guest: Philip Watson:: It would be to think about, "know your audience, and think about the aspect of the business that you're partnering with." So think about that leader you're presenting to and try to think about the challenges he or she is facing. Then tailor your conversations, tailor your analyses, tailor your numbers, tailor what you're thinking, about the business to how he or she is thinking about it because they're ultimately your customer and it is FP&A, or even in finance overall, you're in the customer service business. So, it would be to remember that, yes, you're doing numbers, but you were trying to translate it and be part of the business.
Host: Paul Barnhurst:: KYA, know your audience.
Guest: Philip Watson:: There we go.
Host: Paul Barnhurst:: I like it if somebody wants to get a hold of you or learn more about you after they listen to this, what's the best way for them to do that?
Guest: Philip Watson:: I think I love to get in contact with anybody who wants to reach out. But you can hit me up on LinkedIn. It's Philip Watson, Philip with one "l" and then also, if you just like to write me on my Paddle email address, it's philip.watsonpaddle.com.
Host: Paul Barnhurst:: Well, thank you for sharing that and thanks for joining the show. I enjoyed chatting with you and am excited to release this to the audience.
Guest: Philip Watson:: Cool. Thanks, Paul. I had a great time. I appreciate it, man.
Host: Paul Barnhurst:: Thanks.
Guest: Philip Watson:: Take care.
Host: Paul Barnhurst:: Thanks for listening to FP&A Tomorrow. If you enjoyed the show, please leave us a five-star rating and a review on your podcast platform of choice. This allows us to continue to bring you great guests from around the globe. As a reminder, you can earn CPE credit by going to earmarkcpe.com, downloading the app, taking a short quiz, and getting your CPE certificate to earn continuing education credits for the FPAC certification. Take the quiz on earmark and contact me the show host for further details.
