The state of the CFOtech stack
A deep dive on the evolution of finance tools with "The FP&A Guy"
Software is eating the world, and that includes the Finance department. The Modern CFO is now responsible for company wide performance - which is a major promotion from just “making the backoffice run on time.”
A major catalyst behind this trend is the ability to get all performance metrics in one dashboard for decision making.
There are now more than 100 planning tools, 25 spreadsheet programs, and 10 financial modeling modules that are purpose built for the office of the CFO, and more specifically, FP&A teams.
To get a grip on the everchanging CFOtech landscape, I brought in a category expert - Paul Barnhurst, the FP&A guy.
Here’s what we covered in our discussion:
Part I: How big is the world of FP&A?
“My best guess would be 100,000 to 150,000 professionals in the US, and maybe 300,000 to 500,000 globally”
Part II: FP&A Tools
“In the last 3 years we have seen roughly 50 tools enter the market. I often segment the market into what I call 1st Gen, 2nd Gen, and 3rd Gen tools.”
“Finance and the CFO are becoming more commercial and strategic…and tools have played a huge role in that evolution”
“We are seeing a blurring of the lines between FP&A and BI tools.”
Part III: Buying FP&A Tools
“With the new tools, implementation can get you up and running for some small businesses in as little as a few hours or days, instead of weeks or months. A few tools even have a free trial period.”
Part IV: FP&A Careers
“FP&A is one of the only roles in the company that gets a 360 view of the entire business”
“Get out from behind your Excel Spreadsheet.”
FP&A Demo Days on May 23rd from 8:00AM to 3:00PM PT
Part I: How big is the world of FP&A?
Let’s get this straight from the beginning, so the audience knows who you are and the great work you do - you create content for FP&A professionals as a full time gig?
Yes I run my own business called The FP&A Guy. I create daily content on LinkedIn, have a weekly podcast called “FP&A Today”, and run a website called “The FP&A Guy”. In addition to creating content I also have multiple courses I teach to accounting, finance, and FP&A professionals.
Is the FP&A function growing? How many FP&A professionals do you estimate there are in the US? In the world?
We have seen a lot of growth in FP&A since the pandemic as companies realized the importance of analytical decision making, both short term and long term, within the finance function.
As for the numbers who work in FP&A, my best guess would be 100,000 to 150,000 in the US, and maybe 300,000 to 500,000 globally. Again, hard to say as this role in some companies is done by the CFO, a founder, a controller, or even outsourced. But the need for dedicated budgeting and analysis professionals is large and growing. There’s never been a better time to be in FP&A.
Part II: FP&A Tools
A lot of what you cover is the software and tooling FP&A professionals use to complete their jobs. How has the landscape changed in the last ten years? How many phases have there been?
CFOtech has changed a lot over the last ten years as we continue to see more and more technology used in finance workflows. There have been huge improvements in Excel (the most basic), while BI tools have become more common (even standard), and now there’s a host of cloud based FP&A planning tools.
In the last 3 years we have seen roughly 50 tools enter the market. I often segment the market into what I call 1st Gen, 2nd Gen, and 3rd Gen tools.
The 1st gen included tools like TM1, SAP, and Hyperion. These were very big tools, required a lot of money to implement, and only the largest of customers could afford to implement them. Plus, you usually needed a technical team to maintain the tool.
2nd Gen comprises mainly cloud based applications, focused on more of the mid market. They are quicker to implement and lower cost. Tools in this space include Vena, Planful, Adaptive, and Anaplan (among others).
The 3rd Gen is all cloud based tools that are low code or no code, very user friendly, and collaborative across departments. They typically have a lower cost, shorter implementation time, and a focus on being more user centric. Examples include Pigment, Abacum, DataRails and Vareto.
Here’s a link to the full 3rd gen market guide I wrote for anyone who’s interested.
How has the CFO’s job changed with the evolution of finance software? Do you think the finance department is becoming more strategic as a result?
Without a doubt. Finance and the CFO are becoming more commercial and strategic. The CFO used to be almost solely focused on financial statements, governance, and compliance. Today the job is much more about guiding the wholistic business to achieve its financial targets, while being the right hand person to the CEO.
Tools have played a huge role in that evolution, and the modern CFO will often have analytics and even rev ops under the finance department. Finance needs to have insight and understanding of all the operational and financial metrics, and having a planning tool that can bring your CRM, ERP, HR, and Billing data all into one platform to run metrics can be invaluable. It’s a big confidence booster when you can easily show a leader your core metrics and know it has been calculated the same way every time, and point back to the source of the data.
Is it becoming more difficult to draw the line between FP&A tools and BI tools? Do you think the two spaces are converging?
We are seeing a blurring of the lines between FP&A and BI tools. Any good FP&A tool will do some level of reporting and dashboarding. Some have decided to keep this part to a minimum and instead focus on integrating well with existing BI tools, while others have built their own robust BI tool. Several FP&A tools have write-back capability to Power BI, Qlik, or Tableau, which allows you to do your planning straight in your BI tool. This allows you to have one integrated platform. Some BI tools include Phocas Software, Aimplan, Acterys, PowerOn, InfoRiver, Fiplana, among others.
What’s the biggest difference between a CFO’s tech stack today and ten years ago?
Unfortunately not as much as we would like to see. I do think the biggest change is finance is much more likely to take control of the analytics team and push to own the data calculations for the business, unlike 10 years ago. I think the big changes we are seeing in CFOtech is much better integration of data, and then of course AI. Over the last year a ton has been made of Generative AI and the amazing things it can do. We are seeing many planning tools coming out with their own AI assistants to help FP&A professionals work more efficiently.
Believe it or not, about 20% of our audience is product and growth professionals. What’s the “aha” moment for some of the best FP&A tools you’ve worked with?
One time I had someone email me saying “Why do we need planning tools? Excel is more flexible.”
I explained:
“Imagine trying to easily combine your CRM, ERP, and HR data in Excel, and then refresh them anytime you want, and build your reporting and dashboards on top of them.”
This was an “aha” moment for him when he understood the value of real time integrations with the data. Others have “aha” moments when they see how easy it is to collaborate with the business or share a board deck with external investors without even leaving the FP&A tool. I have had a few “aha” moments myself when I see how easy some of them make what-if and sensitivity analysis.
When we look back ten years from now, what features or capabilities do you think will have changed the FP&A game the most?
That is a good question… I think it is two things:
AI – I think AI over the next decade will change the way every department works.
The budgeting process - I think over the next 10-20 years many companies will abandon the traditional budgeting process for other more agile, flexible approaches like Beyond Budgeting, Rolling Forecasts, etc.
With that I think we will see a great emphasis placed on target setting and true forecasting predictions that are separate from the planning process, etc.
What non-FP&A tool in the CFO’s tech stack has seen the most innovation in the last ten years? Which non-FP&A tool in the CFO’s finance stack do you think will see the most innovation in the next ten years?
Great question, and not sure I could just say one. I think we have seen a lot of progress in procurement and spend management tools for both vendor and employee spend.
Over the next ten years I think we will see huge progress with ERP / accounting tools with blockchain, AI, etc. I think we will continue to see more and more of this work automated and streamlined.
Part III: Buying FP&A Tools
Are implementation costs for FP&A tools still alive and well? Those have always been the bane of my existence… I used to joke that to implement NetSuite’s Hyperion it would cost the same as the subscription’s first 2 years… and at that point, you’ll rip out the office carpet before the software comes out.
Yes, they are still alive and well. But with the new tools, implementation can get you up and running for some small businesses in as little as a few hours or days, instead of weeks or months. A few tools even have a free trial period. Obviously the more customized your needs are, the longer any implementation will take.
Realistically speaking, how much would you say SMB vs Mid Market vs Enterprise orgs spend on FP&A tools each year? If I’m a company in one of these three buckets, what am I looking at spending per year to hop into a decent tool?
This number is going to vary a lot but will do my best:
Startup (less than 10 employees)
From $1k - $10K a year.
Some at the $10 - $20K range often include some basic advisory or bookkeeping services as well
Small (10-100 Employees)
From $5K - $30K a year
Big range depending on needs
Mid (100-1,000 employees)
$20K - $50K a year
Enterprise (1,000+)
$30K - $500K+ a year
Nearly 140 tools exist in the market, from the most simple tool that is $69 for lifetime access and helps you build a budget with no integration at all, all the way up to tools that could be $500K+ and include close consolidation, etc.
Think of the needs for planning for a company like Microsoft…
Part IV: FP&A Careers
We’ve spoken in the past about the concept of someone “getting their Finance passport stamped” on the way to CFO. Can you explain to the audience what that means?
The idea is that in order to become a CFO you need a diversity of finance experiences, and each of these experiences is like getting a stamp on your “finance passport.” In order to make it to the top you need to have an understanding of the different finance functions. This can be done through special projects or a role within the department. However, very few people make it to the CFO chair without a well rounded and diversified set of finance experiences, like FP&A, Accounting, Treasury, and Investor Relations.
You’ve spoken to some brilliant finance professionals on your podcast. What’s the number one sound bite that’s stuck with you when it comes to building a career in finance, and who did it come from?
If there is one thing I would say it is make sure you work with, not against, the business, and get out from behind your Excel Spreadsheet.
What advantage does FP&A give someone in terms of understanding the business world, human incentives, or just how companies operate?
FP&A is one of the only roles in the company that gets a 360 view of the business. And then add in the fact it is from a financial lens, and that becomes an invaluable benefit. This is why we are seeing more and more people become CFO who have a strong background in FP&A. In addition to having a financial lens, FP&A also often gets to see a lot of the operational metrics of the business. FP&A needs to bring this knowledge to the table and be a part of the strategic discussions that happen.
Where can people find you? Do you have any events coming up? People can find me on LinkedIn, or my website.
I have a lot of events coming up but one I am very excited about is the SaaS Solution Showcase on May 23rd. This event is a partnership with Ray Rike, and Ben Murray The SaaS CFO. And I would love to see your audience members attend this free event.
Join us on May 23rd from 8:00AM to 3:00PM PT for an exclusive look at top FP&A solution providers like Planful, Mosaic, Pigment, Discern, Causal, Jirav, and Basis.
Each provider will offer a comprehensive 50-minute session, including company overview, product demo, customer success stories, and a Q&A segment.
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Great insights here, CJ - a lot of value - will share with my procurement network as there are numerous aha's that they need to experience too.