3rd Gen FP&A Tools - The FP&A Guy's (Paul Barnhurst) Top Insights & Recommendations

Kirk Kappelhoff

Paul, how are you doing today? Thanks for joining.

Paul Barnhurst

I'm doing great. And yourself, Kirk?

Kirk Kappelhoff

Not too bad. It's a busy world. Budget periods seem to be expanding across the whole year now; they're not confined to the last three months of the year these days. There's always a budget to be done, always a forecast to be made. Do you find the same thing is true for you?

Paul Barnhurst

I definitely think it's true in FP&A. Even if you're not doing a budget, there's a rolling forecast. There's almost always something going on. It just seems to keep getting busier and busier.

Kirk Kappelhoff

That's 100% true. There's definitely not less work as time goes by. With the upgraded software consistently being added to the world, we always find more ways to add new work, not necessarily relinquish it. That's a good thing from an analysis perspective; from a burnout perspective, well, that's a different story.

Paul Barnhurst

As long as it's productive work and you're not doing a ton of manual work, it's good. But you definitely have to balance how much somebody can work.

Kirk Kappelhoff

No doubt about it. I can see people joining, this is really nice. Welcome, everybody. We're going to get started in a couple of seconds. One thing to call out: you might see a poll on your screen. It will remain there throughout the webinar, so feel free to answer the questions and change your answers before submitting. You'll also see a third question about Drivetrain in particular; you can leave that until the end or answer it now. The first two you might be able to answer already: what are your top challenges in FP&A today? We've listed a couple of items, and feel free to add others. And do you plan to upgrade your FP&A software at all? We're going to talk about the timing of upgrading software, how to evaluate software, and all those details, so feel free to jump on those questions. Welcome, everybody else. I can see a fair few joining, this is great. I'm Kirk Kappelhoff, Director of Strategic Finance here at Drivetrain, and I'll be hosting our lucky guest today, Paul, the official FP&A Guy. He's an expert modeler and an FP&A guru. Paul, I'd love it if you could give us a bit of background: where did you get started, and how did you become the FP&A Guy?

Paul Barnhurst

I got started in FP&A, frankly, after grad school. I worked in contracts, went to grad school, and had the title of finance analyst, but I was really a business analyst doing a lot of report writing and SQL. An opportunity came up for a promotion. It was FP&A, and I said, "You're going to pay me more? Okay, I'll take that job." Little did I know I'd spend basically the rest of my career in FP&A. At the time, it was really just a way to get promoted, so to speak. So I started my journey into FP&A. My journey to becoming the FP&A Guy started probably about eight years ago. I reached out to a guy by the name of Ken Fick and said, "Can I give you a Starbucks gift card for 30 minutes of your time?" I was looking for a job. He said, "I don't want your gift card. I want you to write an article for my website." I said, "I suck at writing, but all right, I'll give it a try." Surprisingly, he liked the article and asked me to write a few more, and I did. I started sharing them on LinkedIn, and that started the journey of growing a following on LinkedIn, which eventually led to where I am today. As for the nickname, the FP&A Guy was a hashtag I used at one time on LinkedIn. Funny story: I decided I was going to stop using it, because someone complained that I shouldn't refer to myself as a guy, since there are women in FP&A. I said, "But I'm talking about me, not the profession." I was going to switch it anyway, since I didn't want to deal with the controversy. Then someone used it again, everybody started following me because of it, and I just stuck with it and decided to embrace it. I don't care if there's one person who has a problem with it. So, the FP&A Guy. One of the better decisions I made was to stick with that brand.

Kirk Kappelhoff

I love it. Thank you so much for that background. I can already see a couple of questions coming in, so feel free to keep adding them in the chat. One we've gotten to start with is: what's the difference between a BI tool and an FP&A tool? And are FP&A and strategic finance platforms the same thing? This is a good question, and I'll answer it from my perspective first, Paul, and I'd be really interested in what you have to say. At a high level, business intelligence tools are one category, and FP&A or strategic finance tools are a whole other category. The way I like to think about it is that where BI tools stop, FP&A picks up. BI is more descriptive and diagnostic: what happened and why, dealing with actual data. FP&A tools are typically predictive and prescriptive: what will happen, and what action will we take? As for what exactly strategic finance is: if you are asking what's the best path to achieve your targets, are you on track to meet them, and how can you course-correct to grow even faster or rejoin the path you wanted to be on, that's what I think of as a strategic finance tool. It's a new breed of tool in the accounting and finance space. If those three questions are on your mind continuously, it's probably time to think about strategic finance software. So again, BI tools are typically historical, and FP&A or strategic finance tools are more future- and forecast-based. Strategic finance specifically isn't just guessing your future numbers; it's strategically thinking about the best path to achieve your target metrics. Paul, that's my high-level view. With your wealth of experience, would you say anything differs, or is there anything you'd add?

Paul Barnhurst

I think that's a pretty good summary. A couple of things I'd add. We're seeing a bit of convergence. FP&A is planning and analysis, and BI tools are also used for analysis. Some FP&A tools very much focus on BI, and some say, "We're going to push everything we can to another BI tool," because the FP&A tool has a different purpose, like you said. But I do think there's some merging. And it's a really good point that FP&A tools are forward-looking for the most part, whereas your BI tool is generally historic, looking at actuals and what happened. With your FP&A tool, there are a lot more algorithms and a lot more thinking about prediction. When I think of strategic finance, I think of an FP&A tool that may or may not be strategic. Some just have basic planning capabilities. When you get into strategic finance, the tool is really focused on the operational side, helping the whole organization, and going beyond just planning, with metrics and the way it thinks about things. So I think you can have an FP&A tool that's not necessarily a strategic finance tool, but I don't think you can have a strategic finance tool without the FP&A component.

Kirk Kappelhoff

Okay, so strategic finance in your view would be a subset of the FP&A piece?

Paul Barnhurst

I think so. You have to have the planning piece in your strategic finance tool as a general rule, especially if it's going to support an FP&A department, because people aren't going to have two different tools, an FP&A tool and a strategic finance tool. So I think of it almost as a subcategory. You often do have a BI tool and an FP&A tool separately, but I don't know of anyone who has both an FP&A tool and a strategic finance tool.

Kirk Kappelhoff

Got you, that makes a lot of sense. Your answer is quite apt for some of the poll responses I've seen. Most people have data gathering and custom reports as their top challenges in FP&A, obviously tied in with the BI piece. Any thoughts on that? Is this what you've typically seen? Is it an issue that has risen with the growth of FP&A and strategic finance tools, or has it always been the challenge?

Paul Barnhurst

I think data gathering has always been the biggest challenge. I've seen studies that say anywhere from 30% to 60% of an FP&A person's time, sometimes even more, is spent on non-value-add activities, with the biggest piece being data cleansing and data gathering. It's a real challenge. Data is exploding, and the proliferation of data keeps making it harder to manage. So that doesn't surprise me. It's definitely what I would have expected as the top answer.

Kirk Kappelhoff

I see what you're saying, that makes a lot of sense. I can also see that 46% of the people on today's call plan to upgrade their FP&A software in the next six months. Almost half. In your world, with all the polls you run and calls you conduct, are you typically seeing a greater appetite for FP&A tools, or are people driving more toward Excel?

Paul Barnhurst

You're definitely seeing more of a need to manage the business, the collaboration and the data gathering. I don't think it's either/or between Excel and FP&A tools. If you have a really technical department, let's be honest, with the Microsoft tech stack, BI, Excel and Power Platform, you can build your own tool if you want, but you'd better make sure you always have the experts to maintain it. It's doable. So you could stay on Excel and build something yourself, or you can get a tool, but you're definitely seeing more of a need to go beyond Excel. A good example: anyone who follows Ben Murray, the SaaS CFO, knows he does an annual tech stack survey. Look at the last several years, and the share of people using an FP&A tool keeps creeping up. The tools are becoming more effective and efficient, and the cost has come down with how much competition is out there. More and more people are realizing the benefits, particularly collaboration and data security, which are difficult to get with just Excel, because at the end of the day it's not an enterprise tool.

Kirk Kappelhoff

Gotcha, that makes a lot of sense. I'm quite excited to meet him. I'm in Denver tonight, and he'll be hosting a bit of a dinner, and I've yet to meet him. He's a partner of Drivetrain, and anybody who doesn't know him should definitely go take a look at his stuff. It's very interesting.

Paul Barnhurst

The SaaS CFO, in case anyone's wondering. Check out Ben Murray's website. It's great stuff.

Kirk Kappelhoff

Really good stuff. So let's dive into what FP&A software use cases really are, and when you're ready to buy a true FP&A software.

Paul Barnhurst

As a general rule, there are a couple of signs that you need one, and then there are use cases. I'd say there are two or three areas where you see people using it. Sometimes people put in an FP&A tool really for reporting and helping with the close. I've seen some just use the tool for consolidation and reporting, and many may start there and add planning later. So I think your two main use cases are the reporting side and planning. Then there are tools, Drivetrain among others, that really let you dig into your data, drill down and see the analysis. Those are the general use cases. Beyond that, the tools are getting better and better at collaboration. That isn't so much a use case, but it's important to think about, because you want a tool your business is willing to use. Historically, the business would say, "I don't want to enter anything in that tool," and send it all to you to enter. We're starting to see that change a little, with more and more employees actually using the tool. As for signs that it's time, there are a few things. If you've worked in FP&A, you've been there with Excel. Excel is a fabulous tool, and I wouldn't tell anyone to get rid of the spreadsheet; there's always a place for it, even if you have a purpose-built tool. But there comes a point where you're linking to other files, numbers are wrong, you can't pull in all the data, you've got four or five sources and it's taking a long time. Yes, you can do a lot with Power Query, but it becomes difficult. You don't have the version control and change control you get with a purpose-built tool that has a database on the back end. There are benefits you won't get with Excel. At the same time, everybody wonders, "But isn't Excel more flexible?" Yes. The reality is an unstructured system on unstructured data will be more flexible than something structured, no matter what the tool is. That doesn't mean the tool isn't great or that you don't get a lot of benefits. But if flexibility is your number one priority and you can deal with all the other headaches, you're probably not ready for a tool. If you can't deal with the other headaches, you'll need to make that trade-off, because the benefit becomes worth it. And as you become more complex, the headaches only grow.

Kirk Kappelhoff

Got it, that makes a lot of sense. I've just seen a question come in that ties almost exactly into what you're saying: "Is anything really more functional than Excel?" It's a double-edged sword. My thought is that you have a spectrum: flexibility at one end, which is what you were talking about and which Excel excels at, and standardization at the other end, which Excel really struggles to maintain. You mentioned the non-value-add tasks before. I'm imagining downloading Excel data from NetSuite or your ERP and trying to put it into your Excel model. Those non-value-add tasks that teenagers could do if they were trained, not FP&A analysts, are what you're trying to eliminate when you move to a tool. So giving up some flexibility is sometimes worth the sacrifice to jump to a tool where you get some automation. I'm interested in your thoughts: is anything more functional than Excel?

Paul Barnhurst

As I said before, the reality is no. Excel can do anything. I don't know how many have seen this, but there's an artist in Japan who does his artwork in Excel and makes a living from it. You can do just about anything you want, way beyond finance. I still remember when a sales rep for one of the tools tried to convince me his tool could do anything Excel could do, including the artwork, and I said, "Okay, I'm going to call BS on that. You may have a great tool, but you're not doing that." And even beyond that, there are a lot of other situations. So if you just want that flexibility and functionality, Excel is hard to beat. But as I mentioned, it's about trade-offs. It won't handle some of those automated tasks well, and it won't handle combining your data well. Multi-dimensionality: Excel doesn't handle multiple dimensions well. If you need to look at customer, entity, currency and account, with five or six different dimensions, that's really hard to do in Excel. So there comes a point where the benefits of the tool, even though you give up some flexibility, outweigh the flexibility.

Kirk Kappelhoff

Well, this leads nicely into my next question: how do you evaluate a tool? You mentioned five or six dimensions. How do you know it's time to make the switch, and what should you look for from an evaluation perspective when choosing a tool?

Paul Barnhurst

I think there are a couple of things. First, knowing when to switch really comes down to when you're having difficulty collaborating and managing the numbers, and the process is constantly in a state of stress, bordering on chaos. Anyone who's run a large company on Excel knows what I'm talking about. I know more than one FP&A person who left a job because they were tired of trying to roll up a billion-dollar company in Excel. So that's the first thing. Second, as for going through the process, the most important thing is to know what you need, because every tool will tell you they can meet your needs. The salespeople will tell you what you want to hear, within reason. If you don't know what you really want, it's easy to get caught up in bells and whistles you may never use. So know your use cases. Know your ERP and which tools work well with it, since there may be limitations. Know the other data you need to bring in. Start small, with those details known. Also have an idea of what type of tool you want. Does it need to manage consolidation? Does it need multi-currency? Do I want a tool that basically lets me stay in Excel, or do I want a replacement? Know the different types out there and what works for your department. Somebody who says, "I want to stay in Excel and just want a database," will select a different tool than somebody who wants to replace Excel and use it as little as possible in the planning process. Those should be different tool sets you're looking at.

Kirk Kappelhoff

That makes a lot of sense. Does team size play into the decision? If you're a team of one, say a fractional CFO who just needs to stand up a model, versus a team of six or seven FP&A people at a billion-dollar company, how does that change your tool evaluation?

Paul Barnhurst

For sure. I think of the market in three groupings, with subsets in each. You have tools designed for the small market, and within that, some are really designed for owners or founders, with no FP&A team or maybe one person. Then there are small-market tools designed for those with an FP&A team, but usually a couple of people. Then you get into mid-market tools. How you define that varies a lot, but you're usually looking at more than $5 or $10 million, some say $50 million, where you start to have a few FP&A people and some scale. Then you have enterprise. Here's an example of how different it can be. I was at a conference talking to one of the big enterprise tools, and their biggest customer, because of the way its processes are written, uses 6 terabytes of data in memory.

Kirk Kappelhoff

Incredible.

Paul Barnhurst

So you're not going to select anything in the small or medium space. Only a large enterprise tool with very strong computational power will work for you. Whereas if I have one person, there's no reason I need a tool that can handle that kind of power, and I'd way overpay for it.

Kirk Kappelhoff

That makes a lot of sense. So when we're talking about size-specific tools, are there also industry-specific tools? I see a question from Katherine Lorenzo: "Is there an FP&A tool that could be customized for the SaaS industry?"

Paul Barnhurst

A great place to look, and again I'll reference Ben Murray, the SaaS CFO: he lists the top FP&A tools that SaaS companies are using. Last year, Drivetrain was the number one listed tool. Others made that list, like Mosaic, which is purpose-built. And many tools may not say "our number one industry is SaaS" but can support SaaS. There are a number of others I could mention, but that's a good resource to look at, and you can also look at the 3rd Gen guide I did. I'd say most tools try to be industry-agnostic.

Kirk Kappelhoff

Okay, because they want to reach a broader market rather than a niche?

Paul Barnhurst

Correct. One, it can be difficult to reach the scale they want with a niche. And two, the foundation of planning is very similar across companies. You're taking historical actuals, some metrics, drivers and assumptions, and forecasting the future. Planning isn't completely different because I'm in this industry versus that one. At its core, the inputs, outputs and all that are very similar.

Kirk Kappelhoff

I see. I've also got one from Victor Chen: "Apart from product features, what else should we look at when evaluating a tool?"

Paul Barnhurst

I think it's a great question. Outside the product, there are a few things to keep in mind. How's the training from the company you're selecting? Do you feel they're stable? This is a huge market; there are about 160 tools out there, and in two years I'll be shocked if the number is 165.

Kirk Kappelhoff

Do you think it's going to halve, or do you think it's going to double?

Paul Barnhurst

I don't think it's going to double. I think it will decrease a little. I've been saying that for a while, and I've been surprised so far, because they just seem to keep coming, though some tools have been lost. So you also need to look at whether they have solid customers, whether you feel comfortable with the leadership team, and whether they seem stable. Those are good things to ask. As for the product, beyond what I mentioned, I like to break it into four key areas. There's the model: how do they handle my data? Can they bring in the data I want, and manage the dimensions and metrics I need? That's the core model they build. How long will it take, and how do they think about it? From there you have the planning layer. Do they use Excel syntax, their own syntax, or natural language? How easy is it to learn? Do I need a coder to write a basic formula? For some tools, that's almost the case. Then there's reporting. Can they manage custom reporting? Can I build my own metrics? Do they have the chart types I need, like a waterfall, bar or column? How well do they integrate with my presentation tools, whether PowerPoint, Google or whatever it might be? And the last layer is workflow and collaboration. Does it integrate with Teams, Slack or my email? Can I assign approvals? How can I manage the workflow piece? Those are the layers I think about, and built into all of it is how they think about AI. I've had some great conversations with Alok, the co-founder at Drivetrain, and I know he thinks of AI as something that should be infused throughout the product. It's not "here's the standalone AI thing," but how do I incorporate AI to make the end user's life easier? Those are things you should ask. What does the roadmap look like, and what are they doing to take advantage of this explosion in technology?

Kirk Kappelhoff

Very interesting. So it sounds like AI should be infused into the DNA of the tool rather than being an add-on feature. Is that what you're saying?

Paul Barnhurst

That was Alok's view, and I think there's something to it. There will be cases where there's some standalone AI, and that's fine. But over the long run, in my view, the best approach is to really infuse it and not think of it as a standalone thing, just part of the software, the same way you think about the user interface and everything else as part of the whole product. That's where we're heading with AI.

Kirk Kappelhoff

Got it. AI is a very exciting topic, so let's talk about something that's not so exciting and maybe a little scary: implementation. There are a million ways to cut this. Some people have had a great time implementing, but the majority of the time, I'd say an 80/20 split, it can be a bit of a headache. The big question I have for you is what you feel about in-house versus external implementation. For the audience, that means: should the company that owns the tool implement it themselves, or is it a good idea to have a third-party provider implement it, separating the implementation work from the tool itself? What are your thoughts on that one, Paul?

Paul Barnhurst

I don't have a strong opinion that you should do one or the other. You just need to be aware there are pros and cons either way. If it's in-house, you get the benefit that they generally know the tool best. They also have more of an incentive to implement well, because they receive the long-term revenue, whereas someone who's just implementing it isn't getting the subscription revenue afterwards. They might have a little residual, but not the same. So those are the benefits of in-house: they generally know the tool better, and they have that incentive. On the flip side, if you go to a third party, they're not employees of that company, so they don't have to toe the company line, and you may get a less filtered view of things. They're also generally specialists in implementation and have seen many different tools, which can be a benefit, whereas people implementing for one company may have only seen that company's tool and may not have as broad an experience. But I don't think there's a right or wrong. The key thing is making sure that whoever does the implementation has a clear outline of your requirements, and that you have a good relationship where you can be open and honest in the process.

Kirk Kappelhoff

Okay, I see what you're saying. Do you think external or internal generally has a longer or shorter implementation timeline, or does it really just depend on the customer?

Paul Barnhurst

I think some of it depends on the tool, because most tools that use external implementers tend to be upper mid-market to enterprise, which is by nature more complex and will have a longer implementation. Big tools that have been in the market a long time rarely do the implementation themselves; they almost all use third parties. So I don't think you can say one is necessarily faster, because most of those that outsource have more complex use cases. That's often why they outsource: let someone else manage it, because it's so different from selling the software and running the SaaS side of it. Whereas if you have a smaller customer base with less complex customers, it's easier to keep it in-house. So I don't know that one is longer than the other. What's your take and experience on that?

Kirk Kappelhoff

Well, it can vary drastically. One thing we're touching on with implementation is training, like you mentioned. At the end of the day, after implementation, I want to know I can use the tool properly. And like you said, in-house has more incentive to keep that long relationship, because they're the ones doing the implementation. The other thing I've seen is that sometimes you get into a dangerous triangle: if something's going wrong, whose fault is it? The customer buying the tool, the person implementing it, or the tool itself? It's very hard to pinpoint. Whereas if you're implementing your own tool, for the most part you're just going to take ownership, because of that customer-is-always-right mentality and wanting them to have the best experience. For example, at Drivetrain, most of our product features are driven by what our customers ask for. I don't know if we'd be able to stay as close to our customers if someone else were implementing our tool for us. So that's one thing I'd touch on. Something you were referencing slightly is the difference between first-, second- and third-gen tools. First gen would be the bigger ones that might take longer to implement. Could you educate us on the lay of the land: what these generations are, how we think about them, whether third gen is heading in the right direction and is the future, or whether there's still a place for first and second gen, say 10 years down the line?

Paul Barnhurst

First, I'll say there's definitely a place for first and second gen. I don't think of the generations the way I think of a phone. How many of us have a first-generation iPhone or Android? If you do, all I'm going to say is, wow, you kept the phone that long. I think of it differently. When I think of first gen, a lot of your big tools, Oracle, SAP, IBM, I don't see those companies going anywhere. Calling them first gen doesn't mean their technology is inferior. What it means, when I think of the generations, is a way to segment the market: how long they've been out there and how they think about things. First gen was very much finance-focused, often coded, and started on-prem, with multi-million-dollar implementations and very expensive tools that scaled to the biggest companies out there. Second gen tended to be very much mid-market. They moved to the cloud, focused a bit more on the user and use case, and became much more cost-friendly and a little quicker to implement. What you've really seen with third gen is the explosion of low-code/no-code, that collaborative mentality, that strategic finance mentality, and the ability to support the smallest companies; some are designed just for founders. So rather than saying these other ones are going away, because many of those tools have re-architected, and you can re-architect a tool to address the technology, I think we'll continue to see more growth in third gen, with some of them moving further up-market. It takes time. Most third-gen tools started in the small or mid-market. It's really hard in any industry, but especially in FP&A and finance with public companies, to go on day one to American Express or Amazon and say, "Hey, we just started, trust us to manage all your public finances, your 10-Q and everything." They'll say, "I'm going with this other company, because I know I won't get fired if something goes wrong."

Kirk Kappelhoff

Sure. So on that, a hypothetical use case: someone's using one of those first-gen tools, say Anaplan, a big player, and they move to something like Drivetrain. What positives and negatives would they experience in a transition from a first-gen tool to a third-gen tool that's scaling, but not quite at Anaplan's size?

Paul Barnhurst

The first thing is that third-gen tools tend to be easier to understand and easier to manage. With Anaplan, and I'll use them just because you mentioned them, one of the biggest complaints is that you almost have to have a model builder. The coding isn't easy and takes a while to learn. It's powerful, but there's a steep learning curve. So as a general rule, with Drivetrain or any third-gen tool, you should expect a shorter learning curve and more low-code/no-code. That's one benefit. You'll often have a more updated user interface, some new bells and whistles, and a real focus on collaboration that you may not see elsewhere. At the same time, they won't have all the functionality of the older tools; they haven't been around long enough. A tool that's been around 15 years will have more functionality than one that's been around two, nine times out of ten, I'd say 99 out of 100. The new tool will have some things the old one doesn't, but sometimes you'll need to be a bit patient. It doesn't mean you're not getting a better experience; they just may not have everything the big tool has. Going the other way, with the big tool, the trade-off is that it'll probably be harder to learn and manage and may not have some of the cool new things you want. So you have to weigh those and decide what makes sense for you.

Kirk Kappelhoff

Got it, I see what you're saying. So it's more of that trade-off discussion from before. With one of the bigger tools, you may have to hire an analyst just to run it, because it's so complex and needs a heavy-coding person, but it handles big data well. Whereas the up-and-coming tools are simpler to use, but the big question is scale: how can they scale relative to my business?

Paul Barnhurst

I think there's a scalability component, and then usually the number of features; they often don't have quite as many. Those are the two things. One of the big companies I worked for was American Express. We had IBM Planning Analytics, and an entire team of people dedicated just to supporting the tool. I remember many conversations with developers. It can be a challenging thing to manage a tool that way.

Kirk Kappelhoff

That makes a lot of sense. Moving away from the finance piece of FP&A tools, I see a question about the non-finance use cases of FP&A tools. Maybe there are things around headcount. That's one area we've been focusing on a lot: simplifying the HRIS experience, where you have not only your actual headcount but also your to-be-hired roles, and then matching those when they actually get hired. You have a to-be-hired sales manager, you find somebody, and you need to replace that placeholder with the person. Simplifying that process. Are there other things FP&A tools can focus on that aren't necessarily finance-related?

Paul Barnhurst

For sure. I'm guessing most people have heard the term xP&A, or connected, continuous or integrated planning, whatever you want to call it. Many FP&A tools can go beyond just the finance use case. Yes, headcount is one. Other good areas are sales planning, whether that's sales operations or RevOps, and supply chain planning. Many tools designed for planning bring in different data. Your typical planning tool will bring in your CRM data, headcount data and ERP data; those are the three I look at as a minimum. Then some, and I believe Drivetrain is one of these, will also bring in data from your BI layer, whether that's Snowflake, your database, your data warehouse or your data mart. With that type of data, yes, you can go beyond financial planning, and many tools are focused on letting you do that. Correct me if I'm wrong, Kirk, but you have a number of users using Drivetrain for sales planning, not just financial planning, right?

Kirk Kappelhoff

Totally. Our biggest user base is obviously the FP&A world, but our second is RevOps, integrated with Salesforce, HubSpot and so on, ensuring you have a pipeline from the top end all the way down to your new ARR. The next piece is probably HR teams; our headcount module has increasingly gained a lot of traction, because we want to be able to break out each expense item at the employee level: not only taxes, but benefits and 401(k) items, so I can see it at a department view and at an individual view. Think about the budgeting experience. When you're budgeting, you want people to be able to quickly add the role they want to hire, and then have the system just do its thing. That's the goal of where we want to get to with something like Drivetrain: simplifying that process so people don't need to think about anything other than inputting a line item and moving on, and when the person gets hired, replacing that to-be-hired role with who they actually are. That's the simplicity we're going for. Is that what you were touching on?

Paul Barnhurst

Yeah, I think you covered it.

Kirk Kappelhoff

I've got another question: "When evaluating a third-gen tool for your increasingly complex business, what are the top three checklist items to make sure the tool can handle your business complexity?" I'm sure this changes by industry and business size, but is there a top-three list where you'd say, "Check if it can do this, and you're more than likely in the right ballpark"?

Paul Barnhurst

There are a couple of things I'd look for. First, how many dimensions can it handle, and how does it handle multiple dimensions in the plan? Many tools that are really focused on the small market struggle to scale with dimensions, because every time you add a new dimension, you exponentially grow the number of calculations. If I go from just product, with 10 products, to product and country, with 50 countries, I've just exploded the number of calculations. So: how well can it handle dimensions? Second, for complex businesses: can it really bring in all your data, and at what level? How low can I see? Can I drill down and get into it? Third, and if I had to pick just three I'm going to go with four here: look at its modeling language and how well it lets you write the formulas you need, because the more complex your business becomes, often the more complex your formulas get. Make sure it has a robust formula language. And the fourth: ask about scale. How many users use the tool at a time? Try to do some research with customers, because many tools start to bog down at a certain point with calculations. Like I said, it grows exponentially, and if they're handling a lot of dimensions, at some point most tools will struggle. It's just a question of where.

Kirk Kappelhoff

I see what you're saying, that makes a lot of sense. I've got another one that's more of a comment, but I'd be interested in your thoughts: "What stops me from thinking about buying a tool is the level of customization it needs. For instance, management would require one cut of data that could be completely unrelated to and different from how I've configured it. I find this kind of customization difficult, and for it I might have to change my data or ERP accordingly." I understand this; I see it a lot when people want to buy a tool. It's the flexibility of Excel again, but it's also these different cuts. There's a management P&L, an investor P&L, an internal P&L, and that's just the P&L, before all the other cuts of data you want. And, like you said, a region gets added. You mentioned dimensionality as something to check for. Any additional thoughts on handling those views and building it out?

Paul Barnhurst

On what he mentioned about configuring it: the reality is you'll never be able to configure the tool for every use case, and there will probably be situations where you go back to Excel. You need to think about whether you're a stable enough business to configure it for the majority of your use cases and make changes on the fly. If you're going through a lot of growing pains, some tools are definitely better than others at handling reconfiguration and changes. But almost always, you'll still have edge cases you'll need to do in Excel. So think about the areas where it can really save you time. Okay, if I can get my budget and headcount done really simply, and get my variance commentary taken care of. The reality is most people, even with a tool, still use a spreadsheet for some level of work. Some companies have figured out 100%, but that's often the case. So I'd look at it a little differently: don't let the level of customization stop you. Think about how to take care of the 80% and give your team time back, and manage the 20% in a spreadsheet when it comes along. Every tool has cases it's going to struggle with.

Kirk Kappelhoff

I like the way you put that: deal with the 80 and let the team manage the 20. I've got a couple of other pieces. One question is: "Does Drivetrain integrate with spreadsheets?" We do. Not only do we have CSV upload capability for spreadsheets, we also integrate with Google Sheets itself, which is more automated since it's an online tool; you can refresh data at a cadence of, say, an hour, or do a manual sync. So if you have ad hoc modeling to get done, spreadsheets are a great way to do it. Another piece I'll touch on, since it's come up: Paul, you talked about the barrier to entry when it comes to writing your script, what you called low-code/no-code. In Excel, if you look at the formula bar and F2 into it, you might see a long INDEX/MATCH referencing various tabs, and you're not 100% sure what it's referencing. It says A21 and takes you to D44, and you have to navigate there or trace your formulas to find where it's picking up from. One thing we've tried to do at Drivetrain is make formula-based planning so easy to understand that it's basically like speaking. For example, to calculate gross profit, I'd simply type "revenue," referencing that metric, minus "COGS," which is a separate metric, with autofill. Then when I look at the formula, I don't need to guess where it's coming from; I can see it immediately. Since we're on this, I'll also remind people about the third poll question. If this is interesting and you'd like a demo of Drivetrain, just answer yes to that question and we'll be happy to set you up. I or someone else from our team can walk you through it and see if it's the right use case for you.

Paul Barnhurst

And I'll add one thing. I have tested Drivetrain, and you can see it in the 3rd Gen guide. They use a natural-language approach, and I found it fairly straightforward. I can't say I wrote really complex formulas or dug into all of it, but I agree with you, Kirk, it was straightforward. That's one of the benefits when a multi-dimensional tool has its own calculation engine: you often get that language of using the metric instead of A7, C4 and D6 and tracing it all out. We've all been there, where someone hard-codes at the end and you're like, "I hate you."

Kirk Kappelhoff

That's right. Hard codes can be hard to deal with, but they'll always end up in a model at some point, and we need to call those out. In terms of pricing strategies, I'm interested in your thoughts on this poll. When you're looking at a tool, sometimes it's seat-based, sometimes usage-based, sometimes just a flat fee or subscription. Is there one approach you see as preferable, from a customer adoption perspective or a value-for-money perspective?

Paul Barnhurst

There are pros and cons. I like the usage-based approach in that you can scale slowly and it will cost less, but some people like having an exact, locked-in amount, because we all know that with usage you sometimes get a surprise. I'd say most tools today do some combination: often a flat fee, then possibly an extra fee depending on how many integrations you have, or if you go beyond 10 users, or other ways to approximate a usage-based approach. So more important than what they're doing is understanding how it affects you and what makes sense for your business. If you'll only have one user and low usage, you may very much want usage-based pricing. If everybody in the company will use it heavily, you might ideally want a subscription. I wouldn't pick your tool solely on pricing, but it's a factor: think about how you plan to use the tool and how that will affect your cost.

Kirk Kappelhoff

Beautiful, that makes a lot of sense. I'm seeing a couple of questions come up. One from Michael Aguero: "How will AI be used with your product?" The specifics are probably a bit more than I can cover here, but it's very similar to what Paul mentioned: making AI not just a feature of Drivetrain, but embedding it in every single part of Drivetrain. Think of things like helping you answer questions such as "Where did my variance come from?" when looking at budget versus actuals, and following that all the way down the rabbit hole to the original assumption that was off. Maybe it was the number of sales reps I had or the quota they attained, which flowed all the way down to my bottom line, net income or even cash. If AI can help me trace that and discover these insights without me having to dig through it, that will be super valuable. Another is charts and visuals. Looking at a tabular P&L is different from looking at a waterfall version, where you have revenue, then COGS subtracted to get gross profit, and so on. I think there's a third way of visualizing things, through the lens of AI, which can see things we simply won't see until we dig in for hours. If we can eliminate those hours of analysis and get the answers in 30 seconds or a minute, that lets us focus our analysis on other things, or simply catch up on the work that's inevitable in finance. So, like Paul said, embedding it is probably the best way to answer that one, Michael. Now, a big question for you, Paul. Let's say I'm a senior FP&A analyst or an FP&A manager, and I want a tool because I'm getting bogged down. I want to secure buy-in from management and win them over, but they're not sure, because of budget or whatever the case may be. How can I go about securing their buy-in for the tool I want to bring in?

Paul Barnhurst

I was going to say, does bribery count? No. On a serious note, that can always be a difficult conversation. There are a couple of things you need to be able to show beyond just "it will make my life easier." How can you quantify it? Say you can show it's going to reduce the time you spend on non-value-add activity by maybe 10 hours a month. And you can show, "These value-add activities I did last year brought this much to the bottom line. I was able to focus on this project. Think about if I could focus on one or two more of those a year, and the value of that." So that's one angle, from your perspective. But I think the even bigger thing is to think about how it will benefit your boss. If you get a good tool, a strategic finance tool, where they can go in and see things, they don't always have to ask you questions, or maybe they can ask the AI in the tool. Think about how that will excite them. If you get them excited that the tool will make their life easier, it's much easier to convince them next that it will also make your life easier, and by extension benefit the business and deliver a return. So don't just focus on what's in it for you. Start with what's in it for them: what's the benefit for management and for the business? Then think about how it benefits you, last.

Kirk Kappelhoff

Got it. So focus on the benefits it brings to management, and then, secondarily, if you can persuade them they'll see the value, they're more likely to adopt the tool.

Paul Barnhurst

Yeah, it's really an influencing activity: helping them see the benefit for them and the business, versus "Well, I want to sleep at night." I know it's not quite that bad, and I'm being a little facetious, but we've all been there, where that's how we feel sometimes when we're up late trying to figure something out.

Kirk Kappelhoff

No doubt. I've got one more question: "One of the constraints we have is dimensionality in vendor expense forecasting and allocating the spend to individual SKUs. Many of the third-gen tools we're doing discovery on either can't handle the flexibility or recommend simplifying. Should we simplify to fit the tool, or is there an 80/20 rule to follow in thinking about this?" I'll give my thoughts first, Paul. I'm a big Excel guy historically; my job has historically been creating IPO models in Excel. I love Excel, it's a wonderful tool, and part of that was learning the complexities of modeling and being able to model them out. But I understand that as teams get bigger, people don't want to learn Excel that deeply, and they want things to be simpler while still getting that level of detail, say at the vendor level, if that's important for their business. I think they should still be able to do that. So I'd say don't compromise on the value you bring as an FP&A analyst. The whole point of the FP&A team is to bring insights that differentiate you from competitors in your industry, so don't compromise, otherwise your competitors will have a competitive edge. On vendor forecasting itself: we have a vendor forecast module that goes down to the vendor level, and occasionally even the invoice or contract level within those vendors. If that interests you, I'd definitely recommend setting up a demo, because we can show you that quite clearly. On top of that, we can change how the vendor forecast module is viewed. If you log in as the head of engineering, you'll see a different set of vendors and forecasts than the next person logging in from G&A or R&D. So don't change; find a tool that lets you model the way you want to model. Those are my thoughts. Paul, anything different, or anything to add?

Paul Barnhurst

I'll add one little thought. I agree with what you said. There are many third-gen tools, especially those focused on the small market, that struggle with dimensionality, so if that's critical, you need to find the ones that are strong at it. You mentioned Drivetrain, and there are others that are solid on dimensionality. The second thing I'd always ask, and I'm not taking vendor as the example here, is: is this level of detail necessary, or am I overcomplicating it? Is it really a key driver? If it's not, ask yourself whether, without it, the tool can handle everything that really is a key driver, and whether you feel it will scale with you. I'm not saying give up. Make sure you have all those key things. But keep the 80/20 in mind. Sometimes the level of complexity we want isn't adding any accuracy or value, so just make sure what you're asking for adds value.

Kirk Kappelhoff

Sure. I definitely struggle with this one, Paul, because, like you mentioned, in Excel you can do any modeling you want; the question is how much time you want to spend on it. With vendor expenses or headcount modeling, things can get quite cumbersome, and the risk of manual error skyrockets. My goal, especially with Drivetrain, is to create something where you get that level of detail without the risk of manual error or the manual effort required to make those views happen. So it's more automated and less error-prone, but you still get the detail you want.

Paul Barnhurst

I agree. Especially in Excel, if you're going that deep, the question is whether you should make it a bit more back-of-the-napkin. You know you can do a back-of-the-napkin calc and get 80% of your forecast right, and the last 20% is where 80% of the time goes. That's where your model build really is. I agree with you that tools should be able to manage that. Just make sure you're asking for things that add value. Think it through: do you need it?

Kirk Kappelhoff

Sure. Paul, we've covered a lot of questions today on FP&A: choosing a tool, the tools themselves, and the functions and capabilities to look out for. As we wrap up, is there anything we've missed that you think is an important call-out for anybody evaluating a tool, or other thoughts from the industry you think the audience would find interesting?

Paul Barnhurst

The biggest thing I'd say is: do your homework. Know the problem you're trying to solve, and make sure you have your questions and your list ready ahead of time. We'll be sending a checklist to people who registered so you're prepared. Don't get sold on something you don't need because the salesperson says, "But we can do this, or we can do that." Make sure you get the tool that will really let you be more efficient. And I'll leave you with this thought. As much as all of us say, "Yes, I need a tool, I'm drowning," remember it starts with people and processes. If you don't have the right people and the right processes, don't spend a bunch of money on the platform, because it's not going to solve your problem. The tool is an enabler. It should enable you to be more efficient and effective. When you have the first two and add the right platform, that's when magic happens. So think about it holistically, and realize it's going to be a challenge. Change management is real. Even if you pick the right tool, and I use that term loosely, you still have to manage the change. Implementation can still fail even if you pick the perfect tool for your company.

Kirk Kappelhoff

That's a great way to wrap up, Paul. Thanks again so much for jumping on with us; we really valued it. We'll put some links in for anybody interested in a couple of the things we referenced today. If you'd like a demo of the tool, or any of the insights Paul talked about today, we'll put those links in as well, so please sign up. You're welcome to be added to our email list too, and we'll be able to send you a lot more that way. Paul, thanks so much for joining us. Everybody, thanks for coming along for the ride. Enjoy the rest of your week, and we'll see you on the next one.

Paul Barnhurst

Thank you, everyone. Thanks, Kirk. Great pleasure to be here.

Kirk Kappelhoff

Thanks so much, Paul. Bye, everyone.