FP&A Secrets

Three Statement Models TRANSFORMED My Finance Career What's been the number one ROI in my entire career? Easy. Learning how to build three-statement models. ?? Want to see exactly how I build these models? Watch the full video tutorial! ?? https://lnkd.in/e--Kpucc It's allowed me to get promoted from my accounting job, connected me with CEOs and investors at fast-growing companies, and even empowered me to start my own accounting firm. And if you learn this skill, I have no doubt it'll do the same for you in your career. ?? THE MYTH ABOUT THREE-STATEMENT MODELS Most people think building a three-statement model is incredibly complex. But here's the deal - it's simple, like really simple. Once you understand the core mechanics, you can create comprehensive forecasts where all three financial statements work together seamlessly. ?? THE FOUNDATION: CONNECTING ALL THREE STATEMENTS The power of a three-statement model comes from how the statements interconnect: - Changes to the income statement flow to the balance sheet - Balance sheet movements create cash flow impacts - Cash flow changes loop back to impact the balance sheet When built correctly, changing one assumption ripples through all statements automatically. ?? ESSENTIAL MODEL STRUCTURE Every top-tier financial model needs: 1. A drivers tab that pulls information and pushes it to other tabs 2. Color-coding so users understand what they can edit: ? Blue cells = editable assumptions ? Purple cells = direct pulls from other tabs ? Black cells = calculations (do not edit!) ? Red items = error checks ?? ERROR CHECKING IS CRUCIAL Smart models include error checks that immediately flag when something goes wrong. For example, if someone edits a calculation cell directly instead of changing an assumption, the model will alert you that balances no longer match. This keeps your model accurate and trustworthy. ?? BRINGING IT ALL TOGETHER The ultimate goal is a model where: - Historical data flows in from your accounting system - Assumptions drive projections across all statements - Everything balances perfectly - Errors are caught automatically - Summary dashboards make insights clear to stakeholders When you master this skill, you're no longer just tracking numbers - you're providing strategic insights that executives and investors crave. === This has been my secret weapon for advancing my finance career, and it can be yours too. The ability to build solid, error-free three-statement models transforms you from a data processor into a strategic advisor. What skills have been most valuable in your career? Let me know in the comments below ??

Here’s how Financial Statements get Produced ?? Credits to Josh Aharonoff, CPA , follow him for more practical finance content. Here's the original post ----- Here’s how Financial Statements get Produced ?? ?? Bookmark this if you work in Finance & Accounting! I’ve closed the books 100s of times in my career for countless fast growing businesses… and each time I have, I’ve followed the same process from start to finish STEP 1?? → SOURCE TRANSACTIONS It all starts with your source transactions. These can be a variety of transaction types such as… ? Bank Deposits ? Credit Card Expenses ? Bills ? Invoices ? Consumed expenses / earned income (accrual accounting) I often times see accounting professionals MANUALLY entering in these details into their accounting software. Today, there are much better ways and most accounting software's support a LIVE FEED via API connection to you bank / credit card. Once you have all of your transactions, it’s time to move onto step 2 STEP 2?? → CLASSIFICATIONS Now comes the time to CLASSIFY each and every transaction. Was it an office expense? A customer deposit? A legal fee? This is why it’s so CRUCIAL to have a well defined chart of accounts…this is the backbone of how your financial data will appear to stakeholders. But it’s not just GL accounts that you’re classifying…it’s: ? Vendor / customer names ? Departments ? Descriptions ? Job codes ? Receipts and these classifications aren’t done by just tagging transactions…they can also be done by booking JOURNAL ENTRIES If you aren’t familiar with journal entries, they are used to adjust the balances of your accounts with DEBITS and CREDITs. When you have all of your transactions loaded into your accounting software & classified, you’ll also want to perform a BANK RECONCILIATION which confirms your source data matches to the bank / credit card. STEP 3?? → PUBLISH FINANCIAL STATEMENTS OK…so you have your transactions loaded in. You have them classified. Now comes time to PUBLISH your financial statements. The Financial Statements are: ? The Profit & Loss ? The Balance Sheet ? The Statement of Cash Flows Take a look at each of these statements. Do they make sense? Are there any big jumps? Did we miss our target by a large amount? These anomalies can help you identify quick adjustments where needed === That’s my take on how financial statements get produced. What’s your method? ----- Follow our page FP&A Secrets to grow your career in Financial Planning & Analysis

CAPM – Explained simply Credits to Bojan Radojicic, follow him for more practical finance content. Here's the original post ----- CAPM – Explained simply A model used to determine the expected return of an asset based on its risk relative to the market. ?????? ??????????: ? Efficient Frontier A curve representing the set of portfolios that maximize expected return for a given level of risk. Shows the best possible investment portfolios. ? Market Portfolio A theoretical portfolio consisting of all assets in the market, weighted by their market value. Represents the optimal portfolio on the efficient frontier. ???????????????? ???? ?????????????????????? ?? Risk-Free Rate (Rf) The return on an investment with zero risk, often represented by government bonds. ?? Expected Return (E(R)) The return an investor anticipates receiving from an investment. ?? Beta (β) A measure of an asset's volatility relative to the market. β > 1: More volatile than the market. β < 1: Less volatile than the market. ??Market Risk Premium (Rm - Rf) The additional return expected from holding a risky market portfolio instead of risk-free assets. ?????????????????? ???????????????????????? Portfolio Diversification: Reduce unsystematic risk by holding a diversified portfolio. Investment Decisions: Use CAPM to evaluate whether an asset offers a fair expected return given its risk. Performance Measurement: Compare actual returns to CAPM expected returns to assess performance. ----- Follow our page FP&A Secrets to grow your career in Financial Planning & Analysis

Ten leader roles you can find in Finance. Which leader role have you worked in or for? Credits to Anders Liu-Lindberg follow him for more practical finance content. Here's the original post ---- Ten leader roles you can find in Finance. Which leader role have you worked in or for? In Finance, there are many leader roles. Here are ten of the most common roles: CHIEF FINANCIAL OFFICER Key Focus: Strategic oversight of the company's financial health. Responsibilities: Develops financial strategies, manages investor relations, oversees risk management, and advises the executive team on financial decisions. CONTROLLER Key Focus: Accurate financial reporting and internal controls. Responsibilities: Manages accounting operations, prepares financial statements, enforces internal controls, and supports audit processes. TREASURER Key Focus: Managing liquidity, investments, and financial risk. Responsibilities: Oversees cash flow, manages banking relationships, handles debt, and mitigates financial risks (e.g., FX, interest rates). HEAD OF FP&A Key Focus: Strategic financial planning and analysis. Responsibilities: Leads budgeting and forecasting, provides financial insights, and supports executive decision-making with analysis and modeling. HEAD OF INTERNAL AUDIT Key Focus: Ensuring compliance and risk management. Responsibilities: Conducts audits, assesses internal controls, reports on compliance, and recommends improvements to financial processes. HEAD OF TAX Key Focus: Managing tax compliance and optimizing tax strategy. Responsibilities: Ensures tax compliance, develops tax strategies, liaises with tax authorities, and monitors tax legislation for impact. HEAD OF BUSINESS FINANCE Key Focus: Financial support for business units. Responsibilities: Provides strategic financial insights to business units, supports budgeting, and drives profitability through analysis and partnership. HEAD OF COMPLIANCE AND CONTROL Key Focus: Regulatory compliance and internal control standards. Responsibilities: Develops compliance policies, enforces internal controls, monitors regulatory changes, and manages financial audits. DIRECTOR OF FINANCIAL SYSTEMS Key Focus: Managing and optimizing financial systems. Responsibilities: Oversees financial technology, ensures data integrity, leads system upgrades, and provides training on financial software. HEAD OF SHARED SERVICES Key Focus: Centralizing and optimizing back-office finance. Responsibilities: Manages accounts payable, receivable, and payroll; improves efficiency through standardization and automation; oversees service quality. Are there any leader roles missing? ---- Follow our page FP&A Secrets to grow your career in Financial Planning & Analysis

5 Steps to Speeding up the Accounts Payable Process Credits to Christian Wattig, follow him for more practical finance content. Here's the original post ---- 5 Steps to Speeding up the Accounts Payable Process #1 Standardize Processes and Procedures #2 Consider Automation Tools #3 Adopt E-Invoicing #4 Implement Early Payment Discounts #5 Conduct Regular Audits and Reviews Let’s dive in: ??#1 Standardize Processes and Procedures This standardization helps reduce confusion and minimizes the risk of errors. That said, employees may resist changes to established processes. Resistance can arise due to a lack of understanding, fear of new systems, or comfort with current methods. To prevent this problem, engage employees early in the process by involving them in the development of new procedures. ??#2 Consider Automation Tools By leveraging technology, organizations can handle higher volumes of invoices with fewer errors and faster processing times. However, automation tools that do not integrate well with existing systems can create additional complexities instead of solving problems. So, select tools that are compatible with your current systems. For example, Mercury, the sponsor of this post, allows you to categorize your bills and expenses within the bank account and easily sync with a variety of accounting software systems, including QuickBooks, NetSuite, and Xero. ??#3 Adopt Electronic Invoicing (E-Invoicing) This method offers numerous advantages in terms of speed, accuracy, and efficiency. Invoicing involves the electronic exchange of financial data, which can be vulnerable to security breaches. Protecting sensitive information from unauthorized access and cyber threats is crucial. Mercury also lets you pay bills directly from your account to eliminate the middleman and optimize your cash flow. ??#4 Implement Early Payment Discounts They are incentives offered by suppliers to encourage buyers to pay their invoices before the due date. However, taking advantage of early payment discounts can strain cash flow if not managed properly. Ensuring that there is enough liquidity to make early payments without impacting other financial commitments is vital. So, regularly update forecasts to reflect current financial conditions and ensure there is always sufficient cash available to take advantage of discounts. ??#5 Conduct Regular Audits and Reviews This helps organizations identify areas for improvement and prevent fraud. At the same time, frequent audits can lead to audit fatigue among staff, resulting in reduced effectiveness and lower morale. To prevent that, plan audits at reasonable intervals, balancing the need for oversight with the need to maintain staff morale and clearly communicate the purpose and benefits of audits. ---- Follow our page FP&A Secrets to grow your career in Financial Planning & Analysis

4 Stages of Forecasting…from BEGINNER to ADVANCED Credits to Josh Aharonoff, CPA, follow him for more practical finance content. Here's the original post ----- 4 Stages of Forecasting…from BEGINNER to ADVANCED Which stage are you at??? Every month, I meet with founders who are looking for help around their financial model. I rarely see a company working with a level 4 forecast… and oftentimes, founders don’t realize how much more value can be unlocked with just a few tweaks. Let’s go over each stage, and what to think about as your company scales ?? LEVEL 1 - CREATE A REVENUE BUILD (Beginner) This is where most founders start with a forecast. This will oftentimes suffice for an early-stage company, as the focus here is simply on the business model and the details behind the blueprint for how the company plans to scale The key here is to think about these 2 things: 1?? How will INPUTS result in OUTPUTS (eg: an investment in sales reps results in more sales) 2?? What are the SOURCES of your revenue (eg: existing customers vs customers in your pipeline vs new customers) ?? LEVEL 2 - ATTACH A PROFIT & LOSS (Beginner / Intermediate) Your revenue build is important, but it's not the only area of your business you need to think about. At this stage, you start to introduce other costs. It's here where you'll also want to attach a dynamic headcount build, showcasing the details behind who is on your team, and who you will hire in the near future. ?? LEVEL 3 - INCLUDE A BALANCE SHEET & CASH FLOWS (Intermediate / Advanced) Most companies report on the accrual basis, especially as they scale. Under the accrual basis, the amounts reported on your profit & loss won't equate with your cash flows. It's here where you'll want to implement a 3 statement model showcasing the movements in your Balance Sheet, allowing you to dynamically showcase cash. ?? LEVEL 4 - INCLUDE HISTORICAL DATA AND DASHBOARDS (Advanced) This stage involves you importing your existing data around your financial statements, allowing you to understand where you have been, and where you are going, all in one view. With this data in place, you can refresh your forecast each month, allowing you to tap into limitless dashboards for any business case. === So...which stage are you at with your forecast? It’s never too late to climb the rung and add more value to your company ??. What else would you add? ----- Follow our page FP&A Secrets to grow your career in Financial Planning & Analysis

"I’m building a finance team, but we’re not seeing results." Credits to Aleksandar Stojanovi?, MSc., follow him for more practical finance content. Here's the original post ----- "I’m building a finance team, but we’re not seeing results." If this is you, you have a role alignment problem. You can’t just assign general finance tasks and expect your CFO, Financial Analyst, and Accountant to deliver results on all fronts. Sure, you might see some small wins here and there… …but the majority of the impact comes when each role focuses on its specific expertise. I’m talking about leveraging your CFO for strategy, your Financial Analyst for projections, and your Accountant for reconciliations. And the surprising part? 99% of the time, this simple alignment makes all the difference. Earlier this year, I consulted with a company where just redefining roles led to a significant boost in efficiency. As long as you’re assigning tasks intentionally, I promise your team’s strengths will shine. They’re working. Waiting for the right focus. Building a solid foundation. Until one day, they’re each contributing to growth in their own way. So please … rethink how you’re using each role. Success in finance isn’t about piling on tasks… …it’s about refining each role so your team can drive impactful results. Give your team clarity. ----- Follow our page FP&A Secrets to grow your career in Financial Planning & Analysis

A good Finance Professional takes care of the cash of his company. Credits to Nicolas Boucher, follow him for more practical finance content. Here's the original post ----- A good Finance Professional takes care of the cash of his company. Here are 9 levers you can use to make an impact on cash ?????? 1?? Sales: -Improve payment terms with clients (negotiate down payments and short payment terms) -Accelerate the lead time to close deals 2?? Procurement: -Avoid down payment -Push the payment terms as far as possible 3?? Project: -Compute cash balance of each project -Plan your cash in and cash out and monitor it 4?? Collection of overdues: -Automate the dunning process -Escalate significant issues to management & key account manager 5?? Inventory: -Monitor level of inventory against forecasted sales -Reduce lead time, -Optimise stock buffer, -Reduce delays 6?? Finance: -Automate reporting -Improve understanding of cash flow statements -Bring transparency to management -Escalate collection issues -Use factoring to accelerate cash payment from receivables 7?? Sales administration: -Optimise the process between a cash milestone achievement and the issuance of the debit note to your client 8?? Management: -Translate cash objectives in team & individual objectives -Put cash on the management reviews agenda -Follow up cash as KPI -Delay investments 9?? Culture: -Communicate, explain, repeat: it’s a culture shift ----- Follow our page FP&A Secrets to grow your career in Financial Planning & Analysis

Analyze a business with just a Balance Sheet ?? Credits to Josh Aharonoff, CPA , follow him for more practical finance content. Here's the original post ---- Most people think all 3 Financial Statements are created equally… But to me, there’s one statement that is SUPREME to all the others And that’s the Balance Sheet ?? What’s so special about a Balance Sheet? Perhaps a better way to look at this would be what are the limitations of the other statements… 1?? The Profit and Loss isn’t connected to any other reports It’s an independent report that show’s you how much you earned in income and how much you incurred in expenses… But it leaves you clueless as to what you OWN, and what your obligations are to creditors + owners 2?? The Statement of Cash Flows does not contain any unique data What do I mean by that? The Statement of Cash Flows just pulls from your Income Statement and Balance Sheet It doesn’t show you new information that you can’t find on those 2 statements and it’s pretty easy to generate on your own - Note: This is mainly in regards to preparing information using the indirect method, which is the most common To sum it up…the Balance Sheet contains data from your Profit & Loss…as well as unique data you won’t find elsewhere ?? How can you analyze a business with just a Balance Sheet? A few ways… 1?? Calculate net income by taking the ▲ in Retained Earnings 2?? Create a cash flows statement by taking the ▲ in all balance sheet accounts, other than cash 3?? Analyze key ratios Here are 5 that you can review ??Current ratio → compares current assets to current liabilities ??Debt to Equity ratio → Compares total debt to shareholders equity ??Return on Assets → Compares net income to total assets ??Operating Cash Flows ratio → compares operating cash flows to total debt ??Return on Equity → measures net income as a % of shareholders equity That’s my take on how to analyze a business with just a Balance Sheet What would you add? ---- Follow our page FP&A Secrets to grow your career in Financial Planning & Analysis

Financial Statement Green Flags Credits to Bojan Radojicic, follow him for more practical finance content. Here's the original post ----- Financial Statement Green Flags: Income Statement ? Net Margin > 17% + ? Gross Margin > 40% + ? EBITDA Margin > 20% + ? Interest Coverage Ratio > 5 ? Revenue Growth Rate > 15% ? Direct Costs Growing Slower than Sales ? Cash From Operations higher Than Operating Profit Balance Sheet ? Quick ratio 1+ ? Debt to Equity Ratio < 1 ? Asset Turnover Ratio > 3 ? Goodwill in Assets < 10% ? Inventory Grows Slower than Profits ? Receivables Growing Slower than Sales ? Current Assets 2x Higher than Current Liabilities Cash Flow Statement ? Cash Flow to Debt > 1 ? Capex of Net Income < 15% ? Free Cash Flow Increasing by 10% ? Operating Cash Flow to Sales 15%+ ? Free Cash Flow Higher Than Net Income ? Stock-based Compensation of Net Income < 5% ? Operating Cash Flow grows faster than Operating profit ----- Follow our page FP&A Secrets to grow your career in Financial Planning & Analysis