Financial Planning for Strategy

Selling to leadership is tough. Learn to speak finance, and everything changes. (This works for both B2B sales and internal pitches.) Speak the language of financial metrics and business impact, and you’ll earn buy-in. Whether you’re pitching a product, service, or internal idea, this skill makes you a trusted partner to decision-makers. Want to dive deeper? Download my free guide “10 Levels of Profitability” here: https://bit.ly/40pY3CQ Here’s why: Executives don’t want fluff. They need to know *how* your solution or proposal will impact their business financially. Here’s how to make your pitch resonate: 1️⃣ Talk Margins, Not Just Savings ↳ Show how your solution improves gross, operating, or net profit margins. Make it clear how it improves topline or streamlines processes to ultimately add value to the bottom line. 2️⃣ Connect to Cash Flow ↳ Highlight how your solution will boost cash flow, not just the bottom-line. Smart executives prioritize cash flow over simple revenue increases or cost savings because it keeps the business stable and flexible. 3️⃣ Show ROI and Payback Period ↳ Present clear numbers on return on investment (ROI) and how quickly they’ll see a payback. Executives need to know when their investment will yield results. 4️⃣ Impact Key Financial Ratios ↳ Explain how your proposal enhances key metrics like ROE (Return on Equity), ROA (Return on Assets), or EBITDA. This demonstrates that you understand their financial framework and how your solution strengthens it. 5️⃣ Talk Risk Management ↳ Show that you’ve considered potential downsides. Demonstrate how your proposal mitigates financial risk and supports long-term stability—not just quick gains. Why this matters: 1️⃣ You Stand Out ↳ Most sales pitches and internal proposals focus on benefits. When you speak in terms of financial strategy and impact, you differentiate yourself. 2️⃣ You Build Trust ↳ Speaking their language shows you understand their challenges, priorities, and goals. 3️⃣ You Become Indispensable ↳ When you can prove your solution impacts key business metrics, you shift from being just another vendor or team member to a trusted advisor. If you want to learn finance strategy to elevate your pitch and proposals, join 3,000 learning with me here: https://bit.ly/famcol Remember: Learn to speak finance, and you’ll open doors that most can’t. ♻️ 𝐋𝐢𝐤𝐞, 𝐂𝐨𝐦𝐦𝐞𝐧𝐭, 𝐑𝐞𝐩𝐨𝐬𝐭 to help someone else. And follow Oana Labes, MBA, CPA for more  

The COMPLETE guide to forecasting every account on your financial statements 👇 The financial forecast is your company's roadmap for success, but most forecasts I see miss crucial details in how they approach individual accounts. I want to share my methodology for forecasting the most critical accounts👇 ➡️ PROFIT & LOSS 📈 REVENUE FORECASTING 1️⃣ Renewals & Expansion → Renewal rate × renewal likelihood × Expansion % This is the foundation of your revenue forecast and typically the most predictable revenue stream For example, if you have $100,000 in current MRR, a 90% renewal rate, and 10% expansion from existing customers: $100,000 × 90% × 110% = $99,000 in monthly recurring revenue Common mistakes to avoid: - Using a flat renewal rate across all customer segments - Ignoring seasonal patterns in expansion - Not factoring in price increases 2️⃣ New Customer Acquisition → Break down by acquisition channel with specific metrics For Sales Reps: - Factor in ramp time (typically 3-6 months to full productivity) - Use realistic quota attainment (industry average is 60-70%) Real example with 3 new sales reps, each with a $500K quota and 60% attainment: - Q1: Minimal contribution - Q2: 25% of full productivity = $62,500 - Q3: 75% of full productivity = $187,500 - Q4: 100% of full productivity = $250,000 Total annual contribution: $500,000 (vs $1.5M if you ignored ramp time and attainment) ➡️ COST OF GOODS SOLD 💰 COGS → Calculate as a percentage of revenue for most businesses Perfect for software companies and service businesses where costs scale relatively linearly with revenue. Implementation tips: - Calculate your 12-month historical COGS percentage - Adjust for any known future changes in your cost structure - Create separate percentages for different product lines Example: If your SaaS platform has historically run at 22% COGS/Revenue, but you're investing in better infrastructure that will reduce costs by 2%, forecast at 20% going forward. ➡️ OPERATING EXPENSES 💼 Headcount-Based Expenses → Build position-by-position with specific hiring dates and fully-loaded costs Example for a Marketing Manager with $100,000 salary + 25% additional costs: - Annual cost: $125,000 - Q2-Q4 cost (9 months): $93,750 Contract-Based Expenses → Review existing contracts and renewal dates with expected increases === Creating a detailed financial forecast takes time, but the accuracy gained from using these account-specific methodologies will transform your company's financial planning. Funny enough, today my community kicks off the FP&A Season with Financial Modeling Fundamentals - perfect timing for this post! We'll be building on these concepts with dedicated sessions on Revenue Forecasting , P&L Forecasting, and Balance Sheet Forecasting. You can find more details about the community here: https://lnkd.in/eU4b8ARA What account do you find most challenging to forecast accurately? Share your thoughts in the comments below 👇

Stop looking at financial modeling as only your job. It should involve many other smart people too. Here's how to involve them and lighten your load. 𝗦𝗮𝗹𝗲𝘀 Sales is a primary driver of the P&L. The P&L is a primary driver of cash flows. Variable costs are heavily dependent on the sales projections which means that the forecast better be reliable. The sales manager should update the sales forecast every week or month with the assistance of the sales team and CRM. The analyst should challenge the numbers but it’s the sales team that is ultimately responsible. 𝗢𝗽𝗲𝗿𝗮𝘁𝗶𝗼𝗻𝘀 Ops bases their decisions on anticipated future activity. Operations tend not to base their decisions on cash flow, unless liquidity is an issue. This requires coordination with sales, not just finance, for planning, purchasing and production. When the volume forecasts change, or requires recalibration, that’s a sales and ops discussion. FP&A may help with facilitating. 𝗛𝘂𝗺𝗮𝗻 𝗥𝗲𝘀𝗼𝘂𝗿𝗰𝗲𝘀 Hiring is usually driven by strategic planning and resource needs. Hiring is usually not a cash flow decision, despite major implications of human resources decisions on finance. The coordination may take place among sales, ops, HR, and the CFO before it ever makes its way into the cash flow forecast. 𝗠𝗮𝗿𝗸𝗲𝘁𝗶𝗻𝗴 Marketing is responsible for the marketing budget, which has direct implications for finance and cash flow. But the marketing initiatives are usually tied to strategic and sales planning. Once those activities are clear, the marketing team budgets for must-haves and nice-to-haves. 𝗖𝗮𝗽𝗲𝘅 The CFO or COO may take ownership of capex planning, depending on the needs and activities forecast by department heads. Timing and magnitude may be contractual obligations with supporting schedules updated periodically. 𝗚𝗲𝘁 𝗼𝘁𝗵𝗲𝗿𝘀 𝗶𝗻𝘃𝗼𝗹𝘃𝗲𝗱: A financial analyst’s responsibilities are to coordinate and facilitate the forecasting process, not owning every dimension of planning. 90% of the process should involve sales, ops, HR, and other business partners. Empowering them and supporting them makes them responsible for their zones of influence. Finance is responsible for putting the pieces together. When you delegate, the forecasting process is better and easier.

CFO: We're shifting all marketing to DR. Brand building is a luxury we can't afford. CMO: That's exactly what Figs tried in 2023. Want to know how that worked out? CFO: They're a billion-dollar company, so probably great? CMO: Let me walk you through their 18-month brand journey. It's a masterclass in what not to do. CFO: I'm listening, but skeptical. CMO: Phase 1: February 2023. Figs was spending 15% of revenue on a balanced marketing approach—brand building and customer acquisition. CFO: Sounds inefficient. CMO: Phase 2: May 2023. They pivoted to "marketing efficiency" by cutting brand spend and focusing entirely on DR and immediate customer acquisition. CFO: That's exactly what I'm proposing! Smart move. CMO: Phase 3: February 2024. Their earnings call revealed the truth. They admitted they'd gone "too far" from their previous approach. CFO: Wait, what happened? CMO: Their growth stalled. They realized they needed a more balanced strategy with product launches and storytelling campaigns. CFO: But did they actually change course? CMO: Phase 4: Mid-2024. They completely reversed strategy, returning to balancing short-term acquisition with long-term brand equity. CFO: So they went full circle? CMO: Exactly. They're now emphasizing top-of-funnel marketing to enhance emotional connection and community engagement—the very things they cut a year earlier. CFO: But what about their bottom line? CMO: That's the point. When they abandoned brand building, their growth plateaued. The short-term efficiency gains couldn't sustain them. CFO: So you're saying we'd be repeating their exact mistake? CMO: It's the classic pendulum swing. Brands panic, cut brand spend for immediate efficiency, then realize they've damaged their growth engine. CFO: But we need to show results now. CMO: Short-term results at the expense of long-term health is exactly how brands get trapped in the discount-dependency cycle. CFO: So what's the alternative? CMO: Balance. We can optimize DR efficiency while maintaining brand investment. It's not either/or—it's both. CFO: I need to see the numbers. CMO: I've already modeled it. We can improve ROAS on our DR spend by 15% through better targeting, which gives us room to maintain our brand investment. CFO: This Figs case study is uncomfortably familiar. CMO: The best time to learn from someone else's mistake is before you make it yourself. CFO: Fine. Show me the balanced approach. But I'll be watching those numbers like Taylor Swift watches her backup dancers. CMO: And I'll deliver results faster than her ticket sales crash Ticketmaster.

"Should we hire or should we cut?" is a question I'm hearing often from small business owners right now, which is fair given the mixed economic signals. Some clients are seeing their best quarters ever. Others are watching pipelines thin out. Everyone seems to be asking, "How do we plan for what we can't predict?" This is where scenario planning becomes your survival tool; not just hoping for the best, but modeling the reality of different futures. Here's what we walk our clients through: 🌳 The Growth Scenario: For example, if revenue is expected to be up, we’re looking at potential team expansion and higher overhead. Looking at what that does for cash flow given the changes to expected expense changes. 🌱 The Steady Scenario: Where flat growth is expected and we plan to maintain current team, we’ll want to optimize margins and prepare for inevitable per team member increases. There will likely be some percentage increase YOY but we expect the core costs to stay the same. 🍃 The Contraction Scenario: On the other hand, if revenue is expected to go down, we want to look at strategic cuts that allow the team to run efficiently while preserving cash. For our clients, this is usually a mix of team, professional services, and travel. We also want to ensure that the resources kept are used efficiently. Each scenario gets its own financial mode where we map out cash flow, runway, and break-even points for 3, 6, and 12 months ahead. The command center for this? Fathom. We've been using Fathom since the beginning of Little Fish Accounting and it lets us build the scenarios in real-time with clients, showing exactly how each decision ripples through their financials. No more spreadsheet gymnastics or gut-feeling guesses. Ultimately, the founders who survive uncertainty aren't the ones with crystal balls—they're the ones with clear models and decisive action plans. And we're glad to be the builders 🧱

What happens to a company’s financial health when the economy takes a turn for the worse? Imagine: A business starts the year with a healthy cash reserve and manageable debt. But As the market shifts, they’re forced to dip into their revolving credit line. The cash cushion starts to shrink, and by the end of the forecast period, it’s gone. Meanwhile, current liabilities and short-term obligations that must be paid within a year remain high, putting added pressure on their liquidity. Now, Here’s where it gets tricky. Even though the company was paying dividends every year, their retained earnings were growing thanks to steady profits. But under this downside scenario, profits turn into losses. Retained earnings reverse course, and equity erodes. The balance sheet starts to tilt: liabilities rise, equity falls, and the company edges closer to breaching financial covenants. The lenders aren’t blind to these risks. They lower the loan-to-value (LTV) ratio meaning the company can borrow less against its capital expenditures. In the best-case scenario, they could secure 75% financing. But as the risk climbs, the LTV drops to 65%. Lenders also shorten the debt repayment period, ensuring they get their money back faster. This shift in capital structure is a stark reminder of how quickly financial stability can unravel. It underscores the importance of scenario planning in financial modeling preparing not just for growth but also for the storms that might come. According to a recent survey, 77% of CFOs identify liquidity management as their top priority during economic downturns. And yet, many companies still underestimate how quickly their cash position can deteriorate under pressure. This is why building a robust forecast, stress-testing your financials, and maintaining a proactive dialogue with lenders are more critical than ever. Have you experienced a shift in your company’s capital structure during challenging times? How did you navigate it?

✨Need some liquid courage while pouring over your budget? ✨ It’s Hard to Predict—But Is It Really? Every year around this time, we work with clients to forecast the next 12 months. Their biggest hesitation? They feel it’s pointless to try and predict the future. It’s challenging for them to think about what’s possible because it doesn’t feel real or tangible. It can seem like the numbers are random—but there are ways to make an educated guess about the future. Here are some of the steps my CFO leads and I take to help clients move through the uncertainty: 1️⃣ Financial Statements We look at the past year or two of financial performance by month. We review the income statement, balance sheet, and cash flows over the past 12–24 months. This gives us a starting point to see if there’s any seasonality, any trends, and an idea of general operating costs. It gives us a chance to look at past revenue sources—what products or services sold the best—and to spot customer patterns, including any former customers who haven’t purchased in a while or new potential customer segments. 2️⃣ Collaborate with the CPA We speak to the CPA to check for any upcoming changes in tax laws that may impact financials. We talk about any potential changes in the industry or economic environment that might affect the company’s future revenue. 3️⃣ Evaluate Staffing and Major Purchases We review the current employee list, their salaries, and benefits to determine if there are any hiring needs. Then, we discuss any new major purchases that need to happen, whether in technology, software, professional development, or conferences. And all of this revolves around the CEO’s higher-level goals for the company for at least the next 3 years. These are just a few of the ways we help make the future feel more tangible for our clients. Do you have similar hesitations when it comes to financial forecasting? If so, come to my next CFO Hours on 11/20—sign up at the link in the comments! #SmallBusinessFinance #ProfitabilityTips #ScalingYourBusiness #FinancialPlanning

Common Mistakes in Cash Flow Management (and How to Fix Them) Cash flow is the lifeblood of any business. Poor cash flow management can lead to financial struggles, even for profitable companies. Avoiding common mistakes can help businesses maintain stability, grow, and stay competitive. Here are some of the most frequent cash flow pitfalls and how to fix them. 1️⃣ Ignoring Cash Flow Forecasting 🔹 The Mistake: Many businesses focus solely on revenue and profits but fail to forecast cash flow accurately. 🔹 The Fix: Implement regular cash flow projections to anticipate shortages and surpluses, allowing for better financial planning. 2️⃣ Overestimating Revenue & Underestimating Expenses 🔹 The Mistake: Businesses often assume payments will arrive on time while underestimating operating costs. 🔹 The Fix: Use conservative estimates for revenue and build a buffer for unexpected expenses to ensure financial stability. 3️⃣ Poor Accounts Receivable Management 🔹 The Mistake: Allowing overdue invoices to pile up can disrupt cash flow. 🔹 The Fix: Set clear payment terms, offer early payment incentives, and follow up promptly on outstanding invoices. 4️⃣ Excessive Spending & Uncontrolled Expenses 🔹 The Mistake: Growing businesses often overspend on expansion, hiring, or unnecessary expenses. 🔹 The Fix: Monitor expenses closely and prioritize spending on areas that drive growth and efficiency. 5️⃣ Relying Too Much on Short-Term Debt 🔹 The Mistake: Using credit lines or loans for daily operations can create long-term financial strain. 🔹 The Fix: Focus on improving cash flow from operations and reserve debt for strategic investments. 6️⃣ Lack of a Cash Reserve 🔹 The Mistake: Many businesses operate with minimal cash reserves, leaving them vulnerable to unexpected downturns. 🔹 The Fix: Maintain a cash reserve equal to at least three to six months of operating expenses for financial security. Strong cash flow management is key to business survival and growth. By addressing these common mistakes and implementing proactive strategies, businesses can ensure financial stability and long-term success. What strategies does your business use to manage cash flow effectively? #CashFlow #BusinessFinance #FinancialPlanning #Entrepreneurship #Accounting #Finance

A poor demand forecast destroys profits and cash. This infographic shows 7 forecasting techniques, pros, cons, & when to use: 1️⃣ Moving Average ↳ Averages historical demand over a specified period to smooth out trends ↳ Pros: simple to calculate and understand  ↳ Cons: lag effect; may not respond well to rapid changes ↳ When: short-term forecasting where trends are relatively stable 2️⃣ Exponential Smoothing ↳ Weights recent demand more heavily than older data ↳ Pros: responds faster to recent changes; easy to implement ↳ Cons: requires selection of a smoothing constant ↳ When: when recent data is more relevant than older data 3️⃣ Triple Exponential Smoothing  ↳ Adds components for trend & seasonality ↳ Pros: handles data with both trend and seasonal patterns ↳ Cons: requires careful parameter tuning ↳ When: when data has both trend and seasonal variations 4️⃣ Linear Regression ↳ Models the relationship between dependent and independent variables ↳ Pros: provides a clear mathematical relationship ↳ Cons: assumes a linear relationship ↳ When: when the relationship between variables is linear 5️⃣ ARIMA ↳ Combines autoregression, differencing, and moving averages ↳ Pros: versatile; handles a variety of time series data patterns ↳ Cons: complex; requires parameter tuning and expertise ↳ When: when data exhibits autocorrelation and non-stationarity 6️⃣ Delphi Method ↳ Expert consensus is gathered and refined through multiple rounds ↳ Pros: leverages expert knowledge; useful for long-term forecasting ↳ Cons: time-consuming; subjective and may introduce bias ↳ When: historical data is limited or unavailable, low predictability 7️⃣ Neural Networks ↳ Uses AI to model complex relationships in data ↳ Pros: can capture nonlinear relationships; adaptive and flexible ↳ Cons: requires large data sets; can be a "black box" with less interpretability ↳ When: for complex, non-linear data patterns and large data sets Any others to add?

Basic FP&A versus Strategic FP&A FP&A can and should be more than covering the basics. Let’s jump in: ⤵️ 📌 Basic FP&A: ➣ Consolidate Data You download data from various systems, like Netsuite for actuals, or Salesforce for sales. Then you clean it up so everything aligns and can be consolidated in Excel. ➣ Update Spreadsheets You manage large Excel files where you get data from different sources to create graphs for your PowerPoint deck. ➣ Adjust Budgets You collect inputs from the department heads. Then you plug it into your spreadsheet to reflect the latest estimates. ➣ Compare Budgets to Actuals You update a report with last month's budgets in one column and copy / paste actuals into the next column. Then you email it to the department heads, asking for explanations. ➣ Update Standard Reports in PowerPoint Once all the Excel reports are done, you need to update the deck that gets reviewed by the senior leaders. Worst case, that means copy/pasting from Excel to PowerPoint. 📌 Strategic FP&A: ➣ Recommend new metrics You find leading indicators that tell you where the business will likely go. If the impact is significant, you improve your forecast accuracy and include the metrics in the management reporting deck. ➣ Get results sooner You identify bottlenecks in the month-end close process and experiment with different ways to remove them. Now you can present results earlier, which gives more time for deep analysis. ➣ Test a new forecasting method You experiment with driver-based planning and realize that combining several forecasting techniques improves accuracy. As a result, your forecast becomes a better tool for making decisions. ➣ Identify risks and opportunities You work closely with your business partners to find the root causes of the forecast variances. Then, you make recommendations about capitalizing on the opportunities or mitigating the risks. ➣ Implement Scenario Planning You take your driver-based forecasting to the next level by identifying best-case and worst-case scenarios. Then, you recommend what the company should do in each scenario. ➣ Identify cost savings You combine your business understanding and business partnering skills with your analytical abilities and determine which costs have low returns. Then, you suggest where to reinvest the savings. The bottom line is this: Strategic FP&A doesn’t just have a more significant impact on the business. It’s also more enjoyable. To do more strategic FP&A, you need to: #1 Automate the basics #2 Develop a broad understanding of the business #3 Become an effective Finance Business Partner So, let me ask you this: ❓Do you do basic or strategic FP&A tasks? ❓ What did you do to spend less time on basic tasks? 💎 Comment below to help others. P.S.: I share FP&A best practices every Tuesday with my audience of 17,000+ finance and accounting professionals who subscribe to my newsletter. You can get it here (free): https://lnkd.in/eGgS9hYs