Carl Seidman

Carl Seidman is a trusted and disciplined advisor specializing in financial strategy and business transformation. He has dedicated his career to guiding healthy companies through strategic growth and aiding stagnant, under-performing, and distressed companies through turnaround or revitalization.

He is a highly sought-after keynote speaker and trainer in the field of FP&A, business modeling, and Millennial career development.

Carl is a CPA and possesses other professional credentials in insolvency and restructuring, valuation, fraud, and financial forensics.

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Corporate FP&A Done Right

By Carl Seidman, Principal, Seidman Global LLC

FP&A Tags: 

According to recent findings by CFO Magazine, Chief Financial Officers are increasingly disappointed with the return on investment received from their financial planning & analysis (FP&A) function.   This is no surprise.  Companies that don’t get the most from their FP&A functions tend to focus meticulously on accounting data, its presentation, and what the numbers mean.  While data accuracy is critical to successful data-driven analytics, HOW that information is used is what differentiates an exceptional return on FP&A investment from a modest one.

When companies put greater weight on what the numbers mean, they often rely more heavily on financial reporting and perceive FP&A as a ‘nice to have’.  But it’s quite the contrary.  FP&A should be used to assist company leadership in problem-solving, risk management, and growth planning including the following:

  • Anticipate forthcoming decisions
  • Evaluate “what-if” scenarios and contingencies
  • Contrast new insights with conventional wisdom

The reasons leadership doesn’t use FP&A to its full potential (or at all) is three-fold:

  • A lack of trust in data
  • A poor understanding of how to interpret and use financial information
  • A culture of pervasive, gut-instinct decision-making

Lack of Trust

An overwhelming number of decision-makers interpret data incorrectly because of bad information.  The adage of garbage in, garbage out rings true here and leads to leadership getting continuously burned.  The fault often lies with inaccurate, untimely, or irrelevant financial reporting stemming from poor systems and unqualified personnel.

If the rubbish output becomes a chronic issue, leadership will adapt to making decisions without data – a logical, but dangerous response.  If and when the company realizes success, over time, leadership may begin to rationalize:  “We’ve gotten this far without access to good data, so we must be doing something right.”  

Poor Understanding of How to Interpret and Use Financial Information

Most owners tend not to come from deep financial backgrounds but possess enough knowledge to understand financial health and what’s going on in their businesses.  But there’s a major difference between having an objective understanding of the finances and creatively knowing how to use the information in making future decisions.   Often it isn’t that leadership doesn’t see a need for FP&A; they have a poor understanding of how to interpret and use financial information and therefore don’t know how to build a function to support it.

Pervasive Gut-Instinct Decision-Making

Business builders can be a confident bunch.  When a business grows and profitability increases, it gives decision-makers the impression they’re on the right track.  Echoing the above, they explain: “We’ve gotten this far, so we must be doing something right.”  There is a tendency to be self-assured, often deceptively, in their abilities to interpret figures and make smart decisions.  Who needs FP&A when gut-instinct has proved effective?

The combination of a lack of trust in data, poor understanding of how to interpret and use financial information, and over-confidence gained from prior wins results in misuse of available information and poor decision-making.

Truth and Consequences

Historical achievements are not always a signal of future success.  Accomplishments of the past may give rise to risks and competitive interference never previously seen.  A ‘shoot-from-the-hip’ mentality will eventually lead to disastrous consequences – some recoverable, some not.  However, intuition, when combined with financial intelligence and analysis, lowers risk exposure and gives rise to better decisions.  FP&A is not meant to replace the experience and instinctual nature of leadership; it’s meant to complement it. 

First, the CFO, Finance VP, or Controller professional must build out the enterprise resource planning (ERP) system or financial platforms to ensure information is timely and accurate.  Those responsible for generating the numbers should not only understand what they are gathering and reporting, but why they are doing it and how it will be used for making important decisions.  This may introduce a cultural shift that should be reinforced by training, coaching, and demonstration of its importance.  Without trust in the information, leaders won’t use it and will instead rely on their intuition.  

Second, instead of relying extensively on objective financial reporting, the business must adopt a more subjective, forward-looking mindset.  It is a move from being reactive to proactive.  FP&A should readily be able to provide an all-inclusive view of the business and where it might go.  Analyses of near-term and future decisions should be conducted with ‘what-if’ outcomes reflecting alternatives and uncertainties.  Evaluation of these scenarios should be considered mandatory, not just a ‘nice-to-have’.  Outputs generated from FP&A will assist in more credible negotiations and discussions with lenders, venders, customers, and other stakeholders. 

Making Educated Decisions

Business leaders should beware of overzealousness and believing what got them here will get them there.  Complacency, aimless strategy, and poor decisions can all lead to missed opportunities, stagnation, or distress.  We’ve witnessed in countless instances the damage caused by a lack of foresight and failure to react to changing circumstances.   A strong FP&A function emboldens leadership to make educated decisions rooted in genuine information well in advance.   In its absence, decision-makers place greater faith on back-of-the-envelope calculations and gut instinct.  No doubt, the shift from reactive to proactive thinking takes courage and investment, but it supports the businesses’ ability to be nimble and avert future pitfalls.

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The Pedigree of a Successful FP&A Professional

By Carl Seidman, Principal, Seidman Global LLC

FP&A is quickly becoming one of the most important fields within corporate finance.  The ability to manage working capital, stimulate growth, collaborate across functional groups, steer toward opportunities and away from substantial risk all falls within the wheelhouse of the FP&A professional.  How does someone not currently in FP&A enter the field?  How does someone already in FP&A succeed in their role and ensure they're at the forefront of the function's evolution?  This article will explain.

Financial planning & analysis, or more commonly referred to as FP&A, is a business discipline focused on financial management and strategic alignment.  To put it more simply, if a CFO’s position were broken down into its many parts and those parts were translated into separate job descriptions, most of those jobs would be in FP&A.  
 
It may surprise many that modern finance, as we know it today, has been around for less than a century. Further, the ways in which companies manage their finances and planning have been exercised for less than a decade. Bring computing and big data in the equation, and today’s finance has been practiced for just a handful of years. Because of the rapid change taking place in corporate finance, the management of the function is evolving as quickly as ever. There has never been a more urgent need for financial planning & analysis and never a better time for career advancement in finance than there is now.
 
The pedigree of a successful FP&A professional may look different than that of a traditional accountant or financial analyst. While many of the building blocks of talent are the same, the application of that talent is wildly different.
 

  • Excellent accounting skills – Despite the evolution of the accounting function away from traditional and mechanical tasks toward strategic and analytical ones, the importance of accounting expertise should not be discounted. CPAs are likely to look more like FP&A professionals than traditional accountants. That being said, those working within FP&A will benefit tremendously from a fundamental understanding of accounting.
  • Critical-thinking ability – The foundation of double-entry accounting ascertains that there are right and wrong answers. The accounting profession is protected by this objective black and white. However, the ideal FP&A candidate must be comfortable with ambiguity and knowing that much of the field is layered with shades of gray. Often there are many good answers and it’s up to the FP&A professional to understand the assumptions, analyze the possible outcomes, and assess the risks attributed to each. This is a different way of thinking than what traditional accountants grow up with and it’s a critical characteristic of FP&A.
  • Effective communication – FP&A professionals must be able to take the complex and make it extraordinarily simple. This is where the function must truly set itself apart from all others and will find much of its value. Non-financial professionals may struggle to understand the quantitative assumptions behind a decision, while financial professionals may struggle to translate quantitative assumptions into easy-to-understand terms. The FP&A professionals who can effectively exercise both talents will be indispensable members of their teams. Effective communication comes in many different forms – an ability to clearly write, influentially speak, and cleanly display visuals to translate information.
  • Emotionally intelligent and conciliatory – FP&A is like the financial heartbeat of organizations.  Information flows to FP&A from other functional group while financial intelligence and decision support flows from FP&A to other functional groups. Being in this unique position, FP&A has the responsibility for understanding and relating to others across the entire organization in a way most other function do not.  As such, FP&A needs to possess emotional intelligence in the form of empathy, diplomacy, and tact to work effectively with professionals from every group.

 
At the beginning of an FP&A career, development of technical skills should take priority as a means of transforming the organization from the numbers. At the time, the value of interpersonal skills shouldn’t be discounted. As FP&A professionals’ careers evolve, they’ll be likely to discover a greater focus on leadership skills and influence and less importance on technical skills. It isn’t that technical skills are no longer relevant – quite the opposite. It’s that the role of an experienced FP&A manager or director is to analyze decisions, make decisions, and develop more junior staff. That said, interpersonal skills become even more important the more senior the FP&A professional becomes. In summary, there are few positions that require such a mix between technical and soft-skills and can have such a tremendous impact on the decision-making in an organization. FP&A is an exciting career choice and the future of the profession is extremely bright.

The article was first published in Unit 4 Prevero Blog

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The Future of Business Modeling – Excel to Integrated Planning to AI

By Carl Seidman, Principal, Seidman Global LLC

The pressure of globalization and agile decision-making requires companies to improve their business modeling. They must integrate big data in real-time, synthesize that data to identify causal relationships and value-drivers, and ultimately use the findings to make high-impact business decisions.  

While many companies seek to move away from Excel in financial planning and analysis, it still plays a major role for most global corporations.  But so do integrated planning platforms such as EPM and ERP. Further, corporations are just beginning to explore the benefits of automated decision-making and AI. This article will address the positives and negatives or traditional Excel software, integrated planning platforms, and what the future of FP&A looks like with artificial intelligence and automation.
 
Among all the changes taking place within FP&A today, digital transformation is one of the most significant.  Never in the history of business has information been so accessible, so quickly, as it is today.  Digital transformation isn’t just a movement from institutional finance to cloud-based finance – it’s how digital information is created, stored, managed, and acted upon.
 
The quick and easy access of digital information poses new opportunities and challenges.  On one hand, the utilization of certain business data and analytics was never possible until recent years. As such, businesses will be able to make critical decisions very quickly based upon large sets of information.  On the other hand, the expanse of information makes it even more challenging to integrate end-to-end financial planning.  Without clear systematic processes in place and the technology to facilitate those processes, the benefit of digital transformation may be lost.
 
A recent study by Deloitte shared that nearly 40% of surveyed organizations still use spreadsheet software, such as Excel, as the primary tool for forecasting and budgeting[1].  Another 24% rely mainly on spreadsheet software but use a vendor planning tool or ERP platforms to integrate activities.  Based upon these findings, over two-thirds of surveyed companies are likely to be constrained in planning and analysis and unable to perform dynamic forecasting.  Only one-quarter of respondents utilize rolling forecast, which is the modern dynamic forecasting tool ensuring future business cycles are always within view.  
 
Deloitte’s findings are not surprising.  Many large institutions utilize integrated platforms primarily for data collection, aggregation and reporting that feed spreadsheet software and are not optimally used for integrated planning.  More recently, however, businesses are depending on the usefulness of financial EPM (enterprise performance management) platforms to run all financial channels such as budgets, forecasts, and financial statement consolidation.  We can expect to see more utilization of integrated planning tools, working in-tandem with spreadsheet software for ad-hoc analysis.  
 
Excel is still the analysis gold-standard for many companies and is far more flexible than many integration platforms. Further, Excel exists on a majority of PCs and is familiar to many business professionals. Finally, most small and mid-sized businesses simply cannot afford more robust software packages that complex corporations so dependently rely upon.  All said, we can expect spreadsheet software such as Excel, to continue serving its niche as an ad-hoc analysis tool, but we’ll gradually see less reliance on it for integrated planning. Survey results imply that, even though many companies still rely heavily on spreadsheet software, their desire is to move beyond it.  
 
Technological advancement should invite the outsourcing of manually-intensive and routine transactional activities that don’t require high cognition.  Outsourcing in this manner means delegating the tasks to machines which can easily and cheaply complete them.  We can expect machine-learning and automated decision-making to become more common in traditional reporting and FP&A functions, freeing up human brainpower for more value-add activities.  Institutions with sufficient spending budgets will continue to trailblaze this new frontier in digital transformation.  As software vendors continue to tailor their offerings, middle-market companies and small business won’t be far behind.

 

Notes:

[1]  Deloitte LLP.  “Integrated Performance Management Plan. Budget. Forecast”  2014.

 

The article was first published in Unit 4 Prevero Blog

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Is Zero-Based Budgeting Still Relevant?

By Carl Seidman, Principal, Seidman Global LLC

Many large corporations believe zero-based budgeting (ZBB) only applies to small companies that have the time to complete such a granular task.  Further, they often don't see the benefit that ZBB can bring to their organizations since those organizations feel a desire to focus more on big-picture planning.  This article will emphasize that ZBB is not exclusively for small businesses. It discusses zero-based budgeting as a tool that can be used to improve a company's understanding of is processes, risks, and opportunities and does not need to be applied to every line or department impacted in the budget.
 
The pressure of globalization and agile decision-making requires companies constantly advance their business models.  This may translate into a focus on top-line growth and process improvement.  For certain, companies must also have excellent visibility into their costs. A powerful process for identifying cost drivers and ensuring they are managed prudently is through a procedure called zero-based budgeting (“ZBB”).
 
Zero-based budgeting postulates a budget can be built most effectively from the ground up. Rather than trust last year’s performance as a justified starting point, ZBB involves analyzing cost driver categories, discounting what happened in the past, and approaching the future with a fresh set of eyes. Resource needs are identified almost as if the company is forecasting for the very first time.  At its core, ZBB invites cost control since it erases pre-determined assumptions.
 
At face value, ZBB sounds appealing but the idea frightens many large-company executives since they assume this means discarding the budget and starting over every year.  Since many companies already spend a quarter or more on the budgeting process, executives fear zero-based budgeting will take far longer. This is misguided. It’s true that ZBB is a laborious process; however, if done correctly, it’s benefits often far outweigh costs.
 
The common practice in budgeting is the roll-forward of prior-year results as a baseline for the next year.  While there’s nothing wrong with this approach, per se, it doesn’t adequately consider whether last year’s performance was optimized.  Just because an organization appeared financially healthy, doesn’t mean it’s established strong cost control.  As a consequence of this roll-forward, companies commit planning errors by setting financial targets early in the process and backfilling operating activities to meet those targets. This is backwards, reactive, and doesn’t appropriately address activities necessary to drive the business.  Worse yet, it encourages bias and sandbagging to meet arbitrary targets.  
 
Instead, with zero-based budgeting, the company may determine which activities align with strategy and the financial performance that can be expected as a result.  This is a very different way of thinking.  By holistically focusing on cost-drivers, eliminating unproductive costs, and managing performance throughout the year, companies can realize significant savings in a very short matter of time.  ZBB quickly becomes more than a cost-savings exercise; it becomes a process by which a cost-conscious culture is developed and maintained.
 
From a cultural standpoint, a company needs to ensure the tone is set from the top.  Leadership should meet with departmental managers to ensure they understand the importance of ZBB and are fully bought into the process.  Leadership should allay staff concerns that the process will be time-consuming, and compensation will be tied strictly to the budget.  Instead, staff should understand ZBB means they’ll have greater control in setting their own departmental goals rather than have targets dictated to them from the top.  Accountability for adherence to goals should be high.
 
Companies large and small and across any industries can immensely benefit from zero-based budgeting.  The gains come from increased cost visibility, disciplined spending, and strong governance.  ZBB is an extremely valuable procedure that reinforces that budgeting should not merely a routine of rolling forward last year’s figures and adjusting them up or down.
 


The article was first published in Unit 4 Prevero Blog

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Author's Articles

November 12, 2019

FP&A is quickly becoming one of the most important fields within corporate finance. How does someone not currently in FP&A enter the field?  How does someone already in FP&A succeed in their role and ensure they're at the forefront of the function's evolution? This article will explain.

 
May 30, 2019

The pressure of globalization and agile decision-making requires companies to improve their business modeling.  They must integrate big data in real-time, synthesize that data to identify causal relationships and value-drivers, and ultimately use the findings to make high-impact business decisions.

January 21, 2019

This article will emphasize that ZBB is not exclusively for small businesses. It discusses zero-based budgeting as a tool that can be used to improve a company's understanding of is processes, risks, and opportunities and does not need to be applied to every line or department impacted in the budget.

February 15, 2018
FP&A Tags:

When companies put greater weight on what the numbers mean, they often rely more heavily on financial reporting and perceive FP&A as a ‘nice to have’. But it’s quite the contrary.  FP&A should be used to assist company leadership in problem-solving, risk management, and growth planning. But what is Corporate FP&A Done Right?