Charlie Liu

Hi everyone. Welcome back to Making Cents with Charlie. Our guest today is one of the most recognizable voices in FP&A. He is the founder of The FP&A Guy and host of three popular podcasts: FP&A Unlocked, Future Finance, and Financial Modelers Corner. He has also spent 12 plus years inside finance teams at companies like American Express, Solera, and DigiCert. Welcome to the show, Mr. Paul Barnhurst. I am really excited to have you.

Paul Barnhurst

I am excited to be here. Thank you for having me, Charlie. I got excited and put on my gear that you gave me. I came prepared to be your free billboard for the day.

Charlie Liu

I love it. Thank you so much. We should trade hats next time.

Paul Barnhurst

Sounds good. My wife made the order and I am really glad it turned out better than anything I would have done. Sometimes you just have to go with the wife because they know best.

Charlie Liu

Fully understood. Well Paul, we like to start with some rapid fire questions and afterwards I would love to dig into your experience and history. You are well loved online and I think a lot of folks would love to hear your opinions on building a career in FP&A. Everyone is talking about AI so we will get into that as well. But first, I did not know this about you: it seems like you have a sports background. Basketball or baseball?

Paul Barnhurst

I played a ton of basketball as a kid. Never good enough for the high school teams but a lot of church league. I would have to say basketball.

Charlie Liu

I also noticed you like running. What do you listen to when you run?

Paul Barnhurst

Most of the running I do nowadays is on a treadmill. I am usually following a workout with music in the background. If I am outside, I am either listening to music or sports talk. Surprisingly I do not listen to many podcasts. Probably should not admit that, but I do not.

Charlie Liu

You create your own style.

Paul Barnhurst

I get plugged in doing eight or nine episodes a month so most of what I listen to is sports talk radio when it comes to pods.

Charlie Liu

In terms of planning, driver based or zero based?

Paul Barnhurst

Driver, generally. When you are dealing with revenue it is almost always going to be driver based. With expenses there are times, especially if they have been out of control, where zero based makes a lot of sense. It forces you to reset everything and justify it all. There is not a clear cut answer. Revenue models should be driver based as a general rule. Expenses you should have drivers, but there are definitely times you need zero based budgeting.

Charlie Liu

How often do you feel a model should be revamped?

Paul Barnhurst

It depends. If you are dealing with a mature industry you may not need to do it often. But if you are in a high growth business you are probably rethinking it constantly because things are changing. How many times have you had to rethink your model in the past couple of years?

Charlie Liu

Quarterly. The first year I rebuilt the whole model monthly.

Paul Barnhurst

Right. It depends on what stage you are at, what kind of business, and what the economic environment looks like. The more stable the business, the less you need to rebuild as long as you have a good model. The more you are in hyper growth or trying to find product market fit, the more often you will be rebuilding.

Charlie Liu

I think this is something people do not think about enough. In the CPM and FP&A software space things change a lot. I used to implement solutions designed to last four or five years. Now depending on who I am talking to I need to design things knowing the whole model may need to be rebuilt every quarter or every six months.

Paul Barnhurst

Especially if you are doing a lot of acquisitions. If you want revenue models inside the tool and the company does a lot of M&A, you need a lot of flexibility. That is always the challenge inside a tool because you trade structure for flexibility. It is just a question of how flexible you can make it within that structure.

Charlie Liu

These are things people actually do not think about. If you want full automation, speed, control, and security, you often lose flexibility. But if you are in a fast changing business, a rigid model is not going to reflect reality in a few months.

Paul Barnhurst

That is the main reason so many modeling tools that tried to bring more structure have struggled to scale like Excel. As soon as the tool cannot handle a use case, and it will happen, the default is to go back to the tool everyone has been trained on, that costs virtually nothing and gets the job done quickly.

Charlie Liu

Have you seen a large shift in how FP&A platforms are being built now? I think two years ago you and I both said there were around 150 of these tools and we expected consolidation. With the explosion of AI I am not sure that has slowed down.

Paul Barnhurst

There are now kind of three or four different categories. There are traditional planning tools, all of which are moving toward agents. I was interviewing a CEO just yesterday about how they are using agents. I also had a really interesting conversation recently where someone mentioned their CFO was using a product for variance commentary but would not let it touch the numbers. When I asked if the agent used a deterministic process for the calculations the answer was yes. And I thought, well, what is the difference then? People have this idea that LLMs are bad at math so they cannot let it touch numbers. But there are many other tools an LLM can call to work around that.

Charlie Liu

I want to dig into that. How do you see the split between AI handling the modeling work versus the planning work?

Paul Barnhurst

The planning phase is probably where the real benefit is. We all want to jump to the modeling phase but AI is actually stronger in the planning, auditing, and documentation phases. Yet we ignore those because the modeling is where we feel productive. If you look at disciplined modeling shops that do this for a living, their advantage is in those other areas, not the modeling itself. That is where the real time savings are and where AI's strength actually shows up.

Charlie Liu

I think the planning exercise and the modeling exercise are very different things and a lot of people are one or the other. A lot of folks in my space came up building models. They are thinking about calculations and logic, not the actual planning. But your CFOs and your heads of sales and marketing, they are focused on the planning piece. What I have seen is that the people who spent all their time building the machine are now actually able to have real business partner conversations because the model handles the grunt work. They are thinking about how to build the plan, not just the model.

Paul Barnhurst

Exactly. And when it comes to planning, the biggest thing you can do is deeply understand the operations of the business. The better you understand the operations the better you can ask the right questions and support your assumptions. Because at the end of the day all models are wrong. The modeling phase should really just be about good design, correct math, and making it as easy as possible to update and trust. The real work is in the assumptions. All models are wrong, as George Box once said, some are useful. The question is how wrong are you.

My professor in grad school graded us almost as much on our thought process as on the model itself. He wanted to see that we had thought through the industry, the strategy, the context. In his view the rest was just math. And to a certain extent he was right. In FP&A whether you are building a board deck, doing an analysis, or putting together a model, we do not spend enough time on the prep, on the planning, on understanding the business so we can ask the right questions. You can build a model that is 100 percent accurate from a math standpoint and completely garbage from a business standpoint. And vice versa.

Charlie Liu

You mentioned ease of use. For me we are predicting the future. If you could predict the future accurately there are a lot better ways to make money than FP&A.

Paul Barnhurst

That is what I always tell people. If your models are perfect, we are going to Vegas because we will make a lot more money there.

Charlie Liu

Exactly. For me the real skill is being able to adapt the model constantly as the business shifts. I get asked a lot by younger people coming out of school what skills matter in FP&A right now. How do you think about that?

Paul Barnhurst

There is a lot you could list. I once saw research showing that finance requires the highest combination of soft skills and technical skills of any business role. You have to have both. Historically when I ask guests on my podcast what the most important skill is, the answers have usually been some combination of Excel and financial modeling. But recently, especially in the last month, I am seeing more people say systems thinking and data thinking. AI is changing the answer in real time.

Charlie Liu

How do you see AI changing what finance professionals actually need to know?

Paul Barnhurst

The judgment piece is becoming more important than the execution piece. What we want from people using AI is the ability to evaluate what it produces, know when it is wrong, and ask better questions. That requires having struggled enough to develop real judgment. We are getting to instant answers faster and faster, and there is something being lost in that. People need to struggle with problems to develop the thinking required to know when the easy answer is actually the wrong one.

Charlie Liu

Growth is growing your circle of competence. That means mistakes, challenges, and overcoming hurdles.

Paul Barnhurst

One of the best lessons I ever received came from my mission president when I was 19. He had run a billion dollar company and he looked at us and said he had never had a failure in his life. I remember thinking that was not possible. Then he paused and said he had only had learnings. At the time I did not fully get it but as I have gotten older it has stayed with me. Do not look at failures as failures. Look at them as learnings. Life is about expanding your circle of competence.

Charlie Liu

My older sister used to say these are not mistakes, they are tuition. We are just paying tuition.

Paul Barnhurst

There is a story, I do not know if it is true, about an IBM executive who made a mistake that cost the company around 50 million dollars. He walked into the CEO's office expecting to be fired. The CEO said why would I fire you? I just paid 50 million dollars for you to learn and I am sure it is a mistake you will never make again. That is great leadership.

Charlie Liu

That is ROI. They learn from it and it pays off. I am trying to build that across the team at MCC. We have weekly sessions we call coach approach where we share our mistakes openly. We are trying to make it intentional and celebrate them rather than hide them. Paul, we are coming down to time. We like to finish with your two cents advice. What do you want to leave the audience with?

Paul Barnhurst

Learn to serve others. That is both in life and in business. The best leaders are servant leaders and they are not just serving out of compassion. They are serving because it makes good business sense. I think a great book on this is The Go Giver by Bob Burg. Find those ways to serve the people you work with. It gets you through hard times and makes you a better leader. Just make sure you do it within reason. Do not say yes to everything just because you want to help. You still have a role, responsibilities, and a scope. Serve within that, do it well, and the rest tends to follow.

Charlie Liu

I personally believe the purpose of life is to figure out how to serve others. By focusing on your team and your clients rather than just the next dollar, you also tend to make better decisions for the business.

Paul Barnhurst

Agreed. The more we learn to be grateful for the journey and serve others the happier we are going to be. Sometimes even in the hardest moments, getting outside yourself is the medicine you need.

Charlie Liu

Paul, thank you so much for being here. This has been a masterclass in modern FP&A, career development, and what it means to lead well. Thank you to everyone listening as well.

Paul Barnhurst

Thank you Charlie. Keep up the great work. I love what you are doing and I am excited to watch how you continue to grow.