Most Common FP&A Team Maturity Trends with Carl Seidman

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Level 1 (Immature and fractured)

So for a level one, for a company that is either just starting out or as a small private business or a family owned business, let's assume that this is a company doing between zero and $25 million worth of revenue, not a huge business.

I'm also identifying that the size of the finance team is one or two FP&A professionals. Now, if you go into a company, and you say, how many FP&A people do you have here you might have a head of finance or a business owner say, we don't have any FP&A professionals.

And you say, well, do you have anybody who's doing forecasting, bookkeeping analysis, relationships with the bank? And I say, of course, we have that. I said, well, that's FP&A. And they say, I've never even heard that term before.Oftentimes you have people who are taking on accounting and financial responsibilities, but they don't see themselves as true FP&A. That's why I call this immature. You may see a CFO, oftentimes you don't even see that. You may see a controller or ahead of finance, but there often is not a CFO.

Most of the work that is being done is in traditional bookkeeping accounting software like QuickBooks or a Zeror a Sage. And then any kind of analysis or forecast is likely to be done in Excel or Google Sheets. Very rarely do I see anything more robust than this.

Level 2 (Immature and connected)

Moving to a level two is when a company says, look, we actually need to get more from our finance function because now we're a 25M to a 100M dollar company. You will start to see more full - time employees. So it is usually between one and four, give or take. You do see a budgeting process and a forecasting process that's likely to involve not just the heads of finance, but leadership of other groups. So you will see the finance team, you will see the sales team, you may see the marketing team. You may see human resources based upon future hiring that they anticipate seeing. So while coordinated and led by the finance team, you're going to see involvement from other people in terms of the systems that you're likely to see. You may still see reliance on Excel and Google Sheets. You may still see systems in QuickBooks, Zero etc.

Level 3 (Mature and connected)

Now you're starting to see exploration into more robust ERP systems such as NetSuite owned by Oracle as well as intact. You may see a bit of movement over to some data visualization and business modeling through Tableau or Power BI.

So you start to see connections between the company or amongst people within the company, as well as connections to other pieces of software. Not just basic accounting, to basic spreadsheet software. You're going to see more robust accounting to spreadsheet software, but also possibly inventory management, HR Management to payroll pieces of software.

Level 4 (Mature and Integrated)

And then finally at a level four, I say this is at $500M and above, although I've seen companies well below that are at a level four. I've also seen companies that are multi-billion dollars that would say they're at level two. Let's say level four is mature, meaning that there's an established FP&A function as well as integrated.

When you take a look at the budgeting process and the forecasting process, this is rolling and ongoing.