Reimagining the Three Core Financial Reports w/ Daniel Harley

Rob Collie (00:00): Hello, friends. Today, we welcome Daniel, Dan Harley, one of our directors of client services here at P3 Adaptive. I like to think... No, I actually believe that every member of our consulting team is a ringer, like a secret weapon, unexpected, and that is absolutely true of Dan. In fact, he's kind of like at the Venn diagram intersection of multiple ringer circles. He was a finance and accounting ringer even before he discovered Power BI and the related tools. And as a result of that intersection, we spent a sizable chunk of this conversation focusing precisely on that intersection of finance and accounting with the modern tool set provided by Microsoft.

(00:41): We also particularly focused our attention on the three humble but classic and timeless financial statements, the P&L, the balance sheet, the cash flow. Everyone has got them, and everyone needs them. Timeless concepts. And they're so fundamental that I think most people often don't even think about the possibility that these things can be improved. And not just improved, but transformed from a cost of doing business tax type of thing into an offensive capability.

(01:13): Things that can be used to answer a dynamic array of varying business questions, things that can be used to very quickly evaluate what if planning scenarios. Things that can be used on a live near daily basis to help steer and improve rather than finding out what the score is when the game is already over at quarter end. It turns out that even when you hyper focus your attention on a tiny little corner of the accounting or finance world, that there's actually tremendous business potential in modernization.

(01:48): And that modernization is not difficult. It is not difficult measured in time. It is not difficult measured in money. Now, Dan, has a very matter of fact way of speaking. You know how when most football players score a touchdown? They have a celebration dance or something, right? They emote a bit. While using that football player a metaphor, when Dan Harley scores a touchdown, he just hands the ball to the referee, heads back to the sidelines. That's what he expected. He expected to score that touchdown and then he just gets ready to do it again. That ain't no big deal, down to earth style makes Dan an absolute dream to work with, and I think you'll also appreciate that quality as you listen. So let's get into it.

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Announcer (02:36): This is the Raw Data by P3 Adaptive Podcast with your host, Rob Collie and your co-host, Justin Mannhardt. Find out what the experts at P3 Adaptive can do for your business. Just go to p3adaptive.com. Raw Data by P3 adaptive is data with the Human element.

Rob Collie (03:02): Welcome to the show, Daniel Harley. How are you doing?

Dan Harley (03:05): I'm doing good. Thanks for having me on.

Rob Collie (03:07): Thanks for being here, and I mean that in multiple ways, right? Thanks for being on the podcast. Thanks for being at P3. So you're a director here with us.

Dan Harley (03:16): Yes, sir.

Rob Collie (03:17): You discovered this world of possibility, right? The world of possibility that Microsoft's advances in software is really, really unlocked. Can we go back to that point in time when you had those first encounters with look at what's possible today?

Dan Harley (03:33): Sure. It's very much a, "You had me at hello". I went to a conference, I think it was in San Diego, but it was for the Institute of Management Accountants or annual conference. One of the workshops I went to see was a workshop on Power Query. I saw one screen that I remember and all it was... I don't even remember what it was doing. All I remembered was that there was a grid of information and on the right-hand side there were the steps that it took to get there and you could hit rewind. And that's all I needed to know.

(04:04): I didn't know much else before at that time and I said, "This is game changing." And then later on during my journey, I found out that this stuff had been around for 10 years prior, and then I just felt totally sad that I had missed out on 10 years of all of this stuff. Just imagining how many late nights I spent trying to recreate something that I had forgotten, the 45th step in the transformation and had to rebuild it.

Justin Mannhardt (04:29): A career in data is just a long series of wishing you'd learned about something sooner.

Dan Harley (04:34): Very much so.

Rob Collie (04:35): Power Query. Power Query was the gateway moment. Then you later discover the data model and DAX was like, "Holy cow." Power Query has always been something that just really gets people's attention because it already fits your workflow of today. The drudgery that you're already doing today. Power Query is the antidote for that. And then it turns out later that you discover that, "Oh my God, the data model in DAX allow me to do things that I've never been able to do."

(05:02): I've still long contended that the data model in DAX is the more transformational part of the Power BI system, but it's harder to imagine doing things that you've never been able to do. It's way easier to look at something and be like, "Oh my God, this is going to take so much of the suffering out of my professional life and just have just a huge light bulb moment." So IMA, you're kind of tipping your hand here. You're not coming from the IT side of the shop. Not a techie first.

Dan Harley (05:34): Right. I've been finance and accounting for, oh gosh, 10 or 11 years up until that point, doing financial analysis, P&L reporting, debits and credits, journal entries, your typical corporate accountant slash analyst roles and managerial roles. I had dipped my toes into the technology space because I was always the budgeting guy. So they bought a new shiny budgeting system. "We'll hand it off to Dan and Dan will figure out how to make our budgets work." That's how I kind of got closer to technology. But certainly the extent of my coding experience was very much just functional code in Excel. I almost felt a little allergic to getting into the code until I saw what the code could do at a level that was accessible to somebody like myself who would stumble very much through any kind of coding language to just get started.

(06:26): Since then, I'm a lot better at picking stuff up, but at the beginning it was pretty tough. There's a story that go along with that, which was a vacation, that I went on and I bought your book, Rob and I had M is for Data Monkey and I brought it with me on vacation. And I got to tell you, I spent a lot of hours working through those books on that vacation. There was a lot of circles. There was a lot of dead ends. There was a lot of endless processing because I did not really know what I was doing, but I loved it. I loved tinkering with it.

(06:54): That was really where I started to get into learning about fundamentals of code and structure and everything. And so that was the beginning of my crash course, so to speak, much learning after that. But that was my self-imposed torturous journey.

Rob Collie (07:09): And you keep saying code and that's accurate. Most people don't think of it this way, but like an Excel formula is a programming construct. Excel formulas are a programming language. They fit every formal definition in computer science. But in programming language, people don't think of it that way. And that's a really important part of onboarding onto these things. Both the perception that this isn't code allows people to approach it that would otherwise say, "No, they'd be repelled by it." But also the fact that it doesn't feel quite like other code, it's learning curve is gentler. It's more gradual.

(07:43): It's a gradual slope as opposed to starting with a cliff. So it's not just the perception, it's also something about it. Both of those things like DAX and M, Power Query are great examples of this. You can have actually some relatively spectacular success stories while not understanding much of the theory at all. It's very, how should I say, formulaic? Yeah, anyway.

Dan Harley (08:08): And I'll say the one thing about the code and that gentler slope is that during that self-imposed little challenging week of boot camp that I put myself through.

Rob Collie (08:16): On vacation?

Dan Harley (08:17): Yeah, on vacation.

Rob Collie (08:18): On vacation. I just wanted to connect those two.

Justin Mannhardt (08:21): I think multiple employees of P3 ended up reading Rob's book on vacation.

Rob Collie (08:27): That should be the title of my next book if I ever wrote one. It's like fabric for people on vacation. Poolside fabric reader just speak straight to the demographic.

Dan Harley (08:38): Well, most of the brick walls that I hit though were because I figured something out and then I wanted more. It wasn't because I couldn't get to that one step. It was like, "Oh, I can do that then why don't I try and do this thing?" It was almost like you wanted to run into the next brick wall. You just went until you couldn't.

Rob Collie (08:53): I've reengaged with that exact dynamic recently in my hockey dashboards. Oh yeah, we've got to have head-to-head matchup stats between players. In between players and goalies. How well do they fare against each other? And this turns out to be, even though it's very simple to describe, it turns out to be like one of the most challenging, if not the most challenging DAX problem I've ever solved. Now, I've found myself using functions that I've never used before. I got to use TREATAS the other day. But it started with a face plant like smack, like a belly flop. It's all working now though. You run into that wall enough, it gives.

(09:28): So coming from more of a business background, finance and accounting and getting into more of the tech, most of the consulting team at our company shares that kind of background, whereas traditionally all IT tech people tend to come up pure tech. I like to talk about our people here as data superheroes. All data superheroes are developers, but not all data developers are superheroes. We all possess the skills of a developer, but that's not all we possess and that business background and just the experience of coming up through the business world orients you and primes you, calibrates you for business problem solving first. And then we give you the tech. That is such the way.

(10:16): But it wasn't possible. It wasn't a way for people to come up other than using Excel until relatively recently. This new generation, this new breed, and I 100% think of you, Dan, as just one of the primest examples of this new breed. And you've had quite a bit of impact in the business world. Before coming here, what's the largest team you've managed in the past?

Dan Harley (10:42): I think it was about 17 people, 18 people give or take.

Rob Collie (10:45): 17, 18 people and now you've voluntarily come here to run a team of six people. If all we were measuring by was size of one's fiefdom or is it fiefdom? I've never known. I've heard it pronounced both ways. So some people would consider this not the right career move, but what is it that brought you here?

Dan Harley (11:04): I think there's definitely an alignment in the way I think about solving business problems. In previous jobs, I was always part of making the reports being the fastest to market, quote, unquote, within the organization, and that really resonated with me in the faucets first and being highly impactful, small footprint. One of the sayings I used to have with my teams, I think this is a good reason why I am here at P3 is one of my sayings used to be with an emphasis on used to be was that we don't try to change our environment, we operate within it.

(11:35): And that was an acknowledgement that you couldn't change the culture around you all the time. You had to work a little bit under the radar. You had to get a little bit of buy-in here and there and everything was a little bit of an organic grassroots effort of selling the idea up the chain until you were big enough, until you had enough that you couldn't get squashed with one snap of the fingers or something like that.

(11:56): Not because anybody was necessarily trying to, but it's new technology. It's ultimately disruptive to somebody along the way, and it's hard to really in an organization to affect the change that you really, really want to. So when I look at P3, I get to do that all the time, and our clients have already cleared those barriers. They've said, "I'm open to hearing about this. I want to give it a try."

(12:17): So with the biggest hurdle out of the way, if all you do is just give us a shot, right? This is what I would ask of my employers. Let's say, just give me the opportunity to fail. That's all I want. I'm not saying you have to guarantee me anything. I just want the opportunity to go give this a shot. If I fail, then I'm accountable for the failure, but it's going to cost you, what, my overtime nights and weekends maybe?

(12:38): And then when I look at it from P3, we have a really great value proposition in that what's the cost of failure? It's a little bit of time and not a huge dollar amount. I've seen lots of projects that had many more zeros at the end fail epically, and they didn't have any more information than what we would provide somebody in an engagement. And so if I'm thinking about the possible return on investment that I thought I was providing in my career, if you just made that small investment in me, I look at P3 and I look at our clients saying, "Well, if you just invest in us, the sky is the limit for what we can do for you together, strategic partners as solutioners, as developers." You name the role.

(13:19): The partnership that can be forged in the amount of value that we can bring is it's so big that it's hard to quantify. It's hard to quantify Amazon stock being where Amazon stock is. When you reverse course many, many, many years, you wouldn't think that this online bookseller would now be powering AWS. You can't imagine it because it's so big. It's beyond our comprehension in many ways.

Justin Mannhardt (13:42): I'd say typical.

Dan Harley (13:43): Yeah. So I think that alignment is a big part of it.

Rob Collie (13:47): An example of that is I used to tell people, or at least I used to struggle with how much to tell the truth. I know that especially when we were comparing our methodology and our tool set to the completely traditional methodology and the completely traditional tool sets, I used to debate telling people whether our approach was going to be a hundred times faster, which is the truth, or saying five times faster. Maybe believe five. Maybe. They're never going to believe a hundred.

(14:17): I think you're also hinting at it's not just speed. There is a qualitative change. Things that you achieve, wins that you get that you would've never gotten to them. And in fact, not only would you have never gotten to them, you would've never even had time or the audacity to formulate the goal as an ambition. It wouldn't even enter your head because it's so far beyond what you've been taught is possible.

Dan Harley (14:41): I'll tell you a little bit about some of the projects that we ran internally. At my previous job, we had several projects that we would have to report out the efficiency on, and we have just had to make up the percentage increase in efficiency because we would take things, it would take four people three weeks to do, and then it was two minutes. It was literally a two-minute process. That was with bad coding, so it could have been even shorter. You can't put that into a number. It's like now somebody clicks a button and it's just done. How do you put that into a real number that makes any sense?

(15:12): You can't put in a percentage with a million zeros to it. So that's really where I think that the idea that you can't imagine it really comes into my mind.

Rob Collie (15:23): Another just brief vignette that just came to mind years ago, we briefly hired a PR firm and they were pressing me for stories. We need numbers, so we need ROI numbers. It's like the efficiency numbers you're talking about. And I went to one of our clients that we'd had just amazing success with, his name is Tom Fenlon, and I asked him, "Hey, you know that project we did? What's the ROI on it?" And he refused to put a number on it. He said, "Listen, I can put a number on it and it's a massive number, just massive. But to put a number, an ROI number on that project would be to demean it."

(16:00): I think he was basically speaking to the same thing. Any number you put on it is going to be so outlandish that people are going to look at it and think it's a lampoon. So it's better to call it priceless. That always bothered me, priceless, whatever. There's a number. But there's a situation in which it makes sense to call it essentially priceless. That project was definitely an example of that. They were making an additional, I forget, it was ridiculous, like an additional eight figures a year in bottom line because of that project. It's unreal. Atypical because they're a big organization, but still.

Justin Mannhardt (16:39): There's seismic shifts, right? It's easy for business leaders, even ourselves in our own company to sit down and say, "Wouldn't it be great? It would be fantastic if we could make this 5% better, 2% better, 10% better." And you approach a project the right way, faucets first, no waste, fast, nimble, and you realize, "Wait a minute, we've just reset the baseline into another universe here." And that's what I think your experience you had Rob and what you're talking about Dan. It doesn't even matter to measure it because we're just playing a totally different game now with this information or with these analytics or with this process or whatever it is. Now you're like, "Okay, now that we're over here, let's make this 5% better."

Rob Collie (17:21): Dan, can we go back to the moment when you first were signing on here at P3, the evaluations going through your head that were telling you, "I think this is going to be something compelling for me." And then walk me through as you met the reality of it, how those impressions changed or were validated or whatever. And the reality is, of course, always going to be different even if it's just more detailed. Do you remember enough of that transitional phase that you can get in the Wayback Machine and take us through it?

Dan Harley (17:54): When I first joined, that was... I remember I applied on a Wednesday and then I had an interview on Thursday and I had an offer on Friday.

Rob Collie (18:03): That's a little atypical. We moved fast. But Dan, you matched our speed, put that process to the test.

Dan Harley (18:10): And that Monday I was on a client and Tuesday I had client equipment. So I mean all parties involved moved extremely fast. That certainly was not expected. I had never been a consultant before. I wasn't sure how good my DAX was or wasn't. How skilled was I? I thought I was pretty skilled.

Justin Mannhardt (18:29): We knew.

Rob Collie (18:34): You did say you applied on a Wednesday.

Justin Mannhardt (18:41): Yeah, we move pretty fast.

Rob Collie (18:41): Oh, we got a live one here. So I still kind of vaguely remember your first day here and I remember you being really excited about the possibilities ahead. What was it that was drawing you here with that kind of energy?

Dan Harley (18:56): Yeah. I really saw the potential of the firm. The caliber of people that P3 employees, and I'll call it like a family because that's how close-knit this team really is, is really above anything I would've ever expected from the level of character to the raw skill. These are the most talented people that I've ever worked with, and the density of talent in this organization is mind-numbing. It's really amazing.

(19:26): So when I looked at the character of the organization and the potential of the people within it, that said to me, "Number one, there was something different happening here." And with the foundation that I was seeing, all I could see were different possibilities. Rob, I think I might've pitched you like 15 different, "Can we do this? Can we do this? What about that? What about this? What about that?" Justin's got a fair amount of those, "Hey, what about this, Dan? We're not ready to do that yet." "Okay, got it." Just for thought.

(19:55): So obviously, it definitely gets me thinking. So the energy that foundation and the people really create is I think a true differentiator of P3. It really feels like you found your kin, or you find your clan so to speak.

Rob Collie (20:09): You have those same kin that inflict imposter syndrome on you. So it's just like siblings. It comes with pros and cons. Mostly pros. But the thing that seems to unify everyone that comes here in my experience is essentially this desire not to waste the gift. Once you've seen what's possible... I describe it as like you're the first person who discovers fire and you're showing your colleagues wherever you were before. "Look, fire," and they're like, "Meh passing fad." I don't think that was your experience. I think you were building buy-in and all those kinds of things. You weren't getting fully stymied like a lot of our consultants were in their former roles and you were talking about talent density. This should be a KPI.

Justin Mannhardt (20:53): I love that.

Rob Collie (20:54): Our talent density grew ever so slightly on the day that Dan joined. Did it not? Because Grinch's heart grew two sizes that day. Anyway, I mean, I think it's almost a slam dunk that that was at least as big of a driver for you as the talent level on the team. So first of all, is that true as I put words in your mouth? And then secondly, what was your experience when you worked on your first couple of client engagements?

Dan Harley (21:22): Well, number one, it is definitely true. When you see the talent that's here and you see what other people have done and you look at what you've done and you see like, "Oh my gosh, what I thought was limitless possibilities that I was experiencing, there's a whole nother level to that limitless possibilities that I'm now experiencing now that I'm here." So there's certainly an element of that expansiveness multiple expansion as you'd say in the stock world, but that multiple expansion in terms of possibilities, certainly a huge factor in me being at P3.

(21:54): My first client engagement was working on building a P&L. We were standing up. There was an ERP shift kind of a business transaction that took place, and we had to create balance sheets and cash flow statements. Many of the things you would just do in Excel manually. We were trying to stand all that up in a Power BI report and create the respective data flows, and we encountered all the same issues that any normal organization would run into that sometimes doing your budget and everything requires people's input.

(22:25): What a novel concept. Everybody's idea of a fully automated budgeting system, until I see it, I don't believe it. But we had to handle a lot of user inputs and things like that. So we did a lot of data flows. We did a lot of data transformation. There's messy data. We had to check the data. The nuts and bolts of it was we needed three statements. One was a P&L, one was a balance sheet, and one was a cash flow statement. It ended up being something that was moved around or shared throughout the organization and actually throughout the stakeholders inner circle where everybody kept on asking, "How did you do that? What is that?"

(22:57): So this legend of what we were doing was spreading. And I'm sure by the end it was this wonderful, fully automated magical black box of wonderfulness that made it all the way out. Of course, being part of it when you've moved that quickly, I believe that the first P&L that I delivered to the client was the second day that I worked on the engagement.

Justin Mannhardt (23:21): There you go. There you go.

Rob Collie (23:23): That's what we're talking about.

Dan Harley (23:24): That was definitely a faucets-first approach, and we iterated on it from there and we just kept on building it out, but we made sure the framework was proper so that we could expand it. It was even better once we brought some of the other PCs in that were even more skilled than I was. So that collaborative, that group consciousness that we can all tap into that knowledge base really makes a huge difference. And I can't imagine, in my previous life, having said we got to build a P&L and L and then going from idea to implementation or at least first draft in two days. We would never would've thought that way. And this wasn't to manage one department, it was to manage an entire segment. It was a big operation

Justin Mannhardt (24:02): Just to quantify the speed at which you were moving on this project, but sometimes I think it's helpful to explain, okay, you were doing the three financial statements that every company on the planet has. What was the magic of having those things in Power BI as opposed to, like you said, just having it on a spreadsheet. What was that enabling for them?

Rob Collie (24:24): I got to jump in here and say, first of all, I was grumpy that you jumped in first, Justin. I had a really important question and then you asked exactly the question I was going to ask.

Justin Mannhardt (24:33): My work count is a little low on this episode, so I'm not going to apologize.

Rob Collie (24:37): No, don't. I just think, Dan, this is putting the bull button on it. This is like the question. Did they not have them already in some form or did they have them in some form, and if so, why was this output better?

Dan Harley (24:50): Yeah. Due to the business transaction, they didn't have P&Ls, balance sheets. I see cash flow statements, yeah.

Rob Collie (24:55): So they had acquired another company?

Dan Harley (24:57): It was a divestiture. It was moving to a joint venture or so.

Rob Collie (25:01): Okay. So there'd been a structural change in the business. They were going through a divestiture. But let's just call it a reverse M&A. They were doing the reverse of a merger and acquisition and that scrambles everything, doesn't it? When the world changes, all of your maps from yesterday are worthless. You need new maps and you need them quickly. You were filling a void here. You weren't doing a lift and shift from Excel to Power BI. You were creating it from scratch.

Dan Harley (25:29): Yeah. We had systems and other supporting systems from the legacy company that were helping. We were getting data feeds from and everything, but ultimately you still had to consolidate that and that typically would've been done by consolidations team. But one of the challenges when you're in that environment is that things are constantly moving and shifting, so you find out that there's a report or there's data that was missing and so on and so forth. What Power BI enabled you to do was immediately republish a single source of truth. If a data set was wrong, that was imported in you correct the dataset, it pops out everybody who has a link to go to that power BI report, which happened to be the P&L, would be able to see the up-to-date P&L. It wasn't, "Well, do you have version 202303-1.2?"

Justin Mannhardt (26:15): Final, final, final.

Rob Collie (26:19): This is another thing I like to emphasize is that even if it were a lift and shift, the end result of it gives you capabilities that the original Excel version simply cannot. There is no way to simply replicate the level of functionality that your Excel version would've given you. By the time you match it, you've greatly exceeded its capabilities, right? There's one example right there. It's always live, right? There isn't some, "I'm carrying around a stale version and don't know it."

Dan Harley (26:52): Being able to see the detail. I would see a lot of these things in previous efforts at my old companies where what would happen is you'd end up trying to keep all the detail because you want to know what made up that number, and there comes a point where you can't carry all that detail with you on a normal Excel sheet. You attempt to do it sometimes with Power Query and everything. But with Power BI, what we were able to do is give instant drill down capability and show what that change was, what makes up the balance. Again, it's still the single source of truth because had the data not updated at the transactional level, you wouldn't have the correct data at the P&L level. So that rapid transparency is if I had an alternative option... Well, I'm not sure that I would use it, but I can't think of one.

Rob Collie (27:36): Well, let's zoom in on this.

Justin Mannhardt (27:38): Gather around children.

Rob Collie (27:40): These three basic financial statements, the way that they've been done traditionally, most of them rhyme with Excel, right? They've never been easy to consume. Just the ability to slice to dynamically interact, drill down, filter certain things out. The way to ask questions of one of the traditional financial statements has been to scroll. That's the way that you ask a question of it. That's the way that you get information out of it as you scroll it and you read it. And if the number that you're looking for is actually the combination of multiple lines in it, now you're doing your own math on the side.

(28:17): Can you give me some examples, some use case examples where the dynamic drillable, sliceable, filterable nature of a Power BI implementation gives you something that's sort of the static financial statements of yesterday... Well, which are really still of today, that those don't deliver? What's the business value? Let's get at that.

Dan Harley (28:36): You have to take a step back and look at the way a lot of our P&L statements are typically done. And to a certain extent there's a system that generates them, but almost inevitably there's another adjustment, a top side, something else, and sometimes that source system that generated that P&L gets fed into another system like Hyperion. And then the Hyperion report gets taken and then it gets exported to Excel and it gets further manipulated. And to a certain extent, you never get to the fully automated P&L in many cases just because of the way SEC filings work and just the nuances that go into that before it gets to what you would say consolidations, where it would go to external reporting, it's up to that point where I think there's definitely that possibility, right? And I think power BI proves that out because it allows you to ingest information and manipulate the P&L the way you want to manipulate it in a way that is actually identifiable.

(29:29): So it's no longer this, "Well, what did you do to add these lines together? Did you remap something?" You remap it in the system, which means that everything, you can see the actual mapping, the adjustments that you've made, and that gives you true transparency into what your numbers really are and how they were constructed. I think that's a huge difference between even the import between say taking it from your source system and moving into Hyperion. One of the things that happens there is Hyperion. It has its own hierarchies, and those hierarchies, they'll say it's the same, but they're never the same. Somebody always has to move something around or whatnot.

(30:05): And what I've encountered is that you end up reconciling Hyperion to the source system almost all the time. If you were doing that through Power BI, you would see the mapping. You would see that you mapped this, this, and this to the other thing. It wouldn't be disconnected on some backend system. And I think one of the things that often gets overlooked is sometimes it's like, "Well, we need to look at all this data, and that's really the time savings." For me, a lot of the time savings are avoiding that one question is, "What is this?" "Oh, wait, I don't know." "Well, it's really important. Well, let's get everybody on a call."

(30:38): By the time you scheduled the call, you've brought the six people that need to talk about it. You've talked for an hour, then you've had two hours of follow-up work on it. Those are the things that, number one, they erode the confidence in the statement, and two, it's an epic waste of time and I have never seen somebody smile after those processes are done is always painful. It's always dreadful.

Rob Collie (30:58): Yeah, it doesn't sound great. You mentioned SEC filing and things like that, so that's a publicly traded company thing, and not all companies are publicly traded. Not all companies have an SEC filing requirement, but they're still generating these financial statements, aren't they? One of the reasons to generate these financial statements is because the law says you have to, if you're publicly traded. Then there's also the internal usage of them. That internal usage is common to whether you're a private company or a public company. And one of the things I have always said, and I'm actually legitimately curious as to how applicable this principle is here, is that you need your top line number, your bottom line number.

(31:41): You need to know what your total is because you need to know what the score is. But at the same time, as soon as you know that score, that score is useless in helping you make the score better in order to get better, getting better, improving is fundamentally something that happens at the next level of detail down or multiple levels of detail down. Improvement is a more detailed operation. It's never a top level thing because some things are going well and some things are not going well, and some things could be improved and some things can't.

(32:15): And it's sub-prescriptions. It's many detailed prescriptions combined that raise the bottom line for instance. Even though if we're producing these reports in their static sort of non-interactive monolithic form, because we need to know the score, it's always struck me that those financial statements are relatively unhelpful in the improvement game because you can't drill, sort, filter, mostly filter, zoom down, ask different questions of it. Maybe I'm wrong about that. Maybe that's not the case. Maybe turning these into dynamic power BI models and reports doesn't add that much. Let's find out. You're the one to ask.

Dan Harley (32:54): Yeah. I believe that they certainly are worthwhile. I've yet to encounter a situation where you've had lots of business units or projects that have various levels of profitability and you line up five business leaders and them saying, I want to see it all the same way. They all want to filter something out, add something in, take something out. And where I see it being really impactful is that, that filtering is now at your fingertips. Sometimes you'd have to run another report and some systems allow you to do some filtering and whatnot, but I think Power BI is one of the only things that I've seen that, number one is accessible enough to build these, but two, it's capable is that you can see a totally different version of that P&L.

(33:40): You could twist it sideways. You can move it up or down. You can eliminate things. Once you start adding in the parameters, you can now do sensitivity analysis. Just from personal experience, one of the things that I've done in my career is built a budgeting tool. We modeled out an entire organization's budget for how many drivers we needed or how much staffing we needed, and we were able to run sensitivity analysis on it. It used to take us 20 minutes to run it through an Excel sheet, and then it took us literally a click of a button to change it and to change all the assumptions that are in it.

(34:12): And so as you're searching for the optimal mix between how much you want to spend versus how much capability you want to have, that rapid iteration is extremely powerful. And then the ability to then zoom out and say, "Well, if I only hire this many, I can only deliver this many packages or I can only deliver so much of that." And seeing what months you think you're going to be short in and saying, "Do I accept that I'm going to be short on labor that month?" And these are the business decisions that business leaders have to make. It's constantly a game of compromise.

Justin Mannhardt (34:44): So I've worked on a couple of P&L projects and I am not an accountant. I'm not a finance professional. I did not come from that background. And so I come in thinking to apply techniques that I've used in other types of reporting, and so I had this experience with a company once where we got all the P&L data there and I built a drill through page where, you know how in Power BI, if you have a line chart or a column chart, you can do the explain the difference feature and it waterfalls out why that trend is going up or down.

(35:14): I remember, "This would be pretty cool, right?" It was this moment of panic for me because the pause in the room, I was like, "Did I just totally miss the mark or did I blow their minds?" And it turns out I blew their minds because to be able to go to one of the accounts and drill through and say, "Why did this go up? Why is this down?" Get these insights that you would never spot looking at all this grid of data, and I think that was sort of a unique experience for me because I was like, "Okay. Did I just totally miss the mark on this?" And it's like, "No, you've exploded this idea of possibility that we never would've thought of."

(35:47): That's just another example of where we've had experiences where people have, whether it's supply chain background or sales background, and they apply the techniques from that world onto some other world and you get this really magical thing that starts happening.

Dan Harley (36:02): And, Justin, those waterfall charts, we love waterfall charts. They're wonderful charts. Everybody needs a waterfall. In a way, it's really logical. It walks you from a start to a finish. In many ways, they're annoying charts to create and depending on what software packages you're using in Excel or whatnot, but they're tremendously impactful because you can literally walk step by step and know how you got there.

Rob Collie (36:26): Also, must say, I'm not an accountant. Just taking waterfall charts as an example, you can get any waterfall chart you want out of your financial model with basically no effort, right? Oh, I want it filtered by this. I want to just show this corner of the business over this timeframe. Completely custom question. You can see, like you said, from the beginning to the end of that era, which is custom defined to whatever your question of the day is and in whatever segment or segments of the business. I remember working for one client years ago, we built this amazing financial model literally like every dollar in or out of this company over a multi-decade span and down to an annoying level of detail.

(37:13): I mean, you wouldn't believe how granular these accounts got and it was only being used to run audits. It was only being used to process audits that their clients or customers requested to make sure that they weren't being cheated. And I was thinking, "Oh my god, oh my God, oh my god, this is the most amazing brain that your organization has ever had, this financial model we built just for auditing and no one is using it anywhere else." No one is using this thing to analyze the business to improve. The IT manager in charge of this project, to this day, I have tremendous respect for, she had no interest at all in trying to sell this thing outside of her org. It was doing exactly what she needed to do, probably the right career move for her to not even bother, but to me it just seemed like egregious waste.

Justin Mannhardt (38:08): You found alien life.

Rob Collie (38:10): I know, right?

Justin Mannhardt (38:11): Tell us.

Rob Collie (38:13): Use it to handle complaints to the customer service department. That's all we're going to use it for.

Dan Harley (38:17): Some of my biggest models were satisfying audit requirements and everything. And the amount of insight that you had in there, they just would sit. You had this big thing, you had this huge iceberg and this little bit of thing, this little tip is showing above the water. And the auditors were really happy, but it was almost like because it was like an audit tool, it couldn't be anything else. It couldn't be any other part.

(38:39): But at one point we had consumed an entire general ledger system for an entire year, like a whole thing, 30 million records or something like that. We captured many more columns than I ever want to capture again in my life. But we did it and there was a couple of things that we applied to it and we applied custom grouping to it and everything. It's a shame to watch these models, these achievements in ways go so underutilized and so to a certain extent you kind of say, "Well, I really wanted to do more."

(39:09): I've always found that it takes a little bit of time to crack that nut open a little bit, but once somebody gives it that shot and looks at it and takes a couple minutes to understand it really. If they do that, they almost never go back. They always go back to Power BI. They always want more out of Power BI. and say, "What else can we do in Power BI?" It's not, "Hey, well, that's nice. I really like my Excel sheet. I want to go back to it."

(39:30): I guess sometimes that happens, but I've yet to see that happen when you really take a decent amount of time and you just don't say, "Oh." You look at the end of the dashboard and you're like, "How do you export it to Excel or print it to PDF?" Outside of those types of experiences, I haven't met anybody who said, "I want to go back to the old."

Rob Collie (39:50): Talking a lot about how if you have one of these systems and you have something like Hyperion, Power BI is still better, way better. There's also the level of organization where they haven't even gotten to the thing that sucks, which is Hyperion. There's a lot of manual work that goes into cobbling together these three financial statements. And so A, a Power BI system once built, removes at least the vast majority of the manual labor that's being consumed all the time.

(40:19): I think it's a side effect that gives you, rather than running these statements like at the end of the quarter or once a month, they're running all the time, which is another big deal in terms of improvement. If you only get the score of the game once the game is over every time, there's not much opportunity to influence it. Having it live most of the time as an added benefit of draining all of the labor cost out. But now there's this slice and dice interactivity, twisting, turning, all these things you're talking about, and because I'm not an accountant, I'm having trouble doing my usual thing, which is really dumbing it down, dumbing down the tremendous impact that this has. I think that's the thing that I'm hunting for and it's elusive because again, I've only got part of the knowledge.

Dan Harley (41:12): Yeah. I think a huge benefit to using Power BI is having near real-time visibility into your transactions. Somebody's day is spent trying to figure out why somebody booked an entry to some set account, and it's usually because it's not supposed to be there. But a lot of these processes, they happen at the end of the month, so you just happen to see them. We know because we work with the tools that we could kick those entries out if they don't hit a certain threshold or they don't hit certain criteria and we could flush them out and see them instantaneously.

Rob Collie (41:43): You get an exception report that's actionable. These things need to be looked at now rather than letting them pile up and people's memory of what happened fade.

Dan Harley (41:52): And a lot of times when you see those exception reports pop out from traditional systems is it's not a balance report or something because the system doesn't know. The system doesn't know because it doesn't have your knowledge built into it, but you can build in your knowledge into these systems and you can say, "Okay. This is such and such." And then if you build the right Power BI system process, you can write it back if you want. You can write explanations. You can tie explanations into Excel sheets. You export the darn thing from Power BI.

(42:20): You write in the explanation as to what has to happen and you go ship it off to somebody. You go get the correcting entry in, you track it for later. That's the worst case scenario. The best case scenario is you go and you tell it what the correct entry is and it goes and automatically books it for you, which is not a pie in the sky concept. We built journal entry models that would take all the labor and determine the accrual and they would also self-reconcile itself. So all you had to look was whether or not there was a red square on the screen, and if there was no red square, you were good to post the entry and it passed every time.

Justin Mannhardt (42:51): Which is a terrifying reality for a lot of accountants like, "Just trust the red square? Are you sure, Dan? What about their month in process? Where we do all the things?" It's a fascinating world.

Dan Harley (43:03): Yeah. And if you saw the red square, you had to go figure out what was causing the red square to show up. But at the end of the day, these are processes that take people days and hours and there's no shortage of work in the finance world. There's always something else to do. And every question you answer brings back another question. It's not like we ask 10 questions and we figure out the answer. "Hey, well, so that's causing this. Can you check about this?" And in general, unless they're saying, "Is this right?" That means your report's doing its job. It means that your product is doing its job.

(43:36): As I think back to my client, the situation was somewhat unique. If you think about a typical challenge that you would encounter at your job, usually something is breaking. There's a change of some sort, but it could seem big. But this team was being taken away from their existing processes, their existing supporting staff, how you look at how you do your day-to-day activities was all in the process of being reimagined. And you had some support with the old systems, but inevitably because you're now separate from the original company that you were with, everything is at least a little different.

(44:15): So before you had an established process to do these three critical reports, now you don't have a process anymore and you've done a budget before, but you've done a budget a certain way before for the last five years that you were there. Now, you have to go out and figure out, how do I do this? How do I get these three critical financial statements out? I have no choice but to produce them.

(44:35): If on them I'm looking at my options and I've got option A, which is go out and find some software, option B, go build it myself. Neither of them sound appealing at all. The last thing I want to do is evaluate 18 different pieces of software only to find out that no matter which one I pick, it's going to have a shortfall. It's going to somehow kick me in the butt at the end. Somehow it's going to bite me. And then the other process, which also sounds equally as dreadful, is having to design it myself.

(45:02): Not only be responsible for designing it, implementing it, building it, but also be responsible for whether or not it works. It's great if I get to build something and somebody else makes sure it's working properly, but for them, they're accountable for it from soup to nuts, from design to execution. If your day is already full, none of those options are particularly great. Having the right partners makes a huge difference. Having the right tools makes a huge difference.

Rob Collie (45:28): This joint venture isn't like a startup. They have all the accoutrements of an existing business. On day one, they already have so much business going on. They have all of this, right? But they don't have some of the most fundamental guiding instruments that would've grown up organically as that company grew from zero. If it had grown from zero. It's like having an existing business and then coming along and surgically removing a lot of its guiding hardware. And now they're just rudderless. But they already exist. They're already doing business. They're in business.

(46:07): This isn't like they've got time to get rolling. They're already rolling. They're behind. That's the way that I'm imagining it. And how many people do they have? Not that many. There's software out there. It's scary. It's expensive. It takes a tremendous amount of time to evaluate and probably whatever you pick, even after you're evaluating, you're still going to pick something that's wrong.

(46:28): It's still going to suck and you know it. You Know it's going to suck. You're going to spend tremendous amounts of time and money on it to find out that it sucks and you're trapped. Right. Yeah. Okay, fine. So that's one route. The other route is to throw a tremendous amount of manual labor at it just like you always do. They don't have a lot of manual labor, and time is short. Even if you do it once, you succeed once, now you're committing to constantly having to do that again with your short resources. I can't imagine what this is like.

(47:00): It's like, "Here you go. You got to ship. Engine is running, propellers are spinning, no steering wheel. And by the way, we've blacked out all of the portholes and the windshield and everything and we've pinned the throttle to 100%." That's kind of how it feels to me from the outside. And instead of doing the manual labor shit, that is going to be error prone, sap your resources, you need to create time to do other things. You don't have the time do all of that. And then you surely don't have the time to do it repetitively over and over and over again forever until the end of time.

(47:34): You don't have time for this other thing. And also it's going to screw you. Buying the software package is not like you're going to evaluate it and get the right one. You're going to evaluate it and get one that still sucks badly and you know it going in. You know it going in and you're going to lie to yourself long enough to pay for it knowing that your future self is going to hate you.

Justin Mannhardt (47:57): This implementation only take 12 months. Three years later.

Rob Collie (48:01): So it's like Excel, it takes a long time, but this other thing is going to take even longer and it's going to be worse. And then you're going to pay for the experience. And instead we have the superhero experience from zero to 60. On day two, you're already giving them a Power BI version of the P&L. It's not the final one. They wouldn't even be done setting up the meetings to meet with the different software companies. It was their numbers produced from their systems. This isn't some demo that they can immediately react to and start telling you it needs to be fixed here, changed here, whatever. That had to give them tremendous confidence.

Dan Harley (48:38): There's a beautiful simplicity to the approach in that just the frequency of touches, just the frequency of conversation and involvement yields good results if not fantastic results.

Rob Collie (48:52): All right. So this was the heck of a project. You basically built their entire financial suite and they had their own private data backend disaster in the middle of the project that we had nothing to do with, that put us on hold for a while. So how much time were you actually engaged with the suite of 15 reports over the course of those months?

Dan Harley (49:12): So the engagement was three months. I'd say like a month and a half for that. And then the engagement got extended and that's where we ended with 15 or 20 or whatever it was. But we had six at the end of the first three months. But there was a stint in there where we had some downtime and all I did was train their team. So that's what landed us with really good stint with the client was we treated them like they were like our own. I woke up every day at 5:00 in the morning and I get on there with Italy at 6:00 AM my time, and I go and train their staff on how to do M code and everything.

(49:45): That has endeared us to that stakeholder. I'm not sure how lucrative that will be down the road, but I mean any day I can pick up and drop him a text or give him a call and he will return my calls, period.

Rob Collie (49:55): That's awesome.

Dan Harley (49:56): That's just the way it works. That was, to me, was an awesome win from a personal perspective.

Rob Collie (50:01): Yeah. That's core to our philosophy. There's so much opportunity in data that you don't need to hoard each piece of work like it's the last piece of food on earth. Just do the right thing. If they want to learn how to maintain their Power Query, heck, awesome. They're like us. Train them up. So when you say, "We got extended," we originally were only doing so many reports and they liked them so much that they said, "Let's do some more"?

Dan Harley (50:29): Yeah. They kept bringing us back to build more and more reports and to keep expanding their capabilities that we had built for them.

Justin Mannhardt (50:36): And then you'll need swimming lessons.

Dan Harley (50:38): That's funny.

Rob Collie (50:39): All right. Well, listen, there's so much more to do here. The world of finance and accounting would've always owned the business intelligence and analytics mission from the beginning if the technology had been more accessible. We are experiencing the transition from the world where IT built all that stuff to a world where IT might have a support role for it, but where the finance and accounting professionals, heck, and then this whole field of FP&A was basically invented because of exactly what I'm talking about. They're retaking the BI mission without saying they're retaking the BI mission. It's unintentionally slick and stealthy. This is going to be an ongoing topic here.

Justin Mannhardt (51:21): Love it.

Rob Collie (51:22): The modernization of the finance and accounting world with the modern tools. I'm super, super excited, Dan, that you're here as one of several but very bright torchbearers for this movement.

Dan Harley (51:35): Thanks.

Announcer (51:35): Thanks for listening to the Raw Data by P3 Adaptive podcast. Let the experts at P3 Adaptive help your business. Just go to p3adaptive.com. Have a data day.