Episode 203

For FP&A, the most dangerous revenue number may be the one that looks credible enough not to question.

A $100 million acquisition was just three weeks from closing. The target had been audited, the opinion had come back clean, and the deal looked compelling. Then Devon Coombs, CPA, spent a weekend digging through the contracts and came back with a very different conclusion: the revenue story did not match the contractual rights and cash flows underneath it.

In this episode of FP&A Today, Devon explains why FP&A cannot automatically treat invoicing as revenue, how principal-versus-agent decisions can make the same transaction appear as either $100 or $3 of reported revenue, and why worsening cash flow can reveal problems that a strong top line hides. The conversation also looks ahead to AI and consumption-based pricing, where minimum commitments, usage, overages, invoicing cadence, and contract structure can make forecasting and revenue recognition substantially more complex.

The bigger lesson for FP&A is simple: understanding revenue means understanding the contracts and economics behind the number, not just the number itself.

Key Moments

• Revenue and cash flow need to tell a coherent story. Rising revenue and income should trigger questions when operating cash outflows continue to deteriorate.
• An invoice is not automatically revenue. Recognition depends on contractual rights, performance obligations, and when those obligations are actually satisfied.
• Gross versus net revenue can dramatically change the top line. The same $100 transaction could result in $100 or $3 of reported revenue depending on the company's role in the transaction.
• Good diligence starts before management explains the numbers. Devon describes looking at the financials first, forming an independent view, and then going directly to the underlying contracts.
• Contracts are an FP&A input, not only an accounting or legal document. Pricing, billing, and commercial terms can materially affect forecasts and the economics FP&A is trying to model.
• Standardization reduces revenue risk. Clearer offerings, pricing structures, contracts, and RevRec processes make it easier to scale without discovering problems during a transaction.
• AI and consumption pricing are changing the forecasting problem. Minimum commitments, overages, usage, breakage, and billing cadence can produce very different revenue patterns.
• Finance teams need a revenue architecture strategy. FP&A should understand how pricing, contracts, billing, revenue recognition, and forecasting fit together as one system.

Timestamps

05:29 — Should the same transaction produce $100 of revenue or $3?
08:15 — Why invoicing does not necessarily equal revenue
12:30 — The $100M acquisition everyone wanted to move forward with
17:58 — Devon's diligence method: start with the numbers, then read the contracts
18:42 — How the buyer avoided a $100M mistake
40:40 — Why SaaS, AI, and consumption-based pricing are changing the revenue model
48:45 — Practical steps for aligning offerings, contracts, and RevRec
56:05 — The revenue architecture question every FP&A team should be asking

Earn CPE Credits

If you would like to earn CPE credit for listening to the show, visit earmarkcpe.com/fpna. Download the app, take a short quiz, and get your CPE certificate.

Further Reading/Listening

Devon Coombs — Website & Resources:
https://www.devoncoombs.com/

Connect with Devon on LinkedIn:
https://www.linkedin.com/in/devoncoombs/

The 10 Laws of Finance:
https://www.devoncoombs.com/book

Top FP&A business consultant Anders Liu-Lindberg joins FP&A Today four years after his first appearance on the show to talk about the radical changes in FP&A and CFO transformation over that period. In the time since, Anders has cemented his reputation as one of the most in-demand consultants for finance transformation, sharing his practical, on-the-ground experience.

• 4 years on: what's changed in FP&A transformation
• How career-minded FP&A professionals are enjoying the best era ever
• A real example of a finance transformation that didn't land
• 3 metrics to measure the impact of business partnering
• Why CFOs should obsess over value

If you would like to earn CPE credit for listening to the show, visit earmarkcpe.com/fpna. Download the app, take a short quiz, and get your CPE certificate.

Further reading/listening

Communicating Financials to Executives: by Anders Liu-Lindberg (Author), Christian Frantz Hansen 

FP&A Today: More than 12 ERP implementations later…Cindy Vindasius

Peter McKenzie, GM at a Blackstone portfolio company, professor at IESE Business School, and speaker at 50+ conferences across the world, talks frankly about executive presence for finance professionals, developed through 25+ years of C-suite experience   He coaches FP&A teams and CFOs on what exactly separates the executives who get recognised from the ones who don't (Communicate with influence, not just authority and focus on strategy and what boards actually want). 

In this episode

• What the board reads (and skips) in a board deck 
• What “business partnership” actually means 
• What knowing the numbers means 
• How to draw a narrative “red line” 
• Now that AI writes a competent narrative, what's the role for finance?