📬 Joining the dots: How to connect FP&A with capital allocation

U.S. accounting teams are still underwater—and good luck hiring

That’s why more CFOs are turning offshore.

At Cloud Accountant Staffing, we help firms scale quickly with full-time accountants in the Philippines, South Africa, and Latin America—at less than half the U.S. cost.

Top 10 U.S. firms trust us. So do scrappy two-partner shops.

Capacity is tight heading into Q3. If you’re curious, let’s talk

Secret CFO readers get $1,000 credit

We’ve got some great topics today. Here’s what’s on tap:

Now, let’s get into it.

Conglominmate from Denmark asked:

Dear Secret CFO, I recently read this article from Deloitte Denmark about FP&A in the top Danish companies. I was wondering how the article's points resonate with you.

They say that capital allocation should be an integrated part of performance management, through a unified business case template that the business leaders are ultimately held responsible for.

Is this ambition even feasible?

Thanks for sharing this. Nearly all white paper-type content written by the Big 4 is vacuous and has no tactical value. But this one was an exception. It’s great they drew on real-world input from 15 FP&A practitioners.

The principles they lay out are sound, but the execution of those principles needs content. As an example, take the idea of a ‘standardized business case template that connects seamlessly to financial performance structures.’ It’s a tidy concept, but it rarely works in practice across a diversified group.

Within a single investment class, like capex, this works. But trying to force a common format across marketing, R&D, or infrastructure investments usually ends up with a template too generic to be useful in making decision. Different investment types carry different risk profiles, time horizons, and attribution challenges. It’s not easy to capture this in one simple meaningful template.

I once worked in a retailer where the main capital allocation decision was: invest in new stores or pay dividends. Once that macro decision was made, the next question (picking the stores) was methodical and repeatable. So, a systematic model worked well.

But contrast that with a scaling business trying to choose between marketing growth, engineering investment, or facility upgrades, all under different funding scenarios. You’re dealing with complexity that needs strategic judgment upfront, not a one-size-fits-all template.

Generally in these situations the best approach to capital allocation is: a principles-based approach, led by a fleet-footed, senior cross-functional group - far more powerful than a rigid, rules-based one. Let clear, well-documented capital allocation principles guide decisions, not a mechanistic scoring system.

Complex capital allocation decisions must be able to handle ambiguity, nuance, and trade-offs, things templates are notoriously bad at.

The best capital allocation decisions have three layers:

I’m, of course, in favor of templating as far as possible, but I suspect for most businesses this is a small family of templates fit for a handful of specific scenarios. Rather than trying to shoehorn every capital allocation decision into a single template.

Where I completely agree with the article is in linking performance management to capital allocation. If a VP promises a 3x return on incremental marketing spend, that must be tracked and owned. Not just conceptually, but through real measurement and accountability.

This is hard, especially when attribution is fuzzy, but it’s essential for credibility and learning.

Most companies skip post-investment reviews. That’s a mistake. The real value comes not just from the initial decision, but from the discipline of tracking the outcome, learning from it, and feeding that back into the next cycle.

Thanks again for the thoughtful question and the excellent article link. It was a genuinely thought-provoking read.

If you want tom go further, I wrote more on capital allocation in a series last year.

Sobermonk from India asked:

Given that traditional GAAP metrics often fail to capture the underlying performance of scaled platform businesses, where revenue recognition distorts core operating performance, how do you think about the interplay between GAAP and non-GAAP metrics in investor communication and internal decision-making? Where do you draw the line between supplementing versus substituting GAAP? This is often important when GAAP metrics become increasingly irrelevant for a platform business that orchestrates transactions between a buyer and seller.

Sobermonk,

Thanks for the question. The accounting profession has created a mess here.

Outdated accounting standards, rigid auditing rules, and regulatory conservatism have left us with financial statements and metrics that often don’t reflect the business model. Audit firms do everything they can to distance themselves from non-GAAP measures, and this leads to a bad answer for investors.

So, let’s build this up from first principles.

Start internally. You need to build KPIs for the business to measure what matters, GAAP or not. If GAAP-based metrics distort the economics, then you shouldn’t be using GAAP-based metrics to make decisions in your business.

Focus on the real drivers: volume, take rate, contribution margin, repeat behavior, and unit economics. If GAAP doesn’t allow you to meaningfully measure these things, then it doesn’t reflect reality. Solve first for internal truth.

Then ask how to reflect that truth externally.

There are two approaches:

Option one: You lead externally with non-GAAP measures. Define them clearly in public, using GAAP-based metrics as your starting point and reconcile from there, showing your work. Use it to educate investors and shape the narrative over time. This takes conviction and consistency. And it comes with commercial sensitivity trade-offs. But done well, it builds trust, transparency and alignment between internal and external measures.

Option two: Stick to GAAP as much as possible externally and let the IR team bridge the nuance behind the scenes. Accept that the statutory accounts and external metrics aren’t doing much storytelling for you. Internally you talk about your internal metrics, not your GAAP / external measures. The result is that the metrics you discuss externally are not as useful as they could be for investors.

In practice, there are solutions somewhere between the two. Which is fine, as the devil is in the details here, and what is right for two businesses will be different. Just be choiceful (metric by metric).

Frankly, as an accounting and finance profession, I believe we need to do better to help. To simplify the story for investors, while ensuring there is a robustness and consistency to how we measure and report.

Angel A. from Sofia, Bulgaria asked:

As a fractional CFO working with early-stage startups, I often find myself caught between realism and optimism in forecasting. Founders usually expect aggressive growth projections—especially for board decks or investor updates—but actual performance consistently falls short.

Your recent piece on the ethics of forecasting and the “sweet spot” of ambition really resonated. But I’m wondering: do those same principles apply in small, private startups where there’s limited oversight, and much more pressure to “sell the dream”?

As a consultant, I often don’t have the final say or the authority to enforce a more grounded forecast—my role is advisory, and ultimately, I have to align with the founder’s narrative (or risk the relationship). How do you recommend navigating this tension ethically, when you're not the one in the driver’s seat?

Thanks for the question, Angel.

Let me unpack this a bit. You said there's more pressure to sell the dream in early-stage startups than in big businesses. I’m not sure that’s true.

There’s just as much pressure in large businesses to juice the numbers, if not more; external targets, comp plans, board decks.

The difference you describe isn’t about pressure / incentives. It’s about quality of governance oversight. Small businesses don’t have the segregation of duties (or sometimes the discipline) to provide their own oversight or check and balance.

And when there’s no oversight, the oversight is you…

So this becomes about personal boundaries for a fractional CFO in your position. How closely are you personally tied to the forecast? Are you the person behind the spreadsheet, advising on assumptions? Or are you presenting it, putting your name to it? Because if your brand or credibility is attached, you're not just an advisor. You're a co-signer.

That changes everything.

Then the question is, what are the stakes? Do these forecasts carry real risk; funding rounds, debt covenants, hiring decisions? Or are they internal fiction, a motivational tool for the board deck?

The level of realism required depends entirely on how the forecast will be used. Not all forecasts are equal. A model for internal decision-making needs to be realistic. A VC pitch deck must show upside, but it still needs a floor you believe in. A board-approved plan is almost quasi-legal. You need to treat that with more care.

So, what do you do if you think the forecast is off? You try to influence the founder. Not by policing it, but by making the consequences real. Show what happens if the numbers are wrong. Bring it to life. What does a 3-month shortfall mean for cash? What hires can’t be made? What funding risk does it create? Walk them through the knock-on effects. It’s not about winning the argument—it’s about helping them see the cost of being wrong before it shows up in the bank account.

And then there's humility. Are you sure you're right and the founder is wrong? Founders are in the business of willing futures into existence. Just because results are delayed doesn’t mean the vision is broken. They might know something you don’t. So this is a game of gradients, not absolutes.

If the forecast crosses your red line and you’re not in a position to walk away, narrow your exposure. Make it clear that strategic ownership sits with the founder. But a great fractional CFO will find a way to get through to the founder and help them see sense to an answer that balances ambition with realism.

So the real work is in defining your personal boundaries. What are you willing to stand behind? What won’t you touch? Get clear on your personal code, and then choose your clients accordingly. Build a portfolio that doesn’t stretch your ethics. And be willing to walk if it ever does.

Your name will outlast any one client, so if your name is at stake… choose your clients carefully.

A few of the biggest stories that every CFO is paying close attention to. This is the section you probably don’t want to see your name in.

This is what you do when you know your new hires are going to use AI to do everything anyway…

Probably just a coincidence, considering rumors are swirling that Shell is looking to acquire some or all of BP.

It looks like CFO’s at defecting to competitors is the flavor of the month… Good luck to Jay Malave on this one … harder to think of a tougher turnaround role right now.

ICYMI, here are some of my favorite finance/business social media posts from this week. In the words of Kendall Roy, “all bangers, all the time.”:

Let me know what you thought of today’s Mailbag. Just hit reply… I read every message.

On Saturday, we dove deeper into the viper’s nest of corporate politics to discover the indirect power players pulling the strings. Check it out now.

Disclaimer: I am not your accountant, tax advisor, lawyer, CFO, director, or friend. Well, maybe I’m your friend, but I am not any of those other things. Everything I publish represents my opinions only, not advice. Running the finances for a company is serious business, and you should take the proper advice you need.