CFM Certification Tips for Financial Modelers to Pass Without 100 Hours with Carolina Lago

Written By Paul Barnhurst

In this episode of Financial Modeler’s Corner, host Paul Barnhurst and co-host Carolina Lago explore their experiences with financial modeling and the Advanced Financial Modeler (AFM) certification. They discuss the value of these certifications, the challenges of studying for them, and how these programs can improve financial modeling skills. They also provide helpful tips and insights into preparing for the Chartered Financial Modeler (CFM) certification.

Carolina is a financial modeling and FP&A specialist with over 20 years of experience. She holds the Advanced Financial Modeler (AFM) certification from the Financial Modeling Institute (FMI) and is working toward the Elite Certified Financial Modeler (CFM) credential. Carolina is passionate about teaching financial modeling and helping professionals use financial models to make better strategic decisions. Her workshops focus on best practices, scenario analysis, and providing businesses with the tools needed to navigate financial challenges.


Expect to Learn

  • The definition of a financial model and how to differentiate it from other types of business models.

  • Tips for studying for the AFM and CFM certifications, including managing time effectively and balancing models as you work.

  • Carolina’s experience preparing for the AFM and how to build financial models quickly under pressure.

  • The importance of practice in financial modeling and how to improve speed and efficiency.

  • The differences between the AFM and CFM certifications and why both are valuable for financial modelers.


Here are a few quotes from the episode:

  • "Even if I don’t pass the first time, I will have already succeeded by learning new techniques and improving my skills." - Carolina Lago

  • "You need to be resourceful and think quickly when preparing for the CFM. It’s about adapting to complexity in multiple areas." - Carolina Lago

  • "A financial model is anything that has inputs, calculations, and outputs, but at the same time answers a business question." - Carolina Lago

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In today’s episode: 

[08:03] - What is a Financial Model?

[12:52] - Fun Use of Excel in Personal Life

[17:06] - Learning About FMI

[24:41] - Toughest Area in AFM Preparation

[28:19] - Advice for AFM Exam

[38:07] - CFM Difficulty and Value

[42:36] - Broken Spreadsheet Joke

[44:56] - Wrapping Up the Episode


Full Show Transcript

[00:01:36] Host: Paul Barnhurst: Hello everyone. Welcome to Financial Modeler’s Corner. I am your host, Paul Barnhurst, aka The FP&A Guy. And really excited for this episode is I have with me Carolina Lago, who's going to be my co-host today. Welcome to the show.


[00:01:53] Guest: Carolina Lago: Hey, Paul, how are you doing? I'm very happy to be here, especially for this special episode that we're going to talk about something very important coming up, but I'll let you talk about it before I do.


[00:02:09] Host: Paul Barnhurst: All right. Sounds good. I'm really excited to talk about it, too. I'm excited you're here. You know, as everybody knows, the financial modelers' corner. We talk about financial modeling. Shock, shock. And it is brought to you by the Financial Modeling Institute. Now, what I love about FMI is they offer the most respected accreditations in financial modeling. It's a way to validate your skills to yourself, to your employer and your prospective employers. I completed the AFM and if all goes well, I'll complete the CFM this year. And I know Caroline's laughing because we'll be studying together for that. So she's like, hopefully I'll get there too.


[00:02:45] Guest: Carolina Lago: Yes, we're in trouble for that now.


[00:02:48] Host: Paul Barnhurst: Probably more than we want to admit. So let me give a little bit of my co-host background today. He is a financial modeling and FP&A Specialist with 20 plus years of experience. She started when she was 12. So that's why she's got 20 years already.


[00:03:07] Guest: Carolina Lago: Yeah, you're right, I'm 19.


[00:03:10] Host: Paul Barnhurst: She designs and delivers hands-on programs that teach professionals and cross-functional teams how to use financial modeling to see the big picture and make sharper strategic decisions. Drawing on her deep background and rigorous best practice methodology, Karolina has already earned the Advanced Financial Modeler designation from FMI, which is a Seal of Excellence. She now pairs it with an ambitious pursuit of the Elite Certified Financial Modeler credential. Her workshops blend time honored finance principles with forward thinking scenario analysis, equipping organizations to navigate uncertainty with clarity and confidence. Whether she's leading a classroom of seasoned executives or guiding an entire finance function through a modeling overhaul. Carolina brings meticulous structure, transparent logic, and an unwavering commitment to elevating financial fluency across the enterprise. All right. Sighting. So let me tell you a little bit about our episode, and then we'll let our co-host jump in here. So we thought it would be fun to try something new. So give us your feedback. After you listen to the episode, let us know if you like it, what you think about it. But both Carolina and I are preparing to take the Chartered Financial Modeler test, right? We're very excited. Have a little fun. No, we are a great program.


[00:04:40] Guest: Carolina Lago: I am I.


[00:04:42] Host: Paul Barnhurst: Haven't got excited yet because I'm I'm excited to learn the material. I'm not excited to find 100 hours to study.


[00:04:50] Guest: Carolina Lago: Yeah, but I have a take on that, so I'll let you know.


[00:04:53] Host: Paul Barnhurst: All right. Go ahead with your take and then I'll finish.


[00:04:56] Guest: Carolina Lago: Okay, so I'm reading this book. I'm sure everybody has heard about it. It's called The Atomic Habits by James Clear. And that's when you ask me if we wanted to study together. And I had just read this phrase by him that says, you do not rise to the level of your goals. You fall to the level of your systems. Something like that. I did not memorize, but it stayed with me.


[00:05:25] Host: Paul Barnhurst: Sure, I get the idea.


[00:05:26] Guest: Carolina Lago: So what I thought before is that I would never have time and I don't have time. And that's why I didn't sign up before, because I don't have 100 hours and I don't know how to take 100 hours. I don't know how I am going to find 100 hours or more if I need it. But I just thought that the process might be fun and might be enlightening and might help me with my work and my help with my goals of becoming a better financial modeler, just like the AFM did. So I decided that I don't know if I'm going to have 100 hours. I don't know if I'm going to go through the whole 12 topics before October, because I should have started last year right after the AFM, I didn't. But what I know is that if I can find 50 hours, if I can find 30 hours, if I can find 20 hours doing this process until October, until I'm done with because I don't know if I will pass in October when we all don't know that. But if I can find some hours, I will make the best out of it. And I think every model that I can go through, every topic that I can find out more, will make me a better modeler. So it's all about the system and not about the engine goal. So I don't care about the engine goal. It's going to come someday and it's going to be a consequence. So if it's going to be now in October, or if it's going to be in a year after, I don't care, I don't mind. I just want to go through the system. So that's why I'm excited about it. And I am not dreading the hundred hours. It's going to come one day.


[00:07:09] Host: Paul Barnhurst: Great perspective. And so, you know, as mentioned we're both signed up. We're going to share some of our thoughts about studying tips, tricks, and things we've learned. And we're going to start today with a little bit of background, a little bit of AFM, and our experiences there. Then we'll talk a little bit about the outline of the CFM share, maybe some preliminary thoughts. And then about once a month we'll do an episode like this because we're, you know, big believers that taking these types of programs can make you a better modeler. And so that's kind of going to be our outline here today. But before we jump into that, I'm going to ask you two questions that you missed last time you were on the show.


[00:07:53] Guest: Carolina Lago: Uh oh.


[00:07:54] Host: Paul Barnhurst: So first one, this is a question I just recently asked. Somebody asked me to ask this of guests. So we're trying it out, to see how people like it. If I asked you to define a financial model. So what counts as a financial model? A lot of times people are like, well, is this really a financial model? How would you define it or how would you answer that question?


[00:08:15] Guest: Carolina Lago: Oh, well, I would go to the basics and say that the financial model is anything that has inputs, calculations and outputs, but at the same time answer a question that can be answered financially because you have many models in the world that will be also inputs, calculation or process or systems and outputs. But a financial model itself needs to answer a business question. So if you remain focused on answering the business question, you have a model. If you don't answer any question, you have a report. So that's how I differentiate it. But then it goes on a white, um, side because the financial model can be on any side of the business, any part of the business, the marketing team, uh, marketing team can be doing a financial model as well. So it doesn't have to be stuck with finance. But if you have inputs, calculations, outputs, the answer, business questions, whatever it is, I consider it a financial model. Well, do you think it is?


[00:09:25] Host: Paul Barnhurst: I think that's pretty similar to my thinking. Right. Inputs, outputs. You got your structure. You're answering a question. I like Danielle Stein's first definition. I've seen a lot of different ones. And she basically says, look, if it's dynamic and it has inputs and outputs and it's modeling something, I'll call it a financial model. And I think that's a very, you know, very loose definition all the way up to when I teach this, there's one, and I don't have it in front of me. But the Federal Reserve, how they define a financial model, you know, and its economic inputs and all these big, huge words throughout the whole thing. And you're just like, oh, that's painful.


[00:10:07] Guest: Carolina Lago: I can't imagine. And then people look at this and don't think, this is not for mere mortals. We are mortals. We are regular people.


[00:10:15] Host: Paul Barnhurst: Yeah, it's very technical. And then I share a more general one. And then Danielle is probably one of the loosest ones I've seen. It's in her, I believe, her, uh, Financial Modeling for dummies book or her other business modeling book. And I like that one because I like to make it general and at the same time, hey, it's dynamic. It's, you know, she's making sure, hey, it's easy to update her inputs, outputs and you're modeling something. I'm like, okay, that really covers it. It's kind of like and you probably relate to this modeling best practices and principles. You can find a 100 page book out there that tells you how to model every little thing and what you should do. And then you have others that have 5 or 10 guidelines. I'm much more of the type of, hey, give me the guidelines, give me the structure, and then let me work within that and versus tell me every little detail, what's your what's your thoughts on that.


[00:11:07] Guest: Carolina Lago: Yeah I like the structure. And that's the big difference between the AFM and the CFM. I don't know if you got into that yet, but the AFM is a very structured model that you know exactly what to expect, but it has a big reason for being that way. And it has, uh, an outcome. If you go through the preparation and if you are prepared to pass the AFM exam, once you're doing this systematically, over and over, you start to build that model in your head. It becomes easier for you to understand how the finance numbers flow throughout the three stage statement model. And that's why I always discuss that. And I always say that in public, that I think learning the three statements is one of the best skills that a financial professional can have, even if they never use it. It's because of this system that you build in your head, and the AFM prepares you for that because you know how to build a model with the best practices with it. The guidelines, like you say, uh, with everything that is the best in the market. But at the same time, you build that in your head because you are repeating that in many types of business, many different cases, you're repeating the same structure. And when it becomes second nature to you, then you can expand. And the CFM is exactly that, that expansion of what the AFM provides you greatly.


[00:12:43] Host: Paul Barnhurst: Like that. And so I'm going to ask one more question you didn't get last time. And then we're going to talk a little more about AFM. So this is kind of a fun one. What's the most unique, most fun thing you have used Excel for in your personal life?


[00:13:00] Guest: Carolina Lago: Oh personal life. Well, we all made budgets for ourselves.


[00:13:05] Host: Paul Barnhurst: But we do. I'm terrible at it. I shouldn't admit that. Don't tell anyone.


[00:13:09] Guest: Carolina Lago: Yeah. Me too. But I think the most unique thing. Uh, well, we did task lists and, um, any kind of project that we need to do if we use Excel a lot, that's what we do every day. We. It's our first tool. But I think the most unique one was designing the floor plan of my apartment in Excel. Architects will kill me for that.


[00:13:36] Host: Paul Barnhurst: So did you. You drew out each room in Excel. Like the actual floor plan.


[00:13:40] Guest: Carolina Lago: I just made each cell square, and I decided that was. I don't know how many centimeters, um, square because I'm from Brazil. Don't talk to me about feet and all of that. And it should be centimeters and centimeters because I had a very tiny apartment back then. Sure. So I had to measure, I had to have the floor plan, but I needed to understand where I was going to put the sofa, where I was going to put everything. I know AutoCAD is there for that and all of those amazing tools that the architects use. But I am a finance person. I use Excel for everything, so I just laid out everything on Excel. I drew the lines of the apartment. It was not perfect, but it helped me understand how I wanted to lay out the floor plan. And I think we all went through that. Right. Uh, using Excel for those?


[00:14:34] Host: Paul Barnhurst: Oh yeah, we've all used it for personal things. I, I get all kinds of fun answers. We have yours. I've had, uh, somebody who built a bathroom tracker, somebody who built, uh, a tracker to tell how many times a TV show used swear words because it swore a lot. So they actually did an API and set up Excel to do that. Um. Wedding planner. No surprise there.


[00:14:59] Guest: Carolina Lago: Planning my wedding in Excel too. I didn't remember that. Yeah. That's true.


[00:15:02] Host: Paul Barnhurst: There you go. I had someone who put, like, life goals for them and their partner and all this stuff so they could evaluate how they were doing each week in Excel. Didn't work very well with the partner, but they did that.


[00:15:14] Guest: Carolina Lago: Habits is another one. I'm about to start that again now that I'm reading, uh, James Clear book.


[00:15:20] Host: Paul Barnhurst: Let me know how it goes. So. Yeah. So all kinds of fun things. All right. So let's spend a little bit of time on the AFM. And I'm going to start by sharing my story. And then I want you to share yours of how you first learned about the FMI. So I'm going to tell mine real quick. So the Financial Modeling Institute I first learned about them probably early in 2019, late 2018. So they were still very new at that point. Um, I learned about them from Lance Rubin. So I was working in a job I had been, uh. I was getting displaced. They were moving the offices to Texas, and I didn't want to go to Texas. So I was like, hey, there's a ton of startups here in Utah. I don't build three statement models. I haven't had to do it for work. It'd be really good to be able to say, hey, I have this on the resume. So I signed up for it. Late 2019, early 2020, based on the recommendations, like I said, of Lance Rubin. And it got canceled for Covid.


[00:16:16] Guest: Carolina Lago: Oh.


[00:16:17] Host: Paul Barnhurst: Covid hit. I was supposed to go to LA. This is when you had to go in person. And Covid hit because the test was in May. Covid really hit in March of 2020. And as all this was going on, the job I was working at, they decided they wanted to keep me on. And so I was working a ton of hours. So I delayed it a couple times and just never completed it. When they became the sponsor of my podcast, one of the requirements in the podcast was in the first year I had to complete the AFM. I wanted to do it anyway. And so that motivated me to complete it. And they were nice enough to comp me that since I had already paid for the test and to delay it a couple times, they had, uh, you know, it had worked out. So that's kind of my story in my journey to how I ended up hearing about the FMI and a little bit of taking the test. Tell me, how did you learn about the FMI? What were your kind of initial thoughts? Tell us a little bit of that experience.


[00:17:12] Host: Paul Barnhurst: While my background is in FP&A. I am also passionate about financial modeling. Like many financial Modelers, I was self-taught. Then I discovered the Financial Modeling Institute, the organization that offers the advanced financial modeling program. I am a proud holder of the AFM. Preparing for the AFM exam made me a better modeler. If you want to improve your modeling skills, I recommend the AFM program. Podcast listeners. Save 15% on the AFM program. Just use Code Podcast.



[00:17:53] Guest: Carolina Lago: Well, I moved to France in the middle of Covid and I had to quit my job. I was not expecting to have to quit my job. I was prepared to work remote, but with taxes, issues and all of that, they couldn't keep me. So I ended up. I spent one year, probably in France, not working, being paid because they were trying everything they could to keep me. And back then when I was working in the office, I was behind the computer. I was not looking at what was going on. So I had never heard about anything like, um, the FMI or your podcast or anything that was going on. I was just stuck in the office doing my routine, doing my things and work, probably knowing a lot about the education industry, which is the industry that I was working in, but I was not trying to go after what was going on in the financial modeling on the, FP&A market. I was not looking at that at all. And then looking for jobs and trying to relocate in France, I started to look around and got back to LinkedIn because I was not on LinkedIn at all until, that time I got back to LinkedIn. I got back to listening to podcasts and got, you know, got the fun of it.


[00:19:16] Guest: Carolina Lago: I started to enjoy it. And your podcast was one of them. And I remember listening to an interview. Yeah, I remember listening to an interview with Danielle. I had never heard about Danielle. I never told her that. By the way, I don't remember. I don't recall if I, I don't think I told her that. So I was hearing her interview with you and she was saying that she taught financial modeling and she did all of that. Uh, she had a group to help women to break into the financial modeling market. And I was like, oh my God, she's so lucky she gets to do that. And then I came back home and I said, can I? I told my husband, can you imagine if I was like a financial modeler instructor, like teaching, financial modeling, doing the best part of my job, but teaching others. And he laughed at me. He said, no, no way. Where are you going? To find a university to do that? No, I can do that online. And then I play the podcasts with him. And he laughed at me. And he still laughs at me sometimes. And I was like, that would be my dream job.


[00:20:22] Host: Paul Barnhurst: Our spouses laughed at all of us sometimes. You're not alone. Don't worry.


[00:20:25] Guest: Carolina Lago: That would be my dream job. That's what I want to do. And then. Then I heard about the FMI and the FME certification, and I. I had just gone to an interview. And on that phase of our lives when we are like, uh, running for higher positions. You don't get to be tested anymore. And I remember one time, 20 years ago, I went to an interview and they asked me to do some tricks on Excel. They opened an Excel and said, do something, and I did a sensitivity model quick a data table in five minutes. And they were like, wow. And I went to this interview and I was saying everything that I went through, and it was impressive and everything, but I could not prove. So once I heard about the FMI, I was like, oh, that's how you prove that's how you put the credential on your resume. It doesn't matter how long you've been on the market, you have a way to prove that you can do it under pressure, under time limit and the CFM even more. But then I said, no, I need to take this test, and I need to test myself if I really can do it, and then maybe one day propose to them that I can be their partner and teach other people to do it.


[00:21:44] Guest: Carolina Lago: And it was not about the business back then. I was not thinking about business. I just wanted to do something that really excited me, and I thought it was exciting to get out of the office a little bit. I was doing consulting work and it was fine. It was fun, but I found that I really liked to teach, and corporate training and things like that would really make my eyes shine, like I say. And I thought Danielle was so lucky to be able to do that, and I just envied that, uh, for a while. So that's when I decided to apply. And then I did the training and it was hard. Oh, man. It was hard. Even though I was like 20 years doing it because doing it under four hours, I never thought I could. But what'd you think was the hardest part about training for the AFM?


[00:22:37] Host: Paul Barnhurst: You know, for me, the hardest was finding time. It was that really, really busy time. I probably shouldn't admit this. I mean, I spent some time studying a few years back, but as far as the actual first test, I probably only put in about 25 hours and I'd say.


[00:22:52] Guest: Carolina Lago: I lost count. How much I did.


[00:22:55] Host: Paul Barnhurst: 10 to 15 probably was the week of the test, but I had watched the fundamental videos before I'd gone through them because I started with that and I had seen, you know, examples of it for a few years. I mean, if you had all of that up together, probably 4050. But I think the heart first was just carving out the time, which is a choice. We all say we don't have time. We all have time.


[00:23:19] Guest: Carolina Lago: Exactly.


[00:23:20] Host: Paul Barnhurst: Every single one of us has 24 hours in a day. We get to choose how we use them. If we choose not to use them to study, then it wasn't a big enough priority. For whatever reason, we won't go into the psychology of all this. We all understand that. But we all like to say, I don't have time. That's just our excuse at the end of the day because we don't want to prioritize it high enough. But I think for me, the debt part was probably the hardest. And then, you know, next I'd say depreciation. Not that that's tough, but a little trick just to make sure you get all the formulas right. Lay it out in a really good format because I didn't deal with CapEx much. And then just getting comfortable linking everything and being quick because like I said, I've only built for a customer in my entire career. One three statement model.


[00:24:14] Guest: Carolina Lago: Okay.


[00:24:14] Host: Paul Barnhurst: Now I've rebuilt it for him as well. I had to rebuild it when they changed all their charts of accounts, and I maintain it for him every month. But you know, three statement modeling was just not something I did. So, you know, really getting comfortable with all the different schedules and quickly linking them and depreciation and equity were probably some of the hardest parts. I mean, you mentioned, you know, time beyond time Him and just getting comfortable being able to be quick. Was there a certain schedule, a certain area that was really tough for you that you had to spend more time on?


[00:24:46] Guest: Carolina Lago: I think the revenue, because I started to practice with different business models. Once you are in an industry for so many years, you don't have to think about the business model anymore. You already know that. So you.


[00:25:01] Guest: Carolina Lago: Don't. Yeah, you.


[00:25:01] Host: Paul Barnhurst: Spend a decade somewhere and you kind.


[00:25:03] Guest: Carolina Lago: Of just it's.


[00:25:04] Host: Paul Barnhurst: Second nature.


[00:25:05] Guest: Carolina Lago: Exactly. And even the model itself once, uh, the first time, actually, I built a financial model was three companies ago. So, uh, that's something that I carried, um, along this time I was implementing software for planning, and then I had to build on the side the model so I could, um, understand how I was going to translate the model in the planning system. Well, that's when I had to learn how to connect everything. And what is the impact of everything? And it just changed. It blew my mind back then. And this has been probably 20 years, 2000 and probably 2009. So back then it blew my mind and I started to see things completely different because of the three statements and how to to understand how the numbers flow, um, between the statements and you can see it, you start to see that everywhere. But the thing is, I had time to do it. I didn't do it in four hours. I did a whole model, probably in a few weeks, so I had time to dive in. Of course, there was a much bigger model that would take the whole company into consideration, actuals and all of that. Here we are just starting from a three statement, um, model and just projecting everything the information is given to you. Okay, that's all of that. But at the same time, I was not sure that I could do in four hours, even if the information was given to me and everything was very well processed already because it is the case that it is very well processed, you just have to put it on.


[00:26:50] Guest: Carolina Lago: If you know what you're doing, you just have to put it on and do it. And I end up doing my test in 2.5 hours. So it was a huge accomplishment, accomplishment for me because when I started, when I first started, I think it took me 7 or 8 hours to do the first one and I knew what I was doing. I watched the videos and I learned a few tricks. I learned a better way, better ways to do some of these schedules. That schedule was one, um, I didn't model a complete revolver. I had some way to do it dynamically, but it was not a complete revolver like we do on the AFM. So there were a few things that I caught on the mid of the way, but what was the most, uh, gain that I had was the speed. And once I had to do it over and over, um, to gain speed, I started to internalize it even more. I already had 20 years building them in my career, and I used it for everything, even though I'm not building the three statements. After that, after that big project I had to use that. I had to use the concept of a three statement on everything that I did. And uh, for that, I was completely, um, how can I say on the job I knew what I was doing, but I didn't know if I could do it on time. So the time was a big challenge for me.


[00:28:19] Host: Paul Barnhurst: And that makes sense. I think that's a lot of what people, uh, fear. So before we jump into the CFM, any advice you'd offer to somebody taking the AFM? It sounds like focusing on getting able to do it quickly would be one of your core pieces of advice. I think for me, the biggest thing is about repetition. The test in and of itself is really not hard if you're prepared, like as many people have said, you know, train hard, test easy, if you've ever heard that expression said in different ways. And that's really true here. It's just about putting in the time, making sure you can do everything you're comfortable with. You know, the examples they give you. They give you flexibility to lay things out the way that makes sense for you. But make sure you can just do it structured. You can quickly connect things. You understand how that all works. It's not you know, this test isn't rocket science. It's really just if you put in the time, you should be able to pass. I think that's the biggest thing for me. Any thoughts that you'd add to that?


[00:29:27] Guest: Carolina Lago: I have two things that I like to tell everybody that is taking the AFM. One is to balance your model as you go. Don't leave it to the end. So nobody there wants to see. I have plenty of webinars. I did one with Danielle. Um, I already posted a lot on LinkedIn on my method of balancing the balance sheet, because every schedule needs to balance the balance sheet. So every transaction in the company balances the balance sheet. So once you do a schedule, as long as you link them correctly to the right place, it should balance the balance sheet and then you move on to the next one. So that's something that my students are used to hearing a lot about my three hooks method. That's where I link the three schedules before I even start to model. So that's one thing. And the other one is practice, practice practice practice. Put your hands in as many models as you can, and that's why it's so valuable to find a training provider. Um, there are plenty out there, but it's so valuable to find a trainer provider because they will give you more and more models to practice with. And as much as you can do different models before the day so you get comfortable doing it. You'll be sure there is going to be a point that you are doing your model in three two hours and a half. Maybe you'll be sure that you pass so you get comfortable and you get calm because you did it so many times. The test is just one more. But now this is completely different from the A from the CFM. So that's where I'm curious to hear about what you think about the CFM in this sense.


[00:31:13] Host: Paul Barnhurst:Bad financial models can lead to bad decisions or worse. So, how do you minimize the risk of a bad model? You make sure the models you build are great. The Financial Modeling Institute developed the Advanced Financial Modeler accreditation program to help modelers like you. The AFM program offers a step-by-step approach to building world-class financial models. The program ensures that you know the best practices in model design and structure, and will help you brush up on your Excel and accounting skills to be the one on your team to build great models. If you want to impress your boss and your clients, get AFM accredited. Podcast listeners. Save 15% on the AFM program. Just use Code Podcast at www.FMInstitute.com/podcast.



[00:32:19] Host: Paul Barnhurst: Yeah. So you know, first one thing I'll add, you know, you mentioned balancing throughout. I did not take that approach. I, uh, link everything up kind of more toward the end. It didn't balance. I did everything else. After I couldn't find out why, I finally came back and figured out what I had messed up. There definitely is some benefit to doing it throughout, so I can relate to that now. So let's talk. Let's talk about CFM. And I think for me that, you know, the CFM again, it's not just practice, right? The AFM is very much the practice of getting used to the structure. It's very methodical.


[00:32:55] Guest: Carolina Lago: Yes.


[00:32:55] Host: Paul Barnhurst: You know, yes they may vary some things like they may change what the revenue is. And you may have to think about capacity or they may add preferred debt or two different types of equity or whatever it might be. But it's not. Every section can be very different. There's some very structured way of doing it. You know, the CFM is structured, but every section can be quite different. The revenue can get very complex, or maybe it's very complex in the working capital or the debt structure or a tax schedule or, you know, multiple types of depreciation. So what they're really testing is you have the ability to think quickly and manage complexity in multiple areas. And so for me it's much more of a deliberate practice. You know the AFM it's practice. But you could just kind of keep going through it. You do it enough times. You're good here. I think there's a lot more to think about. And being able to think strategically and being able to, hey, what are tips and tricks to allow me to quickly make sure I can think about a lot of different industries and how to model them, getting comfortable enough to be able to do that. And there's definitely a structure component to that, just like the AFM, but I think it requires I don't think it does require a higher level of thinking, which means you need a more deliberate practice approach you can't just plan on, hey, if I do it enough times, I'll be good kind of that almost rote memorization, so to speak.


[00:34:28] Guest: Carolina Lago: I think it's not about time, even though you are expected to do it on time and the time is even more limited. I think it's more about resources. So that's why I think preparing for the CFM is going to be a whole lot of different fun from what was preparing for the AFM, because, you know, you have been doing most of those techniques before, but in a comfortable way that you know, the company, you you have time to think about it. You are not under pressure. And then on the CFM you have to think fast and you have to be resourceful. You have to learn techniques. And that's what I'm intending to learn along the way, because sometimes your way of doing might not be the best one. You might get it done, but it might take a longer time, or it might expose your model to some risks. Uh, we have to admit that it doesn't matter how long you've been in this industry, you always have something to learn and learn from others and from other people doing the same problem, which we don't get to do very often. So that's why it's very important to study and being active in the community, active in your community, active in in the FMI community, which is an amazing community to exchange ideas as well, because then you can see how other people solved that, and you can pick up a few things along the way, and sometimes you have the best way to do it and it's fine. It's great. Just celebrate.


[00:36:07] Guest: Carolina Lago: But as long as you understand that you are going to go through all of those techniques, that sometimes is going to be new to you and you are open to learn new things. Doesn't matter how long you've been doing this. Learn new things and apply. Because that's how I think I can evolve as a financial modeler. It's not only because I'm going to have a paper to prove that I am a CFM. I think every step of the way during this preparation, even if I don't get to the end, if I don't get to the 100 hours to do all of those cases, even if I leave some topics off and I happen to be on the test, and those topics are the ones being tested, and I don't pass for that, even though I think I might evolve as a financial modeler as I am preparing for that. Because of every model that I understand and every, every, um, solution from other people that I try to understand, even if I can make my own solution, I'm trying to go through every solution that is out there exchanging ideas. Why did you do it this way? Why did you do that? Maybe I could try this way too. Maybe it'll be faster. Maybe it'll be more safe to do. This way the formula won't break. Maybe it'll be more dynamic. Every single resource that I learned in the middle of the way is going to make me a better modeler. So that's how I'm feeling about the CFM.


[00:37:36] Host: Paul Barnhurst: Thank you for sharing. So I'm going to say a few things about it with the CFM. So there's if I remember right, 12 sections in the CFM, you know you got revenue, you got your cost of goods sold, you got your equity and debt schedules and your taxes, depreciation, you know, on and on and on each of those different schedules that you normally have. And so you have to practice in different ways for each of them. But what I'll say is that the CFM is hard and I'll share what people have told me. So I, I know somebody who runs a professional modeling company, a pretty large one, you know, full time, has a partner. He trains people to prepare for the AFM, you know, along with several other things. And he mentioned how concerned, even after he took it, he wasn't sure he had passed or not, you know, very concerned. He said it was really tough. So it really does help demonstrate the other example I'll give, and I'm going to have him on the podcast here soon, if I was talking to a guy who runs Denmark. I think of Denmark, but I know it's somewhere in that area. He runs for, you know, one of the big four accounting firms. He runs their M&A and, you know, their modeling section and their entire team took the CFM. And they studied together as a group. And he said he could see a big difference in their models. And these are people that are building complex models. You know that's their entire day job. And he was talking about, you know, how difficult it was. They put a lot of time into how it made them all better at their job. So the first thing is people are going to fail it. It's hard. And that's where you know, you're doing something that's worthwhile when there's a risk of failing. If everybody passes, I think you have to question it a little.


[00:39:23] Guest: Carolina Lago: That's how I feel. And even though there's a big risk that me have 25 years of experience, I might fail too. And it's okay because I think if I do fail the test, I have already succeeded in picking up some of the techniques. I might have not picked up everything. So I think, uh, it's just a matter of time and timing to put on. That's why they say it takes around 100 hours. It might take more for some, it might take less for others. And even if I do the 100 hours and I do successfully, there's still a big chance of failing because you don't know what's coming. So it's not like that.


[00:40:06] Host: Paul Barnhurst: Plan is to just bribe to slide some money over to them and see if he'll just pass me. I thought you guys didn't hear that.


[00:40:13] Guest: Carolina Lago: I don't think they take that.


[00:40:14] Host: Paul Barnhurst: So if you're listening, can I be your first student that was able to bribe you to pass the test?


[00:40:21] Guest: Carolina Lago: I don't think that will work.


[00:40:23] Host: Paul Barnhurst: Come on. You gotta. Got it. You gotta try something.


[00:40:26] Guest: Carolina Lago: But you have to see. You have to see that you are already gaining something, even if you don't pass yet. I like to say yet because it's. I think it's a matter of time. And I heard of some people that didn't pass the first time, and then did the second time without even having to study so much, and they just pass it easily because they had already, uh, incorporated those techniques. They gave themselves some time to understand those techniques and put it to use, and then they became comfortable with them. That's why I think, um, it's a matter of time. You will pass some day. Some time. It might not be the first, maybe the second. It's hard. But at the same time, the gain is not only the certificate, the gain is much more than that. And you start gaining it from day one. Don't have to wait a year to do the exam and profit from it. Your profit starts as soon as you start preparing every single model that you go through, you're going to learn something, even if it's a small thing, and that's going to make you a better modeler.


[00:41:36] Host: Paul Barnhurst: Yeah. So, you know, I think as we come close to wrapping up here, we've been talking for a while. I'll add a few little things and then we'll, uh, wrap up one, you know, we're going to do some more episodes on this. So let us know what topics or how you'd like us to approach this. We're going to probably start sharing a little more tips and tricks. Like we may talk a little bit about revenue and how we thought about it. Some of the things we've seen now get into a little bit more of that. So let us know if that interests you. You know, I think the other thing to say is, you know, even if you don't want it, if you don't want to take the AFM or CFM, fine. I still think you can get some value out of listening to this and thinking about modeling. There are plenty of ways you can learn to be a modeler. We like this program, but the biggest goal here is that we're all trying to learn, grow, and become better modelers. However we choose to do that. And then, you know, the last thing is we got to end with a joke here because, you know, why not? So here's the question for you, Carolina. What do you call a broken spreadsheet? Because I nearly fell over. What do you call a broken spreadsheet?


[00:42:44] Guest: Carolina Lago: A broken spreadsheet. You need to give the answers to the guests beforehand. How am I going to know a broken spreadsheet?


[00:42:52] Host: Paul Barnhurst: You got to try to guess, and then I'll give you the answer here in a minute.


[00:42:55] Guest: Carolina Lago: I am not good at that. Jokes. Excel jokes. I'm even worse.


[00:43:01] Host: Paul Barnhurst: You basically it becomes the interns problem.


[00:43:06] Guest: Carolina Lago: Oh, that's true. I heard that one before, and I've been an intern before, so.


[00:43:12] Host: Paul Barnhurst: Yeah. Or the new employee, either or. Hey, this is broken. Go fix it. Whoever designed it didn't know what they're doing. I'm going to start over.


[00:43:21] Guest: Carolina Lago: Yes, I've been there before many times, and that's one reason that you need to learn how to audit the model. That's one important thing that you need to learn how to do, because then you need to learn how to fix it easily. That's one of the topics, by the way, right.


[00:43:39] Host: Paul Barnhurst: I believe it is, yes. The model audit is huge. I've had several guests talk about that. And, you know, because we've all been there where you make a decision and then you come back later only to find out the model was wrong and you pray it wasn't material. You're like, please don't let it be a big mistake. I can still remember the one where, fortunately, we had put quite a bit of padding and I will put it that way in this forecast because we were told, whatever you do, make sure you submit a number you can hit. So there was plenty of wiggle room, which you don't get very often, but we had missed by such big numbers the past several years that it was pretty much we're going to deliver to the board no matter what. And we had like $1 million plus timing mistake we made in one of our businesses, not realizing it was a build where you had four and five weeks and we took five weeks, and we thought it was a four week. And we started with that and built everything on top of it for the whole year. And so that area of the business, the revenue was way overstated. Fortunately, we still hit our number for the year, but that was not a fun one.


[00:44:46] Guest: Carolina Lago: So yeah, you probably understate, uh, your weekly revenue, which is good.


[00:44:52] Host: Paul Barnhurst: And yeah, definitely was a problem, right? When you, uh, are sticking five weeks of revenue in four weeks and you're going to be off. Go figure. But I think we'll go ahead and wrap up for this episode. Again, send me an email, send Caroline an email. Let us know what you thought. Thank you for joining me. I hope you enjoyed that. And we will, uh, do this again in a month or so.


[00:45:17] Guest: Carolina Lago: Yes. Thanks, Paul, and let's get to study. We have 100 hours to manage, right?


[00:45:23] Host: Paul Barnhurst: Yeah. Go ahead and get started today. You know you know the drill. So let us know.


[00:45:30] Guest: Carolina Lago: And forget the vacation. Just start starting right away.


[00:45:34] Host: Paul Barnhurst: Overrated. You don't need a vacation.


[00:45:37] Guest: Carolina Lago: That's true, that's true. Thanks, Bob. Very nice talking to you.


[00:45:41] Host: Paul Barnhurst: Good having you on your show. Thanks for joining me.


[00:45:43] Guest: Carolina Lago: Sure.


[00:45:45] Host: Paul Barnhurst:Financial Modeler's Corner was brought to you by the Financial Modeling Institute. This year, I completed the Advanced Financial Modeler certification and it made me a better financial modeler. What are you waiting for? Visit FMI at www.FMInstitute.com/podcast and use Code Podcast to save 15% when you enroll in one of the accreditations today.







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