cfo – Cooper Mann Consulting

September 23, 2015

Analysis, forecasts and modeling: What’s the point?

finance In today’s business world, risk, uncertainty and volatility are just par for the course – everyday realities of simply being in business. Nothing is certain, they say, except death and taxes. Yet there is a fine art to driving profitable growth in a business, and adapting to existing and emerging risk takes a great deal of experience, information and agility. While planning and process development may occur at many levels within the organization, it is the FP&A (financial planning and analysis) capability which helps top performing businesses be top performers.

Financial planning and analysis are activities central to enterprise performance management (EPM) and must necessarily extend beyond finance. Integrating various functional domains in the business (financial, operational and strategic), FP&A should bring data together from the various facets of the business and use the information to help structure and guide the organization toward meeting short-term and long-term goals. Among the most critical of the duties of FP&A is calculating the financial impact, the monetary effects, of potential business decisions. Everything in business means money, so there is always an impact to a decision. With the right information supporting the decision, it is far more likely to have a positive impact and a level of sustainability.

While many CFOs may recognize the importance of performance measurement, planning and forecasting, a great many also believe the process isn’t very effective. The cause is frequently the divide between the various domains in the business and the information systems supporting them. Operational data are distilled into summary financial information and fed to finance systems, losing much of the underlying intelligence that might be gained from analysis of the details. Strategic development and planning may overlook certain volatile elements in the market, or may base successful outcomes on an expectation that conditions within the business will not change. Finding ways to integrate the data from the respective domains into a comprehensive model is essential to developing a better and more robust forecasting and scenario-playing capability. With the right information, analytics may be applied to all facets of management decision-making, anticipating and shaping business outcomes far more effectively than could be done without the insight.

Small business owners may believe that things like “predictive modeling” and “enterprise performance management” aren’t things they need to worry about, but the small business could use this information just as beneficially as a larger enterprise – perhaps even more as the insight could be the key to small business survival and growth.

Using analytics, the owner is able to adjust and re-align strategy in real-time to keep on the right path and goals clearly in sight. Analytics can also help a business better understand what really drives revenue, working capital and profits. Analytics can even help managers align compensation and strategy with business objectives, preventing compensation issues from outpacing business benefit.

There is a cost to growing a business, and some strategies might be more sustainable than others. Time will tell, but it is great if the business owner has some business intelligence that might indicate what’s going to happen before it actually does.

Make Sense?

September 18, 2013

CIO, CFO, IT and Procuring the Cloud | buildingUp.biz

CIO, CFO, IT and Procuring the Cloud

For as long as there has been high technology use in business, there has been a struggle between the enterprise CFO and CIO for the power to make IT purchase decisions. It isn’t rocket science… the reasons for the challenge are fairly straightforward. The CFO wants to know what the expected return on the investment will be. The CIO, on the other hand, recognizes that there is rarely a straight line to be drawn between IT expenditures and near-term positive business outcomes. Sometimes it takes a while to fully realize the benefits of an IT project… and sometimes it’s necessary to spend the money just to maintain status quo.

While there may be indicators that the CFO’s influence in the enterprise is extending into areas where the CIO traditionally ruled (due – at least in part – to SaaS and the Cloud) there are also indicators that the role of the CIO is evolving rather than losing relevance.

A survey performed in 2011 by Gartner and Financial Executives International revealed a number of interesting results which indicated that the balance of IT procurement power was shifting within the enterprise. 344 senior financial executives were surveyed, and they revealed that:

in 45% of organizations, the CFO makes or leads IT investment strategy
about 75% of surveyed CFOs said they have little confidence in their own IT departments

A CFO.com article on the subject also mentioned a KPMG study from April 2011, in which it was reported that “73% of CFOs identified IT as the greatest risk to finance meeting its objectives”.

With the emergence of “cloud” computing solutions and the plethora of application and service options now available to businesses, some businesses have concluded that “the CFO is better equipped for the cloud world”. The belief is that the CFO is more attuned to the processes of vendor management and contract term and condition negotiations, which are primary areas of focus when looking to obtain outsourced IT and application services. The process of comparing pricing and service level agreements is more of a business process than a technology process, placing it squarely in the realm of the CFO.

The real issue here isn’t a struggle for power and influence; it’s a change in business priorities fueled by changes in technology and service models. IT and the role of the CIO must focus on innovation and improvement of processes and profitability through efficiencies gained with technology, not on defragging hard drives and running software updates. Brocade.com discusses this evolution of roles and focus with enterprise CIOs and CFOs in the release entitled The CIO Is Dead. Long Live the CIO. The Cloud Redefines the Role of the CIO

“ … the CIO role will evolve and policy enforcement, technology evangelism and mediation between business units and their services providers will become the key responsibilities for the CIO by 2020…. And rather than being replaced by the CFO in this shift in IT provisioning, two-thirds of respondents predicted that the roles of COO and CIO will merge as technology continues to become more operationally vital. http://newsroom.brocade.com/press-releases/the-cio-is-dead-long-live-the-cio-the-cloud-rede-nasdaq-brcd-977455

Who understands better than the internal IT department the time-consuming and frustrating nature of maintaining user environments and applications? Who in the organization has the technical understanding, coupled with a direct business understanding, sufficient to explore new ways of approaching various process or workflow problems? I think most business IT managers would agree that addressing issues that have a potential to radically improve the way a business operates is much more challenging and interesting than selecting the right make and model of server.

via CIO, CFO, IT and Procuring the Cloud | buildingUp.biz.

March 18, 2013

Philosophy of Process Improvement: Today’s CFO Focusing on Operations

There are a great many methodologies and approaches to “making businesses better” through process improvement. From SixSigma to Continuous Process Improvement to Total Quality Management – all describe methods of measuring performance and outcomes to return intelligence oriented towards improvement. Many of these approaches are generally applied in manufacturing businesses, because in manufacturing it’s easier to see where processes may be flawed because the process works with tangible elements. Making corrections in a process can improve the performance of that process by reducing errors or increasing efficiency. The truth of the matter is that every business is like a manufacturing business, and applying measurements to the various processes the business performs can reveal the secrets to improving not only process performance and product quality, but resultant profitability.

A recent article on CFO.com titled Operations Take Center Stage, author David McCann discusses how some CFOs are improving business profitability and performance by delving deeper into operational areas of the business, and not remaining focused squarely on accounting and finance issues.

“Operations is the key to everything,” says Larry Litowitz, finance chief at SECNAP Network Security, a secure Internet-services provider. “That orientation is found most at manufacturers, but it should be at every company.”

Fiscal and financial matters are important to every business, but focusing on accounting for the end-result of business activities assumes that the work leading to the result is useful and effective. As more attention is paid to conservation of cash, reduction of expenses, and overall profit improvement, CFOs are necessarily moving deeper into the operational aspects of the business to uncover potential not previously addressed. In some cases, the move is more a function of self-defense and necessity than desire, as businesses increasingly compress spending on management, merging the functional roles of CIO, COO and CFO.

Increasingly, CFOs may find themselves taking on operational tasks whether they want to or not. At larger companies, the steady waning of the chief operating officer position has resulted in more operational responsibility for CFOs, recruiters say. In 2000, 47% of the 669 companies included in either the Fortune 500 or S&P 500 had COOs; in 2012, only 35% did, according to executive-recruiting firm Crist Kolder’s 2012 “Volatility Report of America’s Leading Companies.”

Some accounting professionals may believe that they don’t have the skills and experience to suggest changes in operational areas of their client businesses. I would suggest that logic and reason are generally the prevailing factors supporting process improvement – reasoning that is often developed through simple observation. Taking the time to understand what the business is doing at each level, and then actually observing those activities and accounting for their effectiveness and error rate, is how professionals can spend quality time in the business and uncover hidden profit potential.

Litowitz says CFOs can influence operations at a range of companies, including service-oriented businesses. “It’s really no different. The work is a set of activities,” he insists… “All these activities can be analyzed, controlled, and measured against a predetermined standard,” says Litowitz. And just as on a manufacturing floor, efficiency generates profit, justifying the CFO’s involvement.

Make Sense?

Joanie Mann Bunny Feet J

Read more about how Global CFOs are Returning to Fundamentals

March 7, 2013

Global CFOs returning to fundamentals

Accounting professionals in the United States have recognized for some time the value of offering what many refer to as “high level” services to their clients. For the accounting professional and the client business, consulting regarding strategy and growth represented value for both parties – guidance for the business client and profitable service for the accountant. However, as the economy began to decline and businesses tightened their belts, accounting professionals around the world recognized the opportunity and the need to return to focusing more on client operations and not simply on strategy and growth.

A recent article on CFO.com discusses the results of a survey performed by the ACCA (the Association of Chartered Certified Accountants), discussing how accounting professionals around the world are adjusting their approaches to accounting – adjustments at least partially fueled by global economic difficulties.

“There has been a little bit of a shift following the economic crisis. Pre-crisis there was a lot more focus around growth,” says Lyon. As the recession hit, Lyon says, global CFOs began to immediately question “What’s my cash position from day to day? What’s happening to my costs? What’s happening with my controls?”

Such anxieties may have triggered a shift back to the basics. “The CFO is a key adviser to the strategic (decision makers); that’s not in question. But there is a balance to be had in these times. That balance is around cost management and certainly managing risks,” says Lyon. “Finance as a function has been slightly brought back into focus.”

I would suggest that shifts in the approaches by accounting professionals are (at least in part) due to the various impacts of economy, technology, and globalization. There have always been different types of accounting professionals, with some focusing on management issues and others on strategy. Today’s accounting professionals must find a way to find a balance while addressing holistically the needs of the business client. This belief is also in line with the findings of the survey:

The complete finance professional 2013 summarises our thinking on why businesses need finance skills and capabilities across the entire finance value chain. We also recognise that this new environment requires finance professionals to bring a much broader range of finance skills to the table. The challenges faced by finance functions in supporting businesses are not constrained to a particular accounting or finance discipline. To strive to become world class, finance functions must excel in a broad range of capabilities, from supporting businesses to manage risk, developing effective strategies for growth, driving financial insight, continuing to maintain appropriate levels of control across the organisation as well as ensuring its statutory and regulatory responsibilities are met.

There are a lot of US accounting professionals out there who once approached their clients with a “holistic” service offering, focusing both ON and IN the business. Today, competitive pressures are driving professionals to re-engage with their clients in deeper operational roles, combining cost and cash management with guidance on growth and sustainability. It’s kind of like going back to the good old days of the full-service accounting office, and that’s a good thing for businesses.

Make Sense?

Joanie Mann Bunny Feet J

January 14, 2013October 28, 2015

Re-defining the role of the accountant, or going back to the good old days?

I grew up in a small town in Oregon where my parents ran a “business accounting office”. Many of the businesses in and around town were my dad’s clients, and we all got to know each other pretty well. Dad, you see, wasn’t simply the accountant, and the people working for him weren’t just bookkeepers. Dad was the business advisor, purchasing negotiator, collections agent, and anything else the client needed that he could provide. He fought for lower worker’s compensation insurance rates, got better prices on truck tires, and in general helped his clients with just about every aspect of running their businesses, including getting more customers and managing growth.

I had always believed that this approach, a consultative approach where the professional was intimately familiar with the business and proactively worked from inside the organization, was what all accounting professionals did. This proved to not necessarily be the case. Over the years, I have found that many accounting professionals focus primarily on the historic reporting of activities in the business, rather than actively helping to improve client business operations and performance on a daily basis.

According to one source, describing the differences between a CFO and an accountant: “CFOs are focused on working inside the business helping it generate wealth – ensuring proper capitalization, fostering the right banking relationships, addressing compliance issues – focusing on the company as a whole. Often CPAs tend to be more focused on specific tasks. Is the year-end audit done? Is the tax return done? …While both are vital to a business, a distinction we see is that the CPA’s dominant focus is historical – looking back to prepare tax returns and financial statements. The CFO, though, needs to be a forward-looking, integral part of the management team”.

It has become a reality that many accounting professionals are somewhat disconnected from their clients, a result perhaps of removing themselves from daily bookkeeping and other tasks. Recognizing the disconnect, many firms are now taking steps towards rebuilding those intimate client relationships by offering services which address more operational and strategic aspects of the business. These firms are offering “CFO Services” to their clients in addition to the standard offerings of financial statement and tax preparation. They have recognized the need become closer to the client business, delving deeper into the intricacies of the operation in order to find areas where improvements may be made and necessary controls instituted.

Accounting professionals seeking to increase the value of the services offered to clients should give strong consideration to what the client recognizes as valuable. Historic reporting is necessary, but finding ways to fund budgets, controlling expenses, helping to guide cash investments and taking steps to improve profitability are how a consultative accounting professional delivers real value to the client, building up the basis for long-lived and mutually beneficial business relationships like the ones my father once built.

Make Sense?

Joanie Mann Bunny Feet J

Small Business Owner to Accountant: Make Accounting Valuable to ME

August 10, 2012

Success in the Finance Department: Better Data and Analysis

CFOs and corporate controllers are beginning to recognize the increased value they can deliver to the organization when they take a more holistic and comprehensive approach to data reporting and analysis. The key is in delegation of duties, and establishing the controls and connections which ensure proper (and complete) flow of information throughout the enterprise. The finance department can easily become overburdened if not structured properly, but can be as easily undervalued if the sole focus is getting the numbers right.

An article on CFO.com discusses some of the elements of structuring the finance department for greater success, and identifies the value of taking a proactive, consultative and analytical approach to business finance.

“For a CFO, “success is not just about getting the numbers right, but also uncovering the story behind the numbers: taking raw accounting information and creating cogent and compelling management discussion and analysis,” says Eileen Kamerick, managing director and CFO at investment bank Houlihan Lokey.

Those who take the big picture into account are more likely to develop an organizational structure that isn’t merely reactive. That will allow staff to come up with more ideas and, ultimately, help drive revenue and run the business. “You have to create an organization so you aren’t in the engine all the time,” Kamerick notes.”

This is a great article… read the entire post on CFO.com here

You’ll find that it makes sense.