Beyond Financial Control Overview

Beyond Financial ControlBy

Stuart Bilbrough CA

© 2011 Stuart Bilbrough, Finance Mechanics Limited. All rights reserved. There are terms and methodology developed in this presentation that is the intellectual property of Stuart Bilbrough, Finance Mechanics Limited. Any use of this

material without the written permission of the author is strictly prohibited.

Introducing:

Bean Soup is an innovative and engaging story capturing real-life challenges in getting Finance teams within businesses to add value and move beyond pure financial control.

Written as fiction, it follows Callum Dangerfield, a newly appointed CFO at the Haven Hotel Group. Bean Soup – Beyond Bean Counting is more than a business book, it is a complete training toolkit that provides valuable yet logical steps for lifting a Finance function skill set towards adding value.

Visit: www.thebeansoupbook.com or e-mail: [email protected]

http://www.thebeansoupbook.com/

mailto:[email protected]

TODAY’S SESSION

1. Objective of Today’s Session

2. The Evolution Beyond Financial Control – The Last Fifteen Years

3. What is the Difference Between Financial Control and CFO Functions?

4. How to Get Balance in Your Finance Team?

a. Ensuring the Yard is Tidy – Consistency, Control, Contributor

b. When is there insufficient finance support to navigate a Company?

c. Getting the Right Balance

d. Transforming a Finance team while continuing with the day to day

e. Training

f. A Quick Health Check – Four Simple Questions

Beyond Financial Control


“Explore the changing requirements of today’s CFO and how it impacts the expectations on the Finance Team.

and

“To provide guidance (insights) on how to add value while recognising the reality of the ‘day to day.”


TODAY’S SESSION









e. Training



2. Evolution Beyond Financial Control – The Last Fifteen Years

“CFO of the Future” series – The evolving role of the CFO - 2007 (KPMG-ICAA)


Year of Publications

Changes in Reporting Objectives of CFO’s.

1998 Focus on improving the efficiency of transaction process and promoting CFO’s as genuine ‘business partners.’

2001 CFO’s becoming more involved in non-accounting matters, considering and developing techniques such as fast close and shared services.

2004 A demanding regulatory agenda forces an upgrade of compliance capabilities and supporting directors and executives as they digest the governance implications of IFRS and other changes.

2007 Increased collaboration with executive management on strategy and commercial work. More emphasis on embedding reporting and compliance into core business processes.

Publication Year

Institute of Chartered Accountants Australia, “CFO of the Future” 1998

As above, “The New CFO of the Future – Finance Functions in the 21 st Century” 2001

As above, “The CFO of the Future – Leading through influence and integrity” 2004

Jeremy Hope, “Reinventing the CFO” 2006

As above, “CFO of the Future – The evolving role of the CFO” 2007

IBM, “Balancing Risk and Performance with an Integrated Finance Organisation” 2008

E&Y, “The Future of Finance – Driving business value through performance of the finance function” 2009

IBM, “The New Value Integrator – Insights from the Global CFO Study” 2010

Hudson, “The Changing Face of Accounting and Finance” 2011

2. Evolution Beyond Financial Control – The Last Fifteen Years ……. Cont’d

Publications on what is expected of the CFO and the Functions that support them include:


TODAY’S SESSION









e. Training





3. What is the Difference Between Financial Control and CFO Functions? * …… Cont’d

Direction Comes from the Top – Dependent on Organisations Evolution


The Financial Controller is ‘likely’ to focus on: The CFO ‘may’ have oversight of financial control and ‘may’ focus on responsibilities that extend beyond financial accounting by:

1. Financial accounting which captures the general ledger systems and transactional processes,

1. Being a key member of the senior executive team and a trusted advisor to those executives, the CEO and Board of Directors,

2. They will lead month end and annual closes, 2. Have an in-depth understanding of the operations of the business,

3. Look after accounts payable, accounts receivable and payroll functions,

3. A key contributor to the company’s strategy formulation and provider of shareholder/owner value,

4. Look after the various compliance related reporting required of the company and its industry,

4. Provide innovative, proactive and decision orientated performance measures,

5. Maintain policies, procedures and charts of accounts, 5. Maintain a strong risk management function and strategies to mitigate,

6. Implement and maintain internal controls, and 6. Improve suboptimal spending through effective cost management and champion of business process improvement, and

7. They may have involvement in the budgeting processes and cash management.

7. Maintain a forward looking view on funding options, cash flow and their link to the company’s growth.

* Source: Google - “’The Difference between a CFO and a Financial Controller”

3. What is the Difference Between Financial Control and CFO Functions? …… Cont’d

Moving from Financial Control to a CFO Function

The main challenges are:

1. Freeing up the time and resource necessary to make a value adding contribution,2. With the right skill set,3. Targeted at the key decision makers within the business,4. Providing something they need and is authoritative, and5. Without compromising the quality and integrity of the traditional functions.


Transactional Process

Decision Support

TODAY’S SESSION









e. Training



4. a. Ensuring the Yard is Tidy – Consistency, Control, Contributor *

The ultimate goal is for finance to be seen as a business partner, trusted advisor and value adding contributor to the business. Before this can be achieved Finance needs to have a foundation of tight control and consistent application.


First – Consistency

• A standard and complete chart of accounts

• The same GL system• Common processes• Common procedures

Second – Control

• Ensure a strong control environment

• Ensure accrual accounting• Flash plus cash reporting• Understand and mitigate

financial risks

Finally – Contributor

• Masters of measurements (KPI reporting)

• Responsive forecasting• Financial decision support• Warriors against waste• Be able to answer “What

drives Profit?”

* Very loosely based on – 2008 IBM, “Balancing Risk and Performance with an Integrated Finance Organisation”

4. b. When is there insufficient finance support to navigate a Company?


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4. c. Getting the Right Balance

a. The diagram below represents the four key areas that need to be balanced in a finance function with the right skill set and training.

b. The quadrant called ‘cashflow’ may be different for some organisations. Interest and/or foreign exchange my be more important in other organisations.

c. Expert advise may be outsourced as the investment in an FTE may not be warranted in a small finance function.


4. d. Transforming a Finance team while continuing with the day to day?

Big Businesses

Big business with big budgets have been able to embrace big changes in their Finance functions. Commonly referred to as “Finance Transformation” they have been able to:

a. Offshore many transactional process to low cost locations – AMEX to New Delhi and DB to Manila.

b. Replace IT for software that improves financial planning and analytics. Reduce proliferation of non-core software (including EXCEL).

c. Up skill and retool “onshore” finance employees who have demonstrated value adding qualities outside of transactional responsibilities. This has been done through a mix of in-house development and external providers.


4. d. Transforming a Finance team while continuing with the day to day? …… Cont’d

The Rest

Smaller business (SME) is slow to keep up. Undoubtedly most CFO’s in smaller businesses get the picture of what is required of them but need to work with a much smaller budgets and timeframes and possibly indifferent senior management/owners. As such:

a. Instead of “offshore” they look to outsource non core services where possible – IT, payroll, expert advice (taxation, corporate finance).

b. Instead of “replace” they upgrade where possible and improve financial and non financial analytics with “off the shelf” or hosted software or Excel

c. With up skilling they tend to make do with what they have due to skills shortage and/or high cost of skilled/qualified finance professionals. Transactional process are still required and this can turn some skilled finance professionals off. Training therefore becomes critical.


4. e. Training

The ‘Beyond Financial Control’ series - A framework of inter connected training sessions that provides the stepping stones for lifting a finance function skill set towards a “value adding” team.


4. f. A Quick Health Check – Four Simple Questions


Ask 1 – Can your team provide some examples of controls in place? Are there regular mistakes in the data provided? Confirm that there is a full balance sheet reconciliation completed.

Ask 2 - Who are the key decision makers that require information from the Finance Team and how often does the team interact with them?

Ask 3 – Have a look at ‘ALL” of the reports that are prepared for the key decision makers of the organisation. For an SME this will include Board, CEO and heads of departments (as applicable). Are they professionally prepared with decision orientated financial and non-financial information and insightful commentary?

Ask 4 - Do they know what the strategy of the organisation is over the next year, the expected revenue and profit and at least four main competitors? When was the last forecast completed?


Stuart Bilbrough

Stuart Bilbrough is the Chief Financial Officer for Radius Residential Care Limited, Auckland, New Zealand.

Stuart has worked in Finance for nearly 25 years in a variety of industries, including health, FMCG, logistics, telecoms and financial services.

As well as New Zealand, locations have included Australia, Malawi, UK, Egypt, Singapore and Bahrain.Notable companies include PricewaterhouseCoopers, Fonterra, Deutsche Bank and American Express.

Through experience working in a Finance function that provided great value to the business it supports (American Express) and then involvement in a Finance transformation initiative (Deutsche Bank), Stuart has developed a passion for improving the value and perception of Finance in the functions he leads.

Stuart is a Chartered Accountant and registered trainee mentor with the New Zealand Institute of Chartered Accountants. He is a Certified Practicing Accountant with CPA Australia and holds an MBA with distinction from Massey University. He is also an associate member of the New Zealand Institute of Directors.

‘Beyond Financial Control’ Series

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Beyond Financial Control Overview

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