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When did you last see an IFO?

May 1st, 2008

     Depending on the size of the organization you are running, and the number of entities, one of the more important questions you can ask is whether you are running an Integrated Finance Organization.  While there has been some recent press on the topic touting it as something near “revelation”, it should be standard operating procedure.  It doesn’t matter if you’re coordinating multiple entities in just a North American capacity or a combination of entities throughout the globe.  They all need to be on the same page and communicating under the same guidelines.

     So what is an IFO as opposed to any other Finance department?  When you’re looking at the organization you are are managing and asking whether it’s worth of “IFO status”, there are some key considerations to table and determine whether you meet the criteria.  If you don’t, it certainly gives you something to shoot for.

     First, your organization should be using a “global set of standards” in your reporting process/structure.  Let’s not be too literal in the word global, since this can apply to a strictly NAM entity or a true international structure.  Regardless, all entities need to be working under the same set of rules and have a clear understanding of what those rules are.  Second, there needs to be a standardized chart of accounts that are used through all the functional areas.  Where possible, there needs to be consistency in the use of accounts and little variation for “special” accounts, which end up adding up and clouding the reporting structure.  Third, the entire organization needs to be using terminology that is clear and concise to the completion of tasks, defining processes, delegations of authority, etc.  Any ambiguity will ultimately lead to a breakdown and the potential for risk.  Fourth, the entire Finance organization needs to be working on a standardized set of processes that is used by all entities.  Again, it comes back to a defined structure and scheduling that all parties are clear on and accountability can become a common theme in the delivery of information.

     During my time at MGE, in a pre-merger capacity, I was fortunate to be working under a global CFO who was entirely committed to putting this type of structure in place.  Not only was he committed to it, but it was achieved.  In hindsight, the experience that I received working with him and helping to shape and put his policies in place in North America was invaluable.  In the end, this type of process leads to the effective management of the Finance organization, decreases your levels of internal and external risk, and allows you to deliver information of the highest integrity.  In the end, Finance becomes a true value added service within the company.

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