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It’s December & the Budget isn’t finalized…?

December 10th, 2008 Comments off

Needless to say the last month has been extremely hectic trying to reengineer the financials of a new company, as well as trying to finalize the 2009 Budget. While it’s kept me from regular updates on the blog, it’s been a great exercise in a truly unique economic environment. As of now, I am looking to present the final 2009 Budget to the Board next week for approval. If this was any of the prior years I had gone through the budgeting process I would have been infuriated if the Budget had not been completed by the beginning of Q4, but then again, this is no ordinary year.

Considering that we are focused within the Retail / Apparel sector, we have obviously been closely watching the retail comp results of the last quarter and trying to anticipate the impact to our own business. Fortunately, one of our larger customers, Journeys, has been posting positive retail comps, which has been a bright spot in the Genesco portfolio. However, others have not been so fortunate. We also distribute product through the “Core” channel, which is primarily comprised of “Mom & Pop” shops, which have exhibited some surprising resiliency over the last half-year. Clearly, this holiday season will be the true test for them. Regardless, we have ended up using every bit of time in this calendar year so that we can finalize and commit to a 2009 Budget that is as accurate as possible and not having to explain obvious variances for the remainder of the year.

One of the more challenging fronts has been the International side where we distribute product through more than 45 countries and negotiate our transactions in both the U.S. Dollar and Euro. For our Euro accounts, although we have had discussions with some of our customers about decreased purchasing power and weakened markets, those customers have also shown surprising resiliency. However, for those subject to exchange rates based on their native currency, there’s a different story. We’ve seen decreases of any where from 25% in the U.K., to 40% in Australia, and outright currency freezes in a number of other countries. Will the currency situation reverse as the oil situation did from its highs this year? Hard to say, but at this point we’re planning for an “As-Is” scenario.

So as we move into the final weeks of 2008 and prepare the final Budget for submission to the Board, I’ve been able to effectively incorporate the conditions currently reflected in our sector, which would not have been included were the Budget completed at the beginning of Q4. We’ve made changes to all aspects of the Budget and will be moving into 2009 with a degree of confidence knowing we’ve been able to reflect all aspects of the current environment. We’ve also had the luxury of being a smaller company and having the agility of moving quick to adapt to market conditions, which is much more difficult in a larger entity. So yes, it is December and only now is my Budget being finalized. When was your Budget completed? Are you going to spend the year explaining countless variances or have you been able to incorporate current market conditions?

Thanks for reading . . . .

Jeffrey Ishmael

When did you last see an IFO?

May 1st, 2008 Comments off

     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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