Posts Tagged ‘finance management’

What Are The True Symptoms?

December 10th, 2012 Comments off

For those that know me and have followed my blog for some time, the original catalyst for my writing was to develop a broader understanding of finance and help educate the other functional areas within my company. To give them a better understanding of how their actions affected not only other areas, but ultimately, the performance of our company’s income statement. What I got a kick out of was getting a call from my sister asking me questions about finance and hospital operating expenses. She thought she had signed up for a Hospital Finance course, but instead, found herself in what she thought was a “Greek” class.

We arranged some time to meet up and I immediately started getting the frantic download of all the new terms she was having to come to grips with. Operating expenses, variable expenses, fixed expenses, variance analysis, and a host of others. I was also hearing about the varying “financial opinions” that were being shared by her classmates, which was somewhat amusing. Rather than bore her with just a review of terms, I decided to have her take a “walk” through a hypothetical hospital P&L. I wanted her to really understand how all the elements are correlated, what the influencing factors can be, and that the story presented isn’t always so clear cut. I also wanted to leave her in a position so that if she were ever in a situation where she was being challenged on some operating expense variances that she would know some of the proper questions to ask rather than being told her performance was sub-par.

Another area we spent some time covering was that of a Budget, when assumptions are changed due to market dynamics, and thus prompts the creation of a Forecast. The whole concept of having to follow and report on your actual results against two hypothetical scenarios was a consideration she just didn’t want to have to entertain, but she got it.

Before we started the walk, I told her that in order to properly evaluate the variances that are being reported, it’s necessary to understand what the drivers are behind the variance…what is the real story.  In the terms she works with every day, you have to understand what the true symptoms are. We’ll cover the rest of the walk, and her changed perceptions, in my next posting.

Thanks for reading…

Jeffrey Ishmael

Do you have your financial diagnostic checklist?

September 25th, 2008 Comments off

As I start getting situated into a new CFO position, the first thing I do is run through a preliminary diagnostic of the processes in place, the quality of the information, and the depth of information that management has at their disposal for key decision making. As I’ve mentioned in my posts on internal audits and other control-related commentaries, I want to know what my immediate areas of risk are to the firm and address them immediately. While I have a much more comprehensive list, some of the areas listed below are those I start addressing in the early stages.

-Review of the most recent audit report for insight on potential issues.
-Skills assessment of the existing staff and their commitment levels.
-Review of current systems and the ability to extract accurate reporting.
-Review of all working capital elements and exposure to potential write-offs not recognized.
-Determine the health of current bookings and pending shipment pipeline.
-Assess any current or pending litigation issues.
-Assess the current banking relationships and determine potential issues.
-Assess the dynamic among the Executive team as well as the Board.
-Determine if overall compensation levels are in line or if there is risk to a broad-based increase.
-Review current insurance levels and confirm coverage levels are appropriate.

After reviewing the list above the first question is “Why wouldn’t these items be questioned or reviewed during the hiring process?”. In fact, they should be, but as we all know for the interview process, there’s the process of kicking the tires when you’re on the lot and actually getting a feel for the performance of your new purchase after you’ve had it for a week or two. This is not necessarily a negative situation, but sometimes the Company wants you as bad as you might want the position and you might only get that 80% view. Regardless, if you enjoy what you do and you appreciate a challenge, make the most of it and ensure that the efforts you commit are those you can be proud of and strive for nothing less than success.

Thanks for reading . . . .