Posts Tagged ‘forecasting’

Resurgence of the strategic CFO?

January 29th, 2009 Comments off

      A recent conversation at the trade show I attended had me discussing the expected role of the CFO in the current environment. The conversation, among finance peers, was focused on whether a technical, or “mechanical”, CFO could really be successful in the current economic environment or if we will again see the resurgence of the “strategic” CFO.  If you’ve read my prior posts there’s no question on my opinion. You would also know that my day-to-day activities are focused on a collaborative approach with every functional area of the company and I constantly look for ways to drive efficiencies that will have a positive effect on the bottom line. I’ve also been fortunate enough, prior to achieving the post myself, of working with CFOs who were also very good strategists and mentored me in creating the necessary balance.  The assumption being that any current CFO has the underlying technical skills to support the position.

     The segue for the conversation was a recruiter comment that mentioned they were looking to fill a CFO role but the hiring company was firm on having a CPA. While the scales are slightly tipped as a % towards the number of CFOs who have the designation, there is still a high % who do not, and are simply superior in their skillsets. However, for some time there was the absolute need in many corporations to bring in more of the “mechanic” type profile of a CFO for Sarbanes-Oxley implementations & other peripheral accounting and control functions.  But we now find ourselves in a much more challenging environment and I would table that many of the “mechanics” are simply not equipped, or have educated themselves on the intimate workings of the Company they deal with. That they have not established the necessary collaborative relationships to successufully implement projects. Nor do they have the mindset to work on realistic multi-year strategies that move beyond the simple construction of endless balance sheets. The real difference are the strategic CFOs who utilize their CPA knowledge as a complement versus Accountants who have progressed to the role only through opportunity.

     Yes, these are generalizations, and I have worked with some incredibly talented folks that are also CPAs. However, we are now seeing the absolute need for finance professionals that can work with all the functional areas within an organization and synthesize the information quickly to develop a realistic financial roadmap. Someone that can substantiate the information, really understand the story, and add more value than just changing some variables in a spreadsheet.

Thanks for reading . . . .

Jeffrey Ishmael

Do you have a fiscal strategy or fiscal workout?

October 25th, 2008 Comments off

Every so often we’re reminded about the need to have a specific plan in place, and without that plan, you’re not going to achieve your ultimate goals. I’ve seen this play out in two different ways over the last few weeks. One was my recent commitment to race the Southern California Time Trial Series this year, while the other is my new position as the CFO of a small footwear manufacturer.

Let’s start with my cycling training. I have all the top tools that would enable me to have specific and regimented training programs. I have PowerTap wheels for both my roadbike and TT bike, the latter a PowerTap disc. I have all the latest software to analyze my wattage history and taper accordingly. My wattage levels have been great. However, I hit the first two races and they were an utter disaster. I finished outside of the Top-5 and was not awarded points. My wattages during the race were 15-20% below my recent results. So….the local shop Pro tells me I was probably overtrained and not rested enough. He set me up with a daily program that I have been following diligently every day. While the “numbers” tell me my fitness is dropping, the legs feel fresh and strong. At my last race, I raced in the Pro 1/2 class, received points for second, and set a personal course record. Go figure…..

Carry the same analogy into my new company and I’m finding a team that is working very hard to make sure they hit their annual goals and achieve whatever level of profitability they can. However, just like my previous training plan, there were no day-to-day specifics, or in this case, month-to-month specifics. In particular, the Finance team does not have a forecasted P&L, there are no cash flows, there are no specifics as to how they will move back into profitability, and a host other non-existent reporting tools. The great news is, as I was, they are very willing to change and aware that they need to in order to achieve their necessary results. We are already putting some of the necessary plans in place and I’m very optimistic about the 2009 outlook. In a handful of weeks we already have reconfigured P&L info, we have a preliminary 2009 Budget, and we’ve identified a number of areas that will provide us additional product margin or expense improvements.

In both these cases, we were both working extremely hard but just not getting the necessary results. The effort was there, the necessary tools were there, the skill set was there, but what was lacking was a specific plan. In my case, it took a fellow competitor to bring out my best, while in the case of my new company, they hired me to bring out the best in them….and I’m looking forward to the results on both. So ask yourself – Do you have a fiscal strategy or fiscal workout?

Thanks for reading. . . .

Jeffrey Ishmael

Sales & Ops Planning: Where do I start . . .?

September 16th, 2008 Comments off

My apologies again, but it has been a very hectic couple of weeks between a client project and possible career considerations. But let’s jump back in with a link to our last post of Sales & Operations Planning (S&OP). As I’ve mentioned, this is not a simple process and will reach across the entire organization. In my last post I outlined the significant funtional areas that will be involved in such a project. Let’s keep pushing down and look at some of the steps involved and where we’re headed in our further analysis.

Please note that each one of the areas listed below is an entire discussion in themselves and deserving of a dedicated post. However, there are 5-key steps that that fall within the S&OP process. These steps include:

1. Data Gathering.
2. Demand Planning.
3. Supply Planning.
4. Preliminary S&OP Review.
5. Executive Review.

The amount of data that will contribute to this process is extensive and will range from your closed financials, to bookings, pending projects, and other considerations potentially affecting the Forecast. The data gathering will extend into data points relative to the Production process and the ability to deliver on Forecast in the necessary time constraints. There will be various time considerations with respect to the short-term and long-term goals, both of which will be considered in this process.

When I was first brought in to be a part of this process, I had no prior S&OP experience and was a bit frustrated at being pulled away from my “core duties” and having to spend time on a process that seemed more “Production-oriented”. However, it didn’t take much more than the project introduction to see the value that this project was going to play in the validation of our financial forecasts and to bring an even higher degree of accountability and transparency to the planning process. It also further strengthened what was already a healthy relationship with the Production department. From a Finance-perspective, it allows for a much higher level of information support and accuracy in budgeting, forecasting, and more importantly, working capital management.

Thanks for reading . . . .

How dynamic is your Forecasting process?

July 28th, 2008 Comments off

     Recently I commented on contingencies in the forecasting process and having not only your Plan B…but your Plan C and Plan D.  However, some of the follow-up converstations I’ve had on this topic is the burden in putting together additional forecasts and the time it takes to change embedded assumptions and degree to which forecsating models can be manipulated.  For the majority of my colleagues, Excel seems to be the most prevalent modeling and offline analysis tool.  In my discussions, I posed the question of how the model would reflect changes on the income statement, by functional area, if there was a simple shift or reduction in headcount and the collection of benefits expenses associated with those positions. A very difficult dilemma for each one of them in an Excel-based format.

     One of the tools we used at a previous company was Hypierion Pillar. We used this for all our budgeting and forecasting needs. Although it’s being phased out by Hyperion, along with available support, there are similar tools with the same functionality. It was an incredibly dynamic tool that allowed for an easy categorization of headcount, expenses, and variable benefits by functional area.  If we were to move a handful of individuals from one functional area to another, all the expenses associated with those folks moved with them. If we were to see a change in our workman’s compensation expense we could easily change the assumptions and it would flow through the entire model. Through the use of global calculations we had an incredibly dynamic tool that allowed multiple scenarios with ease. 

     With solid Excel skills, some of these same assumptions can be built in but you end up having a VERY complicated model that can be highly prone to error without the appropriate cross checks built in. Within the Hyperion platform it was very easy to audit for errors, run checks on cost centers that shouldn’t be used, or for inactive cost centers that have inappropriately had costs booked against them. Which leads me to the next point, there’s the ability to combine actual and forecasted data in a very easy to use and TIME EFFICIENT format.  In the end, it’s all about having the ability to produce accurate, timely, and dynamic forecasts that eliminate guesswork & allow for intelligent decision making.

Thanks for reading . . . .