Beyond Financial Control Overview

Beyond Financial Control
By
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:
addvalue@thebeansoupbook.com


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


1. Objective of Today’s Session

“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.”


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 Changes in Reporting Objectives of CFO’s.
Publications

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.


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:

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


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


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 1. Being a key member of the senior executive team and a
systems and transactional processes, 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 3. A key contributor to the company’s strategy formulation
payroll functions, and provider of shareholder/owner value,
4. Look after the various compliance related reporting 4. Provide innovative, proactive and decision orientated
required of the company and its industry, 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 7. Maintain a forward looking view on funding options, cash
and cash management. 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, and
5. Without compromising the quality and integrity of the traditional functions.

Decision Support

Transactional Process


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 Second – Control Finally – Contributor

• A standard and complete • Ensure a strong control • Masters of measurements
chart of accounts environment (KPI reporting)
• The same GL system • Ensure accrual accounting • Responsive forecasting
• Common processes • Flash plus cash reporting • Financial decision support
• Common procedures • Understand and mitigate • Warriors against waste
financial risks • Be able to answer “What
drives Profit?”

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

Low Financial and Cash Risk High Financial and Cash Risk
(Proactive Forward Looking Data) (Reactive Historical Data)

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


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?

‘Beyond Financial Control’ Series

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 Overview

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