Thursday, 29 August 2013

Budgeting and Forecasting for Business

Every business needs to plan ahead by forecasting the future. Done well, it is a powerful tool for steering and controlling the company. However, in too many cases, the process seems never-ending, is plagued with conflict and manoeuvring, and leads to short tempers & injured feelings.  

It is incumbent on you to approach it in a way which minimises the workload and the potential for stress. This article sets out some proven approaches to the process and helps you to deal with the vagaries of budgetary behaviour and game playing.  It is written from the point of view of a CFO.

Key Points

  • Budgeting and forecasting is a business process before it is a financial one
  • Plan and organise your process to the utmost
  • Leave time for revisions and debate
  • Use technology to the best effect
  • Be alive to the behavioural aspects of budgeting
  • Ensure the maximum involvement of operating managers

Friday, 23 August 2013

Cash Management for Business


‘Cash is the life blood of a business.’ ‘Without cash a business will die.’ ‘Turnover vanity, profit sanity, cash flow reality.’ All terrible clichés, but no less true for all that. Keeping the cash flowing is the indispensable task of the finance function, on which the whole enterprise depends.
I've written an article here on how to manage cash flow in a business.
This article won’t tell you how to prepare a cash flow forecast – there are plenty of accounting manuals that can do that. It will tell you how to manage and improve your process so that you can maximise your business’s cash flow.

Key Points

  • Cash management is the indispensable task of the finance function
  • Make the bank manager your friend
  • Involve selling and buying departments in improving cash flow
  • Watch for fraud
  • Forecast and monitor your cash performance

Wednesday, 14 August 2013

Board Presentations for Finance Professionals

The monthly results meeting is your chance to shine. You are centre stage; everyone will be listening to you and taking a detailed interest in what you say. Get it wrong and you will be written off as ineffective or incompetent. Get it right and the board will recognise your credibility, professionalism, and value to the business. It is a career-enhancing opportunity which is available to few other disciplines. This article outlines what you need to do before, during and after the meeting.

Before the meeting
Like any other activity, careful planning and preparation will give you the best results. Ensure that there is adequate time between your completion of the management accounts and the board meeting for you to carry out these preparation activities.
Flawless presentation
The reports that you will issue are going to be scrutinised in detail. Ensure that they are flawless:
  • Tables add up correctly
  • Formatting is consistent
  • Cross references are correct. You need to be one step ahead of the smart director who will be looking out for inconsistencies in your figures.
  • Grammar, syntax and spelling are completely correct. Use the automated checkers on your computer, but don't rely on them exclusively. If you aren't confident in your own written skills, get someone else to scrutinise the reports.
  • Above all, you are relying on the management accounts to be correct and credible.
If reports are to be distributed in paper form, check that each copy has all the correct pages before sending. Take a few spares with you to the meeting.
If the results are to be presented on a projector, ensure you have a back up plan in case of technology failure.
  • A spare projector would be ideal.
  • Ensure there are at least 2 computers available that could run the presentation.
  • Have the presentation files on a memory stick for fast changeover.
  • Have a hard copy of the presentation for your own reference. If the technology fails completely, you can quickly get paper copies run off.
  • Practice connecting the computer to the projector and loading the presentation until you are completely comfortable with how it works.
Get to the meeting room early & stake out a good spot with plenty of space.
Check that the chairman has organised adequate seating, refreshments and coffee breaks.
Think carefully about what you want to say & how you are going to say it. Reading out your report line by line will send the audience to sleep. You need to highlight the most salient points and invite questions.
You should always comment on sales & profit performance, on variance to budget and/or forecast, on changes from last year and on any unusual trends. Otherwise, if an item is on target, or has been discussed at a previous meeting, there's no need to raise it.
You do want to raise items that are unexpectedly good or bad, or where there is action needed.
If you are going to raise a subject that may lead to criticism of another attendee of the meeting, you should always warn him or her about it beforehand. You should provide any counter-evidence and help develop the 'case for the defence'. Raising a subject without doing this will get you a reputation for being untrustworthy.
Consider what areas of the report are likely to be questioned and have your explanations ready. Also consider what areas are likely to lead to discussion and have additional evidence available if necessary.
If there are areas of particular controversy, it may be worth rehearsing what you are going to say. Better still is to practice your speech with somebody outside the business, if possible.
Additional data
You should have a data file prepared containing more detailed information than there is in the report. If you prepare this carefully, you should be ready for any questions that come your way.
During the meeting
Provided you've done your preparation thoroughly, the meeting itself should go smoothly.
  • Stick to your script
  • Answer questions as you go along, referring to your data file as required.
  • Ensure you get over all the points you wanted to make.
If you are asked a question to which you don't know the answer, you should never bluff, but instead say 'I don't have the answer to that here, but will look it up and get back to you.'
If someone asks you a question that requires you to refer to your data file, you should set yourself a 20 second limit to find the information. Spending longer than that leafing through the file will make you appear disorganised and not on top of the numbers. Stop after 20 seconds and say. 'No, I don't have that with me. I'll look it up and get back to you.'
It's fine to say that once or twice a meeting, but any more and you probably haven't prepared in all the right areas.
Make notes during the meeting on actions and follow up questions allocated to you.
After the meeting
As soon as you can, take a few minutes to reflect on how you could have done better:
  • Having different information available
  • Answering questions in a different way
  • Presenting the information more clearly
Be self-critical, but don't beat yourself up too much. You will have another meeting in a month's time at which you will be able to correct these faults. People will be impressed if they see you developing and learning from past experience.
If you have committed to get back to people with information, make sure you do that promptly.
Review any other actions from the meeting and ensure they are dealt with.
On a longer time frame, you should constantly be reviewing the contents of the reports that you present. Ask people what they need. Always be looking to remove items if they are not required. Most board reports are far too long and information could easily be removed without compromising the standard.
Your CEO is the key customer for the board report and you should consult him or her regularly about content.
Actors are only as good as their last performance. In presenting the monthly results, you have twelve opportunities a year to demonstrate your skill. Make sure you are constantly improving the way you do it and your true worth will be recognised.
Key Points
  • Presenting monthly results is a golden opportunity for self promotion and career development
  • Planning and preparation must be exact and thorough
  • Have back up materials that will help you answer foreseeable questions
  • After the meeting, reflect and learn from your experiences
  • Follow up any actions promptly

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Thursday, 8 August 2013

Month End Closing - How to Have a Better Process

Month End closing is the bane of the finance person’s life – but also our main raison d’être. We have to meet demands for ever more detailed information, all of which must be understood and explained, in ever shorter time scales, while carrying on with our day to day responsibilities and not compromising professional standards. It’s no wonder we get stressed.

Fortunately there are some well proven techniques for making the process easier and more efficient. And because it happens twelve times a year, we have plenty of practice to get it right.  

The golden rules for stress-free closing:
·         Plan.          It needs to go like a military operation.
Everyone involved has to know what they are doing every day, & to have Finance on their back if they fall behind. A key step is to issue a timetable in advance to everyone involved.
·         Delegate.   Don’t do it all yourself, use the team and other departments.
Using other departments may take some persuasion and negotiation, but it’s about people taking responsibility for their areas. Finance is responsible for accounting, but not for sales, stock, purchasing etc & people in those areas have to play their part in the process.
·         Use technology.
                Almost any process can be improved with better use of IT.
·         Shorten time scales.
              It may sound like a recipe for more stress, but the quicker you can finish, the more time in a month you have when you aren’t doing closing. There’s also a lot that can be done before the end of the month.
·         Learn.        A continuous improvement approach must be adopted.
              All the time be looking for ways to make things quicker and more efficient. If you have an idea, make sure you write it down and put it into effect the following month. It may only save you a couple of minutes, but if you make a lot of small improvements, there can be a big difference in the closing process.

There's even more detailed guidance and suggestions here.