The other day I was in a Board meeting awaiting my portion of the presentation I began thinking about the level of detail that I had at hand. Other than to gather a few last minute facts and write the materials (memo, PowerPoint, etc.) I don’t prepare for Board meetings. I feel it is like preparing for a test of what you have learned in life . . . either you know and understand the company or you don’t. What occurred to me, however, is the very different level of detail I have in my head for various client companies at the same time.
I have a client who is in a very challenging position and as a result I can speak to the exact amount of cash they collected each day last week. I know the AP balance and the five most critical bills we have to get paid in the coming days. I know precise amounts of payroll runs, the day the cash pulls from the bank and how we have to manage cash so that payroll clears. All of this is important, but none of it adds long term value other than for the company to survive the next week so that perhaps we can think about the long term sometime down the road.
On the other hand, the Board meeting that I was attending was for one of my most successful clients. Four months into the year we are ahead of our most aggressive expectations. I can speak off the cuff to revenues, expenses and cash balances relative to plan. I can speak to where we have favorable and unfavorable variances and why. I have a framework for speaking to the amount of cash we will build between now and year end as well as the amount of debt we will repay. But the facts that do not need to occupy my mind are exact dates and amounts of specific vendor payments, payroll runs, cash collection dates, etc. As long as we are managing according to plan all of this can take care of itself and I can leave the details to the accounting managers.
Instead, I can use my time to think about various scenarios that we might encounter over the next three to five years. We can develop scenario planning models on how we will operate under different sets of economic and industry circumstances. The Board kicked off an active discussion of risks the company could face in the future. We plan to follow up this discussion with an in-depth call and spend additional time on this topic at a future Board meeting. The night before I had dinner with a Board member and had a discussion about how we could improve the financial operations of the firm. He had some good outside perspective and offered to spend some time with the team.
My point is that your CFO should be thinking about long term issues and related consequences. He or she should be part of an active discussion about long term risks and opportunities to the business. They should either be part of or driving the strategic planning process. If they are spending the majority of their time dealing with near term tactical issues or crises, then that is a sure sign that the business is troubled and the entire management team needs to be pulling together to get the company on a stable footing. It’s only from that position that the company can grow and become successful.
If you’re not sure where your company stands, walk into your CFO’s office and ask: What are you thinking about?
If your business could benefit from fractional CFO services, I would welcome the chance to speak with you. Please give me a call at (314) 863-6637 or send an email to For more information, visit www.homza.com
your cash is flowing. know where.®
Copyright @ 2013 Homza Consulting, Inc.