When you join a company as interim CFO you are expected to bring value even from your first week. This is daunting as often it can take a couple of months (even more for larger companies with many subsidiaries and multiple verticals) to fully understand a business in sufficient detail. Also it takes a few weeks to learn how good the team in place are. So what to do so you can actually bring value to the company in a manner where you have confidence under such a tight timeframe?
In an ideal world you will have formed a 100 day plan – however, chances are if you are being brought in as interim CFO – the company may not have 100 days’ cash left; or you are being brought in to fix some specific issue or run a specific project (ie, be it budgeting, working a transaction or an integration after a transaction). If time is on your side, take at least a month to form a 100 day plan and here are the five areas where I would focus:
I was tempted to put “cash” down for all five and frankly, “analysis” in the number one area (which is cash!) will lead you to all other areas of importance:
- “Follow the Cash”: Even from your first day. If there is not a cash forecast , start forming one – right now. The exercise itself will lead you to understand the levers of the business quickly. As you try and forecast cash you will learn on discrepancies from revenue recognition versus actual cash collection – which will start with you understanding the balance sheet debtors and bad debts. You will learn on COGS figures versus what remains in inventory which will lead you to analyzing cash going out on potentially needless inventory build-up.
- Trial Balance Full Review: Understand your balance sheet quickly. Conduct a trial balance review straight away in detail with the current team. Whoever is in charge of accounting ought to be able to explain every line of the balance sheet and show you reconciliations. If not, start investigating and form a reconciliation project plan – the current team are not on top of things. If your balance sheet is correct you are on a solid footing for understanding the business. Areas of risk in the balance sheet are where you may have assets which turn out to be not real (i.e assets not depreciated properly, incorrect debtors, obsolete inventory or inventory that should already be in COGS) or liabilities which you cannot serve (loans or creditors).
- Business Controls and Compliance: Review the business controls so that you can be confident that the business risks are minimised. The best way to do this is to work off your cash forecast work – focusing on the larger areas. By that, I mean checking that your sales to cash cycle does not have any risks/ leakages and your payables function is not leaking cash (ie, paying fake suppliers, overpaying, paying twice or for goods not received). Included in compliance is checking straight away any loan covenants.
- Key Value Generating Products & Major Costs: Figure out your highest margin products – Using Pareto’s 80:20 rule, a CFO needs to quickly see where to focus their energies. Typically 20% of the product range will supply 80% of the profit. Some basic analysis will lead you to these and here you can focus your energies on protecting and growing further these product volumes. Figure out the 80:20 in what controls your costs too – this will allow you to focus on and pull those levers should you need to.
- 5. Team Morale and Focus: Over the first month – sit with each of the team member as they do their jobs and question them on what is working well and what is not. See who your champions are and focus your energy on them – they will grow under you. Focus on getting your ideal team in place quickly and set up as you wish – if you don’t do this straight away you will get caught up in the day-to-day and struggle to get hiring done. You need an experienced accountant in charge of producing your statements. If the one you have is jaded or being running bad accounts - replace.
Being an interim CFO, much is expected of you – you must quickly get a grasp on the figures, the finance team and the strategy and start adding value to the CEO. Outside of the above - as much time as possible should be spent with the CEO and other C-Suite privately to see where the finance team can help ease their pain. Your business instincts should then kick in to lead you to the major issues – then you really roll your sleeves up.
By John Rowland
John is currently in Nairobi, Kenya as interim CFO for Bridge International Academies