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Previous Installment – Part I: Solid Foundations

Now that we have a solid foundation, the appropriate level of reporting and a team capable of providing this on a regular basis, let’s look at ‘painting the financial picture’.  (I could go on about controls, but to be honest any good financial controller ought to be able to put these in place.)

A balance sheet is a static picture at a point in time, it says neither that a company is doing well nor badly.  It simply says at the moment we could potentially liquidate all our assets and liabilities at book value for X. 

Even a profit and loss account for a single period does not provide enough information, about the performance of a company. 

Each piece of analysis is a paint colour and the job of the Finance Director (FD/ CFO)  is to take the colours and paint a picture of the overall performance of the company.  It does seem surprising that I am equating what is a mathematical output into terms that are artistic, but this is what the best FDs do.  This is especially true of smaller organisations where the company may be operating using incomplete data as to the state of the market and competition.

The painting of the picture through the presentation of numbers and the commentary are the primary communication methods used by the FD.  The ability to communicate is essential. 

Once again the degree of communication required can vary from industry to industry.  In creative industries the nature of the communication is vital – the executives of a company are often dealing with intangibles, they are in the business of communicating messages and ideas and this is how they would like to be communicated with.

Entrepreneurs often have very short attention spans they require the bare bones quickly and efficiently.  They don’t want to wade through pages of analysis nor do they necessarily want to have the numbers pitched with spin.  The ability to be able to answer a straight blunt question with a straight blunt answer is often the most important.

In a manufacturing environment the executives are used to wading through quite large amounts of analysis and variance.  These are generally highly analytical people. 

An FD needs to understand what the information and communication needs of his management team are and adapt his/her message accordingly.

Mike O’Connell, CEO, Isosceles Finance  providers of part-time FD and interim FD  (Financial Director/CFO) services

Next Instalment – Part III: The Glue

Tags: Finance Director, Interim FD, Outsourced accounting, Outsourced finance, Part time FD

This entry was posted on Wednesday, August 12th, 2009 at 5:28 pm and is filed under Business Skills, Business Survival, Finance Director. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.