Cash Flow: Not Just For the CFO

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Often considered to be the domain of the CFO, cash flow can be impacted by more than just finance and accounting. Sales, operations, supply chain and others can dramatically impact the speed with which cash flows into and through the organization.

Being able to look at your entire business model and see ideas to improve the cash-to-cash cycle requires outside the box thinking. Challenging what is possible and making no excuses can free up potentially millions of dollars in cash flow. How would you spend an extra couple million dollars?

To read more, visit the latest edition of Growth Accelerator.

© 2017 Rick Pay – All rights reserved.

The Cheesy Thermometer

A client wanted to cut their inventory from $6.5 million to $4.5 million this year. We devised several strategies to do that, and then I suggested they put a “United Way” thermometer on the wall of the purchasing department to track progress toward their goal. One of the people in the department took a poster board and created a nice thermometer and hung it on the wall. Each week they posted the total inventory balance on the chart, and whether the total inventory actually went up or down. My client referred to it as their “cheesy thermometer.”

The impact was amazing. Simply being able to see the score had a big impact on people’s activities toward inventory reduction and the results have come quickly. Just last month they reduced inventory by $1.2 million. They’ve had a few reversals, but seeing the score prompted an even stronger resolve to hit the goal. They’ve identified where the final reductions will occur, which should put them past their objective, and when that happens, the CFO has agreed to buy them all dinner. Maybe they’ll have cheesy pizza to celebrate.

© 2014 – Rick Pay – All Rights Reserved

Are You Believable?

As part of my Operations Evaluation process, I put 13 months of the client’s financial information in a model I have developed over the years. This information tells a compelling – and often surprising – story. It helps identify issues that need to be explored more deeply during the evaluation, such as trends in labor and materials productivity,  inventory turns, and whether fixed costs are really fixed.

At a recent review with a VP, Operations, the charts showed some good performance and some bad. The VP acknowledged each chart as we reviewed it without showing any particular emotion. When we finished I asked him what he thought and he said, “I don’t believe the numbers.” I pointed out that they were straight from the financial statements and he repeated, “I don’t believe the numbers or the CFO’s ability to produce correct numbers.” When I reviewed the graphs with others in the company, I got the same response.

One could claim that the people I was meeting with were in denial, but at the same time, the CFO had no credibility. Whether you bring good news or bad, are you believable? There are three things that can help establish your credibility:

1)   Having the best interests of the company fully in mind – company before self; congruent with the vision; effective in getting things done correctly; teacher/people developer

2)   A high degree of ethics and trust – strong communicator/listener

3)   Competence – knowledge, skills, ability

Are you believable? Is your credibility ever in question? Credibility is hard to gain and easy to lose, and we’re doing one or the other through our actions every day.

© 2011-2013 – Rick Pay – All Rights Reserved

Are You Believable?

As part of my Operations Evaluation process, I put 13 months of the client’s financial information in a model I have developed over the years. It helps identify issues that need to be explored more deeply during the evaluation. The model produces a series of charts and graphs that depict, among other things, whether fixed costs are really fixed, trends in labor and materials productivity, and inventory turns. This information tells a compelling – and often surprising – story.

At a recent review with a VP, Operations, the charts showed some good performance and some bad. The VP acknowledged each one as we reviewed it without showing any particular emotion. When we finished I asked him what he thought and he said, “I don’t believe the numbers.” I pointed out that they were straight from the financial statements and he repeated, “I don’t believe the numbers or the CFO’s ability to produce correct numbers.” When I reviewed the graphs with others in the company, I got the same response.

One could claim that the people I was meeting with were in denial, but at the same time, the CFO had no credibility. Whether you bring good news or bad, are you believable? There are three things that can help establish your credibility:

1)   Having the best interests of the company fully in mind – company before self; congruent with the vision; effective in getting things done correctly; teacher/people developer

2)   A high degree of ethics and trust – strong communicator/listener

3)   Competence – knowledge, skills, ability

Are you believable? Is your credibility ever in question? Credibility is hard to gain and easy to lose, and we’re doing one or the other through our actions every day.

© 2011 – Rick Pay – All Rights Reserved

The Position of CFOO – Effective or Not?

Recently I have noticed a number of companies assigning the title of CFOO to the current CFO. CFOO is a combination of CFO and COO and has overall responsibility for both Finance/Administration and Operations. I am sure most CFOs would agree that Operations executives are not technically qualified to be CFOs. Conversely, is the CFO qualified to lead the Operations side of the business?

Leadership

There are two elements to consider in answering this important question: leadership and technical skills.  Executives need leadership skills to provide the guidance and direction needed to achieve the organization’s goals. Many CFOs have the leadership and project management background that can be useful in operations leadership.

On the other hand, CFOs who may have excellent leadership skills lack experience with the size and complexity of Operations. Finance functions, while they can be highly complex, tend to be smaller and more tightly focused than what an Operations executive will encounter.

Technical Skills

Many CFOs feel they are qualified to lead the Operations side of the organization because they have:

1) Measured Operation’s results,

2) Been involved in inventory and asset management,

3) Set budgets and capital plans for operations, and

4) Witnessed the failings of Operations organizations.

Unfortunately, observing failure is not the equivalent of hands on experience. Think of a time when the airplane you were on had a bumpy landing. While as a passenger you are entitled to say, “That was a bad landing,” it does not qualify you to be a pilot. Operations organizations require experience in production, logistics, supply chain, warehousing, distribution, process improvement, team development and many others.

So what is a CFO to do when presented with an opportunity to expand their responsibilities into Operations? First, assess whether the necessary leadership skills are present, and second, if the CFO lacks direct technical Operations experience, you may need to rely on your highly qualified top Operations managers or bring in a good Operations consultant to create a roadmap for success.

© 2011 – Rick Pay – All Rights Reserved