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Everything a CFO needs to know in the rst 100 days...

but doesnt know who to ask


KPMG LLP (UK)

2010 KPMG LLP , a UK limited liability partnership, is a subsidiary of KPMG Europe LLP and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative, a Swiss entity. All rights reserved.

Contents CFO Guide 01

The first 100 days of a CFOs appointment may determine not only the future of the CFOs position, but also the direction of the company. As such, getting the head of finances priorities in order plays a large part in setting the foundations for success. Much like a football manager, the CFO is a multi-tasking strategist supporting the club or company executive, while stewarding a united team of strong capable professionals towards profit and growth. This guide offers helpful tips and checklists to assist finance chiefs and CEOs through those challenging early days of this vital appointment. For non-finance directors, there are also some handy hints to help you nurture a smooth relationship with the new head of finance. The line-up 1 Kicking things off
04 06 08 10 12 14 The CFOs expanding role Managing expectations First impressions Managing stakeholders CFO Profile: Jim Buckle Stakeholder checklist

3 Smooth running
32 On top of back office operations 34 Ten qualities of an effective CFO 36 Managing the supply chain 38 CFO profile: Alex Woodward 40 IT management 42  Efficient and effective operations checklist

2 Taking control
CEO Football club chairman CFO Football manager Company employee Football team player

4 Pitch performance
46 Performance management 48 Infamous finance executives 50 Tax planning 52 Strategic planning processes 54  Managing operational performance checklist 56  Useful organisations and publications

18 20 22 24 26 28

Risk managment and compliance External reporting and audit Five reasons why CFOs get fired The risks beyond reporting CFO profile: Ann Firth Risk and compliance checklist

2010 KPMG LLP , a UK limited liability partnership, is a subsidiary of KPMG Europe LLP and a member firm of the KPMG net network work of independent member firms affiliated with KPMG International Cooperative, a Swiss entity. All rights reserved.

Kicking things off CFO Guide 03

Chapter 1 Kicking things off


A wise man once said: Remember at work, the authority of a person is inversely proportional to the number of pens he or she is carrying.
As you start your new job as the head of finance, you may feel the task ahead of you seems a somewhat daunting prospect. However, with careful thought and a plan of action, you can remove a lot of pain from the first 100 days in office. This chapter looks at the changing function of the CFO, what is expected of the role and how to make the best of your first few days in the office. Chief among these is getting to know who you need to speak to, how to approach your boss and your team and how to assert your authority without getting peoples backs up.

The first question you may ponder in any new job is what to wear on your first day. While a suit and tie may appear to be a safe bet for a CFO, dont forget to read the culture of the organisation. Making yourself approachable is key depending on the industry, more casual attire may win you more influence. The CEO should help communicate the company culture to the CFO.

2010 KPMG LLP , a UK limited liability partnership, is a subsidiary of KPMG Europe LLP and a member firm of the KPMG net network work of independent member firms affiliated with KPMG International Cooperative, a Swiss entity. All rights reserved.

04 CFO Guide The CFOs expanding role

The CFOs expanding role CFO Guide 05

Constant multi-tasking
The CFO has shed the dour, number-crunching stereotype because the role increasingly requires the head of finance to do and be many things at the same time. Being CFO is more flash than it was think how the slick appeal of the modern football manager has replaced the crusty image of a sheepskin-coated, pie-eating, Woodbine-smoking guvnor.

The term utility man has become something of a dirty phrase in recent years. But, for the modern CFO, no other moniker describes the role as accurately. These days, rather than being average across the board, the CFO needs to excel in a number of positions. Just a cursory look at the CVs of the UKs leading blue chip CFOs reveals commercial acumen, regulatory and communication excellence, along with corporate finance expertise.

Ten years ago, the finance function generally dealt with just that: finance. The CFO was seen as a safe pair of hands that kept the numbers in order and let the teams stars do the sexy stuff. Now, the corporate CFO is expected to look after a whole range of different areas. Strategy and targeting growth in new markets is a key component of the role. Given their comfort with the numbers, CFOs are ideally placed to spot trends and drive the business forward. Meanwhile, with the increased demands from regulators and stakeholders, managing risk has risen up the CFOs agenda enormously in the last few years. Compliance, previously consigned to the lower divisions of the CFOs attention, is also right up there. And CFOs of all sectors are affected. While financial services may labour under a wider range of regulation, there isnt a CFO in the land who is unaware of the need to meet the compliance challenge.

Shareholder activism and the increased reach of regulation have forced the CFOs door open to the demands of the businesss stakeholders. This can extend from basic investor relations to handling shareholder queries, liaising with investors and speaking to the press. The days of hiding behind the desk are over and the modern CFO needs to be a consummate public performer. And what of the top table? The CFOs place on the board is now more important than ever. Theyll need to hit the numbers, liaise with the nonexecs, provide wise counsel and communicate effectively with colleagues to ensure that their voice is heard. All in a days work? Its a game of two halves at least!

2010 KPMG LLP , a UK limited liability partnership, is a subsidiary of KPMG Europe LLP and a member firm of the KPMG net network work of independent member firms affiliated with KPMG International Cooperative, a Swiss entity. All rights reserved.

06 CFO Guide Managing expectations

Managing expectations CFO Guide 07

What CEOs expect from their new CFO


Ask any chief executive what they want from a CFO and youre likely to get a long list: reliability, flexibility, adaptability, commercial acumen, communication skills and a sense of humour. Not much, then.
The new CFO will also need to be aware that the old divisions between the boardroom and the dressing room have been eroded. Most CEOs will expect their new CFO to be contributing at the highest level within weeks of joining the team. The idea of CFO as functionary driven by process are long gone. And relying on reporting what has gone before wont be enough: the boss will expect a clear vision for improving financial performance, spotting and promoting talent in the team, as well as communicating this vision to investors and shareholders. What CFOs want Amid all these expectations, the CFO may have a few specific wants and needs. Firstly, understanding what the chief executive wants for the business is important. Chances are that the chief exec rose to his position by articulating a vision for the company, and this needs to continue into his dealings with his finance chief. Once the CFO has settled behind his desk, the first priority is to get a strong idea of what the chief executive wants the business to achieve. This will be the tactical plan from which the CFO can work. Alongside clarity of purpose, full backing from the man in charge is paramount in order to project an air of authority. If the top man doesnt have confidence in the CFO, why should anyone else? Given the flak that can fly after a few iffy results, having the bosss confidence is crucial for the CFO. Knowing that the top man backs your judgement and is fully behind your decisions gives the necessary freedom and reassurance for you as CFO to get on with your job. The CFO should also expect his chief exec to take the time to offer guidance and advice. Without the closeness engendered by regular time spent together, the chances of a harmonious relationship blossoming are reduced. So regular meetings to coordinate strategy are the minimum the CFO should expect from the chief executive.

First of all, a successful CEO-CFO relationship relies on both parties being realistic about what they can expect from each other. For the CEO, there are certain qualities that he will expect his CFO to display. An important one is decisiveness: a lack of clear decision making can be critical to a businesss prospects. So, the CEO will expect the CFO to spot opportunities and risks, and take the necessary measures to pursue growth and protect the business.

No to yes men! At the top level, certain elements are taken for granted: the CFO will be expected to get the finance function into efficient shape, hit the numbers in the forecast and report to the board and shareholders in timely fashion, alongside the core finance aspects of the role. But the clever CEO will also expect his CFO to offer an invaluable service: challenging the companys strategy. The days of the yes man and his rubber stamp are over. Todays CFO must be in possession of the confidence to ask probing questions of the board and to offer alternative solutions. If the CEO doesnt expect, or indeed, demand this, then chances are something might be amiss.

An important quality that the CFO should display is decisiveness, as a lack of clear decision making can be critical to a businesss prospects

Mr Righ t?

CEO For this job, we need someone who is responsible. CFO Im the one you want. In my last job, every time anything went wrong, they said I was responsible.

2010 KPMG LLP , a UK limited liability partnership, is a subsidiary of KPMG Europe LLP and a member firm of the KPMG net network work of independent member firms affiliated with KPMG International Cooperative, a Swiss entity. All rights reserved.

08 CFO Guide First impressions

First impressions CFO Guide 09

Manage the boss, manage the team


Sitting between the finance team and the CEO, the fresh CFO needs to be thoughtful about gaining his teams confidence, while establishing a close working relationship with the boss.
In business, reading the culture of a company and responding to it is crucial you may have good reason to want to change it, but not on the first day! The flawed and famously outspoken Brian Clough lasted only 44 days as manager of Leeds United before he was sacked by the directors for alienating his star players and getting on the nerves of the management. It turned out that Clough was a talented manager, but that he just hadnt got on with the rest of the club. Similarly, in business the expectations of a CFOs boss and the CFOs team will vary from business to business. As the new head of finance, you need to understand that culture quickly and respond to it. One of the first priorities for CFOs is to meet with senior people such as the CEO and management team and ascertain what they want from the finance department. But to gain a broad-based view of the company, its also valuable to build relationships with people further down the corporate ranks, whether that be salespeople, the warehouse manager or the secretaries that keep the directors diaries. While getting close to your finance team is important they could be your greatest allies it may also be prudent to sit near the CEO and other unit heads where decisions are made. You dont want to be thought of as hiding behind the spreadsheets and it is for this reason that new CFOs are urged not to bury themselves in paperwork for the first few days when they could be building relationships. Team spirit Wait before making major decisions, as you will want to assess the situation first and discuss it with relevant colleagues. An ill-considered decision early on could make you look foolish. On the same note, CFOs are advised not to criticise prior practices openly until they are fully aware of the facts, as your team could resent the implication that intelligent life arrived only after you joined! Once youve gathered your intelligence and figured out the lie of the land, then you can start to set your priorities.

Its Friday! The end of the CFOs first week. To celebrate, why not meet with the financial reporting team to get to grips with any disclosure issues and find out what needs to be done before the auditors come? Its hardly a job for a Monday!

2010 KPMG LLP , a UK limited liability partnership, is a subsidiary of KPMG Europe LLP and a member firm of the KPMG net network work of independent member firms affiliated with KPMG International Cooperative, a Swiss entity. All rights reserved.

10 CFO Guide Managing stakeholders

Managing stakeholders CFO Guide 11

Get stakeholders on side early on


Investors and stakeholders are not that much different from football fans. Even temporary failure on the pitch can urge the most fanatical supporter to question the ability of the management. In business, the difference is that investors are more inclined to sell their stake and back a more promising side.
Getting to grips with stakeholder management is high on the to-do list in the CFOs first 100 days. A CFO must take the needs and wishes of a wide variety of stakeholders into account as an ongoing part of the role. The starting point is to identify the stakeholders, assess their importance and decide on what they will want to hear. Employees, suppliers and other board members will almost certainly feature as stakeholders but beyond these three groups, the range of stakeholders varies from company to company. A CFO working for a public company with a stock market listing will have shareholders, as will the CFO of a familyowned firm. However, these shareholders will differ greatly in number and in the emotional relationship they feel towards the company. Increasingly, CFOs are finding that investors are members of a private equity group seven times more of these deals were done in 2007, compared with 1998. Stakeholder management and communication may involve coming to terms with a new owner or it could be about introducing the company to the public market after a private equity shareholder exit. With increasingly strict financial regulations, regulatory bodies are also important stakeholders that a CFO must keep happy. Managing risk related to them, as with all stakeholders, is another issue that should be high on a CFOs list of concerns. CFOs must also ensure that the leadership of their organisation agrees with the message that they are conveying to every stakeholder, and that their own team within the Finance Department are following the same game plan. Tackling the issue Rather than simply reacting to events, good stakeholder management tends to be proactive. Identifying forthcoming issues for the organisation and the area in which it operates, and deciding how these might affect each separate group of stakeholders is necessary. A new CFO will have to act quickly, as most stakeholders will be aware of his or her arrival almost immediately and will want reassurance of the suitability of the new appointment. Ensuring that communication is appropriate in terms of the medium, the frequency and what messages it contains will require close contact with the director of communications. This may vary from stakeholder group to stakeholder group. A change in circumstances, such as a merger or an acquisition, bad annual results, a rights issue, changes at board level or even external events such as new legislation or a campaign by a pressure group, will all require a CFO to think about how stakeholders may be affected and how they need to be communicated with and handled. Whatever the circumstances of a communication with a stakeholder, careful thought is clearly required. But one very simple trick can help a CFO should put him or herself in the position of that stakeholder. What interest financial, legal or emotional do they have in the organisation? What do they want to know? What will they consider good news? What will set alarm bells ringing? What benefits are they seeking from the organisation better salaries, top products or great returns on their investment, or good behaviour from a regulatory point of view? Dealing with these issues will make handling the various stakeholders easier and show that, when it comes to keeping them happy, the CFO is on the ball. But, as in football when the clubs supporters are unhappy with performance, its not long before they bay for the managers blood!
Invest ment ?

In your first few days, start to identify the stakeholders, assess their importance and decide on what they will want to hear. The range of stakeholders varies from company to company

A CFO had just read the story of Cinderella to his four-yearold daughter for the first time. The little girl was fascinated by the story, especially the part where the pumpkin turns into a golden coach. Suddenly she piped up, Daddy, when the pumpkin turned into a golden coach, would that be classed as income or a long-term capital gain?

2010 KPMG LLP , a UK limited liability partnership, is a subsidiary of KPMG Europe LLP and a member firm of the KPMG net network work of independent member firms affiliated with KPMG International Cooperative, a Swiss entity. All rights reserved.

12 CFO guide Profile Jim Buckle

Jim Buckle Profile CFO Guide 13

A degree in English and the editorship of the university magazine might not be the obvious background for an accountant, but along with his work in the media, it has been useful for Jim Buckle, CFO at Lovefilm, one of Europes leading home entertainment businesses. Jim trained at KPMG and then, after stints at the BBC and Dell Computers, his career took an unexpected turn with a couple of dotcom start-ups. One resulted in the all too common closure, but the other with a successful sale when News International bought Propertyfinder.com. Arriving at Lovefilm in April 2006, this varied experience proved invaluable to him. This really pulls together the threads of what Ive done previously, he says. On the one hand were an online media business, which is where my experience at Propertyfinder is useful. On the other, were very metrics focused, concerned about how many discs we get out in a day, which is the kind of thing that I worked on at Dell. Jim arrived at Venture Capital-backed Lovefilm just as it was merging with another company called Video Island that offered the same service. Every member of the new management team had to produce their first 30-, 60- and 90-day plan.

We had a whole integration process to go through. We needed to decide which warehouse to close, which software platform to use and which staff to lose, says Jim. Although he was hitting the ground running, he was determined to find out as much as possible about the business before he started making changes. The challenge is to really listen you need to know the strategy and the key metrics, as well as what people in the organisation want to do and where the finance function fits into that, he explains. There are always some people who really know how things work and so you need to identify them quickly they might be quite junior. Lovefilm is now profitable but at Propertyfinder, which never made money, Jim had to manage cashflow very tightly, only paying suppliers if there was at least 200,000 in the bank. Profitable or not, as a CFO or CEO youre always wearing two hats. With investors or the media, you need to be positive, but when youre thinking about cash flow you should consider the possible negatives. So, does Jim, who is 41 and married with twins, love film himself? Hes certainly not a film buff but, as he points out, its important to relate to what you do without getting so fanatical that you cant see the wood for the trees. Running is how he relaxes, he reveals, adding: Thats when I get some of my best ideas.

The challenge is to really listen there are always people who know how things work and you need to identify them quickly

2010 KPMG LLP , a UK limited liability partnership, is a subsidiary of KPMG Europe LLP and a member firm of the KPMG net network work of independent member firms affiliated with KPMG International Cooperative, a Swiss entity. All rights reserved.

14 CFO Guide Stakeholder checklist

Notes for non-finance directors CFO Guide 15

Checklist Stakeholder management


Detailed objectives/suggested tasks Identification of key stakeholders Obtain a complete inventory of key Identify key stakeholders both external and internal stakeholders that a CFO needs to Map stakeholders on CFO Agenda framework or interact with: similar relationship map Stakeholders agenda Gain an understanding of current For key stakeholders, determine their views and views of key stakeholders, potential issues through initial research and including any issues discussions with peers and current finance team  Prioritise stakeholders based upon potential issues and importance to achieving goals from CFO agenda  Conduct meetings with C level peers, Audit Committee Chairperson, Board of Directors and Finance Leaders  Develop and execute meeting schedule:  Key analysts; significant stockholders; debt holders  Key customers; suppliers Stakeholder management Proactively manage stakeholders Develop stakeholder management strategy to address any issues and to help (e.g. stakeholder map) with associated action plan ensure achievement of CFO Execute action plan agenda goals Leadership and direction Provide clarity over future direction and priorities. 60 days Timing 30 days
Good morning Wendy, As head of Client Services let me take this opportunity to welcome you as CFO to the happy family that is Brothers & Brothers ...WELCOME!! We must do lunch very soon. Dont worry my treat... my budget (ha ha!!) and Ill tell you all about my big idea for the department, youll love it ;-) BTW Im looking for another 5K for my depts hospitality budget, if you could see your way to processing something for me that would be super! Nigel Carter Director of Client Services
Nigel Carter <Director of Client Services> Wendy Halfpenny <Chief Financial Officer> RE: Warmest greetings

Develop finance vision and strategy Align with corporate strategy Inputs from leading practices and current state of finance

Gain an understanding of the relative Carry out an evaluation of finance resources strengths and weaknesses of current Leadership team CFO organisations resources Other finance resources (quality and members) Ensure CFO organisation fully  Develop communication strategy understands vision and strategy  Websites; email; town hall meetings; conference through calls; cascade management; blogs Monitoring and feedback mechanisms Ensure alignment of leadership team Set personal goals and objectives Align compensation and incentives Monitoring and feedback mechanisms 90 days

One new message for directors


First day of the new CFO So theres somebody new holding the purse strings. As a non-finance director, avoid the temptation to batter a pathway to the CFOs door to demand a bigger budget. The CFO will soon make your acquaintance but not to discuss increased spending. Start off your relationship by making it very clear what your department does and how it adds value to the bottom line. If you can demonstrate this quickly and concisely you will have the CFOs full attention!

2010 KPMG LLP , a UK limited liability partnership, is a subsidiary of KPMG Europe LLP and a member firm of the KPMG net network work of independent member firms affiliated with KPMG International Cooperative, a Swiss entity. All rights reserved.

Taking control CFO Guide 17

Chapter 2 Taking control


Risk and compliance can be seen as a necessary evil and a drain on the CFOs time. But the clever incumbent will note that in difficult times a companys corporate governance credentials are good for the brand.
Benjamin Franklin once said: Necessity wont make a good bargain. This may or may not be true, but if you ignore your duties in modern business the consequences can be catastrophic. When a new CFO is chomping at the bit to make a difference to the bottom line, he or she could be forgiven for thinking that risk management only averts disaster rather than adding value. In the first 100 days, its crucial that the CFO gets to grips with compliance processes, reporting standards and new regulation not to mention other business risks. If a CFO can display to the outside world that effective controls are in place, he or she can make a virtue of the fact when trust is in short supply.

In spite of what the CFO or CEO may have heard, the auditors are there to help the business. So, make contact with them early on by asking them to prepare a briefing pack of upcoming changes in regulatory reporting requirements.

2010 KPMG LLP , a UK limited liability partnership, is a subsidiary of KPMG Europe LLP and a member firm of the KPMG net network work of independent member firms affiliated with KPMG International Cooperative, a Swiss entity. All rights reserved.

18 CFO Guide Risk management and compliance

Risk management and compliance CFO Guide 19

Risky business
All CFOs experienced enough to remember the pre-Enron days would agree that the rules about due diligence have changed and that risk and compliance increasingly demands their time.
Referee! The clever CFO will be aware that the issue of risk management is already built into the job. While the current trend might be for a separate risk management function, which might appease those wishing to see corporations hog-tied by watertight rules, the finance function is still the keeper of the risk register for most blue-chips. And this should mean that risk management is an integral part of business operations, not a box-ticking function in a separate office. Ask most investors and they will tell you that they dont need to know about every possible risk facing the company, from falling sales to product recalls, executive departures to hurricanes. They simply want to know that the CFO is flagging up to the board the real risks the business is currently running, with adequate controls in place to mitigate against them. Of course, every game needs a referee and your average CFO these days is serving a number of arbitrators. There is now an unprecedented range of regulators in the corporate world imposing their will on companies. There are now rulebooks covering corporate governance, pension liabilities, share schemes, audit and financial reporting, to name a few. So while the CFO may not know every last sub-clause in the laws of the game, it is his responsibility to ensure that someone on the team does. Knowing the drill But does this rules-driven approach benefit the companies labouring under the regulations? Most CFOs would say no. To many finance chiefs, the issue of compliance has become the biggest single headache they face. And that emphasises the need for two things: a well-drilled in-house finance team with the necessary technical expertise to cover the main risks; and a properly informed roster of professional advisors at the CFOs disposal, ready to tackle any compliance issue that may arise. There are many detailed aspects to most regulations, and for the CFO to understand them intimately simply isnt feasible. So the CFO needs to ensure that his advisors are fully aware of the issues the business faces in order to provide timely and accurate solutions to technical problems. With a strong defence behind him, the CFO can focus on leading the attack on the competition.

Its fair to say that the responsibility for risk management across a whole range of issues lies firmly with the CFO. This person is the safe pair of hands marshalling the companys defences against various corporate threats. And its not just financial issues. Consider what one FTSE100 CFO has to say on the subject: People need to realise that all these longterm risks can affect the business. Naturally, its hard to get off the moving train when its going well, but there are some long-term consequences and risks that you have to mitigate. And that might mean taking a short-term hit on profits in order to look long term and achieve proper results. That shows the true character of the company and how it conducts itself.

So, todays CFO needs to square the circle of instilling adequate controls and risk management measures, with allowing operational managers to spot and pursue opportunities. No CFO today can afford to ignore the letter of the law and the expectations of shareholders, analysts and investors on this issue.

No CFO today can afford to ignore the letter of the law and the expectations of shareholders, analysts and investors on this issue

Grappling with tax issues can make a significant difference to the bottom line. Around Day 60, ensure that the appropriate tax planning is in place and start to consider future tax planning strategies. The CEO will want to know what approach the business will take on tax matters and it may be worth communicating these issues to the board.

2010 KPMG LLP , a UK limited liability partnership, is a subsidiary of KPMG Europe LLP and a member firm of the KPMG net network work of independent member firms affiliated with KPMG International Cooperative, a Swiss entity. All rights reserved.

20 CFO Guide External reporting and audit

External reporting and audit CFO Guide 21

Fit for purpose?


All managers have to be careful with the companys finances and keep track of expenditure or risk public disgrace. The new CFO would do well to make full use of the auditors to make sure the business gets a clean bill of health.
The CFO isnt expected to know every single element required of the companys reporting performance. For that, he will need to look to his auditors for impartial guidance. The City will expect nothing less. For example, consider the demands of the SarbanesOxley Act: introduced after Enron, it now governs the corporate behaviour of any company with a US listing. Section 404 in particular requires CFOs to liaise carefully with their auditors to make sure they have adequate controls in place to satisfy the regulators. So, CFOs will need to ensure that both their auditors and internal audit teams are fully au fait with the demands of the Act. As any referee will tell you, ignorance of the law is no excuse. Alongside this, the CFO should be making full use of the expertise offered by their auditors. Regulations have a nasty habit of changing with little fanfare, and its crucial the business isnt caught out. While it is the primary responsibility of the finance team to monitor these changes, a new CFO should be open with the company auditors about any concerns regarding imminent rule changes. What this illustrates is the need for the CFO to engage with auditors right from day one. Professional advisors auditors in particular are only as good as the direction they get from their clients, so a hugely important factor in tackling the issue of financial and risk reporting is to set aside enough time to adequately brief auditors on the key risks the business is running. And while the relationship with auditors is crucial, CFOs need to ask themselves whether they have the right firm for the job. Modern regulation makes the proactive auditor worth their weight in gold, so the CFO should be asking whether their auditors are fully focused on spotting potential bumps in the road and working with the CFO to eliminate risk.

Modern regulation makes the proactive auditor worth their weight in gold. New CFOs should ask themselves whether their auditors are fully focused on spotting potential bumps in the road

2010 KPMG LLP , a UK limited liability partnership, is a subsidiary of KPMG Europe LLP and a member firm of the KPMG net network work of independent member firms affiliated with KPMG International Cooperative, a Swiss entity. All rights reserved.

22 CFO Guide Five reasons why CFOs get fired

Five reasons why CFOs get fired CFO Guide 23

Getting the boot


CFOs, like football managers, can be prone to shameful dismissal. Indeed, the turnover of new CFOs is consistently high. Here are five good reasons why CFOs get sacked:
1. Failure to warn the board when problems arise CFOs are expected to keep a constant eye on how the numbers are faring to forecast and anticipate where the figures are headed and sound the horn at the first sign of difficulty. Be direct, dont sugar-coat the bad news and always remember to give colleagues a range of possible outcomes so no one is kept in the dark. 2. Estimations wide of the mark Required to be a professional forecaster of figures, if a CFO provides wildly inexact and inaccurate numbers it seriously undermines the credibility of the role. Avoid losing the confidence of the big cheese by keeping a reliable financial reporting system, monitor it continually and notify management if all is not as expected. 3. Company culture of scape goating the CFO Taking undeserved flak can be beyond your control so responding to it correctly is crucial. Take responsibility for your teams shortcomings but be demonstrative when blame lies elsewhere. Make sure unit heads are accountable for their budgets and staff and that you have communicated their responsibilities. For example, if the commercial team loses a valuable client, you need to be sure that support for that team was not found wanting. 4. Personal failures Vice has been the ruin of many a footballer and manager, and CFOs, being human, are not immune to similar temptation. However, the CFO should represent all that is ethical and responsible. The CFO is the final authority on financial statements, so inappropriate, illegal or irresponsible behaviour equals an immediate red card. 5. Professional conicts of interest Always remember to stick to the companys stringent conflict of interest disclosure policy and ensure your personal expense reports and transactions are above board to avoid even a hint of conflict.

2010 KPMG LLP , a UK limited liability partnership, is a subsidiary of KPMG Europe LLP and a member firm of the KPMG net network work of independent member firms affiliated with KPMG International Cooperative, a Swiss entity. All rights reserved.

24 CFO Guide The risks beyond reporting

The risks beyond reporting CFO Guide 25

Belt and braces


CFOs learn early on in the job that every business activity comes with its own hazard. They must be sure that the individual in charge of that activity is aware of their responsibilities.
Enterprise Risk Management (ERM) provides a framework for businesses to measure and assess risk and reward. It is a powerful tool for CFOs. Successful ERM enables businesses to differentiate between acceptable risks and those that are simply too much of a gamble. Through ERM, a CFO can develop processes and structures that will help mitigate some of the potential dangers ahead. Getting support The list of things a CFO has to consider goes on and on. There are matters concerning data protection, equal opportunities and even the disposal of certain assets that are likely to have an environmental impact. There is little doubt that it has become the role of the finance team, and the CFO in particular, to take overall responsibility for risk and compliance. But that doesnt mean that one individual has to be aware of every last detail relating to every single issue. Instead, the successful CFO needs to ensure that his or her team has the necessary skills, experience and resources to cope with its obligations. A football manager wouldnt try to conduct a players medical himself. But he would guarantee that someone at the club was suitably qualified to perform this task. The life of a CFO really isnt all that different.

As we have seen in the postEnron environment, when it comes to reporting, risk and compliance have emerged as key considerations for CFOs. In this area there are reporting and auditing processes in place (see page 18). But the compliance risks do not end beyond the filing of results. Today, compliance pervades almost every aspect of the business world from tax filings and financial covenants to data protection laws and health and safety measures. And its the role of the CFO to have an awareness of everything. Take tax, for example. CFOs need to ensure tax filings are being completed on time and that appropriate details are being provided. They also need to have a thorough awareness of any relevant exemptions. Tax breaks are available to businesses complying with certain strictures relating to things such as IT investment and energy usage. But to qualify

for these exemptions, you have to comply with the rules (see page 50 for more details about tax). Key questions Issues of compliance and risk will surround most of the financial arrangements a company has in place. There are several questions a CFO must answer in the first 30 days. What debts do you have? How are repayments organised? What happens if you fail to meet your obligations? Have any covenants been agreed with lenders? Borrow from a bank and youll almost certainly have covenants imposed upon your business. These might require you to maintain a particular degree of profitability or revenue generation, and you breach these agreements at your peril. Make an error with regard to covenant compliance and the lender will be able to re-dictate payment terms.

There are several questions a CFO must answer in the first 30 days. What debts do you have? How are repayments organised? Have any covenants been agreed with the lenders?

Its similar to making a player undertake a medical before signing him. Unearth a serious injury and you can call the deal off. But if the player has a less serious problem, there may an opportunity to restructure things.

The risks dont end with reporting figures correctly. CFOs and CEOs are increasingly expected to ensure that privacy, equal opportunities and health and safety policies are in place. The CFO should meet with the head of counsel to confirm that the business is adhering to these policies and to get the status of vital regulatory filings.

2010 KPMG LLP , a UK limited liability partnership, is a subsidiary of KPMG Europe LLP and a member firm of the KPMG net network work of independent member firms affiliated with KPMG International Cooperative, a Swiss entity. All rights reserved.

26 CFO guide Profile Ann Firth

Ann Firth Profile CFO Guide 27

Like her previous job with news agency Reuters, Ann Firths current employer has a strong international dimension. But moving from the commercial to the voluntary sector has presented challenges. Corporate structures are usually well defined whereas here there is a more collaborative approach a company CEO can impose his or her authority but its different with an Non-governmental organisation (NGO), says Ann, 47, who joined Plan International, a worldwide child-centred development organisation in 2006 and is now Director of Finance. We also work more closely with grass roots staff who are in tune with the culture of their own country whereas companies do not have to adapt as much. Communication is very different. Plan uses three different languages. Some of its local branches have no internet and the office phone in Liberia, for instance, is a mobile. Seventeen fundraising operations around the world send money through to Plans head office where Ann has to ensure that it is managed and used to deliver programmes cost effectively. To achieve efficiencies and consistency, finance within this expenditure arm has been reorganised so that it is managed globally rather than by individual countries.

At the start it was really about devising longterm strategies for the function while doing basic business planning, she explains. I also wanted to hear the views, experience and recommendations of the staff. You get an opportunity to do this early on because people know that you have a certain level of ignorance and you havent been involved in previous issues. Its much more difficult later, when youre line managing them and are setting them targets. Targets are increasingly important as NGOs become more commercialised, competitive and professional, Ann explains. Another priority in a diverse, worldwide organisation has been to maintain a certain profile while doing this initial research. I wanted to ensure that the finance function was seen to be out there and taking a lead, says Ann. But she has learned to manage expectations. When people feed back problems, you want to be seen to be responsive and take these issues into the plan but you cant do it all. You want to be ambitious without over-promising. The job inevitably includes travel to visit offices around the world but here again there are differences compared to life in a corporation. We went on a family holiday to Guatemala recently, says the mother of four. Plan has a programme there and it was great to be able to show my children what were doing.

I wanted to ensure that the finance function was seen to be out there and taking a lead

2010 KPMG LLP , a UK limited liability partnership, is a subsidiary of KPMG Europe LLP and a member firm of the KPMG net network work of independent member firms affiliated with KPMG International Cooperative, a Swiss entity. All rights reserved.

28 CFO Guide Risk and compliance checklist

Notes for non-finance directors CFO Guide 29

Checklist Risk and compliance


Detailed objectives/suggested tasks External financial reporting Ensure external financial reporting Meet with financial reporting team to understand obligations are met and on a current state of reporting, potential issues and level timely basis of effort required Meet with external auditors to get their views on reporting process, potential issues and areas of risk Understand current state of Review past regulatory filings and integral internal financial controls management reports  Discuss regulatory compliance with finance teams and external auditors Gain an understanding of upcoming Ask external auditors to prepare a briefing changes in external financial pack of upcoming changes in regulatory reporting requirements (e.g. GAAP reporting requirements IFRS, SEC pronouncements) Tax filings Obtain an understanding of tax filing Meet with head of tax to understand status of status and any associated issues tax filings (VAT, local international jurisdictions) and potential issues Regulatory compliance Gain an overview of various Meet with legal counsel or head of regulatory filings regulatory requirements and filings, to understand key regulatory requirements (e.g. Data and status thereof Privacy/Safe Harbour, Equal Opportunity, FCC) and status of required regulatory filings, including potential issues Organisation and resources Evaluate whether there are Meet with department heads to discuss resources sufficient and approriately skilled and potential gaps resources to manage risks and comply with reporting requirements Funding Understand funding arrangements and ability to meet debt/equity obligations and expectations Timing 30 days

60 days

One new message for directors


Spend some meaningful time with the CFO Most directors expect CFOs to assume a stronger role, overseeing corporate governance. While improving the quality of the boards information depends on the CFO, directors need to be aware of their duties and be proactive in fulfilling them. Close contact with the CFO will enhance governance and improve directors grasp of the company finances. Do not be unduly passive nor overly aggressive, a balance needs to be struck. Trust the CFO but always seek verification.

Meet with Treasurer to be briefed on debt covenants

Enterprise Risk Management (ERM) Ensure organisation has appropriate Ascertain responsibility for ERM and consider ERM practices in place, including whether this is appropriate Standard & Poors requirements Organise a briefing on ERM practices, gain an understanding of key risks and mitigating controls

90 days

2010 KPMG LLP , a UK limited liability partnership, is a subsidiary of KPMG Europe LLP and a member firm of the KPMG net network work of independent member firms affiliated with KPMG International Cooperative, a Swiss entity. All rights reserved.

Smooth running CFO Guide 31

Chapter 3 Smooth running


 The trouble with senior management to an outsider is that there are too many one-ulcer men holding down two-ulcer mens jobs.
HRH the Duke of Edinburgh
Ensuring efficiency and effective operations will be a priority for a new CFO from the get-go. But often more urgent matters can push this lower down on the CFOs 100-day agenda. This chapter looks at how to ensure smooth running of the back office operations, such as transaction processing and the IT function. Remember, though, its your job to improve efficiency where possible; its not your job to micro-manage every little process that is the job of your team. Part of your assessment of back office operations will be to check that your staff have the right support and the right ability.

Dont panic !!

 The major difference between a thing that might go wrong and a thing that cannot possibly go wrong is that when a thing that cannot possibly go wrong goes wrong, it usually turns out to be impossible to get at or repair. Douglas Adams

2010 KPMG LLP , a UK limited liability partnership, is a subsidiary of KPMG Europe LLP and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative, a Swiss entity. All rights reserved.

32 CFO Guide On top of back office operations

On top of back office operations CFO Guide 33

Delegate the details


CFOs are not required to examine the details of individual back office operations on a day-to-day basis, but they must make sure that someone does. Similarly, a football manager would not think to check that each player gets an appropriate-sized slice of orange at half time, but he would make sure that someone was responsible for refreshments.

As we have discussed, CFOs and their teams have come under growing pressure to contribute more value to the business at a more strategic level. But while this may be the case, a CFO neglects the less glamorous back office operations at their peril. The new CFO will look at operations and see what efficiencies can be made but limit the amount of personal time he or she needs to give to this task without compromising the quality of that operation. There are two ways a CFO can attempt to free up the time they need for more strategic activities. They can either invest more money internally to improve and streamline their operations or they can bring in an outside company to run the day-to-day, non-strategic part of their department. By your 90th day, you will want to make a clear assessment on the level of resources at hand to handle back office operations so that you can make a decision on what levels of investment to make.

Transaction processing The finance teams traditional role of transaction processing is one case in point. The first port of call for the CFO is to make sure the appropriate policies and procedures are in place, find out if there are any ongoing issues involving the payment of suppliers or getting paid by customers. Further on in the first 100 days, the CFO will want to meet with the head of accounting and establish what resources and level of skills are employed to meet this function. In addition, the CFO might compare against other industry benchmarks and leading practices. With a stronger grasp on how the business is faring and what lies in store for it in the future, the CFO will at this point also assess the extent to which the current system of transaction processing will meet the businesss needs in coming years.

2010 KPMG LLP , a UK limited liability partnership, is a subsidiary of KPMG Europe LLP and a member firm of the KPMG net network work of independent member firms affiliated with KPMG International Cooperative, a Swiss entity. All rights reserved.

34 CFO Guide Ten qualities of an effective CFO

Ten qualities of an effective CFO CFO Guide 35

How to be the special one


As you sashay through the office among your colleagues, push your shoulders back and move with your head held high. These people admire you, hold you in reverence and value you as a football team would their club manager. If you are the special one, you can take your team to the top of the league. But the role of the CFO is by no means easy, possessing the following 10 qualities should win you the respect of the finance team, the board and your CEO.
1. Uncompromising integrity and ethical standards It may be obvious, but as CFO you are the custodian of everyones money and need to maintain that trust and keep allegiances. Be prepared to report bad news to the board immediately, despite the fact you allowed the marketing department to go ahead with fruitless expenditure that wasted the companys cash. 2. Financial accounting, cash management and corporate nance competence Keep yourself abreast of up-to-date accounting knowledge. Cash management skills are also a core asset, as well as the ability to disseminate this to managers, creditors, shareholders and others. 3. Basic business knowledge and strong understanding of company operations For a successful turnaround, stay on top of business fundamentals and your organisations business model. 4. Strategic vision and leadership skills Dont shun or hide away from your colleagues. Youre not just the numbers person. Apply your strategic mind to formulating and executing business plans, as well as demonstrating your leadership skills across the financial and management team as a whole. 5. Problem-solving abilities Dont just settle for a good deal the best CFOs create a win-win plan to secure the companys future. 6. Communication skills Dont live up to the expectation that accountants cant communicate. Listen and deliver your message without the technical jargon. Make time to improve these skills if you suspect a deficiency. 7. Strong work ethic Expect to work long hours, especially in a turnaround, while processing large amounts of information with a very fine toothcomb. 8. Self-condence and willingness to take a stand Self-confidence is a must. How can you deny the director who uses any swaying tactic possible to secure that boost to their budget, without having reams of confidence? A belief in, and affirmation of, your decisions and views is crucial. 9.  Results-oriented mindset Results must come first, not processes, particularly when it may be company procedures which resulted in a blunder. 10.  Reliability This may sound obvious, but keeping to a strict timescale, while producing accurate information and demonstrating a willingness to undertake any task for results, will keep you away from the firing line. Recent research from software consultancy BizNet found that most CEOs of large firms wanted their CFOs to be a trusted advisor and true partner hallmarks of a reliable business person.

2010 KPMG LLP , a UK limited liability partnership, is a subsidiary of KPMG Europe LLP and a member firm of the KPMG net network work of independent member firms affiliated with KPMG International Cooperative, a Swiss entity. All rights reserved.

36 CFO Guide Managing the supply chain

Managing the supply chain CFO Guide 37

Supply chain oversight


For managers of small companies, there is always a temptation to take on too much responsibility. Bigger businesses appoint trusted lieutenants in the finance team to ensure that the companys partners and suppliers keep the exchange of goods and services in motion.
Whats clear is that supply chains are becoming ever larger, more complex and international. Its the role of the CFO to ensure that everything is managed appropriately. If not, costs may rise and service levels may fall. Most worrisome of all, should a partner suddenly encounter unexpected difficulties, a company may find itself desperately short of an essential asset and blindly scrambling around trying to find an alternative supplier. The secret to managing a supply chain effectively is to ensure that appropriate processes and procedures are in place. A strong CFO must ensure his team understands that choosing suppliers isnt just about cost. Product quality and service levels are just as important. Moreover, signing up a supplier isnt the end of the process. A successful procurement team will continue to monitor the performance of its suppliers and of potential alternatives to ensure that it continues to receive the best deal. Keeping tabs on the players At the end of the day, first-rate supply chain management is all about relationships. Forging strong links with existing suppliers might enable you to secure discounts or garner more favourable payment terms. Building relationships with alternative suppliers, meanwhile, could result in an altogether better deal for your business or a readymade contingency plan in case you experience a break in the chain. If you just tell your team what you expect from them, you may be surprised at what they deliver.

Its essential to ensure that your business is receiving the highest quality products and services at the best possible price. But its just as important not to get bogged down in the details. When it comes to managing the supply chain, it pays to have a strong team in place.

The successful management of supply chains has never been more critical to organisational performance than it is today and that reflects a number of recent trends. First and foremost, businesses are becoming increasingly global. Even modest-sized firms can now boast a worldwide roster of suppliers, partners and customers. But dealing in overseas markets will always present unique challenges. Each country will, for example, have its own nuances with regard to the legal and financial regulations youre obliged to abide by and these may be very different to the practices youve grown used to in the UK. A major responsibility of the CFO is to ensure that his or her team is fully aware of, and prepared for, any differences that may emerge.

Outsourcing Globalisation aside, there have been other fundamental changes to what we perceive supply chains to be. Question most CFOs on this topic as recently as 10 years ago and, chances are, they would simply have recounted a list of organisations providing basic goods and utilities. As the naughties have advanced, times have changed. Outsourcing has risen exponentially. Today, supply chains are as much about services as they are about goods. In fact, its not unusual for companies to completely hand over responsibility for a particular business function such as HR, IT or even marketing to a third party.

The successful management of supply chain has never been more critical to organisational performance than it is today and that reflects a number of recent trends

When it comes to efficiency, by Day 90 the CFO and CEO should start looking at other businesses and compare their benchmarks and practices with their own business. Are yours the best ones for the company right now?

2010 KPMG LLP , a UK limited liability partnership, is a subsidiary of KPMG Europe LLP and a member firm of the KPMG net network work of independent member firms affiliated with KPMG International Cooperative, a Swiss entity. All rights reserved.

38 CFO guide Profile Alex Woodward

Alex Woodward Profile CFO Guide 39

As soon as he had completed his training at KPMG London Alex Woodward left Britain for Spain and the firms Valencia office. I spent three years of my childhood on the island of Cyprus so I felt a strong attraction to the Mediterranean environment in Valencia the minute I walked off the plane, he recalls. Alex, 44, now lives in Barcelona with his Spanish wife and their four children. As Group Administration & Finance Director for Spanish group Abertis Airports, which runs Luton, Belfast and Cardiff airports in the UK. He works between Barcelona and Luton. Alexs Anglo-Spanish lifestyle is ideally suited to the challenges he has faced in his professional life since he arrived in February 2008 as Abertis had bought Cardiff-based airports group TBI plc less than four years previously. Theres still a lot of integration work to be done as the head office has been moved from Cardiff to Luton and now most of the senior positions are going to Barcelona where corporate Abertis is based, explains Alex. Its about getting to grips with two different approaches. The Spanish style is very direct English people might even mistakenly think it rude whereas in the UK people tend to be less naturally assertive. I was recruited because, having lived in Spain for 17 years, I can wear both hats.

The British approach to problem solving is more structured, Alex finds: Many Spanish tend to jump straight into the detail, so Ive frequently found myself saying: Stop and explain this to me from the beginning. I want the team to see the wood for the trees. As UK companies face an increasing number of acquisitions by foreign groups, he advises anyone in this situation to try to identify the management styles of their new teams or bosses and to be ready to work with them. Its not typical with Spanish companies to have an induction course, for instance, he says. You have to ask the right questions. Theres often no one to give you the global picture so you have to pick it out it from what youve learnt from different people. Currently Alex spends four days in Luton and the rest of the week in Barcelona. I made a positive decision when I first arrived to immerse myself in Spanish culture. I speak Spanish to my wife and friends, and only speak English to my children. This makes it possible to be able to change between Spanish and English mode at work whenever necessary.

You have to ask the right questions. Theres often no one to give you the global picture so you have to pick it out from what youve learnt from different people

2010 KPMG LLP , a UK limited liability partnership, is a subsidiary of KPMG Europe LLP and a member firm of the KPMG net network work of independent member firms affiliated with KPMG International Cooperative, a Swiss entity. All rights reserved.

40 CFO Guide IT management

IT management CFO Guide 41

Systems savvy
While the CFO is not required to go at the businesss IT equipment with a screwdriver and a pair of tweezers, ensuring that the companys systems are managed effectively has fallen under the CFOs responsibility.

One of the most significant areas of an organisation that CFOs are now finding themselves responsible for is IT, as CIOs and IT Directors increasingly begin to report directly the CFO. The data that these departments produce concerning sales, costs, margins and staff productivity are essential for financial management. Just as a football manager gets more observations about the teams performance and advice on improving it than he can necessarily handle for a CFO too much uncoordinated data can also be counterproductive. In order to manage and interpret this data and ensure that IT systems are working with optimal efficiency, CFOs often assume a CIO role and get involved in the operations of the IT department as it relates not only to Finance but to every other aspect of the organisation.

Constructing the game plan It is necessary for the CFO to meet with the IT department and establish what level of his input is required and assess whether adequate resources for the management of that team are in place. Furthermore, it is essential not to lose sight of the wood for the trees. In other words, the CFO must understand each function of the IT operation, while bearing in mind the overall picture and its contribution to the organisation. The architecture is every bit as important as the individual applications. This means that the bread and butter core transaction processing needs to work smoothly, of course, but the CFO needs to keep an eye to the future.

At a conference held by IT research specialists Gartner, 40 percent of attendees said that most traditional IT organisations will be closed down by 2012, as each department becomes an IT specialist in its own right. While changes in technology take place and IT functions migrate into individual departments, the CFO must adapt to meet the needs and working practices of their new environments. As the person with overall responsibility for this, they must be ahead of the game.

2010 KPMG LLP , a UK limited liability partnership, is a subsidiary of KPMG Europe LLP and a member firm of the KPMG net network work of independent member firms affiliated with KPMG International Cooperative, a Swiss entity. All rights reserved.

42 CFO Guide Efficient and effective operations checklist

Notes for non-finance directors CFO Guide 43

Checklist Efficient and effective operations


Detailed objectives/suggested tasks Timing Transaction processing Ensure there are appropriate Confirm that there are policies and procedures policies and procedures in place and that they are appropriate Evaluate current levels of Discuss with the head of accounting: efficiency and effectiveness Current resource levels and skill mix of transaction processing Transaction processing costs Gain an understanding of effectiveness of transaction processing Financial controls Compare against benchmarks and leading practices Are current processes repeatable and sustainable? Are there monitoring mechanisms in place? Will these meet future business needs? Information technology Gain an understanding of Meet with CIO or head of finance systems to information technology used for gain an overview of technology architecture core transaction processing and applications Determine if there are any issues or significant improvement opportunities 60 days 90 days

One new message for directors


Win the CFOs confidence CFOs would not tolerate a member of their team botching figures or failing to pay attention to the details and the finance chief would have good reason not to stand for failures in the boardroom either. A director who shows that he or she has a proper grasp of their department and can supply the finance team with accurate and timely information is more likely to win the CFOs confidence and gain greater support from Finance.

2010 KPMG LLP , a UK limited liability partnership, is a subsidiary of KPMG Europe LLP and a member firm of the KPMG net network work of independent member firms affiliated with KPMG International Cooperative, a Swiss entity. All rights reserved.

Pitch performance CFO Guide 45

Chapter 4 Top performance


CFOs dont just count the beans. They also have to grow them too.
This chapter looks at managing the finance teams operational performance and making sure it meets the needs and expectations of the business. Making an accurate assessment of those needs and measuring the teams performance against them will be a key priority in the first 60 days in office. Once this is done you will be in a better position to look more strategically at how operational performance can be enhanced by spending more time looking at operational planning and forecasting.

Q : How can you tell when a CFOs getting soft? When he actually listens to A:  Marketing before saying no.

2010 KPMG LLP , a UK limited liability partnership, is a subsidiary of KPMG Europe LLP and a member firm of the KPMG net network work of independent member firms affiliated with KPMG International Cooperative, a Swiss entity. All rights reserved.

46 CFO Guide Performance management

Performance management CFO Guide 47

Setting the goalposts and keeping score


Nothing says performance like a ball in the back of the net, but in business the goals are harder to define. CFOs need to set out these key performance indicators early on in their tenure and then keep score.

Assessing the performance of key players is as important for CFOs as it is for a football manager. So, the CFO needs to assume a major role in helping to drive operational performance. Meeting unit heads within the organisation in order to get their feedback on the quality of support that they are receiving from the Finance Department should be high on the list of priorities for any incoming CFO. He or she will need to assess whether key performance indicators (KPIs) and other management information are appropriate and timely. Establishing whether the quality of decision support provided and the level of involvement is adequate is another important task.

External benchmarking is a useful tool you may want to identify what other companies of a similar size and sector are using. Determining this will enable a CFO to see what practical measures are relevant. These methods might include activity-based management, value-based management which are aimed at growing the value of the organisation and its assets and balanced scorecards. These measure whether the various operational activities of the organisation are aligned with its overall objectives, vision and strategy.

Top tactics It may well be the case that all three of these methods, plus others, could be useful to the organisation. But identifying best practice here and then deciding what can be used within the CFOs own organisation is only half the story adapting these methods to that organisations own needs and then gaining buy-in from the staff that will implement them is also vital. Reviewing the basic structure of the organisation to ensure that it has the right decision support both in terms of reporting lines and properly trained specialist departments is also important. The CFO will need to consider whether Finance has the right skill sets and experience appropriate to senior decision support roles. Developing training programmes and encouraging staff to think beyond their traditional, purely financial roles, to focus on broader indicators and goals might also be part of the CFOs winning strategy.

2010 KPMG LLP , a UK limited liability partnership, is a subsidiary of KPMG Europe LLP and a member firm of the KPMG net network work of independent member firms affiliated with KPMG International Cooperative, a Swiss entity. All rights reserved.

48 CFO Guide Infamous finance executives

Infamous finance executives CFO Guide 49

Rogues album
S TUAR T M IC KE Y W ILE S e H om e made , th Ben & Jerry s him se lf a ed rn ea The ex-C FO o f y, an cr eam co mp ez zli ng es tabli shed ice 20 05 af ter e mb n sent ence in y. W ile s an mp co he t 27-m on th pr iso m 0 ( 16 7,0 00 ) fro ibu tions , ,00 r 0 nt 30 $ co e ly bl ar ne r char ita ny cheques fo xis tent pa -e n m no co d er ue th iss and o ay s al se ttlemen ts nics, gif ts , holid unspecified leg ro ct ele n o t lash ou s. ex penses to sp ce en ulg d personal in and the usual

M IK E M A R TIN

MI KE MA RT IN

, a health uth Corporation FO of HealthSo hat ew m so a lf As the former C se him Mar tin earned role y, his an for mp 5 co 00 2 re in ca ce ng prison senten aded measly week-lo g fraud. He ple tin un co ac n $2 .7b r counts. in the companys fraud and othe acy, securities execut ive th guilty to conspir ou hS alt He former year s Mar tin , the third all y given five ison, was or igin 50 , 00 0 fine $ a , st re sent enced to pr ar e mont hs of hous eds. pr obat ion , six $2 .39 m in proce that he forfeit and a demand

ST UA RT M ICK EY W ILE S

AN SC OT T SULL IV

EBENEZ ER SC

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SC OT T SU LL IVA N

er or oge was a bank whet her Scro to It is un kn o wn t he did co m e bu r, de len y ne pr of es sio nal mo eent h cent ur y v iew of co ld ninet wh om ep ito mi s e the ar te d man wi th As a mean- he e exclu si on th o acco un tant s. t g, hin yt e was ev er ills the bo tto m lin d the pe ople sk els e, he lacke of mo dern d ire of ev ery t hin g qu re w e t hin kin g no an d big -p ict ur ut ive s. financial exec

g-distance cond largest lon O of the USs se architect of the ed ell As the former CF lab om, Sullivan was s biggest telecom WorldC d up as America it y which ende tiv counting ac ac nt of n ule 1b ud $1 fra in and culminated ate d 05, to 20 y in t ptc n ru me bank imprison O, ed to five years oms former CE ldC fraud. Sentenc or W of ge knowled and entries in ts en Sullivan, with the tm jus ad r us imprope mpanys caused numero to make the co oks and records to meet ar pe ap WorldComs bo lts su re arly financial quar terly and ye pectations. Wall Street s ex THE SHE RIFF O F NOT TINGHA M

Ebenezer Scroo

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IR A ZA R

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s this at ion into claim o-year inves tig ciates by so As r ute Follow ing a tw mp Co up the books of pleaded d an ain rg ex-CFO beefed a ba r entered a ple Za m, mmit 70 co 2 to st y ac lea at conspir ities fraud and e. Stealthy Zar guilt y to secur tic us j t uc str d and ob ract s securit ies frau dollars of cont oked millions of and David n pla fraudulent ly bo Ka id v Da president s 20 04 and alongside vice hs in prison in nt seven mont mont hs . n ve se r e Rivard. He spe th fur e arrest for a was under hous

tructed of the unrecons uld be a model ay s rigorous tod to T he Sheriff wo up nd uld hardly sta ge and CF O and he wo oin ted to mana coun ting. A pp nous lai vil e th , nd standards of ac Engla in the nor th of stealing d an s xe ta enforce order h hig ed people wi th Sheriff oppress wn ends . d to meet his o lan nd a k toc lives

The Sheriff of No

ttingham

19

18

2010 KPMG LLP , a UK limited liability partnership, is a subsidiary of KPMG Europe LLP and a member firm of the KPMG net network work of independent member firms affiliated with KPMG International Cooperative, a Swiss entity. All rights reserved.

50 CFO Guide Tax planning

Tax planning CFO Guide 51

Paying your dues


Giving proper responsibility to someone with a detailed understanding of the companys tax situation in the first 60 days could save your company money and even its reputation.
To this end, you may wish to raise tax as an issue on the boardroom agenda, as CFOs are increasingly being called upon to communicate tax strategy to fellow board members and make sure they are aware of risks. Its also important that no one conducts tax planning without the knowledge of the head of Tax. It is the CFOs duty to make sure these controls are in place. Tax risks A CFO will need to consider what the companys attitude is to tax risk and look at how tax liabilities have been handled previously, as well as how the business fares in the eyes of HMRC. An aggressive attitude to tax planning can reduce costs, but trusted low risk firms who have adequately communicated their compliance are likely to be subject to enquiries by the authorities just once every three or four years less than organisations with a more adventurous take on tax planning. But tax policy can also have implications beyond the balance sheet. It affects the way shareholders and other audiences view the company. For instance, a company that values its Corporate Social Responsibility credentials or has major contracts with government bodies will want to make clear that tax compliance is a priority and that being trusted and paying its liabilities is a core value of the companys brand. A CFO can do much to handle tax policy but the good news about tax and there is such a thing, believe it or not is that comprehensive, up-to-date advice is always available from a professional advisor. For more information about tax you can order KPMGs Everything you ever wanted to know about tax without getting lost from maria.boyer @ kpmg.co.uk

When it comes to tax, an incoming CFOs chief priority will be to meet with the head of Tax and make sure that payment deadlines are met and that compliance is being suitably adhered to. It will also pay to check that the head of Tax is up to date on tax regulations and has any forthcoming changes to the law firmly on the radar. With Her Majestys Revenue & Customs (HMRC) involved in numerous test case battles with the European Court of Justice, there is a degree of flux and uncertainty in the UKs tax system, which could potentially cost UK businesses. Other demands on the CFOs time may preclude him from thinking too much about tax planning until later in the first 100 days. But effective tax planning can save a company significant amounts of money by mitigating its tax liabilities.

Strategic thinking As strategic planning comes to the foreground of the CFOs agenda, any new development in the business, such as a divestment of assets, staff incentive schemes or setting up an office overseas, may well come with an unexpected tax bill attached. This could affect cash flow and undermine the CFOs reputation for smooth financial management. Business processes throughout the company have implications for tax, ranging from purchasing to staff remuneration, so its essential that the CFO is aware of the policy and practice in all these different areas. Changes in these processes as well as a companys performance or structure may alter the tax liability. Therefore, anticipating and managing such changes is important to the financial performance of the company.

Later on in your first 100 days you may wish to raise tax as an issue on the boardroom agenda, as CFOs are increasingly called upon to communicate tax to fellow board members

Before you complete your first 100 days, make sure your team leaders are on board with your strategy. Establish personal goals and objectives and align these with compensation and incentives.

2010 KPMG LLP , a UK limited liability partnership, is a subsidiary of KPMG Europe LLP and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative, a Swiss entity. All rights reserved.

52 CFO Guide Strategic planning processes

Strategic planning processes CFO Guide 53

Time to think about the future


As the your first 100 days progress, you will increasingly be called upon to fulfil your strategic role in the business. You will want to make sure you have met your other priorities so that you can give adequate time to this important function.
executive directors. This will provide a wealth of information relating to current practices and will also offer insights into the finance teams historic involvement in strategic matters. Asking questions of your peers will be helpful. Its important to establish how the finance team is perceived within the business. Does it already add value? If not, what can be done to deliver more? Its just as important to discover how the role of CFO is viewed by the rest of the executive team. Do people think youre there to run a watchful eye over things and provide essential insights? Or do they assume youre just there to cut the cheques? By conducting this research thoroughly from the outset, it becomes possible to evaluate current strategic planning practices effectively. You can assess how current projects are progressing and decide whether or not existing funding structures are appropriate. The art of saying no Never lose sight of the fact that its the CFOs job to say no. Within every business, someone has to step back, weigh up the risks and ensure that money isnt being squandered in pursuit of pipe dreams. Instead, projects have to be carefully planned and constantly monitored. Most importantly of all, they have to be in keeping with the overall strategic vision of the business. Theres no point, for instance, throwing cash at a new product if you have absolutely no idea how to take it to market. All the while, the organisation overall financial position should be closely monitored. Remember, the whole point of strategic planning is to use your resources as effectively as possible. Keep an eye on your debt and equity levels and dont let the ratio between these two metrics exceed a level with which youre comfortable. Its easy to over-commit financially, but far harder to turn things around once youve overstepped your means. Just think of all those football clubs desperate to return to their past glories.

Indeed, you overlook strategic planning at your peril. Attempt to achieve too much too soon and the results can be near catastrophic. Within most organisations, the entire executive team has some responsibility for strategic planning. But, more often than not, its the CFO that has to fulfil the most difficult role. He or she has to strike a balance. On the one hand, the CFO has to deal with the businesss divisional heads, who will want to spend big to achieve optimum success as quickly as possible. On the other, theres the CEO and non-executive team who will demand to see tangible results for every penny invested. Reconciling these expectations is the real challenge.

During the CFOs first 100 days progress in strategic planning will become increasingly important. For many CEOs, a strategic business partnership with their CFO is what they want most from the relationship. However, when it comes to strategic planning, the early days are particularly vital in developing a complete picture of the processes and structures already in place and getting you to that stage where you are able to provide full strategic support to the executive team. As we have seen, the best starting point is to schedule in meetings with fellow

The whole point of strategic planning is to use your resources as effectively as possible. Keep an eye on your debt and equity levels and dont let the ratio between these two metrics exceed a level with which youre comfortable

Q:  How do you create a small business? Manage a big one A:  very badly.

2010 KPMG LLP , a UK limited liability partnership, is a subsidiary of KPMG Europe LLP and a member firm of the KPMG net network work of independent member firms affiliated with KPMG International Cooperative, a Swiss entity. All rights reserved.

54 CFO Guide Managing operational performance checklist

Notes for non-finance directors CFO Guide 55

Checklist Managing operational performance


Detailed objectives/suggested tasks Timing Business performance management Ensure Finance is playing Meet with business stakeholders to get feedback an appropriate role in helping of quality of finance support received vs expectations to drive operational Meet with financial heads supporting business business performance operation to: Assess whether KPIs and other management information are appropriate and timely Consider whether the quality of decision support provided and level of involvement is adequate Performance Measures Determine whether Finance is Evaluate performance measurement practices making use of leading practice in place vs leading practices (e.g. Activity-Based measures and approaches Management; Balanced Scorecards) Tax Planning Ensure that appropriate tax Discuss effective tax rate and tax planning with planning is carried out to manage head of Tax the effective tax rate Consider opportunities for future tax planning strategies Organisation Structure and Human Resources Consider whether resources Evaluate organisation structure for decision support and organisation structure in both in terms of reporting lines and specialist place are appropriate to provide departments (e.g. dedicated Project Management decision support capability; dedicated decision suppport group) Consider whether finance has the right skill sets and training for senior decision support roles Operational Planning and Forecasting Ensure operational planning and Review operational planning and forecasting process forecasting is effective and helps to determine if it is effective (e.g. timely; appropriate; drive business performance carried out at the right level of detail) 30 days

60 days

90 days

One new message for directors


Some top tips 1.  Finance directors should know a lot about risk, so when seeking CFO backing on a project, provide some risk analysis to show what happens when things dont go to plan. 2.  CFOs like predictability. Whether you are pushing a marketing campaign or a training programme for employees, give the head of finance some measure of what you expect your project to achieve. 3.  Past performance is a crucial guide to finance controllers. If you can show CFOs historical data, they will be grateful for your efforts.

2010 KPMG LLP , a UK limited liability partnership, is a subsidiary of KPMG Europe LLP and a member firm of the KPMG net network work of independent member firms affiliated with KPMG International Cooperative, a Swiss entity. All rights reserved.

56 CFO Guide Useful organisations and publications

Useful organisations and publications


Institute of Chartered Accountants in Scotland (ICAS) The ICAS is an independent accountancy body formed in 1951 by the amalgamation of three societies originally granted charters in 1854, 1855 and 1867. The institute is the oldest established professional accountancy body in the world. www.icas.org.uk Institute of Chartered Accountants in England and Wales (ICAEW) The ICAEW is the largest accounting body in Europe, with more than 124,000 members working in business and public practice in 142 different countries. The Institutes qualification is recognised around the world as a prestigious professional business qualification. www.icaew.co.uk Institute of Directors (IoD) IoD is a worldwide association of members advocating director professionalism and providing a professional network spanning the largest public companies to the smallest private firms. www.iod.com

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2009 KPMG LLP , a UK limited liability partnership, is a subsidiary of KPMG Europe LLP and a member rm of the KPMG network of independent member rms afliated with KPMG International, a Swiss cooperative. All rights reserved. Printed in the United Kingdom. KPMG and the KPMG logo are registered trademarks of KPMG International, a Swiss cooperative. Designed and produced by Wardour Publication number: 309-772 Publication date: April 2009

2010 KPMG LLP , a UK limited liability partnership, is a subsidiary of KPMG Europe LLP and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative, a Swiss entity. All rights reserved.