FULL EPISODE TRANSCRIPT
Mitch: (00:00)
 Hey everyone. Welcome back to Count Me In, IMA's podcast about all things affecting the accounting and finance world. This is your host Mitch Roshong, and I'm here to bring you episode 122 of our series. Today's conversation features Arno Wakfer, a former CFO with over 15 years of commercial finance and general management experience. He is now a coach and trainer focused on upskilling managers and professionals through learning programs in Power BI and business finance literacy. In this episode, he talks with my co-host Adam about value creation and how finance and accounting professionals can get closer to the business through insight and storytelling. Keep listening as we head over to their conversation now.

Adam: (00:51)
So Arno, what are some of the value creation ideas that the finance and accounting team can use to set reminders and form habits?

Arno: (00:59)
Thanks Adam, thanks for the question. I think before I go into that, I'd just like to share my own view on what I think it means to drive value in a business. To simplify these, that I think whatever finance does will contribute towards increasing the value of a business for its stakeholders. Any business, any stakeholder business, wants an asset that increases in value and I think finance should be there to help increase the future value of an asset, which is the business. Alright, so looking at some ideas around finance creating value, some ideas around that. So the first thing I do is looking at financial analysis. So what they can do is they can perform business off assessments and troubleshooting risk areas. The second one is cashflow improvements, you know, working with businesses to improve strategies, to improve the cashflow. There's many strategies that you can use to accelerate in delayed cash flow coming in and out of a business. And we all know cash is King and it keeps the doors open so we need to protect our cash. The next one is cashflow forecasting. A lot of business is done with forecasts, when it comes to cashflow I think it's vital. You need to do at least 12 weeks of cashflow forecasting and try and at least have a safety of margin of at least three months of your fixed overheads, just to give you a little bit of buffer in the time that the business struggles. So that's another way that you can create value. Maximizing profits, monitoring all the key drivers in the business that generate profits and measure that in real time if you can. And then, any early warning signals when anything's off track is not on track that management can address. The next one would be, I think where we can also add as early is auditing spreadsheets. I think a lot of managers use their own spreadsheets to make decisions on, and we come across spreadsheets that can have errors in them and those errors lead to poor decisions. So I think finance can be more involved in analyzing and checking those spreadsheets for correctness. The other idea is to, for finance to get more involved in data analytics, you know, being able to use it’s auditing data into analysis and to be able to analyze underlying transactions or key activities that drive business. For example, if we want to analyze where we bleeding on profit margins on a specific customer, on a specific product, on a specific location, I think finance should be able to analyze and give that intel financial intelligence to key decision makers, which will assist the future planning and strategy. And the next one is data visualization, which is becoming a hot trend skill in finance and accounting is being able to turn data into storytelling. Most of us are visual learners. When we see a picture it explains a story to us and I think instead of just pushing out financial reports, we can spend more time on actually visualizing and storytelling the performance. And with that, you can use business intelligence like Power BI, which is the top-rated business intelligence platform in my opinion, by Microsoft. The next one is finance literacy training. I think finance can help educate non-finance people in business about the numbers so that they can just make better business decisions. Finance speaks a foreign language to most because we understand the numbers because we've been taught that and we work with it every day, but non-finance people don't. So we need to be able to remove all the technical jargon and try and simplify the numbers for different levels of management so they can just help make better decisions. The next one is business metrics and KPIs. I think we need to work with business units through finance business partnering, to be able to define what metrics they use to make decisions. Every person's got different inputs that they need to put the full cost and their budgets together and draw strategy. So work with the business units to develop the business critical KPIs and then have regular interaction with those people to monitor those KPIs. Then we can also do businesses systemization. So, I mean, that's processes systems, improving those to create efficiencies and automation in business. Businesses want more, they want to do more with this and I think finance can help create those efficiencies in business. Alright, so that's kind of like, the key value creation ideas after I liked it that I think would add value to business. Thanks Adam.

Adam: (05:31)
Yeah, so I think those are wonderful ideas and now that we've kind of covered those ideas, what are some of the challenges that can prevent those same professionals from delivering value creation?

Arno: (05:43)
Yeah great, great question. So, the obstacles I see finance have in terms of driving value creation. Cause it's easy to say let's drive value, let's do more, but it's, for me, it's a change of a mindset. And what one is to focus on first is the need to find ways to speed up the month-end reporting process. I think before finance looks again, they're spending time on reporting again, and then when they finished the next reporting cycle starts. And reporting is looking backwards, it's not looking forwards. So, I think we need to look to find ways to do more frequent recons, to be planning and eliminating bottlenecks in the month-end reporting process, so that's the first thing. The other thing is the obstacles you'll face is the company culture, its that people don't necessarily like change. And when they do happen, they're not supported by the right people. And then people are not very clear while they're being implemented and they don't really understand the benefit to them in the business. So typically what one would need to do is cost versus benefit and being able to negotiate and be persuasive as to why we need to make changes to drive value creation. Next one is not having the right finance team. You can put all these value creation activities in place, but if you're not driving, if the leader of the team is not driving the right behavior and getting a mission statement of the finance team that's aligned to the business mission statement, and if it's not alarmed, then you're not going to be, the team's not going to be productive. A busy finance team is not necessarily productive finance team and businesses want us to be more productive, to provide more insights rather than just financial information. Next one, you know, inability to influence decisions. I think that is what finance business partnering is all about is being able to take information, provide insights, and influence decision-making. But you're not going to do that behind a desk. You need to be out there building relationships, getting to know people, getting to know the decision makers and actually understand the pain points of the business and what info they need to make better decisions impacting the future of the business. The next point is lacking of systems to provide meaningful insights. You know, businesses want information real-time these days, they can't wait for information. They need to make faster decisions, to drive the business performance, that's the reality we facing. So you need to implement systems to create efficiencies and do things faster and smarter. And I would say the last thing is the of lack of business knowledge, not understanding the key value drivers. I think finance accountants may get too technical about the numbers and they don't really understand the business model, what's driving revenue and profit. It's cost structure, it's values proposition, the mission/vision statement, it’s purpose, all those things. It's key customers, key suppliers, those things. So those are what I would say is like the key challenges that you need to overcome, get your mindset right. And they all can be addressed. You just need to just prioritize where you focus or where you're placing your efforts.

Adam: (08:53)
I think that's a nice segue. I was going to ask, how do you assess if you're spending time in the right areas?

Arno: (08:58)
So that, it's so easy, it's all about time management. It's easy to say that you need to better manage your time, but the only way you can do this is to check actually where you're spending your time. So that's why I've come up with a concept called “value creation opportunity gap”, and it's very simple. You list all your day-to-day activities, your normal activities, and then you list all the value creation activities. The things that you should be doing that draws value creation. And there, so for example, you've got a 40 hour working week, and lets say you spending 80% of your time on day-to-day activities and you want to spend say 60% on value creation activities. Then you can already identify where you spending, where need to drop time to dedicate more time to value creation activities. Now day-to-day activities I typically see as reporting and post-performance, financial working capital net asset management, we've got risk management and governance, statutory audit and tax compliance, and then things like administration meetings and operational issues, so that things are not going to go away. They are part of business and we have to deal with them on daily basis, but now the value creation activities examples are things like driving strategy planning and direction of the business, delivering insights to the business, building relationship with key stakeholders, which takes time, continuous business health monitoring, helping to improve cashflow and profitability, spoke about analyzing data, spend some time on data visualization, we need to look at process improvements and automation, a very important problem solving in decision-making discussions. We need to be in those discussions to help make better decisions, spend time on financial modeling, focus in prediction. So that's the forward looking part, not the backward looking. And then important is the finance team development and coaching, that for me is important. So those are going on, so you can all see all the different daily creation activities, you need to be able to check where you're spending your time so you can close that gap.

Adam: (10:59)
Just to kind of wrap up our conversation. I wonder if you could talk a little bit about how the finance and accounting team can get closer to the business. You've kind of alluded to it a little bit, but I wonder if you could speak in more detail around that.

Arno: (11:11)
Thanks Adam. So I took a class of business, so for me it's about to create value you need to become influential in business as a finance team. If you don't have influence you won’t necessarily get people to listen to you and the recipe to become influential, is people need to get to know you, they need to like you, and then that bolstered trust. People are not going to, you're not going to become influential sitting behind a desk. And in order to do that, finance needs to be, so you need to be more visible, not hiding behind a desk, you need to be effective at relationships, you need to be great at communication, you know, being able to get your message across to the audience is vital. And then also the ability to present and story tell the numbers, that's how you create influence. So to do that, you need to eliminate some of the pain points that the finance function has in business. And these are just general pain points. So I spoke about this previously is about, we need to provide more info instead of insights. We need to be involved when problem solving, we need to improve our communication, we need to be more proactive in driving change, we need to understand the business, the business model, how it makes money and how it operates, we need to build relationship with key decision makers, and we all need to be more involved in strategy and future planning decisions. Then finance, the finance team can't work in silos anymore. It needs to be work with the business. So, there needs to be that connection and it needs to be less backward-looking and more forward-looking through scenario planning for cost predictions, all those things. We should, people should understand our language. It shouldn't be a foreign language. Understand what we talk about when we talk about the numbers. And I think we can probably be a bit more fun and engage more with people so they get to know us. The perception is that finance is boring and I don't believe that. I think we all, I think most of us are introverts, but I think we adapt to the situation and nothing, you know, a guy like me, I like engaging with people and it takes confidence, so the more you do it, the better you get at it. And, you get better doing it if you start doing presentations, you know, it's just conquer your fear and do that. So that's kind of like a, what I would say is the focus points to get close to business. And you know, if I can maybe just summarize, my thinking is that finance needs to find the ways to get closer to business. You know, being busy is not necessarily being productive, focus on building your relationship with decision-makers, emphasizes provide more insights than just financial information, improve your skills in communication, presentation, and negotiation. Understand the business first before you just start looking at making improvements, create a team that is customer focus, customers is internal/external customers. And, you know, embrace technology to create efficiencies and drive business performance. So that would be my key points for driving value creation.

Adam: (14:30)
Do you think that technology is going to help bring together finance and the rest of the business together?

Arno: (14:37)
Yes, I think it will because, you know, the benefits of technologies enables us to do faucet or sectional processing. It enables us to get information quicker to decision makers and it frees up time for us to focus on other value creation activities. And the one thing I think we can spend more time is building relationships because that takes time. You need to get to know people, so automation is not necessarily a bad thing, it helps us to do a better job and get more insights out to business so they can drive better decisions. And, you know, people can get to know us and we can be more influential because we've actually got, we've got the insights to help drive business performance and I think in the automation enables us to be co-pilots to businesses, to help steer the plane in the right direction because our strategy, our flight plan is our strategy, so where we want to head and finance can help co-pilot that.

Adam: (15:33)
Yeah, I've heard you say it a few times that the finance and accounting team needs to be storytellers, you know, as with the more data analytics and those things that are coming on that we've been talking about, how can they become better storytellers as they go along?

Arno: (15:50)
So, so obviously there's best practice when it comes to visualization, but for me it's also about, you know, getting the right message across. Don't get too much detailed cause people get lost in the detail. Go and find out from people what they want to see and then visualize what they want to see, they need to get the story in the first 10 seconds, otherwise you would have lost them. And I think finance can analyze financial and non-financial data. Its no longer just financial data. Non-financial data could be things like your headcount stats. How does that correlate to your revenue? You can look at your customer buying patterns, what are they buying? What are they not buying? It's all those things, and it's not just give an income statement, the P&L balance sheet and cashflow anymore, it's giving more than that. It's the underlying drivers that leads to that number that we can help analyze and I think whatever efforts we give will help with future planning. I think if you've got a strategy, if you need to strategize, and you've got all this intelligence now, it surely will change your mindset and possibly changing the way that you used to budget and draw strategy.

Closing: (17:05)
This has been Count Me In, IMA's podcast providing you with the latest perspectives of thought leaders from the accounting and finance profession. If you like what you heard and you'd like to be counted in for more relevant accounting and finance education, visit IMA's website at www.imanet.org.