- More than 15 years overseeing financial analysis, planning, reporting and strategy in industries including technology, biotech, manufacturing, retail and ecommerce.
- Effectively managed diverse transitions, including mergers and acquisitions, for well-established corporations such as VantagePoint Capital Partners, Gilead Sciences, Gap and Pepsi-Cola and startups like Tesla Motors, Reachlocal Corporation.
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Cross-Functional Transparency in Operational and Financial Reporting
- Financial and operational transparency is becoming more prevalent, even a necessity.
In the current economic and regulatory climate, businesses both large and small are competing for credit and capital, while banks and other financial institutions are now much more cautious in making their investment decisions. In this environment, therefore, it is increasingly important for businesses to be financially transparent.
Many start-up companies are required by their investors to provide financial and metric reporting of some kind on a specified time basis, which could be monthly, quarterly or yearly. It is no longer just a check box of key financial deliverables such as an income statement, balance sheet or cash flow.
Investors want to really understand what is behind the numbers:
- What are the assumptions that led to a particular outcome?
- What are the drivers, the push-and-pull levers and the dependencies?
- Who are your strategic partners, key suppliers and vendors?
- What is the revenue pipeline?
- What are your capital costs?
- What are your operating costs and headcount requirements?
- What is your burn rate?
- Investors are looking for and demanding a culture of transparency instilled from the top.
Startups don't follow a linear path and are unpredictable and often things don't always work out according to plan. Investors know and understand this very well. They look for companies with leadership that instills a culture of openness, confidence, passion and execution.
Employees take their cues from the leader. A confident leader instills confidence – in employees, the board of directors and investors. A leader who is unable to be transparent with his or her board makes excuses. He or she will cut corners and create a company culture based on fear and deceit. This, in turn, leads to employees being fearful of giving bad news, which leads to a culture in which everyone tries to sweep it under the rug when it occurs. If your team can't handle bad news, then it cannot work its way out of a hole.
Transparency helps a company become more effective and binds the organization together more strongly, it helps ensure that every stakeholder has a deep and personal commitment to the mission and aims of the organization.
Lack of trust gets created out of lack of transparency. Mounting evidence suggest that higher values accrue to firms that are upfront with their investors and analysts.
- Raising money continues to be a challenge.
Fundraising boils down to having a story to tell that investors really want to hear. If they are made to believe what the entrepreneur believes, then the chances for raising capital are greatly increased.
In the late 90s, you could raise millions of dollars with just a domain name and customer "eyeballs" – but not a clear idea of how you would actually make any money. And some of that may still exist today for certain investors with hoards of cash sitting around. But in general, you must deliver some kind of business-model proof. How do you plan to make money and do you have proof of that on a small scale? Whenever you are pitching to investors, keep it informative and short, let your true passion and commitment shine through.
Raising money continues to be a challenge because there are so many business ideas for investors to choose from. And expectations for returns have increased. Annual gains of 15-25 percent once made investors happy. But now, investors are keenly aware that today's home runs can yield returns of 500-1,000 percent.
In a venture-capital investor's world, the reality is that only 10-15 percent of portfolio companies are going to make it. So VCs are going to try to bank on the next big thing and choose very carefully.
- Operating cost reductions continue to be a focus.
Because of constant pressure from CEOs or CFOs, cost reduction has become an on-going exercise to build competency around ever-changing business conditions. Cost reduction should not be come about as a singular, one-time reactive initiative. Rather, it should come from process-driven efficiency improvements that add value to the organization.
A proactive initiative, for example, may look to improve manufacturing or production processes and lower cost. It looks at multiple objectives linked to furthering organizational goals. Reactive cost reduction seeks simply to reduce costs by whatever means possible.
Since the financial crisis of 2008, cost reduction's low-hanging fruit – such as headcount reduction, manufacturing downsizing, and outsourcing –- has mostly been picked; these areas are unlikely to yield significant additional savings. That means other opportunities need to be identified. One example, strategic sourcing, a procurement process applied to manufacturing purchasing, involves partnering with preferred vendors to achieve favorable pricing, delivery and quality. It can be applied to all goods and services, resulting in lower costs, higher reliability, better purchasing terms and improved service.
At one of my firms, we applied strategic sourcing across all our vendors and saved the company $1 million within three months. It enabled the company to have access to the best vendors and suppliers, who wanted our business and would do what it takes to deliver.
- Internal processes are typically fragmented and inefficient.
Most large organizations today are multi-level and multi-national. Operations span multiple countries and are typically supported by staff that is fluent in a variety of languages. Operations are decentralized with considerable autonomy at the local level. Aligning information and processes across organizational boundaries is both an operational challenge and a necessity.
In most organizations today, regardless of size and complexity, there is a great disconnect between who has ownership of data and who manages and processes the data. Coordination and collaboration is mission-critical for the functions within the company. The integration of information for internal and external reporting means that the quality of data generated, collected and analyzed internally becomes critical to the success of a company. This may sound obvious, but in many firms, this kind of integrated and quality information simply isn’t available or there is a lack of understanding of the numbers and their relevance. This hampers decision-making, because too much time is spent reconciling figures or trying to get the right information out of different systems.