The Frustrated CFO

Ten Reasons Why "CFO Techniques" Is a Must-Read for Small-Business CFOs

Reason #1.

"CFO Techniques" was NOT written from an academic perspective, such as of a typical university professor with a consulting-for-large-business on the side.

On the contrary, it WAS WRITTEN by your fellow CFO, who utilized her postgraduate degrees in the small-business trenches. During more than 20 years of this hands-on experience, with the last 18 in CFO and Controller positions, she was fortunate to gain exposure to all facets of financial management and organizational administration. Just like the most of you, she knows only too well what it means to wear many hats at the same time.

Reason #2.

Yet, the author did not loose a constructive touch of a theoretician. In writing the book, she employed her:

• in-depth knowledge of the fundamental principles that govern all areas of corporate accounting and finance,
• methodical approach to all tasks that compile ever-expanding scope of a CFO's responsibilities,
• and ability to dissect the cause and effect relationships of various concepts.

The result is the crystallization of the vast experience into a streamlined functional system, easily adaptable to various types of businesses and industries.

Reason #3.

"CFO Techniques" doesn't try to rehash official regulations, statistical information, bits of hot technology news, results of narrow studies, and such. The book's mission is to spotlight the most important areas of a CFO's or a controller's functionality:

Reason #4.

These professional cornerstones are broken down into crucial components described in bite-size, easily digestible chapters written in a fun and lithe language. The book presents the most complex financial and accounting concepts in comprehensive forms,  which can serve as introductory aids for those who just attained their first controllership appointment and as concise refreshers for seasoned professionals.

Reason #5.

It is an unfortunate truth that millions of small businesses struggle (and frequently fail) to survive not because they are neglected by owners and managers, but because these hard-working people simply have no clue what exactly is wrong with their companies, where are the weakest points, which areas require immediate improvements. Smaller enterprises suffer the most from the lack, even complete absence, of business intelligence and performance analytics. "CFO Techniques" is a part of the author's personal crusade to help small and mid-size businesses by providing them with survival tools (analytical, budgetary, procedural, etc.) that don't require expensive and complicated software.

Reason #6.

One of the most unique and valuable devices offered within the book is the proprietary  chart

INCOTERMS FOR ACCOUNTANTS.

Originally developed by Eclectic & Dynamic Controllership Consulting (E&D CC) specifically for businesses involved in buying and selling goods, it expands the definitions of standard Incoterms to include such accounting notions as title transfer rules and description of applicable source documents, thus accommodating needs of proper revenue, COGS, and inventory recognition.

 

Reason #7.

One of the main underlying themes of the book is the necessity for small-business CFO's and controllers to raise themselves above the bean-counting stereotype and become critical thinkers, indispensable members of the executive management team. "CFO Techniques" emphasizes this pressing demand throughout every section and accentuates the tasks that may facilitate such transformation.

Reason #8.

While shedding new light on the day-to-day routines and spinning conventional accounting and finance tasks as crucial and indispensable cogs in the business machine, the author's functional system gives equal rights to new categories of CFOs responsibilities, such as company-wide Information Technology Management, Risk Control, and Strategic Planning.

Reason #9.

The book takes a holistic approach to multi-faceted positions of CFOs and controllers and supplements specific structural guidelines and practical functional advices with discussions of more general topics applicable to any senior professional operating in private-business environment. Among others, it includes observations and suggestions on how to deal with people on different level of corporate hierarchy and what changes to expect in your future, even if at the moment you feel 100% secure.  

Reason #10.

Even if you don't learn anything new, or if you'll find the book not applicable to your specific professional niche, at the very least you can entertain yourself with the multitude of eclectic cultural references and business insights from the author's personal experience woven through the book's text.

Ten Reasons Why "CFO Techniques" Is a Must-Read for Entrepreneurs

Reason #1.

You are a part of a proud cohort of just a few millions of people who summoned their courage and said, "I will not work for the Man anymore! I will be my own boss!"

While your company is growing, it will need to keep its overhead lean. Meanwhile, you can use "CFO Techniques" as a surrogate for a seasoned executive that will provide you with clear guidelines for financial and administrative management.

Reason #2.

Don't let the title fool you. "CFO Techniques" is not a bean-counting manual. It's written with a view to achieving commercial success and places business considerations ahead of everything else.

Reason #3.

It will arm you with a flexible framework for structuring your business in a logical and sensible way.

Reason #4.

"CFO Techniques" is not an academic textbook either. It manages to shed new light on various aspects of finance and business in a fun and easy language. The book is organized into a bite-sized chapters sprinkled with familiar cultural references and illustrations from the author's professional life.

Reason #5.

Yet, it's packed with practical advice,

instructive suggestions, step-by-step guidelines,

checklists,

and visual examples.

Reason #6.

"CFO Techniques" will provide you with a comprehensive breakdown on acquisition of capital resources necessary to sustain and grow your business.

Reason #7.

An entire section of the book is devoted to assessment, reduction, and transfer of the internal and external risks your company may encounter in a normal course of business and in extraordinary circumstances.

Reason #8.

"CFO Techniques" will show you that one of the most critical determinants of whether your company will fail or prosper is the active attention to its performance. The book rejects the rigidity of the uniform approach to business intelligence and underscores the importance of selecting specific indicators that will have the most significant impact on your decision-making process.

Reason #9.

Anticipating your furture needs, the book describes the fundamental steps of strategic planning and basic techniques for explorting opportunities as well as diminishing external threats.

Reason #10.

And when you are looking to hire a CFO, a valuable member of your executive team, the book may serve you as a benchmark in evaluating the candidates' breadth of expertise and depth of knowledge.

"CFO Techniques" Technical Reviewer's Comment for Small Business CFOs

LinkedIn Groups

• Group: Small Business CFOs
• Discussion: How important is to have a Policy & Procedure for a small business?

"Marina Guzik references her recently published "CFO Techniques" book, and it truly is a terrific reference guide for savvy CFO's, containing valuable information about best practice considerations on a number of critical topics. She has done an outstanding job of writing an easy-to-read one-stop source of valuable tips on identifying and solidifying core business functions, and it was my pleasure to assist with its technical review. A must-read for those wishing to learn more about making their business the strongest it can financially be!"
Posted by Randy KRUG

Apress Publishing Issues a Press Release for "CFO Techniques"

You can read it here:

The Insightful New Resource...

I apologize for mistakes made by Apress's PR people responsible for the press release (I definitely don't dispense advice on hardware selection, but I talk extensively about various accounting software). I hope that the direct quotes taken from the book will speak for themselves.

"CFO Techniques" Has Been Released Today

Available on Amazon

From the editorial note:

"CFO Techniques: A Hands-on Guide to Keeping Your Business Solvent and Successful is a comprehensive and instructive working manual for multitasking chief financial officers and controllers working in the fast-paced commercial environment. Every senior financial professional with an ever-broadening span of control will benefit from this complete outline of the core activities—with specific descriptions of individual tasks—comprising the daily agenda of a successful CFO or controller. It covers everything from traditional responsibilities like budgeting and financial reporting, to more innovative tasks like performance analytics and business strategy development.

While emphasizing specific guidelines on what it takes to excel as a company’s head of finance, the book refrains from overwhelming dryness by using cultural references, real-life examples, and a casual tone. With its bite-sized, easy-to-read chapters, CFO Techniques serves as both an invaluable desktop reference handbook and a good bedtime read. Whether you need a quick recommendation on treasury procedures, adhering to GAAP, keeping funds safe from embezzlers, or advice on dealing with the CEO, you will find the answers in this book."

The Weakest Link in a Corporate Finance and Accounting System

Let’s say, as a CFO or Controller you have all policies outlined and procedures carefully designed.  Everything is properly documented and bound into books and manuals, which are readily available for orientation, training, and daily reference.  Through intensive internal audit program all components have been examined; everything have been tested in practice.  Whatever did not work well has been tweaked; cumbersome procedures were replaced with more straightforward ones; the inferior ones have been improved.

Finally it has been determined that the internal control system is both effective and efficient in accomplishing the company’s goals and the executive management’s objectives.  Is it reasonable at this point to expect that everything should be working like that expensive watch I keep mentioning as a model of a perfect mechanism?  Unfortunately, not. 

We don’t exist in the virtual world of The Matrix trilogy, where everyone is manipulated by the digital code.  In real life it is the other way around: our well designed systems and structures depend on being properly handled by people.  Their proficiency and diligence determine how well the policies and procedures are being performed.  The truth is that every task performed by an employee is vulnerable to occasional unintentional errors, consistent sloppiness, and even deliberate mishandling.

Any designer of functional systems, with frameworks that include people as key elements, knows that humans are the weakest links in the chain of actions.  Long time ago, when computers were so huge that a single unit occupied a hall the size of the New York Public Library’s Reading Room, all programs and data were coded on punch cards.  A punched out spot was read by the computer’s card reader as a character or a digit.  These cards were manually created by operators trained to use a keypunch machine.  Guess what?  Two separate people produced every card in duplicate.  No exceptions. If the cards did not match, they have to be re-punched.  Thus, the risk of human error was managed.

Such duplication of staff is unthinkable now.  Today, we rely on computer systems to reduce at least the most common of the risks.  The rest of flaws must be caught through vigorous and persistent scrutiny of performance quality.  Monitoring is the cornerstone of internal control and one of the most important responsibilities of a supervisor.  It brings the entire system together and assures that policies, procedures and people concur.  A series of timely and thoughtful tests should become a part of your, or your internal auditors’, routine.

Remember:   If not corrected, every mistake your employee makes will end up in financial data, documents and reports, for which you are ultimately responsible.  One erroneous entry may affect your bank’s collateral statement or a presentation to the board of directors.  Omissions will impair strategic decisions.  Communication mishaps can impact commercial relationships.  These flaws will most definitely be a poor reflection on your reputation as a financial leader.  You have to create filters that will catch the debris before they pollute the results of your hard work.

You can read about various practical techniques of reducing accounting and finance systems' vulnerability to human factor in my upcoming book "CFO Techniques" (Apress, 12/02/2011), now available for pre-order at Amazon and Barnes & Noble.    

My Book Is Now Available for Pre-Order

My book "CFO Techniques: A Hands-on Guide to Keeping Your Business Solvent and Successful" (Apress, December 2,2011) is now available for pre order at Amazon and Barnes & Noble:

• ISBN-10: 1430237562
• ISBN-13: 978-1430237563

The Frustrated CFO Takes Lessons from Robert McKee

Human beings are like sponges - the second we are born we start acquiring general knowledge of things from everything around us.  It is a natural process. 

When it comes to intellectual knowledge, however, we tend to make our own choices.  Some people read Pynchon, others prefer Sports Illustrated.  Some go to see Black Swan, while others would never miss a new Transformers installment. 

It gets even more selective for specialized knowledge -  higher education, professional publications, technical books, etc.  Even with the subjects of human psychology, relationships, our understanding of the world around us (all frequently featured in The Frustrated CFO's posts), people are more likely to go for books written by "specialists." 

But the truth is that the nature of human interactions and the principles of emotional response to life do not change from industry to industry and from trade to trade. They are universal and I have learned long time ago that the knowledge of things pertaining to human experience can come to us from anywhere.  There is a reason I frequently present my topics by referring to books, TV programs and movies - the best examples of these art forms pursue the truth of life; that is why we can relate.

Those who have seen Spike Jonze/Charlie Kaufman's "Adaptation" may remember the screenwriting guru character played by Brian Cox.  Well, he is a real person - one of the best theoretician's of creative writing in the world Robert McKee.  After several decades of writing for theater and television, Mr. McKee found his true calling in formulating a set of fundamental principles for compelling storytelling, which became the framework of his world-touring STORY seminar.   He also compiled them into a bestselling book by the same name.

I happened to know a young screenwriter who attended McKee's seminar twice and described it as a life-changing experience - not just as a writer, but as a human being.  You see, Robert McKee teaches how movies should be written so that they penetrate straight into the audience's soul.  So, inevitably he touches on the subjects that reach far beyond cinematic matters.  That, together with the fact that his films recommendation list pretty much matches my own roster of favorites, persuaded me to buy his STORY book.

What can I tell you?  This is a very brilliant man.  Anyone who loves movies should read this book...  And everyone who considers himself a student of human nature should read this book.  It is impossible to convey all the wisdom Robert McKee generously shares, but his study of "the principle of antagonism" is particularly invaluable.  

He goes beyond the conventional knowledge that antagonistic conflicts are at the basis of existence (and a story, of course).  He concludes that there are three primary antagonistic forces for any positive value, progressing from contrary to contradictory to "the Negation of the Negation," which, unlike in math where two negatives make a positive, is "a force of antagonism that's doubly negative."  

He further constructs illustrative charts for such values as love, truth, consciousness, wealth, communication, success, bravery, loyalty,  justice, wisdom, and freedom.  I find the last three absolutely universal and applicable to many conflicts we encounter both in our professional and personal lives.  They are reproduced below.  It's mesmerizing: you look at them and it's like a reel of your life's events, fitting perfectly into these diagrams, unspools in front of your eyes.

New CFO's Essential Knowledge Prerequisites

When you start as a CFO, the first thing to do is to get your bearings - to assess your position relative to your surroundings.  As quickly as you can you must grasp general ideas about typical characteristics of your environment, your own role and purpose, expectations of others, as well as primary routes for channeling your talents and efforts.  But as soon as you are done with that, comes the time to get down to the level of firsthand details and study the specific aspects of the business.   You need to draw a detailed map that will help you on your journey as a financial leader.

This is a mandatory activity for a recently hired head of finance, new to the company.  It is a good idea for someone who has been with the company for a while in a lower position and just been promoted – new vantage point may provide you with the better vision of your company.  Even if you’ve held the top post for a few years, but never got around to do this and feel that incomplete picture prevents you from excelling, maybe now is a good time to go back to the drawing board.

This is your R&D stage, necessary for proper functional design.  Your research will help you to improve future performance.  Every CFO and controller must acquire an exhaustive understanding of his employer’s business. There is no doubt, that compilation of, what I call, the big picture is the key element in your strategic responsibilities. However, it is just as important for day-to-day hands-on management.  In the absence of thorough knowledge of all operational and organizational features, it is impossible to construct budgets, define tasks, or determine reporting requirements.

At the very least, your information-gathering activities should be focused in the following four areas:

Study of Corporate Structure

Economic complexity pushes businesses into multiple levels of diversification - wider product ranges, additional services, new geographical and demographic markets, related industries, outsourcing, foreign productions, etc, etc.  As companies pave new ways, their corporate structures adapt accordingly: branches are created, subsidiaries are formed, and satellite offices are opened.  Today, a $10 million service company may turned out to be a surprisingly complicated organism.  This affects nearly every accounting and financial function: local taxation, inter-company transactions, principles of consolidation, financial statements disclosures, banking facilities – just to name a few.

Study of Operational Flow and Value Chain

During your orientation stage this study has immediate practical applications.  It is a prerequisite to identifying accounting cycles, classifying assets and liabilities, pinpointing cost centers, determining analytical and financing needs, etc., etc.  There are transactions happening at every stage of the operational flow that give rise to accounting events.  Without full comprehension of the value chain you run a danger of oversights and errors.

Study of Organizational Chart and Functional Distribution

If the previous section is about processes, in this one we survey people and their positions.  I don’t have to convince anybody that it is important to figure out the chain of command and designation of responsibilities within your employer’s organization – you just need to know who’s who.  It goes beyond just knowing your peers with whom you discuss company-wide issues and inter-departmental relationships.  You have to know people along the value chain – those, who are in charge of cost and profit centers, have relationships with suppliers, vendors and customers, maintain your facilities and receive your mail.   

Study of Existing Policies and Procedures

If you became a CFO or a controller in a company that already has policies in writing and documented procedures in place, even if they are deficient, consider yourself very lucky.  You can study the existing papers, outline blind spots and pinpoint weak or erroneous steps. It is easier to enforce changes, if employees are already comfortable with an idea of adhering to a recorded set of rules.

On the other hand, you must be prepared to deal with a complete lack of anything in writing.  Important thing to remember is that it does not mean policies and procedures don’t exist.  They are there like an oral folklore of an ancient tribe, passed from generation to generation.  It would be a big mistake just to ignore the traditions and try to impose a new order.  You have to uncover and learn them first.   

Excerpted from my forthcoming book "CFO Techniques: A Hands-on Guide to Keeping Your Business Solvent and Successful" (Apress, December 2011)

The Frustrated CFO Attends a Panel on Risk, Probability, and Chance

Annual World Science Festival took place this week in New York City.  It is a wonderful fair with over 40 events and I try to catch at least two or three.  One of the discussions, I felt, was important for me to attend this time was The Illusion of Certainty: Risk, Probability, and Chance. 

Not only that I find practical application of mathematical, statistical and cognitive theories to business risks, economic uncertainty and commercial intuition to be imperative for strategically inclined CFOs and Controllers, but also my upcoming book on functionality of hands-on financial executives will have a chapter on Risks.  Besides, I've enjoyed books penned by two of the panelists - Leonard Mlodinow's The Drunkard's Walk: how randomness rules our lives and Gerd Gigerenzer's Gut Feelings: The Intelligence of the Unconscious (both are featured on by book list to the right).  And even though the distinguished panel, which also included mathematician Amir Aczel and MIT's professor of Computational Cognitive Science Josh Tenenbaum, ran out of time before they got anywhere near concepts of risks, they have touched on quite a few other fascinating concepts  that have direct application to our professional lives.

Here are few highlights.

I.  Self-confidence vs. probability and empirical evidence.  Our ambitions and drive to succeed mandates nurturing of confidence.  Business schools and work experiences show us that only assertive people who stick to their positions, even if they are based on guesses, achieve their goals.  Here comes, the Monty Hall Paradox - a logical statistical problem with an odd, but empirically demonstrable result. 

It is a probability puzzle based on the TV program Let's Make a Deal originally hosted by Monty Hall.  In the first round, the contestants on the show had to chose one out of three closed doors - two concealing goats and one hiding a car.  Then, the host would open one of the remaining doors revealing goats.  Now, that this door is eliminated, the following question is posted: do you want to switch or retain your original choice.  The confident, "believe-in-yourself" people like us most likely will stick to their guns.  Yet, years of replicating the experiment showed that changing your original choice doubles the probability of winning the car: from 1 in 3 to 2 in 3.  This maybe a good indication that there is nothing wrong with rethinking your position - it may actually be beneficial.

II.  Influence of visual presentation on interpretations of data.  Throughout our careers we have been using graphs, charts, dashboards, etc. in presentations of performance results and other information, because experience shows that it impresses the data recipients better than numbers in tables or narratives.  The reason it works so well is because our instinctive cognitive abilities are much better than conscious digestion of facts.  We are capable of processing visual data flowing at us without even thinking about it. 

Like in the chart below, which shows the relationship between marketing expenses (Y-axis, in thousands of dollars) and sales (volume represented by the bubbles, in millions of dollars).  Just by glancing at the chart anyone can see that the larger bubbles (sales) correspond with higher marketing expenses.  Biologically, it is not that much different from our ability to discern danger when we walk through the jungle.  So, when we design our graphic presentations, we should keep that in mind and try to create images that don't just look pretty, but actually transmit the most valuable messages.

III.  People's blind belief in numbers.  This is something that all financial professionals constantly use while communicating with lenders, investors, bosses, commercial partners, etc., without even thinking twice about underlying scientific theories.  Everybody knows, when you pitch a proposal, renew a credit line, or report on the business results, the more numbers you throw at "them," the better.  Presence of the numbers in a message on its own creates the illusion of certainty, regardless of their substance. 

Advertisers know that very well too.  When we hear in a commercial that 9 out of 10 users of this new cosmetic product saw an improvement in their appearance (or whatever), we automatically accept this as a proof of great achievement.  People forget that because these values are assigned by humans, they cannot be precise.   First of all, what is the definition of "improvement?"  And what if I tell you that the product was used on a group of 30 healthy, good-looking people, ages 20 to 25.  Will you still think that it will work on you as well?