When I first became a chief financial officer, 25 years ago, I had taken a few accounting courses, but I was not a CPA. Like many CFOs, my background was in investment banking and financial analysis. I was lucky; I worked with a terrific controller, who patiently guided me through what I needed to learn to be an effective financial leader.
Today, I often meet CFOs with backgrounds like mine. When they ask me what I wish I knew when I started, I offer them these 10 key questions:
1. What are all the management judgments we are making as we prepare the financial statements?
Some numbers in the financial statements are facts. Others are opinions. Let’s figure out which are which.
2. How long does it take us to close the books?
Why does it take us so long? What manual processes are involved, including rekeying data into our system? How can we improve these processes?
3. Do we have one integrated system for both our financial information and our operating metrics?
One of my favorite leaders used to say there are facts, and there are true facts. If you have two or more reporting systems, you will spend unproductive time reconciling differences and untangling conflicting definitions. I’ve seen one company with four different definitions of revenue: non-GAAP revenue before credits, non-GAAP revenue net of credits, revenue for calculating sales compensation, and GAAP revenue. You need a single source of truth.
4. Why do we have so many reports?
In one example, a financial department distributed more than 100 periodic reports. Many of the people who had originally asked for these reports had moved on years before, and the accounting team had no idea who was reading them or whether they were still valuable. After th team moved the reports online, to be accessed by staff in a self-serve manner, it became clear which reports were being used and which were no longer valuable.
5. Show me everything we are doing in Excel. Why are we using Excel?
Excel is a brilliant invention, versatile and easy to use. It’s also hard for groups of people to use together, easy to make mistakes, hard to find mistakes and insecure. The best way to use Excel is for rapid prototyping of anything new. Once the process is stable for three months, it’s time to move to a collaborative, automated, secure enterprise system and off Excel.
Related: How to Become CFO of Your Life
6. Who has access to what functionality in the accounting system? How is this documented? Who approves changes?
A single administrator should control the system and make changes according to a documented approval process.
7. What is the volume of transactions in our department? How many invoices are there and how many vendor payments? How many lines items for each exist? How do we measure quality?
Use this information to plan staffing levels. Demonstrate improving efficiency and quality over time.
8. How many sales orders or invoices are cancelled and rebilled and what are the primary causes of such events? How many dollars are involved?
If it’s a large number or large dollar volume or both, it’s a sign of a badly designed system. Fix it.
9. How many manual journal entries are we making during the close process? What audit exceptions are our auditors finding?
Determine the underlying root causes. Take corrective action.
10. Where should we invest our next dollar in the finance department?
Prioritize the problem areas and focus resources where they are most needed -- whether permanent staff, temporary staff, training, automation, integration or process redesign. Use the latest cloud technology tools to simplify, standardize, centralize and automate all processes.
I’m sure many of the CFOs reading this have their favorite questions to ask their controller. And many of the controllers reading this have an even better idea of what questions CFOs should ask.
Please share your questions in the comments section below.