The prudent businessman!

The financial community in the company as promoter of a sustainable value creation and cash generation

CONTATTO LN Ricerca
Stern Stewart & CO. GmbH
Salvatorplatz 4
80333 Monaco

Contatto
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MANAGEMENT SUMMARY

The external demands placed on CFOs have increased dramatically in the last decade: capital markets, analysts, rating agencies, national and international accounting standards, and compliance directives have had an enormous impact on the efficiency and the influence of the financial community within the company.

In times of growth, operational managers saw it as completely acceptable if the CFO were to withdraw from strategic portfolio and investment decisions, and instead went on a “road show.” Controlling in the meantime had been swallowed up in the jungle that is accounting. Questioning decisions purely from the perspective of a businessman and exercising economic caution were seen as destructive, and it was widely believed that they impaired the business dynamic within the organization. Controlling was then seen as being less important, and was stripped back until merely its reporting function remained. The longest-reaching forecast was merely a preview of the coming quarter. The most recently negotiated budget placed restrictions on opportunities for planning and taking actions. Every management system was abandoned in favor of external standards, compliance considerations, and system and IT considerations. The businessman in the business had died! But now, the present crisis is bringing him back from the dead: the financial community within the company now has a unique opportunity to strengthen its role as patron of sustainable value creation and cash generation, and to realize its role within the company. To achieve these objectives, controlling needs to reinvent itself in terms of its key principles:

1. Controlling is not accounting – it is the basis for far-sighted financial management of the operational areas and for strategic decisions.

2. Reporting, in its practical application, is not controlling. The focus must be directed at the relevant KPIs, and it must be possible to react to changes in the environment.

3. The budget is not a management instrument. Scenarios must be taken into account, and the focus must be on the essentials.

4. The controlling community is not a service center. Organizational consequences need to be introduced, and a new self-awareness must be demonstrated.


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