The Role of a CFO: motivating people, managing assets and hedging risks. Денис ДубовцевЧитать онлайн книгу.
Anything extraneous, artificial or coerced will naturally diminish over time; hence, processes should align with the casual, day-to-day needs of the customer.
In the realm of finance, this entails bolstering decision-making, managing assets, reducing risks, and, importantly, financing the enterprise itself in a comprehensive sense. Adherence to tax authorities and other governmental structures is only fulfilled because it is an integral aspect of asset and risk management processes. Shareholders, encompassing equity, bond, and other debt or convertible securities holders, credit note holders, long-term investors, and creditors within project and syndicated financing, stand as some of the most critical clients for the finance department.
To fulfill the needs of both internal and external clients, finance professionals should configure processes within the enterprise to ensure the most seamless and predictable satisfaction of the demand for information and analytics, primarily catering to management and shareholders.
Therefore, when recruiting employees for the finance department, attention should be directed not only to their resumes and qualifications but also to their alignment with the enterprise’s values and operational methods within the finance department. While this may seem like common sense, these simple and straightforward aspects are often overlooked in practice. The ramifications of erroneous decisions and negligence can be detrimental to both the team and the reputation of the finance department within the enterprise.
As an illustration, one can look at a leading company in terms of sales volume and undeniable leadership in Russian product retail – «Vkusvill». Its founders and leaders have long championed a corporate policy of customer orientation and maximal reduction of bureaucracy internally and externally. Each employee in the company fulfills specific functions for a particular customer, often catering to several types of customers. The primary customer is the consumer – the visitor to the store or the «Vkusvill» website. Another equally important customer is the consumer of work or service within the company – the internal customer.
The consumer, also an external client of the retail network, supports the company through their visits or attention to the brand, the size of their shopping cart, and the amount spent within a specific period. Consequently, their actions may either bolster or diminish their usage of «Vkusvill» products or lead to their cessation. Similarly, an employee – the user of internal services – should have the option to choose between internal service providers and the possibility to replace them entirely with external, third-party services.
In line with this, «Vkusvill» has implemented not just «customercratic» practices, as its leaders term it, but has also duplicated all key functions, or service providers. This has been executed to ensure that internal customers always have options, and internal services thrive in an environment of motivational and healthy competition. Undoubtedly, such a model may not be suitable for every enterprise and sector, as some may lack the profit margins to sustain such initiatives, while others may require stringent control over specific internal processes, such as security. In varying corporate cultures, such practices may give rise to politics, intrigue, coalitions, gossip, and ultimately lead to a decline in service quality and process efficiency. However, embracing, testing, and selectively implementing the best corporate practices are pivotal for development, motivation, and long-term success for any team.
Employees in internal service departments should always remember that if they lose a significant portion of their clients, insolvency may be imminent, similar to conventional competition among enterprises in the market. Consequently, if an internal service employee fails to be customer-oriented and efficient, the corporate culture and business practices of the enterprise should allow for the possibility of revising their scope of work or even their termination. To a large extent, such corporate culture and the establishment of a corresponding environment, or conversely, the refusal to create a competitive finance department, populism, and the protection of unscrupulous employees, are the direct responsibility and indeed the choice of the financial leader.
The Structure of the CFO’s Establishment
In practice, the structure of a finance department hinges on the functions and responsibilities overseen by the financial manager within each specific company. These internal organizational setups vary significantly from one shareholder to another, resulting in diverse roles for financial directors across different companies that differ greatly in scope, depth, and quality.
The traditional duties and authorities of financial managers also vary markedly based on geographical factors, varying from country to country. I have had the opportunity to live and work in several countries for over ten years, both as a banking specialist and as the head of corporate client divisions in banks in Russia and Europe, as well as managing companies in various European countries and the UAE. Early in my career, I directly interacted with financial directors of my corporate clients, and later I held that position myself. This experience allows me to compare approaches in the regions in which have worked, collaborated closely, and built businesses.
In Russia, the role of the financial leader is quite broad, encompassing responsibilities ranging from accountant to financial director, including:
1. Chief Accountant with certain CFO responsibilities.
2. Head of the Finance Department, focusing on data analysis and planning (even without overseeing accounting and payments);
3. CFO, making decisions on a wide range of accounting and financial-economic tasks, either as a classic CFO or as a Deputy General Director for economics and finance;
4. Financial-Operational director with a broad spectrum of tasks, not limited to financial and accounting matters but also encompassing responsibilities for the operational and administrative service units of the company.
In the latter case, in addition to purely financial teams such as the finance department, treasury, and accounting, the senior manager’s responsibilities include various compositions of the operational responsibilities, like human resources (such as payroll and HR document flow support, rather than recruiting or assessments), business analysis, automation and support of corporate IT systems, legal services, compliance and internal controls, and the administrative and economic functions.
In Western Europe, a CFO typically possesses a significant accounting and tax background, resembling more of a chief accountant with financial management functions. Therefore, a common requirement for such positions in Europe is to have the CPA (Chartered Public Accountant) certification.
In the operations of a European company’s finance department, considerable attention is paid to credit analysis, working with accounts receivable and accounts payable, tax accounting, and reporting. Career advancement for financial professionals in European companies often involves area-specific study, spending several years in each function. They rarely have wide coverage of tasks and processes within the responsibility area of one specialist or department, but rather increasing expertise and close hands-on focusing on a specific field. Financial specialists in European companies frequently focus on a single area of responsibility throughout their entire careers, gradually increasing their salary due to indexing and gaining greater autonomy in decision-making (e.g., in determining the size and terms of limits for accounts receivable).
In the CIS (Commonwealth of Independent States, former Soviet countries) and EU (European Union) countries, the primary functionalities of the so-called «classic» CFO include:
1. Financial analysis and planning, including project analysis (“ad hoc” tasks as requested), financial modeling, and budgeting.
2. Accounting and tax planning.
3. Management accounting and reporting.
4. Process automation and BI-reporting, supervision of financial IT-systems.
5. Treasury management, including liquidity management, payment processing, and maintaining a payment calendar.
Corporate IT systems usually fall within the CFO’s area of responsibility, and therefore they play a crucial role in selecting and enhancing not only financial systems, but also overall management and automation systems (ERP), customer relationship automation systems (CRM), working closely with heads of production and leaders of commercial