The Difference Between a Financial Controller and a CFO
As I said to a financial controller recently, I can ask my friend's sixth grader to look at the P&L Account to tell me the % growth figures for Revenue, but I need you to tell me why!
Storytelling is a leadership skill. The ability to explain the complex in a simple, clear and relatable way is a must have skill for accountants wishing to reach the CFO level.
It doesn't matter what sector or what size of company. Tell me what's happening.
Bridges
If you're explaining why EBITDA next year is going to grow from $5m to $10m, show me in stories. Show me the impact of the pricing policies, the volume growth impact, the efficiency impact of the revamped production line, the cost of those new employees, the effect of the new product launch. Build a bridge of stories that explains that $5m increase.
If you're describing the synergistic benefits of this next acquisition target, please spell out who, how and when these benefits can occur.
If you are articulating the post-acquisition costs of the integration strategy, put these into the context of the deal. Show me why this investment contributes the Return On Investment.
Volume & Yield
In other words stand back and talk like a leader. It's the implications of a set of numbers that matters. Don't make me work at it. Remember every financial variance starts with two reasons that caused the variance. Let's assume we are talking about a variance between actual performance and plan. If it's a revenue variance it must have caused by volume and or yield! You sold more or less products than planned and or you sold then at a higher or lower price. That's it. Same with salaries. More people or less people at higher salaries or lower salaries!
Presentation Layer
Finance is full of jargon and potential mystery but as a financial controller you need to dive deep to unearth what is actually happening in a business. Your first version of the explanation will be raw but that's fine. Now you need to fine tune those words to produce a presentation layer that is understable to mere mortals.
In a recent construction example the Gross Margin % had unrepentantly declined in the month of July. By examining all GM% by type of Revenue an issue was uncovered. A timing difference had caused a mismatching of costs and revenue on a specific job. the story is easier to tell when you have the facts.
If It's Interesting It's Wrong
I was 26 years old, a confident young CA when by boss, the divisional CEO of Thomson Reuters said to me. "Ian you're producing these numbers on time every month with comprehensive detail but they are wrong." Once I'd stopped crying (just joking) I asked him to enlighten me. Of course he had spotted an interesting ratio in the KPIs concerning the ratio od Ad pages to Editorial pages. Malcolm Gladwell would call it the Blink Test. It just couldn't be right. It was outside reasonable parameters and his 35 years of experience told him that. It taught me the lesson of reviewing my work more thoroughly. If you like there is no such thing as a great writer just a great rewriter.
Review Time
As a financial controller you are often required to meet unreasonable deadlines with limited resources but those are just excuses. Build in review time to check the work. Ask yourself - do your explanations make sense. Do I need to be in the room to explain my narrative or my charts? Could I simplify my story to make it clearer?
Storytelling
Storytelling takes time and practice to become better. It could be a report, a small meeting or a room of 250 people. Be clear on the messaging you are conveying and be your biggest critic.
Ian is the founder of The Portfolio Partnership. A Value Creation Company that partners with owners to "Build Exit Ready Businesses."
Ian@TPPBoston.com