Nobody knows your organization greater than you do. After all, you are the CEO. You know what the engineers do you know what the production managers do and no one understands the sales procedure greater than you. You know who is carrying their weight and who is not. That is, unless we’re talking about the finance and accounting managers.
Most CEO’s, specifically in tiny and mid-size enterprises, come from operational or sales backgrounds. They have frequently gained some expertise of finance and accounting by means of their careers, but only to the extent essential. But as the CEO, they must make judgments about the functionality and competence of the accountants as properly as the operations and sales managers.
So, how does the diligent CEO evaluate the finance and accounting functions in his business? All too often, the CEO assigns a qualitative value based on the quantitative message. In other words, if the Controller delivers a good, upbeat economic report, the CEO will have positive feelings toward the Controller. And if the Controller delivers a bleak message, the CEO will have a negative reaction to the particular person. Regrettably, “shooting the messenger” is not at all uncommon.
The dangers inherent in this technique must be obvious. The Controller (or CFO, bookkeeper, whoever) might recognize that in order to shield their profession, they need to have to make the numbers look better than they truly are, or they need to have to draw interest away from negative matters and concentrate on good matters. This raises the probability that essential issues won’t get the attention they deserve. It also raises the probability that great individuals will be lost for the wrong factors.
The CEO’s of significant public organizations have a big benefit when it comes to evaluating the efficiency of the finance division. They have the audit committee of the board of directors, the auditors, the SEC, Wall Street analyst and public shareholders giving them feedback. In smaller businesses, however, CEO’s need to develop their own techniques and processes for evaluating the efficiency of their economic managers.
Here are a few recommendations for the modest business CEO:
Timely and Accurate Financial Reports
Possibilities are that at some point in your career, you have been advised that you should insist on “timely and precise” monetary reports from your accounting group. Sadly, you are probably a extremely good judge of what is timely, but you may possibly not be virtually as very good a judge of what is correct. Definitely, you don’t have the time to test the recording of transactions and to verify the accuracy of reports, but there are some factors that you can and must do.
Insist that monetary reports consist of comparisons over a number of periods. This will enable you to judge the consistency of recording and reporting transactions.
Make certain that all anomalies are explained.
Recurring expenses such as rents and utilities need to be reported in the suitable period. An explanation that – “there are two rents in April because we paid May early” – is unacceptable. The May rent need to be reported as a May cost.
Sometimes, ask to be reminded about the company’s policies for recording revenues, capitalizing charges, and so on.
Beyond Monthly Monetary Reports
You should expect to get information from your accounting and finance groups on a everyday basis, not just when monthly financial reports are due. Some very good examples are:
Daily cash balance reports.
Accounts receivable collection updates.
Money flow forecasts (cash specifications)
Substantial or unusual transactions.
Steady Operate Habits
We’ve all identified folks who took it simple for weeks, then pulled an all-nighter to meet a deadline. Such inconsistent work habits are strong indicators that the person is not attentive to processes. It also sharply raises the probability of errors in the frantic last-minute activities.
Willingness to Be Controversial
As the CEO, you require to make it quite clear to the finance/accounting managers that you expect frank and sincere details and that they will not be victims of “shoot the messenger” thinking. After that assurance is offered, your monetary managers must be an integral element of your company’s management team. They must not be reluctant to express their opinions and issues to you or to other division leaders.