Years back, when I had more hair on my head, the corporate office of the enterprise I worked for at the time brought in a BCG trained consultant to work with the
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DEFINING THE FINANCIAL ROLE IN AN ORGANIZATION
INTRODUCTION
Financial Management is made up of 2 broad functions:
1. Prevention of Loss in the Value of the Enterprise (Protection)
2. Acquisition of Gain in the Value of the Enterprise (Productivity)
In everyday words:
1. Stopping us from losing money we already have
2. Helping us to make more money that we otherwise would have
EXAMPLES OF PROTECTION ACTIVITIES |
EXAMPLES OF PRODUCTIVITY ACTIVITIES |
Obtaining effective security for a delinquent receivable/debt |
Educating managers with P/L responsibilities in the financial implications of decision making |
Designing effective |
Designing a highly motivating results-linked incentive program |
Rapid, tightly controlled cash handling and reconciliation |
Negotiating cost-reducing supplier contracts |
Reconciliation of accounts |
Establishing a tightly measured productivity improvement program |
Inflation-shield clauses in contracts |
Designing innovative asset management programs |
Expense budgeting |
Negotiating a lower cost-of-debt with fewer constraints |
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Participating in industry organizations that can materially influence the competitive market |
Effective warehouse inventory receiving steps |
Setting up creative and competitive pricing practices |
Payroll processing and payments |
Develop finance function |
CHARACTERISTICS OF PROTECTION ACTIVITIES |
CHARACTERISTICS OF PRODUCTIVITY ACTIVITIES |
Defensive, inward looking, preventive, procedural, technical, legalistic, bureaucratic, authoritarian |
Outward facing, anticipatory, flexible, interactive, participative, innovative, social, developmental, educational |
HYBRID ACTIVITIES |
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Banking relationships, preparing the |
PITFALLS TO AVOID
You will almost always produce mediocre, if not downright substandard financial management, if you try to get a clear-cut Protection person to handle the Productivity functions, or the other way round. Very few people do both well, but many do one or the other very well indeed.
THE SOLUTION
Split the two functions. Coordinate them, but split them. Staff them according to their Critical Success Factors.
MULTI DIVISION ENTERPRISES
If a Division cannot afford a fully staffed, twin stream financial structure at each operating entity, then set up Protection functions at each operating level and a Productivity function at the Divisional level,
So, what kind of person became my controller?
The answer is: the Protector. My role was to help the divisional CEO grow the operation. Our corporate