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CFO collected wisdom

I thought it would be both interesting and useful to put this topic out there and see what CFOs think of as valuable lessons, worth passing on to others. This is not a post about "great thoughts". Some of them may be great thoughts, but others may be small pearls of wisdom or simply things you know now that you wish you knew all along.

Answers

Topic Expert
John Kogan
Title: CEO/CFO
Company: Proformative, Inc.
(CEO/CFO, Proformative, Inc.) |

Liability insurance, medical coverage, credit card processing, facilities management, contract manufacturing and many, many other products and services are biddable. That is, there are a variety of product or service providers and chances are good that they are strong in different areas and cost varying amounts.

This may seem obvious, but having walked in as CFO at three ongoing companies I am typically struck by how long some of the service providers have been in place with neither competitive bidding to start nor an annual bidding process to keep the business competitive and low cost.

This takes work and discipline. If you like the first service provider you see and if you are very busy, you will be tempted to just take their bid and run with it. But if you bring in at least two more providers you will a) learn more about what you are buying, and b) may find yourself pleasantly surprised with their service and price.

Likewise, it is easy to stay with a service provider year-after-year. There is always some hungry new player who may drive down cost, provide innovative new service or provide a different blend of products. Once again, if you don't bid it out, you will never know. And this does not mean you are dropping a service provider you like. Often, the mere fact that you are making them bid again will get you a better price from an existing service provider than you would have had you not made them bid. That's free money.

Mark Stokes
Title: CFO
Company: Private
(CFO, Private) |

Sure, you may report to either the CEO or the Board, but the shareholders are the ones who own the company and the company is run for their benefit. We've all seen CEOs come and go. They direct the company's efforts to increase shareholder value and the CFO and CEO are certainly tied at the hip for most things. But the CFO should never lose sight of the final beneficiary of their collective efforts and should weigh all programs, hires, investments and activities against such activity's value to the shareholder.

If your CEO goes off the reservation it is your duty to the shareholder to work with the CEO to make things right. In the very rare case that the CEO stays off the reservation, is self-dealing or very clearly destroying shareholder value and they will not listen to you or modify their behavior, it is your duty to protect the shareholder - even at risk to your career. This may mean going directly to the board to discuss issues. I have outlived many CEOs and have never had a board member penalize me for putting the shareholder first. Of course, I have not, nor would I ever go around the CEO lightly. And I always exhaust every internal avenue before doing so - especially working directly with the CEO, painful though it may be, to set things to right.

Remember the shareholder and let them be your guide, and you will stay on the right path.

Rajeev Seshadri
Title: CFO
Company:
(CFO, ) |

Concur with Mark. Though, it is difficult to time the process and communications with the Board when you are in the thick of things. Especially, if the CEO lies, and it takes some time for the lies to become apparent.

Also, to John's point, incumbent service providers are hard to shake off, esp. if they are key providers like independent CPAs or some key vendors. The smarter ones build political inroads into the firm and just a lower quote from a competitor(s) is not usually enough to move the business.

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