Capital management is dominating financial news of late. Pundits everywhere are digging into the impact of the current economy on corporate repatriation, higher inflation expectations, equipment expenditure levels, stock buy-back plans and more – all of which likely require involvement from the board when it’s time to make a move.
While the directors of your board shouldn’t push themselves into the roles of management, they are ultimately responsible for oversight and guidance on strategies and decisions. Many CFOs tend to concentrate on delivering information that helps their boards get comfortable in giving counsel to help management execute.
Progressive CFOs have a different rallying cry where their boards are concerned: “How can I galvanize the most productive board engagement for results-driven impact?”
Resounding doubt continues as to whether GAAP financial statements are useful in evaluating company performance. Many executives, myself included, argue that adjusted financial statements are just as inadequate when trying to make decisions for go or no-go transactions, such as repatriating cash, whether to hedge against a strengthening of the dollar, acquisitions, and how to fund major capital expenditures, to name a few.
What is the solution to accessing actual data for the management team and your board, which will allow the board to be an advocate for your plans?
The answer is found in real-time performance information.
For all that you measure and report, cash flow is king
Jack Welch, former chairman and CEO of General Electric, said it best: “Too often we measure everything and understand nothing. The three most important things you need to measure in a business are customer satisfaction, employee satisfaction and cash flow…. And cash flow is the pulse – the key vital sign of a company.”
Modern CFOs are giving their boards a clear, detailed understanding of cash position based on three things – operations, geography and individual customers – and they’re doing it on a real-time basis, in a language their boards understand.
Whether transactions are small or large, and regardless of the locations and lifecycles of customer engagements, the rapid-cycle nature of technology is capturing, filtering, analyzing and reporting meaningful data in seconds – revealing the consolidated position of each operation compared to the group as a whole, along with which customers are meeting their performance goals and much more.
Additional reading: The Six Key Areas where CFOs Fail to Deliver for the Board of Directors
A ‘culture’ change is taking place
To navigate today’s global financial landscape, CFOs are beginning to realize they need to transform the information, measurements and analyses they put in front of their boards. This change in culture allows the focus on their measurements to be quickly understood and adopted across the entire organization. And in a much larger context, real-time information is becoming the lifeblood of their company cultures, minimizing time and barriers to achieving strategic objectives.
Everything is crystal clear when everyone has access to real-time cash information (see graphic below). For example, it can be seen at the time payroll is funded that it is more or less than the previous week or month. There is no waiting for payroll data to be added to the ledger across numerous accounts, which is an unnecessary delay that makes impact hard to determine and understand.
Kyriba dashboard screenshot demonstrates global cash positions
When you have the ability to perform root cause analysis behind the variances on dashboard data views, your people in operations, for example, can see and understand what is happening right now and what corrective actions should be taken. They become accustomed to monitoring data on a daily basis and driving real-time execution. This is far better than waiting on GAAP or adjusted financial statements, being reactive instead of proactive, and “guess-timating” on corrective actions.
To get this level of insight, a growing number of CFOs are embracing fast, secure cloud technologies as a potent stimulus for transforming financial functions and more efficiently achieving their objectives – including building more productive relationships with their boards.
Your board is your advocate
Corporate governance is increasingly complex, with more external pressure and demands than ever before placed on boards to ensure regulatory compliance, make sound decisions and investments, and enact policies that best serve the strategy of the business.
High-performing boards, and those who do not infringe on the role of management, are those with a lucid understanding of cash performance and foresight gained from that understanding.
Of the many roles your board plays in the efficacy of your organization, the role to nurture most is that of your advocate. When you provide ongoing, current cash flow information to the board, directors are able to have informed and meaningful dialogue with you, and become the value-added partners you need to confidently champion your recommendations and goals.
This is what productive management-board relationships are made of, and how CFOs are driving results with impact in a competitive business environment.
Michael Dinkins is president and chief executive officer of Dinkins LLC, a financial services firm connecting business owners seeking capital with lenders seeking borrowers. Michael has spent more than 40 years in finance, including a distinguished 17-year career with General Electric and GE Capital, and CFO roles with five different publicly traded and privately held companies. Michael currently serves on the board of directors for Community Health Systems and the National Council on Compensation Insurance.