Getting Feedback is Both Helpful and Risky

Hi

Just wanted to share with you a recent experience, where I learned a valuable lesson.

I have been considering whether it would be worthwhile setting up an internet-based offering to help small business owners/managers with financial management. From talking to a couple of people in business it seemed as if there may be some interest in having a site where you can get access to helpful tools, resources, templates, checklists and courses, coupled with the availability of someone like me on the phone or by email. It seemed a good way of giving access to financial management help much more cost effectively.

So I followed some advice. I thought, before I design and develop this I'm going to ask people what they want, and find out what they would find useful. So I designed a survey using my free SurveyMonkey account!

I then sent a link to the survey to CF&M subscribers. I also posted the link on three discussion forums on LinkedIn.

The feedback I got was so varied, it shocked me and depressed me for a little while at least. This is the first time I have done a survey, so I kind of expected that I wouldn't have done it perfectly. But I was still a little disappointed with my efforts when a couple of people very helpfully pointed out one or two glitches. I was still very grateful to those people for pointing them out though, as it gave me a chance to correct them straight away.

On the LinkedIn forums feedback was very direct. One person complained that the survey was "rubbish", which then led to others jumping to my defence and pointing out that that person had not read the survey correctly or gone into it with the right attitude. On another forum the survey was described as "well-conceived"! Interestingly, whilst I was quite hurt by the "direct" comments in the first, it actually generated so much discussion that it spun off lots of really helpful ideas, and was the most active of the three LinkedIn discussion threads.

So, what are my learnings?

First, it's good to get the ideas from your target market before diving in to develop something new. The survey is not closed yet, so I haven't fully analysed what it tells me, but so far it has thrown up some pleasing confirmation of the idea, and a quite different idea of what would be more or less valued.

Second, when you "put yourself out there" you are taking a risk. You have to take the rough with the smooth. Some people are going to love it, some people will hate it. You have to learn from all the feedback, not just the bits you like. It doesn't mean you have to agree with it, but just listen to it, understand it, assess it and decide what it tells you.

Third, when surveying it is best to test the survey first with a close and controlled group. Their specific remit is to give you feedback on the survey itself, as well as completing it. They should hopefully find where there are glitches, and where the questions are not clear or easy to address. Once you have listened to, and addressed this friendly feedback, you are in a much better position to collect the views of a wider group.

Finally, strangely, controversy is not necessarily a bad thing. I'm not, at this point, sure whether creating controversy deliberately would be right. That seems a bit manipulative, and lots of people would see through it. But certainly don't be put off if you make some waves. "There is no such thing as bad publicity" is a bit of exaggeration (witness Gerald Ratner!), but there is a grain of truth in it. One of the secrets of harnessing those waves would seem to be to continue to conduct yourself with integrity, and to use the engagement with people wisely to both show your professionalism, get your point really heard, and get as much useful feedback as possible.

I hope that's helpful.

If you want to take a look at my survey, and help me out if you are the owner or manager of a small business, here's the link:

Click Here to take survey

The Importance of Regular Review

The Importance of Regularly Reviewing Your Finances

I was reminded the other day that many smaller businesses struggle
with knowing what financial information they should be looking at
on a regular basis. Some don't look at any financial information,
apart from maybe their bank statement, from one year to the next.
It's kind of a surprise once a year when the accountant takes their
plastic bag of receipts (or perhaps these days a memory stick might
go with the plastic bag!) and two weeks later they sit with their
accountant to find out how they did. Those in that position lack
confidence in whether they have enough money to spend on things for
the business, and they don't know whether they can do things better.

Other owners of smaller businesses lack confidence that they are
looking at the right things on a regular basis.

So here's a simple little checklist to allow you to healthcheck
what information you are looking at on a regular basis. Apologies
to those for whom this is stating the obvious.

First, you need to place priority on keeping the accounts up to
date on a daily basis or weekly basis at the least. If the
information in the accounting system isn't up to date, then the
reports you get out won't be up to date either. So you need your
bookkeeper, accountant, accounts clerks - whoever keeps your
accounts - to regularly post invoices (sales and purchases), bank
receipts and payments on your accounting system.

Second, you need to look at a profit and loss statement every
month, at least. A profit and loss statement (accountants tend to
call it a "P&L") shows your income/revenue and costs in the last
period. One minus the other is your profit or loss for the period.
The reason you look at it as a statement is that it can tell you
many interesting and useful things that you need to know.

For example, you may get a big surprise when you see your gross
margins (gross profit as a percentage of sales revenue) are 40% and
not 60% as you thought. So it prompts you to find out what's going
wrong there. Or you didn't know that someone had ordered a
particular thing and it's cost £1000, so you go and ask them why
they needed it and why they ordered it without telling you. You
can't leave these discoveries until the end of the year!

Just one quick note, because it's not obvious to everyone - make
sure that these monthly P&Ls are done on an "accruals basis". Say
that to your accountant or bookkeeper and they will know what you
mean. The accruals basis really just smoothes out lumpy expenditure
that you pay for in one month, but relates to a different month or
more than one month - so your audit fee that relates to last year,
or your insurance that relates to every month of next year, and so
on.

Third, you need to look also at a balance sheet every month as
well. The balance sheet is just a statement showing what you own,
what you owe and what is owed to you. Looking at it every month
will help you to see trends and start to understand how to manage
your cash better. It'll give you early warning of things going
wrong with your customer accounts, your stock management or bank
accounts.

Fourth, if you are not in a cash or retail business, and your
customers normally get invoices and pay later, then you will need
to keep a careful eye on who owes you what and when it is due. So
get yourself a detailed aged debtors list (aged just means it shows
the amounts owed in age categories depending whether they are
current, overdue, very overdue or extremely overdue). I would
advise looking at the aged debtors list on a weekly basis, and
keeping it on your desk. Know absolutely what is due in the next
week and keep asking your accounts people every day whether it has
arrived. This is the foundation of good credit control, and is
critical to making sure you keep enough cash in the business.

Lastly, for now, you need to think about what other information
would be useful on a daily, weekly and monthly basis. Perhaps you
need to track your sales, revenues, order volumes, gross profits,
production quantities or whatever - the point of getting regular
information on how the business is doing is so that you know about
problems and successes as soon as they occur (and not a year
later!).

Remember, trying to manage the performance of a business without
using regular information is like an athlete trying to improve his
performance without timing himself.

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Charis FD is Your Friend in Finance. We help businesses with turnover roughly between £1m and £25m, that have not completely got to grips with the finances. Perhaps they are not making enough money, not generating enough cash, or perhaps the finances are simply disorganised and chaotic. We work with the directors and owners in a flexible and affordable way to take the pain out of managing the finances, so that the business can make more money and be even more successful than it already is.

We work mainly in Hampshire, Thames Valley and Central London at the moment.

If any of the above rings true for your business, we would like to hear from you. Either email us at enquiries@charisfd.com, telling us a bit about your business and your finance challenges, or go to our website www.charisfd.com. On our website you will find lots of information, and also a contact form to get in touch with us.

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That's it for this time.

If you have something that you would like us to write about that would help you in improving the finances of your small business, please let us know...

newsletter@charisfd.com

© Charis Business Consulting Limited 2009

Charis FD - Your Friend in Finance

I hope that you found the New Subscriber series of articles helpful over the last two months. They were designed to cover the full range of issues that form part of our business financial management model, centred on the Business Performance Management wheel. All the areas are designed to help you take control of the business finances and manage the finances intentionally.

The purpose of doing the series, apart from giving you some helpful advice, was to do two things:

Firstly, I hoped to demonstrate that Charis FD has a rational model for business financial management, a model that makes sense and covers all the important challenges that you face in making money in your SME.

Second, I hoped to give you an insight into the role that a Finance Director can play in your business. Many small business owners have built their businesses on their own, and whilst they may have met Finance Directors they don't really know exactly what they do or why they might need one.

There is a common misconception that Finance Directors and Finance people in general are simply "bean counters". They punch the numbers into the system and tell you how much money you are making. But you will have gathered by now that there is much more that they can offer. They can help you to be clear on your strategy, to plan effectively; they can help you decide which actions are worth doing, what changes will add value; they can help you measure and monitor business performance and analyse it in order to help make effective decisions; they can help you manage stakeholders; and they can help to manage risk and put in place an internal control system to help to prevent losses and errors.

But here is the tension that you may be feeling now: You can see where your business would benefit from getting better in all the areas we've talked about. But you don't have the time or the confidence in doing it yourself. But neither do you have enough money to employ someone full-time to be a Finance Director in your business and sort it all out. And, to be honest, it may not be a full time job if your business is in the under-£20m turnover bracket.

If that's what you are feeling, then Charis FD's service may be for you. We specialise in delivering assistance to people like you in a flexible and affordable way. Our service has broadly four levels, depending on your needs and your budget. We can provide you with a programme of assistance, combining telephone and email support with a varying number of days onsite working with you. We could be with you as little as one day per month or as much as two days a week.

Our aim is to give you confidence in managing the business finances, which will lead to, amongst other things, improved profitability and better cashflow.

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If you want to talk to us, we're quite happy to give you a call to talk more about your business and the challenges you face. And you may be eligible for a free Finance Strategy Review session. To set that up either email us at enquiries@charisfd.com, remembering to leave your phone number and email address; or go to our website and complete the contact form.

If you want to look back on any of the previous email newsletters we have sent, they are on the Creative Finance & Management blog.

Thanks again for subscribing to Creative Finance & Management. We hope you find it helpful.

© Charis Business Consulting Limited 2009

This is the last in an 8-part series especially for new subscribers to the Creative Finance & Management email newsletter. Every week we are sending you an article aimed at helping you to think about a different aspect of the financial management of your business. This is in addition to the normal bi-weekly newsletter. We are doing it to give all new subscribers the same orientation to the way that Charis FD thinks about small business performance management. That way we can have confidence that all our subscribers have been given the benefit of foundational advice in all aspects of business performance management.

If you missed any of these articles, don't worry. They are on the Creative Finance & Management blog. Just look for the "New_Subscribers" tag.

These are the articles in the New Subscribers series:

1. The ingredients for success in Finance
2. Strategy and Planning
3. Business Change - implementing your strategic plans
4. Measurement and Management go together
5. Paralysis without analysis
6. Your Finance team - a valued asset
7. Stakeholder management - the importance of keeping people happy
8. Internal Control - 3 fallacies that add risk to your business

Here we go again: ...

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Internal Control - 3 fallacies that add risk to your business

Fallacy number one - internal control is boring. Ok, so that's not a fallacy! Internal control IS boring in my opinion. Some of you may even be saying, "What is internal control anyway? Certainly sounds like something boring. Sounds like something that big companies with big auditors might be interested in. But not me!"

No! Please don't switch off, don't close this window and read no further!

Saying that internal control is boring is a bit like a train driver saying that railway tracks, signals and points are boring! He's right, they ARE boring! But if someone doesn't provide those key controls then the train's going to crash. In fact it won't even get going very far.

The same is true in business with internal control. Without controls, your business is going to crash unless it is unfeasibly lucky. So listen up, this will save you much pain.

Fallacy number two - internal control is technical and complex. It certainly can be, but for a smaller business it doesn't have to be.

Internal control is really all about safeguarding the assets of the business, including its cash. And just like safeguarding the assets of your home, mostly it's common sense.

So you could have physical controls, like locks on the premises, access control systems, putting your money in a safe at the end of the day, keeping confidential documents in a locked cupboard, etc.

Authorisation controls are another type of controls. Particularly important when you have employees, these controls just ensure that people get permission from another more senior person (maybe yourself) before they go ahead with something. It may be signing a contract, making an offer to a prospective customer, buying things, or paying for things. Like I said, common sense.

But have you considered that there are certain things that the same person should not be responsible for? These controls are referred to as "segregation of duties", and are mainly geared to avoiding the opportunity for fraud. For instance, if your bookkeeper opens the post in the morning, banks the money received in the post from customers, records the receipt in the accounting system and performs the bank reconciliation, then they have opportunity to make all the right entries in the accounting system but pocket the money themselves. It would take you months to uncover it.

Or another common example: A purchase ledger clerk who is able to set up new suppliers on the accounting system, record purchase invoices and make payments to suppliers, could easily set up a fictitious supplier, record a fictitious invoice and get them paid. Similarly with payroll - don't let someone set up new employees if they are the ones running the calculations and/or making the payments.

There are also review controls and reconciliation controls. These are very important too. Review controls just mean you, or someone senior, looks over something (like a bank statement) to see if they see anything unusual or suspicious. Then they sign it to evidence that they looked at it. Reconciliation controls are really accounting controls. They give comfort that the entries in the accounting system are grounded in facts verifiable from external evidence. Proper reconciliation and review controls make fraud very difficult.

So the simplest reconciliation control is the bank reconciliation. Any person with any experience in finance, from your bookkeeper to your FD, will tell you that this is the most fundamental. In it you are showing that the bank balance showing in your accounts reconciles to your actual bank statement balance. It probably won't agree to your statement, because you may have written a cheque that has been recorded as a payment but not presented by the payee yet. That's why we say that it "reconciles". Reconciling items are adjustments that need to be made to show that the accounts reconcile to the external evidence. If those reconciling items don't make sense, perhaps because they are too old, then something may be going wrong and further investigation is required.

You can do a reconciliation wherever you have external evidence. So the bank reconciliation relates to the bank statement. You can also do supplier statement reconciliations to give comfort that all purchase invoice entries and supplier payment entries in your accounting system are correct.

Fallacy number 3 - it's something to leave to my FD and my auditor. Your auditor may check up on internal control once a year in order to get comfort that they can sign off their audit opinion on your accounts. Your FD (if you have one) is probably the one to whom you have delegated the worry about it.

But internal control, legally, is the responsibility of all directors - with joint and several liability. So it is something to work together on, supporting each other.

The thing about internal control is that it is restrictive. It says to your employees that they have to go through certain hoops before they are allowed to do things, or they have to put a signature on something to say they've done something, or they have to do things a certain way. In a lot of cases, though, employees just want to fulfil their main objective - to make the sale, to finish the batch quickly, to stock the shelves, or whatever. They heave a huge sigh, knowing that Finance has said they have to count, sign, go and get a manager, etc. They may rebel because they can't see the purpose.

I have seen businesses lose lots of money because the directors left Finance isolated in those situations. They didn't see control as a collective responsibility, and they shunted the control issues to the bottom of the management team agenda (which they hardly ever got to).

Conclusion: Internal control is important. I would encourage you to think about what procedures you need to put in place to protect your business assets and cash, and to make sure that all your information is accurate. Listen to the advice of your auditor, accountant and bookkeeper. As the business gets bigger and you delegate more and more authority, the more structured you will need to be.

But please don't write off the issue as boring, otherwise your business will pay eventually.

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If you want to talk to us, we're quite happy to give you a call to talk more about your business and the challenges you face. And you may be eligible for a free Finance Strategy Review session. To set that up either email us at enquiries@charisfd.com, remembering to leave your phone number and email address; or go to our website and complete the contact form.

Thanks again for subscribing to Creative Finance & Management. We hope you find it helpful.

© Charis Business Consulting Limited 2009

This is the fourth in an 8-part series especially for new subscribers to the Creative Finance & Management email newsletter. Every week we are sending you an article aimed at helping you to think about a different aspect of the financial management of your business. This is in addition to the normal bi-weekly newsletter. We are doing it to give all new subscribers the same orientation to the way that Charis FD thinks about small business performance management. That way we can have confidence that all our subscribers have been given the benefit of foundational advice in all aspects of business performance management.

If you miss any of these articles, don't worry. They are on the Creative Finance & Management blog. Just look for the "New_Subscribers" tag.

These are the articles in the New Subscribers series:

1. The ingredients for success in Finance
2. Strategy and Planning
3. Business Change - implementing your strategic plans
4. Measurement and Management go together
5. Paralysis without analysis
6. Your Finance team - a valued asset
7. Stakeholder management - the importance of keeping people happy
8. Internal Control - 3 fallacies that add risk to your business

Here we go: ...

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Measurement and Management go Together

"What gets measured gets done!" is often quoted as a truism. The other way I would put it is, "if you don't measure it, you don't manage it". What I want to do in this article is show you the principles of how to apply that to managing the performance of your business. You do want to manage the performance of your business, don't you? You know that if you don't manage performance then your business will almost certainly underperform?

I've tried to say in the last three new subscriber newsletters that you have to be intentional in managing business performance, or in managing a business in general. If you want your business to perform well, you have to know and specify what you want it to achieve and have defined strategies for achieving those goals. You should also have given yourself targets for what each of your strategies should achieve.

But you can do all that and still not succeed. One of the main reasons that happens in smaller businesses is that they don't check regularly to see whether they are succeeding or not. They don't measure the outcome of their strategies, or at least not regularly enough. It's no use getting to the end of the year when the auditors come in, or when you sit down with your accountant, to find out that you haven't grown your business as much as you wanted to, or you spent too much. It's a bit late then. You need to measure outcomes monthly, weekly, and daily in some cases.

Getting into the nitty gritty for a minute, the basic financial performance reports you need to have on a monthly basis are the income statement (or "profit and loss account") and the balance sheet.

The income statement should not be in so much detail that you can't see the wood for the trees, but should be in enough detail to see where your money is coming from and where it is going to. For example, if you sell the same small set of products to a few regular customers, then show your income by customer or customer group. On the other hand if you have a varied product set you may want to show your income by product. This depends what your marketing and sales strategies are - segment your income in the same way you segment your sales for strategy purposes. Then you can see if your strategy is making any difference.

Similarly you will want to show your costs in the income statement in a way that makes sense. You may show them by type (e.g. premises, people, insurance, IT, etc) or by department (e.g. operations, sales, finance, IT, HR, etc) or both. It depends how complex your department structure is and how you manage your business.

The balance sheet shows the value of what the business owns, what it owes and what it is owed. It is useful to see particularly the cash balance, the debtors balance (what your customers owe you) and the creditors balance (what you owe suppliers).

But this is just the basic level. Every business should do those without question. You need more. If your strategy is targeting increasing sales, then you must also get more detailed reports on sales. If your sales cycle is less than a month, then perhaps you should be getting sales reports weekly or daily. If your strategy depends on production quantities and operational efficiency, then perhaps you need daily or weekly reports on those things.

And again, don't just look at financial performance. Performance measurement and management are much broader than that. If you are a service business, perhaps you need to measure that utilisation ratios for your consultants (time spent generating revenue divided by time available). If you have a long sales cycle, perhaps you need to get weekly or monthly reports on leads generated and sales pipeline reports. If these things are critical in your strategy to achieve your vision for the business, then you can't manage them properly without measuring how you are doing.

To sum up, what are the key things to think about in performance measurement and reporting? What, how and how often - those are the three key questions. What to measure will depend on your strategy, the things you are doing that are important to getting the business towards achieving its vision. How to measure it will have to be thought through carefully - it could be a figure, a ratio, a traffic light, a pie chart, etc. How often will depend on how often things change. You want to be able to make decisions and adjust your strategy and tactics on the basis of what the information is telling you, so the information has to be timely.

Finally, all this measurement will be worth nothing if you don't use it, if you don't make decisions based on the information. No strategy is perfectly infallible. The information you get may tell you that you are not quite getting it right. If you are learning from the reports you get, you will investigate further and tweak or change your strategy depending on what you find. This the feedback loop complete. The business performance management wheel that I talked about in the first of these articles depends on completing the whole cycle - develop your strategy, carry out your strategy, measure your performance and learn from the information to develop your strategy... and so it goes on.

I'm worried that this all sounds complicated, because I've condensed so much into a short space. If you do a healthcheck on what you actually do at the moment, I think you will find that you already do some of this, but it may be ad hoc, disjointed and disorganised. As with other areas, putting some thought into it and having a rationale for measuring things about your business will get you a long way forward. Just the act of being intentional about performance measurement is big progress.

The final thing I would say is that this is probably one of the areas that someone like a Finance Director would add the most value. They are skilled in pulling numbers together and in interpreting what they mean for the business. If you haven't got anyone like that in your business, then give it some thought. And it doesn't have to be full-time headcount. There are part-time options available, which are more affordable for smaller businesses - one of these options is Charis FD's own services. That's a gentle plug for my business, but I think it's appropriate. See our website for more details.

If you are worried about the cost of such a service or the cost of taking on a full-time FD, think of it in terms of the financial benefits it could bring. They would work alongside you, helping you to put in place the finance and performance management disciplines we have been outlining over the last few weeks. So I would be surprised if following all this advice with help could not help to improve your sales by more than 5%, or improve your gross margins by more than 5-10%, or your net profits by 10% - especially if you have not employed one before (either full-time or part-time). If you look at it that way, it doesn't seem so expensive. That's obviously not making any promises, but it's food for thought!

Why not contact us today?

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Until next time...

If at any stage you want to talk to us, we're quite happy to give you a call to talk more about your business and the challenges you face. And you may be eligible for a free Finance Strategy Review session. To set that up either email us at enquiries@charisfd.com, remembering to leave your phone number and email address; or go to our website and complete the contact form.

Thanks again for subscribing to Creative Finance & Management. We hope you find it helpful.

© Charis Business Consulting Limited 2009

When Finance departments need to build bridges

The Marketing Director of a business I worked for once said in leading a seminar, words to the effect that, “functions like Finance, HR and IT are just overhead costs. They don’t add value. They don’t bring in new business or sell anything, and they don’t produce anything.” I didn’t respond at the time, but I remember being quite offended. I felt put down, as if he was saying that I was no value to the business. I was, at the time, I have to say, fairly naïve – this was my first job outside of public practice. What follows here are some of my reflections on the relationships between the Finance function and the other parts of a business, from working in more than ten different companies over thirteen years since then.


“Business Partner” – a misleading phrase

One thing that has mildly irritated me occasionally over the years is the use of the term “business partner” to describe aspects of functions that support and control the main activities of a business (which are providing goods or services to customers). In my experience, Finance and HR use the term a lot. I even use the phrase myself, because I know what people mean by it!

Normally, being a “business partner” simply means that the function or the individual is trusted to be involved in high level strategic decision making. This is as distinct from the mundane provision of information and operation of transaction or control processes.

I think the thing that irritates me about the term (albeit only mildly) is the misunderstanding it generates. This misunderstanding can be exposed by a few exaggerated statements:

- Some functions are not doing business, so they can only partner the business, or maybe just cost money. They don’t make or sell the product or deliver the service, so they are less important. So there are people you employ in your business that are not part of your business, but if you like them enough you may let them partner you in your business.

- Doing business is all about making the decisions, rather than the mundane processing and controlling. I, the CEO, and my board, are the business, because we make the decisions about the business. Business partners help me make decisions about my business. The other people in the functions are just recording, supporting, controlling and doing. The other people are not really part of the business. They just do jobs.

My view is: We are all the business, not a business partner. We all need each other. Not just the people making the big decisions. Not just the people making and selling and providing.

We all need to recognize the value of each other’s contribution to the success of the business. There is a passage in The Bible that speaks in this way about the church. It likens the church to a body. No one part of the body can call itself the body, but the body would not be a whole body without each part. Each part has its role and place, and importance, in the overall function of the body. The church is the body. So every member of the church has a gift and calling from God that contributes to the overall function and goal of the church. We cannot do without each other.

So it is with business I believe. We are all parts of the business, and without every part functioning properly and together the business will fail. This is my fundamental mindset when I deal with relationships in business. Each function and person must support each other in achieving the goal of the business – e.g. more customers, more sales, more profit, lower costs, a better brand, happy shareholders, stable cashflow, improved communities, etc.

So when managing a Finance team I encourage them to see themselves as helping the business to achieve its goals first, then in all their cross-functional relationships if they can help their colleagues it will ensure we are acting as one.

On the other hand when I speak with my colleagues in Ops, Customer Services, Marketing, HR, IT, and so on, I make sure they know what I am there for. Basically we are on the same side. I may have to challenge their spending or their performance against sales targets, question why they have not collected cash from customers quickly enough, set hard budgets, cut costs, and do many things they may not like. But if they know fundamentally that I do this, and Finance does this, because we are following our remit to help the business succeed – then it becomes more a question of asking for their help in achieving our objectives, whilst offering our help in achieving theirs.


Different personalities and skills suit different roles

Character differences produce a lot of friction. But it is possible to recognize that and get better at working together. Clearly Myers-Briggs, Insights, Belbin and the multitude of personality assessments demonstrate this clearly. But it is really self evident.

You get many different personalities in a team. And indeed everyone is different. But you also get certain personalities gravitating to certain roles and functions. I believe certain personality traits go with certain skills, although this is a generalisation that does not always work.

For example, an analytical person may gravitate to the Finance and IT areas, where there is a degree of set process, logic and numerical certainty. On the other hand, a sociable person may gravitate to areas that deal with people – HR, sales or marketing.

And each different business will require slightly different shades of characters within the different functions.

Recognising the strengths and weaknesses of certain character styles in different situations really helps to get people working well together. Instead of looking down on the marketing or sales person for the way they can’t understand the figures, or act unpredictably, we "analytics" can both help them with that weakness and seek their help when we need slightly more expansive and unstructured thinking. Working together creatively leads to competitive advantage.


Finance is sometimes seen as interfering

“What do Finance know about selling? So how can they give me these ridiculous targets?”

“What do Finance know about making our product? So how can they ask us to do it more efficiently?”

“Why do Finance ask us to fill in useless information on our transaction screens? They are just wasting our time.”

“Why do Finance always need an authorising signature on every bit of paper? They are the reason we are not as efficient as we could be.”

Finance people will be familiar with these and other similar accusations. How do we respond? How should we respond? Because one of the main things (though certainly not the only thing) a business is trying to do is to make money for its shareholders, Finance will always be in a central position and get its fingers into a lot of pies. And that can sometimes be seen as interfering in things we know nothing about.

The point I want to get across is that with every such complaint comes an opportunity for dialogue. That’s DIALOGUE! Not talking, not arguing our case, but constructive two-way dialogue.

But before I say something more about dialogue between Finance and other areas, I want to clear something up.

We Finance professionals are trained in Finance, normally first of all as accountants, and then analysts and financial managers. We are not (normally) trained in manufacturing, engineering, C++ programming or human resource management! So when we are accused that we don’t know these things, we should not try to make out that we do! We recognize there are things that we know and things that we don’t, things we are good at and things we are not.

But the next point is equally true – 99% of the time we don’t need to know either! For example, I may not know much about C++ or .net frameworks or web design, but when I challenge the IT department for employing contractors to develop an application, I don’t need to know all that. The thing I may need to know is what the application is for and how it will help the business (financially or non-financially). If they can’t tell me that, or their statement of benefits falls apart under scrutiny, then I have a right, as someone responsible for financial success, to ask them to stop. What we need to know is what is relevant to our remit as financial custodians.

But my main point is DIALOGUE. Every interaction with our colleagues, especially when we are challenged, is an opportunity to 1. Listen; 2. Understand; 3. Think; 4.Explain; 5. Change; and 6. Move on in working together (perhaps into a feedback loop so that the whole dialogue process continues).

1. Listen – Just ask them to tell you more, and then shut up and listen carefully. Finance does not have a monopoly on the truth. We don’t know everything. We need to learn. It also may be true that nobody understands perfectly the way the business works. Businesses are complex, they are made up of imperfect human beings, using machines made by human beings and computer programs written by imperfect human beings! Things never work 100% perfectly, and since we are not perfect we may in fact be the cause of the particular imperfection! This is your opportunity to learn about something in the business, and may turn into an opportunity to help.

2. Understand – Ask questions to get an understanding of the issue. Look for cause and effect. Ask who does what and when. Ask questions to help your colleague understand the issue they are raising. They may not fully appreciate what they are highlighting. You can help them simply by asking questions.

3. Think – Don’t just jump in with a suggested solution. Give it some thought. Go away and draw diagrams, process maps or play with spreadsheets if you have to. Ask other colleagues their opinion if you need to.

4. Explain – Ensure that your colleagues are aware of why you need information, or need things to be done in a certain way. What are the business consequences of them failing to follow procedures? Will we lose money? Will we pollute valuable information sources? Will we be less efficient? Get everyone on the same page. They may start to see how they can do things differently to achieve the desired result. There’s more likelihood of a win-win outcome if you understand each other’s perspective.

5. Change – If you need to. Being ready to modify things to ensure you can both achieve better results shows that you really believe you are both on the same side. It shows you appreciate their difficulties as well as your own requirements.

6. Move on in working together – if you have gone through this active dialogue then you will hopefully have solved a problem at the same time as making a friend and powerful ally. They will be both more ready to help you if you need something in the future, and willing to talk openly and less confrontationally about problems in the future. Keep the door open. Offer to review what you’ve agreed.


Final thoughts

Finance sometimes does not portray itself well. If you rely on Finance for anything it is to provide information on how the business is doing, and to make sure that transactions are managed and controlled efficiently and effectively. You rely on them to be able to analyse and tell you whether something will lose or make money. But sometimes we don’t do our job properly and lose respect and trust.

In those cases, in my experience, you have to be open, especially at a management team level. Explain what you are trying to achieve for the business, and how it will help. Share with your colleagues the problems you are having. Ask for help. There may be someone in another team that is good at process analysis, or good at Visual Basic macros, or good at training, or experienced in restructuring or integration. You would help them if they needed your help, wouldn’t you? And finally, keep sharing – share your successes and your problems. When you understand someone’s problems, share their successes and get involved in helping, you become more sympathetic. So get people on your side, because in reality they are already.

Finally, sometimes people in other functions don’t realize their actions have financial consequences. E.g. lack of detail in transactions leads to errors which leads to loss or time wasted. E.g. delays in dealing with Finance queries can lead to losses if it becomes too late to go back to customers to clear up errors.

Don’t just beat people up for doing the wrong thing and call them stupid behind their back. Go back to the dialogue outlined above, and educate them. I have found that if people realize the consequences of their actions, they are more likely to take care over doing things right. Point out where things are going wrong, and then start to listen to their side… then you’ve started a dialogue.


Conclusion

A business without Finance at the heart will be risking loss through errors, inefficiency or even fraud, and will risk making the wrong decisions through not understanding financial information. But Finance is not the business, and neither is it merely a business partner. We need to recognize the roles, remits, strengths, weaknesses and personalities at play across the whole business. We should value the diversity and work together to succeed in business through trust and open dialogue.

What should Finance do better to make relationships work? In short, better dialogue. You have two ears and one mouth – use them in that proportion! Be always more ready to listen than to speak. And communicate always with the assumption (whether or not there is evidence for it) that you are all on the same side, working for the success of the business.

Work-life balance

I’ve reflected quite a bit on so-called “work-life balance” throughout my working life. Anyone who gets into key positions, especially in management or in expert roles, will face the “work-life” struggle. Work has the potential to stray outside the normal 9am to 5:30pm hours, sometimes by a long way and over a long period of time.

I’m certainly no stranger to the tension – I’ve been in roles earlier on in my career where I worked more than 60 hours a week, some days starting at 5:30am and working through until 2-3am the next morning on occasions. After my first redundancy, however, I became fairly cynical. Hard work, even the sacrifice of my own time outside the hours contracted, did not seem to produce any loyalty from The Company or increase job security. With four young children and a wife looking after them at home, I was also under pressure to give more quality time to them. So I started to rebel, in a non-dogmatic kind of way. I consciously tried to limit my working hours. But there are problems with that approach, and I have struggled, along with 50% of the working population if statistics are to be believed, with getting the right balance between putting priority on urgent work to be done and focusing on family and personal priorities.

Here are a few of my thoughts on the subject:

1. The term “work-life balance” itself is probably flawed and arises from the tension between two misconceived presuppositions. Do we live to work or work to live? Or neither?

The term “work-life balance” suggests that I have work on one side of the scales and life on the other, and the ideal would be to have them in a happy equilibrium. In other words it makes a distinction between work and life. My contention is that it is wrong to make such a sharp distinction. For me work is part of my life, but it is not the whole of my life.

The overwhelming pressure that we have found since the 1970s/80s to work harder and harder can be summed up in the phrase “I live to work”. Work is one of this generation’s great idols. Our work is what gives us meaning and purpose. It is what we do that defines our contribution to the progress of the human race. Therefore I should work as hard as I can, making sacrifices to achieve as much as possible.

We idolize entrepreneurs, sports stars and people who are at the top of their fields – people who have reached those positions by enormous effort, tenacity and sacrifice. To them the idea of balance is ridiculous. Success in their field is everything, and we admire them for achieving it and overlook the battered remains of families, marriages and friendships left behind in their wake.

On the other hand the classic “work-life balance” stance is the opposite – “I work to live”! Why should I let work consume every part of my life to the extent that I have no time and energy left to enjoy it? The purpose of life is to enjoy life. Therefore, work is a means to earn money to buy holidays and other leisure activities, including spending time with the family if I am the less selfish sort (and less and less of us are that sort, judging from the birth rate, marriage rate and divorce rate… but that’s another subject!). Just witness the explosion in the availability of leisure activities and the importance we place on music, movies, sport, entertainment, relaxation, experiences.

But we ought to realize that both those positions are presuppositions from different forms of secular humanistic worldviews. “I live to work” assumes that my purpose is to help the human race to make progress. So I should strive to have the job that helps me to do that best, using my natural gifts and abilities. “I work to live” assumes that my purpose is to enjoy the world around me because there is nothing else – “eat, drink and be merry, for tomorrow we die” – the classic hedonist catchphrase.

The phrase “work-life balance” is really a reaction against the “I live to work” mentality, assuming that work is taking up so much time and energy that I don’t have enough left to live life.

So my conclusion was that the reason the term “work-life balance” does not work for me is because it clashes with my Christian worldview. The Christian worldview would say that I neither work to live or live to work. God created human beings to glorify Him, telling them to “be fruitful and multiply and fill the earth and subdue it and have dominion over [creation].” We are called to be workers therefore, yes, but also parents, teachers, worshippers, members of the community – all in order to bring glory to Him.

The entrance of sin into the world has distorted our view of those objectives, blinded us completely in some cases, so that even my last paragraph will cause laughter for some, anger for others and complete mystery for others.

There is a lot more that could be said about Jesus Christ and his solution to the problem of sin – the Christian gospel. However, my point here is simply that our view of work and balance is based on our fundamental presuppositions about existence/life, knowledge and morality.

For me, from a Christian standpoint, everything in my life has to be done to God’s glory. That means work has an important part in my life, because God has made human beings workers. Family is important in my life, because God has given me an important role in raising a family. Community is important in my life because God said “love your neighbour as yourself”. Leisure is also an important part of life, because one of the ways we glorify God is by enjoying His creation (in a responsible way).

2. Work-life balance is sometimes portrayed as the domain of the family man or working mother.


One of my previous employers made real efforts to encourage work-life balance. And of course we have seen the UK government and EU try to legislate for it as well – parental leave to augment maternity leave, but applying both to fathers and mothers; the Working Time Directive; etc. But I well remember the mild bitterness of one female employee, a darn-good Financial Reporting Manager at the time, recently married with no kids yet. She said that really all the encouragement for work-life balance was so that people could spend more time with their families. But for someone like her, with no pressing need to get back home in the evening for kids bathtime or bedtime story, and her husband equally stretched and working long hours, she could never get a good enough excuse to limit her hours.

What she felt was that those with families were treated with sympathy if they wanted to limit their hours. But those with no kids were still expected to pick up the slack and do the long hours on their behalf! It didn’t seem fair. And to be honest, I can see that kind of discrimination being a reality.

(The Working Time Directive, I guess, was supposed to address that issue by limiting working hours for everybody, but in practice had no discernable impact on anything as far as I can see. What a waste of time! And people actually opt out from it too! Whenever you sign a new employment contract you are given a Working Time Directive opt out clause to sign. This means you waive your right to limit your working hours to 48 hours per week on average over 17 weeks. Employers are not allowed to discriminate against employees that do not opt out, and they are not allowed to compel employees to opt out. So why do employees sign this waiver of rights?! I have never signed the opt out… and at times continued to work more than 48 hours a week over a 17 week period! There have been no consequences on anybody one way or the other!)

Following on from my last point, this is a concern. From my point of view, every aspect of life has a place, and the childless person or single person must still be allowed to engage their outside-of-work interests without guilt, just as much as the parent must be allowed to fulfill their responsibilities as a parent. There should be no discrimination in favour of parents.

3. Where does the pressure to work long hours come from?

This is actually quite a big question. And there may be a different perceived cause in different situations. And there may be a cultural root cause (or causes) beneath those.

Do people work long hours because they want to? Sometimes the “I live to work” mentality comes through strongly. I have met people who so love their jobs that they spend every available hour on it. I don’t belittle them for it. It’s great to love your work. But often they are the big bosses, and they presume everyone else is the same!

Do people work long hours because they are forced to by their employers? This is really a rather simplistic way of putting it. If it means, do people get threatened with being fired if they don’t work as many hours as they are asked to, even if it is more than stated in their employment contract, then this is probably fairly rare. Similarly if it means do people sign employment contracts with specified long hours in them, because they wouldn’t be employed otherwise, then again probably fairly rare.

Perhaps emotional blackmail is more common than actual coercion. “C’mon, we’ll never fulfill this contract order on time if we don’t all put in some extra hours… yes, I know I said that last time and the time before…” And what this overlooks, of course, is that the employer has the power to employ more people to do the work and take the pressure off you. Why don’t they? Because they probably quoted the contract (in the example) assuming they could squeeze some extra hours out, or simply underestimated the work. And so, having won the contract, or priced the product, etc, they would start to lose money if they employed too many more people.

Similarly, perhaps fears over job security “force” people to work longer hours. They want to be seen to be the keenest, the people with the highest output. Then when the accountant’s red pen comes out (in my experience this is a gross caricature, so I’m not sure why I’m using it, being an accountant myself!) we will be lower down the redundancy list.

It would be too easy, I believe, to immediately point the finger of blame at the balance of power shifting towards corporations and away from employees, especially following the decline of trade unions and so on. Where do the pressures on us originate? When the big bosses set the department budgets, asking for year on year cost reductions while asking for greater output, they do it to try and achieve bottom-line growth. And why is bottom-line growth important? For public companies growth in profits allows growth in dividends, and growth and stability help to increase the share price, at least compared to competitors.

Why is share price important? Because companies want people to invest in them. If people don’t invest in them, then they have to borrow and pay interest. Investors prefer stable, growing, profitable, cash-generative companies. The riskier the business (i.e. more volatile or less tried-and-tested) the more return investors want for putting money in.

So it’s the investors who create the pressure. But who are the investors in your employer? For many it’s the government (NHS, civil service, education, etc), and therefore the ultimate stakeholder is the tax-payer – YOU! For the majority of other employees, working in public companies, it’s pension schemes, endowment funds, ISAs, etc. And who demands higher returns from pension schemes, etc? YOU!

So it turns out that when we demand better returns from our savings, pensions and investments, and when we demand greater efficiency from our public services – we are building more pressure on ourselves (as a group) to work harder!! Our own greed is driving our plight!

But again, that’s far too simplistic in one respect. The pressure from stakeholders to deliver returns or to be more efficient has always existed. What held back the long-hours culture in the past was a more balanced view of work. The working time available from the workforce was seen as a limiting factor. If someone was contracted for 40 hours a week, then they would only be asked to work 40 hours a week, and would be compensated for overtime. Nowadays it is common to see no reference to working hours specified in employment contracts (especially for management or clerical jobs), simply a clause to the effect that “I will work as many hours as it takes to get the job done”. So in the past we respected people’s time as their own, and therefore agreed to pay a reasonable salary for a slice of it. Nowadays we set the salary and say we’ll have as much time as we want in return!

In the past, the weekend was not for working. Shops closed, banks closed, not just for Sunday, but for part of Saturday as well. Nowadays 24/7/365 is almost the aim. There is now no one time of the week when communities and families can spend time together. We mocked keeping Sunday special, because of it’s Christian basis, but now feel the exhaustion and stress coming from a world of work without adequate rest.

We have given up on some of our moral principles, and have reaped the harvest of wealth, but not without human cost. My conviction is that workplace stress and long hours culture is not the result of a political or social policy (many people seem to blame capitalism and “The Thatcher legacy”). I believe it is the result of a moral and spiritual decline. It’s the result of changing views about what life is all about and the way it should be lived.

4. Conclusion

Work-life balance issues are simply more consequences of a shift in worldviews. There are no easy answers. My practical advice is to think carefully about how work fits into your life overall, and don’t assume that it has the same place for everyone. If you are a manager, respect each employee individually, recognizing quality rather than quantity of work; and see their value as holistic human beings (with families, communities and life-enriching hobbies), not just workers.