KPMG Cfo Guide

Everything
a CFO needs
to know in the
rst 100 days...
but doesnt know
who to ask
KPMG LLP (UK)
2010 KPMG LLP, a UK limited liability partnership, is a subsidiary of KPMG Europe LLP and a member firm of the KPMG
network of independent member firms affiliated with KPMG International Cooperative, a Swiss entity. All rights reserved.
2010 KPMG LLP, a UK limited liability partnership, is a subsidiary of KPMG Europe LLP and a member firm of the KPMG net network of independent member firms affiliated with KPMG International Cooperative, a Swiss entity. All rights reserved. work of independent member firms affiliated with KPMG International Cooperative, a Swiss entity. All rights reserved. 2010 KPMG LLP, a UK limited liability partnership, is a subsidiary of KPMG Europe LLP and a member firm of the KPMG
Contents CFO Guide 01
1 Kicking things off

04 The CFOs expanding role
06 Managing expectations
08 First impressions
10 Managing stakeholders
12 CFO Profile: Jim Buckle
14 Stakeholder checklist
2 Taking control

18 Risk managment and compliance
20 External reporting and audit
22 Five reasons why CFOs get fired
24 The risks beyond reporting
26 CFO profile: Ann Firth
28 Risk and compliance checklist
3 Smooth running

32 On top of back office operations
34 Ten qualities of an effective CFO
36 Managing the supply chain
38 CFO profile: Alex Woodward
40 IT management
42 Efficient and effective
operations checklist
4 Pitch performance

46 Performance management
48 Infamous finance executives
50 Tax planning
52 Strategic planning processes
54 Managing operational
performance checklist
56 Useful organisations and publications
The first 100 days of a CFOs appointment may determine not
only the future of the CFOs position, but also the direction of
the company. As such, getting the head of finances priorities
in order plays a large part in setting the foundations for success.
Much like a football manager, the CFO is a multi-tasking
strategist supporting the club or company executive, while
stewarding a united team of strong capable professionals
towards profit and growth. This guide offers helpful tips and
checklists to assist finance chiefs and CEOs through those
challenging early days of this vital appointment.
For non-finance directors, there are also some handy hints to help
you nurture a smooth relationship with the new head of finance.
CFO
Football manager
CEO
Football club chairman
Company employee
Football team player
The line-up

Chapter 1
Kicking things off
A wise man once said: Remember
at work, the authority of a person is
inversely proportional to the number
of pens he or she is carrying.
Kicking things off CFO Guide 03
As you start your new job as
the head of finance, you may
feel the task ahead of you
seems a somewhat daunting
prospect. However, with
careful thought and a plan
of action, you can remove
a lot of pain from the first
100 days in office.
This chapter looks at the
changing function of the
CFO, what is expected of
the role and how to make
the best of your first few
days in the office. Chief
among these is getting
to know who you need to
speak to, how to approach
your boss and your team
and how to assert your
authority without getting
peoples backs up.
The first question you may
ponder in any new job is
what to wear on your first
day. While a suit and tie may
appear to be a safe bet for a
CFO, dont forget to read the
culture of the organisation.
Making yourself approachable
is key depending on the
industry, more casual attire
may win you more influence.
The CEO should help
communicate the company
culture to the CFO.
The term utility man has
become something of a dirty
phrase in recent years. But,
for the modern CFO, no other
moniker describes the role as
accurately. These days, rather
than being average across the
board, the CFO needs to excel
in a number of positions. Just
a cursory look at the CVs of
the UKs leading blue chip
CFOs reveals commercial
acumen, regulatory and
communication excellence,
along with corporate
finance expertise.
Ten years ago, the finance
function generally dealt with
just that: finance. The CFO
was seen as a safe pair of
hands that kept the numbers
in order and let the teams
stars do the sexy stuff.
Now, the corporate CFO
is expected to look after
a whole range of different
areas. Strategy and targeting
growth in new markets is a
key component of the role.
Given their comfort with the
numbers, CFOs are ideally
placed to spot trends and
drive the business forward.
Meanwhile, with the increased
demands from regulators and
stakeholders, managing risk
has risen up the CFOs
agenda enormously in the
last few years. Compliance,
previously consigned to the
lower divisions of the CFOs
attention, is also right up there.
And CFOs of all sectors are
affected. While financial
services may labour under a
wider range of regulation, there
isnt a CFO in the land who is
unaware of the need to meet
the compliance challenge.
Constant multi-tasking
The CFO has shed the dour, number-crunching
stereotype because the role increasingly requires the
head of finance to do and be many things at the same
time. Being CFO is more flash than it was think how
the slick appeal of the modern football manager has
replaced the crusty image of a sheepskin-coated,
pie-eating, Woodbine-smoking guvnor.
The CFOs expanding role CFO Guide 05 04 CFO Guide The CFOs expanding role
Shareholder activism and the
increased reach of regulation
have forced the CFOs door
open to the demands of
the businesss stakeholders.
This can extend from basic
investor relations to handling
shareholder queries, liaising
with investors and speaking
to the press. The days of
hiding behind the desk are
over and the modern CFO
needs to be a consummate
public performer.
And what of the top table?
The CFOs place on the board
is now more important than
ever. Theyll need to hit the
numbers, liaise with the non-
execs, provide wise counsel
and communicate effectively
with colleagues to ensure
that their voice is heard.
All in a days work? Its a
game of two halves at least!
First of all, a successful
CEO-CFO relationship relies
on both parties being realistic
about what they can expect
from each other.
For the CEO, there are
certain qualities that he will
expect his CFO to display. An
important one is decisiveness:
a lack of clear decision making
can be critical to a businesss
prospects. So, the CEO
will expect the CFO to spot
opportunities and risks, and
take the necessary measures
to pursue growth and protect
the business.
No to yes men!
At the top level, certain
elements are taken for
granted: the CFO will be
expected to get the finance
function into efficient shape,
hit the numbers in the
forecast and report to the
board and shareholders in
timely fashion, alongside
the core finance aspects
of the role.
But the clever CEO will also
expect his CFO to offer an
invaluable service: challenging
the companys strategy. The
days of the yes man and his
rubber stamp are over.
Todays CFO must be in
possession of the confidence
to ask probing questions of the
board and to offer alternative
solutions. If the CEO doesnt
expect, or indeed, demand
this, then chances are
something might be amiss.
What CEOs expect
from their new CFO
Ask any chief executive what they want from a CFO
and youre likely to get a long list: reliability, flexibility,
adaptability, commercial acumen, communication
skills and a sense of humour. Not much, then.
Alongside clarity of purpose,
full backing from the man in
charge is paramount in order
to project an air of authority.
If the top man doesnt have
confidence in the CFO, why
should anyone else? Given
the flak that can fly after a few
iffy results, having the bosss
confidence is crucial for the
CFO. Knowing that the top
man backs your judgement
and is fully behind your
decisions gives the necessary
freedom and reassurance
for you as CFO to get on
with your job.
The CFO should also expect
his chief exec to take the time
to offer guidance and advice.
Without the closeness
engendered by regular time
spent together, the chances
of a harmonious relationship
blossoming are reduced. So
regular meetings to coordinate
strategy are the minimum the
CFO should expect from the
chief executive.
Managing expectations CFO Guide 07 06 CFO Guide Managing expectations
The new CFO will also need
to be aware that the old
divisions between the
boardroom and the dressing
room have been eroded. Most
CEOs will expect their new
CFO to be contributing at the
highest level within weeks
of joining the team. The idea
of CFO as functionary driven
by process are long gone.
And relying on reporting what
has gone before wont be
enough: the boss will expect
a clear vision for improving
financial performance,
spotting and promoting
talent in the team, as well as
communicating this vision to
investors and shareholders.
What CFOs want
Amid all these expectations,
the CFO may have a few
specific wants and needs.
Firstly, understanding what
the chief executive wants for
the business is important.
Chances are that the chief
exec rose to his position by
articulating a vision for the
company, and this needs to
continue into his dealings
with his finance chief. Once
the CFO has settled behind
his desk, the first priority is
to get a strong idea of what
the chief executive wants
the business to achieve. This
will be the tactical plan from
which the CFO can work.
An important
quality that the CFO
should display is
decisiveness, as
a lack of clear
decision making
can be critical to a
businesss prospects
CEO For this job, we need
someone who is responsible.
CFO Im the one you want.
In my last job, every time
anything went wrong, they
said I was responsible.
Mr Right?
In business, reading the
culture of a company and
responding to it is crucial
you may have good reason
to want to change it, but
not on the first day!
The flawed and famously
outspoken Brian Clough
lasted only 44 days as
manager of Leeds United
before he was sacked by the
directors for alienating his star
players and getting on the
nerves of the management.
It turned out that Clough was
a talented manager, but that
he just hadnt got on with the
rest of the club.
Similarly, in business the
expectations of a CFOs boss
and the CFOs team will vary
from business to business.
As the new head of finance,
you need to understand that
culture quickly and respond
to it. One of the first priorities
for CFOs is to meet with
senior people such as the CEO
and management team and
ascertain what they want from
the finance department. But to
gain a broad-based view of the
company, its also valuable to
build relationships with people
further down the corporate
ranks, whether that be
salespeople, the warehouse
manager or the secretaries
that keep the directors diaries.
While getting close to your
finance team is important
they could be your greatest
allies it may also be prudent
to sit near the CEO and other
unit heads where decisions
are made. You dont want to
be thought of as hiding behind
the spreadsheets and it is for
this reason that new CFOs are
urged not to bury themselves
in paperwork for the first few
days when they could be
building relationships.
Team spirit
Wait before making major
decisions, as you will want
to assess the situation first
and discuss it with relevant
colleagues. An ill-considered
decision early on could make
you look foolish. On the same
note, CFOs are advised not to
criticise prior practices openly
until they are fully aware of
the facts, as your team could
resent the implication that
intelligent life arrived only
after you joined!
Once youve gathered your
intelligence and figured out
the lie of the land, then you
can start to set your priorities.
Manage the boss,
manage the team
Sitting between the finance team and the CEO,
the fresh CFO needs to be thoughtful about gaining
his teams confidence, while establishing a close
working relationship with the boss.
First impressions CFO Guide 09 08 CFO Guide First impressions
Its Friday! The end of
the CFOs first week. To
celebrate, why not meet
with the financial reporting
team to get to grips with any
disclosure issues and find
out what needs to be done
before the auditors come?
Its hardly a job for a Monday!
Getting to grips with
stakeholder management is
high on the to-do list in the
CFOs first 100 days.
A CFO must take the needs
and wishes of a wide variety
of stakeholders into account
as an ongoing part of the role.
The starting point is to identify
the stakeholders, assess their
importance and decide on
what they will want to hear.
Employees, suppliers and
other board members will
almost certainly feature as
stakeholders but beyond
these three groups, the range
of stakeholders varies from
company to company.
A CFO working for a public
company with a stock market
listing will have shareholders,
as will the CFO of a family-
owned firm. However, these
shareholders will differ greatly
in number and in the emotional
relationship they feel towards
the company. Increasingly,
CFOs are finding that investors
are members of a private
equity group seven times
more of these deals were done
in 2007, compared with 1998.
Stakeholder management
and communication may
involve coming to terms with
a new owner or it could be
about introducing the company
to the public market after a
private equity shareholder
exit. With increasingly strict
financial regulations, regulatory
bodies are also important
stakeholders that a CFO
must keep happy. Managing
risk related to them, as with
all stakeholders, is another
issue that should be high on
a CFOs list of concerns.
CFOs must also ensure
that the leadership of their
organisation agrees with
the message that they
are conveying to every
stakeholder, and that their
own team within the Finance
Department are following
the same game plan.
Get stakeholders
on side early on
Investors and stakeholders are not that much
different from football fans. Even temporary failure
on the pitch can urge the most fanatical supporter to
question the ability of the management. In business,
the difference is that investors are more inclined to
sell their stake and back a more promising side.
Tackling the issue
Rather than simply reacting
to events, good stakeholder
management tends to be
proactive. Identifying
forthcoming issues for the
organisation and the area in
which it operates, and deciding
how these might affect each
separate group of stakeholders
is necessary. A new CFO will
have to act quickly, as most
stakeholders will be aware
of his or her arrival almost
immediately and will want
reassurance of the suitability
of the new appointment.
Ensuring that communication
is appropriate in terms of the
medium, the frequency and
what messages it contains will
require close contact with the
director of communications.
This may vary from stakeholder
group to stakeholder group. A
change in circumstances, such
as a merger or an acquisition,
bad annual results, a rights
issue, changes at board level
or even external events such as
new legislation or a campaign
by a pressure group, will all
require a CFO to think about
how stakeholders may be
affected and how they need
to be communicated with
and handled.
Whatever the circumstances
of a communication with a
stakeholder, careful thought
is clearly required. But one
very simple trick can help
a CFO should put him or
herself in the position of that
stakeholder. What interest
financial, legal or emotional
do they have in the
organisation? What do they
want to know? What will
they consider good news?
What will set alarm bells
ringing? What benefits
are they seeking from the
organisation better salaries,
top products or great returns
on their investment, or good
behaviour from a regulatory
point of view?
Dealing with these issues
will make handling the
various stakeholders easier
and show that, when it
comes to keeping them
happy, the CFO is on the
ball. But, as in football when
the clubs supporters are
unhappy with performance,
its not long before they bay
for the managers blood!
10 CFO Guide Managing stakeholders Managing stakeholders CFO Guide 11
In your first few days,
start to identify the
stakeholders, assess
their importance and
decide on what they
will want to hear. The
range of stakeholders
varies from company
to company
A CFO had just read the story
of Cinderella to his four-year-
old daughter for the first time.
The little girl was fascinated
by the story, especially the
part where the pumpkin turns
into a golden coach. Suddenly
she piped up, Daddy, when
the pumpkin turned into a
golden coach, would that
be classed as income or
a long-term capital gain?
Investment?
12 CFO guide Profile Jim Buckle Jim Buckle Profile CFO Guide 13
The challenge is to really listen
there are always people who
know how things work and you
need to identify them quickly
A degree in English and the editorship of
the university magazine might not be the
obvious background for an accountant,
but along with his work in the media, it
has been useful for Jim Buckle, CFO at
Lovefilm, one of Europes leading home
entertainment businesses.
Jim trained at KPMG and then, after stints
at the BBC and Dell Computers, his career
took an unexpected turn with a couple of
dotcom start-ups. One resulted in the all
too common closure, but the other with a
successful sale when News International
bought Propertyfinder.com. Arriving
at Lovefilm in April 2006, this varied
experience proved invaluable to him.
This really pulls together the threads
of what Ive done previously, he says.
On the one hand were an online media
business, which is where my experience
at Propertyfinder is useful. On the other,
were very metrics focused, concerned
about how many discs we get out in a day,
which is the kind of thing that I worked
on at Dell.
Jim arrived at Venture Capital-backed
Lovefilm just as it was merging with
another company called Video Island that
offered the same service. Every member of
the new management team had to produce
their first 30-, 60- and 90-day plan.
We had a whole integration process to
go through. We needed to decide which
warehouse to close, which software
platform to use and which staff to lose,
says Jim. Although he was hitting the
ground running, he was determined to find
out as much as possible about the business
before he started making changes.
The challenge is to really listen you need
to know the strategy and the key metrics,
as well as what people in the organisation
want to do and where the finance function
fits into that, he explains. There are
always some people who really know how
things work and so you need to identify
them quickly they might be quite junior.
Lovefilm is now profitable but at
Propertyfinder, which never made money,
Jim had to manage cashflow very tightly,
only paying suppliers if there was at least
200,000 in the bank. Profitable or not,
as a CFO or CEO youre always wearing
two hats. With investors or the media,
you need to be positive, but when youre
thinking about cash flow you should
consider the possible negatives.
So, does Jim, who is 41 and married with
twins, love film himself? Hes certainly
not a film buff but, as he points out, its
important to relate to what you do without
getting so fanatical that you cant see the
wood for the trees. Running is how he
relaxes, he reveals, adding: Thats
when I get some of my best ideas.
Checklist Stakeholder management
14 CFO Guide Stakeholder checklist
One new message for directors
First day of the new CFO
So theres somebody new holding the purse strings. As a non-finance
director, avoid the temptation to batter a pathway to the CFOs door
to demand a bigger budget.
The CFO will soon make your acquaintance but not to discuss
increased spending. Start off your relationship by making it very
clear what your department does and how it adds value to the
bottom line. If you can demonstrate this quickly and concisely
you will have the CFOs full attention!
Detailed objectives/suggested tasks Timing
Identification of key stakeholders
Obtain a complete inventory of key Identify key stakeholders both external and internal 30 days
stakeholders that a CFO needs to Map stakeholders on CFO Agenda framework or
interact with: similar relationship map
Stakeholders agenda
Gain an understanding of current For key stakeholders, determine their views and
views of key stakeholders, potential issues through initial research and
including any issues discussions with peers and current finance team
Prioritise stakeholders based upon potential issues
and importance to achieving goals from CFO agenda
Conduct meetings with C level peers, Audit Committee
Chairperson, Board of Directors and Finance Leaders
Develop and execute meeting schedule: 60 days
Key analysts; significant stockholders; debt holders
Key customers; suppliers
Stakeholder management
Proactively manage stakeholders Develop stakeholder management strategy
to address any issues and to help (e.g. stakeholder map) with associated action plan
ensure achievement of CFO Execute action plan
agenda goals
Leadership and direction
Provide clarity over future direction Develop finance vision and strategy
and priorities. Align with corporate strategy
Inputs from leading practices and current
state of finance
Gain an understanding of the relative Carry out an evaluation of finance resources
strengths and weaknesses of current Leadership team
CFO organisations resources Other finance resources (quality and members)
Ensure CFO organisation fully Develop communication strategy 90 days
understands vision and strategy Websites; email; town hall meetings; conference
through calls; cascade management; blogs
Monitoring and feedback mechanisms
Ensure alignment of leadership team Set personal goals and objectives
Align compensation and incentives
Monitoring and feedback mechanisms
Notes for non-finance directors CFO Guide 15
Nigel Carter <Director of Client Services>
RE: Warmest greetings
Wendy Halfpenny <Chief Financial Officer>
Good morning Wendy,
As head of Client Services let me take this opportunity to welcome you
as CFO to the happy family that is Brothers & Brothers ...WELCOME!!
We must do lunch very soon. Dont worry my treat... my budget (ha
ha!!) and Ill tell you all about my big idea for the department, youll
love it ;-)
BTW Im looking for another 5K for my depts hospitality budget, if you
could see your way to processing something for me that would be super!
Nigel Carter
Director of Client Services
Risk and compliance can be seen as
a necessary evil and a drain on the
CFOs time. But the clever incumbent
will note that in difficult times a
companys corporate governance
credentials are good for the brand.
Benjamin Franklin once said:
Necessity wont make a
good bargain. This may or
may not be true, but if you
ignore your duties in modern
business the consequences
can be catastrophic.
When a new CFO is chomping
at the bit to make a difference
to the bottom line, he or she
could be forgiven for thinking
that risk management only
averts disaster rather than
adding value.
In the first 100 days, its crucial
that the CFO gets to grips
with compliance processes,
reporting standards and new
regulation not to mention
other business risks.
If a CFO can display to the
outside world that effective
controls are in place, he or she
can make a virtue of the fact
when trust is in short supply.
Taking control CFO Guide 17
In spite of what the CFO or
CEO may have heard, the
auditors are there to help the
business. So, make contact
with them early on by asking
them to prepare a briefing
pack of upcoming changes
in regulatory reporting
requirements.
Chapter 2
Taking control
Its fair to say that the
responsibility for risk
management across a whole
range of issues lies firmly
with the CFO. This person
is the safe pair of hands
marshalling the companys
defences against various
corporate threats. And its
not just financial issues.
Consider what one FTSE100
CFO has to say on the
subject: People need to
realise that all these long-
term risks can affect the
business. Naturally, its hard
to get off the moving train
when its going well, but
there are some long-term
consequences and risks that
you have to mitigate. And
that might mean taking a
short-term hit on profits in
order to look long term and
achieve proper results. That
shows the true character
of the company and how
it conducts itself.
Risky business
All CFOs experienced enough to remember the
pre-Enron days would agree that the rules about
due diligence have changed and that risk and
compliance increasingly demands their time.
Referee!
The clever CFO will be
aware that the issue of risk
management is already built
into the job. While the current
trend might be for a separate
risk management function,
which might appease those
wishing to see corporations
hog-tied by watertight rules,
the finance function is still
the keeper of the risk register
for most blue-chips. And
this should mean that risk
management is an integral
part of business operations,
not a box-ticking function in
a separate office.
Ask most investors and they
will tell you that they dont
need to know about every
possible risk facing the
company, from falling sales
to product recalls, executive
departures to hurricanes.
They simply want to know
that the CFO is flagging up
to the board the real risks the
business is currently running,
with adequate controls in
place to mitigate against them.
Of course, every game needs
a referee and your average
CFO these days is serving a
number of arbitrators. There is
now an unprecedented range
of regulators in the corporate
world imposing their will on
companies. There are now
rulebooks covering corporate
governance, pension liabilities,
share schemes, audit and
financial reporting, to name
a few. So while the CFO may
not know every last sub-clause
in the laws of the game, it is
his responsibility to ensure that
someone on the team does.
Knowing the drill
But does this rules-driven
approach benefit the
companies labouring under
the regulations? Most CFOs
would say no. To many
finance chiefs, the issue of
compliance has become the
biggest single headache they
face. And that emphasises
the need for two things: a
well-drilled in-house finance
team with the necessary
technical expertise to
cover the main risks; and a
properly informed roster of
professional advisors at the
CFOs disposal, ready to
tackle any compliance issue
that may arise.
There are many detailed
aspects to most regulations,
and for the CFO to
understand them intimately
simply isnt feasible. So the
CFO needs to ensure that his
advisors are fully aware of the
issues the business faces in
order to provide timely and
accurate solutions to technical
problems. With a strong
defence behind him, the
CFO can focus on leading
the attack on the competition.
So, todays CFO needs to
square the circle of instilling
adequate controls and risk
management measures,
with allowing operational
managers to spot and
pursue opportunities.
No CFO today can afford
to ignore the letter of the
law and the expectations of
shareholders, analysts and
investors on this issue.
Risk management and compliance CFO Guide 19 18 CFO Guide Risk management and compliance
No CFO today can
afford to ignore the
letter of the law and
the expectations of
shareholders, analysts
and investors on
this issue
Grappling with tax issues
can make a significant
difference to the bottom line.
Around Day 60, ensure that
the appropriate tax planning is
in place and start to consider
future tax planning strategies.
The CEO will want to know
what approach the business
will take on tax matters and it
may be worth communicating
these issues to the board.
The CFO isnt expected to
know every single element
required of the companys
reporting performance. For
that, he will need to look to
his auditors for impartial
guidance. The City will
expect nothing less.
For example, consider the
demands of the Sarbanes-
Oxley Act: introduced after
Enron, it now governs the
corporate behaviour of any
company with a US listing.
Section 404 in particular
requires CFOs to liaise
carefully with their auditors
to make sure they have
adequate controls in place
to satisfy the regulators.
So, CFOs will need to ensure
that both their auditors and
internal audit teams are fully
au fait with the demands of
the Act. As any referee will
tell you, ignorance of the
law is no excuse.
Alongside this, the CFO
should be making full use
of the expertise offered by
their auditors. Regulations
have a nasty habit of
changing with little fanfare,
and its crucial the business
isnt caught out. While it is
the primary responsibility of
the finance team to monitor
these changes, a new CFO
should be open with the
company auditors about
any concerns regarding
imminent rule changes.
What this illustrates is the
need for the CFO to engage
with auditors right from day
one. Professional advisors
auditors in particular are
only as good as the direction
they get from their clients,
so a hugely important factor
in tackling the issue of
financial and risk reporting
is to set aside enough time
to adequately brief auditors
on the key risks the business
is running.
And while the relationship
with auditors is crucial,
CFOs need to ask
themselves whether they
have the right firm for the
job. Modern regulation
makes the proactive auditor
worth their weight in gold,
so the CFO should be asking
whether their auditors are
fully focused on spotting
potential bumps in the road
and working with the CFO
to eliminate risk.
Fit for purpose?
All managers have to be careful with the companys
finances and keep track of expenditure or risk public
disgrace. The new CFO would do well to make full
use of the auditors to make sure the business gets
a clean bill of health.
20 CFO Guide External reporting and audit External reporting and audit CFO Guide 21
Modern regulation
makes the proactive
auditor worth their
weight in gold.
New CFOs should
ask themselves
whether their
auditors are fully
focused on spotting
potential bumps in
the road
Getting the boot
CFOs, like football managers, can be prone
to shameful dismissal. Indeed, the turnover
of new CFOs is consistently high. Here are
five good reasons why CFOs get sacked:
1. Failure to warn the board
when problems arise
CFOs are expected to keep
a constant eye on how the
numbers are faring to
forecast and anticipate where
the figures are headed and
sound the horn at the first
sign of difficulty. Be direct,
dont sugar-coat the bad
news and always remember
to give colleagues a range
of possible outcomes so
no one is kept in the dark.
2. Estimations wide
of the mark
Required to be a professional
forecaster of figures, if a
CFO provides wildly inexact
and inaccurate numbers it
seriously undermines the
credibility of the role. Avoid
losing the confidence of the
big cheese by keeping a
reliable financial reporting
system, monitor it continually
and notify management if
all is not as expected.
3. Company culture of
scape goating the CFO
Taking undeserved flak can
be beyond your control so
responding to it correctly is
crucial. Take responsibility
for your teams shortcomings
but be demonstrative when
blame lies elsewhere.
Make sure unit heads are
accountable for their budgets
and staff and that you
have communicated their
responsibilities. For example,
if the commercial team loses
a valuable client, you need to
be sure that support for that
team was not found wanting.
4. Personal failures
Vice has been the ruin
of many a footballer and
manager, and CFOs, being
human, are not immune to
similar temptation. However,
the CFO should represent all
that is ethical and responsible.
The CFO is the final authority
on financial statements,
so inappropriate, illegal
or irresponsible behaviour
equals an immediate red card.
5. Professional conicts
of interest
Always remember to stick
to the companys stringent
conflict of interest disclosure
policy and ensure your
personal expense reports and
transactions are above board
to avoid even a hint of conflict.
22 CFO Guide Five reasons why CFOs get fired Five reasons why CFOs get fired CFO Guide 23
Belt and braces
CFOs learn early on in the job that every business
activity comes with its own hazard. They must be
sure that the individual in charge of that activity is
aware of their responsibilities.
As we have seen in the post-
Enron environment, when it
comes to reporting, risk and
compliance have emerged as
key considerations for CFOs.
In this area there are reporting
and auditing processes in
place (see page 18). But the
compliance risks do not end
beyond the filing of results.
Today, compliance pervades
almost every aspect of the
business world from tax
filings and financial covenants
to data protection laws and
health and safety measures.
And its the role of the
CFO to have an awareness
of everything.
Take tax, for example. CFOs
need to ensure tax filings
are being completed on time
and that appropriate details
are being provided. They
also need to have a thorough
awareness of any relevant
exemptions. Tax breaks are
available to businesses
complying with certain
strictures relating to things
such as IT investment and
energy usage. But to qualify
for these exemptions, you
have to comply with the
rules (see page 50 for
more details about tax).
Key questions
Issues of compliance and
risk will surround most of
the financial arrangements a
company has in place. There
are several questions a CFO
must answer in the first
30 days. What debts do you
have? How are repayments
organised? What happens
if you fail to meet your
obligations? Have any
covenants been agreed with
lenders? Borrow from a bank
and youll almost certainly
have covenants imposed upon
your business. These might
require you to maintain a
particular degree of profitability
or revenue generation, and you
breach these agreements at
your peril. Make an error with
regard to covenant compliance
and the lender will be able to
re-dictate payment terms.
Enterprise Risk Management
(ERM) provides a framework
for businesses to measure
and assess risk and reward.
It is a powerful tool for CFOs.
Successful ERM enables
businesses to differentiate
between acceptable risks
and those that are simply
too much of a gamble.
Through ERM, a CFO can
develop processes and
structures that will help
mitigate some of the potential
dangers ahead.
Its similar to making a player
undertake a medical before
signing him. Unearth a
serious injury and you can call
the deal off. But if the player
has a less serious problem,
there may an opportunity to
restructure things.
Getting support
The list of things a CFO has
to consider goes on and on.
There are matters concerning
data protection, equal
opportunities and even the
disposal of certain assets
that are likely to have an
environmental impact.
There is little doubt that it
has become the role of the
finance team, and the CFO
in particular, to take overall
responsibility for risk and
compliance. But that doesnt
mean that one individual has
to be aware of every last detail
relating to every single issue.
Instead, the successful CFO
needs to ensure that his or her
team has the necessary skills,
experience and resources
to cope with its obligations.
A football manager wouldnt
try to conduct a players
medical himself. But he
would guarantee that
someone at the club was
suitably qualified to perform
this task. The life of a CFO
really isnt all that different.
24 CFO Guide The risks beyond reporting The risks beyond reporting CFO Guide 25
There are several
questions a CFO
must answer in the
first 30 days. What
debts do you have?
How are repayments
organised? Have
any covenants
been agreed with
the lenders?
The risks dont end with
reporting figures correctly.
CFOs and CEOs are
increasingly expected to
ensure that privacy, equal
opportunities and health and
safety policies are in place.
The CFO should meet with
the head of counsel to
confirm that the business
is adhering to these policies
and to get the status of
vital regulatory filings.
26 CFO guide Profile Ann Firth Ann Firth Profile CFO Guide 27
Like her previous job with news agency
Reuters, Ann Firths current employer
has a strong international dimension.
But moving from the commercial to the
voluntary sector has presented challenges.
Corporate structures are usually well
defined whereas here there is a more
collaborative approach a company CEO
can impose his or her authority but its
different with an Non-governmental
organisation (NGO), says Ann, 47, who
joined Plan International, a worldwide
child-centred development organisation
in 2006 and is now Director of Finance.
We also work more closely with grass
roots staff who are in tune with the culture
of their own country whereas companies
do not have to adapt as much.
Communication is very different. Plan
uses three different languages. Some of
its local branches have no internet and
the office phone in Liberia, for instance,
is a mobile.
Seventeen fundraising operations around
the world send money through to Plans
head office where Ann has to ensure that
it is managed and used to deliver
programmes cost effectively. To achieve
efficiencies and consistency, finance within
this expenditure arm has been reorganised
so that it is managed globally rather than by
individual countries.
At the start it was really about devising long-
term strategies for the function while doing
basic business planning, she explains.
I also wanted to hear the views, experience
and recommendations of the staff. You get
an opportunity to do this early on because
people know that you have a certain level
of ignorance and you havent been involved
in previous issues. Its much more difficult
later, when youre line managing them
and are setting them targets. Targets are
increasingly important as NGOs become
more commercialised, competitive and
professional, Ann explains.
Another priority in a diverse, worldwide
organisation has been to maintain a certain
profile while doing this initial research.
I wanted to ensure that the finance function
was seen to be out there and taking a lead,
says Ann. But she has learned to manage
expectations. When people feed back
problems, you want to be seen to be
responsive and take these issues into the
plan but you cant do it all. You want to
be ambitious without over-promising.
The job inevitably includes travel to visit
offices around the world but here again
there are differences compared to life in a
corporation. We went on a family holiday
to Guatemala recently, says the mother of
four. Plan has a programme there and it
was great to be able to show my children
what were doing.
I wanted to ensure that the
finance function was seen to
be out there and taking a lead
28 CFO Guide Risk and compliance checklist Notes for non-finance directors CFO Guide 29
Spend some meaningful time with the CFO
Most directors expect CFOs to assume a stronger role, overseeing
corporate governance. While improving the quality of the boards
information depends on the CFO, directors need to be aware of
their duties and be proactive in fulfilling them.
Close contact with the CFO will enhance governance and improve
directors grasp of the company finances. Do not be unduly passive
nor overly aggressive, a balance needs to be struck. Trust the CFO
but always seek verification.
Checklist Risk and compliance
External financial reporting
Ensure external financial reporting Meet with financial reporting team to understand 30 days
obligations are met and on a current state of reporting, potential issues and level
timely basis of effort required
Meet with external auditors to get their views on
reporting process, potential issues and areas of risk
Understand current state of Review past regulatory filings and integral
internal financial controls management reports
Discuss regulatory compliance with finance teams
and external auditors
Gain an understanding of upcoming Ask external auditors to prepare a briefing
changes in external financial pack of upcoming changes in regulatory
reporting requirements (e.g. GAAP reporting requirements
IFRS, SEC pronouncements)
Tax filings
Obtain an understanding of tax filing Meet with head of tax to understand status of 60 days
status and any associated issues tax filings (VAT, local international jurisdictions)
and potential issues
Regulatory compliance
Gain an overview of various Meet with legal counsel or head of regulatory filings
regulatory requirements and filings, to understand key regulatory requirements (e.g. Data
and status thereof Privacy/Safe Harbour, Equal Opportunity, FCC) and
status of required regulatory filings, including
potential issues
Organisation and resources
Evaluate whether there are Meet with department heads to discuss resources
sufficient and approriately skilled and potential gaps
resources to manage risks and
comply with reporting requirements
Funding
Understand funding Meet with Treasurer to be briefed on debt covenants
arrangements and ability to
meet debt/equity obligations
and expectations
Enterprise Risk Management (ERM)
Ensure organisation has appropriate Ascertain responsibility for ERM and consider 90 days
ERM practices in place, including whether this is appropriate
Standard & Poors requirements Organise a briefing on ERM practices, gain an
understanding of key risks and mitigating controls
2010 KPMG LLP, a UK limited liability partnership, is a subsidiary of KPMG Europe LLP and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative, a Swiss entity. All rights reserved. 2010 KPMG LLP, a UK limited liability partnership, is a subsidiary of KPMG Europe LLP and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative, a Swiss entity. All rights reserved.
Chapter 3
Smooth running
The trouble with senior management
to an outsider is that there are too
many one-ulcer men holding down
two-ulcer mens jobs.
HRH the Duke of Edinburgh
Ensuring efficiency and
effective operations will be
a priority for a new CFO from
the get-go. But often more
urgent matters can push this
lower down on the CFOs
100-day agenda.
This chapter looks at how to
ensure smooth running of the
back office operations, such
as transaction processing
and the IT function.
Remember, though, its
your job to improve efficiency
where possible; its not
your job to micro-manage
every little process that
is the job of your team.
Part of your assessment of
back office operations will
be to check that your staff
have the right support and
the right ability.
Smooth running CFO Guide 31
The major difference between
a thing that might go wrong
and a thing that cannot possibly
go wrong is that when a thing
that cannot possibly go wrong
goes wrong, it usually turns
out to be impossible to get at
or repair. Douglas Adams
Dont panic!!
As we have discussed, CFOs
and their teams have come
under growing pressure to
contribute more value to the
business at a more strategic
level. But while this may be
the case, a CFO neglects the
less glamorous back office
operations at their peril.
The new CFO will look at
operations and see what
efficiencies can be made but
limit the amount of personal
time he or she needs to give to
this task without compromising
the quality of that operation.
There are two ways a CFO can
attempt to free up the time
they need for more strategic
activities. They can either
invest more money internally
to improve and streamline their
operations or they can bring in
an outside company to run the
day-to-day, non-strategic part
of their department. By your
90th day, you will want to
make a clear assessment
on the level of resources at
hand to handle back office
operations so that you can
make a decision on what
levels of investment to make.
Transaction processing
The finance teams traditional
role of transaction processing
is one case in point. The first
port of call for the CFO is to
make sure the appropriate
policies and procedures are
in place, find out if there are
any ongoing issues involving
the payment of suppliers or
getting paid by customers.
Further on in the first 100
days, the CFO will want
to meet with the head of
accounting and establish
what resources and level of
skills are employed to meet
this function. In addition, the
CFO might compare against
other industry benchmarks
and leading practices. With
a stronger grasp on how the
business is faring and what
lies in store for it in the
future, the CFO will at this
point also assess the extent
to which the current system
of transaction processing will
meet the businesss needs
in coming years.
Delegate the details
CFOs are not required to examine the details of
individual back office operations on a day-to-day
basis, but they must make sure that someone does.
Similarly, a football manager would not think to check
that each player gets an appropriate-sized slice of
orange at half time, but he would make sure that
someone was responsible for refreshments.
32 CFO Guide On top of back office operations On top of back office operations CFO Guide 33
How to be the special one
As you sashay through the office among your colleagues,
push your shoulders back and move with your head held
high. These people admire you, hold you in reverence and
value you as a football team would their club manager.
If you are the special one, you can take your team to the
top of the league. But the role of the CFO is by no means
easy, possessing the following 10 qualities should win you
the respect of the finance team, the board and your CEO.
1. Uncompromising integrity
and ethical standards
It may be obvious, but as
CFO you are the custodian
of everyones money and
need to maintain that trust
and keep allegiances. Be
prepared to report bad news
to the board immediately,
despite the fact you allowed
the marketing department
to go ahead with fruitless
expenditure that wasted
the companys cash.
2. Financial accounting, cash
management and corporate
nance competence
Keep yourself abreast of
up-to-date accounting
knowledge. Cash
management skills are also
a core asset, as well as
the ability to disseminate
this to managers, creditors,
shareholders and others.
3. Basic business knowledge
and strong understanding of
company operations
For a successful turnaround,
stay on top of business
fundamentals and your
organisations business model.
4. Strategic vision
and leadership skills
Dont shun or hide away from
your colleagues. Youre not
just the numbers person.
Apply your strategic mind
to formulating and executing
business plans, as well as
demonstrating your leadership
skills across the financial and
management team as a whole.
5. Problem-solving abilities
Dont just settle for a good
deal the best CFOs create
a win-win plan to secure
the companys future.
6. Communication skills
Dont live up to the
expectation that accountants
cant communicate. Listen and
deliver your message without
the technical jargon. Make
time to improve these skills
if you suspect a deficiency.
7. Strong work ethic
Expect to work long hours,
especially in a turnaround,
while processing large
amounts of information
with a very fine toothcomb.
8. Self-condence and
willingness to take a stand
Self-confidence is a must.
How can you deny the director
who uses any swaying tactic
possible to secure that boost
to their budget, without having
reams of confidence? A belief
in, and affirmation of, your
decisions and views is crucial.
9. Results-oriented mindset
Results must come first, not
processes, particularly when it
may be company procedures
which resulted in a blunder.
10. Reliability
This may sound obvious,
but keeping to a strict
timescale, while producing
accurate information and
demonstrating a willingness
to undertake any task for
results, will keep you away
from the firing line. Recent
research from software
consultancy BizNet found
that most CEOs of large firms
wanted their CFOs to be a
trusted advisor and true
partner hallmarks of a
reliable business person.
34 CFO Guide Ten qualities of an effective CFO Ten qualities of an effective CFO CFO Guide 35
Supply chain oversight
For managers of small companies, there is always
a temptation to take on too much responsibility.
Bigger businesses appoint trusted lieutenants in the
finance team to ensure that the companys partners
and suppliers keep the exchange of goods and
services in motion.
Its essential to ensure that
your business is receiving the
highest quality products and
services at the best possible
price. But its just as
important not to get bogged
down in the details.
When it comes to managing
the supply chain, it pays to
have a strong team in place.
The successful management
of supply chains has never
been more critical to
organisational performance
than it is today and that
reflects a number of recent
trends. First and foremost,
businesses are becoming
increasingly global. Even
modest-sized firms can now
boast a worldwide roster
of suppliers, partners and
customers. But dealing in
overseas markets will always
present unique challenges.
Each country will, for example,
have its own nuances with
regard to the legal and financial
regulations youre obliged to
abide by and these may be
very different to the practices
youve grown used to in the
UK. A major responsibility
of the CFO is to ensure that
his or her team is fully aware
of, and prepared for, any
differences that may emerge.
Whats clear is that supply
chains are becoming ever
larger, more complex and
international. Its the role
of the CFO to ensure that
everything is managed
appropriately. If not, costs
may rise and service levels
may fall. Most worrisome of
all, should a partner suddenly
encounter unexpected
difficulties, a company may
find itself desperately short of
an essential asset and blindly
scrambling around trying to
find an alternative supplier.
The secret to managing a
supply chain effectively is
to ensure that appropriate
processes and procedures
are in place. A strong CFO
must ensure his team
understands that choosing
suppliers isnt just about
cost. Product quality and
service levels are just as
important. Moreover, signing
up a supplier isnt the end of
the process. A successful
procurement team will
continue to monitor the
performance of its suppliers
and of potential alternatives
to ensure that it continues
to receive the best deal.
Keeping tabs on the players
At the end of the day,
first-rate supply chain
management is all about
relationships. Forging strong
links with existing suppliers
might enable you to secure
discounts or garner more
favourable payment terms.
Building relationships with
alternative suppliers,
meanwhile, could result in
an altogether better deal
for your business or a ready-
made contingency plan in
case you experience a break
in the chain. If you just tell
your team what you expect
from them, you may be
surprised at what they deliver.
Outsourcing
Globalisation aside, there
have been other fundamental
changes to what we perceive
supply chains to be. Question
most CFOs on this topic
as recently as 10 years ago
and, chances are, they would
simply have recounted a list
of organisations providing
basic goods and utilities.
As the naughties have
advanced, times have
changed. Outsourcing has
risen exponentially. Today,
supply chains are as much
about services as they are
about goods. In fact, its
not unusual for companies
to completely hand over
responsibility for a particular
business function such as
HR, IT or even marketing
to a third party.
36 CFO Guide Managing the supply chain Managing the supply chain CFO Guide 37
When it comes to efficiency,
by Day 90 the CFO and CEO
should start looking at other
businesses and compare their
benchmarks and practices
with their own business.
Are yours the best ones for
the company right now?
The successful
management
of supply chain
has never been
more critical to
organisational
performance than
it is today and that
reflects a number
of recent trends
As soon as he had completed his training
at KPMG London Alex Woodward left Britain
for Spain and the firms Valencia office. I
spent three years of my childhood on the
island of Cyprus so I felt a strong attraction
to the Mediterranean environment in
Valencia the minute I walked off the plane,
he recalls.
Alex, 44, now lives in Barcelona with his
Spanish wife and their four children. As
Group Administration & Finance Director
for Spanish group Abertis Airports, which
runs Luton, Belfast and Cardiff airports in
the UK. He works between Barcelona and
Luton. Alexs Anglo-Spanish lifestyle is
ideally suited to the challenges he has
faced in his professional life since he
arrived in February 2008 as Abertis had
bought Cardiff-based airports group
TBI plc less than four years previously.
Theres still a lot of integration work to be
done as the head office has been moved
from Cardiff to Luton and now most of the
senior positions are going to Barcelona
where corporate Abertis is based, explains
Alex. Its about getting to grips with two
different approaches. The Spanish style is
very direct English people might even
mistakenly think it rude whereas in the UK
people tend to be less naturally assertive.
I was recruited because, having lived in
Spain for 17 years, I can wear both hats.
The British approach to problem solving
is more structured, Alex finds: Many
Spanish tend to jump straight into the
detail, so Ive frequently found myself
saying: Stop and explain this to me
from the beginning. I want the team
to see the wood for the trees.
As UK companies face an increasing
number of acquisitions by foreign groups,
he advises anyone in this situation to try
to identify the management styles of
their new teams or bosses and to be
ready to work with them.
Its not typical with Spanish companies to
have an induction course, for instance, he
says. You have to ask the right questions.
Theres often no one to give you the global
picture so you have to pick it out it from
what youve learnt from different people.
Currently Alex spends four days in Luton
and the rest of the week in Barcelona.
I made a positive decision when I first
arrived to immerse myself in Spanish
culture. I speak Spanish to my wife and
friends, and only speak English to my
children. This makes it possible to be able
to change between Spanish and English
mode at work whenever necessary.
You have to ask the right questions.
Theres often no one to give you
the global picture so you have to
pick it out from what youve learnt
from different people
38 CFO guide Profile Alex Woodward Alex Woodward Profile CFO Guide 39
Systems savvy
While the CFO is not required to go at the businesss
IT equipment with a screwdriver and a pair of tweezers,
ensuring that the companys systems are managed
effectively has fallen under the CFOs responsibility.
One of the most significant
areas of an organisation
that CFOs are now finding
themselves responsible
for is IT, as CIOs and IT
Directors increasingly begin
to report directly the CFO.
The data that these
departments produce
concerning sales, costs,
margins and staff productivity
are essential for financial
management. Just as a
football manager gets more
observations about the
teams performance and
advice on improving it than
he can necessarily handle
for a CFO too much
uncoordinated data can
also be counterproductive.
In order to manage and
interpret this data and ensure
that IT systems are working
with optimal efficiency, CFOs
often assume a CIO role and
get involved in the operations
of the IT department as it
relates not only to Finance
but to every other aspect
of the organisation.
Constructing the game plan
It is necessary for the CFO to
meet with the IT department
and establish what level of
his input is required and
assess whether adequate
resources for the
management of that team
are in place. Furthermore, it
is essential not to lose sight
of the wood for the trees.
In other words, the CFO must
understand each function of
the IT operation, while bearing
in mind the overall picture
and its contribution to the
organisation. The architecture
is every bit as important as
the individual applications.
This means that the bread
and butter core transaction
processing needs to work
smoothly, of course, but
the CFO needs to keep
an eye to the future.
At a conference held by IT
research specialists Gartner,
40 percent of attendees
said that most traditional IT
organisations will be closed
down by 2012, as each
department becomes an IT
specialist in its own right.
While changes in technology
take place and IT functions
migrate into individual
departments, the CFO must
adapt to meet the needs
and working practices of
their new environments.
As the person with overall
responsibility for this, they
must be ahead of the game.
40 CFO Guide IT management IT management CFO Guide 41
42 CFO Guide Efficient and effective operations checklist Notes for non-finance directors CFO Guide 43
Win the CFOs confidence
CFOs would not tolerate a member of their team botching figures
or failing to pay attention to the details and the finance chief would
have good reason not to stand for failures in the boardroom either.
A director who shows that he or she has a proper grasp of their
department and can supply the finance team with accurate and
timely information is more likely to win the CFOs confidence
and gain greater support from Finance.
Checklist Efficient and
effective operations
Transaction processing
Ensure there are appropriate Confirm that there are policies and procedures 60 days
policies and procedures in place and that they are appropriate
Evaluate current levels of Discuss with the head of accounting: 90 days
efficiency and effectiveness Current resource levels and skill mix
of transaction processing Transaction processing costs
Gain an understanding of effectiveness
of transaction processing
Financial controls
Compare against benchmarks and leading practices
Are current processes repeatable and sustainable?
Are there monitoring mechanisms in place?
Will these meet future business needs?
Information technology
Gain an understanding of Meet with CIO or head of finance systems to
information technology used for gain an overview of technology architecture
core transaction processing and applications
Determine if there are any issues or significant
improvement opportunities
Chapter 4
Top performance
CFOs dont just count the beans.
They also have to grow them too.
This chapter looks at
managing the finance teams
operational performance
and making sure it meets
the needs and expectations
of the business.
Making an accurate
assessment of those needs
and measuring the teams
performance against them
will be a key priority in the
first 60 days in office.
Once this is done you
will be in a better position
to look more strategically
at how operational
performance can be
enhanced by spending more
time looking at operational
planning and forecasting.
Pitch performance CFO Guide 45
Q: How can you tell when
a CFOs getting soft?
A: When he actually listens to
Marketing before saying no.
Setting the goalposts
and keeping score
Nothing says performance like a ball in the back of the
net, but in business the goals are harder to define. CFOs
need to set out these key performance indicators early
on in their tenure and then keep score.
Assessing the performance
of key players is as important
for CFOs as it is for a football
manager. So, the CFO needs
to assume a major role in
helping to drive operational
performance.
Meeting unit heads within
the organisation in order to
get their feedback on the
quality of support that they
are receiving from the
Finance Department should
be high on the list of priorities
for any incoming CFO. He
or she will need to assess
whether key performance
indicators (KPIs) and other
management information
are appropriate and timely.
Establishing whether the
quality of decision support
provided and the level of
involvement is adequate is
another important task.
External benchmarking is a
useful tool you may want to
identify what other companies
of a similar size and sector are
using. Determining this will
enable a CFO to see what
practical measures are
relevant. These methods
might include activity-based
management, value-based
management which are
aimed at growing the value of
the organisation and its assets
and balanced scorecards.
These measure whether the
various operational activities
of the organisation are aligned
with its overall objectives,
vision and strategy.
Top tactics
It may well be the case that all
three of these methods, plus
others, could be useful to the
organisation. But identifying
best practice here and then
deciding what can be used
within the CFOs own
organisation is only half the
story adapting these
methods to that organisations
own needs and then gaining
buy-in from the staff that will
implement them is also vital.
Reviewing the basic structure
of the organisation to ensure
that it has the right decision
support both in terms of
reporting lines and properly
trained specialist departments
is also important. The CFO
will need to consider whether
Finance has the right skill sets
and experience appropriate
to senior decision support
roles. Developing training
programmes and encouraging
staff to think beyond their
traditional, purely financial roles,
to focus on broader indicators
and goals might also be part
of the CFOs winning strategy.
46 CFO Guide Performance management Performance management CFO Guide 47
R
MIKE MA TIN
, a health
South Corporation
h
FO of Healt
t
As the former C ewha
self a som
Martin earned him
company,
005 for his role
care
tence in 2
ek-long prison sen
asly we
aud. He pleaded
me
counting fr
$2.7bn ac
.
in the companys unts
fraud and other co
securities

ilty to conspiracy,
utive
gu
r HealthSouth exec
e third forme
ars
Martin, th e
ginally given five y
s ori
d to prison, wa
000 fine
sentence
use arrest, a $50,
nths of ho
o
ion, six m
roceeds.
probat n p
e forfeit $2.39m i
and that h
and a dem
EBENEZER SCROOG
a banker or
her Scrooge was
wn whet
e to
It is unkno
did com
ney lender, but he
sional mo
ofes iew of cold
pr
century v
e the nineteenth
whom
epitomis
hearted man with
n-
As a mea
on
accountants.
o the exclusi
was everything, t
bot tom line
ple skills
the
d the peo
e
hing else, he lack
ryt of modern
of eve ired
hinking now requ
cture t
and big-pi
ecutives.
ancial ex
fin
E
IRA ZAR

on into claims this
r investigati

lowing a two-yea
iates by
Fol
of Computer Assoc
s
eefed up the book
ed
ex-CFO b
a bargain and plead
e
entered a pl

t least 270m, Zar
commit
a
and conspiracy to
ud
urities fra
Zar
guilty to sec ealthy
ustice. St
aud and obstruct j
rities fr f contracts
secu
dollars o
booked millions of
fraudulently id
id Kaplan and Dav
dents Dav
ongside vice presi
2004 and
al
months in prison in
pent seven
He s n months.
Rivard.
r seve
arrest for a furthe
er house
was und
TUART M
Y WILES
ICKE
S
made, the
ome
f Ben & Jerrys H
o self a
The ex-CFO
mpany, earned him
co
ice cream
ezzling
established mb
05 af ter e
n sentence in 20
priso any. Wiles
27-month
he comp
( 167, 000) from t
, 000 ibutions,
nearly $300
e contr
eques for charitabl
pany ch
-existent
issued com
ther non
l settlements and o
d lega , holidays
unspecifie
n electronics, gifts
h out o
expenses to splas
ulgences.
d
e usual personal in
and th
U
SCOTT S LLIVAN
stance
ond largest long-di
Ss sec
r CFO of the U
hitect of
As the forme
as labelled the arc
WorldCom, Sullivan w
com Americas biggest
tele as
which ended up
y ing
fraudulent activit count
ated in $11bn of ac
min
ate and cul
5,
bankruptcy to d
t in 200
risonmen
ed to five years imp
nc mer CEO,
fraud. Sente r
ge of WorldComs fo
with the knowled
in
Sullivan,
tments and entries
roper adjus
p
sed numerous im
companys
cau ke the
s and records to ma
ms book o meet
WorldCo
results appear t
cial
yearly finan
quarterly and
ectations.
Wall Streets exp
HE
F N
NGHAM
RIFF O OTTI
THE S
nstructed
the unreco
f
e a model o
b
he Sheriff would
gorous
T
nd up to todays ri
dly sta
nd he would har
e and
CFO a
ppointed to manag
A
rds of accounting.
da e villainous
stan
orth of England, th
e n
nforce order in th g
e h taxes and stealin
eople with hig
ssed p
Sheriff oppre
wn ends.
o
nd land to meet his
a
livestock
18
19
IRA
ZAR
MIKE
MARTIN
The Sheriff of Nottingham
Ebenezer Scrooge
Rogues album
Infamous finance executives CFO Guide 49 48 CFO Guide Infamous finance executives
SCOTT
SULLIVAN
STUART
MICKEY
WILES
2010 KPMG LLP, a UK limited liability partnership, is a subsidiary of KPMG Europe LLP and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative, a Swiss entity. All rights reserved. 2010 KPMG LLP, a UK limited liability partnership, is a subsidiary of KPMG Europe LLP and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative, a Swiss entity. All rights reserved.
Paying your dues
Giving proper responsibility to someone with
a detailed understanding of the companys tax
situation in the first 60 days could save your
company money and even its reputation.
When it comes to tax, an
incoming CFOs chief priority
will be to meet with the head
of Tax and make sure that
payment deadlines are met
and that compliance is being
suitably adhered to. It will
also pay to check that the
head of Tax is up to date on
tax regulations and has any
forthcoming changes to the
law firmly on the radar.
With Her Majestys Revenue
& Customs (HMRC) involved
in numerous test case battles
with the European Court of
Justice, there is a degree of
flux and uncertainty in the
UKs tax system, which could
potentially cost UK businesses.
Other demands on the CFOs
time may preclude him from
thinking too much about tax
planning until later in the first
100 days. But effective tax
planning can save a company
significant amounts of money
by mitigating its tax liabilities.
To this end, you may wish to
raise tax as an issue on the
boardroom agenda, as CFOs
are increasingly being called
upon to communicate tax
strategy to fellow board
members and make sure
they are aware of risks.
Its also important that no
one conducts tax planning
without the knowledge of
the head of Tax. It is the
CFOs duty to make sure
these controls are in place.
Tax risks
A CFO will need to consider
what the companys attitude
is to tax risk and look at how
tax liabilities have been
handled previously, as well as
how the business fares in the
eyes of HMRC. An aggressive
attitude to tax planning can
reduce costs, but trusted
low risk firms who have
adequately communicated
their compliance are likely
to be subject to enquiries
by the authorities just once
every three or four years
less than organisations with
a more adventurous take on
tax planning.
But tax policy can also have
implications beyond the
balance sheet. It affects the
way shareholders and other
audiences view the company.
For instance, a company that
values its Corporate Social
Responsibility credentials
or has major contracts with
government bodies will
want to make clear that tax
compliance is a priority and
that being trusted and paying
its liabilities is a core value
of the companys brand.
A CFO can do much to
handle tax policy but the
good news about tax
and there is such a thing,
believe it or not is that
comprehensive, up-to-date
advice is always available
from a professional advisor.
For more information about
tax you can order KPMGs
Everything you ever wanted
to know about tax without
getting lost from
maria.boyer@kpmg.co.uk
Strategic thinking
As strategic planning comes
to the foreground of the CFOs
agenda, any new development
in the business, such as a
divestment of assets, staff
incentive schemes or setting
up an office overseas, may well
come with an unexpected tax
bill attached. This could affect
cash flow and undermine the
CFOs reputation for smooth
financial management.
Business processes
throughout the company
have implications for tax,
ranging from purchasing to
staff remuneration, so its
essential that the CFO is
aware of the policy and
practice in all these different
areas. Changes in these
processes as well as a
companys performance
or structure may alter
the tax liability. Therefore,
anticipating and managing
such changes is important
to the financial performance
of the company.
Tax planning CFO Guide 51 50 CFO Guide Tax planning
Later on in your
first 100 days you
may wish to raise
tax as an issue
on the boardroom
agenda, as CFOs
are increasingly
called upon to
communicate
tax to fellow
board members
Before you complete your
first 100 days, make sure
your team leaders are on
board with your strategy.
Establish personal goals
and objectives and align
these with compensation
and incentives.
Time to think about
the future
As the your first 100 days progress, you will
increasingly be called upon to fulfil your strategic
role in the business. You will want to make sure
you have met your other priorities so that you can
give adequate time to this important function.
Indeed, you overlook strategic
planning at your peril. Attempt
to achieve too much too
soon and the results can
be near catastrophic.
Within most organisations,
the entire executive team
has some responsibility for
strategic planning. But, more
often than not, its the CFO
that has to fulfil the most
difficult role. He or she has
to strike a balance. On the
one hand, the CFO has to deal
with the businesss divisional
heads, who will want to spend
big to achieve optimum
success as quickly as possible.
On the other, theres the
CEO and non-executive
team who will demand to
see tangible results for every
penny invested. Reconciling
these expectations is the
real challenge.
executive directors. This
will provide a wealth of
information relating to current
practices and will also offer
insights into the finance
teams historic involvement
in strategic matters.
Asking questions of your
peers will be helpful. Its
important to establish how
the finance team is perceived
within the business. Does
it already add value? If not,
what can be done to deliver
more? Its just as important
to discover how the role
of CFO is viewed by the
rest of the executive team.
Do people think youre
there to run a watchful eye
over things and provide
essential insights? Or do
they assume youre just
there to cut the cheques?
By conducting this research
thoroughly from the outset, it
becomes possible to evaluate
current strategic planning
practices effectively. You can
assess how current projects
are progressing and decide
whether or not existing funding
structures are appropriate.
The art of saying no
Never lose sight of the fact
that its the CFOs job to say
no. Within every business,
someone has to step back,
weigh up the risks and
ensure that money isnt being
squandered in pursuit of pipe
dreams. Instead, projects
have to be carefully planned
and constantly monitored.
Most importantly of all, they
have to be in keeping with
the overall strategic vision
of the business. Theres no
point, for instance, throwing
cash at a new product if
you have absolutely no idea
how to take it to market.
During the CFOs first 100
days progress in strategic
planning will become
increasingly important.
For many CEOs, a strategic
business partnership with
their CFO is what they want
most from the relationship.
However, when it comes
to strategic planning, the
early days are particularly
vital in developing a complete
picture of the processes and
structures already in place
and getting you to that stage
where you are able to provide
full strategic support to the
executive team.
As we have seen, the best
starting point is to schedule
in meetings with fellow
Strategic planning processes CFO Guide 53 52 CFO Guide Strategic planning processes
All the while, the organisation
overall financial position
should be closely monitored.
Remember, the whole point
of strategic planning is to use
your resources as effectively
as possible. Keep an eye
on your debt and equity
levels and dont let the ratio
between these two metrics
exceed a level with which
youre comfortable. Its easy
to over-commit financially,
but far harder to turn things
around once youve over-
stepped your means. Just
think of all those football
clubs desperate to return
to their past glories.
Q: How do you create
a small business?
A: Manage a big one
very badly.
The whole point
of strategic
planning is to use
your resources
as effectively as
possible. Keep an
eye on your debt
and equity levels
and dont let the
ratio between these
two metrics exceed
a level with which
youre comfortable
54 CFO Guide Managing operational performance checklist
Checklist Managing
operational performance
Business performance management
Ensure Finance is playing Meet with business stakeholders to get feedback 30 days
an appropriate role in helping of quality of finance support received vs expectations
to drive operational Meet with financial heads supporting business
business performance operation to:
Assess whether KPIs and other management
information are appropriate and timely
Consider whether the quality of decision support
provided and level of involvement is adequate
Performance Measures
Determine whether Finance is Evaluate performance measurement practices 60 days
making use of leading practice in place vs leading practices (e.g. Activity-Based
measures and approaches Management; Balanced Scorecards)
Tax Planning
Ensure that appropriate tax Discuss effective tax rate and tax planning with
planning is carried out to manage head of Tax
the effective tax rate Consider opportunities for future tax
planning strategies
Organisation Structure and Human Resources
Consider whether resources Evaluate organisation structure for decision support
and organisation structure in both in terms of reporting lines and specialist
place are appropriate to provide departments (e.g. dedicated Project Management
decision support capability; dedicated decision suppport group)
Consider whether finance has the right skill sets
and training for senior decision support roles
Operational Planning and Forecasting
Ensure operational planning and Review operational planning and forecasting process 90 days
forecasting is effective and helps to determine if it is effective (e.g. timely; appropriate;
drive business performance carried out at the right level of detail)
Notes for non-finance directors CFO Guide 55
Some top tips
1. Finance directors should know a lot about risk, so when seeking
CFO backing on a project, provide some risk analysis to show
what happens when things dont go to plan.
2. CFOs like predictability. Whether you are pushing a marketing
campaign or a training programme for employees, give the head of
finance some measure of what you expect your project to achieve.
3. Past performance is a crucial guide to finance controllers. If you
can show CFOs historical data, they will be grateful for your efforts.
2010 KPMG LLP, a UK limited liability partnership, is a subsidiary of KPMG Europe LLP and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative, a Swiss entity. All rights reserved.
KPMG
Everything you ever
wanted to know about
audits... but couldnt
be bothered to ask
KPMG
Audit guide
KPMG
Everything you ever
wanted to know about
tax... without getting lost
Also available

56 CFO Guide Useful organisations and publications
Useful organisations
and publications
Institute of Chartered
Accountants in Scotland
(ICAS)
The ICAS is an independent
accountancy body formed in
1951 by the amalgamation
of three societies originally
granted charters in 1854,
1855 and 1867. The institute
is the oldest established
professional accountancy
body in the world.
www.icas.org.uk
Institute of Chartered
Accountants in England
and Wales (ICAEW)
The ICAEW is the largest
accounting body in Europe,
with more than 124,000
members working in business
and public practice in 142
different countries. The
Institutes qualification is
recognised around the world
as a prestigious professional
business qualification.
www.icaew.co.uk
Institute of Directors (IoD)
IoD is a worldwide association
of members advocating
director professionalism
and providing a professional
network spanning the largest
public companies to the
smallest private firms.
www.iod.com
2009 KPMG LLP, a UK limited
liability partnership, is a subsidiary of
KPMG Europe LLP and a member rm
of the KPMG network of independent
member rms afliated with KPMG
International, a Swiss cooperative.
All rights reserved. Printed in the
United Kingdom.
KPMG and the KPMG logo are
registered trademarks of KPMG
International, a Swiss cooperative.
Designed and produced by Wardour
Publication number: 309-772
Publication date: April 2009
The information contained herein is of a general nature and is not intended to address
the circumstances of any particular individual or entity. Although we endeavour to provide
accurate and timely information, there can be no guarantee that such information is
accurate as of the date it is received or that it will continue to be accurate in the future.
No one should act upon such information without appropriate professional advice after
a thorough examination of the particular situation.
Disclaimer
All gures were correct at the time when the publication went to print.
Credits
Main photography by Drew Gardner; proles photography by Johanna Ward.
kpmg.co.uk
2010 KPMG LLP, a UK limited liability partnership, is a subsidiary of KPMG Europe LLP and a member firm of the KPMG
network of independent member firms affiliated with KPMG International Cooperative, a Swiss entity. All rights reserved.

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