📬 Words of wisdom: Any advice for a first-time CFO?

The Rookie from California asked:

My boss (CFO) just got fired and they pinged me as his replacement - do you have any words for a rookie?

Congrats on the promotion. The job is yours now, so it’s time to mentally promote yourself. Make sure the C-Suite and your team see you as the new CFO, not just a stand-in. Time to walk the walk.

Next up, do you know why your boss got fired? I don’t mean the bull sh*t party line that went out in the internal email. Do you REALLY know? Speak to the CEO, the rest of the board, and, if you can, your (now former) boss. This will help you understand expectations for the role better than any job description will.

An internal promotion can be a blessing and a curse. First up, you know the company and the issues. But the risk is that you start from an overly familiar place. You now need to have a different purview.

I would encourage you to spend a few weeks looking at the entire finance function and business with fresh eyes. Roleplay as if you were an external hire who is brand new to the business. You will see things, you would otherwise miss.

Finally, give that balance sheet a good look. If there is any sh*t in there, you only get one shot at calling it out before it becomes a ‘you’ problem. Hopefully, there isn’t, but if there is, you have about 30 days to call it out.

Those are the things that are top of mind, but there are another 200,000 words of advice on cfosecrets.io for how to tackle the CFO role. Hopefully, you find something useful there.

Kristen from Durban, South Africa asked:

When you feel that the CFO does not communicate effectively to the divisional Heads regarding their P&Ls, and you have identified a number of issues due to this lack of communication and process control, what is the best approach to take to resolve these issues without starting a war with the CFO?

First up, Kristen, let me state the obvious.

This is not okay.

As a divisional head you are running the business accountable for delivering your part of the P&L. The finance function is there to support you doing that. Not make your job harder.

The first thing to do is figure out if this is a ‘skill’, ‘will’, or ‘hill’ issue. Is it a lack of capability, willingness to help, or competing priorities?

Take them for a coffee or a beer and make the effort to build some rapport, and share your issues in a non-threatening way.

It’s not often you see a true unwillingness to help. Most people come to work to do a good job. But if it is that… gloves off. Get your fellow divisional heads behind you, and prepare for war.

If it’s a skill issue, you can help the CFO understand what is missing and educate them on the issues it’s creating. You can also suggest areas where it would be helpful for them to strengthen their team to better support the business. This is an elegant way of pointing out their own deficiencies without embarrassing them directly.

Most likely, it’s a ‘hill’ issue - too many competing priorities. If so, you should explain what you are seeing, the impact it has, and the root cause of the problem. Assuming the impact is serious enough, they should divert their attention and resources to solve it.

Final point… you described ‘communication and process issues’. I’d probably tackle this by picking off the process issues first. CFOs like process, so speak their love language. The communication issues could even be resolved through working out the process issues as a live example.

Good luck with it, and thanks for the question.

Alberto from Monterrey, Mexico asked:

We work with bulk material (Coal, Graphite, and other minerals) it is received and kept either in Big Bags (1-2 tons, never an exact number) or bulk. The inventory measurement is a mess. Big Bags are often not exactly at a certain weight, the bulk material is taken with pay loaders, so there is no exact measurement of how much raw material has been used. For raw materials, there has never been an official warehousing, nor is it practical. And this of course makes our books next to worthless in terms of calculating bottom lines.

Is there a way to measure the accuracy of inventory certainty? What steps would you take to have confidence in the inventory, and therefore have a trustworthy bottom line number?

Alberto… I feel your pain.

Managing bulk material of variable weight through production is horrendous. HORRENDOUS.

I don’t know if that makes you feel better or worse, but let me try and help with some practical steps.

First up, get watertight on ‘goods in’ and ‘goods out’ processes. Start with the easiest bit. You know what materials you have taken in because you are approving and paying invoices from your suppliers. And likewise, you must know what materials you are shipping out, because you are invoicing your customers.

Make sure these processes hum. Ensure the operational process for weighing the product in and out works perfectly. If your weighbridges aren’t good enough. Get better ones. They’ll pay back in weeks.

Ensure this weighing process is reproduced accurately in your accounting system. That at least ensures that you have invoicing accuracy at both ends of the process.

Next up, mass balance it. Get a good operational accountant on the shop floor doing this for you every day. If you have taken delivery of 50 tons of material and sold 40 tonnes. Do you know where the 10 tons is? Inventory? Waste? Production losses?

This person will pay for themselves in what you learn about wastage and production efficiency.

Then over time, you want to shorten the intervals in this mass balance exercise. Maybe you can break that one mass balance down into three mass balances (one for each part of the production process). So you can pinpoint which part of the process creates what waste. Start measuring these more frequently. By shift. Hourly if you can.

As you shorten the feedback loops and narrow the intervals you will squeeze out the process inefficiency and uncertainty.

Somewhere on this journey, you want to upskill the operations team so this isn’t just a finance exercise, but becomes part of their standard operating processes. And how they measure performance. You can get quite sophisticated here. Yield per man hour. Start measuring different waste streams, etc. You can value each waste stream to create top-down KPIs.

Eventually, you want to systemize this, but don’t start there. Most ERPs aren’t cut out for handling this kind of process (even though all think they can/say they will). And until you understand what is happening on pen and paper, how would you even build a scope for systemizing it?

I’ve been there, Alberto. One step at a time. Thanks for your question and best of luck.

Every week I’ll share a book I loved or found useful.

A few of the biggest stories that every CFO is paying close attention to. This is the section you probably don’t want to see your name in.

Two Boards Oversee Public Companies’ Accounting. Why Is One’s Independence More at Risk?

With all the overhaul in government departments right now (and a new Trump appointed interim chair of the SEC) who knows what that will mean for the FASB and PCAOB.

Advanced generative AI cyber fraud rose 118% last year

Honestly, I’m surprised it’s that low. I believe that rate of growth will grow over the next few years (even as the base grows). Be watchful my CFO friends.

Deloitte once again named the world’s most valuable and strongest commercial services brand—for the seventh year in a row

I just threw up in my mouth a little bit.

ICYMI, some of my favorite finance/business social media posts from this week. In the words of Kendall Roy, “all bangers, all the time”:

For this first one, if you don’t know who Bonnie Blue is, be grateful. And enjoy the accounting banter. But whatever you do, do not look her up on your work device:

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And ICYMI, check out Saturday’s Playbook on the future of the finance function, and the role AI will play in it (spoiler: it’s massive).

Disclaimer: I am not your accountant, tax advisor, lawyer, CFO, director, or friend. Well, maybe I’m your friend, but I am not any of those other things. Everything I publish represents my opinions only, not advice. Running the finances for a company is serious business, and you should take the proper advice you need.