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The automation and consolidation of business processes cited in “Fasten Your Seatbelts” (July/August) are indeed the main factors in achieving optimum financial efficiency, ensuring more timely reporting.
This is what we found following the merger of NTL and Telewest in 2006. The new company — rebranded Virgin Media — had multiple legacy reconciliation systems, meaning a dramatic increase in the complexity and volume of transactions. While setting up a new financial shared service centre helped in this mission, greater consolidation of systems and processes was also needed. Through consolidating the reconciliation process onto a single platform, while eliminating the use of multiple formats across different sites, we have significantly reduced the time required to complete month-end closes in the business units we service as well as reducing transaction-matching error rates to less than 1%.
Head of Finance & Payroll Services
Know Your ABC
When it comes to managing supply chains (“Digging In,” September), CFOs should consider the role that activity-based costing (ABC) can play. Some of the initiatives cited in the article — such as companies developing various tiers of service according the profitability of each customer — show how components of ABC are being deployed across supply chains.
I strongly encourage CFOs, whatever the constraints they may face in terms of legal reporting requirements and standard accounting procedures embedded in their back-office systems, to sponsor the development of an ABC model, which can encompass finance, supply chain, operations, manufacturing and any other related department. In this way, the sorts of initiative identified in the article can be replicated on a regular basis across their businesses.
Gideon Hillman Consulting
Leamington Spa, UK
Karlheinz Hornung, CFO of MAN, has got it right, as “Dash for Cash” (July/August) shows. Companies with CFOs who educate their colleagues and embed cash-conscious management systems into everyday operational activities are in an enviable position. The emphasis here is on embedding a cash culture, rather than rolling out specific tools to fix payables or receivables.
The successful exploitation and optimisation of working capital and cash flow has to do with a culture driven by the CEO, COO and CFO. This culture enables the right strategic partnerships with clients and suppliers, and the right investment in management and processes. And it is this same culture that means there is rarely, if ever, any need to make a perilous and often hopeless dash for alternative funding.
Ready to ROC?
It’s true that using market measures to compute ROC (“ROC Solid,” June) imposes too much variance and overlooks what companies really have control over. At the same time, the accounting world is moving towards market-based asset valuation, which obscures the amount of hard capital actually deployed. All entrepreneurs know several basic facts, such as how much cash is on hand and what assets actually cost. With a recent propensity to alter asset costs on the balance sheet, computing returns on the cost of capital deployed is getting harder and harder. This fact can take one away from the realities of business-model evaluation and can actually obscure how much value is created — or lost — by management.
President and CEO