CFO Career Grid

Corporate

CostAccnt.

Planning,Reporting,Investor

Relations

BusinessAnalysis,Treasury

StrategicPlanning

Acct.AuditTax

Entry

Manager

New Co.’s

International

Crossfunctional

Development of FinanceDevelopment of Finance

Tax - Responsibilities

• Federal– Social Security– Corporate– Sales

• State– Sales– Payroll

• Audit– Any of the above.

Tax - Personnel

• Personnel – Rules & Regs. Specialized/Technical People

who make it their career

• During Audit Time(s)– Need other Specialists & Best Negotiators to provide

support

Tax - Responsibilities

• Minimization of Given Tax Payments

• Effects of M&A’s

– Classification of Assets

– Ownership

– Depreciation

Tax - Responsibilities

• International Planning Function

– For at least 4-5 Countries

– (or different places with Impacts on Business)

• Incentives

• Tax-Sheltered Programs

International Tax PlanningU.S. GmbH Eire

35% 55% 10%

RoyaltiesTrademarks

Management Fees

(Same Scenario w/ States)• State Income Taxes •Property Taxes

•Sales Taxes •Corporate Payrolls

Lessons Learned - Tax

• Aggressively Challenge IRS

– But reserve aggressively as well

• Global Businesses demand

- World Class Planning

• Always include Tax Management in M&A

– Planning and Negotiations

– At the Beginning & Strategic Level

Operations & Cost Accounting

• Highly Competitive Global Economy

• Firms that Accurately Measure and Understand their Costs may Survive.

Those that Don’t, Will Not.

Operations & Cost Accounting

• Controlling Costs & Capital

– Raw Materials

– Processes

– Systems

• Capital Budgeting & Returns on Capital

-- Productivity

• CEO & Team Understand Concepts of System

– Shared commitment to making them work

efficiently.

• Timely & Accurate (System) Numbers

Operations & Cost Accnt. System Imperatives

• Integrated Systems One Forecast

– Marketing - Updated & Sensitized

– Manufacturing as necessary

– Distribution, etc…

(-bonuses based on the above One Forecast)

Operations & Cost Accnt. System Imperatives

Operations & Cost Accnt. Systems

• Management from Top to Bottom must Know the

Systems

• Lower Levels must be trained in the use of the

systems and the need for required discipline.

– i.e.: Time Lines & Accuracy

Operations & Cost Accnt. Systems Responsibilities:

• Sales & Production Forecasts

– Procurements

– Maintenance of Product Data Records

• Info. must be clearly defined & accepted by the members of

management

– Inventory Levels

• Shrinkage, Obsolescence

Operations & Cost Accnt. Systems

• Assigned to Specific Management Fxns.

• Computer Based Systems

– Updated on a Daily Basis

• For Key Items: Manufactured, Used, or Purchased

– Constant Training & Retraining

• Accountability for Training

Operations & Cost Accnt. Systems

• Manufacturing/Inventory Planning Systems

– Must be Soundly Conceived

» Integrated with:

• Financial/Cost Accounting Systems

Operations & Cost Accounting Capital Appropriation Needs:

1. Climate in which Innovation Flourishes

2. Acceptable method for Evaluation of Proposals

3. Expenditures on a project to be Controlled &

Periodically Reviewed

4. Planned Post-Audit Program

5. Shared Lessons Learned

Operations & Cost Accounting Budgeting & Financial Models

• Capital Expenditures

• Cost of Capital

• Capital Rationing

– i.e.: Strategically Important Projects

• NPV & EVA

Analysis Methods

• Breakeven Point

• Cost/Volume

• Variance

Break-Even Point

• B.E.P. = Sales Revenue that Equals the Total Variable and Fixed Costs for a Given Volume at a Particular Capacity Utilization.

• BEP units = Fixed Costs

Unit Contribution

• BEP dollars = Fixed Costs

Contribution Margin

Cost-Volume-Profit Analysis

$

Units

Loss

B.E.P. ProfitContribution

FixedCosts

Contribution Analysis

• Contribution = Excess of Sale(s) over

the Variable Costs

or

the Amount of Money Available to

Cover Fixed Costs & Generate

Profit.

• Ability to Analyze & Explain

The Casual Factors Behind Changes in Profits.

Variance Analysis

Variance Analysis

1. Volume Variance

Variance =

= (100 units – 110 units) * $4

= ($ 40) -- Unfavorable due to Fewer

Units

ActualQuantity

StandardQuantity

_ Standard ProfitPer Unit*

Variance Analysis

2. Price/Cost Variance

Variance =

= 110 units * ($9.5/unit - $10/unit)

= $ 55 -- Favorable if Price

Unfavorable if Cost

ActualQuantity

ActualPrice/Cost

StandardPrice/Cost*

_

Earnings Variance Analysis

Plan/Forecast Actual

Volume/Units 100 110

Revenue $ 1000 $ 1045

Costs 600 715

Profit $ 400 $ 330

Earnings Variance Analysis

Plan/Forecast Actual Earnings

Variance

Volume 100 110 $ 40

Revenue $ 1000 $ 1045 < $ 55 >

Costs 600 715 < 55 >

Profit $ 400 $ 330 < $ 70 >

Good Volume Offset by Lower Price Levels and Higher Unit Costs

Operations & Cost AccountingNeed to Account for & Manage:

• Overhead– Payroll, Benefits, etc…

• Absorption

• Sunk

• Fixed

• Semi-Variable

• Influenced– Affects of every addition

Costs

Operations & Cost Accounting Manage By:

• Standard Cost Accounting

– Std’s, Budgets, Variances

• Inventory Valuation and Control

– Avg., Std., LIFO, FIFO, Cost Specific LOT

Operations & Cost Accounting Manage By:

• Budgeting

– Cycles

• Annual are the most effective

– Gamesmanship

• Under promise, Over deliver

– Allocations

• Know their Influences

Lessons Learned - Restructuring

• Bite the Bullet, for everyone’s sake

• Cut Once and Cut Deep

• Collapse Layers

• Keep it Secret

• Do it Quickly

• Do All that You Can for Employees

• Continue Recruiting

L.L. – Restructuring II

• Empower People – Increase Span of Control

• Over Communicate, At All Levels

• Be Humble, Be Honest

• For People and Markets:

“Cutting Losses Rather Than Hoping for Rebounds.”

“Hope is Not a Strategy”