A recent crackdown by Nigerian authorities on South African companies has brought the matter of financial management into the spotlight. Last month, mobile provider MTN was fined an unprecedented $5.2-billion by Nigerian regulators for failing to register users. A week later, the Financial Reporting Council of Nigeria (FRCN) suspended the ability of four people associated with Stanbic (Standard Bank in Nigeria) – including a chairperson and the chief executive officer – to sign off on financial statements. The move came after they uncovered irregularities in the 2013/2014 financial statements. The bank was hit with a $5-million fine and instructed to withdraw and restate the statements.
Whilst the Nigerian regulator seems to have been rather stringent in its punitive measures (MTN’s fine is equivalent to ¼ of the country’s gross domestic product),the regulators are within their rights and the happenings highlight a risk faced by every company doing business. Financial management oversights – whether intentional or not – could cost you lots and lots of money. In the case of MTN, share prices fell by 16% within days.
So what can South African businesses learn about financial management from the mishaps of some our biggest multinationals? Here are a few thoughts.
Good financial management can protect your company from authoritarian clampdowns.
The likelihood of the South African revenue service (or another regulator) going on a rampage against your company is small. However, if you’re not complying with tax or other financial reporting laws, expect to be hounded. In other African countries though, your business might be specifically targeted – whether as a cash cow for government revenue or other reasons. Prudent, proactive financial management will protect you from this. Even if a regulator is specifically gunning for your company, they’ll be unable to catch you out on anything if your record is squeaky clean.
Financial management is as much about external stakeholder relations as it is about internal.
Many see the financial management role as one which involves steering internal departments toward a specific goal and persuading department heads why they should stay within a certain budget. This is certainly true, but good financial management practices are also cognisant of the environment in which they operate. It’s just as important to make sure you’re not doing anything to offend your local trade and industry department as it is to ensure you’re not doing anything to offend your operations manager. Good financial managers are aware of the cultural and institutional expectations surrounding the business.
Good financial management saves you money.
Hire the right financial expertise, and it will pay you dividends. A good financial manager doesn’t come cheap. But what he or she brings to your company will pay itself back several times over. Instead of scrimping by hiring a full-time junior employee to take care of your finances, bring on someone with the right qualifications and experience part-time.
It’s unclear in the cases of MTN and Stanbic whether their non-compliances were intentional or not, they are most certainly being regretted by each company now. And that’s the last point to remember about good financial management: it is ethical. Your financial manager is being trusted with the lifeblood of the company – make sure they are someone who is worthy of the charge. If you are looking for a high level finance executive to provide the kind of management that will protect your business during the tough times, contact The Finance Team. We can help connect you with the right professional to provide you with interim or part time management, according to your company’s needs.