financial executive Archives - The Finance Team

Five ways your interim financial executive can help you expand into Africa

The African growth story is an exciting one, dotted with giant forward leaps and unexpected dips. It holds the thrill of an under-exploited market, and represents huge diversity that is still shrouded with mystery for many. Many international brands choose South Africa as a springboard for growth into the rest of sub-Saharan Africa. Over the past year, Hilton Hotels, Airbnb, Cotton On, H&M and Forever 21 have been just a few of the mainstream international brands making an entrance into the continent via our shores. Theoretically, this means companies like yours — that were founded and established in South Africa – are one step ahead. Already successful in the South African market and more familiar with their neighbours than non-African entrants, many SA-founded companies are perfectly poised for expansion into the rest of Africa.

However, it only takes one attempt at doing so to realise that this is no light undertaking. The first lesson to learn is that categorizing the “rest of Africa” as a homogenous ‘other’ is a foolhardy mistake. Every African market is vastly distinct from its peers, and it takes expert insight to understand the market you’re entering. At times like this, an interim financial executive can act as a subject matter expert and partner during the expansion process. Here are some of the insights an interim financial executive can offer as you weigh up the possibility of expansion in Africa.

Understanding the GDP

Anyone can google the GDP of an economy, but your interim financial executive will know what the numbers mean for your business. For example, Nigeria, with its Gross Domestic Product of $522-billion has recently officially overtaken South Africa’s GDP $351-billion to bag the title of having the largest GDP in Africa. Does that mean your company’s market would be more buoyant in Nigeria than SA? Not necessarily.

South Africa’s wealth per capita is double that of Nigeria, at $6 600 per capita here versus just over $3 000 in Nigeria, according to World Bank 2013 figures. Your interim financial executive can further help you understand the cost of overcoming infrastructure and transportation limitations in your host country. Understanding the GDP means knowing how likely people will actually purchase your product in the new country, not just how much money is collectively amassed in the country.

Understanding who the big players are in the new country.

Your interim financial executive can help you know who is already established in your space, how long they’ve been there for and what they did to get there. Knowing your competition – and how they prosper – is key to your own strategy and survival plan.

Knowing the labour market.

Your interim financial executive can research and help you understand things such as wage and salary trends, and what they mean for your business. Assuming that you will be able to find and attract the right talent in your new host country, how much will it cost you to keep the human resources you need? Can your company afford to pay employees what they will expect to receive, in light of operational and capital costs? Your interim financial executive will be able to analyse these possibilities and answer these questions.

**Becoming au fait with tax requirements.**

If you thought doing tax in South Africa was a headache, try navigating a completely different set of tax requirements in a foreign country where the system is likely much less sophisticated. Your interim financial executive will make it his job to get to know the ins and outs of the system, what the reporting requirements are, how your company needs to comply, and when.

The nuances around paying employees and suppliers.

In South Africa, you may be used to a “30-day from invoice” expectation with your suppliers. In the new host country, suppliers may demand cash on delivery. You might be used to paying employees via bank transfer, whereas your host country may require cash payments for many of your workers. Your interim financial executive will get to know the local way of doing things, and help gear up your company with the right systems, processes and checks to make this work.

Expanding into the vastly under-explored continent of Africa is both daunting and bright with opportunity. With the right partners assisting you, it can be part of a fulfilling and successful endeavour. Contact The Finance Team to find an interim finance professional who is willing to travel with your company and become your sounding board and partner as you take the leap.

October 22, 2015 / No Comments /

What’s the exchange rate doing to your company’s cash flow?

Exactly one year ago, markets were in a flurry as the rand reached and exceeded R11 to the US dollar. As usual, analysts rushed to predict where the trajectory was headed. In retrospect, we can say with confidence that those who predicted a downhill slope were the accurate ones.

The rand hovered a little below R11 for a brief moment, hitting its strongest point at R10.43. But the strength was short lived: the currency began a steady downward trajectory from that point onwards. Earlier this month, it hit R13.90 and analysts began to scratch their brows about the implication of the new possibility of R14 to the dollar.

Of course, while an overly weak currency does not spell out much good for the economy, the news means different things for different people – and different companies. Take a quick look below at a few key terms that explain what a weaker rand might mean for your cash flow if your business trades internationally.

It makes sense to start off with a definition of foreign exchange exposure. This is the formal term that refers to the potential for loss or gain due to a change in the exchange rate. In their book ‘Financial management’, authors Carlos Correia, David Flynn, Enrico Uliana and Michael Wormald explain further.

If your company owns a foreign subsidiary whose assets and liabilities are stated in terms of the foreign currency, then you will feel the effects of foreign exchange exposure, they write. If you purchased goods from a foreign supplier on credit and might still have to settle payment, your company will also feel the effects. Obviously, depending on how the exchange rate changes, your firm will also lose or gain on its foreign exchange exposure. Different kinds of exposure have different implications for cash flow. We explain three below.

Translation exposure

The authors define this term as “the effect that a change in the exchange rate will have on the recorded accounting results of a company”. Companies with subsidiaries on foreign soil will need to translate the income of their foreign branches into the local currency while preparing consolidated financial results. Because translation exposure does not affect the amount of money flowing into or out of the foreign-based subsidiary, it does not affect cash flow. As such, some refer to this it as “accounting exposure” – the theoretical loss or gain of the company should its income all be translated into one currency. In other words, this won’t affect the day-to-day running of your business, but it will look either good or bad on the books.

Transaction exposure

Investopedia defines transaction exposure as “the risk, faced by companies involved in international trade, that currency exchange rates will change after the companies have already entered into financial obligations.” For example, your jewellery store places an order of diamonds from Canada. Payment for the diamonds is due on delivery of the goods, but your firm bills clients on the current costs of the diamonds. The diamonds arrive three weeks later. During that time, the rand has depreciated against the Canadian dollar by 20%.

“Such exposure to fluctuating exchange rates can lead to major losses for firms,” notes Investopedia.

The first place this is going to hit you is your cash flow. You budgeted on spending X amount on the goods; now, because of exchange rates, you are actually having to spend X plus 20%. The implication of this is that companies involved in international trade need to allow for a higher level of cash flow, especially in times of uncertainty. Your cash flow will ultimately need to absorb the uncertainty in the market faced by your business.

Economic exposure

Economic exposure is the catch-all phrase referring to how your company will weather ‘economically’ as it is exposed to currency changes. It is “the risk that a company’s cash flow, foreign investments, and earnings may suffer as a result of fluctuating foreign currency exchange rates,” says investing.com. For South African companies that import products or services as part of their offering, this has borne itself in losses over the past year or two. For exporters and those in the local tourism industry, though, this has meant a boost to cash flow and overall earnings. While the former companies are having to rein in spending and be extra strategic about their management of cash flow, the latter can look for new smart investment opportunities and ways to maximise on their additional incomes.

Whether your firm’s cash flow has become tighter thanks to rand exchange fluctuations or whether you’re seeing extra waves of income, you need somebody with insight to help you make the right decisions during this time of uncertainty. Contact The Finance Team to find out how a qualified finance executive can assist in guiding your company on an interim or part time basis.

Image credit © Charlieaja | Dreamstime.com

October 1, 2015 / No Comments /

Tasks that only a qualified project accountant can master

Of all the roles connected to project management, project accounting is arguably one of the most specialized and simultaneously ubiquitous in the field.

A project accountant’s role as “a specific project management practice that identifies, monitors, and summarizes costs incurred in a project to provide an overview of the project’s financial state and cost performance,” according to Taskmanagementguide.com. It is a way of “connecting the financial system of an organization with project activities in which the organization is involved.” That’s all well and good to hear it described theoretically, but what will a project accountant’s role actually translate into, for your business?

Let’s imagine you own a printing company. You take on large printing jobs for corporates in Johannesburg. However, you were recently approached by a friend to spearhead a vast printing job in Bloemfontein. The contract will be a lucrative one, but will involve hiring a facility in Bloemfontein, hiring the necessary equipment, sourcing and purchasing what needs to be printed in the North West province, hiring management staff to oversee things and operational staff to make it happen.

You decide to run this task as a project. Your first step might be to hire a project manager. Your second step might be to hire a project accountant to work alongside them.

Now that they’re on board, here are some tasks that your project accountant can be relied on to carry out effectively.

Tell the (financial) past and future of the project.

A project accountant estimates project costs before the project begins. She would get quotes for hiring facilities and equipment, an estimate of paper costs and a guide as to how much the staff you need will cost for the duration of the project. She’ll give you an idea of what the whole thing will cost the company, and why. As the project progresses, your project accountant will track costs and keep management abreast of expenses. At the end of the project, he or she ensures that costs are accounted for as part of your corporate expenses.

Prepare client invoices.

As your project accountant tracks project expenses, he’s making sure that the company is making profit on what it outlays. He does that by preparing the in-depth, detailed client invoices for your Bloemfontein contact. He makes sure that no expense is incurred without it being passed onto the client (where appropriate).

Provides monthly reports comparing projected costs to actual costs, forecasting and budgeting for the next period.

Your project accountant will help you know where things went over budget and why, and how to cut back in order to remain on track or readjust expectations in order to stay realistic.

Pay sub-contractors.

The end of the month comes, and oh no! You’ve forgotten to pay the local printing foreman for his time. You didn’t factor that cost into your budget, and you’ll have to dip into the company credit card to cover expenses. Scenarios like this are the reason that unexpected costs incur. If you’ve got a project accountant, they should be limited to fiction.

Help bolster cash flow.

Your project accountant will constantly be looking for ways to keep cash flowing into the project. That means she will be proactively invoicing your client and following up on payment. It also means she’ll be searching for extra ways to make local sales and decrease the accounts receivable days. Bottom line (excuse the pun), your project should have more cash on hand if you have a competent project accountant working on your team.

If your company is looking to embark on an ambitious project that needs expert financial management, contact The Finance Team. Our qualified project accountants can guide your venture to financial and logistical success. They are happy to come in to assist for as long as you need them and no longer.

Photo Credit: career-job-tips

August 27, 2015 / No Comments /

Chevron’s Pat Yarrington: Lessons from a top female financial executive

Happy August! In recognition of Women’s Day this month, we’re looking at what we can learn about female financial executives across the globe. We will spend the next few weeks gleaning insights from some of the best female financial executives around the world.

Historically, finance has been a male domain, and while demographics in the workplace have evolved, top financial executive positions are still largely held by men. As an example of this: Out of the top 500 companies on Fortune’s list, there is currently a grand total of 58 female chief financial officers. That means 11.6% of the top financial executives in the Fortune 500 are women, and almost 90% are men.

Companies ‘unwilling to deviate’ from the norm

The female representation seems a paltry amount, but it’s actually an improvement on previous years. A similar analysis conducted in 2010 revealed 14 less women than there are today, and the current figure is 30 financial executives more than there were in 2000. So the direction is right, but progress has been incredibly slow, with only one more top female financial executive on the Fortune 500 than there was last year.

Two possibilities could be drawn from these statistics: firstly, women could be shying away from financial leadership roles; or secondly (and, as history as shown, the more likely scenario) companies remain hesitant to deviate from the traditional profile when it comes to top leadership. Employment Equity laws in South Africa have induced more female representation at the most senior levels, but this often takes the form of human resource and corporate affairs, rather than the CEO, CFO or operations management roles.

Still, some of the most successful and established companies on Fortune’s list have taken the “gamble” and have female financial executives at the helm. The success of these companies attest to the fact that these women add a unique dynamic that is helping their companies see ongoing progress and growth.

We’ll be running a short series of blogs looking at a few of these remarkable women this month, and some lessons we can learn from them. First up is Pat Yarrington, the CFO of Chevron, which ranks third in the Fortune 500.

Pat Yarrington

Yarrington has worked for the petroleum giant for more than 30 years. During that time she’s held various operational leadership positions, including heading up Chevron Canada, and running the company’s strategic planning division. In addition, she’s a director of the Federal Reserve Bank in San Francisco. She became the CFO of Chevron in 2009 and steered the company through some of the lowest points of the recession. A company that traditionally makes its money from fossil fuels, they had to weather the increase of the oil price and the emergence of alternate energy forms. Yarrington’s philosophy through all of this has been to adapt quickly and think long term. While she sees a firm future for fossil fuels, Yarrington says there’s an opportunity for Chevron in clean energy. “It’s good for our shareholders and good for the economy,” she says.

Support and mentorship

When asked how she made it to the top as a female financial executive in a male-dominant environment, Yarrington told the Wall Street Journal: “It’s a whole series of things. In my life I had a number of people who were important and who set certain expectations. You start with your parents — they always said, “You can do anything you want to, just put your mind to it.”

I married an individual who’s very supportive of having a wife with a career. I have three great kids, and at various points when the decision came — should mom take this job if we have to move? — they basically said yes. If they had said no, I wouldn’t be sitting in the chair today. I also had two or three people that I can very discreetly point to, who gave me chances when they didn’t have to. I will also say I performed when those chances were given. So it’s that whole complexion that has gotten me to sitting in the chair today.”

Yarrington also pointed towards the importance of having a mentor who believed in her. She remembers being sent on an important assignment after only being in the company for a few years, and not feeling up to the task. Her boss at the time said: “Look, Pat, let me just tell you. Anytime I ask you to go into a room and represent me, I have complete confidence in you, and I expect you to take your full seat at the table. You are just as bright, just as capable, as anybody else you will meet. Never forget that, and always make sure your voice is known.”

Yarrington said: “That was 27 or 28 years ago. I think about that almost daily.”

If you are looking for decisive leadership from financial executives in your company, contact The Finance Team. We have formed a network with remarkable men and women who are both highly qualified and experienced. They can provide you with financial assistance on an interim or part-time basis as you need it.

Image credit – www.frbsf.org

August 11, 2015 / No Comments /

Three qualities of a top class financial executive

Top class financial executives are hard to find. They have to be organised, strategic thinkers, have a keen attention to detail, and above all be trustworthy. Becoming a top class financial executive doesn’t just happen overnight, it is a process that happens over a period time. Whilst having the right qualification is a must, one of the biggest contributing factors when seeking top class financial executives is the quality and amount of experience they have had within a variety of industries.

Financial executives are often regarded in the business world as managers of financial departments only, but the top financial executivesin many companies have more than just financial expertise. In order to be the best financial executive, one has to embody the qualities of a successful manager as well as that of a financial expert.

Listed below are 3 qualities of a top class financial executive (NOT EXHAUSTIVE BY ANY MEANS):

A commitment to professional ethics should always be the foundation of every financial executive’s operating principles.

1. Planning and Implementation

A financial executive at Financial Manager or Financial Director level should NOT be getting involved in the day to day debits and credits of the business. This is the role of data capture clerks and bookkeepers. The financial executive can never be effective or cost efficient if they are getting bogged down in transactional record keeping. The best financial executives that we have worked with all have one thing in common; they have the ability to quickly identify weaknesses, come up with an effective action plan and then effectively implement these plans. The areas of weakness that they tend to focus on are human capital (specifically those reporting to them), internal controls, lack of policies and procedures, inadequate reporting, budgeting and forecasting.

Implementation is critical. Accountants are generally very good and coming up with solutions as it is drummed into them over years of theoretical and practical training but very few are good at the implementation phase of the solution. I think that this is because most top level financial executives are high on IQ but tend to lack in the EQ department. Lack of EQ can be overcome through years of practical experience at the coal face.

2. Understanding Business Processing

Financial executives don’t just need to understand how money flows through a company—they need to understand key business processes in order to be successful. An understanding of business processes allows a finance executive to find the root cause offinancial loss and help design processes that will be more effective and efficient. Knowledge of business processes can help you find ways to minimize costs within the company and add value to the business.

3. Delegation & Management

Following on from point 1 above, implementation is almost impossible without the skill of delegation and management. One of the first elements that our Associates look at when they go to a client is the quality of the financial staff reporting through to them. It makes no difference how brilliant you may be as a Financial Manager or Financial Director, if you cany delegate work to competent staff you will never be effective in your role. If your assessment is that the financial resources are lacking in your environment we would suggest you get that right before you look at anything else. Hand in Hand with this is then the ability to manage those staff members reporting to you. This is a difficult skill and does not come naturally to everybody. The ability to assign responsibilities and then measure performance against these responsibilities will be critical to your success in this area.

Contrary to popular belief, being a top class financial executive is not all about being proficient at the “hard” skills usually associated with being a Financial Manager or Financial Director but it is almost as important to be proficient at many of the “soft” skills that one needs to master when dealing with the human element common to all companies.

August 13, 2014 / No Comments /