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Tag: Finance Director

Christmas: How Our FD Saved Ours, Reveals Santa Claus

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Christmas: How Our FD Saved Ours, Reveals Santa Claus

Santa Claus, now in his 1,747th year, reveals for the first time how his part-time Finance Director helped Christmas Inc. claw back from near-disaster.

Last year we were hit by so many problems. Money problems. Health and safety issues. Capital funding problems. Bad PR. The lot.

Fake News at Christmas

“Someone posted a story on Facebook last August that said I hated mince pies and was allergic to milk. Dreadful business. I had bags and bags of letters from angry dairy farmers and retailers. And emails from worried parents asking what they should leave out for me on Christmas Eve if I didn’t want mince pies and a glass of milk. Some got a wee bit personal, a tiny bit sarcastic, which wasn’t nice. That went on for several weeks.”

“Not long after that, another story appeared that said I mistreated reindeers. Someone started a Go Fund Me page for Rudolph and the rest of the gang and children across the world were urged to donate their pocket money. Luckily, the authorities tracked down the culprit before any money changed hands. That man was definitely Number One on my Naughty List last Christmas. Those two stories were really damaging. It wasn’t a happy time at Christmas HQ while all that was going on.”

Elf and Safety Issues at Christmas

“Then we had a scare with compliance. One of the elves in the workshop slipped on some wrapping paper and broke his leg. We hired a Health and Safety inspector to help us prevent more accidents and she found that the workshop wasn’t fit for purpose. It’s a very old workshop and needed to be updated. We’d just added bits on as we grew so it was a bit higgledy-piggledy but we loved it all the same. Getting it modernised cost a fortune.”

“The Health and Safety Inspector hit the roof when she discovered that some of the elves were sleeping underneath their benches. I tried to explain that they do it because they love making toys and have such fun at work they don’t want to leave. But she said that it had to stop immediately. She insisted on staying in the workshop until we’d dismantled all the tiny beds and wardrobes. Some of the elves, who’ve worked with me for more than 1,000 years were heartbroken. They’d created little homes from home underneath their workbenches.”

“That meant I had to create sleeping quarters for the elves and didn’t know where the money was going to come from to finance the whole thing. But then Mrs. Claus read a blog about how you could hire a part-time FD for the same amount you’d pay an office junior. She said he could help sort us out. I’d never heard such a thing but decided to try it.”

Our Part-Time FD

“Hiring our part-time FD David was the very best thing we’ve done. David helped us find funding for the elves’ sleeping quarters. And he sorted out our cash flow. This is the first year, for example, that we haven’t had a cash flow crisis. Every year, we employ thousands and thousands of elves to help make presents and that’s always thrown our budget so by January, the cupboard has always been bare. David stepped in and helped us arrange to fund and so for the first time, we’ll be able to look forward to January. No more living on baked beans in January for Mrs. Claus and me, I’m happy to say.”

He’s also helped us move into new markets and made sure we had all the licenses we need. And in April this year, he stopped a Mr. Grinch from stealing our Christmas market franchise. That was the same naughty fellow who wrote those fake news stories last year. That’s all behind us now, I’m very happy to say.”

No Exit Planning

“David and I get on extremely well but there’s one thing we disagree on and that’s exit planning. David has been trying to convince me that I should start looking for a successor and thinking about an exit plan. But I don’t want to stop doing this. It’s what I was born to do. Retirement isn’t for me. Besides, Mrs. Claus wouldn’t like me sitting around the house all day, making cups of tea and eating mince pies. So, David and I have agreed to disagree on this one matter. So, you can look forward to me popping around on December 24th for many, many years to come. Ho ho ho.”

Rolling Back The Years…

by Lee McMullen
Rolling Back The Years…

The comedian Barry Cryer tells a story about a Finance Director walking down the street. The FD is approached by a homeless man. “Excuse me, mate,” says the man “can you spare me a few quid, I haven’t eaten for two weeks”? “ I see,” says the FD “And how does that compare with the same period last year”?

Of course, no FD would be that heartless but the story also hides a deeper truth – most of us think in fixed periods of time, mainly years and months. This puts us in a situation where we measure financial performance by the distinctly non-financial yardstick of how long it takes the Earth to revolve around the Sun. This is understandable as we measure our lives in the same way – but is it the best way to plan a business?

There has been some movement away from the annual forecasting and planning cycle; I work with several businesses that use rolling forecasts, for example. According to a study by CIMA, about 20% of businesses use them – but what do the other 80% do? Fixed annual forecasts, presumably.
The idea of a fixed annual forecast includes the following assumptions:

• A year is the ideal planning period;
• We can get a good fix on revenues, costs, and profits over that period;
• We can reasonably predict how external economic, political and social factors will turn out.

Let’s think about this a little more. Why is a year the ideal planning period? What if we consider, for example, a five-quarter forward planning period instead? Firstly this gets us away from what I call “the January factor”. By this, I mean that a forecast is prepared and January, (or Q1), shows a marked change from the end of the previous year. Revenues shoot up; costs are magically under control.

In reality fewer changes in most businesses between December and January than at any other time of the year; staff, directors, customers, and suppliers are all off for Christmas!

Yet this happens. Perhaps businesses, like people, make New Year Resolutions – and perhaps they break them too. The fact is, a business is a continuous process; the last quarter of one year flows into the first quarter of the next. Businesses don’t stop and start with a jolt and unless we make changes they will stay the same, yet the planning process often suggests otherwise.

If we choose a different planning period we automatically start to look at the business in a different way. The selected forecasting period needn’t be longer than a year – we might wish a six or nine-month period if we feel that this reflects the nature of the business. A restaurant might have a very different planning cycle from the manufacturer of Oil Rigs, for example. But the selection of an appropriate planning period is key.

This brings us on to the next part of the change in the planning process: if we break away from the notion of the annual planning cycle we can then take it to the next stage, rolling forecasts.

Businesses spend time and resources preparing annual forecasts that run from January to December. That means that at the start of the year they look forward to the next twelve months of activity, but as the year progresses the horizon shrinks. Rolling forecasts enable the business to keep looking up and thinking about the future rather than focussed inward on a set of assumptions that are all too quickly outdated.

What underpins this idea is that in uncertain times (and I would argue that businesses always face uncertain times) the forecasting and planning process needs to be nimble enough both to predict and react to changes in the business environment. A rolling non-annual-based forecasting process enables us to do just that. The non-annual part acknowledges that a business is a continuous process and the rolling part keeps it focussed on change and development.

This is not to suggest that the business should be purely reactive or incapable of setting long-term strategic objectives but that such a mechanism is the best way of reaching those objectives.