Difference of opinion with MD

Difference of opinion with MD

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I have recently started a new role as a financial controller at a fairly successful and growing SME

Its becoming increasingly obvious however that many of the companys senior management are lacking in fairly basic business and finance knowledge, which causes a bit of friction between us in Finance and the rest of the company, especially with the MD. An example of this occurs due to a 'live' P+L that we have, as soon as anythig is posted to the accounts, it updates the P+L. While preparing the month end accounts, it tends to fluctuate quite wildly as we post our adjustments, which leads to the MD jumping up and down every 5 minutes worrying that our net profit is spiraling out of control

This is my first role at this sort of level, having worked in financial management for a number of years in larger organisations. Is this sort of thing fairly normal at a SME? most of the BOD have been with the company since it was pretty much formed, and hence this has been the only place they have worked.

I am on a 6 month probation period, and am not sure I am totally comfortable with how things are going at present

Replies (6)

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By WhichTyler
14th Jun 2014 15:04

Turn it off...
If the 'live p+l' isn't accurate, it shouldn't be used for exactly the reason described.

You have to take responsibility for any financial information that is available and the processes that underlie it.

If they want live information, start with something less complicated like sales.

If they really want a daily p+l, you will have to think of a way of bringing in reasonable estimates for things that otherwise get posted at month end. Though I'd suggest you concentrate on getting a really solid monthly pack together, then taking them through it until they have confidence in it.

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By Moonbeam
14th Jun 2014 15:41

Communication is Key

Many of us have had some pretty difficult employments where the MD is a bit on the thick side, doesn't understand finance, but is reluctant to spend any time with someone who does, in case they rumble him, which of course they did long ago.

So if this is the scenario with you, why not arrange a meeting with MD and another more with-it senior person so you can offer your solution of a new way forward. If the whole board are tarred with the same brush (no surprise there) then you should ask for a meeting with all of them attending to discuss. You should make sure your language and explanations go at their speed rather than yours.

I agree with everything WhichTyler says here, and taking responsibility in effect means being as helpful as possible but pointing out whether what is being asked of you is realistic or not. If you are not clear and firm you will have problems in the future.

It sounds as if you are already considering your future. Why not have a rethink about how to get them onboard with you? Is there someone on the board who you get on with, that you can sound out about a meeting  to explain things? Maybe the board consider you a remote figure, and are terrified of speaking to you in case they don't understand you. That might not be your fault, but it is within your power to suggest ways that will help them integrate you more within their culture.

Given that the company is a success at making profits you could perhaps call the meeting How we increase profits and structure the meeting to show what other KPI's would be useful to them if only they helped you get the information. At the same time you would craftily weave in how you need to make changes to the reports they get and educate them about what's realistic.

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By tom123
14th Jun 2014 16:11

Quick / or accurate

How are they accessing the data - is it by ODBC links or something?, or is it software that produces dashboards etc.

As per the other comments - find out what dashboards they have, and modify or eliminate any that are not useful.

Point out that some things (depreciation, salary journals) are posted once a month and may not be included at the time of posting.

The quicker that information is required, the greater the level of estimation, and subsequent reversals, that is required.

I am fortunate to work for a financially astute MD now - although have worked for all sorts in the past.

Could you, for example, post prepayments a month in arrears and adjust - so that there are no wild swings as these items get included.

How about accruing overheads (electricity, stationery) to budget etc.

As Moonbeam said, communication is best. If you are going to do these type of things you need people to be aware of everything.

You never know when some random 'consultant' is going to pitch up to review stuff - so make sure you have a reliable month end file - even if you don't always share the full contents.

I usually report Sales first, then debtors, then general overheads, (in total figure), then finally cost of sales and full P&L as that is the way our routines go.

We find it hardest to do cost of sales, as that is a manual system of analysing the GL transactions, due to how our software is set up.

Better to report a little bit later - but have bombproof figures - than early and have to revise. Revisions often show up more in the SME accounts than larger corporates - due to the lower total values etc.

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By andy.partridge
14th Jun 2014 16:19

Opportunity
Clearly the current situation isn't working. But did it ever? Find out.
You are in a good position to advise on something better that will appease all parties. As suggested the live P&L is a nonsense. I would concentrate on a system whereby sales information is robust and from that a theoretical P&L can be deduced from standard ratios. When you produce the real P&L after the month end you can analyse a few key variances to explain how the actual has deviated.
If you can crack this it will look great on your CV regardless of how long you stick around.

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By CStone1980
14th Jun 2014 17:27

Thanks for all your replies, very helpful

 

The current system is a mixture of sage, and an in house built Web based system, which the MD built himself. It's an ok system, but causes the issues above.

The FD has been with the firm a couple of years, and I think has been reluctant to challenge anyone on current processes as I think he felt outnumbered, I have noticed lately he has been more willing to challenge certain things that are historic, so maybe it's just a case of us implementing change by gradual education of the other management

I was more concerned that this firm was unique with the strange management style, but based on your comments I don't think it is, which is reassuring.

 

 

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By tom123
15th Jun 2014 11:06

FD - reluctant to challenge

A bit disappointing the FD had been reluctant to challenge - is that because he doesn't fully understand the system.

I assumed you were working directly for the MD, with no FD, as would be common in the sector.

You do need to keep the FD in the loop though, as 'insubordination' and politics in a small setup can get very difficult.

Are your systems skills up to modifying the inhouse system - surely it must just be some kind of lookup system.

Agree with Andy - analyse the historics to get agreed fixed monthly amounts for the key overheads = and then you just need to do Sales and COS on the fly.

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