The CEO Challenge
CEOs, and the Boards to whom they report in any company, have a difficult task. On the one hand the CEO especially is accountable for everything that the company does and its financial results, on the other hand there is only limited time to concentrate on Finance with so many strategic, client, competitor, investor and project execution issues to deal with. Yet at the end of the day finance is key to everything. In a large company with quarterly reporting people look to the CEO just as much as the CFO to be on top of revenue numbers which will heavily affect the stock price. Investors look for as much predictability as possible. For a smaller company with a smaller finance function, cash and funding are key to planning and sometimes even to survival.
Any company is always going to be subject to competition, whether better sales and marketing or better product, and this will affect revenues and profits. Some businesses are heavily affected by regulatory change. But any CEO would like to be on top of :
- Revenues, both current and forecast.
- Cash projections and any funding needs
- PBT and EBITDA projections
- Significant milestones that affect the likelihood of future cashflows
- The impact of deal closures or project events on any of the above
CONVENDIA Revenue Modeller has been built to allow a CEO to obtain more quality financial information in less time, and to be able to view it at the press of a button. This includes what-ifs like “how much difference will it make to year end recognised revenue and cash if the biggest deals in the pipeline close”. The workflow can be set up so that board members can either see it directly too in real time or can see it in report style after being signed off by CEO and/or CFO. Then using CONVENDIA Investment Analyser, analysis can be done on various ways of financing cash shortfalls, whether equity or debt, and if equity the effect on value per share and EPS of the dilution.
How we help CEOs…
CONVENDIA Revenue Modeller has been built to allow a CEO to save immense time and obtain more quality financial information in less time, and to be able to view much of it at the press of a button. Moreover it sets a common language that can be used within an organisation. The CEO can have a review meeting with his Sales Director or other key reports with the same information that the CFO and the Sales Director have. The board will see reports based on the same information as will the CFO when he or she is looking at the cash forecasting. Everyone can speak the common language. It helps everyone prepare for meetings which can be shorter and higher quality than a meeting where the information has to be discovered.
Rather than being simply a static report set, everything can be dynamically modelled and this includes what-ifs like “how much difference will it make to year end recognised revenue and cash if the biggest deals in the pipeline close”. The workflow can be set up so that board members can either see this reporting directly too in real time or can see it in report style after being signed off by CEO and/or CFO. For every event what is the cash impact and when, and what difference does it make to recognized revenue when. Then, using CONVENDIA Investment Analyser, analysis can be done on various ways of financing cash shortfalls, whether equity or debt, and if equity the effect on value per share and EPS of the dilution.
How we give CEOs more transparency…
CEOs need and should expect to have transparency of data from their direct reports. They in turn are expected to give quite a lot of transparency to their boards. But the key is not just the data, even if it is accurate, but the analysis and interpretation of the data. This analysis and interpretation can be quite difficult, and is often only arrived at by lots of interlinked spreadsheets - and often this is so difficult that only really the base case is looked at and not the key “what-ifs”. CONVENDIA can really help with all this. Once you have captured data on existing contracts, ongoing projects and sales pipeline then CONVENDIA can turn it into forecasts of recognized revenue and cashflow by period, and even value of the firm, and can easily model the various what-ifs. CONVENDIA allows this transparency to be cascaded through an organization, of course only with the right permissioning, so that there is a common language. A meeting between the CEO and the CFO can use the same data for the firm that the meeting between a Sales Director and a salesperson uses for that salesperson’s pipeline, or a Project Manager with his or her team. The only part that CONVENDIA can’t do is force people to enter all data and to enter it accurately and keep it up to date - that is a management task, but even then CONVENDIA can help you with metrics on it !
How we help CEOs with their shareholders…
Shareholders want CEOs to deliver numbers in accordance with analyst forecasts. Exceeding those numbers usually gets a boost to the share price, while doing a profit warning can receive disproportionate punishment from the market. Many firms are privately held but private equity firms may have leveraged their investment in your firm and are also not very forgiving about CEOs who miss their numbers.
Competitive and market pressures make it hard enough to achieve forecasts, but many firms face the additional own goal of having to make forecasts at the time of results and these forecasts simply not being very carefully thought out at the time they are made. An analyst is desperate to have the management number to publish a research note on the morning of the results, and then the CEO and CFO have to spend the rest of the year treating this hastily produced number as the holy grail. This helps no one, either investor or analyst let alone CEO. CONVENDIA allows forecasting, and a common language for that forecasting, to become part of the DNA of the firm. Numbers may still be missed or exceeded owing to competition or project delays, but at least you can be sure that they were prepared as carefully as possible at the time you made the forecasts. And if you are taken to task later, you can show the evidence of how you got to the number rather than having to admit that the CFO did it on the back of an envelope.
Investors and analysts that believe in your forecasting methodology will probably rate your company higher. Put differently you will have a wider investor pool than companies that aren’t as well run, and this may well result in a higher share price and more liquidity for your shares.
How we help CEOs in their board meetings…
CONVENDIA can help you at board meetings in two distinct ways. Firstly by giving excellent high quality financial information created out of all the data. Of course it is based on exactly the same data that a CEO and CFO have for daily running of the business, and so will again speak the common language that CONVENDIA allows to be created within a company. Secondly in automating board paper production. Every company has a different style of board meeting ranging from the highly organized and well prepared to the somewhat chaotic and/or prepared at the last minute. Many company boards suffer from the common theme of too many papers being produced too late and not being read properly as a result - with a huge amount of time still spent preparing the papers and board members not being able to give their best input if they haven’t had time to read the papers. CONVENDIA can help you automate the production of a large part of your board report, and perhaps this part could be circulated easily a few days before the board meeting even if the rest is not ready. Of course the commentary and the strategy parts will always need to be written personally, but the parts around revenue projections and cash projections and variations from the previous month (and what has caused them) can be heavily automated by CONVENDIA.
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Contact us to learn more about how Revenue Modeller can help you