Armanino CFO Evolution White Paper 2013

Elevating the Strategic Leadership
of the CFO Organization

CONTENTS

Overview............................................. 2
Background ........................................ 3
Challenges .......................................... 5
Framework .......................................... 6
Achieving Success .............................. 9
Path Forward .................................... 11
About ArmaninoLLP ............................ 12

Prepared by:

Elevating the Strategic Leadership of the CFO Organization

Overview
This white paper introduces Armanino’s CFO Evolution thought
leadership research. It defines a framework for consideration by
“My CFOs and the key people within their organization as they think
organization
critically about their organization’s challenges and goals.
spends 80% of
our time on
Accounting The CFO Evolution categorizes the CFO organization’s
and we are responsibilities into three distinct roles:
still working
nights and  Accountant - oversees fast and accurate financial reporting;
weekends just  Protector - ensures there are no surprises and that risk is
to keep up.” appropriately managed
 Business Leader - involved in the formulation, execution and
support of the corporate strategy

Armanino’s CFO Evolution is a set of initiatives focused on people,
process and technology. It Streamlines the Accounting function,
Optimizes the Protector role, and Elevates Business Leadership
activities, enhancing the value of the CFO Organization.

© ArmaninoLLP | amllp.com Page 2


Background
Demands on the CFO and the CFO’s entire organization constantly
pull them in different directions. Indeed, the CFO organization has
both a lot on its plate and a lot of people to answer to. Stakeholders
include the CEO and the rest of the C-suite, the Board of Directors
and regulators. In addition, the CFO organization needs to play a
guiding role to the rest of the organization by enforcing spend
policies, ensuring business operations, accurately forecasting
future performance and providing data back to managers to enable
sound business decisions.

Adding to this complexity is the organization structure. For many
companies, IT, HR and Legal roll up under the CFO organization.
Whether these groups report directly to the CFO or through a
dotted line, the IT, HR and Legal groups can impact the
effectiveness of the CFO organization.

CEO and Management
IT Effectiveness Legal Governance Training
Daily Accounting Budgeting Compliance
Payroll
Contract Management Revenue Recognition

Company Stakeholders
Financing Risk
Reconciliations Monthly Close
Tax Planning HRMS
Regulators

Consolidations Planning
Internal Controls
CFO
Weekly Accounting Business Architecture
Cash Flow Projections IT Overview
Internal Audit
Board Meetings Asset Tracking
Treasury Management
Internal Communications FX Transactions
Loan Covenants
Business Intelligence Monthly Accounting Investor Relations
Board of Directors

Not long ago, the CFO was typically responsible for generating and
explaining the numbers, helping with acquisitions and divestitures
and taking the lead with risk management activities. The CFO also
had to have a solid understanding of the company’s strategies and
operations.



Then, as a result of the increased scrutiny on corporate governance
caused by corporate failures and fraudulent acts, CFOs and their
“Managers organizations were forced to spend the majority of their time on
throughout the
countless accounting, regulatory and risk management matters,
business keep
asking for
and less time on more strategic, value added activities. In fact, one-
more and more third of the CEOs, Audit Committee Chairs and Board Members
information, that responded to a recent CFO survey concluded that their CFOs
and we keep do not have the needed depth of understanding of strategic
giving them business issues to effectively contribute to the development and
more and more execution of corporate strategy.
reports, but it
is not enough.” Most recently, the role of the CFO has expanded so greatly that
there is often intense conflict among all the competing demands for
the CFO organization’s time. Given the ever changing environment
in which businesses operate, we believe that CFOs must constantly
reevaluate their organization’s Evolution to add strategic value to
their CEOs, Boards and Shareholders. This is no easy task,
particularly because there is no wide consensus as to where a CFO
should ideally be spending his or her time and resources.

Given these challenges, the critical questions are:
 What is the mission of the CFO organization?
 How best do we focus our resources to respond to all the
demands put on CFO organization?
 What activities do we perform to ensure success?
 How much do we spend on developing our capabilities?



Challenges
We have studied this issue for many years and have developed a
framework that we believe can be applied to all companies,
regardless of size, maturity, or business complexity. We have
identified a way to make measurable improvement for every CFO
organization in an effective and efficient manner.

We have discovered through our years of consulting that three
things typically prevent CFOs from striking the right balance
between all the competing demands:

1. Accounting. Surprisingly, most CFO organizations struggle
with the Accounting function. Most companies have too many
people working on accounting, the timeliness of the accounting
is in question or always under pressure, and the accounting
staff is often frustrated due to a lack of clear policies and
procedures or laborious manual processes. Further confusing
the issue is what is considered accounting versus supporting
the business operations.

2. Business Protection. This area continues to be a challenge to
most CFO organizations and really has to do with “can the
organization predict consistent performance” or, better said, can
they protect the business from surprises. In most cases, the
ability to meet compliance requirements, manage company risk
and forecast financial results related to revenue and cost is not
optimized.

3. Business Leadership. Every CFO wants to be a business
leader and a partner to the CEO. However, all of the competing
demands on the CFO and the CFO’s organization keep this
from actually happening. While most CFOs will personally say
they have a goal to be a business leader, the activities of the
entire CFO organization are primarily focused on other activities
such as accounting, internal controls and financial reporting.



Framework

Drawing on our client experience and market research, The CFO
Evolution framework outlined below is Armanino Consulting’s point-
“We cannot get
our employees of-view on the key business capabilities a CFO organization needs
to follow the to focus on to be successful.
spend policies
put in place. Each of the three key roles must be addressed with a specific plan
We continue to
for its goals, expected outcomes, and the resources it will require:
find managers
throughout the
organization 1. The Accountant role. The goal of the accountant role is to be
doing what they fast and accurate. If your organization is accurate but not fast,
want.” use of resources is suboptimal and less time is spent in other
key areas.
2. The Protector Role. The goal of the Protector role is to
manage the entire business with “No Surprises.” Examples
include the ability to accurately forecast revenue, meeting
budget to actuals. Additionally, the Protector role encompasses
internal controls to prevent fraud, theft, and business loss, and
adequately controlling the activities of all employees through
documented policies and procedures.
3. The Business Leader Role. The goal of the Business Leader
is to team with company leadership to accomplish overall
business success. This role is focused on teaming with the
CEO, the Board and the other operating departments to ensure
they have the right information to make the right business
decisions. This goal can best be summarized as being Forward
and Strategic.

Role Goal
Accountant Fast & Accurate

Protector No Surprises

Business Leader Forward & Strategic

Three key roles for focus and goal setting

The CFO Evolution is a set of initiatives focused on people, process and
technology. It Streamlines the Accounting function, Optimizes the
Protector role, and Elevates Business Leadership activities, enhancing
the value of the CFO Organization.



Armanino’s CFO Evolution. Does the CFO Evolution framework
only apply to the accountants in the business? Absolutely not. For
example, IT needs to supply systems that automate accounting to
make it fast and accurate, provide systems that allow early warning
detection to enhance the Protector function, and implement
Business Intelligence tools that enhance Business Leadership.
Other examples, such as HR and Legal, would include providing
policies and procedures around people-processes to increase
efficiencies across the business and proper employee policies to
ensure compliance with laws and regulations to enhance the
Protector role.

Role Goal Key Elements
 Accurate and timely financial reporting
 Effective and efficient accounting
Fast &
Accountant systems
Accurate
 Trained and experienced accounting
team
 Company wide governance, risk and
compliance
 Proactive cost control and cost
Protector No Surprises
management
 Effective revenue forecasting and
predictability
 Actively particpate in strategy setting
Business Forward &  Team with business operations
Leader Strategic  Forecast and plan the future of the
business
Three key roles for focus and goal setting

Where Do You Allocate Your Resources Today?
Most clients we work with tell us they currently allocate their
resources for each role in the proportions outlined below – though
not necessarily by design. They admit there is a lot more “fire
fighting” and “squeaky wheel repair” going on than they would like.

Role Current Company Allocation
Accountant 61%
Protector 24%
Business Leader 15%
Where are you spending your time?

Now, before turning the page, ask yourself “Where would I like to
allocate my resources?”



Where Would You Like to Allocate Your Resources?
The interesting insight that most companies share with us is that
they feel they spend too much time (out of necessity) focused on
their Accountant and Protector roles, when they know it would
benefit the company if they could focus more on their Business
Leader role. The challenge of course is how, when so many
seemingly urgent and important needs and responsibilities grab
their attention instead.

Role Current Allocation Optimal Allocation

Accountant 61% 28%

Protector 24% 29%

Business Leader 15% 43%

Making the most of your time

The CFO Evolution is the set of initiatives that transforms the CFO
Organization into a Strategic and Forward-Thinking Business Leader for
the Company.



Achieving Success
Let’s look at some real world examples where measureable
“It is a mad improvement has been made by focusing on these three distinct
scramble to pull roles:
all the
information The Accountant: A 400 person staffing agency converted from a
together prior to manual weekly time capture system to an internet-based self
a board meeting. service time entry and automated billing system. Once this was
We nearly kill done and employees were properly trained, this business reduced
ourselves getting its accounting headcount by two-thirds while business revenues
ready for each
tripled over a three year period.
meeting.”
In our experience, the Accountant area provides some of the
quickest, highest impact improvements a CFO organization can
attain. In automating a frequently-used process such as order-to-
cash or time and employee expense capture, one can drastically
improve accuracy while freeing up significant staff capacity. For
someone looking to make a pronounced impact on organizational
effectiveness, the ROI comes in many forms - improved accounting
close process, automation of manual processes, trained personnel
and increased employee morale.

The Protector: An $800 million technology company had received
a material weakness within their revenue recognition business
processes. By re-engineering key controls, taking advantage of
automation and re-training key individuals, this company reduced
manual processes, developed a stronger revenue recognition
process and saved over
$5 million over 24 months.

Many CFOs and Risk Managers have told us that they often
struggle to strike a balance between enhancing stakeholder value
for their companies and protecting their companies’ assets. As a
result, gaps can occur in risk coverage as the CFO organization is
challenged to take a company-wide view of the risks that could get
in the way of moving forward. Also, overly conservative processes
and controls can inhibit growth and innovation and cause
inefficiencies. Our view is that the role of the Protector must be
optimized at all levels to allow for creativity and growth while
preventing surprises.



The Business Leader: A $220 million contractor previously ran
400 monthly reports for its project managers. Many of these
reports were old or stale by the time the managers received the
data. This company deployed an internet-based business
intelligence tool which allowed project managers to receive daily
information on their projects. No longer were these managers
waiting for accounting to produce the data. Managers were now
given real-time, comprehensive information on the business. Each
manager had access to their data and was empowered to make
decisions like never before. The project payback for this initiative
was less than four months.

This area provides the opportunity for the CFO to be proactive in
leading the company while raising the effectiveness of the entire
CFO organization. A major impact can be achieved by focusing on
the business operations needs and applying the key skills within the
CFO organization to meet those needs. ROI for these initiatives are
at the business level, improving margins, saving costs and
identifying new business opportunities.



Path Forward
Consider how your CFO organization prioritizes and actually
spends its time and effort around each of the Accountant, Protector
and Business Leader roles versus how you would like to. Think
about the advantages of spending more time focused on the
Business Leader role with the security of knowing your Accountant
role is fast and accurate and the Protector function is optimized.

The stakes are high – the demands on your time will not decrease
nor will business complexity. Without a solid framework for
improvement, much of your team’s performance is at risk.

The CFO Evolution is your tool for transforming your organization
into a Strategic Business Leader for the company. By providing
fast and accurate accounting, minimizing business surprises, and
being more forward-thinking and strategic, your organization can
meet its growing challenges and expectations while creating
efficiencies for the company and enhancing overall value.



About ArmaninoLLP
Armanino helps companies succeed by enabling their CFO
Evolution. ArmaninoLLP is the largest California-based CPA and
Consulting firm offering a comprehensive portfolio of business and
IT services to support the CFO organization at each stage of its
company’s business development.

Our challenge to you – define your CFO Evolution and go for it.
Determine how you can streamline your accounting, optimize your
business protection and empower your organziation to be a
strategic and forward-thinking business leader in your company. If
you’re looking for more insight on how to advance your CFO
Evolution or how your CFO organization compares to others, we’re
ready to help.

For more information, please contact:

Tom Mescall
Partner In-Charge, Consulting
ArmaninoLLP
925-790-2600 x2812
Tom.Mescall@amllp.com

San Ramon Office San Jose Office San Francisco Office
12667 Alcosta Boulevard 50 West Fernando Street 44 Montgomery Street
Suite 500 Suite 600 Suite 900
San Ramon, CA 94583 San Jose, CA 95113 San Francisco, CA 94104
925.790.2600 408.200.6400 415.568.3280


Armanino CFO Evolution White Paper 2013

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