The Business Journal’s Peter J. Brennan asked five local chief financial officers about
the newest trends in corporate finance, and where their attention is focused. They
spoke of leadership, the new tax law, vitality of data—and the
ability to tell company stories using numbers.
Edited excerpts:
Joe DaMour
SVP, CFO
J.D. Power, Costa Mesa
First, the pro-business stance of the Trump administration has presented significant opportunities for companies agile enough to adjust. Second, the role of CFO as a key business adviser to the CEO has grown appreciably.
Recent reductions in the federal tax rates are generally beneficial, but those benefits are governed by the debt leverage assumed by individual companies. Specifically, the law limits the deductibility of interest paid on a company’s debt to 30% of operating profit. Today, with many companies owned by private equity firms, this limitation and how to best optimize financial returns is a significant issue.
The thinking is still evolving, but a few things are clear.
First, the cost of carrying excess debt went up and the equity returns needed to justify this extra debt increased accordingly. Second, the issue is much less, if nonexistent, for publicly traded companies that rarely assume debt loads that would trigger this limitation. Because this issue starts as a financial question—but quickly creates broader shareholder implications—sage business advice from the CFO is critical for the CEO and the board.
The administration’s pro-America trade stance has created a very fluid international landscape for many. Changes can manifest in various ways, from direct effect on the costs of products or services to effects on overseas revenue and profits driven by local currency movements.
Change creates opportunity for those CFOs and companies that are capable enough to recognize the changes—and nimble enough to take advantage. We’re not nearly far enough along to draw conclusions and make recommendations, but the landscape of current trade disputes will endure and be worth investing time to analyze and make strategic changes in business structure.
Clearly, the role of CFO as a business adviser is fundamental for companies with global operations.
Chris Lawrence
CFO
American First Credit Union, Brea
The role of a CFO is becoming less about accounting and more about finance. Keeping the books in order is still necessary, but it’s no longer sufficient.
Finance in the information age means data is paramount. We can no longer simply make intuitive decisions or rely solely on the balance sheet because the person with the best data that also tells a story is going to win. Fortunately, there is a multitude of publicly available data, as well as a lot of data about my clients in my very own systems. The catch is to mine it. This means user-friendly systems and the right processes to capture all that information.
From there, it’s a dance with the data. Sometimes you have to take the lead and ask the right questions; sometimes you have to let the data take the lead and listen to what it’s trying to tell you.
As for the tax law changes, I work for a nonprofit so it may seem like it doesn’t affect us but we compete with institutions that pay taxes, so the new laws offer a relative competitive advantage to my for-profit counterparts. This means my company needs to be a little smarter now, which brings me back to my previous comments about data.
Andy Mandell
CFO
CoolSys Inc., Brea
A tremendous amount of data arises from our tens of thousands of [heating and cooling system] service calls each month. We’ve developed a series of internal dashboards that allow management to view different cuts of this information to help manage our productivity and margins—but this has been limited to preselected data fields and hierarchy.
With the development of business intelligence software, we’ve begun to unlock the wealth of information we create every day. We’ve greatly expanded what is available for more focused reporting at almost any level.
We can now track performance of our technicians, vehicles and asset utilization at the individual level, as well as any combination above that. While starting with some “standard” views of the information, our internal users can easily manipulate the data to create user specific reporting, without technical support, highlighting areas of opportunity.
A pleasant surprise: some of our biggest supporters are some of our more tenured, less tech savvy managers who have seen what the power of the data provides when viewed on an exception basis instead of having to dig through reams of it and try to spot where the issues are.
It’s early yet, so we haven’t fully measured our return, but are confident it will increase productivity and pay for itself many times over.
Information is now also available for customers to identify opportunities to improve their systems’ internal reliability. We now provide real-time monitoring of our customer equipment and sites to identify potential issues—before customers even know they exist and addressing them with the right technician response.
These services help us differentiate our offerings and provide more value to their businesses.
Debby Morris
EVP, CFO
Apria Healthcare Group Inc., Lake Forest
I’m a passionate believer in the power of data and data analytics, and I’m equally passionate about the power of teamwork and collaboration. Put the two together and you can create transformational change.
When true business partnerships are formed across functional areas and these partnerships are supported with good data, clearer, quicker, and better decision-making is enabled, better alignment across the enterprise is achieved, employees are more satisfied and customers are well-served.
Data alone is of little value. It’s what people do with it and how people collaborate with it. I believe a key trend of the past five years is not just using data to drive decision-making, but a shift from functional silos to collaborative business partnerships throughout an organization.
In the “old” days, people were respected only for their direct knowledge and experience in a particular area. Today, they’re valued for their relevant experience, their ability to see the bigger picture, their ability to apply skills and expertise to a broad array of business issues and their ability to collaborate effectively across the organization.
Financial data alone, similarly, is of little value to the business. Financial data is important for many reasons, but in driving business performance and value to customers, shareholders and employees, it shows nothing more than the outcome—it does not answer the question, “Why?”
It takes the trifecta—financial data, key operating data and collaborative business partners thinking beyond their function and providing real business insights—to drive results.
Erika Urbani
VP of Finance, CFO
R.D. Olson Construction, Irvine
The role of a CFO has evolved significantly due in part to new technologies, regulations and industry advances.
As CFO, my focus is not solely on revenue growth but organic growth. This means a shift in responsibilities from financial reporting, forecasting and budgeting, to leading the company strategically to ensure overall success.
Successful CFOs are strategists and our role has expanded:
• Clear Path. CFOs go beyond keeping operations flowing by ensuring appropriate resource allocation, availability of productivity tools and compliance. This often requires us to revisit company policies and find creative solutions to expedite work. We identify ways to optimize the business—eliminate a step, a piece of paper, or a signature.
• Think Big. Despite day-to-day issues that require our time and attention, supporting organic growth requires us to become strategic partners. Each month I meet with our president to discuss our pipeline of construction projects and we ask ourselves and our teams, “What are our barriers to success and peace of mind?” Once we identify these pain points, we find calculated solutions. For RDOC, the result has been financial stability and strategic growth.
• Mentors and Succession. I’m often asked the best path to CFO. The truth is you don’t learn the intricacies of being an accomplished CFO in school. While the strongest CFOs earn multiple degrees, it’s the years of hard-earned and hands-on experience that qualifies them to make gut-based decisions and be successful leaders. Leadership tends to be an overlooked skill, but for a CFO it’s more important than the transactional know-how, because it’s what you don’t see in the data that can bite you.
It’s up to us to mentor our up-and-coming CFOs on how to be efficient leaders. Those that master the art of mentorship are not only rewarded with strong teams but hope for the future of their industry and confidence in passing the baton.
