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Thought Piece

Problems in the finance function

In my experience, a problem in the finance function can be the clearest indication that there's a more structural problem within the business. Problems of this nature often go together with less than optimal internal communication and often, emerging problems in the finance function put down their roots a good while earlier and have crept gradually into view, or suddenly reveal themselves alongside a change in material conditions.

Problems can stem from changes in management and staff; a loss of the original focus and or expertise that built the business in the first place. Alternatively, the problem could stem from (trying or drifting into) extending the products/services away from the original concept before putting into place the checks, balances and experience needed for the new area, the result of an under estimation of what it takes to move into a new business.

To address theses fundamental issues, what is usually needed is a to build an internal consensus of what to do next and then to introduce the many incremental, complimentary improvements that get the business to where it needs to be, whilst at the same time, maintaining the "business-as-usual" operations that pay the monthly bills. Without such radical action, further deterioration is certain. All this requires effort and experienced resources. An external team can help facilitate building this consensus and identifying the many improvements that need to be introduced and ideally, play a hands-on role in implementation.




As a member of a team that has managed similar turning points in a range of business situations I can honestly say that it never pays to jump to hasty conclusions. Better to work with external resources that possess the forensic accounting skills to organise the financial data and reveal underlying issues, drivers and triggers. This provides everyone with a 360° view without distracting key management and jeopardising forward motion. In addition, external or interim expertise, people with the experience and track record to facilitate the re-orientation of business direction, can identify the steps required to get there and prioritise the sequence of their introduction.


Banks are not charities. But they do calculate the lifetime value of the customer and they understand the reputational risk to themselves of the slash and burn exercises they are sometimes accused of.


That brings us to the role of the banks, so often the largest creditor and certainly the one with the most intimate knowledge of how a company is faring. We all love a stereotype and the heartless, faceless bank pulling the plug on sound businesses over a minor blip sits deep in the business consciousness. But not all banks fit this caricature. "We want to work with management of a business facing difficulties to help identify the issues and provide solutions to get them back on track," says a senior manager with a leading retail bank. "We can make the most impact when the problems are identified early. We are keen for management to be open with us."

Banks are not charities. But they do calculate the lifetime value of the customer and they understand the reputational risk to themselves of the slash and burn exercises they are sometimes accused of. Most solutions to business difficulties involve access to more funds and/or different products (hedging, leasing, factoring) and that all adds up to continued and profitable involvement for the bank.

A Repositioning Turnaround may mean divestment of a troublesome subsidiary. It may mean embarking on (yet another) cost-cutting exercise, including turning away revenue opportunities if they are not of a sufficiently high margin. It most certainly involves a first step of getting an impartial and pragmatic overview of what the problem actually is, from Turnaround Professionals who also know the kind of language with which to talk to banks. The moment you take this kind of decisive action, you're likely to discover that there's no crisis, no drama, only urgent action that must start now.

Peter Charles 2010


Banks are not charities. But they do calculate the lifetime value of the customer and they understand the reputational risk to themselves of the slash and burn exercises they are sometimes accused of.



That brings us to the role of the banks, so often the largest creditor and certainly the one with the most intimate knowledge of how a company is faring. We all love a stereotype and the heartless, faceless bank pulling the plug on sound businesses over a minor blip sits deep in the business consciousness. But not all banks fit this caricature. "We want to work with management of a business facing difficulties to help identify the issues and provide solutions to get them back on track," says a senior manager with a leading retail bank. "We can make the most impact when the problems are identified early. We are keen for management to be open with us."

Banks are not charities. But they do calculate the lifetime value of the customer and they understand the reputational risk to themselves of the slash and burn exercises they are sometimes accused of. Most solutions to business difficulties involve access to more funds and/or different products (hedging, leasing, factoring) and that all adds up to continued and profitable involvement for the bank.

A Repositioning Turnaround may mean divestment of a troublesome subsidiary. It may mean embarking on (yet another) cost-cutting exercise, including turning away revenue opportunities if they are not of a sufficiently high margin. It most certainly involves a first step of getting an impartial and pragmatic overview of what the problem actually is, from Turnaround Professionals who also know the kind of language with which to talk to banks. The moment you take this kind of decisive action, you're likely to discover that there's no crisis, no drama, only urgent action that must start now.

Peter Charles 2010

Peter Charles

"Problems can stem from changes in management and staff; a loss of the original focus and or expertise that built the business in the first place."

"or the result of an under estimation of what it takes to move into a new business."

"what is usually needed is a to build an internal consensus of what to do next and then to introduce the many incremental, complimentary improvements"
"Add an interesting quote here."

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