Challenges in a Financial Organization faced by Interim Executives
Challenges faced by a financial organization may be worlds apart from other companies
Interim executives step into companies at times of crisis. Facing challenges and solving problems is what they’re good at. Their brief role in financial organizations and others have the power to transform them and bring them out of trouble or ease a transition.
Each financial organization has a unique set of challenges, but there are some financial ones common to most, according to long-time interim CFO Bill Hegeman. His background working in the financial sector of Fortune 500 companies has made him a top interim executive in financial operations. In the Cerius Business Today podcast, he shared the following.
Some of the ways he helps companies solve common financial challenges.
Lack of trust in financial organizations
A major issue leadership has with their finance department is credibility in the financials being produced from both a timing and accuracy perspective. Credibility issues leads to miscommunication causing cracks in the running of the company which are problematic in both the long and short-term.
Some companies often find themselves in a situation where things have gone on for a period of time, they miss deadlines and don’t communicate. Hegeman says, “When they do communicate, the information is either incomplete or it’s confusing. People then start asking more and more questions, and they get more information that doesn’t quite make sense. Eventually, they just don’t trust the financial organization at all. If you’re a bank or you’re an auditor, that causes a great deal of concern for you and it becomes very dysfunctional for the organization.”
Cash flow blockage
A frequent problem that Hegeman sees in companies he’s called into is the lack of cash. It’s usually the tipping point when he gets called in because they don’t have enough cash to run the business. The shortage of cash creates a blockage in cash flow and disrupts financial activity and payment of expenses needed for production.
He says, “The shortage of cash is usually a product of a number of different things. Primarily, it’s usually that they don’t collect what is owed them, and for some reason, they don’t feel that they can go out and ask for it on a consistent basis.” Cash collection appears to have low priority among many companies causing issues with stakeholders, payment of expenses and investment.
No value on financial organization
Some organizations have a lack of discipline within the finance organization. It can cause a lot of problems when they don’t run the business as a serious entity. Hegeman says, “A lot of times the company doesn’t value the finance function, and so they don’t put enough resources in or enough skills in those resources to run a good finance department.” Issues that come with a lack of investment in finance organization pop up in a number of different ways.
Red flags you’re in trouble
Companies can avoid getting into trouble by watching out for some early signs in their finance and accounting departments. They should be aware and check to see if the company has outgrown the current expertise or is beyond their capabilities.
An early warning is when you’re unable to adequately answer your bank’s questions or you are finding too many questionable items yourself in the financials. Because they deal with so many companies, banks are pretty adept at picking up that something is wrong. Getting an abnormal amount of questions from the bank should be a sign for companies with a cloud on the horizon.
Another area to look is timing. Hegeman says a red flag is when “They can’t produce consistent financial results for you – the executive. They should be able to produce those in a timely manner, but if they’re struggling to do that, there’s usually a reason that says something’s broken and isn’t getting fixed.”
But perhaps the biggest red flag is when a company is unable to pay their bills. That requires instant help and often the services of a professional interim finance executive who can get to the cause quickly and get it fixed.