39. A New CEO – Where do you start with the financials?

SUMMARY

Where Does A New CEO Start With The Financials?

Here is a question I have been asked - where do I start as a new CEO? Here are five elements that a new CEO should consider when reviewing the financials.


Transcription

Where Does A New CEO Start With The Financials?
Have a great CFO 

This question was sent to me last week, and it's a great question and I'd like to answer it. I want to answer not from a purely financial perspective, but looking at it from a complete overall picture of the business or the company. Remember, when you become the CEO, you are not the CFO. You don't need to become an accountant. You need to have a good CFO. You need to have a great CFO that you can ask questions. So you can set expectations and that you can work together. But you don't want to be getting stuck into going line by line, asking budgetary questions because that is micromanaging the CFO, and that's not keeping you focused on the overall strategy.

Have a plan

Number two is you want to have a plan. You want to be looking at the financials within your strategic plan. When you look at your financials and you don't have a plan, you're gonna read the financials in a very different context than if you have a plan. The plan is like giving you the glasses to actually see things clearly. If you look at a set of accounts without a plan, they may look completely bad, but then if you look at and provide the context and provide the plan overview, you could be heading towards where you want to be. So you want to look at the context of the financials within a plan.

Build a fortress balance sheet

The third things is, and this is when we start looking at the actual financials, is the first thing is to look at the balance sheet. You want to build a fortress, and so building a fortress means building something that's gonna be strong and that's gonna be able to withstand any of the forces that come against it that's gonna cause problem. The first three things that I suggest to look at is your cash, do you have enough cash? How long will that last? Your working capital. How's your working capital being managed? Thirdly, is your debt. When is debt being due? Are you gonna be able to meet that debt?

What provides your customers value

Fourthly, then you need to start looking at what is providing the customers value. That's generally gonna be your sales and your cost of goods sold. Look at your sales and your cost of goods sold and then comparing it to your customer value proposition.

Structure, Execution & Culture

Then lastly, what are the things that affect your expenses? That's your structure, your execution, and your culture. Having a look at these three things, how they're running efficiently, effectively, and how they're affecting the expenses. Remember to also not just to have looking at the financials, but you want to have KPIs which then link back to your plan. So you're getting a total view of the financials and the company. This is what I would recommend a CEO to look for on the financials when they first take over.

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