2 Useful Accountability Tools for CFOs [Blueprint Building Block #1]

Written By Mike Ridder

We’re starting a new series here on the blog that we’ll drop once a quarter: Blueprint Building Blocks.

The B³ series — which is appropriately named, by the way (see what we did there) — will focus on things that seem obvious to us CFOs but may not be obvious to others.

Our first topic is accountability.

Accountability is a powerful tool in a dynamic environment — where you have the right people in the right seats, where trust is the foundation.

For a CFO, accountability pops up in multiple ways. We want to highlight two applications:

  1. Variance accountability

  2. Accountability reporting

A laptop with charts and graphs, indicating accountability reporting in business

1. Variance Accountability

So, you missed your sales target for the year. Let’s go point a finger at the salesperson, right?

Not so fast.

Let’s look at the variables that make up the sales line on the P&L…

  • Sales volume: Did you sell enough of a given product to meet your targets?

  • Price: Did you charge enough for the product you sold?

  • Mix: Did you sell the right basket of goods to the customer?

Who is accountable for each of those areas?

Usually, it’s a combination of the sales, operations, engineering, and finance functions.

  • Did the salesperson sell enough product to fulfill your target?

  • Did the operations person produce enough product to fulfill the orders?

  • Did the lead engineer create enough new products to introduce to the market?

  • Did the finance person provide enough capital to allow the operations, engineering, and sales functions to operate effectively?

By breaking out any variance — whether sales, working capital, expense spend, or other cash flow metrics — into who is responsible for the variance, you will be able to remedy the variance in an orderly fashion.

Much better than pointing fingers!

2. Accountability Reporting

I was introduced to the topic of accountability reporting back when I was at Danaher Corporation.

Essentially, it is an extension of variance accountability. 

For the key members of the executive team, we would break down the P&L, balance sheet, and cash flow statement into who was accountable for the given area. 

For instance:

  • The head of sales P&L would include sales, any sales-related expenses, and collection terms.

  • The head of operations P&L would include sales, gross profit, any operating expenses specific to their control, inventory, and capital expenditures.

  • The owner/CEO and the CFO would have the full P&L, balance sheet, and cash flow statement.

Layering this out into a consolidating statement would make it evident to all involved how they were contributing to the overall targets and performance of the company.

Need Help Driving Accountability in Your Organization?

Give us a call. We can help you drive these tools into your organization.

 

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Mike Ridder
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