Finance people are the number crunchers….
Finance is the place where you can get the
numbers….
We do the business, the finance will take
care of the rest….
Finance is dry….
While discussing finance with many
counterparts I hear very often similar statements. If one was to believe any of
those interpretations of the role, finance would be a very sad place to be.
I love finance and I believe that is one
of the most exciting functions in a company. Why is that?
Because finance is the place you need to
go first if you want to understand the business, what happened to it, what is
happening now and what could happen if you do certain things. Finance is a
reflection of the beginning and the end of all company’s activities.
As a finance person you have to own the
future, the present and the past (yes, also the past). This means that you have
to take responsibility and tell the management or the owner what is working and
what is not, regardless of the consequences. And you have to stand upright also
for the past and for the things you might be not responsible for: if there is
some mess created in the past to be sorted out, you still sit with it and will
need to fix it, no matter who created it. The willingness to own the past, the
present and the future determines the quality of your finance people.
That is why I love it.
I like to think of finance as a big
bathtub with one faucet pouring water in (revenues) and several holes draining
it (expenses and investments). The art of managing the water flow is the
reflection and the catalyst of the company’s strategy.
What you want to have is a constant level
of water and a pleasant temperature. If you have too much water pouring in
(allowing for example revenue enhancing discounts), the tub will spill and you
will waste the water; eventually you will need to dry the floor. If you
draining holes are extracting too much water, the tub will be empty at some
point.
How do you know what is the right way of
managing the flow?
My own philosophy in understanding the
appropriate “water” level resides in understanding the difference between
creating value and extracting value.
You will create value if you keep a
pleasant level of water, at the right temperature, so that you can bath (or
drink; in this case you are taking the dividends) as long as you want.
Extracting value can happen through
reducing expenses and investments by closing the drains and opening the faucet
too much. The joy of watching so much water filling the tub will soon be
replaced by the sadness of drying the floor and paying for the floor repairs.
Dear salesmen, strategists, marketing
people, IT people: next time you pass by the minimalistically furnished finance
offices, with poor light and worn down floor, think about the bath tub. You too
will love finance.
I love bathing. I love finance.
