The new CEO of a medium-sized company that manufactures heavy equipment for contractors and suppliers to use in making construction materials was unable to make important decisions in a timely way. This was due to a 25- to 30-day closing period and the fact that financial reports were not as accurate as they needed to be. This caused many problems for the 60-year-old company. Bookings and backlog were not being tracked and this resulted in the inability to staff workloads. Inventory was not regularly being monitored, particularly as to obsolescence, so as with many accounts, its value was unreliable. The likely reason for these problems was that the accounting group was weak and not properly led. The new CEO felt he had to take action with respect to the finance team if he was to improve and build company performance.
He hired a new CFO, now a E78 principal, who had Big 8 experience followed by many years leading finance for manufacturing companies. He set out to provide new finance team leadership and to improve the timeliness and accuracy of information to help the CEO achieve his goals. His first act was to restructure the accounting group, starting with hiring a new Controller, and then to add skills and experience to the team in the ensuing months. With a better organizational structure and team, he was able to:
- Implement a much shorter but still realistic closing timetable and checklist, and as a key component of this, to establish a shorter account reconciliation process.
- Take corrective action to handle issues in implementing the new closing process through frequent, focused staff meetings.
- Pay particular attention to special problem areas such as inventory management and backlogs.
Within a few months, timely and accurate financial statement were being produced within 5-6 business days of the end of the month. The reports gave better insight for important areas of management such as the Weekly Bookings/Backlog report, which led to better visibility of resource needs for better on-time delivery. The reliance on insightful information, delivered in time to take action, led to steadily improved performance as the company eventually tripled its revenues. As a result, company management was significantly better equipped to initiate changes in operations to improve efficiencies and profitability.