Re-launch your engagement with
Finance- 10 key questions to
promote open dialogue
Better Boards conference, 3 August 2014
Michael Corry, CFO Clarity
Brief overview – our objectives
WE WILL …
 Consider why there is sometimes a disconnect
between Finance and the rest of the organisation
 Do some profiling of Finance Managers, CEOs and
Chairs
 Consider different ways to ask questions and receive
challenging news
 Look at 10 key questions to address to Finance.
 Explore strategies to make those questions more
effective
How to engage with Finance?
The ten questions- a sneak preview
1. How are we investing our surplus cash?
2. Are we tracking aged debtors and creditors?
3. Are all of our activity streams covering their costs?
4. How can we use technology to improve things?
5. What’s our main tax risk?
Questions 6 to 10
6. Is our fixed asset register up to date?
7.
How can we improve reporting to the board?
8. How do we know everyone on the payroll works for us?
9. Got any leave planned?
10. What keeps you awake at night?
Profiling Accountants
Profiling CEOs- number 1, the Volcano
Profiling CEOs number 2- the smiling
assassin
Profiling CEOs number 3- the sulker
Question 1; how are we investing our
surplus cash?
Principal X interest rate X time invested =
investment return
Question 2; are we tracking our aged
debtors and creditors over time?
Question 2; are we tracking our aged
debtors and creditors over time?
 Several measures can work OK
 The key is consistent measurement over time
 Example;
Total purchases (exclude salaries)/365 = purchases per day
Creditors / purchases per day = creditors days outstanding
Question 2 continued
 AND/OR- an aged creditor listing
Total Current 30-60
SGR lawyers
AGR electricity
GU Workcover
LL premises
Total
5,654
5,654
0
12,400 12,400
0
1,544
0
0
10,450
0 10,450
30,048 18,054 10,450
60-90
0
0
0
0
0
90+
0
0
1.544
0
1,544
Question 3- are all of our activity
streams covering their costs?
Check everyone knows what we mean by “cost recovery”.
General meaning- are we avoiding a loss? Are we generating
enough revenue to cover costs? Does this work across all
activities?
Specific meaning- can we allocate some costs to this grant,
and legitimately spend, say, 90% in the field?
Question 4; how can we use technology
to improve things?
 Quick fixes
 Medium-term projects
 Broader strategic objectives.
 Finance system change or whole of business?
 Emphasis on reporting or processing?
Question 5- what’s our main tax risk?
 “Not-for-profits don’t pay tax”. They’re exempt!
 Oh yes they do!
 GST, fringe benefits tax, Workcover (alright, not a tax) etc
Question 5 continued
 Have a good look at contractors.
 It’s a complex area.
 Various tests. 80% test is just one.
 Affects superannuation, Workcover, (payroll tax),
withholding tax on payments to contractors
Question 6- is our fixed asset register
up to date?
 This is a CLASSIC risk area.
 Does the register contain redundant assets?
 Is all work in progress shifted into the register?
Question 7; how can we improve
reporting to the board?
 Comprehensiveness versus clarity
 Risk of CYA approach- “they’ve had it so they can’t say
they haven’t”
 Keep it meaningful and concise
 ASK THE BOARD- what’s useful to them?
Question 7 continued; board reporting
Question 7; Board reporting
Lessons from the Centro case
 Each month the board received a board pack about
450 pages long. One of the board packs that was
particularly relevant was more than 1000 pages long.
 “The directors failed to see the ‘obvious errors’
because they all took the same approach in relying
exclusively on those processes and advisors. No
director stood back, armed with his own knowledge,
and looked at and considered for himself the financial
statements.”
Question 7; board reporting
Lessons from the Centro case
 “A board can control the information it receives. If there
was an information overload, it could have been
prevented. If there was a huge amount of information,
then more time may need to be taken to read and
understand it. The complexity and volume of information
cannot be an excuse for failure to properly read and
understand the financial statements.”
Question 8- How do we know that
everyone on the payroll works for us?
Check this from time to time.
Fraud prevention/detection focus
Think laterally about how you approach this.
Question 9- got any leave planned?
“……..spent more than a year struggling to
reverse a bewildering decline in cash flow”
“Trusted senior accountant…..” “Multimillion dollar discrepancies” “Rat in the ranks….” “No
outward sign……..” “…where the complexity
came in was…how she covered her
tracks”…………
“payments in bank statements deleted from
on-line records”
Question 10; “what would keep you
awake at night”
 THE KEY QUESTION.
 Works best with trust.
 Off-the-cuff or on notice?
 Be ready for an initial brush-off.
 Persist gently but firmly.
 Gives the accountant “permission” to air
concerns.
Question 10 continued
Goes back to how you ask questions, and
how you receive answers
“What exactly do you mean by that?”
“How specifically does that work?”
Conclusion
 If you ask penetrating questions constructively, the
finance function will generally welcome this and feel
engaged.
 Set up the culture where it’s OK to report bad news if
necessary.
 Develop a technique of questioning that gets the answers
you are really looking for. Be aware and genuinely
inquisitive.
 We accountants love to spend time mixing with the
humans. Re-engagement is good. Good luck!