Determining a Format

The format for the document itself can be altered to fit the writing style and sophistication of the management team charged with implementing the strategy. The one must to writing the document will be focusing on its usability. The fact that the document will be circulated throughout the organization and relied on in the future is reason enough to develop an informative record of objectives and tasks. The finance strategist must recognize that this document will not only inform but also serve as a platform and motivation for action. Therefore, the components of the document must translate easily into manageable tasks and initiatives. A suggested format to serve this purpose is:

- Summary of business

- Define problems/objectives

- As-is finance function

- To-be finance function

- Proposed actions

- Key dependencies/issues to monitor

The particular arrangement and details of each area may vary, but this general format should be observed, especially for organizations embarking on a finance strategy for the first time.

Summary of the Business

The finance strategy must fit the business in both the needs it addresses and the ability of the company to follow through with relevant tasks and initiatives. The strategy in its manifest form must sell the reader on both the solutions proposed and the needs they address. Establishing the validity of needs to the reader requires a clear definition of the business and its current status in the environment in which it operates. The document also should indicate overall needs as they relate to the finance function. This section should segue into the problems/objectives section.

Referencing the multilevel approach will be imperative in the “Summary of Business” section of the strategy document. Is needed to evaluate the company’s past, present, and future and in so doing illustrate the need to develop a strong finance function. This part of the document will serve as the foundation for the presentation of needs and their solutions. Understanding Tier 1 considerations will serve to sell the organization on the need for long-term solutions that may be costly or demand comprehensive commitment from the leadership. Downey Interior’s preliminary strategy document touches briefly on certain Tier 1 issues, particularly the quest for financing and the desire to expand the business model into the retail furniture arena.

The necessity to define the business and its needs is easy to discount when creating a document that is deemed to be exclusively finance-oriented. The finance strategist must keep in mind the fact that, as time passes, the business and its needs will change. Certain aspects of the strategy, therefore, may be questioned or challenged, whether the initiatives are being upgraded, changed, disposed of, or remain unchanged. The strategy document must clearly show that the business’s situation dictates the need for the tasks and initiatives put in motion, whether the business has changed or not. New executives/managers who may become a part of the overall effort after its inception will depend on historical documentation for the duties they are charged with addressing. The business description will allow for this and enable an easier transition as tasks and initiatives are enhanced/upgraded to fit the growing business’s needs and circumstances.

Define Problems/Objectives

This section of the strategy document outlines the primary needs of the organization as they relate to the finance function and the proposed solutions. The scope of the strategy is outlined as well as the challenges that are to be addressed. The overall strategy objectives also must be clearly articulated. Considerations that factor prominently in defining these three main topics include:

1. Scope. The scope section provides a statement of the impact of the finance strategy. It should not be long and detailed but rather short and pithy, enabling the reader to grasp the essence of the need for the strategy in a concise, easy-to-understand paragraph. Many small and emerging businesses may be burdened with a haphazard, inefficient finance function or be without one altogether. The scope statement may address the need to overhaul the finance function or develop one from the ground up.

2. Challenges. The finance strategist must elaborate on the challenges and issues faced by the organization as they relate to the finance function. Doing so will mean taking the scope statement and defining in greater detail the issues to be addressed. In particular, this area of the strategy document identifies certain routine aspects of data flow that are not adequate and reporting requirements that must be addressed. The challenge for the strategy author at this point is to articulate these challenges in a finance context and also to show how they impact the business.

3. Solutions. The strategy document must define, in high-level terms, the overall objectives of the finance strategy. This section provides the opportunity for the strategist to do this. This discussion must be confined to the major intended accomplishments and objectives. The challenge in restricting attention to major accomplishments being sought revolves around distinguishing between major strategy objectives and minor initiatives that support the whole endeavor. The solutions proposed at this stage must be logically linked to enhancements to the business or business model.

Attention must be focused on Tiers 3, 4, and 5 of the multilevel approach when defining solutions. Topics of infrastructure, business modeling, and performance metrics factor prominently in this aspect of the document. Although the details of implementation may not be addressed here, the objectives must be clearly articulated. These objectives may come in tangible and less tangible forms. Examples of the former may be the installation of an ERP or consolidation tool. Less tangible objectives may involve establishing a solid base of knowledge and skill in the finance area to help create and enhance business models. Other less tangible objectives may focus on matters of data flow process enhancement, whether it relates to reducing the time to close the books or to enhancing the volume and reliability of financial information. Objectives must be specific and provide clarity and focus to the reader without being too pointed and mired in details. Downey was without a finance function altogether. The strategy author has enumerated the need for many Tier 3 upgrades, particularly development of a data flow process, development of systems infrastructure (network and financial applications), and the establishment of a core finance organization (hiring a full-time controller). The implied evolution of the finance organization hinges on the retention of the two software (AccPac and Hyperion Enterprise) development professionals. Upper-tier considerations are addressed, especially the need for developing analysis models that examine the business’s major customer divisions—condominiums/apartments and business/ commercial (and retail furniture division starting in Year 3).

As-Is Finance Function

Amajor component of the finance strategy document is the outline of the current state of the finance function. By defining the landscape of the current finance function, the specific areas to be focused on for improvement will be clarified. This depiction of the as-is finance function will serve as a natural extension of the listing of challenges noted earlier in the document. The as-is discussion should be comprehensive and relevant to the strategy objectives while avoiding irrelevant details. The strategy author must include all aspects of the as-is finance function, even if it includes weaknesses that will not be addressed in the immediate future. Doing this will leave the strategy open for further development as the business evolves.

Adiscussion of the as-is finance function serves to document the starting point of the strategy. More often than not, finance strategies will evolve over time, with some initiatives and tasks implemented sooner than others. The passing of time will mark the gradual fruition of benefits by the finance organization and the business as a whole. Reflecting on where the finance function began and how far it has come at any stage of the evolution of the strategy will serve the overall effort. The well-documented beginnings of a nonexistent or poorly defined finance function will serve to motivate the organization to continue with the finance strategy and to inspire those who may be faced with a particularly challenging slate of tasks.

To-Be Finance Function

This discussion is optional and necessary only if the objectives/solutions section is particularly comprehensive. The author may wish to include specific objectives, link certain solutions, or provide a time perspective to the solutions. For example, the objectives of a certain finance strategy may be the installation of a global consolidation, ERP, and OLAP tool. Although these may be illustrated in parallel in the document, the finance function evolution may employ these three in varying combinations throughout the business life cycle. The global consolidation tool, because of its ease of implementation, may be prescribed first, followed by the ERP, which may be implemented over a longer time period. The OLAP tool, which may depend on the ERP being in place, may be intended to supercede the global consolidation tool. All three solutions in this case will serve a purpose at different times during the finance function life cycle, although the planning and conceptualization for all three may have to begin immediately.

Proposed Actions

This stage of the strategy document defines with more specificity how the organization will go about executing the strategy. This section provides more detail on the objectives/solutions part of the document. The finance strategist uses this section to define relevant initiatives, resource requirements, and timing of deliverables. The following topics should be outlined:

- Key resources. This section will have two components: (1) human resources available and needed and (2) financial resources required. The nucleus of the strategy team may already be in place; however, roles as they relate to the strategy may not be clearly defined. This area of the document allows for current finance and nonfinance personnel to be formally tapped and their roles identified. This listing also enumerates roles and responsibilities the organization may not be equipped to handle. The organization will use this document to help in its search for outside help whether it be consultants or new hires.

Making financial needs clear at this stage allows management/owners to become acquainted with the fiscal realities of follow-through. Fiscal needs must be highlighted in the document as well: Hardware, software, or other consulting requirements can be clearly defined along with the appropriate cost. Downey Interiors is facing an investment in hardware and software of approximately $332,000. Additionally, it must commit approximately $490,000 toward qualified professionals to execute and maintain the

finance strategy ($100,000 will be dedicated to a year’s worth of consulting for initial strategy design and follow-through). Knowing that these numbers may change in either direction, the finance strategist (Dan Walters) should create an overall budget for Deborah Downey and Downey Interiors.

- Hardware/software requirements. Detailed descriptions of hardware and software components demanded by the finance strategy are documented in this section. The strategist’s objective is to define the need to upgrade existing hardware and software to accommodate further systems enhancements or to communicate major structural components that must be purchased. Defining major software and hardware purchases in this document will be advantageous in that needs can be put in a logical context. A major part of the finance strategist’s job is to secure the bankrolling and budgetary provisions as they relate to crucial strategy components. Communicating them clearly in the context of the entire finance strategy may make the need more palatable to company owner/managers. Downey Interiors will need to create a systems structure from the ground up. Not only will desktop computers, printers, and a server be needed, but also an additional software package (Hyperion Enterprise). One of the key software packages (AccPac) will be retained and developed further.

- Preliminary strategy time line. The strategy author should take this opportunity to create a time line summary of the foreseeable initiatives that make up the strategy. The time line may be either top level and summary in nature or detailed. The nature of the time line summary depends on the clarity of the tasks and initiatives and the development of the finance strategy itself. To the extent possible, the finance strategist must make certain that dates for deliverables and task completion are consistent. The critical factor is the arrangement of dependent initiatives and tasks. Many tasks must be achieved first before others can follow. Identifying these foundational initiatives is critical at this stage of documenting the strategy. The strategy author also must be aware of external or nonfinance events that could impact key dates. The dynamics of the initiatives proposed in the first three months of Downey Interior’s finance strategy are outlined in Exhibit 9.1. Events in the business life cycle, such as financing arrangements, major filings, or comprehensive audits and evaluations, must be considered in the time line as they will demand resources that may be dedicated to the finance strategy. This area of the document may have to be revisited on a regular basis as events and issues are encountered that impact proposed completion and deliverable dates.

- Major components and deliverables. This section links, in more detail, who is responsible for what. The strategy author must go beyond general roles and begin to link major deliverables to individuals and/or groups. In this section of the document the strategy author can assign responsibility and establish accountability where necessary. Identifying key contributors or peripheral nonfinance personnel who will be depended on to help with followthrough could be critical to the success of certain tasks and initiatives. Generally the finance organization is the major contributor to overall finance strategy development and follow-through; however, success may hinge on certain professionals who fall outside the finance/accounting area. These part-time participants could represent weak points in initiatives, especially if the finance strategist has no capacity to dictate their actions. Listing who these people are and what their roles will be, no matter how minor, will ensure a record of support and will invoke either resistance early on in strategy development (which allows time for adjustment) or agreement of support. Agreement at this stage will make reluctance to follow through in the future that much more difficult. It also will signal to the organization that the finance strategy is and will become a permanent part of business objectives and culture.

Potential Risk Factors/Issues to Monitor

The business environment is always rife with change. The author of the finance strategy document must be acutely aware of the changing business environment and circumstances that could lead to amendments or changes to the finance strategy. Changes that threaten or alter the finance strategy and supporting initiatives may come in the form of a shifting economy, changing customer base, disparate market trends, or cost/availability of technology and people. An unexpected (unfavorable) shift in the economy or changing customer base may necessitate abandoning certain initiatives that support the overall finance strategy. A favorable shift in the economy may allow for a rededication to certain initiatives or an enhanced focus on certain areas of the strategy. Monitoring internal risk factors is crucial, especially in regard to turnover in key areas of the organization.
Particular issues to be monitored may range from maintaining a knowledge base for software and hardware implementations to monitoring the stability of government infrastructure in foreign countries in which the company does business. The finance strategist must carefully evaluate all aspects of the strategy and be certain that these risks and issues are truly relevant. What would it mean to the finance strategy if the worst-case scenario were encountered? This section is critical for those who may be skeptical of the relevance of the finance strategy and its ability to be implemented. Skeptics may lie in wait for a bump in the road that may derail the overall effort or call it into question. Defining these bumps in the document will put all members of the organization on notice that certain events or issues may be encountered that could change the landscape of the overall effort. This section is not a list of excuses for the finance strategy to fall short; however, in this section the finance strategist can establish realistic expectations for all involved. Risk factors of note for Downey Interiors include the need to commit the organization to long-term information system construction and maintenance. The need to develop solid GAAP accounting methodologies for the company is also mentioned. These particular items communicate two considerations that could dampen the effectiveness of the finance strategy or impede its development altogether.