Accenture: Fools Rush In – Andrew Meade
Finance directors increasingly find themselves taking charge of their organisation’s cost cutting and working capital management initiatives. According to Andrew Meade, Accenture, FDs must talk to all parts of their business, keep their eyes on a sustainable strategy and take the time to act with clear heads to achieve what is expected of them. He shares his perspective with FDE.
The drive to cut costs and keep working capital to a minimum to enable organisations to survive the hard economic conditions currently afflicting the world, has pushed responsibility firmly onto the shoulders of the finance director. The finance team increasingly holds the reins, but steering a business through the downturn is no easy task. "We are in interesting times. Whilst the CEO remains the navigator, the FD or CFO is now carrying greater responsibility within the business. Cash and capital are so scarce that everyone is looking to the CFO for approval and to champion the cash generation agenda," explains Andrew Meade, partner at Accenture, where he is the senior executive on working capital reduction.
Less haste
Meade warns against knee-jerk reactions to the abrupt change in the world’s economic fortunes. The temptation to act quickly to address cost and working capital issues could lay traps for the future.
"Cost is a valid area, but there is a lot of soft money tied up in working capital. It is healthy to target both and use a sustainable model for managing them. You can cut travel costs easily by putting a freeze on trips, but this is not sustainable in the long term. You need to understand the real drivers of cost and address them with clear policies and sourcing strategies," he says.
Above all, organisations must be willing to hold back, take a breath and think twice before making any rash decisions on cost. The extra time to plan thoroughly, identify the right actions and assess their consequences will pay dividends.
"Get every opportunity on the table, then let senior management decide how far to go with each of them. Don’t start with the target in mind, because you will find problems when the target changes and your analysis will need to start all over again," warns Meade.
Hold back on hunches
In the planning process, Meade advocates objective analysis and an open mind. In testing times it may be dangerous to rely too heavily on instincts – even when they have been tempered by experience.
"Some things intuitively make sense, like changing policies on nonstrategic vendor items, but other things need real analysis to ensure that an opportunity exists. You have to show that cutting costs in one area does not hamper the business in other ways," says Meade.
Carving costs out of IT, for instance, might seem like a good idea in some organisations, but Meade has seen an instance where such a policy so jeopardised an enterprise’s strategic future that the company in question actually decided to invest more heavily in IT as part of a sustainable strategy.
Balance your cost cutting with your strategic direction
Furthermore, the strategy revealed by detailed analysis of each opportunity to optimise efforts to reduce cost and working capital must be implemented across the entire business and at every level.
"In considering both cost and working capital it is important to differentiate between gut feeling and in-depth analysis. In managing DSO, for instance, you need to not only work on credit collection processes, but also on credit terms," Meade remarks.
"The CEO and CFO must take visible responsibility, effort must be focused and must cover the whole organisation down to the field work force – anyone who spends money or who agrees terms with customers. Everyone must understand the policies that are in place and how their activities affect the performance of the business," he adds.
He believes that with robust analysis, visible ownership by senior management and the ability to pause for thought, many businesses can quickly reveal hidden opportunities that will help them shape up for these tough times.
