• The Finance Gem 💎
  • Posts
  • The Finance Gem 💎 Week #56: Strategic Finance Analysis, Strategy & Leadership

The Finance Gem 💎 Week #56: Strategic Finance Analysis, Strategy & Leadership

Strategic Finance Analysis, Strategy & Leadership

Together with

Stay up-to-date with AI.

AI won’t replace you, but a person using AI might. That’s why 500,000+ professionals read The Rundown– the free newsletter that keeps you updated on the latest AI news, tools, and tutorials in 5 minutes a day.

WELCOME TO ISSUE NO #56

weekly strategic finance gems to accelerate your career and grow your business

BEFORE WE GET STARTED

  1. A condensed and strategic version of The Cash Flow Masterclass is now available for Executive Leaders and another one for Portuguese Speakers. Sign up today for only $149 (or as low as $75 with automatic location based discounts).

  2. Join me for an upcoming complimentary webinar in partnership with Export Development Canada. Details and registration here: Negotiating Payment Terms for Optimal Cash Flow

  3. Please share your testimonial for a chance to win an exclusive 30 minute coaching session with me! Scroll to the end of the newsletter for details.

  4. Last week I asked a our Linkedin community about their most critical priority for 2024. Here are the results:

  1. I’d love to get your thoughts on this week’s polls. Scroll below to share what you think!

  1. 100 Questions for the CFO to Answer

100 Questions for the CFO to Answer.

CEOs want revenue growth, maximized profit and optimal capital allocation.

Companies need competitiveness, risk management and compliance.

The business needs efficient budgeting, forecasting, and operations.

Investors want transparent and strategic financial management.

⏬⏬⏬

Here are 100 critical questions for CFO to answer in order to help move their organizations closer to these critical objectives.

☑️ Financial Strategy & Planning

- How are we slicing down budget turnaround times?

- What's our approach to iterative budgeting?

- How do we proactively strategize our financing?

☑️ Revenue & Profit Maximization

- Is our pricing strategy truly optimized?

- How are we leveraging data analytics for financial decisions?

- Are we leaving any tax-saving opportunities on the table?

☑️ Cost Control & Optimization

- Where can operational efficiency be further improved?

- Is our procurement strategy delivering the best ROI?

- How can technology reduce costs?

☑️ Risk Management & Compliance

- Are our financial controls fool-proof?

- What's our game plan for regulatory changes?

- How do we keep fraud risks at bay?

☑️ Capital & Liquidity Management

- How do we ensure that we always have the right type and amount of capital?

- Are we maximizing our cash conversion cycle?

- What are our back-up plans for liquidity crunch situations?

Download a copy of the entire list of 100 questions here.

The Cash Flow Masterclass for Executive Leaders is now Live. This is the condensed version of my flagship Cash Flow Masterclass. Invest only 1.5 hours to focus on strategic decision making and watch yourself dramatically increase your leadership potential, impact and influence.

  1. Short-term vs. Long-term Business Financial Planning

Short-term vs. Long-term Business Financial Planning

Here’s what they are, how they work and why you need both.

🎯 Short-term Financial Planning

➡️ focused on here and now - the immediate financial horizon, typically up to a year

➡️ key areas of concern include:

> Capital Management: juggling assets and liabilities efficiently

> Liquidity: primary goal is ensuring there's enough cash flow to meet immediate obligations

> Short Term Risk Management: focus is on immediate risks such as currency fluctuations and short-term credit risks

➡️ tools of the trade:

> short-term forecasts

> cash-flow statements

> working capital analysis

🎯 Long-term Financial Planning

➡️ focused on designing the future and typically looking 3 to 5 years out

➡️ key areas of concern include:

> Strategic Capital Structure: involves strategic decisions on capital structure, long-term investments, and funding

> Solvency: the focus here is on the ability to meet long-term obligations and sustain operations

> Long-term Risk Management: focus is on managing long-term risks, including market volatility and strategic risks

➡️ tools of the trade:

> discounted cash flow (DCF)

> scenario planning

> capital budgeting

  1. Accounting vs. Finance KPIs

Accounting vs. Finance KPIs

🎯 Finance KPIs focus on the financial performance of a company and help assess value creation by measuring financial health, ability to generate profits and ability to manage capital appropriately

⚫ Key Finance KPIs include:

1. Economic Value Added (EVA) is a measure of corporate performance that factors in not just the earnings but also the cost of capital.

2. Weighted Average Cost of Capital (WACC) serves as an all-encompassing rate that represents the average rate of return a company needs to compensate all its investors.

3. Quick Ratio (Acid-Test Ratio) is a more stringent test of liquidity than the current ratio and evaluates how well a company can meet its short-term obligations using its most liquid assets.

4. Price to Earnings Ratio (P/E Ratio) provides insight into the valuation of a company's stock compared to its earnings.

5. Free Cash Flow (FCF) is the cash generated by the business that is truly available to service debt obligations, and afterwards be distributed to investors or reinvested.

6. Debt to Equity Ratio serves as a barometer of financial leverage, calculated as Total Debt/Total Equity

7. Current Ratio is a liquidity ratio that measures a company's ability to cover its short-term liabilities with its short-term assets.

8. Earnings Per Share (EPS) is a key profitability metric defined as (Net Income−Pref. Dividends)/Weighted Average Shares Outstanding

9. Return on Equity (ROE) is a measure of profitability that evaluates the ability to generate earnings from shareholders' equity

10. Dividend Payout Ratio shows what percentage of net income is returned to shareholders as dividends.

11. Return on Assets (ROA) gauges asset efficiency and profitability

12. Return on Invested Capital (ROIC) provides a comprehensive view of how effectively a company uses its capital to generate profits.

🎯 Accounting KPIs focus on the day-to-day operations of a company to help measure and monitor financial operation efficiency, and the effectiveness of assets, liabilities, and cash flow management

🟡 Key Accounting KPIs include:

Liquidity Metrics

1. Operating Cash Flow Ratio: Measures a company's ability to cover its short-term liabilities using the cash generated from operations.

Efficiency Metrics

1. Inventory Turnover: Gauges how many times a company's inventory is sold and replaced over a specific period. C

2. Accounts Payable Turnover: Assesses how quickly a firm pays off its suppliers.

3. Accounts Receivable Turnover: Evaluates the effectiveness of a company's credit and collection policies.

Time-Cycle Metrics

1. Days Sales Outstanding (DSO): Shows the average number of days it takes to collect payment from customers.

2. Days Payable Outstanding (DPO): Indicates the average number of days a company takes to pay its suppliers.

3. Days Inventory Outstanding (DIO): Measures the average number of days inventory is held before being sold.

Profitability Metrics

1. Gross Profit Margin: Represents the percentage of total sales revenue that exceeds the cost of goods sold. Net Profit Margin: Highlights what percentage of sales is net profit.

Asset Utilization Metrics

1. Total Asset Turnover: Gauges how efficiently a company is using its assets to generate sales.

Operational Metrics

1. Cash Conversion Cycle (CCC): Highlights the time it takes to turn current assets into cash.

2. Break-Even Point: Indicates the level of output or sales that cover all costs.

The Cash Flow Masterclass gets 5* Reviews!

~ Executive and Portuguese Versions now Available ~

s⭐⭐⭐⭐⭐ 

“Fantastic course and inspired learning experience! The simplicity of conveyance and follow up with infographics instigate learned absorption and assimilation to the complex matter. Thank you Oana for the motivation and satisfaction in your lessons. Learning is infinite!

Andy Cruz

“This course is engaging and well-organized. Oana has put in extra effort to make it concise and effective. I highly recommend it to non-finance professionals who want to broaden their knowledge, or experienced individuals who want to improve their understanding of Cash Flow.

Darren Hedley

“I recently completed the Cash Flow Master Class online, and I must say it was an incredibly valuable experience.

Colm Croughan
  1. It’s hard being a CEO.

It’s hard being a CEO

Every decision impacts finances, team morale, and stakeholder satisfaction.

To succeed, you’ll need a skilled CFO.

And you’ll need to master Strategic Management.

Here are 15 important areas for CEOs to focus on, to help you measure progress and performance:

1. Vision and Strategy Development

🎯Design the future, align with the strategic vision, and craft long-term strategies for achieving objectives.

2. Leadership and Organizational Culture

🎯Cultivate a positive and productive corporate culture.

3. Financial Oversight

🎯 Manage the company’s financial health.

4. Corporate Governance

🎯 Uphold the highest governance standards.

5. Risk Assessment

🎯 Identify potential risks and establish mitigation systems.

6. Operational Excellence

🎯 Streamline operations, enhance efficiency, and encourage innovation.

7. Talent Optimization

🎯 Ensure the right individuals are in appropriate roles to drive the strategic plan effectively.

8. Customer-Centric Approach

🎯 Instill a customer-focused mindset to meet customer requirements.

9. Investor Relations

🎯 Maintain robust and transparent relationships with investors, shareholders, and financial analysts.

10. Brand Integrity

🎯 Serve as the company’s face and ensure actions positively impact the brand.

11. Innovation and Technology

🎯 Cultivate an innovation-oriented culture to stay ahead of technological advancements.

12. Sustainability and Social Responsibility

🎯 Aim to reconcile profit drivers with ethical and sustainable business practices.

13. Stakeholder Engagement

🎯 Skillfully manage relationships with diverse stakeholders.

14. Mergers and Acquisitions

🎯 Assess growth opportunities through mergers, acquisitions, partnerships, or joint ventures and ensure their effective execution.

15. Business Continuity and Succession Planning

🎯 Create and execute a comprehensive business continuity plan for sustained success.

Download a full resolution image of CEO Checklist here.

The PDF file is available for sale in my store.

  1. You need to move from Accounting to Finance

You need to go from Accounting to Finance

And from Finance to Strategic Finance.

Because that's what will:

🎯 enable your long term business objectives.

🎯 align your financial and your business strategy.

🎯create long-term sustainable value for stakeholders.

Many get stuck on the way from accounting to finance.

And even more get stuck on the way from operational to strategic finance.

But strategic finance is where you build the future, so keep pushing to get through.

🎯Here’s a 120 point checklist to help you navigate Strategic Finance, split between:

☑️6 main areas to get right.

How do we create and maximize value?

How do we best allocate our limited capital?

How do we manage costs strategically?

How do we forecast strategically?

How do we effectively plan for, and navigate M&A?

How do we manage strategic risks?

☑️6 supporting areas to understand in depth.

What is strategic finance?

How do we implement effective corporate governance?

What are the main international considerations?

How does digital transformation enable strategic finance?

What key ESG considerations influence strategic finance?

How do we use strategic finance in corporate restructuring?

Visit my digital store to check out my viral cheat sheets and checklists

THANK YOU FOR THE LOVE!

Please share your own testimonial for a chance to win a complimentary 30 minute coaching session with me!

Every month I will pick 5 testimonials and will invite their authors to an exclusive group coaching session. If you’d like an opportunity to participate, please share your feedback here https://testimonial.to/oana-labes/all 

Dr. Hossam Omran

JOIN AN UPCOMING WEBINAR

Join me for cash flow insights and actionable strategies in a power-hour designed for ambitious professionals, executives and business leaders.

Learn how to master cash flow, enhance your strategic decision-making, and compound your impact and influence in boardrooms and beyond.

GIVE TO GET PROGRAM

If you’re enjoying this newsletter, please forward it to your friends & colleagues. It only takes 3 seconds. Writing this took 4 hours.

🎯Refer 1 person and get my exclusive eBook 10 Essential Strategic Finance Concepts that link Accounting, Finance and Strategy

🎯Refer 10 people and get to pick your favorite infographic from my digital store.

POLL TIME

If you had a magic wand, what would you change about The Finance Gem💎?

Login or Subscribe to participate in polls.

What was your favorite topic this week?

Login or Subscribe to participate in polls.

How did it feel reading this week's issue?

Login or Subscribe to participate in polls.

As always, if you have suggestions or feedback, simply reply to this email.

How can I help you?

  1. Upgrade your strategic finance skills with The Cash Flow Masterclass, my highly reviewed, on-demand video course. Portuguese and Executive versions now available, as well as discounts up to 50% based on your geographical location.

  2. Train your team or engage your events with strategic finance workshops and presentations. Reach out here for training and here for speaking.

  3. Grow your business with short, medium and long term financial planning, and big-picture financial models so you’re always finance-ready. Reach out here.

  4. Sponsor a future issue of The Finance Gem 💎 

Thanks so much for reading.

Oana