Basic principles of finance have not changed that much in the last century: Businesses exist to make profits and generating positive cash flows is important.
Given the recent developments in the e-commerce space, several ‘old school’ finance professionals are unsure whether the ‘universal’ and ‘time-tested’ principles will ever hold good in the future. Valuations of most e-commerce deals in the recent past have been at astronomical levels, most often expressed as several multiples of sales. It’s common knowledge that virtually every e-commerce company in India is losing money today. So, why are investors paying a sales linked multiple (and a premium at that!) for buying into a loss making company.
CFO is one of the earliest moves made by a PE firm upon adding a company to its portfolio. PE investors want to track the Investee Company’s financial situation as soon as they are invested. While the acquired portfolio company may have solid financial systems and reporting, the PE firm’s first priority will be to upgrade the financial structure and transparency by adding a new CFO.
PE investors prefer CFOs who have worked in both large and small corporates. The large corporate experience provides an understanding of sophisticated corporate systems and the experience in a small company helps to test and enhance the CFO’s resourcefulness and ability to deliver when removed from the expansive support systems of a large corporate setting. Continue reading →
Hyacinth Ferrao, Financial Controller & Senior Vice President, India
While every CFO needs to undoubtedly spend time on strategic & tactical matters, it is also very important to pay attention to timely & accurate processing of vendor payables. Every CFO can, I am sure, recollect one or two or even more payment escalations that have come to either them or at times even the CEO of their company. What follows then is a frenzy of activity to find out which are the invoices pending, where are they lying currently, why were they not paid? More often than not there is a mad scramble to unearth the facts and respond promptly. Now, let’s imagine – what if we could at the click of a button see if invoices have been received for a vendor, view the actual invoice online (if received), Continue reading →
A CFO is amongst a rare breed of people who is not just responsible for his own function/ department but is also required to contribute to the other functions within an organization. The CFO now has to straddle and importantly contribute to the company’s business functions. The CFO is often labelled as someone who is conservative, takes a very ‘numerical’ view of the business and does not understand the business intricacies.
Companies think hard when it comes to investments or spends relating to diversification to new geographies, new product introduction, Capex, R&D, marketing spends, M&A activities etc. While there is always a sense of optimism associated with any new initiative, these need to be viewed from a stand point of whether the spends will generate reasonable returns over a finite time frame. This is where the role of the CFO becomes crucial. The CFO here not just need to look at situations like these from a numerical stand point but also need to understand the underlying business assumptions that make up the spreadsheets.