Fulex is in the business of developing fuel efficiency solutions for the Genset manufacturers. This involves carrying out R&D on the technological and commercial feasibility of the products and, once the feasibility is demonstrated, developing and manufacturing these products. The Company is in a high growth phase with a need for maintaining high level of working capital to sustain the growth, in addition to capital requirement to fund expansion. The objective of the budget exercise was (a) to develop 5 / 10 year plans, Annual Operating Plan or Annual Budgets with monthly / quarterly break-ups at a departmental and segment level (b) Determine sales targets to the sales team, broken by products, geographies, customer segments etc. (c) Determine P&L position and cash/working capital requirements at various levels of sales (d) Determine the amount of capital to be infused to support ongoing operations and expansion plans (e) Planning for manpower needs (f) Expense control, by allotting expense budgets to departments (g) Determining profitability by product, geography, customer segments etc (h) Exploring feasibility of expansion plans with metrics such ROI and IRR (i) Scenario analysis, Sensitivity analysis and “what-if” analysis through modification of the assumptions.
Challenges for MyCFO
Budgeting at Pharmax was a simple ‘spread sheeting’ exercise restricted only to collation of data inputs received from various departments. The variance between budgets and actuals for instance in financial year 13-14 was more than 80%. The variances were reported every month to the HOD’s and the management on a month on month basis for their review and comments.
(a) Arriving at a meeting point between the “top-down” and “bottom-up” approaches (b) Maintaining a balance between “trend-based” and “zero-base” approach (c) Managing iterations and version control (d) Consolidation of inputs received from diverse sources (e) Seeking consensus and “buy-in” across the organization on a common set of goals (f) Changes in assumptions after freezing the budgets (this was handled through quarterly rolling forecasts)
How the client benefitted
The exercise helped the company to formulate its 5 and 10 year plans along with the annual operating plan, department and segment sales and expense targets were formalized, key ratios and trends were fixed and tracked, this allowed the company to benchmark key metrics against industry parameters and allowed the Board and the Management to track actuals on a periodic basis against the budgets.
VirtualRaceis a start up promoted by professionals who have held CXO level positions in the past. Virtualrace is a pedometer based, mass participation event conducted over 100 days. Virtualrace is backed by a Venture Capital Fund and it encourages activity and health in a fun and inclusive manner that complements hectic lifestyles.
Our MyCFO role
MyCFO plays the role of a full fledged CFO. MyCFO got involved at a pre – revenue stage to assist the promoters to monetize the business concept. Being a full blown CFO role, MyCFO also is involved in assisting the company in defining the key metrics to measure business performance, preparation of MIS, communication with the investors, negotiations with vendors, thinking through price points and customer profitability, involvement in getting the website operational, thinking through modes of distribution and logistics including tax, cash flow and profit impact and drafting employment letters and salary structures for new recruits.
How our client benefited
MyCFO’s role extends beyond the role that a full time CFO would have handled. Considering the range of activities that Virtualrace had to get done, MyCFO provided the client support on Commercial, Financial, Accounting and Operational support. We are a Business Partner, not a Service Provider. MyCFO also plays an active role in providing periodic reports (not just accounting) to the investors and promoters which has provided visibility into the business performance. Our involvement on negotiations has helped the company to reduce costs by 30%. The payback on MyCFO’s annual fees has been less than 3 months for Virtualrace.
Diagnostic Center is an ultramodern diagnostic centre with comprehensive facilities for Laboratory, Imaging investigations and other diagnostic facilities headquartered in Mumbai. Lifecare provides digital x-ray, digital imaging, mammography, bone densitometry, sonography, cardiac imaging, advanced dentistry, spirometry, eye check up amongst others.
MyCFO plays the role of a full fledged CFO for the Diagnostic Center which involves partnering the CEO to support the execution of Diagnostic Center’s Business Plan, implementing a high quality MIS on both the Finance and the operating side which involves defining, designing and tracking of KPI’s, providing visibility into financial and operating performance through visual dashboards to the CEO. MyCFO has also assisted the Center to implement best practices and process improvements through development of Standard Operating Procedures (SOP’s), implement performance measurement systems for the Finance team, streamlining working capital flows including setting credit controls, improve collection mechanisms from hospitals and monitoring cash flows through preparation of rolling cash flow forecasts. MyCFO also plays a commercial decision making role by being involved in equipment purchase decisions, opening of new centers and front ending discussions with existing and potential franchisees.
How the Client benefitted
MyCFO’s involvement helped Improve collections from 90 days to 30 days, resulted in cost savings of 20% in costs relating to re-agents and consumables, closure of non – profitable units based on unit level P&L and Break even point analysis, increased stickiness of clients through introduction of loyalty schemes based on our analysis on repeatability of clients, improved prices for certain tests buypto 30% based on accurate test level costing and improvement in sales efficiency by 10% through regular sales person performance tracking
Commodityco is a leading company in the trading of pulses and has recently ventured into processing. An overseas Joint Venture (JV) partner has invested in Commodityco 3 years back. The business has been doubling over the last 3-4 years and Commodityco is currently at sales aggregating to INR 2,500 Crores. The aggressive growth was not backed by implementation of robust Finance and IT systems, with Tally being used till about 12 months back. The company is Family owned and the second generation promoter felt the need to support the growth by instituting better quality controls, systems and a performance driven culture which had largely been ‘personal’ with the promoter and ‘informal’.
Challenges for MyCFO
Some of the key challenges faced by the MyCFO team was (a) getting a good grasp of the business (dynamic business with exposure to large volumes, forex and commodity price exposures, absence of written contracts), unavailability of data relating to the past (largely in key people’s ‘memories’), competency of the existing team and to be able to connect different silos where information was hitherto residing.
MyCFO’s mandate here was to play the role of an ongoing CFO for Commodityco. Commodityco and MyCFO felt the need to implement an ERP system which would help address issues on data integrity and also integration of key functions across the organization including processing locations, branches etc. The implementation of the ERP was completed in 7 months, post which the budget exercise was activated. This took MyCFO and the company another 45 days to get a ‘first draft’ of the proposed budget. The budget tracked the following parameters (a) Sales and Purchases: By Business Unit, By Commodity and By Trader (b) Processing Plant: Capacity utilization, production units and by item/commodity (C) Gross Margins: By Commodity, By Business Unit and By trader (d) Overheads and (e) Cost per ton. The budget committee in this case largely comprised of the promoters and the MyCFO team with involvement of departments on a need basis. The budget draft underwent 2 revisions post which this was rolled out/finalized.
How the client benefitted
The company had undertaken a budget exercise for the first time in its lifetime. The budgeting exercise was combined with the KPI exercise for the company. The concept of tracking performance against set targets/budgets was communicated and a tracking mechanism (budgets vsactuals) has been instituted on a monthly basis, providing visibility not just to the promoters but also to the JV partner.
SpecBiois a 12 year old company with $ 35mn in revenues. The company manufactures and trades in Speciality chemicals and has recently diversified into biotech. Production is carried out in Gujarat.
Our MyCFO role
MyCFO has been mandated by SpecBio for the development of a 5 year Business Strategy, with clear roadmap to achieve desired turnover, profits, geography mix, product mix and customer mix. MyCFO was involved in development of a Budgeting system and in carrying out monthly performance reviews with individual business managers. MyCFO also assisted the company in accessing innovative debt funding to expand working capital availability.
How our client benefited
MyCFO's involvement with the Business Strategy provided the Promoters and senior Business Managers with an unified view of where they should be taking their company in the next 5 years. The clearly defined goalposts and time linked milestones are helping the Promoters to track actual performance against set targets. MyCFO's assistance with monthly review meetings has resulted in more discipline in management review processes and more result-oriented and solution-oriented discussions within the company. Our help in expanding working capital facilities through the innovative Trade Channel financing route, helped the company to achieve additional 15% topline growth in a year.
Implant India is an exclusive distributor of orthopedic implants and joint replacement products. The parent company is a leader in the manufacture and distribution of medical implants. The group is amongst the top 3 companies in this space globally.
MyCFO role involves acting as the sounding board to the business team at Implant India. The role involves helping the management with a 3 year business plan, cash flow forecasting and fund management, inventory control, distributor evaluation and decision making based return on investment calculations, driving the finance agenda for Implant India, Product costing and fixing pricing and to play the role of a partner to the CEO/ business.
How the Client benefitted
MyCFO’s involvement has helped in 15% reduction in inventory holding through better visibility on implant consumption patterns, 10% improvement in sales through better distributor performance management, cash flow improvements by 12% through reduction in debtor days, 25% improvement in order to dispatch turn around time, implementation of bar coding system to help track inventory movement