Let me begin this series by saying that I feel complimented to have been asked to prepare these articles, and I hope that I am able to give you some insight into the things that a chief financial officer (CFO) thinks about. First, let me introduce myself. My name is Michael Hutchison, and I am the CFO of a large, privately held construction company based in Florida. Like many private company CFO’s, the IT function reports to me, and it is my job to run interference for them, to make sure that necessary projects get funded, and to help in generating the annual budgets. In addition, the head of the IT department and I prepare project-specific budgets for things such as our Enterprise Resource Planning (ERP) conversion or the change to VMware that we underwent about a year ago. At the same time, it is also my job to force accountability in the spending process and ensure that all expenses support our overall business purpose. Mundane things like copiers or cellular laptop cards get expensive quickly, and we need to make sure that someone is monitoring these expenses.
My goal for the series, at least the ones that I prepare, is for you to come away feeling as if you spent 30 or so minutes visiting with someone you trust to deliver information in a clear, concise, and usable format. I will present terminology (sans jargon and buzzwords), metrics, and indicators that CFOs use as well as an overview of ongoing processes such as the annual budget or the month/year-end close processes. I hope to provide you—technology professionals—with some insight into the world of accounting and finance.
Some of the future topics I hope to explore in this series are as follows:
- Capitalization vs. Expense: Why some things have to be capitalized vs. expensed and some methods for determining the difference.
- Preparation of the Departmental IT Budget: I will address typical budget cycles and updates, important elements of different budget methodologies and some thoughts on how to avoid (or at least handle) unexpected things such as a once-in-a-hundred-year decline in housing coupled with a unprecedented downturn in the credit markets.
- Business Decisions: How some of the decisions you want the finance department to make are analyzed using return on investment (ROI) or payback. Also, important metrics that are used to evaluate the IT department from a finance perspective.
- Cadillac Technology: How to avoid the perception (or reality) that you are building a Cadillac system when a Chevy is what the company needs.
- Basic Accounting Principles: Things such as depreciation, debits/credits, accruals, allocations, budgets, ratio analysis, audits and taxes.
- Project Budgets: How to plan and present the budget.
- Strategic Planning: Know the strategic plan for the business so you can plan accordingly. For example, the business plan calls for migration of the company’s sales efforts online, but the company lacks the infrastructure. In this situation, you need some time to plan and resources need to be allocated.
- Other Accounting Initiatives: Coverage of some of the items such as Extensible Business Reporting Language (XBRL), International Financial Reporting Standards (IFRS), or Sarbanes-Oxley Act of 2002, particularly Sec. 404 (Management assessment of internal controls). These are “accounting” rules, but they all have direct impacts on the IT department.
- Dealing with the CFO: Tips for your meetings or discussions and possible CFO pet peeves regarding technology discussions.
- Accounting System Upgrade: Finally, we are looking to perform a major upgrade to my employer’s accounting system. If there is any interest, I can provide periodic updates as to our progress, likes and dislikes, stumbling blocks, etc.
I would appreciate your feedback on the articles and suggestions as to other topics you might find interesting. If it is something I know about or have time to research, I will include it in a future article.
My primary reason for agreeing to write these articles is to share some of the things I have learned in my experience and work with IT professionals. CFOs and IT professionals tend to view the world in an entirely different way. I want to help prepare IT professionals to work with their finance departments by providing them insight, necessary terminology and knowledge. There is a tremendous opportunity for IT professionals to work closely with their CFO to help guide the IT department from a financial viewpoint as well as a technological one.