Effective Financial Management

The subject of Effective Financial Management (EFM) seems to be a perennial favorite.  Welcome to our inaugural blog on the subject.

EFM has been a favored research topic for educators and consultants alike.  The subject while likely around since shortly after the creation of double entry bookkeeping which seems to be around 1211 in Florence Italy, really came into focus in the mid 1980’s as companies were stretching their resources (and those of many of the manager-owners) to accomplish leveraged buy-out transactions.  Up until then, keeping score was the role of a few people in the organization whose offices did not have great views.  However, once people started putting their own money into the game, the desire to know where you stand began to build.  Further, the basic need for “safety” helped to move the concept of internal control out of the “nuisance column” and into the – “this is a good idea- even if it creates a bit more work column”…. ERP advances and the desire to cut cost lead to EFM’s focus initially being placed on transactional efficiency.  Shared services, and outsourcing created the opportunity to create both economy of scale- and economy of intellect (just how lucky were you to have the best accounts payable supervisor in each of your 29 locations that paid bills….?) by co-locating people doing the same tasks.

The ENRON era related failures created additional control requirements mostly on the reporting side of the business with the apparent goal of creating an environment that financial leaders would be much better prepared to describe exactly how the horse left the barn when it was decided to keep the barn doors open to avoid the costs of running the fans….

Yet these might not have been all that potent since we are still at a loss in coming to grips with just exactly happened on Wall Street in our latest series of financial challenges- and why “whatever it was” wasn’t reported sooner and more clearly.  Most of us are waiting with baited breath to understand the full scope of new government regulation that will help with these challenges in the future.

And the debate rages, blame is laid and elixirs abound.  Yet, there are still many different definitions- and degrees of rigor applied to the answer of the question of: ”just what is Effective Financial Management”.  The debate is still a bit uncomfortable because some of the outcomes might not be “doable” for many organizations because many are still debating just “what is the role of finance” and if you can’t get your status in the organization settled- it might be tough to acquire or develop the resources to create EFM.

Having been on the EFM quest for 30+ years, we know there are a lot of good people with good ideas- some basic- and others game changing about how to create a business environment that enables more Effective Financial Management.  With that as background, we launch this Effective Financial Management Discussion Forum.

We want to run this as a true discussion forum with rich and thought provoking conversation emerging.  Since we are all at the same time, operators and investors, it is in our best interest for companies to improve the effectiveness of their financial management.

To put the ball in play- we ask a few simple questions: To create a more Effective Financial Management environment or capability for your organization what would you have to:

  • Start doing
  • Stop doing
  • Continue doing with more intensity?

What has been in your way of accomplishing this?

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