The interim manager was engaged as interim CFO by the managing partner of a company in the steel and plant construction sector in the field of renewable energies based in Germany (200 million turnover, 2 production sites). The company was in a turnaround situation due to market conditions.
For a company of this size, the controlling department was insufficiently developed at the beginning of the mandate. The informative value and duration of the preparation of the monthly and annual financial statements was insufficient. There was no reliable process for preparing monthly rolling forecasts. The situation was also caused by an ERP system that could only be used in a rudimentary way following a system change.
The assignment for the interim CFO was therefore structured in several parts:
- Operative management and strategic reorganization of the central administration
- Project management in the ERP stabilization phase
- Increasing the informative value of monthly / annual financial statements
- Integrated corporate planning with year-end forecast
Weak points in controlling and ERP system identified and remedied
The interim manager first evaluated the existing controlling tools and the implementation status of the new enterprise resource planning system. In doing so, he identified weaknesses in the ERP system, which are briefly described below using examples.
Data warehouse forms new basis for reporting actual values
The ERP system did not allow automatic, time-based value determination for finished and unfinished products (work in progress, WIP). However, the change in profit and loss (P&L) resulting from the WIP valuation is decisive for a reliable determination of the profit for the period. To enable the necessary queries and analyses, the interim CFO extracted, cleansed and adjusted the ERP source data. The data is then delivered to a target memory - the data warehouse. Using suitable business intelligence software (in this case Microsoft Power BI), the ERP data can now be analysed and visualized. In future, the data warehouse will form the basis for reporting the actual values. The WIP evaluation can now be displayed just as reliably as the analysis of project success.
Correct RHB movement is ensured for determining period success
While in accounting before the ERP system change, all material purchases were already allocated to projects as expenses upon receipt, the new ERP system requires a functioning materials management system. In accounting terms, material purchases lead to an increase in the stock of raw materials, consumables and supplies (RMC). Material consumption in production, on the other hand, leads to a reduction in stock or a charge to the income statement. The correct mapping of RHB movements in terms of process and time has become intrinsic to the correct determination of profit for the period. The interim manager therefore placed particular focus on these processes and created effective controls during the preparation of the financial statements.
The weaknesses outlined as examples illustrate that clear process definitions are a prerequisite for increasing the informative value of period-end closing, especially if the desired reduction in processing time is to be achieved. Integrated systems also require the coordinated work and timely input of all departments.
Successful development of month-based integrated corporate planning
Building on the new processes, the interim manager set up month-based integrated corporate planning. With the help of the "Business Planner" software, the profit and loss account, balance sheet and cash flow statement are mapped as a closed system.
Of particular importance was the redesign of the central "project planning" sub-step, which provides the necessary information for all customer orders:
- Production planning as the basis for personnel planning and material requirements planning
- Period-based sales planning as the basis for profit planning
- Customer-based sales planning as the basis for liquidity planning
- Production and sales planning as the basis for WIP planning
Period-end closing and forecasting established as transparent management tools
The sum of the individual measures led to the reliable preparation of monthly and annual financial statements. The period-end closing, supplemented by a monthly updated year-end forecast, has firmly established itself as a management tool in the challenging corporate environment. The reliable, timely and comprehensive reporting on the company's assets, earnings and financial position had a positive impact on the confidence of the various stakeholders.
