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Simplifying Numbers: Frederic Neus on Unveiling the Power of Financials for Strategic Growth

Simplifying Numbers: Frederic Neus on Unveiling the Power of Financials for Strategic Growth
Simplifying Numbers: Frederic Neus on Unveiling the Power of Financials for Strategic Growth

“A great CFO not only masters the technical aspects but also leads with a commercial mindset and a people-oriented approach. These two factors truly differentiate between good and great CFOs ... Without a business or people-oriented approach, engaging others becomes challenging, ultimately affecting the company's overall performance.”  Frederic Neus 

Frederic Neus, Founder of JK7 Consulting, is known for simplifying financial management. Many professionals, even those with business backgrounds, need more financial literacy, which leaves entrepreneurs and CEOs guessing the real story behind numbers. For this reason, Frederic advocates for better financial education from an early age and the critical need for entrepreneurs to proactively seek professional financial assistance to navigate complexities and ensure the long-term sustainability of their ventures.

Stephen Matini: As a CFO, what insights have you gained about effectively collaborating with other functions within an organization?

Frederic Neus: It's crucial to have the ability to connect with people and genuinely take interest in their work. As a finance professional, we're often perceived as the serious number crunchers. 

However, if you don't engage with others and show interest in their roles, you won't achieve much. The key is to foster mutual understanding by sharing information beyond just numbers. This approach ultimately fosters growth within the company.

SM: When we met, you mentioned being very people-oriented and having a keen commercial understanding of business. Would you say these qualities have enhanced your communication with other functions?

FN: Absolutely. There's a distinction between a good CFO and a great one. A good CFO is highly technical, adept with numbers, and has a solid grasp of business sense and technicalities.

A great CFO not only masters the technical aspects but also leads with a commercial mindset and a people-oriented approach. These two factors truly differentiate between good and great CFOs.

Personally, my emphasis on people has consistently boosted company performance by fostering a positive work environment. Collaboration with other departments, as you mentioned earlier, is key. Without a business or people-oriented approach, engaging others becomes challenging, ultimately affecting the company's overall performance.

Moreover, being people-oriented contributes to better employee retention across the entire company, not just within the financial department.

SM: When you work in a company where cross-functional synergy doesn't happen, what would you say could be a first step that anyone could take to move more in that direction?

FN: I don't think there's a recipe for that. To me, it starts with the strategy. 

You need a great CEO who clearly defines the strategic goals, and ensures there is a cascade of these goals between the different functions of the company, without forgetting the interconnection between these pillars. All depend on each other for sure.

It all starts with the strategy. You state the objectives, and this allows you to have this interdependence between the different pillars or functions of the company.

SM: Why do you think people become so tribal with their function and somehow struggle with interconnectedness?

FN: This stems from a lack of alignment from the start. If you don't have a CEO with a vision and the team spirit to connect everybody, you have a big chance of non-success.

If you don't manage as a CEO or as a management team to play as a team, you will create silos in the company, and everybody will sit in their silo doing whatever they think is good for them, which means it is not good for the company.

Some entrepreneurs, the CEOs of the company, do this on purpose. They keep people separate so that they can maintain control over everybody. This ensures that everyone has to go through them, which, to me, shows a lack of confidence in themselves rather than anything else.

SM: I love your expression, "telling a story through the numbers." Is it easier for an outsider or an insider to tell the story through the numbers?

FN: There is no black and white. As an insider, you already know the company because you've had time. Big companies have onboarding where you go through everything. From that perspective, I think it's easier.

As an external consultant, we also have an onboarding process, which is rather technical. The main purpose of our onboarding process is to get a feel, and ask the right questions to understand what's going on in the company in order to provide good value as quickly as possible.

Whether internal or external, you have to understand the company and the business they are in very well to provide the right support and value as a CFO. At the end of the day, it's the same. But if one is easier than the other, I would say that being internal is easier.

However, we are trying to be as effective as an internal CFO by implementing our thorough onboarding process.

SM: How did you choose this slogan, “Making the Invisible Visible” for JK7 Consulting? It's so simple but so great.

FN: We were in a session trying to come up with the right sentence for our vision and mission. We brainstormed different possibilities, and two of us more or less arrived at the same idea.

We help our customers understand what's happening in their company because 95% of the time, they don't know half of what's going on. They don't recognize all the interesting elements in their numbers because they don't know how to access that information. So, our first job is to create the right visibility and understanding of what's going on.

As I mentioned before, if you claim to be a great CFO and the best, then presenting liquidity ratios, assets, and such, your customer, who already doesn't understand their numbers, will understand even less. If you don't speak their language, you're going to lose them even more. 

So we create visibility for the past, and then we create another set of visibility for the future, a more strategic one. In this scenario, 1, 2, 3, this is what is going to happen with your company if you do that. From a numbers perspective, this is what will happen. This is a valuable approach because it allows CEOs to start realizing the impact they can make by implementing certain changes in the company.

The first consequence of that is an intangible element, which is peace of mind. I will never stop emphasizing that the peace of mind of the entrepreneur, the boss of the company, is priceless and cannot be overlooked.

SM: Many people with business backgrounds struggle with understanding numbers. Why do you think that is?

FN: Finance is complex. It's a difficult subject. The economy is complex, and tax regulations are different everywhere. Even tax experts sometimes don't fully understand them. Then there's financial jargon. If you go to a big company's financial presentation and you’re not a finance person, you might understand only 20% of it because many of the terms they use don’t exist in any dictionary.

This is why I always emphasize the importance of financial education to my kids. Schools don't teach finance, whether it’s personal finance or how to manage your money properly. Nobody talks about it at school. 

As you mentioned, in business, there is a general lack of financial background. The basics of finance for entrepreneurs are often missing. I can tell you that many CEOs of small entities and even big companies are not at ease with financials either. This is also true in large companies.

Another issue is that many people don't realize the importance of finance. They don't understand that the numbers are there and that we need to do something with them. Until someone explains it properly in their language, they won’t realize its significance.

SM: If you're with a leadership team that has little understanding of numbers and they have a financial statement full of figures, where do you focus their attention?

FN: We always try to demystify the financials because as the CFO or financial team, our job is to absorb the complexity of the numbers and tell a story that the person in front of us, whoever they are, will understand from their own perspective.

It's not black and white because it can vary from one company to another depending on the industry. However, we usually focus on five or six key elements. 

Revenue is always important, though not the most important. Gross margin is crucial. For example, if you're selling goods, you have your revenue (what the customer pays) and the cost of goods (what you pay your supplier). The difference is the gross margin, which shows what the business costs you.

We also look at gross margin as a percentage of revenue. Then there's net profit, which is important because between gross margin and net profit, there are many factors like remuneration and other costs.

Cash is vital, especially in SMEs, so we track cash closely. Lastly, working capital is important because it’s a balance sheet element that tracks the day-to-day operations of the company.

SM: In any story, a crucial element is the conflict. In the story of an entrepreneur, based on numbers, who would you say is usually the villain?

FN: We try to avoid labeling anyone as the villain. If the numbers are good, there isn't a villain. If the numbers are bad, the villain can change depending on the situation.

We always aim to share the story as positively as possible because, as financial professionals, we're often perceived as the bad guys since we're pointing out problems. We need to approach it positively and explain the situation while offering solutions. 

We ask if they agree with the solution and what elements they can bring to the table to help us find more solutions. Essentially, you need to position yourself as a coach.

SM: As an entrepreneur, what signs should I look for to understand that I need someone like Frederic to come in and provide professional financial management assistance?

FN: Regardless of your company's size, you need financial assistance from the start. 

It seems we're at a turning point where more people are becoming entrepreneurs rather than employees. SMEs now need to last longer than a human generation. We must build companies to endure.

Bankruptcy rates are alarming, with a continuous increase year after year. Even during Covid, when bankruptcies were temporarily halted, there was a lower peak. This is a clear indication of the need for change. Our vision is to contribute to this change by providing clarity and creating strategic visibility for entrepreneurs to foster sustainable growth and peace of mind. 

Generally, there are two to three types of companies. Firstly, those already in trouble, akin to seeking medical help when already very ill. Secondly, those showing early signs of trouble and need to address them before it worsens. And then the third scenario involves the company that is growing, the one that's booming. They start to question whether they're heading in the right direction. 

Most of the time, we encounter these three scenarios, but I must emphasize that the first one is becoming more common. The question they often have is simple: "I have profit, but no cash. What's going on? I don't see my family; I'm working tirelessly and going nowhere. It's June, and I still don't have last year's numbers. I want to invest, but can I? I'd like to hire people, but can I afford it? I'm juggling everything, from invoicing to meeting clients." This is a situation where people are in a complete mess, to put it mildly.

Then there's rapid growth, a massive expansion, where you lose control. This is when you realize you need someone with the right knowledge to back you up and implement strategies effectively. You enter into complex financial transactions, like considering raising capital through loans or bringing on a new owner through mergers. These situations indicate the need for support. Sometimes, you have numbers but aren't sure if they're accurate, a common occurrence.

You may also face significant debts and struggle with managing them, prompting a focus on cash flow. You'll wonder where your cash flow is headed and what's going to happen. If your costs are spiraling out of control and you're uncertain about negotiations with suppliers, it's time to reassess.

Business valuation is another important aspect. People often focus solely on current profits, but it's crucial to recognize your company's value. The more organized and self-sufficient your company becomes, the more its value increases.

SM: Based on everything we've discussed, what's one thing you'd like our readers to focus on?

FN: The crucial point is that you cannot go at it solo; it's just not feasible. You're the pilot steering the company, but like any plane, there's a co-pilot. You require someone to push you, to back you up, someone who brings valuable experience and serves as a daily challenger.

Most often, finance is the area that seems to slip out of control. Sure, I have my accountant, who does commendable work on an outsourced basis, I must admit. However, what we offer to businesses transcends mere accounting. We provide genuine strategic guidance for our clients’ day-to-day operations, facilitating their growth and offering them peace of mind. 

So, the bottom line is, individuals can't handle it all alone; they need constant challenges and fresh perspectives to foster that growth mindset and attain peace of mind.

SM: You assist them in crafting their story.

Frederic Neus: Absolutely. Bringing clarity to their day-to-day operations and their overall strategy, among other things. It's not necessarily straightforward, especially if you aim to do it thoroughly and pinpoint the exact pain points. Yet, telling their story effectively is pivotal.

Currently, many receive financial statements annually from their external accountants. While we provide that service, we do it monthly because consistency is key; it ensures the numbers stay fresh in their minds. This recurring process is crucial.

We guide them to set future-oriented goals rather than dwelling on the past. During our monthly sessions with clients, we allocate about fifteen minutes to reviewing the past and roughly an hour and a half to discussing the future because that's where the focus should lie. It's all about finding solutions and moving forward.

SM: It's all about having someone with experience to support you, and I love the fact that your approach is positive, focused on simplifying, and looking forward. Thank you, Frederick, for everything you taught me today.

FN: You’re welcome. Thank you.

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How do you unveil the story through your company's financials to make strategic decisions? Share your experience!

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