Friday, November 28, 2014

Part 2, Manufacturing Perspective on Asset Management with Catherine Dacules

In part 1, Catherine Dacules told us about her path to becoming a CFO and shared her experiences on how Asset Managers can help CFOs in the manufacturing sector.

In Part 2,  Catherine shares how the CFO role has changed and her next objectives.

Catherine Dacules, CFO
How has the role of CFO changed over the years?  The length of tenure becomes shorter as CFOs move from permanent postings to interim assignments. This is a predictable phenomenon given the availability of sophisticated ERP systems and flexible, cross-functional IT platforms.  A good CFO has its mind focused on a short turnaround period.  You can’t possibly be going in and out of the ICU with the same diagnosis, can you?  A good CFO bridges the gap to enable the company to proceed to the next performing level.  I look at prospective employers as project assignments – there’s an inception and mutually-set goals culminating upon reaching the desired results.  It’s not an all-seasons engagement for me.  That’s why I go for client companies who really need help.  It could be in any aspect of their financial management, as long as the company is open to the idea of a properly executed turnaround, close to 50% of my job is already considered done.  Based on my experience, the company who admitted to needing real help, benefited the most in the shortest possible time with the turnaround procedures that I instituted for their financial management system.

How do you see it changing in the future?  I seriously believe that the CFO status is pivotal for any finance professional like me.  It is equated to the collective trust that one has gathered from past employers – whether they get to realize it on time or not. 

Second to a bailout, having a good CFO is the next best or worst thing that could happen to you as an owner.  We can paint the picture that you want to see hanging on your wall. Or, you can’t paint the picture as it subject exists. You either lose the company (including the CFO) and pocket a handsome profit or keep it (including the CFO) with just enough to get by.

So it’s no surprise that most CFOs fall out of the corporate finance wagon to build their own.  With a good grasp of their numbers, most finance professionals team with maverick sales & marketing people to transform their visions into reality.  Nowadays there is a current market glut for full-time CFOs, especially in the manufacturing industry.  From the corporate finance industry comes the next breed of CEOs – who knows their costs under different scenarios and are very IT-conscious.

Apart from your current involvement with Kratos Consulting firm based in Calgary, what other activities keep you busy career-wise? Well, as I always say, at some point one learns the trick of the trade.  I’m hinting at driving a company from the top by becoming its CEO. I think that is the natural progression from the CFO status. Unleashing my entrepreneurial spirit was by far one of the most challenging if not the riskiest undertaking I have taken so far.  But it was timed properly when I came across a product I believe would truly sell to a larger market across many countries. So when I had the chance to make a go for it, I did with utmost enthusiasm! 

Typical apprehensions were there; however, I had a reasonable level of confidence that I’m equipped to read market analytics and its financial impact on my undertaking.  My company Quartz-R-Us is involved in a projected 100,000 liters/day sustainable spring water distribution with its initial product offering addresses aging related health issues namely Osteoporosis, Arthritis, Alzheimer’s Disease, Parkinson’s Disease, Atherosclerosis, Diabetes and to some degree Psoriasis and Ehler-Danlos Syndrome (EDS).  

A large part of our Twitter followers are athletes and sports nutritionists, so that is worth looking into as well.  In 2015, we plan to exhibit at an A4M event launching QuartzWater as the first anti-aging bottled water in the world.  Currently, we have a serious market base in the US mainland and these are from the healthcare, sports and wellness industries.

Friday, November 21, 2014

Manufacturing Perspective on Asset Management with Catherine Dacules

Catherine Dacules is an experienced CFO  Because of her experience in different vertical markets, I sought out her perspective on Asset Management in the areas of manufacturing.      

Part 1 of 2

Can you tell us something about your path to becoming a CFO?
I have simply assumed that I was a CFO in training since I was 19.  It all started with an assumption that if I evaluate each case study from an owner’s perspective, then I will see the whole picture and better learn everything there is to learn in a short time.  It was my dedication to the management accounting practice that primed me to the CFO path. Coincidentally, that’s the branch of accounting that really kept my interest going for years on end. I have had my share of interesting and risky assignments. Fraud detection, management, and prevention were common to all of them.  

Catherine Dacules, CPA, CFO 

I would say, having a good pulse and intuition about which part of the operations went awry jumpstarts my assignment in a very positive way. It shortens turnaround time.

Was it something that you have always aspired to become? Not really. The dream that I had nurtured up to the point, where I decided to take up accountancy instead, was to become a child psychiatrist.  Because of this previous path, I approached the accountancy degree with a high level of objectivity, looking at it as more of a technical undertaking than anything else. In so doing, I kept my focus.

In what industries have you worked? The bulk of my experience is credited to my exposure in manufacturing companies with various industries, from garments to cosmetics, oil & gas, shipbuilding, logistics, and construction.  My loyalty lies with my company’s growth and not to any single industry.

Have you worked with life-cycle asset managers?  Typically this function is assumed by project managers. In that respect I have worked with a lot of them in various projects in various industries.

Can you share any of your experiences? During pricing decision-making or review, lifecycle cost considerations are hugely discussed and deliberated typically during brainstorming sessions. It was more of a creative process than a structured, scientifically proven method. Before the advent of ERP systems, getting anywhere near a proper lifecycle product cost review would have been next to impossible. And while a sophisticated way of monitoring costs throughout the manufacturing process is offered by major ERP systems, it’s a different scenario once the product is out in the market especially in the FMCG industry like food and beverage.  In contrast, lifecycle product monitoring is almost mandatory if not the norm for most big ticket project executions in the construction and oil and gas industries. On hindsight, it’s no accident that SAP was first created to serve the energy industry.  

Ideas on how our work affects the balance sheet. The balance sheet just like any other financial statement is only a snapshot, a glimpse in time, an image that reflects a single day out of 365 days of collective management success and failures. And while the age-old belief of keeping costs to a minimum gives most top management a certain level of control and assurance, the same belief will hinder the organic growth of the enterprise. Fear of costs is tantamount to fearing growth. Cost and growth are inseparable in a healthy and growing business. Since lifecycle asset management is more of a risk management approach, a large part of that activity – specifically R&D and aftermarket service or maintenance, is not capitalized and thus charged to period costs.

In manufacturing, both research and development and aftermarket costs fail to satisfy the criteria of specific product assignability within the period being referred to and reported on in the balance sheet. These costs are not inventoriable because they carry no identified real benefits beyond the current reporting period and they are not intrinsic to the product during the manufacturing process (the actual physical transformation and realization of the finished product) like materials, overhead and labor costs.

No specific balance sheet account will indicate with close accuracy whether an instituted lifecycle asset management approach has been working effectively or not.  For example, a dramatic increase in post-sales service and maintenance does not necessarily mean that the product is faulty (translated to poor R&D).  It may only be an effect of a seasonal increase in demand for the functions of that product, thus its breakdown may have resulted to overutilization of performance capacity.  Sometimes an increase in maintenance was a result of a fortuitous event. 

It’s only during massive recalls (in the automotive and pharmaceuticals industry, respectively) where significant losses will be booked and reflected in the balance sheet.  While the common perception in this instance puts the blame on faulty R&D,  poor procurement and supply chain management could equally be as guilty if not more. 
Ideally, an effective product lifecycle management is best measured by market surveys in the short term and translated to actual dollar terms through the increase or decrease of the enterprise’ share market prices over a considerable period of time. Or it could all happen overnight. And that’s the tricky part.

Read Part 2 or click here,