To young peoples contemplating to choose finance as a profession

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Explaining finance to … my grandchildren.
(To young peoples contemplating to choose finance as a profession)
You have to keep in mind that Finance is one of the functions in a company. In short, its
prime roles are (i) to ensure that the company is correctly funded (ii) that the finance records
are effectively kept and are compliant (iii) to support the management in making decisions.
The other functions cover Research and development (developing product and services and
technologies), Marketing and sales (selling those products), production (manufacturing the
products or delivering the services), Logistic (insuring the deliveries of products), human
resources, IT, … as well as general management.
In order to achieve its objective finance department needs:
 To tend to the “ideal” finance department,
 To work in partnership with the other functions in order to implement the strategy and
deliver results,
 To adapt (customize) its methods and tools in order to fit with the business structure.
Similar things can be said for every functions.
The business structure is driven by the company offerings. It has large influence on the
way finance is organized.
 Products or services and pricing types,
 Revenue types (revenue recognition)
 Market stage and type of products/services
 Company geographic reach,
 Vertical scope,
 Customer types.
It impacts the amount of funding required,
It impacts the way revenues, costs, investments, inventories and cash flow are followed.
It impacts the way actuals and forecasts are organized, analysed and reported.
It has direct consequences on the data and data structures to be managed.
“Ideal finance department”. What does it mean? Where and how can we learn it?
There is no simple answer to those questions. As already mentioned, the business structures
impact on way finance shall operate. Let say that finance covers a number of functions for
which technical knowledge (theory and tools) is necessary but not sufficient. Know How
(experience), Processes, Tools functionalities, Quality and Accountability are other
competences to acquire.
Each of these functions may be fulfilled by one or several specialists (very large
organisations) or one/a group of individuals may cover several functions. Not everyone will
be at these top qualifications but overall, in the department those will exist and be effectively
activated i.e. Have high technical knowledge associated with advance experience in

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using best practices and advance tools. Finally, delivering high quality output and
developing a high level of accountability.
Some of those qualifications are depending on the company size or industry i.e. “Advanced”
may not mean the same in large retail group than in medium industrial BtoB company.
Schools, universities and complementary formal training will focus on the theoretical training
column. Some of the others column may also come through that.
The other competences shall be gain in practicing. It requires moving between several
positions in finance for those wanting to achieve top level. Other people may want to
specialised in some part of finance.
Achieving top level then means both long theoretical studies but also long practice.
As you can see finance can’t be summarised, in our today world to accounting and treasury.
It covers many domains and associated competences.
What is the difference between the two type of accounting?
The first correspond to the company legal obligations and is driven by legislation and
regulations. Basically, it is what permits to establish Balance Sheet and Profit & Loss and fill
tax returns. Still, except for small/simple companies this is not enough.
The second will provide details that permit to manage the company. This one is more or less
detailed depending on the size and complexity of the company.
Functions (alpha order)
Technical
knowledge
(theory and tools)
Know How
(experience)
Processes
Tools
functionalities
Out put quality
(Level of)
Accountability
Accounting :
* Financial/general accounting High Advanced Best practices Advanced High High
* Cost/management accounting High Advanced Best practices Advanced High High
Analysis and Synthesis High Advanced Best practices Advanced High High
Audit High Advanced Best practices Advanced High High
Competitive and business intelligence:
* Strategy and general business acumen High Advanced Best practices n/a High High
* Specific industry key success factors n/a Advanced Best practices n/a High High
* Specific industry playground n/a Advanced Best practices n/a High High
Communication :
* Written prez (reporting and others) High Advanced Best practices Advanced High High
* Live prez (reporting and others) High Advanced Best practices Advanced High High
Costing / Pricing High Advanced Best practices Advanced High High
Data management High Advanced Best practices Advanced High High
Planning and forecasting High Advanced Best practices Advanced High High
Soft skills High Advanced Best practices n/a High High
Taxes High Advanced Best practices n/a High High
Treasury :
* cash management High Advanced Best practices Advanced High High
* Funding High Advanced Best practices Advanced High High

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Soft skills: What is it?
These are behavioural competencies and they are not specific to finance.
Communication is one of them but it also includes decision making or problem-solving
capabilities; capacity to manage time, stress and emotions; motivation; creativity; curiosity;
empathy; confidence …
Working with people will challenge those competences in many ways. Properly developed
and used they permit to significantly improve the performance of any professional and
increase its influence. They are as important as hard skills in particular when accessing to
management position.
These might come naturally to some people while others may face real difficulties in those
domains. Communicating efficiently to small or large group of people, taking and assuming
heavy decisions, facing stressful situations, being able “to look out of the box”, managing and
motivating people, facing time constraints or strict timetable, … there are many
circumstances that will challenge individuals. In most case, training is an important
complement to improve natural capabilities.
Analysis and synthesis are not soft skills?
People may be more or less naturally good at analysis and synthesis. They may be
exercising themselves to improve on their natural capabilities. As such you can put them in
soft skills.
Still, in finance they are “hard” competences to build in those domains. Account or bank
reconciliations are accounting regular activities that need structured approached. Same as
far comparing evolutions over periods or profitability analysis or preparing a report.
Learning accounting is not just about learning how to book correctly transactions. It involves
learning how to explain account balances, how to reconciliate accounts with statements, how
to assess accuracy of transactions, how to produce synthesis from the mass of transactions
etc.
Then finance shall mainly focus on reaching an excellent status?
No, definitively not. There is even a term to describe such behaviour (it is not specific to
finance): Silo organisation. In such organisation, each department focus on its own and
miss their true purpose, which is to implement the company strategy and ensure the
company (and its different functions) delivers results. This can only be achieved when
all function/departments work in close cooperation.
Achieving excellence is only a mean to achieve the greater purpose of the company. A true
reciprocal partnership is essential to achieve that. Each department is both a “supplier” to
and a “customer” of the other departments in order to implement strategy and deliver results.
For finance, it means organizing the flow of data and information end to end, building a
common/transversal accountability across functions i.e. delivering against expectations. In
simplistic way, what is finance expecting from the other departments (timing/frequency, level
of details, accuracy/quality, format) and what are the other departments expecting from
finance (timing/frequency, level of details, accuracy/quality, format).

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Examples:
- Sales and Sales administration expects to receive revenues analysis, revenue
forecasts, product or customer profitability, customer credit validation et customer
aging, ….
- Finance expects to receive market and market trend information, prospects and
customer information, order reporting and validation, proposal qualifications, ….
- Departments expect to have their projects and activities financed,
- Finance expects departments to take necessary actions to ensure proper treasury
planning and secure usage of funds…
What are the characteristics to consider while adapting (customizing) methods and
tools?
 Products or services and pricing types,
The company offerings may be standardized products/services or
specific/personalized products and services. Those will drive different types of pricing:
- Catalogue with no negotiation but with promotion periods,
- Catalogue with discounts based on negotiations or volumes,
- Quote for specific products or services.
 Revenue types (revenue recognition)
The time from Proposal to order to revenues is a key structuring element. One off
versus recurrent is another element. Furthermore, certain activities are mainly project
or seasonal driven.
 Market stage and type of products/services:
The market stage is another structuring element as well as the type of product ore
services.
Revenue type (revenue recognition type)
Time from order to revenues (production+delivery+acceptance)
One OFF (1) Recurrent (2) Project (3) Seasonal (4)
A week or less O 1 R 1 P 1 S 1
2-4weeks O 2 R 2 P 2 S 2
1to 3months O 3 R 3 P 3 S 3
4to 6months O 4 R 4 P 4 S 4
More than 6months O 5 R 5 P 5 S 5
(1) e.g. equipment sale, installation…
(2) e.g. rental, maintenance, …. Whereas initial activation of revenues are more or less delayed then it is monthly for contract duration
(3) e.g. Building, special projects,…. Whereas revenue recognition is dependant on project phasing and advancement
(4) Could be one season (e.g. Christmas), or more (e.g. Cloths, vacations,…)
Each combination have its own characteristics. They
need to be managed as such. A business is
potentially combining several types in various
proportions.
It is important that data and methods are adapted to the visibility and predictability of the business.
Marketstage andtype of
product/services
New product/innovation
New product
version
Mature products
Obsolescence
developingproducts
Developingmarkets Dni1 Dnv1 DM1 DO1
Growingmarkets Dni2 Dnv2 DM2 DO2
Mature markets Dni3 Dnv3 DM3 DO3
Decliningmarkets Dni4 Dnv4 DM4 DO4
The strategy and its concretisation through planning
and execution have characteristics thatneed to be
understood, followed, forecasted logically.

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 Company geographic reach,
Thanks to globalisation a lot of companies operates in a multinational level, yet the type
of market is the structuring element.
 Vertical scope,
Fully vertically integrated companies are not the majority. Many Business models
combine internal functions with either partnership, subcontracted or outsourced
components.
 Customer types.
The nature of the customers (simple purchasers or customers i.e. repetitive purchasers),
their numbers (from few to millions) are the final structuring element. The following
generally describes the type of business:
- B to C i.e. Direct sales from company to final consumers,
- B to B i.e. Business to business
- B to B to C indirect sales through distributors
- B to B to B indirect sales to business.
Understanding the final customers is still a requisite for indirect sales.
Then it is on the way sources of revenues are looked at?
Yes, but not only. For example, the business model choices in terms of vertical integration
have material impacts on the way to look at costs, investments and inventories.
The cost of goods sold will tend to mirror the revenues. Whereas the other costs will depend
on the organisation structure put in place.
Furthermore, the end goal is not only to access the level of activity. It largely involves
understanding how profitability is build up and evolve. Profitability by product/product line or
by customer/customer type, require that costs are organised in way that will facilitate the
calculation of such Profit and Loss analysis.
Finally, costs and investments for “business as usual” may need to be isolated from costs
and investments dedicated to key strategic projects.
Type ofmarket One country Fewcountries One continent Fewcontinents
Local/multi-local
International (import/export) n/a
Globalizationphase n/a n/a
Global n/a n/a n/a
Companygeographicreach
Dataorganisation,FX,intercompanypricing,etcwill
be dependingonthe strategicpositioning
Type of business
Vertical scope
Activities
Internal Partnership
Subcontracted /
outsourced
R&D
Production
Assembly
Logistic/distribution
Marketing and sales Bto C orBto B
From full vertical integration through fabless to pure retail, there are many
type of business and each have its characteristics
Bto Bto BorBto Bto C
Fabless approach

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All those elements are to be consider when building the company finance organisation. It
shall result in a customized set up that fit with the company business structure.
But there should be optimum methods and associated tools?
Process Integration and automation from operational systems to accounting and
reporting systems are key in order to insure both efficiency and quality. It may be
customised interfaces or an ERP type software but the general logic is the same:
 Commercial management to billing to revenues accounting (instead of rekeying, the
invoices will be produced from the customer orders and the accounting entries will be
generated automatically)
 Purchase management to external costs and investments accounting (the matching
of supplier invoices with the purchase order will generates the accounting entries)
 HR and payroll to accounting (the payroll will generate automatically the accounting
entries)
 Production systems to inventories,
 Asset management.
It involves communication and cooperation between the different departments and between
the different systems. It implies that the data referential is consistent over the different
systems or modules.
Overall, the set up put in place has multiple purposes to fulfil.
 Some are driven by regulation (those are generally the first set of priorities)
o Company official accounts and reporting,
o Different tax returns
 But it is far to be enough and other purposes are driven by the need to manage the
company
o Understand how the company evolve,
o Understand how profitability is building up,
o Understand financing and cash situation (resilience)
o Understand departments and managers performances,
 In all communication is key
o Written communication (reports)
o Oral communication (explaining reports, discussing key items, etc)
Whereas regulations will define to some detailed level the rules and forms to be used
(GAAP, IFRS, IAS, tax rules and other regulation requiring compliance i.e. the technical
knowledge), management needs are essentially covered through customisation. Finance
professionals have then an important role in defining the internal ways of working, the
associated practices and reporting.
 Reporting by departments (revenues, costs, investments, inventories, customer debts
aging, etc ...)
 Reporting by product or product lines (revenues, costs, margins)
 Reporting by business geographic areas (revenues, costs, margins)

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 Reporting by customer or customer type (revenues, costs, margins, Win/loss
analysis, customer debts aging, …)
 Reporting by projects
 …
Timing and frequency are important characteristics. It can cover:
 Period and periods to date,
 Versus past or prior year periods,
 Versus budget or forecast,
 Period is generally considered as month but it may be weeks or quarters or seasons
depending on company activities.
Those reports shall describe the situation and its evolution and also gives business
explanations. It is to be noted here that some of the principles of statistics applies here in
particular the distinction between descriptive and explicative methods and Simpson paradox.
 Descriptive methods are rarely explicative, they just describe the end results.
 Explicative methods mean more detailed analysis considering the different variables
of a given phenomenon.
 E.g. Revenues have increased by 3% to reach XXXXX € is descriptive. Explicative
would mean analysing the prices and volumes effects, the product mix, the customers
win and loss and other variables potentially applicable.
 Simpson paradox “Simpson’s paradox or Yule-Simpson effect is
a paradox in probability and statistics, in which a trend appears in different groups of
data but disappears or reverses when these groups are combined. It is sometimes
given the descriptive title reversal paradox or amalgamation paradox”. (Extract
from Wikipedia). “Descriptive” reports and even more KPI or Ratios aggregate a lot of
variables and data groups of different size which is when Simpson paradox appears.
Good explicative analysis prevents such an effect but is less easy to produce in
particular if the data flow and granularity are not correctly organized.
How does this reflect as far as forecasting the future? How to build a budget?
Overtime, the notion of budget has evolved in order to adapt to the different business
environments.
Having strong set of actual data, analysis and reports is important but it has become
progressively clear to the finance professionals that it is insufficient. You cannot forecast
accurately the future based on actuals (at least in a very large majority of businesses).
Over the data structures and additional business and competitive intelligence, the methods
and tools used in terms of forecasting will depend on:
 The volume and complexity of data to be managed,
 The widow of visibility generated by the revenue types and key time from to.
One OFF (1) Recurrent (2) Project (3) Seasonal (4)
Visibility/predictability
A week or less O 1 R 1 P 1 S 1
2-4 weeks O 2 R 2 P 2 S 2
1 to 3 months O 3 R 3 P 3 S 3
4 to 6 months O 4 R 4 P 4 S 4
More than 6 months O 5 R 5 P 5 S 5

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The main issue in deciding how to customise a company solution is to choose a standard
forecasting cycle that meet the business cycle. A standard 12 months fix budget is not
necessarily the best method. The choice may be rendered more complex due to mix of
activities.
 Seasonal activities will adopted a season cycle (it may be one season a year or two
or more depending on the activity i.e. 12, 6 or 3 months windows), combine with the
key Time to this could be either fix budget with 12,6 or 3mths windows (S3 to S5)
or rolling forecast for the shorter time to (S1 and S2).
 Projects will have project budgets generally based on the agreed contract/orders
with regular updates. Depending on the project product type these updates can be
either fix budgets aligned with the contractual time table/phase or rolling
forecasts when time table is fluid. Project budget or rolling forecast will be
consolidated in an overall forecast but the key activities will be at the project level.
 Recurrent revenues offer relatively high predictability. Still contract end and potential
renewals associated with price revision, potentially product changes shall be
forecasted. This then will include scenarios that will tend to forecast “what if” we lose
the contract; we win the renewal with what price reduction, etc... Obviously winning
new contracts is also on the table. Thanks to proper follow up of proposal and order
status, that permits to create budgets with strong scenarios in particular if the
cycle is correctly aligned with the key time to (3, 6- or 12-months windows).
 One off (none recurrent) offers less predictability in particular when the time to is
short. This will be domains where monthly or quarterly rolling forecast will better
fit. It will include scenarios concerning prices, customers, products evolutions. Thank
to proper market intelligence the number of scenarios should be limited. Order and
proposal portfolio are important when the time to is relatively long (O3 to O5).
In all situations when the number of customers is limited, the best is direct and regular
account review with sales and potentially customers. The quality of data even if not perfect
will be better than any other methods. Other situations are less favourable, unfortunately.
Market with large number of purchaser or customers, potentially highly innovative and in
grow phase needs marketing inputs. They may come from market studies of which Big data
can be a very valuable source. For market with large number of customers predictive
analytics is also a valuable source. Again, talking to customers is key.
All this imply that forecasting is not necessarily limited to statutory accounts items. In certain
type of business, order forecasting come first and shall not be left as a pure S&M targeting
exercise. Order and revenues forecasting may have different time table and frequency. Cost
of goods sold will follow the revenue time table but other costs may be on a different time
table i.e. when revenue forecasting is done.
When activities include both revenues with high visibility/predictability and revenues with low
visibility/predictability, it is better to have two process running in parallel and consolidated
into one when the longer process is due e.g. Budget with 6 months window for recurrent
revenues plus a monthly rolling forecast for one offs (consolidated every 6 month).
You did not mention ZBB (zero base budget)?
Initially, ZBB was mainly design for costs, investments and inventories.
It is opposed to renewing mechanically budgets from period to periods with only discussion
on a marginal increase (decrease). It ensures that all resources and costs are re-challenged
at each cycle. This is also a key method when company is reorganising, having merger or
acquisition.
It is good practice to have ZBB approach on regular basis even if this is not done
systematically at each forecast cycle.

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For revenues, as long as you are building your revenues forecast on detailed customers /
orders / contracts … you can say you are doing ZBB. Still, real ZBB revenues will be when
you really challenge your revenues such as whether we want to continue this activity, this
contract, this product etc…
In other words, ZBB is when you challenge your sources of revenues or costs not just in
ways to try to make it accurate but in ways where its existence or continuation is questioned.
From my point of view, ZBB is more about how aggressive any process is in ensuring that
company profitability is optimised.
With a fix budget we know how much resources or spending can be engaged, but with
other methods how is it done?
This is a touchy point. It depends on the organisations culture. A budget or a forecast is a
way to define a path in deploying a given strategy and achieving its goals (mainly markets,
activity level and profitability). It describes how resources are allocated in this perspective.
The management should be focused on optimally managing those resources as per the
evolution of the activity and profitability (i.e. not on spending a given budget or forecast).
Obviously when activity is in line with the budget or forecast, there is no specific reason to
deviate materially and it drives to consider the budget or forecast as an authorisation to
spend in many organisations. Still, such a vision of the budget mechanism can be considered
as a human bias.
The priority shall be on (over) achieving the activity and profitability targets. Budget or
forecast methods put in place should be considered as a guide to achieve superior
objectives. Flexibility to adapt in real time shall be allowed in order to adapt to evolution of
the activity and/or profitability.
When the budget (or any type of forecast) is “sacralised” it creates sub-optimal behaviours (i)
when building the budget or forecast (ii) when managing the resources. Example would be
when a department hurry to spend the unspent budget at end of budget window period in
order to claim same or higher resources allocation for the next period. ZBB methods could
minimise such attitude.
Business and competitive intelligence. What role for finance?
Understanding and explaining the activity evolution means analysing a mix of internal and
external data to transform them into information. Whereas internal data require organising
the data and data flow that are generated by the company activity, external data are more
complex.
Externalities are multiform and require a consistent effort from all department. In many
companies there is no structured approach and people are just gathering information and
exchanging it more or less extensively within the company. Finance is not necessarily the
prime “collector” of such information but is a key user.
As such finance needs to play a role in identifying the key element of information that needs
to be collected and which department is the best to collect and analyse them. Marketing and
sales for market, competitors and customer evolution, Engineering/R&D for technology
evolution, etc… and finance for customer financial situation (annual report to collect and

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analyse). Having managers with good business acumen is important, making sure this
competence is enhanced and shared through a proper process is even better.
Gathering, analysing and circulating internally such information is a key effort to structure in
order to improve the company ability to timely understand its environment and its evolution,
as far as finance is concerned it will permit to better explain actuals and forecast.
What are the key data required and how best managed depending on business
structure?
Quantities and prices are two key factors for both actuals and forecasted revenues and
cost of goods sold. Whereas quantity is more or less straight forward, price is more complex.
For standardise products, catalogue version and promotions plus customer/supplier specific
discounts are key to understand whereas for specific or customised products, it will be
reference to contract or order pricing.
The product coding (revenues and COGS) needs to be very specific. It may be the reference
appearing on the invoices or an accounting code that regroup a number of customer/supplier
references. Whatever it is, it needs to be specific enough to correspond to the different
product or product lines but also category of products (simplistically O1 to O5, R1 to R5, P1
to P5, S1 to S5) and to segregate new product/innovation from new product version, to
mature or obsolescent products.
The product coding is then a key data element that will provide essential information for
analysis and forecasting.
The geographic reach is also a key element for certain company. The delivery country is a
key element to analyse in order to understand the evolution. In the most global companies, it
shall not be confused with the operating unit delivering and/or selling. A product sold by one
country may be delivered from a different country to a third country. At opposite, many
companies sell, produce and deliver within the same country (although in large countries
region need to be considered). In between, some companies are involved in import/export
and needs to track at least two country dimensions.
Customers or customer types is the next important element to follow. It may be a direct
customer relation (B to B, B to C) or indirect i.e. through distributors (B to B to C, B to B to B).
Customer relationship will be followed individually when the customer number is low or for
major customers or distributors, it can be by type when the numbers are high.
The same applies to key suppliers in certain business.
Costs and investments will be allocated by responsibilities within the organisation structure.
In very simple/small companies it will only be direct/production versus sells and marketing
versus general and administration. In large organisation, they will be split in order to
understand the cost and investments involved in each service and department of the
company.
All this require a proper data management put in place in order to manage the coding used
within the different operating and financial systems.
Transactions will always be encoded at the lower levels of granularity. For reporting and
analysis purpose, those codes will be embedded into complete code hierarchies. (Simple
examples)

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Those hierarchies can be more or less complex depending on company and industry e.g.
Order/contract is important when a company have few large customers but meaningless for
companies with millions of small customers. Some companies need projects other do not
etc…
A relatively large multinational will have something similar to the following:
This will permit one truth reporting at different level of granularity (using hierarchies) and
largely facilitate analysis. FX information will permit to understand the FX effects. Entity and
delivering to country will permit to understand geographic reach and market stage etc …
When organisation change, new hierarchy is defined and will permit to rerun the actuals
applying the new structure without changing the base transactions.
Isn’t Treasurythe main role for finance?
It is definitively a key role but not the only one! The importance of this role tends to depend
on the company financial strength and resilience. Some companies naturally generate
excess cash whereas others are generating net cash needs. This might be due to company
profitability issues or to market type.
Managing the company cash flow and managing external funding are two different areas that
are at the end complementary but correspond to different activities.
Managing the cash flows is a daily activity. Collecting customer and other debts in due time
and insuring company debts are timely paid are tasks that are strongly linked to accounting
transactional activities. Still, it requires proper forecasting activities and as such a specific set
of information flows.
Collecting customer debts needs good cooperation with sales and sales administration. The
reasons for customer overdue might come from internal source such as billing or delivery
errors or wrong payment terms applied or from customer difficulties or “attitude”. Customer
credit control and collection activities involve communicating with the customer accounting
department to understand the nature of the problems and act on their resolution. In many
cases, involving sales is essential in order to resolve issues.
Transaction code Grouping level 1 Grouping level 2 Grouping level 3
Product code Type of revenue Product group Product line
Section Service Department Division
Account Sub-nature Nature BS or P&L
Lower to higher
Standard chart of accounts Standard account grouping
Entity By region/continents
Entity currency No hierarchy
Departments Services in departments in divisions
Products in product lines
Customers in customer types
Projects ?? hierarchy depend on business
Order/contract No hierarchy
Transaction Fx + potentially pricing currency No hierarchy
Deliverying to country By region/continents
Organized in hierarchies
of 3 or 4 level to
facilitate reporting
Pricing type No hierarchy?
Organized in hierarchies
of 3 or 4 level to
facilitate reporting

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Similarly, suppliers finance departments will be contacting in order to obtain payments.
Coordination with the purchasing departments is then important in order to insure proper
responses.
Finding and managing funding is related but operate at a different level and on different
timing. Relations and negotiations with banks or other financing organisations or with new
shareholders need longer term planning and takes times in order to build sufficient level of
trust.
The less the company needs new funding, the more it will be able to find it. The more the
company needs new funding, the less it will be able to find it (at reasonable terms).
Emergency is a situation to avoid in such activities. It is normally managed by the CFO and
also involve the CEO level.
Are not prices dictated by the market? Why Costing and pricing?
It is far from that simple. Yes, competition influence the price you may demand for a given
product or service. Still, in most case, it is not giving you a price for your offerings that you
can take and apply and even if this is the case a company will need to determine the cost of
each product and service it offers. Competitors offerings are not strictly similar even for
standard products or services.
Costing and pricing are then key activities which needs coordination with the different
department in order (i) to achieve profitability targets (ii) maintain or developpe market
shares. This is not a balance that is easy to obtain. Actual profitability by product can
produce good guidance but is not sufficient. New products or new offers (none standardise
products/services) needs specific assumptions and calculation. It involves considering the
volume evolutions and their impacts on unit costs as well as marketing information about
competition. The decisions taken can have important consequences either on profitability or
on the level of revenues.
In-depth understanding of the company business and industry is necessary in that domain as
in others. At this level let just say that it is not just a simple straight forward calculation.
What is the importance of taxes versus accounting regulation?
Both are highly complementary. Still their purposes are not the same and it may conduct to
some conflicting situations i.e. cases where the accounting regulations will drive for an
accounting treatment that is not similar to the tax treatment. The most typical issues are
difference in timing for when a revenue or cost shall be recognised and charges that are not
recognised by taxman. Finance shall then get organised to produce the company accounts
as per the accounting regulation but also to make the adjustments necessary for the tax
returns.
On a day to day basis, accounting will have to ensure that both regulations are properly
followed in order to achieve compliance in both domains. It involved working with billing,
logistics and purchasing departments in particular to make sure that VAT (or similar) and
duties are correctly applied, documented, declared and paid. Same with human resources in
order to ensure that taxes and social charges are correctly applied, declared and paid.
In multinational companies, intercompany pricing or cost distribution is a very sensitive
aspects from a tax perspective. In some complex deal, tax engineering needs to be prepared
during the deal preparation. The challenge there is to avoid paying taxes twice i.e. on both
side of the transactions. The absence of strong international rules and the differences in tax

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logic between countries make difficult to achieve without help from internal or external
specialists.
Audit is about external auditors, right?
Working with and getting organised to have company external auditors executing their works
efficiently is effectively a key aspect of finance function. At end, you want to have your
company accounts certified and a good report to your shareholders.
Still, in some companies you need to have finance executing its own audits in order to
ensure control and compliance. This is mostly the case for large companies or groups. It may
also be performed in order to improve organisation efficiency.
Conclusion:
Finance is a complex and challenging function covering several types of activities and
competences. The days of the bean counters are long gone. Modern finance has a key role
to play in company management. If you want to embrace it, you need to acquire a wide
variety of knowledge and experiences.