The TriFinance study 2009

For the third consecutive year, Vlerick Leuven Gent Management School has collaborated with TriFinance to survey 171 Belgian CFOs from companies both quoted (35%) and not quoted (65%) on the stock exchange, in all sectors. The study − “Finance function of the future” − which has been conducted annually since 2007, clearly traces how the financial function is evolving within an organisation. The CFOs are asked how they experience their function, the financial division in their company, and their relationship with other stakeholders. For this 2009 edition of the study, emphasis was placed on finding out to what extent, and in what way, the crisis is impacting the corporate financial function.

The crisis has completely changed the CFO’s challenges

CFOs today are particularly concerned about economic growth, consumer demand and access to financial resources. In large organisations, the cost of financing (11%) is also causing concern, while those in SMEs lie awake from the added worry about over-regulation (11%). The cost of, and access to, funding are especially a problem for companies with low liquidity, and it’s these companies in particular that are worried about over-regulation.

According to the CFO, the challenges for the future are clear: the management of working capital, data systems and expenses. In SMEs, attention is also being paid to internal control and risk management, while large companies see another large challenge in the creation of value.

The TriFinance study indicates that, in not even three years’ time, the CFO’s challenges have shifted significantly. In 2007, a CFO’s primary concern was still the reliability of information, whereas today this issue barely makes a blip on the radar screen (it’s a concern for 4% of the CFOs in SMEs and 1% of the CFOs in large organisations). Even the creation of value has dropped in priority, and the CFOs confirm that the balance between risk and return has changed dramatically since the outbreak of the crisis. Finding financial resources, which was not at all a challenge in 2007, has become an extremely important challenge in the current economic climate.

The CFO is even more prominent now

Today, despite the expectations of the CFOs in 2007, the finance division devotes nearly 45% of its time to ‘transactional activities’, such as general ledger and accounts payable & receivable. This is particularly the case in large companies (45%), while in SMEs (37%) more time is spent on risk management, internal control and financial management tasks.

The CFO himself is especially active in supporting decisions (performance management, EBIT analysis) and today, as a consequence of the current economic crisis, he devotes more attention to tasks concerning ‘risk & control’ (11.4% in 2007 vs. 14.5% in 2009). CFOs expect these current trends to continue: 4 out of 5 CFOs believe that they will spend even more time on ‘risk & control’ in the coming 3 - 5 years, and 70% anticipate spending more time on supporting decisions.

The relation between banks and the CFO has grown more intense

The previous editions of the TriFinance study revealed that the relationship between the CFO and other CXOs still left a lot of room for improvement. The 2009 edition shows that this relationship has become a lot more intense as a result of the crisis. Indeed, in times of crisis, closer internal collaboration is more than appropriate. In particular, the contact with the CEO (almost 60%) and the COO (almost 55%) has grown stronger. Nearly 7 out of 10 CFOs from large companies report having a closer interaction with their CEO, which indicates that the CFO of a large organisation performs a more strategic and decisive role in a crisis period. This is clearly less the case in SMEs, where 4 out of 10 CFOs work more intensely with their CEO today than they did before the current crisis.

The bond between the CFO and external parties has also become tighter under the influence of the crisis. This is especially the case for the interaction with auditors, shareholders and banks, but not for the collaboration with consultants. 6 in 10 CFOs from large companies say that they have greatly strengthened ties with the banks, while this is true for not quite half of the CFOs from SMEs. It’s also noteworthy that the relation between CFOs and banks has become stronger in organisations that are not part of a group (about 75%) and in organisations that have their decision centre in Belgium (65%).

The importance of a good, trusting, long-term relationship with the banks must not − certainly these days − be underestimated: alternative financing sources are drying up, and furthermore banks are asking for a detailed update of the financial situation more and more frequently. Over time, this is leading to a further professionalisation of the financial function.

Even today, mergers and acquisitions remain attractive to CFOs

The CFOs state clearly that the crisis has accelerated the working capital cycle and strengthened the impact of the CFO’s recommendations. In addition, the importance of forecasting has increased, and reporting now needs to be done more frequently and in greater detail.

CFOs today also pay a lot of attention to cost-savings. But the TriFinance study indicates that they are using a short-term(quick-fix?) strategy in this area: savings are being made especially on travelling expenses and marketing, and there is a hold on recruitment. So, in this respect, the crisis has not prompted more long-term measures, but linear cost-savings instead. The positive side is that, for the moment, few companies are seeking refuge in savings on Research & Development.

Today, no more than 17.4% of the CFOs declare that all investments will be carried out as planned. On the contrary, 3 out of 4 CFOs foresee postponing or cancelling some investments, and 1 in 20 CFOs even foresee postponing or cancelling all investments.

In spite of the crisis, half of the CFOs (48%) say they are still on the lookout for mergers and acquisitions, but at the same time they foresee even stronger financing conditions in the future. Along with the sourcing of funding, which has now become a real priority, CFOs are constantly presenting ‘cash’, ‘costs’ and ‘risk’ as the greatest challenges. The results of the study indicate that today’s CFOs regard these challenges as more pressing than value creation and reliability of financial information.

About TriFinance

TriFinance is a provider of pragmatic advice and service, active in finance and control. The company was founded in Belgium in 2001 and is run by CEOs, CFOs and experts from a variety of top organisations. Since its establishment, TriFinance has grown to be a company of over 400 professionals, who operate from 6 offices in Belgium (Brussels, Antwerp and Ghent), The Netherlands (Amsterdam and Rotterdam) and Germany (Düsseldorf). TriFinance gives advice, leads projects, offers temporary support, deploys project consultants or interim managers, and recruits finance professionals and managers. Integrated, as necessary, and always tailored to the client’s situation.

Facts & Figures

• Founded in 2001
• First office established in Brussels in 2002
• As of 2009: 6 offices in Brussels, Antwerp, Ghent, Amsterdam, Rotterdam and Düsseldorf
• 400 employees
• Turnover for Belgium (2008): 30.4 million euro