CFO Talk: A Story of Financial Transformation with Hiten Keshave
Steve: Welcome to CFO Talk. My name is Steve Rosvold. I am the founder of CFO.University. Today, we have Hiten Keshave with us. Hiten is the CFO at PRP Solutions in Johannesburg, South Africa. He’s gone through a finance transformation at his company that I’m excited to have Hiten share with our Member Scholars. Welcome, Hiten.
Hiten: Thanks, Steve. Thank you for having me on the show. It’s a pleasure.
Steve: Well, we will jump right into the finance transformation that you executed at PRP Solutions. Describe how the finance function at PRP Solutions worked before you arrived.
Hiten: Reporting to our shareholders was only done on the closeout of Management Accounts after the 15th of the month. So this delayed information was old news by the time leaders received it and not very helpful to the decision making process. PRP was always playing a reactive game instead of a proactive game. It was very “old school” .
Steve: How did the company perceive the finance function?
Hiten: The function was looked on as a cost center. The “whole organization” had an old school view of the traditional finance function. They never had a CFO prior to me. I think the company was going through a transformation; changing the mindset in terms of what the finance function should actually be and the value of what the finance function actually brings to the business itself. One of the main reasons for my appointment was that they saw gaps in how the finance function was currently being run.
Steve: That kind of a “back-office” mentality seems pretty common across a lot of companies. Maybe that’s what financial transformation is all about. How do you define financial transformation at PRP?
Hiten: Financial transformation is about automation in a positive way. Automating systems is one thing, but the value you get out of those system automations is the critical factor behind it. That, for me, is all about having real time information available at our fingertips and being able to utilize information to make decisions in your business. The old school ways of doing things manually, that’s out the window. That was one immediate transformation. When implementing processes and systems we strive for quicker processes and automation.
We also work hard to develop data extraction that creates information which helps us make better business decisions.
Steve: I think you are spot on. There are a few different needs for transformation, including updating your systems and technology and using that as a stepping stone to be forward, rather than backward facing. What ultimately forced you into doing the finance transformation at PRP? What made you realize, we have to make a big change here.
Hiten: The first element that I looked at was the reactive part of the business; reporting to your shareholders and closing your books by the 14th and 15th was absolutely ridiculous for me. So the implementations we made in terms of maximizing the use of all our PC systems and integration into existing databases helped to automate the closing processes. We looked at all functions from operations to sales to finance for improvements. For example, the stock management and bill paying system was separate from the sales and invoicing system. We integrated these systems with the financial system to allow for automated invoicing to the client, and other improvements that bridged a massive gap of 21 days in invoicing just on annual on monthly service fees. That’s recurring. So that is a typical example.
There were a lot of gaps that we could improve on and create efficiencies in terms of how we run our business. I’m an individual who’s not very much into traditional finance itself. I like to have spare time to focus more of my energy on the business itself and the commercial aspects around helping a business flourish.
It’s a mindset shift. It’s being able to recognize what’s manual, eliminate all that and use the extra time for analysis.
Steve: You mentioned the savings and the closing process. Not only did you do it much quicker, but you saved a tremendous amount of time on it relative to the size of your staff. Can you talk a little about that?
Hiten: We used PowerPoint slides, copying and pasting from Excel tables and manual inputs at times instead of back-end integration with our PRP database. To speed the process up we implemented dashboards from Power BI. Today at the click of a button, we produce our summary management reports on the third of every month, fully integrated from our high-level financial reporting right up into the detail itself. The whole transformation saves at least two weeks of work in terms of reporting and closing of our books. The integration aspect into our other systems are used either for our clients or for other internal operational processes that save us two to three weeks of mundane non value added tasks.
Steve: Was there a huge investment in systems? How did you go about making sure there was budget for it and keeping the costs within a return range that you could afford?
Hiten: Cash flow management was critical at the time I entered the company. The business was in a very tight position and needed a turnaround. We knew we had to invest cash into improving our systems and our processes for our business because we needed the efficiency to improve operations. We were able to deliver both to our external stakeholders customers and suppliers and internally in terms of utilizing people’s times more effectively. So, our Mojo of the businesses, people’s time, is valuable and we work hard not to waste it. So, if we run inefficient processes we aren’t living up to our Mojo and we would be selling something we actually don’t practice.
Steve: I love the analogy to the Mojo. You’ve got to have a mindset and the Mojo to be efficient and effective. You were able to get4 buy in because people recognized the systems needed to be improved. Did anybody flinch when you started spending money? How did you make them comfortable the spend was going to be worth it?
Hiten: I worked hard to explain the program to them to them and convince them of its value. A big part of the success is dependent upon the relationships and trust you built up. So, it comes with accreditation from the past by accomplishing what you said you would accomplish.
That trust, together with having a phased-in rollout instead of going with the Big Bang rollout helped move the project ahead. In terms of prioritizing, a phased-in rollout approach it allowed us to focus on fixing the most important, burning issues. Once we proved those worked everything else began to flow naturally. I also don’t believe that if something’s not in the budget you can’t spend it. There are always exceptions that need to be made for businesses. If we had to run strict and rigid processes like that our business would have failed.
Steve: That’s good point. Being able to gain the trust of your superiors and peers and who you’re working with gave you the latitude and flexibility to make the project successful. How quickly were you getting the money back that you were investing in this financial transformation?
Hiten: I did not actually do an ROI in terms of monetary value. I looked at it purely from a human factor. And, you know, the optimization aspect.
I don’t believe that every investment made has a monetary return on investment itself. It’s more the outcomes that you are looking to achieve/automate that determine what value add is actually being extracted. In certain instances, I believe value add can be a return on investment from a monetary perspective, but there can also be a return on investment from a non-monetary aspect that might include things like efficiencies and improvements that allow to run your business faster and bette.
Steve: I think part of it is your culture too. Your culture and Mojo require some of these changes be made or you wouldn’t be true to them. Your mindset and your Mojo wouldn’t be in sync. I applaud you having the courage to take those steps because sometimes putting a return on something becomes the goal. That doesn’t necessarily have to be the goal. It can be “Do these actions fit our culture?” or “Are we making the right changes to fit our Mojo?” You really have to be have a lot of internal fortitude to march forward in the face of other people saying, we’re not going to let you spend that money. Your transformation is creating an intangible asset, something you can’t see or touch.
How do you measure the value of that? It’s an interesting concept that takes a powerful vision to execute. The trust and belief that this is going to be a good thing even when you can’t put the numbers in place to show it. That takes a lot of courage, foresight and all those other factors described above. Would you take a minute to tell us about the steps you’ve taken since you first started the transformation? How did you progress it to where you are today?
Hiten: In any role that I’ve played, I always have a 90-day plan. The first 30 days, I look into the process optimizations, doing gap analysis in terms of the alignment between the various other departments and finance itself. The next 60 days are about making a plan and implementation. In order to make sure things are seamless, you do not want rigid structures. You want flexible structures to make the right business decision at the right time. Those are the critical aspects that I pay attention to. Part of it, at PRP Solutions, is that we hadn’t optimized our systems in terms of automation, integration or processes. Things were quite manual when I arrived. We introduced new technology and new functionality in order to make the integration of operations into finance more seamless. I personally believe in targeted timelines and goals that need achievement. If I don’t put that down for myself, I can’t hold myself accountable to set up to achieve x, y & z.
Steve: Great point. The accountability factor is really important. Having a great idea, a plan and fantastic steps to go from 15 days to 3 days is great but if you can’t execute there is no benefit. All that extra time you believed you were going to earn for analysis will slip away if accountability isn’t clear.
How have you thought through automating functions like recording and reporting and moving into a predictive and analytical world? How has the company benefited from those efforts?
Hiten:Let’s take our sales process for example. We have a lot of customer data regarding customer behavior. That behavior has a knock-on effect on our turnover and revenue. Our sales forecasting has been based on historical trends instead of using predictive and forward looking analytics. We redesigned the format of our PRP system that spits out the results. We then applied AI data analytics to our customer database. This data uncovered a seasonal change within a customer. In the summer, they had a high influx of headcount (terminology used in terms of billing). In the latter part of autumn, the client had a drop in headcount. This allowed the sales team to know what to expect. What do we do to counter this? This is the type of insight we found to help us better understand where business is going and help us improve our forecasts. In this case understanding seasonal attrition rates within our customer base which also allows us to take corrective action and report more accurately going forward.
Steve: That’s brilliant, really helping the commercial team with the information you’re preparing. Where are you today in your journey? What’s your current focus? Are you done with your financial transformation? What’s next?
Hiten:We are pretty much done with the financial transformation. What we are doing now is introducing new technology for our suppliers that integrates them into our financial and operational systems. That is one of the roles I am playing today. But I am also playing commercial and strategic roles with the external stakeholders at the moment. These include acquisitions of new business, overseas expansion and starting a new company in Europe. Those are three critical areas that I spend my time on. I’m glad to because it’s good to have all that. The backend necessities being streamlined allow me now to comfortably focus on looking forward in terms of growing this business and how to become bigger and stronger in the industry itself.
Steve: What advice would you give other CFOs who are just embarking on their finance transformation journey?
Hiten:Make sure that you have a 90-day plan in place. When you get into a transformation journey, ensure that you plan and understand what it is you are planning to deliver, not necessarily the outcomes you intend to achieve. That holds you accountable in terms of delivery. Also, account for the fact that finance is not a one man show. There are a lot of other departments that rely on finance, and how can you streamline all major processes. Smooth them out for everyone so the company works like a well-oiled engine.
Steve: Great advice. I think that it’s really helpful to have a plan. Any advice on how to go about determining where the transformation should take place?
The question I ask myself is, what are my burning points? Which of these burning points can I manage my business with currently? Which ones are the ones that are affecting me negatively? They can all have negative effects. Some can be managed, while others, if not resolved, can get out of hand in the future. Those are the burning priorities you must take action on.
Steve: That’s great. I sure appreciate you joining us today to talk about your finance transformation; and sure some really enlightening ideas. What you’ve done at PRP is beneficial for the company and I think really beneficial for your career as well. Thank you for sharing your story with our Member Scholars.
CFO.University is a professional community of members, scholars, companies and trusted advisors dedicated to the development of chief financial officers. If you want to know more, you can go to CFO.University. This is Steve signing off.
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