Links between the book's chapters and strategies
This summary picks up from the chapters as ordered in the book and the key links between finance and strategy.
The format is a checklist of points or questions that may be used to link your strategies to financial statements and models. They will assist in identifying how formatting and interpreting a financial statement or using an appropriate model can help with strategy delivery:
1 What does strategy mean to you and your company?
- Is everyone clear?
2 Why be in business?
- What are your objectives?
- What other reasons are there for being in business apart from purely making a return?
- What other issues affect strategies apart from finance?
- What constraints are there to going for a purely 'make a high return' strategy?
3 The principal financial statements
- How can strategic decisions be made if you don't know where you are and how you got there?
- Understanding profit and how it was generated is vital, as is knowing the profiles of your costs; the profiles will tell you much about your strategies.
- Understanding the balance sheet and its profile again tells you much about your strategy - your strategic position at the end of the year, the assets at your disposal as you go forward.
4 What underpins financial statements?
- How much do you need to know?
- Do you need to get closer to your records?
- Executives have to state that adequate internal controls exist - are yours adequate?
- Is your corporate governance adequate and robust?
5 Accounting rules
- Do you know your specific accounting policies?
6 Published or statutory accounts
- Can reading these help you understand your and other companies' financial strategies?
7 Interpreting financial statements
- Do you understand the directions in which your company is heading? You must be able to read the figures.
8 Cash - the vital element
- Strategy cannot be delivered without cash - generation and investment.
9 Internal reports - management accounts
- Are reports clear and actionable?
- Does your process deliver?
11 Investment appraisal
- What is your investment strategy - is it tested properly?
- Is there adequate investment appraisal guidance?
- Are investment decisions consistent and coherent?
12 Structure or pure financial strategies
- Is this your role?
- What is the effect of a pure financial strategy on operational strategies?
- Is a financial strategy linked to the operational strategies or does it just happen in isolation?
Are your strategies co-coordinated and aligned?
Whatever your position in the company, whether as the CEO or other executive with the power to change or an operational executive under command of the board, it is important to understand what the businesses' objectives really are. If you do not like them, or believe that they are not obtainable through economic forces or due to misalignment, then either you can push for change or move on:
- What are your objectives?
- Do any conflict?
- How are conflicts evidenced and managed?
- Who leads the alignment process? Are there many leaders?
- Visions are often vague.
- Strategies are not objectives.
- A strategy without an objective leads nowhere.
- Turn your vision into an objective and sub-objectives.
- Know your objectives - let everyone know.
- Identify the drivers you can control.
- Identify strategies and tactics to drive the drivers.