Investing Company Profits: Insights from a CFO's Perspective
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Chapter 1: The Role of a CFO in Investment Strategies
In order to foster growth within a company, it is essential to reinvest its profits wisely.
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Section 1.1: My Journey as a CFO Stand-In
I find myself in the role of a temporary Chief Financial Officer (CFO) at my organization, although my official title is Pre-Sales Senior Manager. My responsibility is to enhance our revenue presence in the Asia-Pacific region.
This CFO position was offered to me for several reasons. I have a passion for working with numbers, spreadsheets, and making informed investment choices. The Group CFO, based in France, appreciates my financial insights but struggles to grasp the financial logic of my Managing Director. Consequently, the Asia-Pacific Managing Director delegated this responsibility to me, stating, "You take it and make it work," on a crisp December morning in 2021.
Without hesitation, I accepted the challenge. From that point onward, I became deeply engaged in the investment decisions for my division.
Section 1.2: Guiding Principles for Corporate Investments
When I wear the CFO hat, I adopt an investor's mindset.
I refrain from investing in equities, bonds, gold, or cryptocurrency. Instead, I focus on reinvesting our surplus profits back into the company to nurture our financial growth.
My decision-making revolves around a few fundamental principles:
- Does this investment enhance our revenue or lower our operational expenses?
- Will it increase our company’s asset base?
- What is the anticipated timeframe for recovering my investment?
The first question relates to the Profit & Loss statement, while the second pertains to the Balance Sheet. The final inquiry assesses the speed of recouping funds for future reinvestment.
Chapter 2: Investment Decisions for Revenue Enhancement
"My ambition has never been simply to create a company. Many misunderstand this, thinking I disregard revenue or profit. What I mean by not just being a company is to build something that truly makes a significant impact in the world."
If you manage a startup or a nascent corporate office in a remote area, I advise against solely following the conventional wisdom of industry giants. Your employees rely on the company's profitability for their livelihoods, and investors scrutinize your quarterly financials for further investment opportunities.
Therefore, it's imperative to focus on immediate and future revenue growth. My role involves not just expanding revenue, but also maintaining cost efficiency.
To achieve this, I collaborate with my Marketing and Managing Directors quarterly. We prioritize building our corporate brand to drive sales.
Our process is methodical: we evaluate upcoming corporate events, with the Marketing Director assessing costs related to logistics and participation fees. We then project potential revenues based on previous events of similar scale, while I present data on sales leads, closure rates, and contract values to assess marketing expenses.
If we are confident about achieving a minimum of 30% profit after covering costs, we proceed with the event. Our aim is to realize this profit within a year, after which the principal amount can be reinvested for further growth.
Events that do not meet our 30% profit target or one-year payback will be deferred for future consideration.
Section 2.1: Investments for Cost Control and Asset Growth
I firmly believe in enhancing the left side of the Balance Sheet and increasing asset value to minimize operational costs. When operational expenses decrease while revenue rises, the benefits become evident.
For instance, leveraging various software solutions can significantly enhance efficiency and strategic market responsiveness.
Being in the software industry, I recognize that adapting to the dynamic business landscape is crucial. It is my ambition for our company to serve clients across 15 countries in the Asia-Pacific region, spanning six time zones. Thus, embracing digital transformation is not just a trend; it is essential for operations.
To evaluate software investments, I first analyze our organization's entire value chain. Then, I pinpoint areas where enterprise-grade software can drive improvements. These improvements often focus on tasks that consume significant time and resources, such as email campaigns and social media management.
I build a business case for platforms like Hubspot or Salesforce, which could potentially reduce our time spent on marketing efforts to almost nothing.
How does this initiative align with cost control and asset procurement?
By streamlining marketing tasks, our team can dedicate more time to corporate events without needing to expand our workforce. This translates to reduced hiring costs, as software usage can generate substantial savings over time. In a span of 2, 3, or 5 years, the software can evolve into a valuable corporate asset reflected in the savings accrued.
Author's Note: While it’s impossible to detail every investment made by my company, this article focuses on key initiatives we prioritize on a monthly and quarterly basis.
Summary
Our company functions as a financial tree that we have the power to nurture. Growth is essential for providing bonuses, commissions, and incentives to our team, rewarding their hard work.
This motivates me to continuously seek investment opportunities that benefit our organization.
About the Author:
Feel free to connect with me on LinkedIn and Twitter!
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