Episode #1017: Glean insight from Jim Lindell, a CPA, CSP, CGMA, executive coach, Vistage Chair of 19 years, best-selling author, certified speaking professional with the National Speakers Association, and owner of Thorsten Consulting Group, on some of the most important financial aspects of business: getting below the numbers, measuring a company’s blood pressure using Z-Scores, when to replace a CFO, and questions that help client’s find their North Star. Join us as we learn more about the many facets of financial health in corporations and apply it to our coaching practice today.
About the Jim Lindell
Jim Lindell is a CPA, CSP, CGMA, executive coach, Vistage Chair of 19 years, and best-selling author out of Wisconsin. Jim is also a certified speaking professional with the National Speakers Association, author of the best-selling book, The Controller as Business Manager, and owner of Thorsten Consulting Group. His passion for making a difference in the lives of others has made him a difference-maker and a highly impactful member of the executive coaching and Vistage Chair community. Instead of financial gain, Jim genuinely seeks to help others with their businesses and leadership. Jim is a lifelong learner who seeks to learn from every situation that comes his way and encourages others to do the same. With his 19 years of experience in the coaching industry, Jim has continued to make an impact on the coaching industry and the lives of those he coaches and mentors.
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The difference between a Controller and a CFO
Jim states that the “Controller takes care of the inside-of-the-house transactions, financial statements, internal controls, etc.,” while CFOs look outside of the business. When handling financial statements, Jim believes that “the numbers are nothing but a transaction of the activity” and that it is important for business leaders to consider the full picture of their financial situation (including inflation). Severin comments on the difference in skill set between Controllers and CFOs. Controllers function as statisticians and CFOs are required to have interpersonal relationship skills.
The basics of Financial Planning and Analytics (FPNA)
Jim explains FPNA as the ability to read beyond the numbers. He states that FPNA is “getting below the numbers to what the meaning is.” Translating trends, rations, business performance measures to understandable sections is vital for a successful financial strategy. Jim also states the importance of understanding your capital. By understand FPNA and the financial state of businesses, leaders are more able to make better decisions for their companies.
The Controller as a Business Manager
Jim, author of the best-selling book, The Controller as a Business Manager, explains why he wrote his book and the importance of it for current coaches, CEOs, and CPAs. In his time as a CPA and Vistage Chair, he noticed a need for an increased understanding of the role of the Controller. Jim shares that it is vital for CFOs, or the main financial leader, to be a business person first. His book seeks to increase the overall understanding of financials and the economy for executives, CFOs, controllers, and those who coach CEOs and other executives.
Jim has four terms in his book when explaining the translation of financial statements to actions. First he focuses on the financial statements. Second, he focuses on the variances and why they happened. The next stage focuses on the cash flow and profits of the organization. Lastly, Jim outlines a stage of prescription: using the data collected to decide on what actions to take. These stages are covered in his book with the goal of helping people move beyond seeing numbers and financial statements as just numerical reports. Jim wants businesses to see the meaning that these reports provide and apply these new learnings to their businesses.
The importance of Z-Scores
When asked about Z-Scores, Jim explains their importance and meaning using a metaphor of a doctor and a patient. Jim shares how Z-Scores are like blood pressure readings. When Jim explains a high blood pressure reading to his group members, they begin to prescribe actions such as exercise and diets. Just as blood pressure readings describe the overall health of a body, Z-Scores describe the overall health of a business and can be used to prescribe new corrective action. Jim explains how Z-Scores can be calculated and what their different readings mean. There are specific Z-Score formulas for private and public companies.
The Z-Score formula covers working capital, total assets, retained earnings, eBid, and market of value equity. When this information is plugged into the formula, the resulting Z-Score describes the health of the business. If the resulting Z-Score is too low, the business will go bankrupt in 24 months or less at the current rate. Jim believes in the importance of monitoring Z-Scores as they are the health rate of a business. He believes that companies do not invest time in Z-scores because they believe that they are far from going bankrupt. Instead of waiting until there are signs of future bankruptcy, Jim believes that CEOs should monitor their company’s Z-Score as an indicator of whether or not the company is getting stronger versus weaker.
When to replace the Chief Financial Officer
When asked “When do you know it’s time to replace your chief financial officer?”, Jim responds with “when they are falling into the pennywise pound foolish category.” Jim states that when CFOs are solely focused on numbers and not financial ramifications that are placed on a business, they are no longer being helpful to the business. CFOs need to be able to get down to all the details of a business. They need to be able to understand and communicate what the numbers mean to their employers. Furthermore, CFOs should often be replaced before the thought enters your mind. Jim states that when the thought of replacing your CFO enters your mind, it’s normally 18 to 24 months too late. Conflict of interests are also something to take seriously. Severin shares a story of how suspected conflict of interests went unnoticed and cost a corporation millions of dollars.
The importance of perspective
Jim Lindell believes in learning from every experience that comes into his life. He shares a story of putting out a dock with his sons and nephew. Whilst putting out the dock, it began to snow. In response, Jim encouraged the boys to try and catch a snowflake because “this may be the only time, and it probably will be, that you ever experienced this.” Jim shares this as an example of taking each day’s experiences and learning from them. He uses this philosophy in his executive coaching, taking joy out of the ability to help people in every situation he can.
Jim’s powerful questions
Jim has a series of powerful questions that he enjoys asking clients. One of his favorites is “May I offer you something?” This question allows Jim to offer advice and perceive if a client is open to discussion or closed off. When asking questions, Jim tries to “provoke thought” in the other person. Jim strives to present his questions without the influence of his own solutions or answers. Furthermore, Jim likes to ask questions that include, “Who should be fired that hasn’t been fired”, “What is the thing that you should be doing that you’re not doing”, “What would be the name of your most favorite council person that you have and what would that person say about the way you’re running your business right now?” By asking these questions, Jim is able to encourage deeper thought in his clients and encourage them to take on different perspectives of their challenges.
The changing coaching industry
When reflecting on changes in the coaching industry, Jim states that coaching has matured in recent years. Today, there are a multitude of coaches, many of whom have no training or certification. Jim has concerns about the representations that these new coaches are giving the coaching industry and recommends exercising caution when starting a coaching business. Furthermore, Jim believes that confidentiality should always be maintained regardless of training received and executive coaches should have experience in the corporate world.
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