The Value of Financial Audits for Fast-Growth Firms

Q: What is a financial audit?
A: Before launching a growth strategy, an akamai CEO launches a financial audit, which is not listing QuickBooks accounting errors.
Rather, it consists of 20 to 25 questions and is completed by the CEO, CFO and all senior managers in sales, HR, marketing and operations. The aggregated answers can reveal critical gaps in a firm’s financial processes and controls.
The first question is the tip of an iceberg: “Do managers take responsibility for financial matters?” Each manager selects one of three answers:
A. Managers don’t engage in financial matters.
B. Managers review regular financial reports as a team but don’t act on the reports collectively.
C. Management team acts collectively on strategic issues and opportunities. Managers understand the links between investments, costs and service delivery. They circulate relevant financial information to their teams and routinely engage them on financial topics.
Answer A positions the firm at “Growth Inhibited” and answer B indicates the company is “Growth Ready.” Answer C shows that managers as a team make decisions based on relevant financial data. An example of such a decision might be shifting data storage to the Cloud because that reduces IT expenses for salary and storage. Such a firm is “Growth Optimized.”
One topic for the financial audit is actionable financial data and the training required for managers to understand the numbers. After the same training program, managers who impact the firm’s growth leverage data for decision-making – a sign of a Growth Optimized organization.
Sometimes financial audits lead to one-off actions, like cash management: The solution is a minimum cash balance that matches a projection of one month’s fixed expenses (payroll + rent + utilities).
Other questions delve deeper into complex financial details, like accrued revenues, inventory and “doubtful” accounts. The need for day-to-day monitoring leads to a dashboard, so financial updates are available online to the entire organization.
Managers also respond to a question linking salaries and bonuses to the firm’s growth. The managers’ aggregated answer uncovers if every manager understands the relationship between variable pay and company performance – part of an owner’s mindset.
The financial audit awakens the firm’s leaders to the close synergy between financial data and decision-making – which optimizes business strategy execution.
Ultimately, the CEO’s goal is for managers to answer this question effortlessly: “Are we having a good year financially?”