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Lee Terry
A top 10 list of issues CFOs are facing right now

Changing health care and tax laws are just the tip of the iceberg for CFOs.

April 22, 2013
By Lee Terry, J.D.

From late-night television to enticingly headlined blogs, it seems as if everybody has his or her own Top 10 list these days. CFOs should be no exception.

With the first fiscal quarter behind us, we can, with some confidence, assemble a list of the top issues currently affecting CFOs. Such a list provides perspective for finance chiefs. It reassures some that their own issues are not unique, while alerting others to emerging problems. Overall, it allows CFOs to view their own companies from a different, enlightened perspective. These items are not ranked in order of importance, nor are they applicable to every CFO. Every list reflects the maker’s perspective and experiences.

Here is my Top 10 Issues List for CFOs in 2013:

10. Managing the costs of the Patient Protection and Affordable Care Act. There is still debate about how the PPACA will impact health care costs in the overall economy. But most CFOs don’t care about the macroeconomic debate; they just want to keep their own company’s health insurance costs down. It will not be easy.

9. Dealing with constantly changing FASB standards and tax laws. Since Jan. 1, FASB has issued five new pronouncements on topics ranging from allocation of joint and several liability arrangements to reclassified comprehensive income. Up to 10 previously announced FASB updates will first become applicable to 2013 financial statements. On the tax side, changes in income, capital gains and dividend tax rates, caps on itemized deductions, estate tax exemptions, and other aspects of the “fiscal cliff” tax deal and the PPACA will make 2013 a challenging tax year.

8. Preventing bribery and other corrupt practices. For the past few years, the SEC and the Department of Justice have vigorously enforced the Foreign Corrupt Practices Act’s anti-bribery provisions. The DOJ’s November 2012 official guidance as to which practices actually violate the FCPA was supposed to reduce the anxiety of U.S. firms doing business overseas but, frankly, hasn’t helped that much.

7. Expanding the business without increasing risk. This is the age-old dilemma of all successful companies. Expansion could boost revenue and profit. But it also could lead to higher expenses, great forecasting uncertainty, and other risks.

6. Choosing IT solutions that make, or save, money. We all have heard the horror stories of the incredibly expensive, but nonfunctional , hardware upgrade, or the horrific cost overruns in software conversion projects. But we also have seen once-prosperous, cutting-edge companies lose huge chunks of their business when they fall behind technologically. Making decisions on when, and how, to upgrade can give a CFO plenty of sleepless nights.

5. Instituting fraud prevention systems and internal controls. Dealing with these issues today entails a lot more than protecting cash drawers and securing bank account statements. Today there are threats from cyberthieves of every ilk, creating previously unheard-of risks such as rerouting of goods en route, raiding online bank accounts, and wholesale identity fraud.  

4. Balancing legal risk and legal expense. Lawsuits that drag on for months or years can be bottomless pits of expense. Creative fee arrangements, such as those mirroring early completion bonuses in building construction contracts, can help get lawyers and clients on the same page financially. Unfortunately, the incentives of the lawyer on the other side of the case cannot be controlled, so litigation remains a wild-card expense.

3. Reducing costs without decreasing output. This could be the ultimate, oversimplified job description for a CFO. Even if it were the only task a CFO had on his or her plate, it still would be an extremely challenging job.

2. Raising new capital for the business. Raising any kind of new capital, including bank loans, has been brutally difficult for the past several years. While things are loosening up, the longest distance in the world continues to be the space between an investor’s pen and his or her checkbook.

1. Improving shareholder return on investment without reducing CFO compensation. Yes, this last one is a joke—but it’s only funny because it has a grain of truth in it. Lowering the salary and benefits paid to the CFO by, say, $25,000 does, in fact, improve the company’s profitability by $25,000. A CFO always has to find “better” alternatives to that particular cost savings or else find a bigger and better company willing to pay well-deserved compensation.

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Lee Terry is an attorney who practices corporate and securities law, spending most of his time counseling CFOs and CEOs on their companies’ legal and business problems. He will be among the panelists at the “Hot Topics” presentation at the AICPA CFO Conference, May 15-17 at The Ritz Carlton Hotel in Marina del Rey, Calif.