My guest today is Frederic Neus, Founder of JK7 Consulting. Frederic is known for simplifying financial management for his clients so they can confidently focus on growing their businesses.

In our conversation, we explore the crucial role of financial management in fostering cross-functional synergy.  For Frederic Neus, cross-functional synergy starts with the CEO's clear strategic vision, with goals cascading down through different functions to foster collaboration among departments.

Many professionals, even those with business backgrounds, need more financial literacy. For Frederic, this is a significant gap in our educational system, leaving many entrepreneurs and CEOs guessing the real story behind numbers. 

For this reason, Frederic advocates the critical need for entrepreneurs to proactively seek professional financial assistance to navigate complexities and ensure the long-term sustainability of their ventures.

Listen to the episode on Spotify, Apple Podcasts, Google Podcasts, Amazon Music, or your favorite podcast platform.

How do you unveil "the story" behind your company's financials to make strategic decisions? Share your story!

Subscribe to Pity Party Over for more insightful episodes. Questions? Email Stephen Matini or send him a message on LinkedIn.

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TRANSCRIPT

Stephen Matini: I was thinking about a conversation, and the one thing that was really curious is; after working for so many years as a CFO, what have you learned to be a successful approach as a CFO to interface correctly with all the other functions within an organization? 

Frederic Neus: You need this ability to interconnect with the people and to really interest in what the other are doing.  As a finance person that is always seen as the serious guy and a number, a cruncher, if you don't go to them and get interest in what they do, you are not going to make happen. That's the best way to return and to make them understand, that you will share with as information as numbers, or to open their eyes in order to grow the company at the end.

Stephen Matini: You shared with me last time that you tend to be very people-oriented and also you have a certain commercial understanding of a business. Would you say that these two components helped you communicate with other functions better? 

Frederic Neus: Yes. There is a difference between a good CFO and a great CFO. A good CFO will be the one that's very technical. He knows his number and he's doing the right business sense and all the technical.

To me, the great CFO is the one that has a good understanding of all technical part, but the greatest is a leader with a commercial approach, business understanding people-oriented approach. These two are what is making the difference between a good and a great CFO, that's for sure.

From my part, what has made me different in terms of people has always been an increase in the performance of the company because you make people work better in a nice atmosphere.

You were speaking before but was collaboration with the other department, that is a key, because if are not business-oriented or people-oriented, you will not get the others participating in all this, which the company overall suffer.

And also being people-oriented helps the company overall to have a better people retention, of course in the company and not only in the financial department, but overall.

Stephen Matini: Sometimes there's a cultural element within organizations that impacts what it's called the organizational synergy, meaning the ability of all the functions to talk and to work together. Somehow some companies seem to give priority to some function.

So to give you an example, lots of companies are commercially driven. So the sales function is seen as “The King” of the company, those are the ones who bring the money. 

So in your opinion, when you work in a company in which cross-functional synergy doesn't happen, what would you say that could be a first step that anyone could take to go more in that direction?

Frederic Neus: It’s a difficult question. I would say. I don't think there is recipe for that. To me it starts from the strategy. If you have a great CEO, we have clearly defining our goals, our strategic goals, and that there is a cascade of these goals between the different functions of the companies, that clearly defining those goals by the pillars of the company and without forgetting the interconnection between these pillars. All depends on each other's for sure.

It all start from the strategy and then you state the objectives and this allows you to have this interdependence between the different pillars, functions of the company as you say. But yeah, obviously I agree with you, “The Kings” are always commercial.

Stephen Matini: Why do you think people become so tribal with their function and somehow struggle with interconnectedness? 

Frederic Neus: This is a lack of and alignment from the start. Again, you don't that CEO which has that vision and the team spirit of connecting everybody, you have big chance for non-success.

If you don't manage as a CEO or as a management team to play as a team, you will keep the silos in the company and everybody will sit there in his silo and do whatever he thinks is good for him, which means that is not good for the company.

You have some entrepreneurs, so the CEOs of the company, they are doing it on purpose. You know?  They are keep the people separate. In order for him to have got this link with control with everybody, he is sure that everybody had passed by him, which at the end of the day to me show a lack of confidence in himself rather than anything else.

Stephen Matini: I love when you said that you have to be able to tell the story through the numbers. Do you think it's because you experienced both working as a CFO within a company and now as an external consultant providing SCFO services to companies. Would you say that it's easier as an outsider or an insider to tell this story through numbers? 

Frederic Neus: There is no black and white. As an inside for sure you already know the company because you have this time of you go to good companies or big companies. You've got this onboarding where you go through knowing everything, starting your job, well most of the time saying that it's everywhere, but you have more time. And from that perspective, I think it's easy.

So what we do now as an external, we've got onboarding process, which at the end of the day it's rather technical because you need to get the data, you need to ask questions and everything. But the main purpose of this onboarding process is really to get feel and to ask right question in order to understand what's going on in their company in order to provide them good value as quick as possible.

You've got to understand very well the company and the business they are in order to provide the right support and the right value as a CFO, being internal or external, at the end of the day, it's the same. But then if one is easier than the others, I would say that being internal is easier, but we are trying to be as effective as an internal by having this perfect onboarding process.

Stephen Matini: How did you choose this slogan, “Making the Invisible Visible” for JK7 Consulting, which is so simple but so great?

Frederic Neus: We were in a session in order to get to the right sentence for our vision and mission, we came up with different possibilities and two of us more or less arrived with the same thing.

We're trying to bring to our customers that understanding of what is happening in their company, because 95%of the time, they don't know half of what's going on in their company. They don't know all the interesting element that is in their numbers because they don't know how to get there. And so this is our first job. Let's create the right visibility and the right understanding of what is going on.

And it's not easy, but with simplicity. Because I mean I already told you about that, but if you, yeah, I'm a great CFO and I'm the best, and then you come up with ratios of liquidity, assets, whatever. I mean your customer which doesn't understand already his number, if you come with that, they will understand even less. If you don't speak their language, you're going to lose them even more. So we create visibility to the past, and then we are going to create another set of visibility, but to the future, a more strategic one.

In this scenario, 1, 2, 3, this is what is going to happen with your company if you do that, this is from a number perspective, this is what will happen. This is a nice element because it allows that CEO that we were talking before to start to realize the impact that he can make by doing that that that in this company.

And the first element to that, the first consequence to that, is an intangible element, which is the peace of mind. I will never stop mentioning that the peace of mind of the entrepreneur, the boss of the company, this has no price and we cannot forget that.

So these are things that are very key in our job and therefore making the invisible visible is to meet the differentiation of what we do.

Stephen Matini: A lot of people, well, you would assume people that do business, they must have gone to business school or study business. And yet I'm always amazed to see how little people understand of numbers. And I'm one of those people, I'm definitely by no stretch of the imagination, someone who's just so savvy, but somehow I guess because I've always worked for the most part as a small entrepreneur, I need to make sense of this entire world. 

So the question for you is this one, why would you say that a lot of people that come from business backgrounds, somehow they seem to have such a hard time with numbers and to navigate through this complexity of numbers? 

Frederic Neus: Finance is complex. It is complex, it's a difficult subject, but if you look at the economy in general, there are people that are making masters and for five years to understand that, then you can expect that these guys, they understand what they do and what they talk about.

So yes, economy is complex tax regulations. I mean you go all over the world. I mean it's different everywhere. You understand nothing about that, even the tax guys, they understand nothing about that to be honest. And you've got the financial jargon.

You go to big companies for example, and you go to listen to a financial presentation and you are not a financial guy, you would understand 20% of it because most of the words that they are saying in there doesn't exist even in any dictionary. So to me, this is something I always say to my kids as well, the education, the financial education.

You go to school, they don't teach about finance, whatever type of finance, even personal finance or how to manage your money properly, nobody speaks about it at school. On top of that, there is indeed, as you said in the business in general, there is a lack of financial background. The basics of the financials for the entrepreneurs, they are not there.

But I can tell you that most of the CEOs of these small entities, of that big company, they were not, I would say at ease with financials neither. This is a fact also in the big companies, OK?

There is also something which is bad is that a lot of these guys, they don't realize the importance of it. So they don't get the point that numbers are there and needs to be, we need to do something with it. But until the time that you will not have somebody that will explain that properly with your word, you will not realize.

Stephen Matini: So let's say hypothetically you are with the leadership team, and you do realize that the people working with you have a little understanding of numbers and they have in front of them in financial statement with millions of different numbers. Where do you bring the attention to? I mean, is there any specific figure on a financial statement that somehow you tend to emphasize first, to simplify the matter?

Frederic Neus: We always try to demystify the financial, because at the end of the day, we are the guys, as the CFO ,or a financial team. We are the guys that need to absorb the complexity, which I was telling you before. Well, it looks simple, but it's not.

We need to absorb the complexity of the numbers and tell a story to the guy that is in front of you, whomever it is, that he will understand from his own point of view with his own filter in order for him to understand. So it is quite difficult. It's complex because one is different than another and it takes time, but the quicker you get there, the better it is for the company.

And this is not black or white because it can be different from the company to another depending on the industry they are in. But most of the time we have a five or six element that we are trying to speak is always about revenue for sure, because it's an important element. It's not the most important. I want to be clear on that.

You have the gross margin, which is really, I take an example. If you are selling goods, so you've got your revenue, so how much your customer is paying for that, and the cost of it, what you are paying to your supplier to buy these goods, if you are distributing these goods. One minus the other is the gross margin. So it's really the business, what it costs you for that business.

The percentage that go with it, so gross margin as a percentage of the revenue, this is always a relationship that you're trying to do. Then you've got the net profit, which is important because below between that net profit and between the gross margin, there are a lot of elements like the remuneration, you know, whatever costs you've got in there.

And then cash, cash is important. So we are tracking cash obviously, and mainly in SMEs is even more important. And then we've got the working capital aspect. So we keep it as important because that's the balance sheet element and you're tracking the day-to-day of the company. When you look at working capital.

Stephen Matini: As you said, it's about telling a story. So in any story, an element that is super, super important is the conflict. And so in the story of an entrepreneur, based on numbers, who would you say usually is the villain of your story? 

Frederic Neus: We are trying to avoid any bad guy I would say, because at the end of the day, the story that we are telling to our audience. If the numbers are good, there will be no bad guy. I would say if the numbers are bad, there will be different bad guys all the time.

So at the end of the day, we are always trying to share the story in the more positive approach as we can, because otherwise we are already perceived as the bad guys, us as financials, because we are always pointing the finger to something bad that doesn't work. You have to always approach it in a positive way and explain to your counterpart with bringing solution on the plate, and do you agree with this solution? What elements you can bring on the table that will help us to find more solutions? You always need to position yourself as a coach, basically.

Stephen Matini: As an entrepreneur, what would you say are the signs that would make me understand that I need someone like Frederic to come in and to help me out, so I need a professional financial management assistance? 

Frederic Neus: Whatever the size of the company you have, you need financial assistance from the start. I have the feeling that we are at pivotal points where more and more people are getting to entrepreneurs rather than employees. And to me, we are at a point where the SMEs will need to last longer than the human generation. To make it clear, we'll need to build companies which will last for longer.

Because now when you look at the bankruptcy rates, it's crazy. I mean, it's increasing year on year and you had a lower peak at Covid because I mean the States stopped putting bankruptcies. So this is an element which for us, it's our vision, this will happen.

What we are playing in this is that we want to play a role in that by doing what? By bringing the clarity, which I told you, and creating that strategic visibility to the entrepreneurs in order for them to play along the game with a sustainable growth. And of course with the peace of mind, which we cannot forget, I told you before.

When you look at that, generally speaking, you've got two to three different type. The first time is the company which are reading in trouble. When you are sick, you feel bad and you go to the doctor, most of the time it's already late because you didn't anticipate and do something about that. So we have this type of persons, which are already in a very bad situation, sometimes close to bankruptcy.

You've got the other one, which is also in a bad situation, but already not that bad. And then he needs to start thinking about that because he sees really signals that he's entering into a turbulence.

And then the third one is the one that are growing. I mean the one that has this company and it's booming. And then it start to see, am I doing the right thing? Am I going into the right direction and everything?

So most of the time we've got these three scenarios, but I need to tell you that the first one is the one that is coming. The question that they have most of the time is simple. I have profit, but I don't have cash. So how come what's going on? I don't see my family. I'm working like hell and I am going nowhere. We are in June and I don't even have the numbers from the last year. I want to do an investment, but can I do it? I don't know. I would like to hire people, but can I afford it? I mean, I'm doing everything. I'm doing my invoice, I'm doing this, I'm everywhere. I need to meet my clients. So that's really the situation where the people are in a complete mess to not to say something else.

And then I have a rapid growth, a big expansion, and I'm not in control of the thing anymore. So this is a point where you need to realize that you need to be backed up with somebody that has the right knowledge to put to implement the thing.

You enter into complex financials transactions. You are thinking of raising capital, for example, because you need to get either loan or you need to have a new owner on board, or ... I mean these are signs also, or you do a mergers for example. These are signs that you need somebody that is going to support you in this. I mean, I was saying sometimes you've got numbers, but you're not sure they're right. And this is always something that happen.

You've got big debts and you don't know how to manage them. So there you come back to the cashflow. Where am I going with my cashflow? What's going on to happen? You have your costs which are not under control, so you are spending to hell and you don't know where and you don't know why, and you are not negotiating properly with your suppliers or you are in doubt about that.

Business valuation needs for example. I mean, this is also another element which is important. I mean, people are always looking at today, okay, what is my profit? So also you need to understand that your company has a value. And more organized your company will be, more you build a system that is working alone, without you no dependence on yourself, more the value of your company will be obviously.

Stephen Matini: What would you say that is maybe one thing that you would like our listeners to focus on based on everything we said? 

Frederic Neus: The point is that you cannot do it alone, it's impossible. I mean, you are the pilot of a company, but any plane, there is a copilot. You need to be challenged by somebody. You need to be supported by somebody, and this can be done with a person that is going to help you, to bring you all this experience and to be this day-to-day challenger.

And most of the time, finance is the topic that is not under control. I have my accountant, but the accountant is doing the accounting most of the time on an external basis, and they do a great job these guys, you need to be honest.

But what we bring to the companies is not accounting, we are really giving them strategic advice on the day-to-day of the companies in order for them to grow, and to gain that peace of mind. So what I would say is that the people cannot do it alone, and they need to be challenged on a daily basis and to have an eye opener in order for them to have this peace of mind and that grow mindset.

Stephen Matini: So you help them write their story.

Frederic Neus: Yeah. Bringing clarity to their day-to-day and to what they do, et cetera. I mean, that is not that difficult, even though it is if you want to do it properly and with the right point and to put your finger where it's really painful for you to understand. But again, the story you will explain, it's key.

Most of them what they do now, they receive a financial statement from their external accountant, which has been done on a yearly basis. We do that, but on a monthly basis because there needs to be that recurrence of the numbers because that's the only way that they need to be. It would be in their head. So the recurrence is very important, it's very key.

They will start to fix their objective by looking forward rather than backwards. So when we do our monthly calls with our clients or our monthly meeting with our clients, we spend, I would say, fifteen minutes to the past, and I would say one hour and a half to the future because that's what you need to talk about. I mean, what am I going to do now that I know what happened in order for that to not happen anymore or for that to happen? So you have to shift your mindset to the future and to the solution rather than the past.

Stephen Matini: It's all about having someone who has experience to support you, and I love the fact that your approach is positive, is about simplifying, is about looking forward. So I love it. Thank you, Frederick, for everything you taught me today. Thank you. 

Frederic Neus: You’re welcome. Thank you.