How CFOs should tackle a restructuring: in a restructuring situation, the CFO plays a pivotal role in meeting stakeholder expectations. A turnaround specialist outlines some of the areas that should be considered before you find yourself in the middle of a crisis.

• Author: Tormey, Robert
• Position: RESTRUCTURING

CFOs of public or private companies are more responsible, and ever more at risk, with respect to the expectations of a company's stakeholders, whether equity or debt. If expectations are not met, the company may face an amendment in credit facilities, a refinance, a "troubled debt restructuring" or even a sale event under distressed circumstances.

A good time to consider what you might do to ensure that if a challenge arises, you will not only survive but capitalize on the opportunity it might present is before you are smack in the middle of that situation. And, in light of the recent turmoil in the financial markets, here are some considerations and lessons learned from past restructurings.

Failed Expectations. Stakeholders expect the CEO and the CFO to "own" the budget plan. When expectations aren't met, shareholders and lenders may question the CFO's skills in educating management or in challenging assumptions during the budget cycle. In this area, CEOs rely on CFOs, who may face a challenge in doing this without appearing critical. At all costs, the CFO must maintain his or her political effectiveness with management.

Consider establishing reporting tools that support self-discovery for key operating areas. Management will become regularly grounded in its thinking. Weekly dashboards, key performance indicators (KPIs), industry benchmarks and rolling forecasts allow management to come back to earth without feeling the CFO is not supportive of their goals. With support of information technology (IT) specialists, these tools need not be an accounting department product.

Budget Processes: Start Early. Most companies that miss projections have a simple thing in common: the budget process is hurried. The budget process must begin early enough to support and seize available opportunities in all areas. New disciplines and initiatives have lead times that exceed one year. Consequently, budgets should have event horizons that mirror these periods.

Get the Numbers Right. The frequency of accounting restatements is alarming, and it's not just arcane issues driving the problem. Frequently, errors are made in revenue recognition, work-in-process and inventory valuation, self-insurance reserves, sales expense recognition and capitalization of intangibles. Use risk-based auditing techniques to evaluate which areas are not well understood by personnel or where facts and circumstances may drive surprises.

Train and Delegate. Every accounting environment...