The Accidental CFO

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CFO Studio Magazine, 4th Quarter 2012
Q&A, Interview By Andrew Zezas 


Sometimes becoming the CFO of a successful company can happen through happy accident. This was the experience for Steve Mullin, chief financial officer of Wurth USA, a wholly owned subsidiary of the Wurth Group specializing in aftermarket auto parts.

He sat down with Andrew Zezas, host of CFO Studio and CEO of Somerset, NJ-based Real Estate Strategies Corporation, to discuss the unusual path Mullin took to get to the top of the finance executive ladder. Below is an excerpt from that conversation.

(ANDREW ZEZAS) Your background is rather diverse and unique, and it seems that you didn’t intend to start out as a CFO. Tell me how you got to do that.

STEVE MULLIN: Well, I never aspired to be a CFO. I was good with numbers, so my mother suggested I get an accounting degree.

I started my career at a very large Japanese organization as an accounting manager and worked my way up through the ranks. I became a controller and a VP of finance for a multi-billion-dollar-division company. Along the way, I also began to branch out to take on the re­sponsibilities of the operational side. So, when I did become the VP of finance for this division, I was also in charge of all their operations — anything with supply chain, logistics, product management was also under my responsibility.

I spent the last three years with this organization. I was running one of the sister division companies, about a $200 million company, and it gave me the experience on a much broader scale, not just finance and operations, but sales, marketing, and engineering as well.

You described to me in the role of a CFO, you’ve seen yourself as more of a forward thinker as compared to a traditional rear-view mirror type.

MULLIN: I was never really content with re­porting the numbers. I always wanted to know what was behind the numbers, what were the business decisions that took place to create the financial result that I was now responsible to report on. So, I took my own initiative to start branching out and work very closely with the other functional managers, to understand their side of the business and what decisions they were making. Whether it’s a balance sheet or P&L, I needed to be able to connect the dots on a business process.

I’ve heard you use the term, “learning to work small.” Explain that to me.

MULLIN: Again, I came from a multi-billion-dollar environment. We don’t have that at Wurth USA. We have a very capable staff, but some of the “working small” is first identifying what I can bring to bear to help improve the business. There are also going to be some obstacles. What is the right timing? What resources are available to the company to drive these types of things?

I have to take what only I know, and I need to try to whittle it down and fit it into a new environment.

When a finance executive aspires to be more, what specific expertise or traits must they possess?

MULLIN: For me, it was to be inquisitive, to want to know more than the numbers and then have the ability to partner the cross-functional team members across the enterprise and start to work with them to un­derstand what it is that makes the company operate. It takes leadership.

Steve, would you agree that the most progressive, most successful CFOs — and when I say successful, I mean for their companies — are those that recognize that finance is really the tool to drive the company’s profit, growth, and strategy?

MULLIN: Yes, I do. We actually created the title “The Finance Business Partner” in a prior company that I worked in. I think to truly add value and to guide corporate decision-making, you’ve got to become a good partner, and that could be mentoring your boss.

Wait! Hold on a second. Mentoring your boss?

MULLIN: It could be mentoring your boss in how to better understand the financial dy­namics of the business to improve decision-making along the way. There is an old adage that I learned long ago at a Japanese company that finance was looked at as the better half of marriage in management. As finance head, you really need to steer that ship so you’re achieving all the financial objectives, not just the top line.

How to Win the Packaging And Positioning Game

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CFO Studio Magazine, 4th Quarter 2012
By Cindy Kraft, the CFO Coach

Very few CFO positions are ever posted online, and when they are, they are usually the bottom-of-the-barrel opportunities. So how can you win the packaging and positioning game and score that next great opportunity? Just as your marketing team strategizes on marketing your company, product, and/or service, you need to begin thinking about “product you.” 

Be Branded

How will you fit within a company’s culture? It’s the 64-million-dollar hiring question. And sadly, poor culture fit happens more often than you would think.

A Psychology Today blog post reported: “According to the Harvard Business Review, 2 out of 5 new CEOs fail in their first 18 months on the job.”

Are these failures all due to poor culture fit? Absolutely not. But the article goes on to say, “It appears that the major reason for the failure has nothing to do with competence, or knowledge, or experience, but rather with hubris and ego and a leadership style out of touch with modern times.”

Those are issues that can speak directly to culture fit.

So how do you showcase that you’re a good fit with your target audience? By being branded. A strong and compelling, authentic brand sends a crystal-clear message to your audience of who you are and how you have been effective. Branding makes it easier for a company to view you through the lens of its culture and assess — upfront — whether you’re a potential fit, a good fit, or a great fit.

And here’s the real secret: When you’re a top-three candidate, your ability to do the job has already been confirmed. The only two remaining questions on the table are “culture fit” and “likability.” With a strong brand, you have already answered the first of those two questions.

Be Different

If you look like the competition, you blend in with the competition. Instead, be a purple cow and stand out — and away from — your peers.

Often in creating marketing documents, CFOs will list responsibilities held. Things they’ve done. Their career progression, often beginning in public accounting. Ho hum. Your competition can probably all say those same, or very similar, things.

It’s football season, so let me use a foot­ball analogy to make my point. If you put both teams in the same uniform and stuff them all in one of the 10-yard end zones, they will all look alike. You can’t discern defensive players from offensive players. So chances are at least 50/50 that you will pick the wrong player from the wrong team for your defense or offense.

However, when you put them in their re­spective colors and put names and numbers on their jerseys, individuals begin to stand out from the other team and even from their teammates.

Put your unique name and your unique number (strong brand) on your marketing documents and stand apart from the crowd.

And remember, it’s not what you did, it’s how you delivered. It’s not what responsi­bilities you held, it’s about positive impacts that made the company more profitable, more efficient, and facilitated growth. It’s not about your career climb, it’s about how you solve problems.

Problem-solver = value = in demand!

Be Visible

Even if you don’t have an intentional brand, you have a default brand. Appear­ing on job boards paints you as a desperate job-seeker who probably is or will soon be unemployed.

Where should you be visible? First and foremost on LinkedIn, with a complete, compelling, and branded profile. Why?

  • LinkedIn is the web 2.0 version of the old corporate bio.
  • It’s the very best place to be noticed by recruiters (one of my clients had three great-fitting opportunities come his way in his first four days of having his profile updated).
  • To not be on LinkedIn is to send the message: Do not bother and do not disturb.

Show up where people from your target audience are also showing up. What are they reading? What are their hobbies? Do they have a cause they support? Have a visible presence wherever they are.

Today’s strategies for winning new oppor­tunities aren’t rocket science, but they are different. To win the new game, you must know the new rules.

A “pull strategy” (attracting recruiters and opportunities) will work infinitely better than a “push strategy” (sending your résumé out to every posted position) when you clearly market your ability to solve problems. And when you are gainfully employed and therefore highly valued as a passive-and-worthy-of-being-poached candidate.

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Managing the Medical Device Tax

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CFO Studio Magazine, 4th Quarter 2012
By Emmalee MacDonald, Senior Tax Manager at EisnerAmper LLP & Michael Hadjiloucas, Partner at EisnerAmper LLP

How to prepare for the new sales tax, effective January 1, 2013

One of the provisions of the Affordable Care Act is an excise tax on sales of medical devices. This tax becomes effective January 1, 2013, and will be imposed upon the manufacturer, producer, or importer of the medical devices.

The tax will be charged at a rate of 2.3 percent of the sales price, and the IRS has issued proposed regulations (IRC 4191) to identify which medical devices will be subject to tax and which are exempt.

Definitions

Per the announced regulations, a medical device includes any device defined in the Federal Food, Drug & Cosmetic Act that is intended for humans. This section explains that the term “device” means an instrument, apparatus, implement, machine, contrivance, implant, in vitro reagent, or other similar or related article used for health-care purposes.

The trigger for the tax is the passage of title from the manufacturer to the purchaser. The sales price subject to tax includes charges for packaging as well as charges incident to plac­ing the device in a condition to be packed and ready for shipment.

Specifically excluded from the sales price are:

  • Manufacturer’s excise tax.
  • Cost of transportation, delivery, insurance, installation.
  • Discounts, rebates, and similar allowances actually granted to the purchaser.
  • Local advertising charges.
  • Charges for warranty paid at the purchaser’s option.

If a rebate is offered, the tax must be levied on the original sales price, unless the rebate has been made prior to the close of the pe­riod for which the return is due. If a rebate is subsequently allowed for a device on which tax has already been paid, the manufacturer is entitled to a credit or refund.

Exemptions

Tax-free sales include sales for use in further manufacture, export, or by purchaser for export by a second purchaser. In order to qualify for the exemption, registration must first be completed with the IRS on Form 637.

In addition, IRC Section 4191 specifically exempts eyeglasses, contact lenses, hearing aids, and any other medical devices that are generally purchased by the general public at retail for individual use.

In order to qualify for the retail exemption the device must be regularly available for purchase and use by individual consumers who are not medical professionals, which is determined by reviewing whether:

  • Consumers who are not medical profes­sionals can purchase the device through retail businesses that also sell items other than medical devices, including drug stores, supermarkets, and similar vendors;
  • Consumers who are not medical profession­als can safely and effectively use the device for its intended medical purposes with minimal or no training from a medical professional; and
  • The device is classified by the FDA under Subpart D of 21 CFR Part 890 (Physical Medicine Devices).
  • It also must have a design that demon­strates that it is not primarily intended for use in a medical institution or office, or by medi­cal professionals. This can be determined by reviewing whether:
  • The device generally must be implanted, in­serted, operated, or otherwise administered by a medical professional;
  • The cost to acquire, maintain, and/or use the device requires a large initial investment and/or ongoing expenditure that is not affordable for the average consumer;
  • The device is a Class III device under the FDA system of classification;
  • The device is classified by the FDA under certain parts or subparts of 21 CFR; or
  • The device qualifies as durable medical equipment, prosthetics, orthotics, and sup­plies for which payment is available exclu­sively on a rental basis.

The regulations provide a safe-harbor provision for qualification under the retail exemption, for medical devices listed on the FDA’s IVD Home Use Lab Tests (over-the-counter tests) database at http://www. accessdata.fda.gov/scripts/cdrh/cfdocs/ cf IVD/Search.cfm. This also includes those described as “OTC” or over-the-counter de­vices in the relevant FDA classification regu­lation heading, or in the FDA’s product code name, the FDA’s device classification name, or the “classification name” field in the FDA’s device registration and listing database.

Devices that qualify as durable medical equipment, prosthetics, orthotics, and supplies, for which payment is available on a purchase basis under Medicare Part B payment rules, are also included under this provision.

The regulations provide that veterinary devices are specifically exempted. “Research Use Only” devices are exempt to the extent that they are not listed with the FDA pursuant to FDA requirements. A device would be listed if it had other purposes than research and/or had been introduced into commercial distribution.

In addition, devices subject to “Investigational Device Exemptions” are not subject to the tax.

Observations and Recommendations

The principal area on which commentators have sought additional guidance is with respect to the retail exemption. Unfortunate­ly, the proposed regulations did not provide the clarity that many interested parties had been seeking.

While the safe harbor is fairly straight-forward and exempts most over-the-counter items, more scrutiny is required in order to determine whether or not other types of medical devices qualify for the exemp­tion. Therefore, it is advisable that taxpayers review their product lists prior to year-end in order to ensure they have identified which of their devices are subject to the tax and which may qualify for an exemption.

If any products qualify for an exemption, it is important that the correct forms be com­pleted to ensure the exemption is properly claimed and supportable.

For those products on which the tax must be charged, manufacturers should evaluate their pricing structures to determine whether it is appropriate to adjust prices to compensate for the tax. Observers, however, have noted that it is unlikely that most companies will be able to pass the cost of the tax on to their customers.

Some companies have already forecasted a large charge to their expected earnings due to the fact that they anticipate the need to absorb the cost, which is what many critics of the tax had feared. There has been concern that if companies are forced to absorb the cost of the tax it will eventually hinder inno­vation as there will be less reinvestment into research and development. Job loss within the industry has also been a primary criticism of those who oppose the tax.

Companies with taxable devices should also familiarize themselves or contact their tax advisors regarding IRS Form 720, which is the form on which the excise tax is reported. Lastly, if the company is not already registered to electronically remit tax to the IRS, it may be required to register.

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