At the end of 2014, we caught up with Radha, VP of Finance for Avnet Technology Solutions to get an update of how TS Asia Pacific performed across the year and the strategies priorities for finance in 2015.
Phenomenal Fiscal Year 2014 for Avnet
Radha highlighted that FY14 was another strong performance year for Avnet Inc, as revenue grew to a record $27.5b, an 8 per cent year-on-year improvement. Operating income came in $931 million, indicating growth of about 15.8%. He further pointed out that diluted earnings per share saw a 16.8 per cent year-on-year growth to $4.24. Altogether, revenue growth, expanded operating income, and earnings per share (EPS) improvement made FY14 a “phenomenal” year for Avnet.
Historic Highs for Avnet Technology Solutions, Asia Pacific
According to Radha, significant progress was made in FY14 in its business model as well as in its financial performance. He shared that historic highs were achieved in Avnet TS APAC’s revenue per quarter and operating income per quarter. Despite the tight ongoing situation in China and India, Radha pointed out that the company had managed their working capital well, further stating that Avnet was going ahead with a much stronger business model and balance sheet into FY15. He also emphasized the disciplined cost management undertaken by the company across its business units as a key contributor to Avnet’s strong performance in FY14.
Fiscal Year 2015 Finance initiatives
Going forward, Radha explained that a key initiative for Avnet’s finance team in FY15 would be to create a clear linkage between the business strategic initiatives driven by the businesses, and the financial measures and outcomes from those initiatives. Secondly, Avnet’s finance teams will also continue to focus on cash flow management, to ensure that such efforts, along with working capital management, would continue to generate significant and positive cash from their operations.
The third area of focus is to ensure that the finance team is fully involved in the dialogue and decisions leading to M&As as well as divestment, thus making sure that that the company can fully realize the benefits derivable from M&A activities.
In the area of talent management, Radha noted that Avnet was, on a global scale, placing emphasis in creating a quality finance organisation by providing opportunities for talented employees to move between business units. The company would launch talent bench strength as well, allowing it to address market opportunities and support its future growth.
Fundamental Building Blocks of Value Added Business Analysis
When it comes down to conducting business analysis in order to identify challenges and generate solutions, data integrity continued to be the foundation for any meaningful analysis. Every organisation needs to have one version of the truth, in order for the finance team’s analysis to be understood clearly.
On the subject of line card expansion, Radha highlighted that Avnet, which carries many OEM products, intends to stay invested on those products. It would therefore be prudent that the company knows the kinds of returns expected on those investments on a consistent basis, and for Avnet to measure those considered important or relevant for businesses in helping them achieve their business objectives.
Being a technology distribution company, Radha said that Avnet saw its margins to be under constant pressure. In that regard, he stressed the necessity for analytical work performed by the finance department to be meaningful, and provide value-add to the business, as well as to keep track of the amount of resources invested in each line card.
Tool & Innovations in the Finance Organisation
In the recent budgeting cycle for FY15, Radha shared how Avnet has adopted the BW tool for budgeting worldwide. The implementation subsequently shortened the accounting cycle, as well as long-term planning. In addition, Avnet has also introduced a module to the ERP system that helps with account receivable management, as well as a tool that automates accounts reconciliation process, which is expected to improve visibility and quality of a balance sheet, along with a faster addressing of outstanding issues. Company-wide, Avnet has adopted HANA to improve its business analytics reporting, the speed and quality of analytics and a faster close cycle in a manner that would help the business meet its goals.
All of these implementations are expected to improve the efficiency of the accounts closing process, and positively impact profit.
In the next conversation, Radha will talk about the business partnership between the CEO and the CFO. Stay tuned!
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