Karthik Mohan is CFO of VIP StarNetwork, a healthcare company for the film industry based in Albuquerque, New Mexico. The company provides medical services to film professionals, including cast and crew members, who are away from their regular physicians. The company also now outsources Covid-19 testing services for any industry. We asked Mohan about recent strategic initiatives he has undertaken and what other CFOs can learn from them.
Tell me about a recent initiative that you spearheaded.
Once I took over in this role back in October 2020, I took the initiative to manage the cash flow for the company. Since then, we have streamlined the process for vendor payments and client payments.
The first step I took was to create a short-term cash forecast, which helped pave the way. I reviewed our receivables, including the processing, flow and timing of the customer contacts. I also reviewed collection tools available to the employees, as well as the performance of collections personnel, credit terms for future contracts and average collection period.
The second step was to review payables, including the process, flow and personnel involved in payables function and vendor contacts. I focused attention toward streamlining the process and making sure we were avoiding duplicate payments and errors.
The third step was to review billing, including the process, flow and speed at which an invoice was sent to the client. I put an emphasis on training the employees to lower billing errors and process checks where a bill is reviewed by supervisors and sales personnel to make sure the line items were in line with the contract before it was sent to the customer.
The fourth step was to review payroll, including the process, flow and timing. Any errors in the system were found and fixed, and a better system was put in place for error tracking, with ample training to the employee and with a focus on increasing the accuracy while entering data. Finally, I addressed the understanding of and making debt payments and reconciling the accounts.
What was the impact of all these moves?
These steps enabled us to generate a preliminary cash forecast almost immediately. Once we had this roadmap in our hand, we were able to divert our attention to the places where we were lacking. We were able to collect almost immediately once we had our accounts receivable process reviewed, and we were able to set a goal for the weekly and biweekly collections. This brought us the inflow of the required working capital to address our accounts receivable, payroll, short-term debts and long-term debts.
Any advice for other CFOs undergoing similar initiatives?
I believe CFOs who are looking to manage cash flows should have a cash budget. They should also ask for deposits from clients when starting projects with them, offer discounts to clients who pay earlier, re-engage with vendors for better credit terms and strictly enforce their collection policy. Above all, CFOs should continue to invest in people and resources.
How has the Covid-19 pandemic impacted raising capital and managing funds?
Venture capitalists are sitting on a lot of money at this time, and they are looking to invest and make deals. The startup environment in the country is a very lucrative market now for venture capitalists.
We could possibly see more companies start up in the coming months as ideas have become plentiful. Having said that, the terms for startups might not be as lucrative as before, and the venture capitalists and other investors might be looking for a very detailed process review.
What made you choose to work in this industry?
The healthcare industry, even though it is stressful, can be very rewarding and fulfilling. The CEO’s vision of grassroots development and bringing healthcare to more workers enticed me to work for this company.
What are some new ideas and strategies that you brought to your company?
We are a people-oriented company—it’s one of our core values. To achieve this, we implemented various ideas and strategies along with input from mentors and the leadership team.
One of those strategies is using the idea of emotional quotient to help better manage stress among our employees. The other one would be a concept called Kaizen—“change for the better” or “continuous improvement.” It’s a Japanese business philosophy regarding processes that continuously improves operations and involves all employees. Kaizen sees improvement in productivity as a gradual and methodical process.