CASE STUDY Yang Yichao FCMA
CIMA where business + finance meet Yang Yichao FCMA CFO, Sara Lee Group, Greater China
As chief financial officer at Sara Lee, Greater China, Yang Yichao is using his CIMA qualification to design an innovative approach and deliver multi-$million savings. This is his story... The turning point in Yichao’s career came when he was introduced to the CIMA Professional Qualification in management accounting.
‘When I first graduated from university I worked for a bank but it wasn’t for me,’ he recalls. ‘The bank had very strict rules and I found myself drowning in procedures. The focus was on following the routine but I was more interested in how much you can contribute to a business.’
‘CIMA shows you how to understand the story behind the numbers and to think from the business perspective.’
CASE STUDY Yang Yichao FCMA
In 1996, Yichao moved to a division of industrial gas suppliers, BOC, in Shanghai. At first, he worked on improving his skills in the technical side of accounting such as reporting and modelling. But it wasn’t long before his boss told him that he would progress up the career ladder more quickly if he studied for the CIMA qualification. Reading the story behind the numbers ‘Traditional accounting focuses on the figures, but CIMA shows you how to understand the story behind the numbers and to think from the business perspective,’ Yichao says. ‘The emphasis is on getting the right information and using it in the right way. Presenting information that is relevant and easy-to-understand is more important that creating fancy financial models.’ And the results speak for themselves… New solutions to historic challenges Since becoming a CIMA member, Yichao has initiated a number of innovative projects. As general manager of finance and administration at BOC’s China division, he saved the company more than US$1m a year by devising a ‘virtual pooling treasury system’. ‘China doesn’t allow non-financial organisations to borrow money from each other,’ Yichao explains. ‘Because of these restrictions, BOC couldn’t lend money to other entities in the same group.’ By the late 1990s, the scale of incoming business was increasing rapidly and the company found itself with surplus cash – but unable to use this surplus to support its newer offshoots.
CASE STUDY Yang Yichao
‘Working this way was time-consuming and expensive as the young companies were having to pay high interest rates on bank loans,’ states Yichao. ‘We had to find a solution.’
chief financial officer at Sara Lee’s household and bodycare division for the Greater China division. When Yichao arrived in 2006 the company had two separate legal entities in China.
Visionary Yichao found a better way… After talking to the banks, Yichao came up with the idea of pooling the group’s surplus cash using an ‘entrustment loan’. The pioneering management accountant found a bank that was willing to act as an intermediary and all 12 entities in the BOC group were put under an umbrella agreement.
Tackling the issues facing Sara Lee ‘There was a duplication of costs and spending because the two companies were often selling the same products to the same customers,’ he says. At the same time, the profit-making company had to pay income tax while the loss making company could not utilise its tax losses – as China does not allow tax consolidations in the same group.
Companies in the group with surplus cash channelled money into a central pool which was managed by the bank. The cash-strapped companies could then borrow money from this pool at a reduced interest rate. Interest earned on the cash pool meant that the group as a whole saved around 3.5% on inter-company loans.
‘A lot of companies in China are following the same solution now’ US$1 million saved – and a new process discovered During Yichao’s time at BOC, US$30 million was used in inter-company borrowing – which in real terms, means Yichao saved the business around US$1 million. Unsurprisingly, other businesses quickly caught on to the idea. ‘A lot of companies in China are following the same solution now,’ he says. ‘Many banks have even developed standard software to handle this type of transaction.’ More recently, Yichao has been busy developing more effective operations in his current role as
CIMA helped Yichao see the bigger picture Where many would have given up, innovative Yichao looked sideways and saw an opportunity to save money. ‘We decided to consolidate some of the core functions into a new company which would act as a sole window facing our customers,’ Yichao says. ‘At the same time we centralised certain functions to create something like a shared services centre.’ Yichao’s hard work has paid off and the project is now saving the company US$500,000 a year.
‘The CIMA syllabus changed my whole mindset and provided me with a different portfolio of skills.’ What’s Yichao’s secret? Although Yichao has come a long way from his days as a CIMA student, it’s clear that he continues to benefit from his CIMA qualification. He explains: ‘CIMA has provided me with a very profound knowledge in terms of business
thinking and awareness. The CIMA syllabus changed my whole mindset and provided me with a different portfolio of skills.’
Yichao’s hard work has paid off and the project is now saving the company US$500,000 a year.
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