If CEO’s ran their companies like the Candidates run their campaigns….

5P'sThe primaries are over and now we Americans and the world get to see the time honored spectacles of the Republican and Democratic Conventions.

A place where party faithful come and listen to leaders of their party paint a vision of tomorrow and in turn try to convince the greater party members and those of other parties that their vision is better.

Sound nice on paper, doesn’t it?  However, many times, and it looks like especially with this election, the paper is a little thin on specifics and heavy on hyperbole.  Nevertheless, this article isn’t really about our electoral process or this specific election as it is a similarly to what many CEO practice; business plans that are thin on specifics and heavy on hyperbole.

Business Planning

We were taught when we were young that the quickest route between two points was a straight line (it is actually a great circle, at least when it comes to navigation; I add this because I don’t want the fact checkers to have a snit).  So why are so many businesses without not only a strategic business plan, but a tactical plan as well?

“You fail to plan, then you plan to Fail.” – John L. Beckley, Founder of The Economics Press, Inc. and author

Ask a CEO what the business plan is, and they will give you a bullet pointed executive summary as proof that there is a plan.  While this limited executive summary is better than nothing; it really isn’t much.  It is talking points, and as we saw in the primaries, they get old after a while, especially without any meat to backup those talking points.  And by meat, we’re talking facts, figures, roadmaps, tasks, milestones, dates, timing, slippage and ultimately [sub]-goals.

Now let’s be fair to our CEOs.  Not every company has the talent or budget to have a planning department in their company.  Planning takes time, a tremendous amount of time.  Time that many feel is unproductive, failing to meet the goal of producing revenue.  This can’t be farther than the truth (within reason).

This is why we have the old military adage, the 5P’s.  Proper Planning Prevents Poor Performance.  Five simple words that say it all.

Strategic v Tactical Planning

Of the two types of planning, strategic is the most common.  Why, because you can create your bullet pointed executive summary, having for all intents and purposes a strategic plan, albeit a thin plan, but a plan nonetheless.

Most people can think strategically to some extent.  Moreover, if you are a CEO or business owner, you’ve at least identified long-term or overall aims and interests and the some means of achieving them.

Some of the business plans I have seen say:

“We are the primary distributor of widgets in the southern part of the county.  We do this by providing:

  • The best value proposition
  • Next day delivery
  • No minimums
  • No handling charges

Which will allow us to build our company and ultimately enter the northern part of the county.”

That is for better or worse a strategic plan.  Where we are, where we want to go and some reasons why they will be able to achieve their goal.

Tactical plans give you a step-by-step, inch-by-inch recipe of how to go from here to there.  They should provide milestones, timing, be quantifiable, be able to be monitored, measured and have the ability for feedback. Tactical planning is more difficult because you need to get down in the mud and get dirty.

It’s easy to say (and every politician has said this) “I will keep our streets safe!” That is a great strategic plan and even a better political slogan since it imbues itself to the psychology of the voter; I want my family and friends safe.  However, how you get there is complicated and complex.  Your plan needs to match that complexity, but be dynamic enough to change with the situation.

A business plan needs to be dynamic.  Static plans will fail once there is a choice that was not imagined on the decision tree of the plan.  Think of the term “abort”; a computer term meaning abnormal termination.  The programmers did not think of every single possible result and the computer system, which is in some respects static, just gave up (especially older computer systems).

Living Document

Your business plan is a living document.  Simply as your business grows and changes, so too should your business plan.  As a CEO you see an opportunity that needs to be exploited.  Your business plan should be adjusted to reflect this new deviation, which in reality may be the ultimate in a dynamic system, change and that change brining profitability as a result.

“A lack of planning on your part, does not constitute an emergency on my part.” – SSgt Chad Sommers, USMC


Next time you are in a position to hear a pitch about a company, think about if there is any real planning behind the hyperbole.  Remember the more planning the better chance of success!

Who really makes the Budget?

Someone didn't like their brand new booties
Someone didn’t like their brand new booties

I have been making budgets for way too many years in scores of industries, sectors, sub-sectors, mid sized companies, small companies, start-ups, growth, turnarounds, privately held, VC/PE held, publically held; well I guess you get the drift.

As the senior accounting/finance person (the titles have been different over the years, but the responsibly in this instance was the same), I was charged with making a budget that represents both revenues and costs for the foreseeable future (be that 12 months, 18 months or longer).  Simple task or so one would think.

Some of you would be amazed, others surprised and a smaller sub-set will chuckle when I say, I as the person who makes the budget, let’s say as the Chief Financial Officer cannot do it in a bubble, on my private island with no access to anyone save my very intelligent dog.  For those of you who are dog people, he is a cross between a King Charles Cavalier Spaniel and Cocker Spaniel.  The designer dog lovers call this breed a Cockerlier and pay big money for pups; we believe in getting dogs from rescue groups, so we just call him Mr. McQ). But I digressed.

Parts of the Budget

All businesses should have a budget for revenues and expenses.  Everyone knows how simple it is to shake that magic eight ball and ask the question “How much will revenues be this year”!  But it’s not simple and most CFO’s don’t have a magic eight ball, but they have a marketing department and maybe a CMO, a sales department and maybe a CRO and quite possibly some consultants and prior history.

Therefore, the formulation of the revenue piece of the budget just became a team approach with my job, as CFO, to be the Team Leader, the Project Manager, the Realist and Lord High Questioner.  In other words, it is nice you people gave me this number.  It’s really close to last years, or it’s really high/low; but really how did you come up with the number.  I want to see the data you used, a list of people you spoke with, etc.

Once I am satisfied that the number makes sense, remember it’s a best guess; then I will accept and use that number.  Asking them to move the number to reach a magic bottom line number is dishonest, especially if I’m asking them to inflate prospective revenues.  This also goes for the average mark-up percentage.

How can we turn around and charge more for the same item (whether we got a price increase or not from our vendor/operation) if we aren’t providing value.  So another duty is to question our value proposition vis a vis our products, or competitors and the market place itself.  Let’s not forget to factor in the geopolitical atmosphere of the locales where we operate and what or market growth plan is as well.

Moreover, since I talked about our growth plan, what is or does our strategic and tactical business plans say?  Are the revenues (and for that matter the costs) in line with what the Board has dictated?

Same sort of concepts are used for the Cost of Goods Sold, if we have inventory and all the operational expenses.  It’s a team approach with me as the CFO having the same duties, but possibly, most definitely now working with a new set of team participants who are involved in purchasing, managing other areas of the company, those who are responsible for head count and the list goes on.

So who really makes the budget?

I can honestly say it is or at least it should be a Team approach, with my role as coordinator or project manager reaching out to both internal and external subject matter experts to create a projection that it not only realistic, but attainable.

So it is not “my” budget, it is our budget.  I may have to defend it before the Board, and they may call it “my” budget, but it isn’t.  A budget done properly has a lot of different hands involved, and lots of managerial knowhow, negotiations and personality at work.  The final product is not mine it is ours!

My view on the final product

Now I always like to add some fat into my budgets, as a way to hedge our bets.  I always try to use a slightly lower revenue number and slightly higher expense numbers.   If both these numbers become reality, then the company matched the projected net income/EBITDA number of the budget.

However, if we do a better job at cost containment, then we’ve made more money.  In addition, if we sold more than anticipated, we made more money.  Moreover, if we really were lucky and spent less on expenses and sold more product or services, then we; the organization; may have had banner year!

Query: So why do Hiring Managers feel that the CFO needs so much industry or sub-sector experience to do the budget?  Maybe you can enlighten me?


Dear CEO, What is your definition of the qualities and qualifications of a CFO?

CThis is an open letter to the Chief Executive Officers of the world.

There seems to be a great amount of confusion on the part of those who are, or who think they are and those who really aren’t, but say they are; as to what qualities and qualifications are necessary to hold the position of a Chief Financial Officer.

There are accountants, controllers/comptrollers, VPs of Finance, public accountants, auditors and Chief Financial Officers.  Just because you are a member of one or more of the aforementioned groups, even if you have the title of CFO, does this qualify you as a CFO?

Who determines what a CFO is or does?

Now, there are many definitions of what is a CFO.  These definitions come from disparate constituencies such as CFOs themselves, Human Resources, Recruiters, Academia and public accountants.  Each constituency has their own reasons for creating these definitions.  Some based in reality, some not.  Some to increase their perceived power or prestige, others out of sheer ignorance.

However, the faction we seldom hear from are those who are actually the people who need to work with their CFOs day in and day out, the CEOs.

Now there are many different types of CEOs.  There are the entrepreneurial CEO, who is the owner, a partner and/or founder.  All-powerful and controlling their businesses could literally be morphing on a daily basis.  They have their unique definition, based on their perceived needs.

Then there is the CEO of the more mature mid-cap company.  While the company may have many attributes of an entrepreneurial atmosphere, the company has more structure with official policies, rules, procedures and processes.  These CEOs have their definition as the CFO role has probably changed.

Lastly, there are the larger mid-cap to large-cap companies who are steeped in bureaucracy, structure, where policies and procedures are foremost in the mind, even when they are crippling at best.  And yes, the definition of a CFO may be unique here as well.

Let us not overlook that any one of the CEOs may have to take a step to the left (thank you Richard O’Brien) because they are owed and/or controlled by Venture Capital or Private Equity.  That changes the dynamic and the definition of who the CFO may report to, and thus the qualities and qualifications of CFOs in this space.

We can’t overlook the public companies either, which may be of any size as well.  These companies and their CFOs have similar but different requirements.

Which definition is right?

So who is right?  I can say, from what I’ve seen, who is usually wrong, but I won’t. Why?  Because that would be tainting the conversation.  I want to hear from the Chief Executive Officers themselves.  I am not hiring me (the CFO), but you, the CEO should be (hopefully it is the CEO/Board, not HR).

I want to hear what the CEOs think and why they think their requirements are correct.  I want to know why “industry experience” is so crucial, where over 90% of all businesses are similar, that a smart person (we hope we all agree that the CFO should be a smart person) either can learn or lean on subject matter experts (SME) for what they don’t know, in the short term, but in reality always, because that is the definition of a SME, they are the experts.

Given the sheer span of the responsibilities of a CFO, regardless of company size, how can one person be an expert on it all?  I mean, no one demands that an attorney know everything (that is why they specialize).  Same thing for the medical profession and believe it or not, public accounting.  Think about it, you as the CEO rely on your C-Suite to assist you in performing your job.

Isn’t the role of the CFO to make informed decisions on all available information?  Wouldn’t a smart CFO seek out information and opinion to either inform themselves on an issue they don’t know as well as they should or just to broaden their grasp on an issue.  Whom do they seek out?  SME’s.

Let us return to industry experience for a second.  If you only want to hire from within an industry, sector, or sub-sector, how do you gain diversity in thought and experience in your business?  I mean, if I only worked in the widget industry and everyone makes left-handed widgets; where is the innovation.  Who would ever think of making a right-handed widget and if they did, could someone steeped in the culture of the left even give anything but a short shrift to the right-handed business case?

Diversity of experiences which includes education, work experiences, post-nominals for what they are worth, are part of what makes that a single CFO better than the next for a particular position.  Their (the CFOs) ethics, ethos, working paradigms and management style are just as important.  Nothing can be worse than hiring an individual who clashes, thereby diminishes or eliminates all value add.  Even in change management, it is easier to succeed with the project by winning the hearts and minds of the employees as opposed to being dictatorial.

Is hiring to company culture important?  It depends on what the CEO and Board need to get accomplished.  The same is true as to whether one needs a tactical CFO or a strategic CFO.  However, if you are hiring a tactical CFO, what are the other members of the accounting/finance leadership team doing?  While all strategic CFOs do get involved in tactical issues, that is a far cry from hiring someone who becomes mired in the day to day events to the exclusion of the strategic issues that businesses must tackle.

Let us start the discussion!

So Mr. and Ms. Chief Executive Officer.  What do you see in the general sense, the macro big picture scenario of your ideal CFO?  Then, since the ideal is usually a utopian concept, make it a real definition.  Flush it out with what would make the real candidate for your industry, sector or business.  Then look at some of the definitions you find describing the job description and qualifications needed for a particular CFO.

Just like school, compare and contrast.

As the discussion grows, and I truly hope it does, has your point of view changed?

Please let those of us who are CFOs today or aspire to be the CFO tomorrow know what is real and what is not, so we know where we stand or need to stand to make positive contributions to your companies and our [professional] lives.

Small businesses need to get financial savvy

savvyI went to the Small Business Expo held in NYC last week.  This end of the company size/age spectrum is not where I spend a lot of my time, but I do start-ups and it was worth the trip to go  (and I got a great workout walking cross-town).

What I found, by way of vendors was extremely interesting.

There were no accounting system vendors like Xero or Quickbooks.  Strange as this is definitely fertile ground for sales.  There was one single bookkeeping service and one non-affiliated CPA.  Again, prime sources of new clientele.  These three groups provide the basis for financial/tax services to small businesses.

In addition there was a smattering of the larger generic banks and a plethora of funding companies (factors, ABL and others of dubious nature), more about these later.

Lastly, a few franchise brokers attended.

 Why small business refuse to get financially well informed

I think it comes down to tunnel vision.  If the process does not directly drive revenue, than that is a cost.  Expenses are to be avoided at all costs (sorry for the pun and cliché); unless of course that cost can offset a personal cash outlay, (we are speaking T&E, electronics and auto leases).  Therefore, whom or what function in a company, especially when your mindset and point of view is so narrow; screams expense.  Accounting/Finance of course.

Why hire an accountant who is trained to analyze financial performance, where a bookkeeper will do?  Why have little to no internal controls and misplaced trust when it is just easier to delegate without providing proper and timely supervision?  Why have a business plan and gauge your success against that plan, because it costs money to track money!

So many small businesses take the cheap way out.  Cheap is not inexpensive.  Cheap the state of  “is not fully understanding the tradeoff” today and the loss of service value versus the increased cost to obtain that same level of value later.

An example could be implementing a system that will only be able to handle your company for 12 months of estimated growth versus spending more now and not have to implement two systems for the next several years.  System implementation, whatever that system is, from computers to software, an office floor plan to leasing a copier, is expensive, in both time spent, loss of other opportunities and salaries and consulting fees.  One must look past today and see where you think you will be in the mid-term.

The entrepreneurial myopia against finances can have some dire consequences.  It causes bad decisions to be made, due to lack of information, and forecasting made by experienced and qualified staff or advisors (who themselves cost money and don’t generate revenues).

The funding companies

 I mentioned the fair number of funding companies present at this Expo.

All companies need working capital.  Working capital comes from three sources, organic, investors and creditors.

Organic is though sales.  As revenue grows so should the contribution margin.  So as revenue is growing, hopefully, and if the company has and is following their budget; and at the same time is practicing cost containment, working capital will grow.

When costs are growing faster than sales, not an unexpected event in a start-up, working capital will need to be infused.  One can either borrow which means you need to pay it back usually monthly plus interest or let someone buy into the business, and never be obligated to pay it back.

So, you either sell a piece of the business, gain a partner who may or may not have other benefits, synergies or disadvantages (like being intrusive or annoying) or borrow the money and have an entity who is looking for the cash every month, and with lots of penalties if you fail to pay on time.

Funding companies want you to take their money.  They in return charge you interest (whether they call it that or not).  They also charge you fees for certain services (whether they themselves pay a fee or not for that service).  Between interest and service fees, the adjusted APR can get quite steep.

Also, many of these funding houses are predatory; they are not your friend and don’t ever be fooled into thinking that they are.  Other funding houses do try to help and do, for a fee, provide services that are beneficial and priced correctly.  But remember, they are in business and the concept of business is to make money.  Caveat Emptor.

So, I started walking around to all these funding companies.  I just wanted to know the answer to one question.  What is your APR? If they said it depends on [fill in a factor or issue], I just clarified it as what is your highest APR rate you may charge. Not only is it a simple question, but NYS Banking Laws require full disclosure, so you really need to tell the customer.

The answers were quite astounding. In New York State, which has complicated law structure, at least when it comes to loans finding out what the legal maximum interest rate for a loan can be daunting.  One needs to look in two places, one for civil usury and another for criminal usury.  The former is found in the banking laws and the latter, the penal code.  However, for simplicity sake, for private loans under $2.5M, the criminal usury maximum is 25%.

I was being told rates from 9% to 50%.  I was told by one company that they don’t release that information.  Another person told me the APR is not important, it is the IRR (what?).  One firm stated quite clearly that the broker could make as much as eight (8) points, where another had a placard of a fictitious client saying “I don’t want to sell a piece of my business to obtain working capital, instead I went to xyz”.

Needless to say there were some vendors that were honest and their fees were within the norm for third-tier lending.

Exits and Investments

Lastly, why would these small firms not want to, from the get-go, set themselves up so if they had an opportunity for an exit or a major investor buying in, that they be ready?  It makes no sense.

However, does it?  In some respects, many small entrepreneurs have a million dollar idea and just want to run with that idea.  They are going to make so much money, that it does not matter.  That is the Facebook or LinkedIn folklore, but both of these companies had scores of professionals, both on staff and as consultants, making sure everything was just right for the IPO or sale.

I guess the small businesspeople just miss that paragraph.


If you are a small firm (even a larger than small firm) it behooves management to understand and embrace the financial-accounting aspect of the business.

Get professionals on you team, the right CFO and/or Controller.  The CPA/Audit firm and a good General Counsel that has experience (real experience) in you market.  Too many times people ask favors of friends who are lawyers and they get fuzzy answers that they rely on.  Just because you do corporate law, the laws concerning basket weaving may be different and that difference could mean winning or losing both in and out of court.

Why I never describe myself as a CFO that can cut costs

cost cuttingI have met and talked to hundreds of individuals who call themselves Chief Financial Officers.  Some work in the small to mid-market, some large cap all with varying degrees, certification, and experiences in different industries and sectors.  What an overwhelming number of these fine men and women say in their “elevator pitch” is they can come into your company and cut costs.

Anyone can cut costs!  To steal a slogan from Nancy Regan; “just say no” and you have reduced a cost. Experienced business people can cut costs, so we can change the statement to all CFO’s, Controllers, accountants and bookkeepers can cut costs.  Those CFO’s who claim in their elevator pitch that they can cut costs are tactical CFO’s. They fully involve themselves; immerse themselves; in this pursuit to the exclusion of most of the other aspects of being a CFO.

However, can you cut costs without damaging the business?  Just like a surgeon, cut too deep and you damage the underlying organs or tissues and while you may cure the patient today, tomorrow the patient may make a turn for the worse or never regain full mobility.

Nevertheless, we are moving away from my central thesis, “Why I never describe myself as a CFO that can cut costs”.  Yes, I can cut costs.  Yes, I can do it intelligently, and argue when cost cutting has exceeded the safe zone and the business will be damaged.  I am not alone here in this skillset.

However, if I convinced you to hire me; and my claim to fame is cost cutting; I am setting myself up for future issues.  Think about it; I come into your business, it may take a year or so, and I am able to save the business a significant amount of money.  I do it smartly and the business does not suffer much.  A job well done!

Then, what is my next trick?  Most of the time you can only cut costs once, sometimes twice.  Then what?  What else can I do?  I sold myself as a cost cutter.  I performed and now it is time the business hires that strategic CFO it needs.  I have indeed raised the bottom line, but how have I helped the organization grow?

What I sell

So what do I tell CEO’s?  I tell them that I am a strategic CFO.  I believe in cost mitigation.  Mitigation includes intelligently controlling costs; which includes evaluating the way we do business.  Evaluation requires a strategic vision of the business.  A mapping of all processes and an on-going GAP Analysis program to root out stovepipes, waste and non-performing aspects of the business.

While I do believe in cost mitigation, by using GAP Analysis and other tools (such as the development of metrics to assist in gauging effectiveness of business and programs) I also believe in empowering and growing top line revenues.

How?  By providing information that sales and marketing needs, based on their requirements.  Giving them access to the data in formats that they want, not what I like.  Teaching and encouraging their use of the tools provided to analyze the company data.  By spending time with sales and marketing during their sales cycle.  This means I go on sales calls.  I meet our customers.  I learn to understand the business from the revenue side.

I learn what roadblocks there are in selling our product or service.  I fully understand our value proposition.  I empower sales to close the deal, by giving them the full understanding of where our break-even position is, and where it may pay to make a sale a loss leader.

I also learn the business from the vendor side, by sitting in on the purchasing cycle.  I visit vendors, and where these vendors actually produce specific product for the company, I learn their process.  Now I am able to understand the practical issues that may be increasing our costs.  Higher costs may make our products more difficult to sell.

On the other hand, pricing may not be the reason we cannot increase revenue.  That is why I sit with the marketing department.  I want to understand the processes they use.  I want to know: How do they find new customers?  What methodology do the use to  decide what new products and services to bring to market.

I also want to provide them my point of view, from both the strategic and financial vantage, as well as diversity in businesses, markets, sectors and industries that I have acquired in business.

It is for these reasons I can never describe myself as a CFO that can cut costs because if I do, I have painted myself into a corner, locked the door to the room and will never be able to get out. No disrespect intended to Gaston Leroux’s literary masterpiece “The Mystery of the Yellow Room”.

GAP Analysis – why it should happen constantly

Gap AnalysisGAP Analysis is a technique used by all strata within an organization to first gauge how they are doing today versus a future state as well as a basis for creating a template or plan for improvement.

A simple concept

Really a very simple concept; I’m on first base, because I can see the scoreboard and the referees agree.  I want to get to home plate, and along the way, I’ll need some help.  Whether that comes directly from the opposing team in the form of a balk, walk, an error, a player hit by a pitch or just bad pitching or from fellow teammates in exceptional hitting or base stealing.  In any event, where I have control, I need to work on those processes to make sure that if the opportunity arises, I can capitalize on it.

So in GAP Analysis, we have the extant company and the company in the future, let’s say company 2.0.  Am I at the ideal?  That is a simple yes or no.  Moreover, that may work fine for some GAP Analysis projects.  It can be a great bubble sort of your issues.  For those who never took a programming course, a method compares two items and sorts them based on a criteria.  The sort goes through the entire data set until you have those that match the criteria and those that don’t.  It is considered slow and inefiectint, but it does work.   We can call this type of GAP Analysis a binary GAP Analysis as a quick GAP Analysis.

A little more complicated

For a deeper more efficient and informational GAP Analysis I like to modify the binary aspect and remove, the “Yes” and “No” feature and use the integer scale of 0 to 10.  There are only two ways to get a zero, you don’t do a specific process, and this zero really should be scored as a not applicable (N/A) or you failed to do a process that you should.  In comparison, very few processes get a 10, because nothing is truly perfect.

So why would I give a 10?  The reason would be the antithesis of a zero, in that there are only two results, it’s done or it’s not.  An example is that you need to file a tax document by the 25th of a given month.  You don’t get extra credit if it’s early, however you do get a penalty if it’s late.  Therefore, if you file by the 25th, you’d get a 10, after the 25th, a zero.  Actually in this case, the scale has a “Y”/”N” attribute to clarify the methodology.

Therefore, our scale should be 0 to 10 plus “Y” and “N”.  So why bother?  Because now you can see where on a linear scale your processes are doing.  It is much easier to tackle and see improvement when the score is low, than when the score is high.  From both a percentage basis and the sheer amount of what can get fixed, the low scorers will probably provide both quicker roads to productivity increases, lower costs and better internal PR.

Remember, in order to properly do any GAP Analysis you have to have a known where are we today (business process mapping) and where you want to be in the future (business strategy, planning and functional requirements).  GAP Analysis can be done successfully without a thoughtful and compressive determination of these two aspects.

Why constantly?

If you were indeed executing plans at improving processes, how else would you know whether the plans were successful?  Using GAP Analysis to gauge progress of a project is another use of GAP Analysis.

I have created an on-demand course for Proformative.com on both business process mapping and GAP analysis.  Proformative charges $99 for one year of unlimited courses.  Currently there are over 275 courses with more being added every day.

My courses can be found here:


So when was the last time you did GAP Analysis (either a quick one or the more complex version)?

Business Process Mapping – when was the last time you created those maps?

Business Process

Business Process Mapping, a simple yet time-consuming chore that seems never to get done due to lack of enthusiasm of both management and staff.  A strange phenomenon where both employers and employees are in perfect synergy and both terribly short sited.

For those who have never been involved in business process mapping: it is the systematic collation of every action that is done by an employee for a given result.  An example, I think, would be easier to understand.

Cash Receipts:  Procedure 1: via Mail.  Mail is delivered to the receptionist who then does a rough sort, mail made out to individuals and general or non-specific mail.  This mail (general or non-specific) goes to the office manager who then sorts the mail by department and gives accounting all invoices, notices, legal items and checks.

The A/R clerk opens the obvious checks and runs a manual total on the checks. [snip]

The process of business mapping, as stated, is time-consuming and what is of extreme importance is it should be done separately by everyone who is empowered to perform the process.  This is done up and down the process chain, that is those who feed the process and those who receive the results of the process.  So in our example, the Receptionist, the Office Manager, the A/R Clerk and the Controller.  Let us clarify the term “empowered to perform”.  This term is meant to apply to anyone who is cross-trained or performs the process.

Why?  Have you ever played telephone as a kid?  The first person says a sentence and the last person usually says something else.  In business, we want standardization on all processes.  It helps find and eliminate stovepipes and increase productivity.

The end-result should be a standard process document with a graphical diagram (see picture above) detailing the key steps or decisions that need to be made.  This helps keep the process orderly.

There are two other reasons for business process mapping, and periodically updating those maps.  First is training or cross-training of new or existing staff.  In all businesses, people come and go, get transfers within the organization or promotions and like our telephone analogy, bad habits or personalization end up creeping into the process.  A business map will keep those modifications at bay.

Secondly, without a business process map, GAP Analysis cannot be done effectively.  How can you compare what is being done today with what you want to see in the future when you don’t have a handle on what’s going on now? The concept is basic, but so many people start a GAP Analysis on what they believe is the extant systems, not the actual systems.

I have created an on-demand course for Proformative.com on both business process mapping and GAP analysis.  Proformative charges $99 for one year of unlimited courses.  Currently there are over 275 courses with more being added every day.

My courses can be found here:


So when was the last time you did a process map?

The Back Office Matters – more than you think!

Back OfficeI have been involved in the start-ups to the $100M business segment for most of my career.  What is almost universal is that most business owners, whether first-timers or serial entrepreneur’s or professional management of start-ups to companies running about $40M in revenue just don’t understand, yet even appreciate what the back-office does for the organization.  More importantly, they fail to realize what benefits can be gained from the back-office if funded correctly and lead effectively.

A few of years ago, in 2011, I went to the New York Times Small Business Summit in New York City.  It was a collection of about 600 men and women who were small business people, entrepreneurs, either working start-ups ventures or the traditional small businesses; all seeking additional insight.  At the plenary session, the guest speaker, Jay Goltz, a very successful businessperson who after 7 tries finally hit the mother lode, an extremely successful company, spoke.  He was at that time and until Dec 2014 wrote the “You’re the Boss” small business blog for the NY Times.

What made that session unique was not what he said, but the indifference shown by the attendees to anything but sales and marketing. I’ll clarify this later as to not degrade those who sole focus is sales and marketing.  But without the back office, they couldn’t do their jobs.

Food for thought: what is your definition of the back office?

The Back Office

Well the back office isn’t made up of little drone bees toiling in the dimly lit, drab back of the building within dingy cubicles; well maybe there are a few of them.  You actually have all levels of employees that make your company succeed, livable and alive.  From the janitors who keep it clean and mechanically operational to the shipping department, from accountants and bookkeepers to HR, as well as receptionists, information technologists and strategic planners.

To many in management it’s anyone not producing direct revenue; a somewhat myopic viewpoint, but a popular one.  It is just this viewpoint that damages many a company.  Damage in reduced productivity, reduced sales and exorbitant expenses.

So back to my story…  Mr. Goltz held a “town hall” type of session.  The members of the audience asked all sorts of questions.  I’d say 95% of those questions were about sales and marketing, 4% were about hiring employees (sales and marketing) and the last 1% other queries. These questions went on for about 45 minutes until I asked my question and follow-up (part of that 1%).

My question was why no one was interested in the financial health or business processes that ran their companies.  Why was it that no one asked about what type of bookkeeper or accountant they should hire internally?  Did they need a CPA firm, and what could a CPA firm provide?  What was the difference between a CPA firm and a CFO?

Forget about business strategic or tactical planning.  FinTech, was not even an issue (even though that term wasn’t in vogue then, the concept was still being practiced).  Measuring success or other factors of the business through metrics or key performance indicators (KPI’s) – never mentioned.

How about more mundane issues such as what’s more important, an income statement, the balance sheet or statement of cash flows?  Are orders not shipped counted in those numbers?  What’s the best way to source our product?  And the list goes on; questions never asked or answered.

The lack of focus on these vital issues went absent from the other tracts that I attended.  One track was co-chaired by Carol Roth, author and TV financial commentator whose book “The Entrepreneur Equation” was a New York Times Bestseller.  Speaking to her at a break, she too wondered why these issues were never raised (except by yours humble blog writer). In fact, a portion of her book spoke about this very issue.  Her book sat prominently in my bookshelf until Superstorm Sandy destroyed it and the rest of my office in the great flood.

So does the Back Office matter?

Granted, I am biased, for I could be considered the titular head of the back office.  I am a Chief Financial Officer.  However, my role is so much more than debits and credits which was the central point of the job in an era gone by.  In fact, some of the best of breed CFO’s are not even accountants or finance people.  They are strategic thinkers, leaders, big picture people who know they right questions to ask of the subject matter experts to create the basis for what hopefully is a correct decision.

Nevertheless, all those professionals (and even that janitor can be considered a professional, because it is a demeanor that is taken in the performance of duties) do make a difference.  They enable the company to grow.  There are more people in the military providing support functions to the warriors than warriors themselves.  Why, because tools, products, weapons don’t materialize by themselves; they are purchased, catalogued, shipped, quantified, reported by the back office.

So next time you think about the back office or investing in back office systems, understand that the investment may not make revenue directly, but that return on investment will enable the company to increase the top line and the bottom line as well.

What do  you think?

What are you doing to protect your most valuable mission critical resources from being compromised?

I’m not talking about computers, software, or physical security (although that is an aspect) of your offices.  I’m talking about your people, the human assets on which your company is able to operate.

Whiprotectionle I’m not specifically talking about people poachers, market swings, bad employees, bad managers, morale or company culture; they all play a part in protecting your people.

I am talking about health.  I am talking about things you can do within your office to mitigate certain health issues that will not be considered Orwellian or even Bloomberg-ism to your staff.  Simple policies that can have an untold positive effect on the morale and well-being (past the psychological effect) of the staff.

Simple Policy Changes

Flu season is peaking late this year.  The common cold and maladies can strike at any time.  In fact, the ten top communicable diseases include not only the previous two, but strep throat, pink eye and something I never heard of until doing some research for this article, Fifth Disease.

“Fifth Disease is caused by a virus, called parvovirus B19, which tends to spread among children in elementary school. It is most prevalent in the winter and spring, but it can spread at any time and among people of any age.” Says healthline.com.

So what policy changes can you make to protect your staff?  Intelligent use of sick time and remote/telecommuting policies.

Having a sick employee staying home protects all your employees.  Ben Franklin said in 18th century, “An ounce of prevention is worth a pound of cure.”  That paradigm is still true.  There is no reason to risk having the entire office because an employee feels they must come to work sick because of guilt, policy or economic repercussions.

A simple change in a policy like this can go along ways (but not entirely) in relieving some of the second easiest fix a company can do, stress reduction.  While there will always be stress, there are a myriad of steps a company as a whole can do to help reduce stress.

Stress reduction decreases the chance for heart attacks, hypertension and stroke.  Moreover, while there are scores of other triggers for these diseases, a less stressed employee is a more productive and accurate employee.

What can you do?  Enforce breaks, taking lunch/dinner, even a mid-day walking club.  Something that gets your employee away from their daily routine and allows them to just plain relax.  Try it, it does work.

My question to you?

If your company is not talking about these programs, why are they not seriously considering them?

Too much money – the loss of productivity from sick employees and diminished work far outweighs the costs of these simple programs.  A happy workforce is a more productive and loyal workforce.

Lastly, what can affect the staff can affect the bosses, so it’s in their best interest as well!

Caveat Lector – Why your company needs accounting controls

fraudThe Event

“I received a first email this week from our CEO advising of intention to send a wire that day. Then got a second email an hour later with wire details. Bank of Philippines.”, wrote John P. Hart Vice Pres – CFO at Nova Pressroom Products, LLC on Proformative.com, a social media and education site for financial and other professionals.

Jim followed up on that request.  He wrote, “I asked him [the CEO]– in person – why we needed to send $75,400 to an individual in the Philippines!” “WHAT?” he said.”


The Issue

Sadly, this seems to be a more and more common swindle that the criminal element is using to bamboozle the overworked accounting department.

Finding out who the CEO for many companies is quite easy, and spoofing their email address – that is child’s play for these people.

They are just betting on your staff, fellow employees or you to be sloppy. Hey, the CEO is the boss, and if he asks for money to be wired, he knows what he/she is doing, right!

WRONG! So wrong! Dangerously Wrong! Especially from the accounting control perspective.


The Solution – Accounting Controls

Every check that is written, wire that is sent, ACH entered into the banking system needs to be processed by a previously documented set of rules.  Rules may vary a bit, but all of them have the same basic tenants:


  1. Backup documents to clearly and explicitly stipulate what the payment is for (services/products)
  2. Signatures that attest that the documents have been read and approved
  3. Dates
  4. Standard addresses and bank accounts (if any) that the vendor uses (preferably sent via a secured methodology and counter-signed)
  5. Mandatory voice verification of e-mail requests for wires that
  6. Are over a certain threshold (with or without backup documents)
  7. That contain different banking information
  8. Are being sent to a “new” entity

Emerson Galfo the CFO at C-Suite Services added his comments as another way to prevent this situaiton: “I say whole organization because the “in thing” now is SOCIAL ENGINEERING where hackers can get in or get company info via seemingly innocent emails/links. A staffer may innocently click on one.

Here is an example….A staffer has indicated her company email address in her Facebook page. Now, the format of your company email addresses (ex. Firstname.Surname@companyA.com) is out there. From there, a hacker can broadcast an email to ALL your staff and hoping ONE (that is all they need) can be tricked to clicking on a link.”


Just as we have made rules not to open documents from unknown sources, have installed and up to date virus protection, we must now be vigilant on just assuming every e-mail is real.

Just as the fraud where you get an e-mail from someone who is on vacation, is mugged and left penniless asking that you send money to a Western Union address, you need to sit back and think about the contents of requests that just seem wrong.

Think about it, does the IRS call you saying that you owe money and ask for payment over the phone?  No, the IRS would never call you.  They send regular US Mail.  You can independently verify the letter by calling the IRS directly (if in doubt, do not use the telephone number they provided on the letter).

Today, the term caveat lector should become as popular as caveat emptor.  Let the reader beware!