Category Archives: annual planning

The Last 60 Days – Evaluate Envision Execute

Danielle Moga, Barker Associates

The Last 60 Days – Evaluate Envision Execute

There’s nothing that brings on a bit of panic that the end of the year is coming like seeing Christmas decorations prominently displayed at retailers before you’ve even heard the knock of trick or treaters at your door.

For me, as the year-end approaches, I tend to count down shopping days and furiously plan out how I’m going to get it all done. It’s an approach that many of us take as we navigate holiday parties, shopping, travel, and the million other things that are synonymous with the end of the year. Whether you’re a holiday enthusiast or just a busy parent who is driven to make this the best holiday ever, It’s easy to get super focused on the end of the year hoopla for your family to ensure you get it all done, but what about your professional life?

For the business world the last quarter of the year is full of opportunities though I’ve heard countless excuses for the end of the year slack ranging from PTO, lack of focus or just plain ole procrastination but this is the best time of year to outpace your competition and get a jump start on the next year.

Mindy Barker | Barker Associates

“If you fail to plan you plan to fail” – Benjamin Franklin

While everyone else is planning their vacation, surfing online stores for that coveted gift, and running around to countless holiday parties, what are you going to be doing?

Now is the time of year for a full-on sprint to the finish, but to cross the finish line a winner, you need to take some time to evaluate.

What did you set out to accomplish this year?

Did you accomplish all your tasks, achieve your goals?

The last 60 days is an excellent opportunity for a big push to check off those last few boxes on the company to-do list. If you haven’t set specific goals, think in terms of categories and get your team together for a review. The more involvement in the evaluation process, the more likely you will get the support and momentum you need to push ahead.

Financially – Did you meet your profitability goals, move inventory, or land the big customer you had your sights on? If not, design some strategies and draft an action plan for the next 60 days. Is there a campaign you could run, a promo, or maybe a customer appreciation event?  

Projects – Review your project list. How many did you complete? Did your accomplishments align with your goals? Assess current status on open projects and determine what you can accomplish now.

Teammates – Look around, is your team tired, haggard, and barely hanging on? What have you done this year to take care of your team and show your appreciation? People can only push so hard for so long, so if your team has been knocking it out of the park, look for ways to acknowledge and reward. If you don’t know what to do or want to find creative low or no-cost strategies, enlist teammates across all levels. I think you will be surprised at how a little goes a long way towards building a loyal following in the workplace.

Customers – What’s your retention rate? How about an acquisition? Have you on-boarded the customers you desired, and are they generating profitability as you anticipated? Customers are essential in our business, and like teammates, they need to be appreciated. A simple thank you note, a holiday gift, a discount…all simple ideas that make a difference.

Conversely, you may have customers who cost more to serve than they add to revenue. Now is a great time to review those customers and ask why. It may sound crazy to think about firing a customer, but if they are hurting profitability, morale, and taking too many resources, now is the perfect time to devise a phase-out approach.

Environment – Take a look at your surroundings. Have you spent the year head down so focused you no longer see the stack of files or the supply closet in desperate need of a KonMarie makeover? What about empty desks? Did you have layoffs this year, and now a sea of cubes with an errant stapler is your only reminder of what once was. Clean it up. No one needs to see that; it’s depressing. Reorganize your space, check lighting, bring in some plants and ask yourself, is this a place people want to spend most of their waking hours? If not, make a change. Enlist your team. Nothing drives enthusiasm like a DIY project. Set some guidelines and go for it, then plan a celebration to cap off the year.

Once you’ve evaluated your year and have an accurate assessment of the current state, envision your future…dream big with your team. Throw out a few SWAG ideas, brainstorm, put all options on the table to discuss, and leverage to take massive action to reach your goals. Collectively ask “if we were to look back in 60 days, describe the perfect close to the year?” If you know what ideal looks like, then you have something to work towards.

Lastly, map it out. Studies show that we are more likely to be successful if we know what our goals are and then create SMART strategies to turn those goals into reality. Write them out, prominently display them and continually work with your team to get to the finish line and celebrate you’re winning year.

“If you don’t know where you are going, any road will get you there.” – Lewis Carroll

Do you need help creating your winning strategy, finding focus, or creating an action plan for success? Barker Associates is here to help you kick it into gear for the end of the year sprint and plan out your roadmap for future success.

Heading Off Unintended Consequences

Heading Off Unintended Consequences

In recent emails, I’ve updated you on regulations going into effect this year as well as consequences we realize from previous legislation (namely, SOX). The legislation was enacted because of the erosion of accountability in this country. How do you hold your company accountable while also raising the bar for maturity of processes? Here are my recommendations, based on my experiences in private equity firms, for-profits and nonprofit organizations. It means going back to the basics that technology may have allowed inexperienced staff to circumvent.

Unintended Consequences of Financial Regulation

Assess Your Procedures for Payments and Bank Reconciliations

Paper checks – Get rid of them; but if you must have them, make sure to use Positive Pay through the bank. Positive Pay uses information from a file that you provide to the bank each time you process checks. As checks are cashed or deposited, your bank compares the checks they receive against the checks you wrote to ensure they match and are not duplicated.

 

ePayments. If you can eliminate paper checks, consider using an ePayment service. Such services provide a comprehensive payment process with built-in controls. The due diligence process to determine which service will work for you can be overwhelming, but you can request a free ePayment vendor selection checklist I put together with the information you will need about your company and the questions to ask potential vendors during the evaluation phase.

 

I applaud companies who had the foresight to move to the ePayment process. Make certain the IT department has proper documentation on how the process works. With low unemployment and the resulting turnover, you do not want to find yourself with no one who knows how to push the buttons and fix this if something goes wrong with the process.

 

The checkbook is a thing of the past, and many young accounting professionals would not know what one looks like.  I have asked many accountants, as they are processing a stack of checks, how do you know you have enough money in the bank account to cover those checks? Most of the time they put a very proud smile on their face and report, “I checked the online bank account balance this morning and there is plenty of money to cover the checks.”

 

After I hear this, I work to control my facial expression. I should become a poker player so I can practice the poker face I need when I hear this response.

 

So, I ask, “What about the outstanding checks that have not cleared the bank account? What about the auto draw of ongoing expenses like rent and other items? How do you account for that? Do you maintain a checkbook?”

 

The responses or reactions run the gamut from blank stares, to statements such as, “I keep a running total in my head,” “The checks we issue get cashed quickly.” These answers only serve to challenge my poker face so that I can keep good customer relations. Rarely does the person I am asking show me the checkbook kept in the general ledger system and a proper cash reconciliation they prepared for the previous month. I find this lack of process in organizations of all sizes.

 

Bank reconciliations. In general, if the organization has escaped the Sarbanes Oxley controls, which, as I stated before, more and more are doing to escape the enormous and overreaching regulation, there is no timely bank reconciliation.

 

Make sure that, at a minimum, these controls are in place:

  • Blank checks are locked in a secure place and only check processors and checks signers have access to them.
  • Ensure there is a review of the bank reconciliation and the bank statement two times a year by a C-Level executive, Finance Committee or Board member or investor. Request a free step-by-step bank reconciliation checklist on how to do this here.

 

This is a true story. I received a check for payment from a large, publicly-traded company. I was shocked when I received the same check number for the same amount twice in the mail. I called the insurance company to report it, but they never called me back. I received a letter about the duplicate check weeks after I had received the second check and made the phone call. The letter I received was very factual and did not offer an apology or do anything to try to mitigate the branding impact. This was a shocking revelation to me that the lack of controls over payments was everywhere.

 

Get Corporate Credit Card Usage Under Control

 

Credit Cards – If the US government ever creates a Corporate Credit Card office, I am going to run for the position and work myself out of a job. Corporate credit cards are a nightmare to manage in all companies, from small to large.

 

Large, publicly traded companies hide behind the fact that they are audited to ignore credit card controls. Yes, you are audited, but the corporate credit card balance is small and immaterial, which means it does not meet the audit criteria for detail testing. Remember, the outside auditors are focused on what the SEC is going to ask them about – the corporate credit card is not on the list. Many small, fraudulent credit card transactions can add up and instill a culture of weak financial responsibility in an organization.

 

In small organizations, the office manager, bookkeeper, (remember the one who figured out how to print a check out of QuickBooks?), or even the receptionist has a company credit card. This usually happens when a C-level person realizes they may have to pick up the toilet paper at Sam’s Club with their credit card and they do not want to. It’s OK to delegate that responsibility as long as controls are in place to prevent fraud and misuse.

 

In my work with all sizes of organizations, I have found that often they do not have a credit card policy. Get a policy, even if it is short and sweet, and have each employee sign it who is holding a company card. Email me for a free credit card policy template to get you started.

 

Fraud on corporate credit cards is running rampant. Often the employee is incurring small, unauthorized charges that add up to a significant number.  The Accountant, Purchasing Manager or whoever oversees the corporate credit card may be faced with ethical dilemmas every day when executives in higher positions are the guilty parties. Such situations make it difficult to manage and monitor effectively without a signed policy as backup.

 

Small organizations and nonprofits tend to have no automation of the credit card process, relying instead on cardholders to provide receipts for accounting purposes.  When cardholders are late in providing the receipts, accountants set up a holding account in the General Ledger, (which is often QuickBooks), where they charge the payment of the credit card to avoid paying late.  With no accountability for the balance sheet reconciliation, the account just grows. If the accountant responsible for collecting the receipts takes their job seriously, they will walk around the building asking for the receipts and, as an added bonus, hit the goal of 10,000 steps on their Fitbit – the search for the receipts will take care of that!

 

Tighten up controls on the use of corporate credit cards with these process improvements:

 

  • If you work for a public company and have authority over credit cards, set up a process where the Audit Committee of the Board has someone designated to review a monthly or quarterly report of corporate credit card usage. Internal Audit should be reviewing executive expense reports and corporate credit card statements annually. I suggest they pick randomly from the group for about 10% coverage each year and always review the CEO and CFO.
  • Nonprofit Board – make sure there is a policy that each cardholder signs. Review how the process works and suggest implementing automation of credit card receipts. Expensify, or a similar technology tool, can serve that purpose.
  • Private company – Set up automation of collecting credit card receipts and a review process like the one described for nonprofits.

 

Readers of this email who work for well-organized companies with mature practices in place may be thinking, “Surely there are not companies operating without these fundamental business practices in place.” My response is that if that was the case, I would not be writing on this topic or asked repeatedly to present these concepts to audiences!

 

You can easily implement the actions from this post. I’ve made the tools available for you for free.

Get them sent straight to your inbox and download the ones you want.
Tools:
·       Free ePayment vendor selection checklist

·       Free step-by-step bank reconciliation checklist

·       Free credit card policy template

Simple click here – Yes, send me the free tools.

 

If one of your 2019 goals is to build up your company infrastructure with financial process improvements, Barker Associates can help. Contact us today at cfo@mindybarkerassociates.com

 

Find the other related articles here:

Unintended Consequences of Regulation,

ASC 606 Revenue Recognition

Four Must-Haves for Strategic Growth

As new entrepreneurs become caught up in day-to-day survival it’s easy to overlook these four practices that support the long-term strategic growth of the new business:

  • Annual budget
  • Business plan with 5-year forecast
  • Planning for leadership evolution
  • Impact of decisions on cash flow

Let’s start with budgeting. The key to survival is measuring and monitoring the results. It is essential to complete an annual budget, break it down in monthly components and monitor each month. The budget should include an income statement, balance sheet and cash flow. Most companies have an income statement; however, I have seen fewer balance sheets and cash flow projections. This can really get you in trouble as you will not have any line of sight to your working capital needs. Working capital is the cash you need to run the business.

 

4-MustHaves-shutterstock_339785828

Grow in leaps and bounds when you incorporate these 4 strategies.

For example, if you sell goods, chances are you will need to spend money on inventory prior to selling the item and recognizing revenue. If you have projected your sales to increase by 25%, you may have painted a lovely picture of growth with your projected income statement that is not reality if you do not have the cash to purchase the inventory to sell because you have not projected the use of cash to purchase the inventory, which is what the balance sheet and cash flow projection are for. This can really get you into trouble, especially if you have inventory on your balance sheet, but not enough cash coming in from sales to pay for it.

 

In addition to a budget, your company should have a business plan and a five-year forecast. The business plan should articulate the plan for your company’s growth and address anticipated changes in the economy and future trends. It is difficult to predict all of these things, but if you develop a robust business plan, you are thinking through the different scenarios and how these scenarios will impact your business.

 

Think through leadership, including yourself, as your company grows. Clayton Christiansen* of Harvard Business School, says managers who are talented and skilled in the area of productivity and squeezing out the last bit of value from a company’s assets, are usually not the same people who are great at innovation and major change. Often a successful manager replaces the person who is responsible for helping the company become successful when the company becomes mature enough to establish systems and balance checks.

 

It is imperative to think through how decisions you make can impact cash flow – and here is why. I worked with an organization a few years ago that historically had double-digit growth each year and was very profitable. The initial product the business launched was a great success because it was much better than anything on the market. The company was getting ready to launch a second product. At my first management meeting they discussed how the product was on its way to the warehouse, noting they had offered extended payment terms to customers on their entire order if they added the new product to their order. No one had projected the impact this decision would have to their balance sheet and cash flow, so they were unaware that the plan they had in place was going to essentially stop incoming cash – and they had just signed up for a huge payable to the vendor. We had to react quickly and manage cash to meet payroll and other obligations. Such a decision caused a 5-6 month stressful time, requiring we run cash flow projections daily during that time to ensure obligations would be covered.

 

Unsure how to get started on these four critical processes to help with your growth? Contact Mindy Barker & Associates to find out how we can assist with the process.

 

* Clayton Christiansen is regarded as one of the world’s top experts on innovation and growth. He is the Kim B. Clark Professor of Business Administration at the Harvard Business School, where he teaches one of the most popular elective classes for second year students, Building and Sustaining a Successful Enterprise. – See more at: http://www.claytonchristensen.com/biography/#sthash.jS5zzfLx.dpuf

Cost Center Owner – If You Don’t Own the Budget for Your Department – You Should!

As a cost center owner, have you found yourself being asked to approve expenses, but you have no clue where they came from? You know you have a budget, but do you truly understand how it was developed or how you are supposed to work with it on a daily, monthly, quarterly and annual basis?

In the course of the budgeting process, an isolated group often prepares budgets in a vacuum, failing to include the right people in the process. accounting-57284This leads to confusion and frustration when the budget-to-actual expense is compared each month. I have often experienced meetings where budget-to-actual variances are discussed and the manager approving the actual expense (a) has no idea how the budget was prepared and (b) cannot answer any questions about the budget-to-actual variance for the month. This leads to the Board, President and Senior Leaders reviewing and approving a budget based on inaccurate information. They may have unrealistic expectations when planning for the next year as the expenses budgeted in each cost center is inaccurate. Make sure your budget process is well planned out and includes all the responsible parties.

Please contact me if you would like to have your budget process reviewed to learn how to include all of the right contributors, avoid setting unrealistic expectations and finding surprise variances each month.

Why is Preparing a Budget Without a Balance Sheet and Cash Flow Like Driving a Car in a New City with an Old GPS?

Cars built in the early 2000s that had a built-n GPS required periodic updates using a CD with new roads and street addresses. If you are still driving around with a GPS of that era, you already know that when you get to a new construction area, the GPS will confuse you more than help you get to your destination. This analogy is similar to preparing an annual income statement for a budget without updated information. iStock_000019083488_LargeThe annual income statement will show the projected revenue and expenses – but will leave out critical pieces of information vital to the day-to-day planning of a business. Here’s an example of what I mean: revenue is highly seasonal but expenses are spread throughout the year, causing issues with covering expenses month to month. Actual cash flow and the ability to cover debt service payments are not analyzed solely with an income statement. Another example: internally developed software can cost a lot of money; the cash required for the development is maintained on the Balance Sheet and not the Income Statement.

Lack of proper planning and analysis, and failure to prepare a projected-by-month Income Statement, Balance Sheet and Cash Flow can lead to an unplanned cash crisis. Please contact Mindy Barker & Associates if you would like to have your budget process reviewed to determine how you can avoid such crises each month.