True leaders know they are as only as strong as the team they build around them. To that end, hiring not only the most qualified, but also the most compatible C-Suite executives with whom to strategize and collaborate on the future of the company is invaluable.
Recruiting the right person at this level differs significantly from recruiting at other levels. He or she must possess the requisite qualifications and also the requisite experience to be enabled to make significant decisions quickly. Moreover, he or she must have the ability to handle incredible amounts of responsibilities, and function well, if not thrive, under pressure. This person’s presence will impact other employees, the company culture, and the company itself. And a bad hire at this level can lead to enormous disruptions, including damaging morale, decreasing productivity, and adversely affecting the company culture.
Finding the Best Talent Doesn’t Come without Challenges
Recruiting top-level employees presents its own unique set of challenges that aren’t generally encountered at other levels. These challenges should be kept in mind as the recruiting process begins. First, you will likely face competition. These employees are in demand, usually having the ability to choose where they want to work and name their terms.
Additionally, C-Suite employees in general are not actively looking for a new job. In most instances, they are already employed. However, individuals at this level are always looking for new opportunities, so don’t let their current employment stop you. The workforce is different today. Long gone are the days of people retiring from a company after thirty years of service. This person may be ready for a change in his or her career, and that change could be your offer.
Tips to Help Secure the Right C-Suite Fit
Set Goals. Ask yourself the following: What are you looking for? What is negotiable? What is not? What input have you received from your board of directors or even other employees? You should have the answers firmly decided upon before moving forward, and be clear about them during the interview process. It is equally as important to understand with clarity who you do not want to hire. What characteristics do they have? Transparency from the start is essential in this process.
Draft the Right Job Description. Don’t just resurrect an old job description or write what you “think” you need. Engage in due diligence to find out what your competitors are searching for, what candidates are putting out there (if anything), and then set benchmarks and make the description appealing based on the information you learn. This document should never merely be about a title and responsibilities. It should reflect the company’s culture and clearly demonstrate where this person will make the largest impact and how.
Realize Expectations. C-Suite candidates will have certain expectations, often resulting in increased costs. They may request their own office, own parking spot, and certain other benefits. Ask yourself what you are prepared for and can handle financially before you engage in discussions.
Vet carefully, but do not delay. It’s important to get to know this person – not just their qualifications and experience, but their values and who they are at their core. Utilize behavioral interview questions and emotional intelligence quizzes. Have frequent follow ups and thoroughly check references. However, all of this is said with a caveat. Remember this individual is likely in high-demand, and one of your competitors could move in and make them an offer if you delay too long.
Consider promoting someone from within. You should always consider moving someone up from within. Benefits of this decision include being good for overall morale, motivating employees, and increasing retention. Yet, while it is ideal to promote from within, you must ensure he or she is ready for the type of responsibility and demands the C-Suite brings with it.
Hiring at this level requires forward-thinking analysis. It calls for significant preparation far before any job description is drafted or interview occurs. For example, you want to ensure that you’ve created a culture that reflects the company’s mission, objectives, values, and long-term vision. Without proper alignment, you risk attracting the wrong type of candidate for your company.
Often, the first (if not, one of the first) C-Suite executives hired is the Chief Financial Officer. Generally speaking, the owner or CEO excels at strategy or operations, but does not possess the knowledge needed for financial decisions. He or she needs someone who thoroughly understands all financial aspects of the company and can then guide it the right direction. Outsourcing this function is another available option.
With the significant investment of time, money, effort, and energy the recruiting and onboarding of your new C-Suite employee will be, you want to ensure longevity with the right fit. Barker Associates has extensive experience working as an outsourced CFO and assisting companies in determining their needs for this position. If you would like to discuss these services, or if you have other specific areas of concern, please click here to schedule a 30-minute consultation at a rate of $100.
Financial Literacy for Raising Money The Questions You Need to Ask Yourself
As we continue to discuss increasing our financial literacy, we must also consider the ways in which a company increases its chances for securing money for growth. The list of possible ways to obtain money to finance the growth of a company is extensive, including multiple forms of debt and equity instruments. The question of which is right for you is dependent upon your particular situation and your level of understanding of each. In order to navigate through this scenario, we have come up with a list of questions you need to be able to answer to make the best decision for you and your company overall.
Do you really need money for growth?
While there are many professional organizations that make endless promises to help you raise capital for your business, and while they all sound tempting, you must first understand whether or not you actually need money for growth. Contrary to popular belief, you will not always answer this in the affirmative. If you decide your organization requires capital for growth, then begin the process by speaking to your trusted advisors about their opinion on your plans. This discovery process should happen with professionals you already have a relationship with and who know about your company. Think about your attorney, CPA, outsourced CFO, or someone in a similar situation who has previously advised you in these matters. Only after this discovery and pertinent conversations can you then move forward with first designing a strategy, and then executing that strategy in a way that does not allow the fund raising process to consume the C-suite and deteriorate the business itself. These results can occur whether you are a small start-up or a large organization.
How do you know in which direction to go?
If you’re the decision maker and have governance over an organization, the first step is to evaluate your ethics and check your ego at the door before you begin to have the necessary conversations. Raising capital has become so sensationalized that those with decision-making authority tend to think of fund raising as a necessity. However, that is not necessarily the case. While raising funds is a common impetus to growth, it isn’t for every company.
Start by looking at the historical and projected financial information. Ensure the use of funds you expect to raise is clear, and that the financial strategy for growth is viable. This initial step will require that you have quality up-to-date financial information. Click here to see my blog about the need for financial infrastructure.
How do you know who to trust?
Many entrepreneurs tell me about situations where a third party offers to help them raise capital, but charge them a percentage of what they raised. Keep in mind, if the person who made that statement is not a broker or investment banker, that arrangement could be illegal and cause issues as the company grows. My biggest piece of advice is to ask if the person if he or she has a license to effectuate this type of arrangement.
The other issue is that some of the investment bankers have had a difficult time getting clients in the pandemic environment. As a result, they have started consulting to assist with cash flow and to provide themselves with additional companies to move into the investment banking sales funnel. The issue with this is that these companies are signing up to be with the investment banker before they even know if that is the right fit for them or not.
As a true professional, both of these instances are painful to witness. Before executing a contract or providing a deposit to anyone to assist with fund raising, proceed with caution. Make sure their culture and track record are consistent with your goals and strategy. If you have partners that have different goals and ethics, it could be catastrophic to the organization. Do your homework to make sure it is the right partner from the outset!
Do you need debt, equity, or a combination of the two?
Banks are conservative, and it is difficult for any size corporation to secure debt these days. This form of capital is, of course, cheaper than equity overall as you do not have to give up ownership and the interest rates are currently so low.
Equity partners can potentially have in-depth experience with the industry you are in and can actually help you build a larger and more robust entity. The saying is, “You can have a smaller piece of a big pie and actually have more value than a larger piece of a small pie.” If you do your homework and make sure your equity partner is aligned with your values and the right fit overall for your company, you can accomplish this goal.
In a scenario with a combination of convertible preferred stock, it provides the investor with a liquidation preference. In the event a few unlucky events happen, this could mean the common stock investors could wind up with nothing in the end, which is exactly what happened when BlackBerry liquidated. In that case, the company emphasized to employees that they should buy in while they could. When they were granted stock, they had to pay the taxes at the value at the time, and then when they sold the stock, it was, at time, at 1% of the value on which they paid the taxes. So, that could mean they were granted stock worth $45 per share, paid the taxes on it at their rate, let’s say 20% or $9, then they sold it for $.40, which was all the cash they received for that share, despite the taxes they paid. If they had a number of shares, that is a lot of money wasted.
In the situation with a SAFE combination, there is a debt instrument that converts to equity at the next round of investment. This is a great instrument when companies are at an early stage and the discussion over valuation is difficult. When valuations increase quickly for successful companies, this can actually turn into an uncomfortable conversation that can hold up an exit transaction under certain circumstances.
Just as with our previous financial literacy articles, it’s not just about improving your financial knowledge of the present, but about strengthening that knowledge to predict a brighter future, especially as it pertains to the growth of your company. If you would like to discuss various growth strategies and what makes the most sense for your business, or if you have other specific areas of concern, please click here to schedule a 30-minute free consultation. NOTE: beginning May 1, 2021 consultations will no longer be free.
The Balancing Act of Account Reconciliation and Online Banking Convenience Doesn’t Make Up for Inaccuracy
We are continuing our financial literacy discussion with something we all know about … or do we? We’re talking about online banking and its effect on our reconciliation habits (or lack thereof). In our daily routines, with our phones and computers easily assisting us with deposits, automated payments, and Zelle transfers, do we ever think about good old bank account statements and the ever-important task of regular bank account reconciliations? My guess for many is no.
Most of us happily “live” online. Our online lives provide convenience and speed like we’ve never known before. Simply, they provide what we all crave – instant gratification. As a society, we have become accustomed to having all of the information we need with the click of our mouse or a swipe on our smartphone. Dare I say, we tend to get a little lazy, not to mention, annoyed, when we don’t have instantaneous satisfaction. Everything from groceries to dinner delivery to setting appointments to virtual doctor’s appointments to online banking just helps make our lives easier. And we’re all for it.
With regard to online banking, being able to find out your balance, arrange for a payment, and make a deposit all from the palm of our hand is wonderful … in certain situations. However, in many instances, people are becoming far too reliant on this online information and forgetting about some of the basics, such as bank account reconciliation.
In the Days Before Online Banking
Once upon a time, long before online banking became a regular part of our lives, the standard practice for both personal and business checking accounts was to reconcile a check register to a monthly bank statement. You remember those days (or you should) – when you received your bank statement in the mail (yes, the actual mailbox, not email) and then you’d open your checkbook and go through line-by-line check-marking away to make sure each transaction was accounted for? Well, there was a reason for that. You need to know which transactions have cleared and which haven’t, so you can accurately determine how much is in your account (which, in reality, is not always what the number on the statement says).
Yet, when accounting professionals adopted online banking into their processes, organizations tended to forgo the discipline of maintaining a check register as part of their reconciliation processes. In the interest of increasing efficiencies, and feeling as if the ends no longer justified the means, reconciliation became an “obsolete” practice. But should it have? Absolutely not.
A Common Conversation
The following is a typical conversation I’ve had when consulting with clients on accounting process improvements:
Accounting professional (with a bundle of unsigned checks): “This is our process for obtaining check signatures.”
Me:“How do you know you have enough money in the account to cover these checks? What is your procedure?”
Accounting professional:“I checked the balance online this morning.”
Me:“Where is the reconciliation to the check register? How do you know that all of the uncashed checks will not deplete the entire balance?”
Accounting professional:“I know there are not that many outstanding checks.”
Me:“When is the last time you reconciled the account?”
Accounting professional: Answers range from “a year ago” to “I do not remember” (not good) to “yesterday” or “a month ago” (which is good).
Finding the Right Balance
I am not saying there aren’t times when viewing online balances without going through the reconciliation process is appropriate, but it’s not the final reconciliation resource. It’s okay to use online banking as an effective tool to manage your daily cash flow, but it requires the extra effort of being connected to a cash reconciliation process that is properly maintained and reviewed periodically. Without accurate and consistent reconciliations, your organization is at risk of fraud, unauthorized withdrawals, or bank errors. If left unchecked, these issues can quickly lead to cash flow issues that will hurt business operations and stifle growth.
Let’s avoid those situations with an experiment: If you are a CEO, President of a company, or a Finance Chair of a non-profit, ask the accounting department for the latest bank/cash reconciliation of the operating account. Ask specifically for these documents:
The bank reconciliation
A copy of the bank document to which it was reconciled
The Balance Sheet balance to which it was reconciled
(Note: Publicly traded companies, financial institutions, insurance companies and other regulated industries have to maintain reconciliation procedures, so if you are in charge of one of those, regulation will take care of this.)
If you are bold enough to move forward with this call to action, my experience tells me about 50% of you will get a reconciliation completed in the last 45 days. If you get one and do not know how to review it, schedule time with me for a free, no-obligation checklist that will guide you through a high-level review.
If you do not get a reconciliation, and, in fact, get a blank stare from your accounting person, contact me to complete a review of your cash procedures and processes. You may have plenty of cash flow today, but how do you really know without a current reconciliation? Don’t risk finding yourself in a position where you cannot meet your basic financial obligations. “Cash is king” is a cliché’ for a reason – it’s true!
How to Avoid Driving Down the Interstate Blindfolded Our Kick-Off to National Financial Literacy Month
April is National Financial Literacy Month, and I personally cannot think of a better time to discuss the importance of understanding financials. You don’t have to be the CEO of a Fortune 500 company to have a healthy grasp on your numbers. In fact, I sincerely hope that many others do. Financial literacy is important whether it’s for yourself and your family, as the owner of a small business, as a non-profit director, or in any capacity where you have some control over money coming in and money going out. This month presents a timely opportunity to review and upgrade not only your financials, but equally as important, your financial knowledge.
First, some history. National Financial Literacy Month had its beginnings over twenty years ago, and has since evolved into a month-long observance. The idea of dedicating a month to this topic has broad support – the House and Senate have issued joint resolutions in support of National Financial Literacy Month, and the U.S. Department of Education promotes its observance.
What is Financial Literacy and How Does it Affect Business?
According to Investopedia.com, “financial literacy” is the “ability to understand and effectively use various financial skills, including personal financial management, budgeting, and investing.” And unless the business you’ve started or are otherwise running is a financial services firm, accounting, budgets, and numbers may not be your strong suit. That’s okay – they’re not a lot of people’s favorite things either (we are a select few)!
Yet, understanding your business’s finances, including cash flow, profit and loss statements, balance sheets, and budgets, is essential to understanding the overall health of your business. In fact, according to a study by U.S. Bank, as reported in Business Insider, 82% of small businesses fail because of cash flow problems. That’s why every for-profit and non-profit organization owner, officer, and director should prioritize financial literacy in their continuing education. And it’s also why we’re going to help you do just that.
For the next few weeks, we are going to observe National Financial Literacy Month in the best way we know how. You can expect our own version of financial tutorials right here in our blog. We will talk about everything from the terms you need to know to common misconceptions to why it’s so important to review some basic concepts, such as EBITDA (Earnings Before Interest Taxes Depreciation and Amortization), Working Capital (Cash and other Current Assets less Current Liabilities), Aged Accounts Receivable, and many more.
Where Do You Stand?
For this week, let’s start with some basics. Take this financial literacy quiz to see if you’re on the right path to financial brilliance, or if maybe you have some brushing up to do.
1. Do you have a financial professional on staff?
Having the expertise of a CPA or internal (or outsourced) CFO can save you time and money in the long run.
2. How often do you forego infrastructure development to save money?
Saving money is, of course, important, but so are efficiencies.
3. Do you have an annual budget?
Navigating the fiscal year without a budget is just like driving down the interstate blindfolded! By reviewing past revenue and expense flows to forecast future income and expenses you can create a budget to see clearly where you are going.
4. If yes, do you monitor actual vs. budget?
The annual budget is a living, breathing document, meant to be part of your monthly financial review process – planned versus actual expenses. It’s okay to make periodic adjustments, a process that helps you know if the company goals are on track.
5. Do you firm grasp on your profit and loss statement and balance sheet?
Both documents are crucial, but each provides its own benefits. A balance sheet provides a snapshot as to how effectively a company’s resources are used. A profit and loss (P&L) statement provides a summary of the company’s revenue and expenses incurred during a specific period of time.
6. Is your G/L infrastructure meeting the need?
If your monthly financial reporting: (a) is either non-existent or (b) is not helping you run your business, consider a review and restructuring of your GL. Make it work for you – not the other way around.
How many “Yeses” did you score on the Financial Brilliance Meter? 0 – 1 – Financial Dunce
2 – 3 – Financial Aptitude
4 or more – You are on the road to Financial Brilliance!
No matter where you scored, we’ve got you covered. Stay tuned for the best ways to increase your financial literacy this month, so that a perfect score is waiting for you the next time you take the quiz. And if you scored perfectly now, congratulations! But, as you know, as a leader, professional, and human being, there is always room for growth.
If you need additional assistance, we’re only a phone call or email away. Barker Associates has extensive experience working with organizations to better understand their financials and help them drive into their future blindfold-free. Use this link to my calendar to choose the best time for your free 30-minute financial analysis consultation.
Pitch and Storytelling According to “Schitt’s Creek”
A Successful Pitch is the Result of a Good Story
Recently, I have been watching the Schitt’s Creek series on Netflix … for the second time, and enjoying it even more this time around. When I watched it the first time, I found myself getting irritated. But several Schitt’s Creek fans I knew encouraged me to stick it out, and I am so glad I did. What I learned watching the entire series twice is that each character surprises you from many different dimensions throughout the six seasons, representing numerous similarities to the world of pitching investors.
The story centers around an ultra-wealthy family that loses everything. The first episode shows the authorities taking all of their possessions, forcing the family to move out of their large estate. They soon learn that they can retain a small town they purchased as a joke years earlier. So, they get on a bus with their suitcases and head to their new life. They are immediately immersed into a stark contrast from the luxurious lifestyle to which they had been accustomed. Yet, despite the lack of luxury, their experiences in this small town teach them many lessons they never would have learned before about life and business, including how to pitch to investors. You can see why my interest was piqued! In fact, I was so interested in the story that I watched an interview with the two creators.
One of the creators insisted on developing the backstory of each character for hours prior to starting the script, while the other got increasingly frustrated with the time and energy “wasted” on backstories when they had an entire script to write. However, he soon realized that the investment of time in creating those backstories was one of the primary reasons for the success of the series.
The parallelism to pitching to investors was uncanny. An essential element of a successful pitch to investors is having a compelling backstory. It is far beyond the “script,” or in this case, pitch deck. Working on the story behind the company so that it is authentic and backed by sustainable facts is the key to reaching investors. And connecting with them authentically through your story, coupled with ensuring you are the right fit for their investment criteria, will ultimately secure the investment! Success!
I recently became an investor in the Seattle Angel Group and immensely enjoy the education the group provides for both investors and companies preparing for pitch competitions. Bob Crimmins, a repeat successful entrepreneur, was one of those educators, and he was fascinating. He called successful stories “Cogent Stories,” as they are believable and can help an investor understand how they are going to invest their dollars now and receive a significant return three to five years later. As I watched Schitt’s Creek, I thought a lot about Bob and the impact of “Cogent Stories.” Apparently, they work for more than investor pitches. They are also what is behind a hugely successful series.
Now, back to our regularly scheduled programming! (Spoiler alert here – if you have not watched the entire series you may not want to read further, but schedule a chat with me (link to my calendar) to discuss your backstory and pitch deck.).
In the show, Johnny Rose (the family patriarch), Stevie (the hotel clerk), and Roland (the mayor of Schitt’s Creek) are business partners and pitch investors, achieving success at the end of the series. There are many circumstances that bring these individuals together, and their collective growth leads to the overall success of the pitch.
Johnny Rose had been a successful businessman and made a lot of money with his business “Rose Video.” The events that led to the loss of his fortune were based only on his business partner’s actions. The business itself was successful. While Johnny’s story is fictional, similar stories happen every single day in the “real world.” What happened to Johnny could happen to anyone if they are not paying attention to governance, controls, and financials. Yet, the loss of Johnny’s fortune was itself a growth experience.
Stevie was working the front desk at the hotel in Schitt’s Creek, feeling like she was a failure. In an effort to “get her life together,” she decides to branch out and interview for a professional position with an airline. After she secures the position, she learns it is not for her after all. This experience actually creates a huge appreciation for who she is, her talents, and her previous role. Similarly, for the C-Suite to be successful, confidence and self-identification for the position must exude when the investors begin their due diligence.
Roland is the mayor of Schitt’s Creek, which is a position filled with pride, in part, because it was bestowed upon him through birth rite. Roland struggled with who he was, and there were many times that his self-discovery process irritated Johnny and Stevie. But despite all of those irritations, he showed he was trustworthy and loyal to them in many ways as their relationship grew.
Through trial and error, often hysterical ups and downs, these three professionals began to trust each other. They respected the talent and contribution they each brought to the team. Johnny knew that Roland would always have his back, and vice versa. One of my favorite episodes is when Johnny and his wife, Moira, are celebrating their wedding anniversary, and they run into some of their old “rich” friends, along with their new friend, Roland. The encounter is a life lesson in itself. Johnny and Moira attempt to fit in like they used to, but soon get irritated and offended when their old friends begin to talk negatively about Schitt’s Creek. Johnny, standing up for Roland, who is even more offended, mentioned that while their so-called friends never reached out once after they lost everything, Roland and Schitt’s Creek welcomed them with open arms.
This episode reminded me of the loyalty, communication, and respect needed among team members working toward pitching to investors. Working as a team to strategize and execute a fast-paced growth company takes perseverance, intellect, the ability to deal with ambiguity, and many other attributes that can only be achieved when there is open communication among team members who trust each other. At the end of the day, it must roll up into an authentic story about who these people are because that’s what investors are investing in … the people behind the company.
When you are preparing to pitch to investors, the best thing you can do is work on your “Cogent Story.” Take the time to create all aspects of your strategy prior to the pitch, similar to how the creators worked tirelessly on creating the backstories of their characters on Schitt’s Creek. Your story will be more authentic, your confidence will increase, your team will be stronger, and your chances of success will increase exponentially. Barker Associates has extensive experience with assisting companies in developing their backstories and preparing pitch decks. Schedule a free 30-minute consultation with this link to my calendar to talk about how we can work toward getting you the investment money you need.
Non-Profit Mergers: It’s Time to Close. Now What? Beyond Planning & Due Diligence
Last month, we talked about the initial considerations of a non-profit merger, as well as the critical due diligence phase. After finding unity of purpose, reflecting on the relevant issues and deciding that a merger aligns with your goals and mission, you engaged in an extensive due diligence process, examining all legal, financial, logistical, and human resource documents and processes. At the conclusion of due diligence, the board of directors of each organization developed and approved a Plan of Merger consistent with applicable state laws. At long last, after months of preparation, meetings, discovery, approvals, and planning, the time arrives for merger implementation. Essentially, it is finally time to close the deal. However, this is only the beginningof the end.
As with the previous phases, planning and organization are crucial for a successful implementation. While it would be nice if we could sign on the dotted line and all issues magically resolve, we know that is not the case (it never is!). This process, like the others, will take time, patience, and an in-depth understanding of the logistical steps that must be achieved to effectuate the merging of two different organizations. The following checklist can be used as a guide through the final steps of the merger.
1. Appoint a Merger Transition Team. This group of three to six individuals will spearhead each logistical step of the merger. They will assign tasks, set timelines, and keep the merger moving forward at a reasonable pace for the new nonprofit.
2. File Appropriate Documents with the State. Each state has its own requirements for filing with regard to non-profit mergers. All documents should be filed with the state of organization/incorporation, following those particular guidelines and requirements. Note that although the merger is legally completed once the state accepts the documents as filed, many more steps must be taken for actual completion.
3. Develop Integration Plan. Due diligence should have previously identified duplicative positions, departments, and resources. This plan will identify what is being removed and what is surviving in the new organization. The plan should also identify any issues in the short-term due to the merger and provide for analysis at one month, three months, six months, and twelve months.
4. New Board of Directors Established. The new board generally consists of previous board members from each of the non-profits prior to merger, but can be entirely new. They should establish their new meeting schedule and implement new by-laws as soon as possible.
5. Schedule Employee and Volunteer Training. How will the new departments, responsibilities, and tasks differ from the previous ones? What do employees and volunteers need to know about the mission, vision, and day-to-day operations to effectively perform their duties?
6. Determine Human Resource Needs. Establish a new payroll system, health benefits, vacation and sick pay, and hiring and termination protocols.
7. Finalize any Facilities Management Issues, Vendor Contracts, and Insurance Coverage. What contracts need to be rewritten in the new organization’s name? How will insurance coverage transfer without lapsing?
8. Develop Communication Plan. This plan should involve internal and external communications and ensure consistent messaging throughout. This may include the launching of new branding, the name and logo, and a marketing campaign. The new website and social media accounts must also be established and maintained.
9. Finalize Financial Transactions. Transfer assets, close and open accounts, as needed, and integrate accounting systems.
10. Implement Technology Solutions. How will technology, phone systems, and databases be integrated? What is still required? What can be eliminated?
While the entire process can take between twelve and eighteen months, depending on the size of the organization, this Closing Checklist enables the Merger Transition Team to keep the merger on track, heading toward a successful completion.
Need more assistance? Barker Associates has extensive experience working with non-profit organizations as they implement and finalize mergers. If you are considering this strategy, use this link to my calendar to choose the best time for a free 30-minute consultation.
Last week, we talked about the strategic planning of an ERP system implementation, with factors to consider in both the planning and implementation phases. This week, we pivot to how to choose the right system for your organization.
The decision has been made. You and your key stakeholders are ready to automate and streamline the workflow and day-to-day tasks. You’re more than ready to increase efficiency and productivity with one resource for data centralization, workflow management, and tracking. You’re moving forward, but quickly become overwhelmed, not with the process of implementation itself, but with the vast variety of ERP system options available.
Taking the time to ensure there is a good fit is crucial for success. In fact, implementation failures often occur where there was never the right fit from the start. However, this should not discourage you from pursuing a transformational strategy that will provide a competitive edge.
The following are the top five tips that will help eliminate the confusion and move the process along to help you choose the best system for your organization.
1. Thorough Process Review and Analysis. Prior to looking at any system, you should determine your current needs, as well as those needs that are likely to arise in the foreseeable future. Start by documenting your current processes, strengths, and weaknesses. Ask yourself the following:
What is working?
What is not working?
Where are the gaps in the current system and processes?
What should the system look like now?
What should it look like going forward?
Do I actually need a new system?
What problem am I trying to solve?
What functions are “must needs,” and which would just be a bonus?
After you answer those questions, create a document that shows the core objectives, needs, and gaps; what essential functions, solutions, and automation capabilities a new system should provide; the budget; timeline; and a list of key stakeholders. This document should present a clear picture of the criteria you require in an ERP system.
2. Determine Budget and Research Costs. You’ve determined your needs, but now you need to know what budget you have and the related costs of the various systems. An ERP system implementation is time-consuming and a large investment, so you want to ensure you are comfortable with your budget, as well as all of the associated costs up front. As you research ERP systems, you should have a good understanding of all the costs involved – not just for implementation, but long term. You may want to consider: What are the licensing fees? Are there costs for training? Are there support, maintenance, and upgrade fees? It is up to you to discover any “hidden costs.”
3. Review of Current Infrastructure. Before proceeding, you want to have a clear understanding of your current information technology infrastructure. An ERP system is software, and you don’t want to start down a road with a possible solution only to find out later that it does not align with your current technology. This is a large enough undertaking of resources. You do not want to have to worry about investing in a new technology system as well. Involve your IT department from the beginning to confirm that the new system will be compatible.
4. Evaluate Systems. Narrow your requirements and criteria to the five or ten that are priorities. What exactly are you looking for? Use a chart or Excel spreadsheet to list out each and to keep all of the details organized. Then research systems via Google, social media, reviews, and recommendations. Verify all claims made through independent research and 3rd party reviews, and consider all options to start. It is not prudent to choose one because you’ve heard the name before or because it is what competitors are using. Instead, ensure it will meet the needs you identified in your process analysis.
As you analyze your potential new partner, you may want to make the
How many implementations have you performed? Any in our industry?
Who will be responsible for different parts of the implementation? What experience do they have? Will you use a third-party for any phases? What is required from my team?
Is there a guarantee or warranty?
Are training and support offered?
Is it customizable? Mobile friendly?
Is there cloud storage? If so, what are the data limits?
As you gather information about each system, plug it into your criteria chart, so you can easily compare the systems, their functionalities, and their solutions. Additionally, check on the system’s scalability. This is a long-term investment. You don’t want to outgrow it in the foreseeable future.
5. Meet with Stakeholders to Make a Decision. Having everyone’s buy-in on the system that is ultimately chosen is critical to its long-term success. Management teams should be involved – anyone who will be impacted during or after the process. You will need their support during planning and implementation. Choose the one that offers as much of the functionality your organization requires as possible, and don’t be swayed by extra features that you don’t need. Finally, look for longevity and a proven track record with other organizations similar to yours.
Remember no one system will be a 100% perfect match for all of your needs or requirements, but it should be an overwhelmingly good fit for your organization. Barker Associates has extensive experience with ERP system implementation plans, assisting organizations achieve increased productivity and efficiency. Use this link to my calendar to choose the best time for your free 30-minute ERP consultation.
ERP System Implementation Importing a Phased Plan, Exporting Complexity
Transitioning to updated, automated systems that support growth and infrastructure is crucial to the long-term success of an organization. As part of this transition, the value of an Enterprise Resource Planning (ERP) system cannot be underestimated. Despite some challenges due to the complexity of automating several functions at once, implementation increases both productivity and efficiency. Through the integration of various functions, including financial reporting, human resources, and sales, the organization inevitably performs at a higher level.
While the entire process may seem complex, as with most transitions, proper planning has a direct correlation to its successful conclusion. We often recommend to start not at the beginning, but at the end. In other words, what is the desired outcome? Knowing where you are going sets the tone for how you are going to get there. Examining what processes can be automated, the investment of resources (including time) needed for implementation, assignment of roles, including who can assume the project manager role, and the restraint on resources in the day-to-day demands being met simultaneously with implementation demands are just a few of the initial considerations.
Once buy-in and support of company executives are achieved, the more complex process of implementation and execution can begin. A phased plan that clearly defines the requirements, objectives, and steps is crucial for a company’s successful navigation of an ERP system implementation. Best practices mandate that the plan be divided into two primary phases: Initial Planning and Implementation.
Initial Planning Steps
Review the current data structure and system to identify gaps. Rank the gaps in order of importance so you can determine what you need in the new system.
Make a list of all the functions that are in the current system that are critical to the operation’s success. Make sure those functions will be in the new system.
Gather information about the organization, the day-to-day management of financial reporting, and any limitations of the existing reporting structure.
Prepare a list of all reporting needs to ensure the proposed structure meets the requirements.
Provide all information to make a decision and assist the organization with compliance. This review and analysis should cover the general ledger, development, and day-to-day operations.
Review the process necessary to retrieve the data from day-to-day operations to make certain there is minimal (or no) double entry of data.
Determine how all historical data will be kept and maintained once the current systems contracts are terminated.
Determine the amount of time the products will remain live during the integration process.
Determine the extent of historical information (timeframe and detail) to bring into the new software.
Present the structure, outputs/reports, and plans for implementation to Executive Management to receive approval prior to moving forward with implementation.
Map all current general ledger accounts to the proposed structure, making sure each detail transaction has a location in the new set-up. This mapping is tedious and critical for the success of the new system. It should be carefully prepared and reviewed.
Document all newly created processes for the new system, carefully reviewing each to ensure proper controls are maintained and no essential functions are excluded from the new system set-up.
Export data from the current systems to preserve detail historical data that may be required for research after conversion.
Export data from the current system and, using the mapping created, move it into the new system.
Do this month-to-month, and run basic reports to review against the current system information. This review will result in some changes to the set-up. Make these changes in coordination with Executive Review and approval.
Ensure consistent and clear communication has been provided throughout the organization, and that key stakeholders will be able to obtain the information they need to do their jobs.
Perform extensive testing in compliance with professional standards.
Train staff who will be working with the new system.
Make sure data is reconciled between all systems. For example, sales agrees with the sales and customer systems, contributions in a non-profit agree with the development data, and accounts payable agrees with the subledger.
Following these phases and steps will help to ensure not only a smooth transition, but a successful process overall. Barker Associates has extensive experience with ERP system implementation plans, assisting organizations achieve increased productivity and efficiency. Use this link to my calendar to choose the best time for your free 30-minute audit consultation.
You Have Unity of Purpose, but What about Unity of Numbers? The Importance of Financial Due Diligence in Non-Profit Mergers
Last week, we talked about the initial considerations of a non-profit merger. Once you’ve reflected on the relevant issues and made the decision that a merger aligns with your goals, donors, board members, and mission, it is time for the next phase of the process – engaging in due diligence.
In the scenario of a non-profit merger, due diligence has three primary functions:
1. Minimizing the risks associated with joining two separate organizations to further a common mission;
2. Providing clear insights into each organization’s interests; and
3. Improving the timeframe of the merger by reviewing the relevant documentation and processes, and identifying any challenges sooner rather than later.
Due diligence is conducted by thoroughly inspecting all aspects of the organization with which you plan to merge your own non-profit. The entire due diligence process consists of numerous categorical reviews, including legal, contractual, employment, operational, financial, tax, real property, physical property, intellectual property, and human resources, among others. However, for our purposes, we will focus only on financial due diligence.
Financial due diligence provides an opportunity to analyze potential savings with regard to the overhead of the combined organizations. With this full and complete knowledge, the approving Board Members will have the ability to examine the overall benefits of the merger.
The Financial Audit Checklist
Before you can merge with another non-profit, you must possess a clear understanding not only of its current financial status, but also of its financial history. You must have the ability to answer questions such as: What resources will be available moving forward? And what obligations will remain?
Financial due diligence will include a review of the following:
Audited Financial Statements for at least three years
Annual Budgets, Projections, and Strategic Plans for at least three years
Debt and any Contingent Liabilities
Grant level financial results
Fixed and Variable Expenses for at least three years
Depreciation/Amortization Schedules and Methods for at least three years
Accounting Methods and Strategies
Any Investment Policies
Employee listing with position and annual salary
Detail list of larger donors
While non-disclosure agreements must be executed prior to any due diligence occurring, many organizations have valid confidentiality concerns as they relate to financial reviews of internal documents. As one possible solution, some organizations choose to move forward in a phased approach. In doing so, they leave the disclosure of the most sensitive data and documents to the end of the process.
While each situation will be different, and financial due diligence may vary slightly, it is essential to build a foundation for success. Not only are you protecting the non-profit itself, but also the individual board members and donors involved. Each non-profit should conduct its own independent due diligence, as well as joint due diligence to maximize information and minimize risks. By taking both a historical approach and a forward-looking approach, you will gain an incredible amount of knowledge. And with more knowledge, comes the empowerment to make the best decision for your non-profit.
Barker Associates has extensive experience working with non-profit organizations as they prepare for, and go through, a merger. If you are considering this strategy, use this link to my calendar to choose the best time for a free 30-minute consultation.
It May be Time for Non-Profits to Consider a Merger A Possible Solution During Impossible Times
The profound effects of the COVID-19 pandemic will be felt for years to come in all aspects of our lives and businesses. However, non-profit organizations have faced, and will continue to face, their own set of unique challenges. Overall closures, increasing unemployment, a lack of feasible projects, and the cancellation of fundraising events have combined to result in sizeable shortfalls with regard to funding.
To navigate through these trying times and ensure success moving forward, non-profits need effective solutions. One possible solution they may consider in 2021 is a merger with another non-profit. And the time to consider this course of action is now – prior to it being needed. Too often, there is an inclination to only consider mergers reactively because, for example, the organization needs financial help. However, the best time to consider it is proactively, as an effective growth strategy. When considered proactively, the advantages and disadvantages can be examined on a more rational, analytical basis instead of an emotional, biased one.
As with any transition, challenges will be present. Questions to explore may include:
Do you have enough knowledge about mergers and the due diligence required to effectuate one?
Is there enough funding for the process?
Do you know a facilitator to help explore merger options?
Does either non-profit have government contracts in their name for a specified amount of time?
Do you have too much of a personal connection to the non-profit mission and vision to examine the option clearly?
Do you perceive a merger being a failure?
Are you concerned about losing employees? Or the organization’s culture?
There is no doubt that these are valid questions and considerations that must be examined. Yet, they should not undermine the significant advantages of mergers for both organizations involved, including:
Increased resources – Instead of purchasing new equipment, leasing new space, or hiring new employees, a non-profit can gain all the resources needed through a merger.
Decreased expenses – Each organization has its own expenses, many of which will be duplicative. Once merged, those expenses will decrease.
The ability of each to meet the needs of the other – Each organization has its own strengths that will often compensate for the other’s weaknesses.
Effective growth strategy – Combined resources coupled with decreased expenses will result in an increased probability of growth.
Furthering mission – Oftentimes, with a merger, the reach of the non-profit will expand due to the increased resources, enabling its mission to have a more significant effect.
Better positioned to achieve goals – With more resources and further reach, the organization will have the ability to focus on, and work toward, reaching its goals.
Greater probability of long-term sustainability – With a more effective growth strategy, there will be a higher chance of long-term sustainability and success.
After thoroughly examining the challenges and the advantages of a merger, the following questions should be considered:
1. Can you look at a similar organization as a resource, and not as competition?
2. Can you determine the ways in which you are similar and the ways in which you are different?
3. Can you envision what working together would look like?
4. Could combining resources, leadership, and operations work in both your favors?
5. Which name should survive (considering government contracts, if applicable)?
6. Are you prepared for extensive due diligence?
Mergers are viable solutions for non-profits, whether due to funding needs or the desire for an effective growth strategy. In either case, through a merger, the strengths of each can be leveraged for a common goal. Over the next several weeks, we will explore a variety of topics related to non-profit mergers, including due diligence, closing items, and integration considerations.
Barker Associates has extensive experience working with non-profit organizations as they prepare for, and go through, a merger. If you are considering this strategy, use this link to my calendar to choose the best time for a free 30-minute consultation.