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Feedback From Alight Planning - Jul 24, 2009

Posted by: Mark Gandy in Success Stories

Mark is probably the most knowledgeable client/partner I've encountered during my work at Alight Planning within several domains. First, Mark has experience with many small to mid-market budgeting and planning software applications. Mark is the guy I can [call] when I need to know the difference between Alight and some other budgeting application when it's not clear which tool is right for one of my customer prospects!

Of course, Mark has built models in Alight Planning and can quickly understand client requirements and translate this to a robust planning model using "best practices" -- in fact, Mark may even teach us a thing or two about balance sheet planning etc. When I say "us" I am including the whole team of seasoned "gray-hair" forecasting pros here at Alight!

Mark is an exceptional listener and question-asker. Probably my favorite part of my work so far with Mark is that he doesn't rush to promote ideas until they are fully vetted and "realistic". I know if I forward a lead to Mark to contact because they need more than software or are looking for some "CFO-level" guidance, Mark will always come through - most importantly, Mark knows where he can bring value to the table or is better off passing the lead back to me which reflects his integrity and long-term thinking about client relationships! I recommend with no reservations contacting Mark for anything related to mid-market financial modeling, strategic planning and accounting activities.

Ben Lamorte
VP Sales
Alight Planning
www.AlightPlanning.com

Will New Hires Need To Be Managed If So Rethink The Hire - Mar 30, 2009

Posted by: Mark Gandy in Articles

One of the benefits of this economic turbulence we're experiencing is that there is much talant available for your growing business (or for your business that is limping along).

I've had the pleasure of helping my clients hire senior-level talent during the last few years. It's true that some of my CEOs ask traditional questions that most of you have heard during the interview process. My favorite question is 'What will your 180 plan look like from day one?'

There are several reasons I like this question:

-1- I want to make sure my client is hiring a leader, not a follower.

-2- If a leader, that means the new hire will manage him/herself as opposed to the CEO constantly making sure the new hire is keeping up or trying to maintain pace with the rest of the team.

In a similar vein, Good to Great author Jim Collins addresses the caliber of people that gets a company through an economic storm. Check it out over at Fortune.

Sales Forecasting Its About How Not What - Mar 22, 2009

Posted by: Mark Gandy in Articles

When your sales staff provides your top-line outlook, are you being fed arbitrary targets? Or, are those numbers filled with support showing how those revenues will be achieved.

Let's plow in with an example. The table below is a simple sales forecast for a small $1 million electrical supply distributor. The sales manager provides the owner a three-month forecast each and every month. Notice the projected sales are driven by number of customers, the number of lines per each sales order, the average price per line item on the sales order, and the number of times each customer places an order each month.

If your forecast does not resemble this level of detail, seriously consider adding such drivers to arrive at the forecast. For each driver, there's an underlying strategy to hit the forecast (marketing, proper inventory management, customer service, strategic pricing, and so on). Sales do not just happen. Accordingly, manage and plan the drivers, not the sales dollars.

The forecast is completed. Now what? Here's the fun part. Compare the plan to actual results. Assume the following:

Actual sales: $96,294
Forecast: $104,132
Variance: $7,838 unfavorable

What does this mean? We were off nearly $8,000. So what? Why? What caused the drop? Consider the table below for the answers.

The table above is a variance analysis showing the causes for not hitting our sales forecast. Customers, lineage, and customer frequency experienced drops while the average price went up per line.

While the sales forecast with proper drivers can serve as part of your strategic plan on the top line, the variance analysis comparing actual result to the forecast shows us if we need to revise our strategies, and if so, take steps to resolve undesirable trends.

In short, here's a quick summary for perfecting your sales forecasting:

-1- Pick a time period such as week or month.
-2- Select the appropriate sales drivers that you can manage (but keep it simple).
-3- Forecast the drivers and complete the forecast.
-4- Compare actual results with the forecast and determine causes for variances.
-5- Revise strategies to obtain your desired future results
-6- Repeat steps -1- through -5-

As a side note, I want to thank my friend and fellow partner Keith Simmons in New York for helping me think through the causal analysis. Keith is a great CFO and his cost accounting abilities are through the roof.

If you need help in this process or need a quick sounding board, drop me a line at mgandy@b2bcfo.com.

10 Million Embezzlement Exposed Preventable - Mar 17, 2009

Posted by: Mark Gandy in Articles

I recently read where a California bookkeeper was charged with grand theft and embezzlement to the tune of nearly $10 million. As a highly-educated recovering perfectionist who understands a thing or two about advanced financial technology solutions, I'm not sure I could even pull this off. Really.

But here's my question--actually, several of them: 1) Did stakeholders read the financials each month? 2) Did stakeholders closely monitor gross profit and all the COGS accounts? 3) Were book to physical inventories done regularly? 4) Did someone beyond this bookkeeper review the bank statements before recons were completed? 5) Were budgets and/or forecasts performed then compared to actual results regularly?

My suspicion is that none of the above have a 'yes' answer. If the simple controls addressed in my questions are applied, then this theft is either greatly minimized or the theft never happens.

After reading about this theft, I wanted to know if some of my partners agreed with me. I asked them two questions: Could this theft have been prevented? What could have stopped this theft? Here are those responses.

Many businesses are familiar with the roles of the Controller and the CPA. Owners are frequently unaware that another role is necessary. The CFO serves as the eyes and ears of the owner. If the CFO is performing analytic reviews of the company's records, the weekly $25,000 would likely be noticed. In addition, if the CFO is performing or reviewing the bank reconciliation, unusual payees would also be noticed. This situation definitely should have been caught well before six years elapsed. Sometimes, having a CFO deters the would-be thief and the embezzlement never happens.

Karen Chin
Texas

I believe this could have been prevented by sound financial controls. One of the basic tenants of sound controls is that, whenever practical, it is wise to have different people reconciling bank accounts, approving payments and writing checks. Where were the checks and balances that prevent a single individual from being able to have so much person autonomy? With numbers this large, it also seems to me that the company should have been engaged in a more thorough review or audit by an independent CPA. It seems very likely to me that an audit would have uncovered a recurring disbursement of $25K each week.

For this situation to take place, this CFO had to be able to approve the amount for payment, generate a check or bank transfer, sign the check and then reconcile the bank account; that's simply too much temptation for many people. You need to limit opportunity through the use of better checks and balances by inserting other individuals into this cycle; more eyes reviewing transactions means less opportunity and less temptation and fewer losses.

Michael Landrigan
Indiana

This is almost a textbook case of a person most likely to commit fraud. 60% of fraud is committed by one person, generally aged 36-50. The older the person, the larger the fraud. The fraudster generally has no criminal or employment misbehavior record. In most cases, the fraud goes undetected for years.

The large red flags in this case are a person living beyond their means, addictive behavior (shoes) and apparent unwillingness to share duties. Other behavior was probably apparent but not mentioned in the article.

The two most effective ways to deter fraud are to institute surprise audits and to have someone take over the duties periodically by enforcing job rotation and mandatory vacations. Of course a B2B CFO is the perfect person to assist a small to mid sized business to enact the most effective ways to combat fraud.

John Williams
Virginia

I appreciate the comments above from Karen, Michael, and John. Additionally, my friend Jerry Mills, the founder and CEO of our firm has a great chapter on this subject in his book The Danger Zone. The chapter is called Who is Watching the Controller?

Nail down those internal controls, and theft such as the above can be significantly curtailed if not eliminated.

Are You Keeping Score If So Are You Winning - Mar 8, 2009

Posted by: Mark Gandy in Articles

What is it about our culture that we like about keeping score? When I coached my kids in their youth sports (as in 8 years and younger), the league would not allow scoring--something about harming the self esteem of these kids. Yeah, right.

So why was it that every mom in the stands was keeping score? They knew the numbers, and so did dads. Here's the reason. We want to know if we're winning, plain and simple.

Before I get on a soapbox about kid sports and scorekeeping, let's move this to the business realm. In spite of our desire to know the score at all times on the sports field, I find it odd we don't have the same scorekeepng mentality in our businesses. In fact, some of my new clients have not looked at a P&L for months let alone a simple weekly scoring system that tells them if they are winning or losing the battle.

I truly believe every business owner should have a simple scorecard where the business owner can track 4 or 5 key numbers each week. These should be the most relevant numbers you can think of (think gas gauge or check engine light in your car--pretty important).

Below is a very, very simple example of what I'm describing. In fact, the sample below is taken from a new scoring system I'm implementing for one of my clients.

Once you create your scorecard, I highly recommend you fill in the numbers yourself the first few weeks. Many of your managers will provide you the numbers, but I WANT YOU to complete the scorecard. I promise that you will be moved to some action as you start looking at these numbers weekly which is the purpose. Also, do not be amazed if you start seeing improvement where you are tracking results. I'm sure my Ivy League buddies at our firm could explain this phenomenon--all I know is that it works.

By the way, keep it very simple. If you want to use pencil and paper, that's fine. Want to do the tracking on your cell phone, go for it. But the message is the same. Start the process now so that you'll know the score at all times.

Need a kickstart in getting this scorecard started? I can easily think of over 100 professionals that could help (even over the phone or via webinars). Here's your headstart by clicking here: B2B CFO Partners.

Good Economy Bad Economy Its Still About The Customer - Feb 26, 2009

Posted by: Mark Gandy in Articles

Recently, I was asked what a company should be doing differently during this economic downturn. My answer? "Keep doing the same things as you were doing before." Then I promptly added, "but do those things better."

There is however one area I where I want to see serious improvments during these trying times--taking care of the customer. During a good economy, lose a customer and there are several others to replace the lost business. Not so in this economic environment.

Here's a short list of assignments I've been giving my CEOs during the past few months which may spawn some ideas for your firm:

Look at your business from your customer's point of view. Why do they buy from you? Do they like your business? What would happen if your business did not exist for these customers? If you can easily answer these questions, you have a great starting point.
Have you lost some customer/client business over the past few months? If so, find out why. Was it pricing ? Was it service? Some other cause?
Set up meetings with your top 5 to 10 customers. Find out how your business could be improved from their point of view.
Do your employees understand the value of each and every customer? Do they understand their role in taking care of the customer? That includes the receptionist (or the Director of First Impressions, support staff, the accounts receivable clerk, and all other members of the team).

Bottom line, take care of the customer. Do you know what keeps them up at night? Do you know the dangers and threats they face in their businesses? If so, you'll be a step ahead of your competitors who may be more focused on cost containment rather than enhancing those valuable customer relationships.

Are You Pleased With Your Sales Force - Oct 16, 2008

Posted by: Mark Gandy in Articles

My greatest skills reside in corporate finance, business analytics, daily/weekly/monthly management reporting, and driver-based financial modeling. Yet, I've spent my fair share of time this year helping my clients evaluate, motivate, and coach their sales forces.

During some of this work, I've noticed a trend across some of these businesses relative to their respective sales forces--weak to underachieving sales performance.

In every situation, I know the cause of this undesirable performance. The cause can be traced to two of the most critical requirements to be successful in sales according to Ron Willingham, author of Integrity Selling for the 21st Century:

Strong goal clarity

High achievement drive (to reach goals above)

If your sales team members are not performing to par, start with their goals. While you may provide them targets each month, are they going the next step by setting clear personal goals to make sure they reach the corporate targets? If not, you have a coaching opportunity to make sure that happens.

Regarding achievement drive, a sales team member either has it, or they do not. Such drive cannot be taught or driven (no pun intended). If the drive does not exist in the sales team member, do not let that situation linger. Make a change quickly.

By the way, I cannot say enough about Integrity Selling for the 21st Century. More than a book, Ron Willingham's sales method has been taught to some 2 million students worldwide. As a proud graduate of this system, I highly recommend it. Joe Worth, another partner in our firm, is a certified facilitator of this sales training, and I'm sure he would field your questions if you would like to learn more.

Do You Know Your Tax Liability - Sep 17, 2008

Posted by: Mark Gandy in Articles

Several of my newest clients paid extremely large tax liabilities for their successful business performance a year earlier. That's not unusual. However, they did not know the extent of those tax liabilities until it was too late to plan how to finance those obligations. Sound familiar?

One of my favorite chapters in The Danger Zone by Jerry Mills is The Black Cloud that Haunts. In that chapter, Jerry addresses how to alleviate the frustration of not knowing that tax liability.

The answer is very simple, and here's how I do it for my clients. After we complete the financials in a timely manner, I prepare a very simple one-page estimatation of the projected tax liability as of that point in time. We repeat the process each following month. I leave it up to my client if they want their tax CPA to review the estimates, but I require tax CPA input for solid tax planning strategies throughout the year.

I cannot eliminate your tax burden, but we can help you eliminate those sleepless nights by removing your black cloud that haunts each year.

By the way, I recommend Jerry's aforementioned book The Danger Zone. You can buy a copy at www.dangerzonebook.com.

One CFOs Secret To Timely Financials - Sep 15, 2008

Posted by: Mark Gandy in Articles

I'm curious. When do you receive your financials? Weeks after the new month? Longer? What if I said one day? That may be impossible in your situation, but I do have some quick suggetions for getting your numbers quicker each month.

I took on my first CFO client in 2001. In that situation, we closed the financials the last day of the month--yes, I was a bit fanatical about a quick close. My secret? I created a simple checklist in a spreadsheet. All responsible parties followed the checklist items allowing for that quick close.

I know it sounds simple, but it works. Not only are month-end closings quick, but they are consistent from month to month because the process stays the same.

There's one other process that makes month-end closings go faster. Have your staff reconcile cash every single morning in the accounting system (more on this best practice in a future blog entry). In cases where hundreds of line items hit the bank account daily, this procedure eliminates chasing down errors which may take hours when reconciling a full month of transactions under the typical approach.

There are many other ways to generate those financials earlier in the month, but these two are the perfect starting point.

Isps Individual Strategic Plans - Sep 9, 2008

Posted by: Mark Gandy in Articles

Imagine for just a minute that everyone on your management team is on the same page and that 'same page' is being monitored closely by you and your team.

As difficult as this may seem, the process can actually be simple. As CEO and the key finder in the organization, once you have established your clear and concise goals for the year, share those with the key members of your team. Obtain their input and make changes if necessary.

The next step is where you bring everyone on the same page. Have each team member complete 1) their own strategic plan for the year and 2) create a 90-day operating plan based on their own strategic plan. It goes without saying their plan has to align with the overall company strategic plan.

After you review each planning document (these should be no longer than one-half to one page each), it's time to monitor the progress each team member is making on their 90-day operating plans. This needs to be done regularly.

Execution of any plan is never easy, but as you meet with your team members individually and as a group, go over their planning documents and evaluate their progress. Everything they should be doing should be linked to these 90-day plans.

I've watched these simple concepts work in my cliet base, and without such discipline, goals are not accomplished. Or, if the goals are met, they are met far beyond the time period you desired.

In summary, document your own goals and objectives for the year that can be easily measured (between 3 and 5) and have your management team create their own strategic plans for the same time period and their 90-day operating plans. Both have to align with the overall company strategic plan. Then you need to monitor the 90-day plans on a regular basis helping each team member meet their goals and objectives. This process is repeated each quarter. And finally, celebrate those goals you achieved with your team.