B2B CFO^®    (877) 4-B2B CFO

  What are they and do I really need one?

You are driving down the road behind the wheel of your car. How fast are you going? Do you have enough fuel! Are you headed in the right direction? How is the engine performing? Is the engine's temperature & oil pressure OK? Are there any warning indicators? In short, how do I know if everything is working as necessary to get me to my destination? Quick answer, you look at your dashboard for these answers and more. Also consider this, can you imagine driving your car without it?

And in business it can be the same tool. A Dashboard for your business will help you identify the key indicators to let you know your business is either on track or that you need to take corrective action. The speed indicator is revenues, your other indicators are key metrics & measures, and your fuel CASH! Typically the update frequency is weekly, but in more sophisticated systems it can be real time.

Each dashboard is designed specifically for the business. Metrics for one business are not the same as another's and while some elements may be the same, others are significantly different. A professional firm is different from a manufacturer and a retailer with inventory different yet again. So it is critical that the person designing the dashboard and the person using the dashboard agree on the content, how it will be gathered and maintained and ultimately the cost as it should not exceed the benefit. And much like an automobile manufacturer changes the dash periodically in a car to make it better, so should your business dashboard be a living, working tool that is continually improved over time.

Let's look at some of the more common elements and a few variances for different industries:

Revenues: This measure should generally be as follows, current week, month-to-date, quarter to date, year-to-date compared to the same period's budget and prior year actual. This is how fast the business was planning to go and whether it is picking up speed or losing pace.

Operational Metrics: These measures can vary greatly by industry. For example in a restaurant the number of covers (people), the average check size, and influencing conditions like weather should be checked daily and charted to display trends. In professional services firms (law firms, engineers etc.) utilization (percent billable to percent available) and realization (percent collected Vs percent earned) are keys to profitability. And in almost all businesses, labor hours, overtime, and head count are key metrics to measure and follow. How about your accounts receivable? What are your days of revenue outstanding at the end of the week, your cumulative ageing, and estimated bad debt and collection problems quantitatively?

Cash: Cash is what fuels or throttles down the growth of business. How much do you have on hand, what is the available amount of credit on your credit facility, how much do you need next week, and is there enough to meet those needs???? Remember this axiom, Never; don't Ever run out of cash, Never! Cash is a key indicator and while for certain measures weekly are enough frequency, the daily cash balance is something worthy of consideration too. And do you know the bank balance, the book balance or both? Do you know the difference and why that is important?

Interpretation: And that brings us to the final point; can you properly interpret the data? How do you know a long term trend rather than mere weekly aberration? Just like when you learned to drive a car, learning to read and interpret the dashboard is critical to using it successfully. So not only can your CFO help develop and implement the dashboard, they can also help you interpret the information and react appropriately to what lays ahead.

B2B CFO^® has approximately 3,000 years of experience to help identify, monitor and solve your business problems. Let us help you keep your business on the road to success!

 Companies without a Chief Financial Officer are at a competitive disadvantage.  It's not unusual for small to mid-sized firms to have sophisticated operations and complex cost and financial challenges like large companies.  This often means that the CEO or the owner of the business needs the expertise of a senior financial executive.

As an owner or CEO of a company, have you ever wondered how to solve the problems you're facing?  Have you ever spoken with another owner and come to the conclusion that what you really need is the advice of a CFO . . . but knew that you either didn't need a CFO on a full-time basis or couldn't afford the cost of a full-time CFO?  Did you then decide to give up on finding the advice that you need?

You are not alone.  And, you are perhaps doing what many owners do - You try to figure it out yourself.  Let's be honest. Are you really the right person to do that?  Do you have the background or expertise to prepare accurate and useful financial statements, or even truly understand them?  And is your digging into these areas even a good use of your time?  As the owner, you need to be the visionary, focusing on the future-and you are the one who should be spending more time with your customers. 

Using your time to develop financial information or analyzing your cash balance and future needs is something that someone else should be doing.  What you need is the assistance of a high level financial professional.  Outsourcing this function is a cost effective alternative to hiring another employee because it avoids the cost of a full-time salary, payroll taxes, and fringe benefits. A contract CFO is a very affordable means to obtain that higher level of expertise and add significant value to your business.         

ADVANTAGES OF OUTSOURCING CFO's

Better financial information for key decision-making.  It's a fact:  most small to mid-sized businesses either don't prepare financial statements, or they are not reliable.  Another fact:  you simply cannot make important business decisions while relying on bad, inaccurate, or incomplete information.  If you have found yourself frustrated with the lack of information from your bookkeeper or controller, chances are the information they are giving you is of questionable value.  You cannot effectively run a business in that situation.

More time to spend with customers.  To be competitive, you need to spend most of your time with current and prospective customers.  Particularly today, you need to be with your customers as much as possible.  Just as you are trying to get new customers, your competitors are trying to meet with your customers.  You simply need to be spending the majority of your time with them.

More money from the bank and from vendors.  Bankers and vendors are more sophisticated and less forgiving than ever.  With the current financial situation affecting all businesses, creditors will refuse to lend money to anyone other than the safest and most reliable companies.  And they will require regular and reliable financial statements. The financial statements must look professional, follow accepted accounting principles, and highlight the company's key ratios. A CFO working with you on a part-time basis can improve your company's external "image" and assist you with opening doors to banks and obtaining better vendor terms.

Other advantages to having an outsourced CFO include:

• A sounding board for the owner in making key decisions
• Fewer cash flow surprises
• Better trained accounting staff
• A theft deterrent
• Better documentation and controls
• Fewer surprises relating to tax payments
• Solutions to company problems

SOME THINGS TO CONSIDER 

A CFO is a proactive professional that has a pervasive knowledge of information important for the owner to properly run the company.  This includes handling not only financial matters but also addressing HR, operations, sales and marketing, IT, and other issues needed to help the company succeed.

A common misconception is that a CPA can take the place of a CFO.  The simple reality is that a CPA cannot do the work a CFO does because each has a different set of skills.  As noted above, a CFO has a broad range of experience in financial and non-financial areas.  The CPA and the CFO should work very closely together, but neither has the ability to step into the other's shoes.

So, when you are looking to outsource the CFO position, you need to look for a professional with 25-plus years of experience.  You should be sure that the CFO is supported by a national organization that has the resources to be able to give your CFO the support that may be needed.  In finding someone with this experience level and support, it is highly unlikely that a problem or issue will come up that can't be resolved. 

Avoid signing contracts.  If an organization is not confident and competent enough to perform these services based on a hand-shake, consider walking away. 

You should be comfortable that the fee fits comfortably within your budget.  Ask that there be a monthly "ceiling" for the fees to be paid; there should never be any surprise on fees.

Finally, be sure that you are comfortable with the CFO.  With a high level of trust between the owner and the CFO, the company will be in a better position to meet the challenges that it faces.

Companies without CFO's can gain a significant competitive advantage and improve profitability by outsourcing a CFO on an as-needed basis.  These days, it's a wise investment, and can fit within the budget of most companies.

Please feel free to give me a call with any comments, questions or suggestions that you may have. My office number is 813-994-0416 and my cell phone number is 786-281-4527.

 

The Power of the Pause: Taking a Break for Success

Don't just do something, sit there! - Dr. Edward Frost

Ever since a mid-day meal became a "power lunch" and a week off morphed into a "working vacation," we seem frantically driven to pack more into every waking, and sometimes non-waking, moment. We eat breakfast over our computers and text message over lunch. We listen to tapes while sleeping and catnap while working. We exclaim, "There aren't enough hours in a day!" and "How will I fit it all in?" In short, many of us fill our daily business with manic busy-ness and then pine for a way out, but fear and anxiety trap us in a spiral of escalating activity to be ever more successful.

The good news is yes, there is a way, but it's not what most of us think. It's not cramming even more in, nor training our brains to multi-task more efficiently. Instead, it's nothing. More accurately, it's a technique about nothing (to paraphrase "Seinfeld,") that I call "Power of the Pause." With it, I'm convinced we're able to foster even more success than our default of always doing something.

As a business coach, I discovered the "Power of the Pause" while working with hard-driving entrepreneurs. These people wring their hands over feeling they should be doing more, especially when closing a sale. When a deal starts to languish, anxiety takes over and they do what they know best - i.e., more of what they did originally to interest the buyer. They cover benefits, handle objections, and reiterate value. In short, they talk... and talk... and talk some more, hoping they'll convert the prospect, who can't get a word in edgewise, into a paying customer.

It's easy to jump into a client's anxiety boat. After all, they feel discouraged because they have tried everything to attract more clients, build their business, and make sales. It feels natural to commiserate by sharing their fear and dejection, and then to help them feel better by offering support and encouragement. However, the more enthusiastic and rah-rah we become, the more we create noise in everyone's mind, heighten anxiety, and reinforce the strategy of trying to force things to happen.

That's where the pause comes in. It's small, powerful, and takes only a moment. Simply center the body, relax the shoulders, take a few deep breaths, and say nothing... for a minute, maybe two. This is an eternity for some, but by letting stillness prevail, natural problem solving processes begin to flow.

If we replay the scene with the nervous entrepreneur about to lose a sale, the pause works two­fold. First, when the client starts down path of doom and gloom, we as coaches need only shake our heads in acknowledgement of hearing, and say nothing. Simply let the concerns be voiced and then allowed to waft to the floor. It's at this point the client can "hear" the words just spoken in full fidelity, undiluted by the usual tidal wave of sympathy. It's in these moments where clarity of thought emerges, and solutions reveal themselves to the unguarded and receptive mind.

Second, the pause will work for the business owner's interaction with a customer - for all the same reasons. When the customer starts to back-pedal and offer objections, this is a great time for the salesperson to sit back, breath, and allow a few beats of silence to fill the room. It stops the train of unbridled thinking, allowing real obstacles to be managed.

The pause works equally well in reverse, when needing to remove a client or customer who no longer is a good fit. Simply allow time to get ready, breath, and then initially review the positive aspects of the working relationship. Next comes the "scary" part. Gently convey that something you're thinking (the negative prediction) may be upsetting. In reality, the client often feels fine and not surprised at all. Then, state what needs to be done - end the professional relationship - and stop. Do not say anything and give the client time to digest and reflect. After a response, take one more breath and reflect their feeling. "I see that you're confused - or upset, ok, disappointed." Then stop again, breathe, and get centered. Feel the confidence.

A key component to the pause is breath. In yoga, participants create openness in their bodies by intentionally "sending" breath to the places that are blocked and tight, thus releasing the tension and allowing energy to flow. The pause is like a mini yoga moment. By acknowledging the tension and then giving permission to pause, transformation occurs. Both parties reflect and make conscious, thoughtful decisions - not reactive, impulsive ones. The results are immediate and often astonishing.

If the pause is so effective, why is it not taught in sales courses and seminars? The answer, I believe, is our cultural role models push us to work hard and stop only when exhausted. Slowing down is seen as weakness, even laziness. While difficult to resist this cultural message, I challenge all of us to try. Americans are the world's leading workaholics, with all the attendant dysfunction. Breaking the cycle can only help us. Harness the Power of the Pause - It will open the door for better decision-making and even greater success.

Margo Geller            http://www.margogeller.com/            margo@margogeller.com           404-321-2131

One of my friends, Joe Heller of Brooke Companies Search (http://www.brookecompanies.com/) invited Eric Standlee of American Prudential Capital (http://www.americanprudential.com/) and me to appear on Dialogue Houston in an interview with Laurence Payne.  It was a great opportunity and I'd like to share the video with you.  Just follow this link.

 

In addition, I was invited to bring two clients: D'Lea (Dee) Nichols of Unishippers (http://www.unishippers.com/) and James Marcel of Reliant Leasing Systems (http://www.reliantleasing.com/) who brought their perspectives as business owners.  Their segment is here.

I recently was reading an interesting article on BusinessWeek.com titled ‘The Problem with Problems" by Fred Collopy, professor at Case Western Reserve University. The premise of his article was that "by focusing so often and so consistently on problems, we come to adopt a kind of deficit thinking. Plans of action that flow from it are concerned with repairing, fixing, and compensating. We spend so much time considering what is wrong with our organizations that we overlook what is right."

If there ever was a time for business owners and their organizations to find the value of positive thinking, it is now.  Now I am not talking about some mystical mind-bending exercise to make us all feel better.  What I am talking about, and what I think the professor was getting at in his article, was that it is time we start to look at the good things our businesses do and start to rediscover the value our businesses bring to the marketplace - the things we do better than anyone else.

Start thinking about them, and start reminding one another within the organization of what we do well.  We need to instill that "positive thinking" in all levels of the organization - from upper management and the board of directors all the way down to those that come in contact with  customers on a daily basis.  And then, once we have reminded each other internally of what is positive about our company, then we need to start reminding our current customers and even those "soon to be" customers what our value is and why they need our products and services. 

In an upcoming article I wrote for a local business journal, I remind business owners that rediscovering value, from an internal and external perspective, is something that our businesses need now more than ever, considering the economic challenges we are all facing these days.  Whether it's good times or not, our organizations need to spend time analyzing and highlighting the value our companies create.  It is also not a time to be timid about innovations, but it is a pivotal point where we need to invest in enhancing our companies' strengths to bring them out of this economic malaise.  By doing this we will set our organizations up like on a springboard to launch to new levels of success when things start to turn around.

You certainly can't ignore problems; you do need to deal with them, but it certainly will be a more powerful and productive use of our time and energy if we spent more time emphasizing the good our companies are doing and highlight and reinvest in our strengths.

Contact William Wright at (757) 685-2455 or by email at wwright@b2bcfo.com

My practice was recently in transition. I have a number of clients who are utilizing my expertise and time. Previously, my time was spent networking, managing it was much easier. I thought about the issue and decided that while meeting as many people as possible through networking events is good, taking a hard look at my contact list is essential.

We are taught to create goals, to write them down, to make them clear and concise. I have given this a lot of thought and effort, since it is important to incorporate networking goals into my practice. I have decided that Quality is better than Quantity!

Here are my thoughts which can be used for many different types of goals:

1. Getting to know you - I really want to get to know specific business folk much better. I've already figured out that their friendship grows when I contribute more than "I'll see you at the next networking meeting."

2. Provide the benefit - I want to be able to provide a benefit to them which I believe is impossible if quantity trumps quality. How would I know what their needs and desires are, if I don't get to know them on a more professional and personal level?

3. Reap the benefit - Every networking friend or acquaintance that I've met agrees that taking the time to form a relationship allows them to make introductions (to me) of their network of professionals as well as decision makers.

4. Become a better professional - I'm convinced that we gain experience and expertise from others. Whether from individuals who have mentored us or individuals whom we mentor, we grow professionally. The same holds true for networking, we gain from the contacts we know and become more intimate with.

5. The business comes to those who are patient - is really what the lesson is for me. We must be patient; the business will flow because there are too many small to mid-sized businesses that need a B2B CFO to assist them in running their business, providing strategic planning, etc.

Business owners ultimately benefit from our goal setting and strategically networking with a smaller group of professionals.  How does this occur? My thought is that a banker, lawyer, CPA, insurance broker, those professionals who we meet, who we invest our valuable time with, ultimately will make a call, to a decision maker, say some kind words about us, about our professionalism. The decision maker then feels better about investing his/her time with us. Ultimately, this part of rapport will lead to a long term engagement, to a long term relationship that not only benefits us, but will ultimately benefit the business owner, his business and personal life.

Back in 1989, I led what was then called an MPR II implementation project for Thunderbird Formula boats  (http://www.formulaboats.com/).  We had many objectives that we wanted to reach and one of them was to be able to look at the quantity listed as "On Hand" and trust the number was correct.  For too long, our purchasing personnel simply didn't trust the numbers.  Instead, to be certain that they knew the right quantity on hand, they would go find the inventory and make sure the quantities were right. 

 

While this was understandable, it was also exceptionally inefficient.  Why not get correct balances and keep them correct instead?  Now, you may be thinking, okay, they'll take a full physical inventory and everything will be correct.  Unfortunately, it isn't that easy.  There are a number of problems associated with a physical inventory:

1. Often firms use whatever personnel might be available so the person counting may not be familiar with the parts they are counting.  This means there can be errors in quantities or part numbers.  For example, if the standard unit of measure is pairs and the item is counted as "each" the total quantity will be overstated by a factor of two!
2. Often there is too little time or lack of available resources to investigate discrepancies.  As a result, wrong quantities are posted to inventory.  Wrong quantities lead to lack of faith in the numbers and the cycle of distrust starts all over again.
3. Confusion over open order and allocations can cause personnel not to count items that should be counted or to conclude that the parts are included in WIP when in fact the parts are still located in Raw Materials.
4. Often companies call items "inventory" but they don't have a good method to identify these parts so they become part of an accumulation of unidentified inventory.
5. Entry errors can be another source of problems causing incorrect entries to be posted to inventory and the general ledger.  These can be errors such as typing in a wrong quantity or typing in the wrong part number.
6. When you can't trust the inventory numbers, morale often lags because you question the ability of the company to perform even the most simple of tasks.
7. Research indicated that in general, a physical inventory created more problems than it solved!

 

So, how does a company reach the point of trusting their numbers?  You start by taking one final inventory.  About 1989, Thunderbird did just that and there hasn't been another physical inventory at Thunderbird since!

 We started out with one primary goal: we had to maintain a minimum of 95% inventory accuracy. 

We probably should define inventory accuracy.  In general, if, when you count a part, the quantity you count is plus or minus 5% from the actual counted quantity for the part. As long as the quantity counted is close enough to be within the acceptable range that count would be considered a hit.  If the count falls outside that range, it would be a miss.  If you count 100 items and 95 or more fall within the acceptable range, then your inventory is above 95% accurate.   There may also be times that you can't afford any variation.  For Thunderbird, those parts were boat engines.  We felt that boat engines should always be 100% accurate without any variance range allowed.  Typically, these parts that fall into this category are very valuable and have a ready market to buy the item.

We kept track of our inventory using a class system.   For example, at Thunderbird, we established four classes:

1. Control group - This is a group of parts that are representative of the inventory in general.  In other words, these parts helped us identify parts that were not being relieved properly from inventory or if we were failing to record activities properly.  These items were counted at least weekly and in some cases daily.  If these parts were off, it typically meant that we had failed to record some activity properly such as relieving a manufacturing kit from raw inventory.  A manufacturing kit is a collection of parts that were needed to manufacture an assembly or subassembly.  
2. "A" items were high value items that were counted once per week.
3. "B" items were generally more readily available and not as expensive.  We would count these parts about monthly.
4. "C" items were usually inexpensive and readily available like nuts, bolts and screws.

Using this process, we would count every item at least 4 times each year.  We assigned an individual as our cycle counter.  This person needs to have certain traits.  They must be very detail oriented, enjoy the challenge of digging into to a problem and figuring out what happened and then capable of helping to develop procedures to help avoid having the problem continue to occur.  Our first cycle counter was a gentleman named Richard Black. 

 

Richard was excellent at what he did.  Each day, before production began, he would go out and count the items.  Enter the data into our software system and then review the results.  When there were problems he would do research and feed solutions back to the proper individuals.  If the problem was in our bills of materials he would make sure the bills were updated.  If we had failed to record transfer of inventory he’d get that problem corrected or if we had not recorded the proper number of items received from a vendor, he knew how to make those adjustments as well.

 

The key here was to find a person with the motivation and drive to get to the root cause of the mistakes and fix them.  Also, Richard knew all our parts, knew the unit of measure for each part and then graphed and published the results so we could visually see our cycle counting progress.  We didn’t face the errors generated by a physical inventory and that created trust in the numbers.  When purchasing trusts the numbers, purchasing becomes far more efficient.

 

 A friend asked me today to send him an email that answered two basic questions.

What are you looking for in terms of leads and referrals?

 What can I tell my contacts you will do for them?  

His intent was to make sure he knew what I wanted him to do for me and to make sure he could explain to others what I can do to help them.  I thought that was a pretty reasonable request and I jumped right on it.  Here are my answers.

Leads

An ideal lead for me is a warm contact with a professional service provider ( such as a CPA, attorney, banker, insurance, HR, systems, M&A, equity source or other similar role) that has privately owned small to midmarket clients that may need assistance with any traditional responsibilities of a CFO. While my objective is to get an opportunity to talk to owners of companies, I find that such conversations are much more productive if they occur due to a suggestion from a trusted advisor.

I am always looking for opportunities to speak to business owners individually or in groups about the benefits of using a part-time B2B CFO®.

What I do

Our website has a copy of my bio that tells who I am, and provides a good explanation of what we do and how we work in general terms.  Below are some more specific examples of how my involvement can be a direct benefit not just to the client but to the other professionals as well.

For the bankers I can help their current or prospective clients:

• Produce real GAAP financials,
• Clean up accounting problems,
• Get into compliance with covenants,
• Provide competent cash flow projections,
• Develop well structured and supported plans,
• Prepare and present bank credit package,
• Provide the financial knowledge to request the appropriate credit vehicles and banking services, and
• Recognize the need for credit facilities.

For the CPA's, I help them service their clients by:

• Digging in to complex problems,
• Performing orderly monthly closes throughout the year,
• Preparing for audits, reviews and tax returns,
• Implementing their recommendations, and
• Allowing them to perform within their proposed fee structures.

For the attorneys, I help them better serve their clients by:

• Providing the accounting, financial and administrative follow-through on transactions,
• Organizing, analyzing and presenting the business case for planned transactions, and
• Grounding the entrepreneur with the required accounting and tax rules.

 

For shareholders or prospective equity providers, I can help them by:

• Providing timely, accurate and competent financials,
• Developing and implementing necessary corporate governance, and
• Keeping the CEO focused on finding business not minding the business.

For the CEO, I help them with:

• All the above.
• Getting them the cash they need to do what they want to do,
• Time to do their job,
• Peace of mind that the fundamentals are covered, and
• Be a source for sound financial counsel that understands and knows their business.

I hope the above is useful and I would greatly appreciate and welcome any feedback.

My friend Chris Ruisi of The Coach's Zone recently interviewed Caryl Felicetta of Single Throw on the subject of email marketing. I found Caryl's advice to be clear and right to the point. If you use email marketing or are thinking about using it, this advice will be of value to you.

 

As everyone knows, the economy is, and has been, horrible.  I thought I would describe how one of my clients has begun to respond.

My client is in the commercial and residential heating and cooling business.  In our region, I am informed that 8 similar businesses have failed in the last 12 months.  By the time I became involved (referred in by the client bank) my client is on COD (cash on delivery) with all of its major suppliers.  Although they continue to receive product, the suppliers have required additional weekly funding with each COD delivery.  The bank loans are current, but straining the company.  Weekly and monthly cash flow was negative.

Our first step was to match the monthly and weekly expenses with the available cash flow from the service business and the margin after equipment costs from installations and repairs.  Fortunately, most of the expenses are variable and rise and fall with the sales.  So, labor, payroll taxes, fuel, installation costs of equipment, and the like, move up or down with volume.  The fixed expenses were the hardest to reduce:  salaries, office, warehouse, health insurance and in particular monthly installment loan payments, plant mortgage, and the additional vendor payments.  Further, there is no supplier credit available.  We downsized the fixed expenses to match current, and much reduced volumes, assuming no fast recovery.  If it happens, great, but we are planning for the worst.  So, we budgeted to cash flow break even.

With a little bit of additional owner capital, we are approaching the suppliers.  The suppliers would like to continue working with my client. After all, there are only a few still operating in our region, and the suppliers need customers too.  So, we are offering some up front cash with two requirements:  1 - the gross supplier balance will be permanently reduced 50% and 2 - the additional weekly and monthly payments, above the COD payments, will be cut by 50%.  In the event my client does not make the now reduced additional weekly payments to fully pay off the reduced balance we negotiate, the full balance will be restored.   And, important to the suppliers:  they are all treated equally, so that none get in front of another.  These adjustments free up weekly and monthly cash flow to 10% of sales.  That extra cash will be used to reduce bank and installment loan balances.  But, once the economy turns (it will) we will have freed up resources by having reduced the payables balances, and we will recover faster.

It is not easy, but in this economy, the suppliers are willing to help, my client is taking the drastic but necessary cost reduction steps, and they will survive this economic crisis.

The point is to be proactive.  Start with the cash available from sales, and match the expenses to that level.  Work with the banks and the suppliers, and the business can pull through.