Partner Blogs | B2B CFO

215 partners in 40 states
6,451 years experience

Fill out the form and receive for FREE The Discovery Analysis (a $1600 value)

Testimonial: The Farmers Bank of Osborne, Kansas - Dec 16, 2010

Posted by: Gary Lee in Testimonials

Gary Lee was introduced to us through a mutual business associate and he exceeded our expectations right from the very beginning. He played a very integral part in internalizing our previously outsourced financial reports. He is always accessible and ready to answer any questions at any time. Gary has been and will continue to be a very valued friend and partner of our bank.

- Rudy Haberer, VP/CFO of The Farmers Bank of Osborne, KS

Is a Budget Really Necessary? - Oct 23, 2010

Posted by: Gary Lee in Articles

Hopefully, every company's goals for next year have been set. With those goals in mind, a budget helps give financial clarity to support those goals. If not already done, there's no time like the present to put one in place before the new year begins. Yes, budgeting is difficult for most of us, but as time goes on, the process becomes easier and accuracy improves. The first budget is always the most difficult budget. A company with a budget is more likely to hit its goals than a company without one.

Budgeting can be accomplished in a variety of ways. The easiest and most traditional approach is to take historical numbers and ratchet them up or down in line with the projected business level for the next year. Most accounting software packages offer some tools to automate the process, so that's a good place to start. In QuickBooks, for example, this is a fairly straightforward process. Also, once the budget is in the system, generating financial reports comparing actual results to the budget in the next year is a relatively simple process.

Zero Based Budgeting (ZBB) is another approach, whereby every number must be justified by managers - a real crowd pleaser! ZBB is more difficult to pull off, of course, but it ensures that a good deal of thought goes into the budget and those held accountable have input.

A "top down" budget sets revenues and expenses on a company-wide basis, and revenue and expense amounts are pushed down to departmental levels using various "drivers" such as capital deployment, number of employees, square footage, etc. This may lack precision, but it is efficient and keeps the focus on what the company's overall results are expected to be. A "bottom up" budget would involve starting at the most basic level and adding up the numbers. When those numbers don't add up to an acceptable company-wide total, there must be a back and forth process to reach consensus on the final totals. The budgeting process must be started early to allow enough time for this process!

Whatever the methodology, the numbers should be tweaked to allow for anticipated changes in the landscape for the coming year. The budget should be in sufficient detail to let managers know what is expected, to facilitate accountability. Time spent on details which doesn’t significantly improve the usefulness of the budget is time better spent running the company. A budget is only a tool. Once the fiscal year is underway, the budget can be changed monthly or quarterly to reflect actual conditions which differ from the original assumptions. This is especially true given the current state of flux for the U.S. economy; any company owner has to wonder why he or she should even try to set a budget for 2011. It's hard to know if a tax increase is coming or not. The cost curve for health care is not predictable. Increased cost of operations will result for many industries if some type of cap and trade program is mandated. Compliance with an ever increasing regulatory environment continues to bite big chunks out of the bottom line. Interest rates and inflation are very low, but for how long? Using Excel, or another financial tool, it is possible to create different budget scenarios - most likely, worst-case and best-case. This process provides forethought on what actions might be required if things turn out worse than expected, such as trimming staff or cutting other expenses, or what steps would be required to expand if business is significantly better than expecte....

Planning? Please, anything but that! - Jun 18, 2010

Posted by: Gary Lee in Articles

What is it about planning that brings such dread to mind? No doubt many of us have been involved in planning before, so we have memories of the experience, some good, some not so good.

A popular business proverb is “failing to plan is planning to fail”. Do an Internet search on that phrase and you get 24,700,000 hits! That means a good number of people have heard that proverb before and have something to say about it. So what?

Those of us that have been involved in strategic planning in business have many stories we could tell. Sometimes planning is borne out by the results, sometimes not. If the planning is simply done so someone can say the company has a plan it will fall into the “sometimes not” category. What a waste, some would say. We tried it once and it didn’t work. We can’t predict the future so why try?

Well, we do it because studies of businesses over time bear out the fact that those that are actively engaged in careful planning perform better than those that aren’t. Hence the proverb.

Unfortunately, the majority of businesses don’t have a strategic plan in place. They may have written a business plan to obtain a loan, perhaps an SBA loan, and that was the last time anyone gave planning much thought. It is unlikely a strategic plan spelling out the details of how the company would accomplish that plan was ever written. If having one is so important, why doesn’t it get done? It seems that business owners simply don’t know where to begin and may feel they don't have time to develop one. They want to get the business underway and think they can handle things as they come up.

Alan Lakein, author of books on time management, said “Planning is bringing the future into the present so you can do something about it now”. He was talking about this in the context of someone’s personal life, but for owners of a small to medium-sized business, the line between personal and company goals can be a blur, so I believe what he said is important for both.

Personally, do we plan what to do for a given day after the day’s end? Of course we don’t. At the start of the day we know what we want to accomplish for that day. When an entrepreneur starts a company, it is imperative to have an end-game in mind ahead of time as well. Is the purpose of a business to provide a living for a period of time? Is it to build something of value to sell or perhaps pa....

Character - Good or Bad, Does It Still Matter? - May 14, 2010

Posted by: Gary Lee in Articles

I was told recently that some believe a person's character doesn't really matter so much anymore. It made me wonder why they would feel that way. Whether or not character is important is certainly discussed often in the media. If there is rampant cheating at a university or crooked dealings by someone, it makes the hourly news and the newspaper headlines. Why did they do it? The public wants to know. Apparently, someone of bad character thought cheating or being a crook was acceptable, and the media was ready to report all the juicy details.

At least at some point character must have been important, because it is one of the five "C's" of credit -- one part of a fundamental assessment of whether or not money loaned to an individual or company would be repaid. I believe those of us that have been around a few winters have an opinion as to whether or not it is important. Personally, I would be uneasy making a loan to someone of questionable character even if capacity, capital, collateral and conditions all looked favorable.

So, does character only matter if you lend money? Obviously that isn’t the case. Every business owner, corporate officer or supervisor should be concerned with the character of those they hire -- employees AND vendors. When people face a decision, they will make it based upon their character, their very nature.

Something else I heard recently, in essence, was that character is caught not taught. We learn it in our formative years by observing others - parents, teachers, mentors and friends, whether good or bad. In those early years, someone may hear arguments for situational ethics. It all depends upon the circumstances. Later in life, an employee may justify embezzling funds because they felt they weren't paid enough and the boss was just being greedy. To them, it only seemed fair. Situational justification had become a part of that person’s core values. Good character isn't something we learn as an adult from reading a checklist or from studying a few easy lessons. It isn't like throwing an on/off switch. It is at the core of who we are.
As far as financial matters of a company are concerned, business owners have the right to expect their CFO, staff and any business advisors to be of good character. That will help them sleep better at night.

Interest Rates - Get Out the Crystal Ball - Mar 26, 2010

Posted by: Gary Lee in Articles

Rates have remained at historically low levels for some time now, so they must be ready to increase, right? Let’s assume not if but when, so the more important questions are how high and how fast? That’s the part that requires a crystal ball. There are so many factors affecting interest rates, where does a person begin when trying to guess what lies ahead?

The Federal Reserve Bank (Fed) is responsible for directing the economy using various tools -- monetary plumbing only economists understand. One of those tools is control of the money supply. The problem is that over time the Fed has found itself less and less in control of it. The creation of money market funds, for example, created money in the economy that was outside of the Fed’s direct control. If the money supply expands beyond the Fed’s targets, inflation is the result. The opposite is true if the money supply contracts too far. Plainly stated, it’s more difficult to manage these days.

Interest rate levels are another well-publicized tool for the Fed during this current recession. Because of a dearth of economic activity, the Fed has been able to push rates to historically low levels and keep them there without inflation rearing its ugly head. Once the economy rebounds (some say the turnaround has already begun), economic activity, along with other factors, will bring pressure to bear that will make increases in interest rates inevitable. Because of other tools the Fed employed to save the economy from ruin, low interest rates are desirable, but not sustainable. That’s a different discussion.

Rates are going up. What makes me so sure? When the economy does claw its way back to expansion mode, the resulting economic activity will increase the money supply, so that is one factor. As companies grow their operations to meet their customers’ demands, some will need to borrow more money. Unfortunately, government deficits continue to grow, and the Treasury auctions of debt securities will necessarily increase significantly. The increase in public debt will compete with financing in the private sector, another factor forcing rates higher.Read more...

Testimonial From Premier Pneumatics, Inc. - Feb 9, 2010

Posted by: Gary Lee in Testimonials

Gary is dedicated, hard working, competent, discreet and honest as the day is long. During the seven years Gary Lee worked for me at Premier Pneumatics he was a most important part of my management team. He ran his department efficiently and effectively as he worked to solve problems and improve processes across departmental boundaries. He made himself invaluable from the beginning by working with the existing ERP and mainframe vendors to upgrade, at minimal cost to Premier, a computing system which was processing so slowly it was significantly hampering the Company’s ability to get work done. When Gary finished that project, we were once again able to provide the level of care our many repeat customers had come to expect. In another instance, Gary recommended we work to reduce raw material inventory. He spearheaded a project which trimmed inventory by $1,000,000 (a 47% reduction) and improved the rate at which we turned our inventory by 30+%, yielding improved profitability and freeing up cash for use elsewhere in the business. Gary created a metrics report recapping orders, shipments, backlog, cash flow, etc. on one page, and made sure that the report was produced and available immediately after the close of business every day. With Gary’s help, I had my finger on the pulse of the business like never before. When we decided to sell the Company, Gary capably handled his part of the management presentations to potential buyers. Once a buyer was selected, Gary managed our end of the due diligence process so effectively that I hardly remember that part of the transaction. Gary was always discreet in his handling of the Company’s financial information. He always produced financial statements on a timely basis. I could trust him to get his job done and more. I recommend Gary to anyone needing CFO expertise.

Robert B. Korbelik, President and Owner

Go Team! - Jan 4, 2010

Posted by: Gary Lee in Articles

During winter each year, football fans everywhere are hoping their favorite football team wins the championship. I can’t tell who will win the college or pro bowl games in any given year, but from my days of playing, I can tell you what type of team will win.

We’ve probably all suffered through a football game where the star running back rushes toward the line only to discover there is no hole, no place to go. That player is quickly stopped at the line of scrimmage or thrown for a loss. On third and long we’ve seen the quarterback get sacked yet again before a receiver broke free. A game where lackluster performance rules the day is not fun to watch. You might find yourself thinking the coaching staff must be absent.

The team which will win is one that has all players focused on doing what they have been assigned to do and doing it well. The lineman opens up the hole in the line for the running back to advance the ball. The linemen hold off the charging defenders to give the quarterback time to successfully pass the ball to the receiver (who hopefully doesn’t drop it). No one great player is enough to win the game. It takes eleven all working together, focused on the goal line and a great coach to call the shots..

So it is for businesses. In manufacturing, for example, it takes a determined effort to make everything flow smoothly. Engineering needs to release product structure accurately and timely and design tooling so production can take the ball and make the product. A glitch in the line – an overloaded work center or purchasing dropping the ball for delivery of raw material or parts can cause a fumble. Sales must line up the customers and promise delivery dates to meet their needs, lest the competition intercept the order and take business away. Shipping has the ball last, hopefully getting the product to the customer when promised and in proper working order. At that point the finance department had better do the invoicing to the customer and collect the cash or everyone is working for nothing. To win, the coaching staff, headed by the CEO, needs to be on its top game.

How is your throughput? How long does it take your company to use its resources to produce and sell its products and bank the cash? Just one bottleneck in any business can hinder the process and unnecessarily build inventory levels. Every employee must be focused and properly trained. The longer the cycle of production or provision of service, the more resources your company needs, translating to higher costs and less profit. Sometimes a bigger balance sheet is not a better balance sheet.