What is your Fraud IQ? - Aug 9, 2011
Posted by: Stu Lipkin in Articles
As many financial professionals know, budgeting is a projection of future results based upon historical analysis. While that model may have worked in the past, the recent recession and upheavals in this economic climate require an overhaul to that process. No longer can most companies assume that their historical trends will continue in the future. In fact, most companies have already seen these trends destroyed in 2009 and may continue to see them deteriorate in 2010.
So how does a company begin the planning process with historical trending no longer reliable? The answer is, from the beginning. Ignore past data and assume this is the first year of operations. The process described below may have more or less participants depending on the size of the Company and the depth of the management team. However, the process will still be the same.
The first place to start is a very detailed Sales and Marketing Plan. This process must begin with the CEO/President and include all individuals in the business who are involved with Sales and Marketing. Each person who has sales responsibilities must develop their own sales projections for their specific list of customers. These projections should take into account lost customers and new customers which occurred in the preceding 12 months. It should also include product lines that are being terminated or projected new products that will be introduced in the upcoming periods. The projections should be detailed as to each Customer with a separate entry if any significant product lines are being terminated or added. The projections should be jointly reviewed with the CEO/President, CFO or Controller and the salesperson who prepared the information to verify that there is agreement. It is not uncommon for a salesperson to be more conservative in the projections compared to what the CEO/President is expecting from that person. Particularly if the salesperson is being paid commission and the projections are the basis for the calculations. The meeting will also give the CEO/President insight from the salesperson as to any problems that may have developed or opportunities for future growth with those Customers. Once the meetings are completed with all of the salespersons, the CFO or Controller will consolidate the data and use this as the basis that will drive the Sales numbers in the budget. As with all good budgeting techniques, it is advisable to develop Sales projections at 3 levels. While there are many labels (pessimistic/expected/optimistic, low/medium/high, etc.) it is important in these economic times to fully understand the impact of hitting the budget at these various levels. While the information supplied by the Salespersons should be used for the expected level, developing 2 additional budgets that reflect Sales %10-%20 below and %10-%20 above the expected level will become invaluable to managing the business.
The next step is to distribute the 3 sets of Sales numbers to the employees responsible for Procurement and to those responsible for Operations. The Procurement people will need to evaluate what gross margin levels can be achieved both with existing product lines and new lines to be introduced. This step is critical in light of today's economic environment. Every Customer is looking to their suppliers for ways to reduce costs. This competitive pres....
What is B2B CFO and What Can They Do For ME? - Jul 7, 2009
Posted by: Stu Lipkin in Articles
The following excerpts are discussions that have occurred by many a business owner/CEO and a B2B CFO Partner. Owner: My business is out of control and my accounting people can't supply me with accurate and timely financials. What can you do to help me? B2B CFO Partner: With on average 25 years of practical CFO experience.... Posted by: Stu Lipkin in Articles
Exit Strategies for the Prudent Business Owner - Jun 16, 2009
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