September 2009 Contract CFO Articles
Excellent Article on CFO For Rent Industry
http://online.wsj.com/article/SB125358186243529783.html
The One Piece of Paper That Drives Your Business
Contributed by Ted Hofmann, Principal; CFO Plus; http://www.CFOplus.net
The 10 Key Strategies for a Profit-Oriented CFO
Contributed by Rick Balog, CPA; The ARC Consulting Group; http://www.arcconsultinggroup.com
The One Piece of Paper That Drives Your Business
Imagine lying on a beautiful beach on the North Shore of Kauai, soaking up the rays knowing that when you get back to the hotel there will be an eMail message to you that will enable you to know - at a glance - how your company is performing while you are away on vacation. If you are like many busy entrepreneurs who know all too well the reams of paper that fly through your office at any given time, take heart. This could be your reality.
When you step behind the wheel of your car, all the vital information is right in front of you. Indicators of speed, fuel consumption, oil level, temperature gauge and RPMs allow you to avoid unnecessary disasters such as running out of fuel, overheating the engine or stripping out the gears.
Other information allows you to plan for the short- or long-term future. You check the odometer to plan for buying your next car and rely on your maintenance records to ensure you maximize the care of your investment.
Your business is much like your car. And, like a car, all the information you need to keep it humming like a top race car can be condensed down to one sheet of paper. As the driver of your business, what information do you rely on a daily basis to drive your business?
For decades, business owners have accepted that the mountains of paper that stream into their offices are required to stay on top of their businesses' performance. Now, we know that this is simply not true. Success leaves clues and those clues are found in your company's Key Performance Indicators (KPIs).
These indicators allow you to know how well your business is doing - at a glance. This means, that one sheet of paper can help you drive your business more profitably and efficiently than actually wading through every figure in your financials. In essence, these indicators and performance drivers allow you to know which areas need attention, which areas are running at top performance and what you can do to maximize your resources to attend to both. Of course, like the odometer on your car, the historical documentation you currently are managing still offers you valuable information for other decisions you may make, including selling or planning for succession.
Each business, regardless of the industry, has a unique set of key performance indicators (KPIs) that allow business owners and executives to strategically manage the company's operations. In today's fast-paced business world, it's critical to leverage your time whenever possible. If you could look at one sheet of paper each day and know - without a question of doubt - what needed to be tweaked to improve performance, would you?
In short, this one sheet of paper - also called a "Performance Dashboard" (much like the dashboard on your car) - allows you to put the power of performance to work for you. You can easily pinpoint trends, evaluate available options, determine solutions and maximize your opportunities. You will quickly become proactive and, with strategic action, you can realize vast improvements in performance.
An effective dashboard condenses information into an easy-to-use format. It offers information in a way that is meaningful to you, the business owner, and connects to other information that can be used for short- and long-term planning. Some other items that may be on a typical dashboard, include:
• Revenue & Gross Profit for the last three years and rate of change for each.
• Revenue & Gross Profit to date and current month.
• Projected revenue for the remainder of the year.
• Revenue per employee and corresponding headcount.
• Average $ sale (historical versus current).
• # of active customers, # of new customers & # of lost customers.
• # of customer leads and conversion rates (historical versus current).
• Net working capital (historical versus current period).
By developing a customized dashboard, you can rev your engine only in the areas where it will be most beneficial. To learn more about building your one-page dashboard, give us a call today at 415-289-5050. CFO Plus can put you on the road to increased performance!
The 10 Key Strategies for a Profit-Oriented CFO
Most folks think all we accountants do is "Put little numbers in little boxes." This is because at times, financial professionals forget that the operations folks are our primary customers; not the IRS, not the Banks, but the company managers. As CFO's, we can lose focus on the internal customers in the turmoil caused by external demands. Today, some see today's economy as a challenge or even an outright threat. The profit-oriented CFO sees it in the same light as do the top American business entrepreneurs - a unique opportunity to enhance their profits by building on what made them great in the first place. If you are truly committed to gaining ground in this period of opportunity while others are running for the hills, do what your competition is not doing, follow these 10 key strategies.
An effective CFO creates a custom-designed, profit-focused action plan and information flows that focus on the financial resources on their business, their environment, and their market. Effective CFO's understand that their sole responsibility is to support the operational decisions of the company. Smart CFO's know that bankrupt companies do not need a CFO! .The financial information they provide is the key element in corporate decision-making. Look at each key business decision as a unique opportunity to become the foremost provider of your specific product - Financial Data.
If you strive to be the financial leader of a successful business, take the time to take action, maximizing the return of your investment in Economic, Intellectual and Human Capital. Work together with your colleagues in operations, marketing and sales to capitalize on the synergy of your Total Capital Investment and take full advantage of today's new opportunities.
Top 10 Winning Business Strategies
The following strategies are a great place to start. These work because "They're simple, they work, and they engage your Human Capital to exceed your expectations":
1. Focus on the Windshield
2. Define your Product by What You Do
3. Drive your Invested Human Capital to see "What Could Be"
4. Continually Invest in Your Human Capital
5. Understand your "Customer Profitability"
6. Do it Right the First Time
7. Make the Person that can affect the Change Feel the Pain
8. Understand what Drives your Business Processes
9. Outsource to Increase ROIC
10. Make the Decision
1. Focus on the Windshield - Know where you're going. Understand how the events of the past are driving your company into the future. The question is simple - Do want to drive down the Interstate of Business at 75MPH looking in the rearview mirror? Always focus 18 month out.
2. Define your Product by What you Do - Companies incur cost by what they do. They generate revenues by what they sell. There are always to products associated with any process, what we created, and what the user purchased. In order to understand the cost of production, you need to document your processes. For each process, ask, "Why do I do this?" If you can't find a reason, don't do it!
3. Drive your Invested Human Capital to see "What Could Be" - Drive operations to continually innovate. But ensure they understand the impact of the innovation. Some ideas are great at face value, but the required investment of cash far outweighs the potential return. This is where a sound internal financial communication stream is essential.
4. Continually Invest in Your Human Capital - Educated and motivated employees have a tremendous impact on your company's success and profitability - and even more so in slow periods. Your people are your product. Never forget to invest in them. They are your company.
5. Understand your "Customer Profitability" - Not all business is good business. Our research shows that 70% of a company's customer base provides 130% of their current profitability. By identifying the activities you perform "gratis" for some customers that are "over and above" what you would typically provide, you can identify those customers who may be sapping your profits.
6. Do it Right the First Time - There are two ways to do anything, the right way---and again. Doing it again only adds cost. By investing in effective controls, you significantly reduce cost of the process, the potential for employee theft and other forms of business fraud. Your understanding of the control process can send a strong message to all employees, doing it right is important.
7. Make the Person that can Affect the Change Feel the Pain - Developing processes and then handing them over to some else to perform just plain does not work.. To truly affect change, tie the process Owner's compensation or reward, to making positive change. Ask them to "sign-off" on the new process. Attach their name with the change. Now, THEY own it. Now tie their bonus to the output of the process, and "voile", ownership!
8. Understand what Drives your Business Processes - Companies incur all expenses because an event occurred that made you perform an activity. This event is a ‘Cost Driver." Companies do not make more money by working harder - they make more money by working differently.
9. Only Outsource to Increase ROIC - Return on Invested Capital is a measure of management's ability to turn assets into profits. The small business owner has limited opportunity to leverage high cost items such as I/T and HR software, and related capital equipment. The use of HR and Payroll outsourcers limit capital requirements and help avoid litigation. Always ask, "Is this what I do best?"; "Is this the best use of my time?" . Look at every hour as an investment in your Return.
10. Make the Decision - There is an old children's riddle that goes as follows: Five frogs are on a log. Four decide to jump off. How many are left? The answer is five. Once you make a decision to change - Do It! The worst disease a business owner can contract is Paralysis by Analysis. You do not enhance your profits by deciding, you enhance profits by doing.
The ARC Consulting Group is here to help.
For information on how ARC can help your business gain a solid economic advantage, call Rick Balog, CPA, President & CEO weekdays between 7 a.m. and 7 p.m. ET, at 904-268-1148, or email me at Rick@arcconsultinggroup.com to schedule a Corporate Wellness Evaluation of your organization. We can help!