November 2009 Contract CFO Articles
The Oh-So-Good Way to Share Not-So-Good Info
Contributed by Carol Couglin, CEO/Founder, Bottom Line Growth Strategies, Inc.; http://www.bottomline-growth.com
IFRS - how knowledgeable are you?
Contributed by Peter Welch, President/Founder, SOX International, Inc.; http://contractualCFO.com
Analyze Your Business - Client Fulfillment
Contributed by Ted Hofmann, Principal, CFO Plus; http://CFOPlus.net
Part Time CFO; Best Reasons to Hire a Money Guru
Contributed by FindCFOServices.com staff
How Venture Capital Lost Its Way
http://www.businessweek.com/magazine/content/09_48/b4157080870431.htm?chan=magazine+channel_business+views
Trying to Sell Your Business? Think Like a Buyer
http://boss.blogs.nytimes.com/2009/11/20/trying-to-sell-your-business-think-like-a-buyer/
Rising Unemployment Taxes Could Hinder Hiring
http://news.yahoo.com/s/ap/20091122/ap_on_bi_ge/us_unemployment_taxes
The Oh-So-Good Way to Share Not-So-Good Info
Businesses love sharing news about their successes. Not only do they enjoy tooting their organizational horns, but they should share good news. It's good business to tell customers, stakeholders and the public in general about the great things that are happening.
However, with a large number of businesses now in adverse financial situations, many owners are questioning whether sharing is such a good idea right now. They are asking:
• Should we tell our employees about our financial situation and, if so, what exactly should we tell them?
• How should we manage our Boards, banks and investors?
• What do we tell our vendors?
• When and how do we tell them?
Before we get on the loud speaker, call in the troupes for a state of the union or even consider blasting an email, we need to consider one question very seriously: What do people really want to hear?
Regardless of whether or not our own actions are the cause of the company's current unfavorable financial results, there are significant economic forces above and beyond our control. The question isn't necessarily who's at fault? The critical question on our stakeholders mind is this: What are you, Person In Charge, going to do about it?
The answer to this is what's desperately needed right now: for owners and leadership to fess up to what is happening and clearly state what they're going to do to change it.
Generally, in communicating adverse financial information, Bottom Line Growth Strategies advocates transparency to key constituents. We are not suggesting you should advertise to the world that you are currently losing money or, perhaps more aptly, having cash flow problems. What we are saying is that your stakeholders want to hear what you are doing to correct your company's financial hardships and when that correction will occur. And how you send that message depends on which type of stakeholder you are talking to.
Following are the key stakeholder categories and a guide to communicating Not-So-Good Info to each:
Your Staff: We've listed your employees first because they are your lifeblood and, as crazy as it may seem, the same employees who have been with you during good times not only can but want to help you to improve the company's financial situation. All you need to do is give them the opportunity by including them in the discussion. Employees rally around those leaders who allow them to feel part of the inner circle.
You don't need to hand out printed financial reports; instead give an update on how the company did in the past year, how it is currently doing, current factors influencing the results and, ESPECIALLY, the actions you are taking to fix the situation. Avoid making promises you can't keep. This includes telling your folks there will be no layoffs or salary/benefit cuts. Making this promise and then needing to break it destroys your credibility. Instead, take this opportunity to emphasis teamwork and how you will all "get through this together."
Right before you is an opportunity to get feedback on areas of waste, cost savings or, even better, increasing revenue. If you don't talk, endless speculation and back channel communication may result. If you do talk, that time may be spent brainstorming new solutions and ways of working with the current reality. Take advantage of your employee's knowledge.
Your Board, Your Bank, Your Investors: When managing and working with a Board (or other vested parties), honesty is always a good policy. But again don't over- or under-promise by creating overly optimistic or pessimistic projections. Prepare projections you believe your company has a good chance of achieving. Boards, investors and the like don't want surprises, especially bad ones. They want to know that you have a handle on the issues and, again, what you are doing to fix the problem. Always be one step ahead by anticipating their questions and hot buttons. It's likely many of your Board members and/or investors have been (or are currently in) your exact shoes and you will build super-solid credibility with them by being honest and open during this time.
Your Vendors: Every business has key strategic vendors that need to be included in the Not-So-Good Info communication loop specifically so that they can assist your company in getting through tough times. If you communicate appropriately with vendors during financial adversity, not only telling them what is going on, but also what you are doing about it, they may be more flexible and collaborative about payments and other issues than you would have imagined. You do not need to go into a great detail with this group - just give them the bottom line - most importantly, your action plan.
Employees, vendors, Board members and investors have one thing in common: They are PEOPLE. And, generally, people are more than willing to work with and support someone in difficult times if they believe that person is honest, credible and, most critically, has a plan.
Communicating in business is not so different from communicating with friends, family or any other group that is in some sense vested in you. Human qualities like compassion, teamwork, perseverance, commitment, empathy and even love, rise up to meet the business owner who has the guts to face tough times head on with honesty and with integrity.
Certainly, we want you to be strategic in your conversations, but when you are sitting at your desk pondering whether silence really isn't golden, remember this: You, them, us - we really are in this together.
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Navigate the path through the economic downturn and recovery with greater insight, wiser decision making and better partners. Bottom Line Growth Strategies, Inc. guides business owners on their journey to success. We are experienced CFO's offering strategic, progressive and practical financial thinking for smart, sustainable growth. Call 443-798-1357 and find out more about how our team can support yours. After all, no one summits solo.
IFRS - how knowledgeable are you?
The harmonisation of worldwide accounting started some years ago and the role played by IFRS is hugely important.
Are you up to speed? Here are ten questions about IFRS to test your knowledge.
1) True or false? IFRS adopts a substance over form approach.
TRUE. Although there is no single standard on substance over form, it is embedded with the characteristic of reliability which can be found in the IASB's Framework for the Preparation of Financial Statements.
2) Why were derivatives "off balance sheet" before IAS 39?
Derivative instruments have only been on the statement of financial position (balance sheet) since 2001 when IAS 39 first became effective. Prior to that the instruments were kept off balance sheet as most had no initial historic cost.
3) How should convertible debt issued be treated on initial recognition under IFRS?
Any convertible debt issued by a company must be separated into its debt and equity elements on initial recognition. IFRS is then silent on what to do with the equity component once it has been created, the obvious treatment would be to make an equity transfer to retained earnings over the life of the instrument.
4) State three items which are required to be reclassified from other comprehensive income to profit or loss under IFRS.
IFRS is the only major GAAP that requires certain gains or losses to be reclassified out of "Other comprehensive income" into profit or loss. Reclassification is required in respect of available-for-sale financial assets, cash flow hedges and certain foreign exchanges differences but not gains arising on the revaluation of non-current assets.
5) What is the impact on profit and loss when shares are sold or purchased between a parent and non-controlling interest where control is maintained by the parent?
A non-controlling interest (NCI) is deemed to be part of the equity of the consolidated group. Any transaction between parent and NCI, so long as there is no change in control has no impact on profit or loss.
6) What impact are share options likely to have on deferred tax?
Accounting for share options will usually give rise to a deductible temporary difference, and therefore a deferred tax asset. Any tax benefit will normally be earned when the options are exercised and will probably be based on the options' intrinsic value.
7) At what level within a group should goodwill be allocated?
Goodwill should be allocated to cash generating units that are expected to benefit from it. This will invariable mean that the goodwill should be allocated at a level below that of an operating segment.
8) How does IFRS apply to a painting by David Hockney owned by a company?
There is no specific accounting standard for such a non-wasting assets, therefore the principles of IAS 8 "Accounting Policies, Changes in Accounting Estimates and Errors" should be applied. This would most likely mean valuing the painting at fair value as the holding of the painting is analogous to holding investment property (IAS 40).
9) Which IFRS deals with slaughtered livestock?
IAS 41 "Agriculture" puts a soft face on the slaughter of livestock by saying that livestock is "harvested", just like harvesting apples from a tree. When the meat is processed it is transferred to inventory (IAS 2).
10) True or false? David Beckham would have been recognised on the balance sheet (statement of financial position) of Manchester United in 1999.
David Beckham would not have been recognized as an asset in Manchester United's balance sheet as he would have been classed as internally-generated. But any footballer acquired by means of a single transaction would have been included.
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If you would like to improve your knowledge of IFRS and be prepared for the eventual transition from U.S. GAAP to IFRS please contact: www.ContractualCfo.com. We have a complete self-study program available today (either download soft copy or printed version) unavailable anywhere else in the U.S. Use the materials developed and published by ATC International to attain an internationally recognised diploma. The material can be used as a basis to develop a College curriculum or as a basis to start creating IFRS compliant Policies and Procedures Manuals. Most importantly, CFO's and Accountants need to understand where, within their businesses, IFRS will have a major reporting impact and start getting prepared today. Most of the Big 4 clearly state that at least 1 - 2 years will be needed to prepare and get internally organized and all staff with any reporting responsibilities need to be trained to think concepts and not rules. It is not just accountants that need to be trained either! Last but not least, IFRS will impact your Sox 404 compliance and new key controls will have to developed and tested thoroughly. Most organizations should start to consider developing ‘information process flow maps' based on current financial reporting under U.S. GAAP and then study where within the current processes, IFRS will create major changes. Be prepared to explain the differences to Analysts, the Board of Directors and Banks and lending Institutions; consider whether loan covenants are affected? And don't forget FASB Codification and that impact throughout the entire organization (SEC, Policies and Procedures Manuals, Notes to the Financials, Sox documentation etc.) where any references to FAS are stated. Combining implementing FASB Codification with an in-depth study of IFRS and its impact is the most efficient use of both time and resources. Call us today at 347-632-8196.
Analyze Your Busines - Client Fulfillment
Once again, it's time to examine what is true about your business to get even better at prioritizing the areas that demand your attention. Here is a series of questions you can use as a starting point for identifying potential problem areas in your company's Client Fulfillment system. But what is Client Fulfillment? It consists of the product or service itself plus three major processes: Production, Delivery, and Customer Service. These combined processes put your product or service into the hands of satisfied customers.
Please remember that this is not intended to be a full analysis, but rather a tool you can use to focus your attention. It may be helpful to print this page, and actually write down your responses. Take one question at a time and really think about your answers. This is not a test. There are no right or wrong answers. There are only responses that reflect your truthful objectivity about the state of your business.
1. What is your product or service, and what is the idea behind it? How do you make it a reality; how do you produce it? Can you draw a flow chart (a "box and arrow diagram") of the steps in your Production/Delivery process?
2. Do you consistently and predictably keep your promises to your customers? Making mistakes is human and forgivable, but do you frequently make mistakes? How many customer complaints do you receive on a monthly basis? What is the average time it takes you to resolve those complaints? Do you experience a reoccurrence of the same kinds of complaints?
3. In considering all positive and negative feedback from your customers, is there a common thread? Can you identify new systems or modify existing systems that could enhance the positive and eliminate the negative?
4. Use the details you determined about your clients when you evaluated the characteristics of your typical customer using the Marketing Business Needs Analysis to re-evaluate your products or services. Do your products or services do what you intend them to do in order to satisfy your customers' true needs? Are they designed that way, with your customers' needs and wants in mind?
5. Have you used your own products or services? Would you? Why or why not? Have you "shopped" your competition? What do they do better than you? What do you do better than them?
6. When you physically deliver your product or service, what is the experience your customer has at the time of transfer? Do they feel good about the value you're giving? How do you know?
7. What services do you offer to your customer to enhance the value of your products and services that are not an inherent part of the product itself? Information services, technical assistance, set-up, maintenance services, credit and financial services, help with complaints and adjustments?
8. How do your customer services enhance your main offer? Do your customers even know they exist? Are your customer service opportunities recurring situations that require constant handling, or are they rare and unique situations that rely on basic policies and philosophies for responding to them?
9. Do you provide customer service training to your employees? Is this training documented?
10. How do you identify new customer service opportunities?
11. What are the standards you use to ensure that every product or service is consistent, time after time, and every time? Are those standards subjective (depending on the experience and judgment of the employee operating the system) or objective (judged against a clear and specific set of standards, or random (no criteria for quality are imposed on the system)?
12. What are your total system costs and per-unit costs?
13. How do you innovate ideas and systems in your business? How do you install and test the innovated system?
14. Identify the one thing you've always felt was "impossible" to do, but if you could do it, would completely transform your business in the eyes of your customers. Write it down. What barriers exist to making it a reality?
Now go back and review your answers. Are you uncomfortable with any of the answers you gave? If so, then you've identified the primary areas of focus for your business development efforts.
Call CFO Plus today @ 415-289-5050 to learn more about their contract CFO services.
Part Time CFO; Best Reasons to Hire a Money Guru
(1) The Bottom Line
Until an business reaches a certain level of critical mass, with sales exceeding several million dollars, most enterprises do not require the full-time efforts of a six-figure CFO with many years of corporate or consulting experience, though having the guidance of such a person is an invaluable resource to business owners and CEO's. Generally, this type of consulting expertise can be purchased at rates ranging from several hundred dollars per month to hourly rates nearing two hundred dollars. In any event, a part time arrangement with a CFO expert will save you many thousands of dollars over the course of a year when compared to the cost of a full-time executive. In the end, this will leave you with more cash for sales generating activities, and yourself.
(2) Hard Earned Experience
It sounds cliché, but there is truly no substitute for experience. It's hard to build a house if you've never built one before. Likewise, it's hard to build a sturdy and flexible financial framework if this is not your area of interest or expertise. If you only own an old saw and a hammer, its best to leave those things on the shelf, focusing instead on the tasks you perform well.
Engaging a highly experienced financial consultant early in the life of an enterprise will greatly increase your ability to set the stage for later success, and help you present well to bankers, potential investors, and others in the business community. In short, an experienced part time CFO can help you structure scalable financial reporting systems, raise capital, monitor your business trends, and in general, help you see around the next corner.
(3) Partner for Rent
It's lonely at the top, and it can certainly be lonely for a small business owner that has no sounding board, generating ideas and plans without the input of groups or partners present in larger organizations. In fact, because of their varied experiences, part time CFO's are often able to offer valuable advice on a wide variety of topics including information systems, human resources, benefits, and general management topics. In short, a part time CFO offers the dual benefits of a "partner" and an outsider, viewing your business objectively from a new prospective.
FindCFOServices.com is the nation's largest on-line independent directory of CFO Services in the United States. With hundreds of consultant listings from California to Maine, it's easy to locate a part time CFO for your business. Click http://www.FindCFOServices.com to find a consultant today.