Category Archives: Decision Making and Analysis

Create a Company Dashboard

How can a finance professional provide timely and relevant information for business decision makers? In a previous post we looked at some steps for creating a company wiki for organization-wide knowledge sharing. Another routine and systematic tool for business information sharing is a dashboard. The CPA Journal recently ran an article about Developing Dashboards for Performance Management, and here are some highlights from the article:

  • Dashboards focus on goals. Managers have the responsibility to achieve business objectives, and they can make the best decisions when they have concise, periodic updates about defined organizational metrics.
  • Dashboards provide a quick visual glimpse into key performance metrics. The authors suggest having four to seven metrics on the dashboard to avoid information overload.
  • Dashboards can highlight financial as well as non-financial elements of business performance. The balanced scorecard approach, for example, assesses a company on the dimensions of financial, customer, internal processes, and learning and growth.
  • Dashboards should be user-oriented. Will the dashboard be used for reporting strategic, analytical, or operational information? This depends on the needs of the users. Also, the design and formatting should be tailored based on the type of user.
  • In choosing a dashboard technology platform, consider that ERP systems such as SAP and Oracle have built-in reporting and analysis modules. Alternatively, data can be drawn from databases into Excel to develop dashboards that can automatically refresh periodically. Excel dashboards can be developed from scratch, templates can be purchased, or skilled consultants can develop dashboards. 
  • The dashboard development process includes defining the objective and the metrics, seeking user input, building and testing the initial dashboard, publishing the dashboard, and monitoring its use.
  • Dashboard design elements can highlight important information, communicate information concisely, and engage users. The concept of “gestalt” can help balance various design elements to tie together the “big picture” with the details of the dashboard.

Dashboard development is a good skill for finance professionals to add to the professional toolkit. In addition to developing dashboards to share and analyze key performance indicators, a trusted go-to finance professional can provide decision support to help senior management use broad sources of information, including dashboard metrics, to steer the company in the right direction.

Create a Company Wiki

Knowledge sharing is crucial for organizational success in the Information Age. Knowledgeable, dedicated employees are often eager to add value and contribute to the organization’s success by sharing what they know. Finance professionals are fundamentally information workers who give and receive valuable insights to contribute to the success of the organization. There is not always a clear line of distinction between the finance and technology groups because tech tools are integral for the finance professional’s work.

Fortunately, in an environment that relies upon systematic information sharing, wisely deployed technology can facilitate the free flow of knowledge. CIO Magazine provided some best practices for implementing a company wiki:

  • Initially, what is a wiki? The article says it is “a software application that allows groups of users to create, edit and comment on online documents.” Wikipedia is undoubtedly the most popular example.
  • Companies use wikis for collaboration and employee communication, among other reasons.
  • The first implementation step is to define why the organization wants a wiki. This sets the direction and defines the parameters of the wiki’s purpose.
  • The second step is to choose a software platform. Options vary from free to fee-based, open-source, hosted, or deployed on the organization’s own system.
  • The third step is for the wiki implementation team to define the structure: “These include defining to what extent end users will be able to edit wiki pages, setting standards for how administrators will respond to updates from users, and setting rules around uploading text files or videos.”
  • The fourth step is to put someone in charge for maintenance. A wiki “gardener” can help the project grow, root out “weeds” (i.e., old information), and bring contributors on board.
  • The final step is to promote the wiki to end users. Start uploading useful content, refer to the wiki in communications, and encourage employees to read it and contribute what they know.

One helpful website referenced in the article for comparing wiki options for different purposes is http://www.wikimatrix.org/.

Bottom line, wiki implementation and maintenance is a good tool for finance professionals to consider adding to their skill sets.

The Future of Your Work

TIME ran a series of ten features regarding the future of work. In formulating a career development plan it is imperative to begin visualizing how work life might look in the future in light of rapid global changes. Here are a few summarized conclusions from TIME‘s articles:

  • “We will see a more flexible, more freelance, more collaborative and far less secure work world. It will be run by a generation with new values — and women will increasingly be at the controls.”
  • Not surprisingly, one of the best sectors into the future will continue to be technology. Entrepreneurs will set the tone for which specific areas thrive and dominate within the broader tech landscape.
  • Debate rages about the role of business schools in inculcating managerial ethics. One way or another, the importance of business ethics – and the consequences for diverging from paths of integrity – will not wane into the future.
  • As a cost-savings measure, companies will increasingly expect employees to contribute more toward paying for their benefits. Many companies started their benefit plans when the ratio of young workers to retirees was much higher. Now that the ratio is reversing, companies have to adjust accordingly and trim back benefits expenditures for employees and retirees alike.
  • Rather than the old traditional “up or out” model of career advancement, some companies are adopting a “lattice” model. Employees can “dial up” or “dial down” to different roles and enjoy more flexibility. Implementing telecommuting and other forms of flexible work arrangements can even be financially compelling for companies.
  • Baby Boomers will have to keep working longer than anticipated rather than retiring due to not having enough retirement savings. This can have both positive and negative effects for the economy.
  • Women will continue to extend their influence in the workplace. Women have a distinct style focused on collaboration, managing risk cautiously, and looking into the future, as compared to their male counterparts who thrive on risk. With more women comes more emphasis on work-life balance and flexibility. Furthermore, “When a company gives employees freedom, it doesn’t just feel good or get shiny, happy workers — productivity goes up.”
  • Green jobs geared toward various environmental objectives will likely continue to gain traction.
  • Generation X management styles will increasingly emerge. Gen X will have to manage Gen Y. “Companies already want more short-term independent contractors and consultants and fewer traditional employees because contractors are cheaper. And seniority matters less and less as time goes on, because it’s about the past, not the future.” Collaboration among workers from various backgrounds who are spread all over the world will become increasingly common. Cross-cultural communication and motivation strategies will become paramount career skills to develop.
  • Manufacturing productivity continues to vastly increase, coupled with less domestic demand for manufacturing workers. “Highly skilled workers creating high-value products in high-stakes industries — that’s the sweet spot for manufacturing workers in coming years. … Ultimately, what’s endangered is not U.S. manufacturing. It is our deeply ingrained cultural image of the factory and its workers.
  • “In order to understand what your workplace is going to be like in five or 10 years, you need to think about what your work is going to be like. Here’s a clue: employers no longer need to pay you to drive to a building to sit and type. In fact, under pressure from an uncertain economy, bosses are discovering that there are a lot of reasons not to pay you to drive to a central location or even to pay you at all. And when work gets auctioned off to the lowest bidder, your job gets a lot more stressful. … So, are you essential? Most of the best jobs will be for people who manage customers, who organize fans, who do digital community management. … Some people will embrace this new high-stress, high-speed, high-flexibility way of work. We’ll go from a few days alone at home, maintaining the status quo, to urgent team sessions, sometimes in person, often online. … Work will mean managing a tribe, creating a movement and operating in teams to change the world. Anything less is going to be outsourced to someone a lot cheaper and a lot less privileged than you or me.”

What other trends for work and careers can we expect in coming years and decades? How should we respond? This is a significant theme I plan to explore in many future installments. Whether we like trends of rapid change, reality is reality. We can either complain about emerging patterns, or we can learn to work them to our advantage. The choice is ours. Let the planning and action begin.

Five Ways to Avoid Getting Ripped Off

In theory, the world would be a great place to work if everyone were honest, transparent, and competent. We would not have to waste time out of our busy workdays uncovering and dealing with mistakes, frauds, intrigues, scandals, shenanigans, and so forth. We could focus on what we’re really in business to do, which is satisfying customers’ demands efficiently and effectively.

In reality, we all know the world is different from this. Regrettably, life is not so straightforward. Work and business are complicated by the ever-present necessity to maintain situational awareness and never let our guard down. Without being paranoid or cynical, we understand reality — everyone in the business world is looking out for their own best interests, regardless of how positively or negatively this might affect you or your business.

In the spirit of managing risk, here are five tips for avoiding getting ripped off:

  1. Demonstrate due diligence. Sometimes prevention is the best cure. Effectively position yourself to give others the impression that you are watching over your interests with an eagle eye. In a situation of risk and uncertainty, demonstrate that you will do whatever it takes to dot all the i’s and cross all the t’s to ensure that you are not taken for a ride. At the same time, be careful to maintain the element of surprise and not divulge key facets of your due diligence strategy.
  2. Ask open-ended questions in a non-threatening manner. Take the lead on getting to the bottom of whatever matter you are handling. Know when to be laid-back and casual and when to lower the hammer. In certain situations, if you ask pointed questions or insinuate suspicions of wrongdoing up-front, you will often encounter stonewalling and defensiveness. It is better to give the other person an opportunity to voluntarily come clean if they have the impression that you are bargaining in good faith. If information is not forthcoming after a brief time period with the casual approach, more drastic steps can be pursued.
  3. Anticipate responses. Know the boundaries of what would constitute a legitimate explanation versus what you should consider an excuse, illegitimate rationalization, non sequitur, or plain old lie. Have follow up questions planned depending on what responses you receive. Also, anticipate that others you are dealing with will try to use the element of surprise to their own advantage. Expect the unexpected.
  4. Make sure you understand. Be alert for a “shark in the water” when you hear someone throw out expressions that are clearly intended to artfully baffle others. Some people are easy to manipulate, so don’t let yourself be one with the wool pulled over your eyes. Don’t take everything you hear at face value. Dig deeper, and don’t ignore red flags.
  5. Buy time. Issues arise over time. If you are dealing with a legitimate operator you will notice a pattern of competence, professionalism, and integrity. Take time to observe who you are dealing with, and realize that they are generally putting their best foot forward for you from the get-go. Always expect potential negative surprises, rarely positive ones, to surface later. If you have a negative taste in your mouth from the get-go in your dealings with someone, don’t expect it to get any better with time. Also realize there is a fine line between buying time and procrastinating. Depending on the scenario, if you wait around too long, issues can start to pile up and it can become increasingly difficult to navigate through the compounding complexity. Take enough time to work through due diligence and gain confidence, but once you’re ready to progress with a business deal or relationship, move forward.

Finally, it is important to recognize that we all will make mistakes in our dealings with others. Someone might try to rip you off and have some success, but don’t worry about it too much. Rather than getting discouraged or frustrated, learn from your mistakes and be wiser the next time you encounter similar situations.

Communications 101: Listen More than You Talk

Who is wiser, the person who talks a lot or the person who listens the most? Clearly, people who listen well are among the wisest. First, they gain valuable insights from others. Secondly, they avoid revealing their own ignorance or incompetence. “Talk is cheap,” and those who talk the most often deliver the least in terms of tangible results. Better to remain silent and obscure than to make a big splash but fizzle out with nothing to show for all the fanfare.

In communicating, don’t just “hear” what others say, but truly “listen.” Tune in and try to understand the other person’s point of view. Valid or invalid, reasonable or unreasonable, you have to understand where the other person is coming from in order to have meaningful dialog and a significant relationship. Business leaders can never be isolated but must engage with their teams. Listening is vital.

I am impressed with people who have insightful questions and who truly listen. They give the impression of being wiser than most. Because of this, I often come away from those types of conversations wishing that I had asked more questions, listened more, and talked less.

I have also learned that people enjoy talking about themselves and what they do. Ask them engaging questions about what they’re interested in the most, themselves. You will be popular, not because of the brilliant and witty insights you articulate, but because of your attentiveness.

Finally, think before you speak. Never hesitate to listen and engage. When it comes to talking, less is often better.

Second Set of Eyes: The Value of Redundancy

The idea of redundancy is sometimes associated with inefficiency. However, building in redundancy is often crucial to ensuring continuity and effectiveness in business operations.

Building in redundancy can be applied in various settings, including IT-related backups. A company needs to continue operating if a server crashes or a disaster strikes. Data recovery can only happen if a routine backup (i.e., storing data redundantly) is implemented.

Cross training employees is another area of redundancy. Rather than having only one employee who can perform key functions, build in redundancy by training one or two others. Furthermore, documenting key processes and procedures ensures continuity if a key employee leaves.

Another area for redundancy is accounting and internal controls. For example, have a “second set of eyes” check invoices to customers and payable runs for vendors. Finance professionals, especially accountants who deal with many transactions on a daily basis, get inundated with details and can make mistakes. Having a “second set of eyes” is a great form of redundancy to ensure that mistakes are caught, fraud is prevented, and processes are performed effectively.

Accounting firms are known for hiring young accountants and utilizing the process of reviews as a primary tool for development. Whether the project is a tax return, audit or review, or a consulting project, senior accountants review and mark up the work of the less experienced staff. Not only do the more experienced “second set of eyes” catch mistakes before work products are delivered to customers, but the process serves as a very valuable and enlightening means for younger accountants to quickly and directly learn on the job.

Another opportunity for a “second set of eyes” is with business documents such as contracts and agreements. Small clauses can have large impacts, positive or negative. Take advantage of subject matter experts, such as accountants and lawyers, who can provide a “second set of eyes” to avoid costly mistakes during business negotiations.

The Number One Way to Gain Your Employer’s Trust

All of us have seen or heard of situations in which an agent (e.g., an employee) abuses the trust of his principal (e.g., the employer). Business theorists refer to this as an “agency problem,” the conflict of interest that exists when an agent looks out for his own interests above (and to the detriment of) the interests of his principal.

One of my mentors, a finance executive, once explained that he tried to manage the company’s money “as if it were my own.” He set a good example: Just as he would watch his own finances with eagle eyes, he paid careful attention to his employer’s money. By demonstrating a pattern of due professional care, he clearly demonstrated that he took his fiduciary responsibility seriously.

The best way to gain your employer’s trust starts with your own mindset: Treat your employer’s resources as if they were your own.

Your employer will trust you if you demonstrate a pattern of careful analysis and decision-making. You must exercise due diligence in small as well as large areas. Wisely manage resources that have been entrusted to you and areas of oversight that have been delegated to you.

Your ability to negotiate for a better stake in the future of the enterprise will be enhanced if you prove that you have the organization’s best interests at heart, not just your own best interests.

No Exceptions: Five Reasons to Get Your Agreements in Writing

With a written agreement,
You have a prayer;
With a verbal agreement
You have nothing but air.

-Robert Ringer

Everyone in the business world will have an opportunity, at one time or another, to make a verbal commitment and shake hands to “seal” an agreement. However, as all savvy business participants learn, there is no exception to this rule: “Get it in writing.” Here are five reasons to never diverge from this simple rule:

      1. Why not? That’s right: Why not get your agreement in writing? I cannot contemplate a situation in which it would be unfeasible to commit an agreement to paper (or electronic form, if appropriate). There is no legitimate reason to avoid putting an agreement in writing. You have nothing to lose and everything to gain (see below), so just do it.
      2. Following up on the above point, there certainly are illegitimate reasons that someone might refuse to put an agreement in writing. One or both parties might not intend to follow through on the agreement (or they might want the option of an “escape” in case following through becomes challenging). That said, in most cases — from a legal and ethical standpoint — an agreement is an agreement, whether verbal or written. (Disclaimer: Consult an attorney, as this is not to be construed as legal advice). Even so, it is all too easy for one of the parties to say, “I never agreed to that. Prove it.” If you have nothing in writing, it will be your word against the other person’s word.
      3. Even assuming that all parties to an agreement are bargaining in good faith, fully intending to follow through with their commitments (and this is certainly by no means a given), getting an agreement in writing provides clarity on the specifics. Although it is possible to misunderstand a written agreement due to ambiguity, how much more unclear could a verbal agreement be, especially months and years after the fact.
      4. Requiring agreements to be in writing positions you as a careful professional who wants to make sure the interests of all parties are well served. This will make you attractive to business colleagues with a similar interest in integrity. As a bonus, it will make all the others think twice about doing business with you, knowing that it might be hard to pull a fast one on you.
      5. Written agreements are legally required for some contracts. And even when not technically required, written agreements can provide the best evidence of what the parties intended. Again, consult an attorney since this is not to be construed as legal advice.

If you have learned this lesson the hard way, you need no further convincing. If you have yet to learn this lesson the hard way, be grateful. Simply make a commitment that you will always follow this rule with no exceptions — no matter how compelling an offer might be from someone who refuses to put the agreement in writing. There is a reason they are refusing, and you can easily call their bluff by standing firm with your requirement to “get it in writing.” If this forces a no-go decision on the deal, you can move forward to the next opportunity knowing that you have spared yourself a lot of wasted time and resources.

Three Ways to be a Savvy Finance Professional

Every now and then an “opportunity of a lifetime” will arise in your personal or professional life. How do you discern whether these situations are the “real deal” or “too good to be true”? Here are some tips I have compiled, which are drawn from reflecting on valuable lessons from classes I have taken in the “school of hard knocks.”

  1. Don’t believe everything you hear. “Well duh,” you say. In theory, this principle seems simple enough. In practice, it is all too easy (if we’re not careful) to let ourselves be bamboozled by slick and smooth blowers of smoke. Savvy finance professionals learn not to be dazzled by ostensible brilliance or baffled by indecipherable nonsense. This leads to our second point.
  2. Evaluate evidence and look for proof. If the sales pitch for this “opportunity of a lifetime” doesn’t make sense, be intellectually honest with yourself about this. Here’s a simple rule: Never pursue a product, job, or other type of situation that you do not understand. It is easy to become “desperate” to jump into something you don’t understand when you are driven by greed or fear. Therefore, you must maintain integrity and not get wrapped up in destructive emotions. Also, use your creativity to develop other opportunities for yourself so that you have “walkaway power” rather than allowing yourself to cast aside your better judgment and jump headfirst into a “too good to be true” scenario.
  3. Develop “professional skepticism.” This is a principle from the audit profession. Young auditors must learn to dig into the subject matter and understand the numbers for themselves rather than subordinating their judgment to the client or even to senior auditors. You have your own mind, and you must take ownership of your thoughts rather than letting someone else program your evaluation process. Too many shady operators get away with shenanigans when others are afraid to question the so-called “wisdom” of experienced “experts.” But if you want to be a savvy financial professional, you should be willing to take scorn much like the little boy who declared the “emperor has no clothes.”

Following these tips is not easy. You have to learn to use uncomfortable words and expressions, such as: “No” or “Prove it.” Or sometimes you have to humble yourself and make the dreaded admission: “I don’t understand.” But you will add value to your jobs, your career, and your relationships if you bring intellectual honesty to the table. “Nail everything down” rather than letting yourself be manipulated into pursuing a disaster, cleverly disguised as an “opportunity of a lifetime.”

Whitepaper: Do I Need a CFO or a Controller?

What are the differences between the roles of the CFO and Controller? How does an organization determine whether to utilize the functions of a Controller or CFO (or both)? A white paper by The Brenner Group provides this summary: “The CFO and the Controller play very important, yet different roles within growing companies. The CFO typically serves as a strategic partner for the CEO and the Controller is more focused on day-to-day tactical accounting matters.”

The white paper gives the following descriptions for the role of the Controller:

  • Implement and/or create fundamental accounting policies and procedures
  • Manage day-to-day accounting and cash flow maintenance (including payroll processing, accounts receivable and collections, and accounts payable distributions)
  • Implement accounting software and establish chart of accounts
  • Update financial models and analyze budget to actual activity
  • Prepare financial management reports in a timely manner for use by the management team and the Board to run the business
  • Handle basic Human Resource tasks such as maintaining employee files, generating offer letters, researching benefit questions, processing 401K activities, etc.
  • Help recruit, build and manage the accounting and finance department
  • Manage annual audit preparation and process
  • Act as the historian with respect to accounting matters

On the other hand, the CFO’s role is distinct from that of the Controller:

  • Be intimately involved with the CEO and Board on strategic planning matters, effectively serving as the “right hand” to the CEO
  • Assure adequate capital or growth by assisting with financings, including preparation and presentation for Angel or Venture Investors
  • Manage cash flow and provide timely communications regarding the future cash projections and needs
  • Function as the “Vice President of all other”—i.e. any function not directly involved in designing, manufacturing, selling or supporting the product
  • Direct or implement accounting systems, policies and procedures
  • Facilitate the development of annual strategic operating plans
  • Create and implement forecasting tools to measure the business
  • Administer stock option issuance and tracking
  • Manage the human resources function, including obtaining and administering employee benefits
  • In cooperation with the CEO and the Board, locate and negotiate facilities and fixed asset acquisitions
  • Initiate and retain outside relationships with independent accounting, tax and legal advisors
  • Work with the sales department to establish pricing policies
  • Hire and staff the finance and accounting department
  • Oversee risk management, including adequate insurance coverage

Read the complete whitepaper: Do I Need a CFO or a Controller?