Category Archives: Information Technology Tools

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.

Smart Controls: A Financial Institution Disables Admin Accounts After 30 Days of Inactivity

I once had the experience of working with a financial representative to pay employees’ retirement contributions, along with my employer’s matching funds, into employees’ retirement accounts. The representative informed me that my administrative account would be disabled if I did not log in within the next 30 days. Each time I log in, the 30 day countdown starts over.

The representative explained that his financial institution wants to give employers and their representatives (e.g., financial controllers or CFOs) incentive to deposit employee funds timely. The IRS requires companies to contribute the employees’ retirement funds within 30 days after the month in which the employees would have been eligible to receive the funds in cash. Thus, for example, any employee contributions withheld during August from employees’ paychecks must be deposited into their accounts by September 30th. To comply with regulations, the controller or CFO must log in at least every 30 days and make the deposits, so the financial institution’s policy is a handy reminder.

I also reasoned that financial departments have turnover, and one controller or CFO could replace another and assume the duty of depositing employee and matching employer funds into retirement accounts. Part of the controller/CFO function (in conjunction with IT) is to ensure that access to administrative accounts and information systems for the departing controller or CFO is appropriately disabled (or passwords changed, as the case may be) in a timely manner. However, in organizations with lax controls, sometimes during the transition no one thinks to disable the previous controller or CFO’s access. The financial institution I worked had thought of a solution for one piece of this problem by simply disabling the accounts of departing personnel after no one logs in for 30 days. The accounts are personalized for the employee who logs in and deposits the funds, so if a new controller or CFO takes over the responsibility, that new person would create a distinct account instead of using the account of the departing employee. Unless the departing employee made a habit of logging in, the account would be disabled after 30 days and the company would no longer have a risk that the departing employee could later gain access to sensitive financial information and functions.

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?

Categories for My Website

This is my CFO Career Development Plan website. I will post my career plan and chart my progress, and this site will be a tool in the process. For example, part of my career plan will involve reading books, and I can review them on this site to give valuable input for others from my learning.

Here are some of the categories I plan to cover on this site as I develop my career as a financial professional:

  • Risk Management
  • Tax and Regulatory Compliance
  • Human Resource Management and Supervision
  • Policy Making
  • Decision Making and Analysis
  • Forecasting and Budgeting
  • Professional Development
  • Strategy and “Big Picture” Focus
  • Investor and Lender Relations
  • Information Technology Tools
  • And More …