Glen Katlein, B2B CFO®
Providing B2B CFO® services in Coppell, TX and surrounding areas

Thanks to Partner, Scott Cosper for sharing this insight:

I hear far too many accounts of fraud from my clients and contacts. Very sadly, most of the cases are very similar and come down to the issue of misplaced trust in the person in charge of the accounting function. I can send you articles of this happening right here in Orange County to some high profile organizations. Most of the time, after the fraud is exposed, the money is gone with no chance of getting it back. Someone who steals usually isn’t someone who saves and invests.

The following bullets comprise of an assortment of things that a business should consider with respect to protecting itself. Buy the way, if you are the person in charge of the books, you need to put forth these items to both protect your company and validate your integrity. By not insisting on controls like these, you are doing a grave disservice to your employer.

• Dual signature checks – I wouldn’t count on a bank checking the validity of a signature on a check, but theycan easily check to see if there are two. It might not stop a determined forger, but if everyone knows a second party is required to sign all checks on a regular basis, it will tighten up the cash disbursement process.

• ACH/EFT blocks – If you don’t need to have these electronic payment services for your normal accounting process, see about having them shut down by your bank.

• A list on the wall – Never, ever, EVER leave a list of your bank accounts out for anyone to see – including credit card numbers. They should be locked up and pass worded if possible or done with enough abbreviation to prevent their appeal to thieves. I’ve been in businesses where a list of accounts was pinned to the wall in the AP cube, the payroll office AND the controller’s office. If these numbers fall into the wrong hands, you will lose. They should not appear anywhere where they are not needed and this includes the title on the accounts in the general ledger.

• Quality checks and printers – Yes, they can be costly, but I showed a controller one time that I could cleanly lift the payee’s name off of a check with a strip of scotch tape. Also consider the chemically reactive checks; it is very hard to manipulate these documents.

• Reconcile bank accounts constantly – with access to online banking, you no longer need to wait until the bank statement shows up in the mail. BUT the person doing the reconciliation should not be the one who is also doing the bookkeeping. A second person, or even your tax accountant, who doesn’t have any access to the accounting functions and isn’t a party to the transactions can do it. The fancy word for this is “separation of duties”. Bank reconciliation is a very powerful control for many reasons. If it is not being done consistently, cleanly and easily, something is wrong. If reconciliations are not as current as they can possibly be, there is a process problem. If you ever hear that they are behind, find out why and immediately correct the problem.

• It is not just paper – Try this; walk through your accounting department after hours and check the desktops, mail boxes, drawers and filing cabinets, printer trays, shred boxes and maybe even the trash. If you find any checks, bank or credit card statements or even payroll records, you’re at risk. They are critical documents and need to be tightly controlled.

Here are a few of my experiences that would have been avoided by having some of the above procedures in place:

• A receptionist opened mail from the bank which she was clearly told not to do. The next time the bank statement came and the accounting manager reconciled the account (yes, promptly upon receipt of the statement) there were $8,000 of transactions charged to the company by the receptionist – her name even showed on the transactions! She bugged out shortly after we called her on it and the money was gone forever.

• A client of mine noticed a large unusual check clearing his account. Someone got into his check stock (in an unlocked drawer) and stole a check from the middle of the stack. If he hadn’t been watching his bank account regularly, it could have been weeks, maybe even months before he found out about the fraud. Fortunately, he got his money back from the bank, but it was not a simple process.

• In another instance, several credit card account numbers had been stolen by cleaning company staff after hours in a branch office. Our employees had copies of company credit card statements lying around pending completion of their expense reports. Sure we got our money back, but all of the cards needed to be re-issued and each of the fraudulent transactions had to be formally addressed in writing by the company.

Hopefully these ideas resonate with you. But above all, if there is not a strong “control environment” in the organization, there is risk – risk that can easily be reduced. Like him or not, when Regan said “trust but verify”, he was offering sage advice.

Exit Strategy Planning
You have worked hard to build your business here in the greater Denver Metro Area– You have been thinking about Exiting the business but want to know what are those first steps…

Check out this video – The Exit Strategy Handbook

A Solution to ‘How’ Is Available
You will need a knowledgeable Advisor and Success Team^TM to provide guidance through the process – someone to listen to your concerns and discuss your options. This handbook is unique. It is written for a unique audience that is about to go through a unique period of time.

Owners of closely-held companies who want to sell their businesses in the next few years; you are unique because you represent only about 8% of the population in the United States, yet you employ between 60% and 70% of all USA employees. Most of your assets are found in the companies you own.

There are 78 million baby boomers that will retire in the next few years.  This will create an unprecedented number of companies that will be available and “on the market”. To you this means there will most likely be more competition for the available buyers to choose from…will you be prepared? Will your company be more attractive and worth your expectations?

Original  post shared by Partner, Tom Matthews:

My short answer is nothing!  The two reasons you don’t get much from your financial statements is 1) they were designed by someone that does not know your business (your CPA/bookkeeper) and it was designed for someone that does not really know your business (IRS, Banker, vendor).  You’re spending all this money and it really does you, the owner of your business,  no good.

So what is the answer?

There is a reasonably new discipline in my world called “Lean Accounting.”  Here is what  Wikipedia says:    It seeks to move from traditional accounting methods to a system that measures and motivates excellent business practices in the lean enterprise.

This whole concept started in manufacturing as a way to present the cost accounting reports to management in a way that they can be understood.  Organizations that adopt lean techniques are very motivated to eliminate waste, free up capacity and improve profitability.  I’ll bet you’ve never had anyone saying this is the purpose of reviewing an income statement or balance sheet for your company.

Here are the goals of this new reporting system:

• lean-focused performance measurements
• simple summary direct costing of the value streams
• decision-making and reporting using a box score
• financial reports that are timely and presented in “plain language” that everyone can understand
• radical simplification and elimination of transactional control systems by eliminating the need for them
• driving lean changes from a deep understanding of the value created for the customers
• eliminating traditional budgeting through monthly sales, operations, and financial planning processes (SOFP)
• value-based pricing
• correct understanding of the financial impact of lean change

There is no exact point in time where Lean Accounting began but conventional wisdom says it was Bill Smith, an Engineer at Motorola in the 1980s.  It started as this methodology:

• Define the problem as perceived by the customer
• Measure the performance of the process
• Analyze data to determine root causes of problems
• Improve the process
• Control the improvements

As you can see, there is some pretty high-brow stuff in all these definitions.  The point is you need to be able to manage your business.  In order to do that, you need tools to help you measure, understand, analyze and act.  The concepts in lean accounting will do that for you.  And it does not matter if you are a billion dollar a year manufacturing company or a $600,000/year service business.

If you really want to get good at this, the gold standard book is called “Lean Accounting Best Practices for Sustainable Integration,” edited by Joe Stenzel.

Sharing a post from my B2B CFO® partner Tony Valentino:

Make it Happen

Sometimes it can seem like there are so many people to involve, committees to cover or approvals to seek that we forget our main objective is to be efficient and make things happen. It is easy to analyze and question, but if we establish good plans, coordinate with each other and agree on our actions, when it is time to jump, we will jump.

Deal in Facts

We are constantly bombarded with information in the form of opinion, gossip, facts, innuendos, beliefs and assumptions. Almost any conclusion can be drawn by listening to the wrong information. It is only by sorting out the facts, applying the ones that are relevant to the situation and keeping an open mind that we can make intelligent, rational decisions that pertain to the matter at hand.

Respect Each Other

We are all in this together. Individuals that put personal objectives (that harm our best interests) ahead of the organizations objectives are guilty of playing politics. Like weeds, if allowed to flourish, politics will destroy everything we are trying to achieve. The true sign of a strong management team is one that develops mutual respect, realizing that the best way to achieve personal goals is by working with, not against each other.

Stay on Course

It is not uncommon to find ourselves taking two steps forward and one step back. We need to realize that progress starts slowly and builds momentum with time and patience. What is important is that we continue to get better. As long as our direction stays true and we remain committed, we will get there.

Remove the Roadblocks

There is nothing as frustrating to a good employee as wanting to do a good job but not being able to do it. In addition to helping people understand their jobs, good management remains ever aware of opportunities to make jobs easier. Rather than forming more committees and muddying the waters with minor details, we must help our employees to be effective by discovering and removing the obstacles in their way.

Empower

Organizations are truly effective when each person is given the responsibility and authority to make decisions within their area of control. By empowering people we instill a sense of pride and recognize the knowledge and experience in our own backyard. By offering to help but leaving the responsibility with our people, we encourage ownership in all our processes.

Article excerpts by Partner, Debra Cristein

I attended the MIT Enterprise Forum last week on tips for securing Angel Investing – I attended the one in Ann Arbor, MI but there are several around the state held simultaneously and connected virtually – http://alumweb.mit.edu/groups/efgreatlakes .
Some tips that I gleaned are:
• Dilution may seem painful, but a small percentage of something is better than 100% of nothing
• You need a team to grow a company successfully and Angels don’t want to see a one-man show
• Don’t let your valuation get too high before seeking funding. High valuations can keep Angel Investors away
• Convertible debt in the early rounds can be preferred because it defers the pricing question
• Especially if you are planning a VC round of funding later on, the Angel Investor will prefer preferred debt
• Make sure that your Angels are with you for the long run, that you can approach them for future rounds and they have the staying power for the long haul – you won’t have to woo new investors and it also is not a good sign if your original investors are not still in the game
• Ask for enough money to last for a while – you don’t want to go back to the well too soon
• Your investor is not interested in providing funds to pay you the salary you made before you quit your corporate job – they want to invest in product or service and they also want to see that you have some skin in the game

In addition, entrepreneurs must be well prepared to clearly and concisely present their business concept and strategy to gain investor enthusiasm and confidence.  Guy Kawasaki offers great guidance -  http://blog.guykawasaki.com/2005/12/the_102030_rule.html#axzz0XtZP1AG9http://blog.guykawasaki.com/2005/12/the_102030_rule.html#axzz0XtZP1AG9
•  Ten slides. Ten is the optimal number of slides in a PowerPoint presentation because a normal human being cannot comprehend more than ten concepts in a meeting—and venture capitalists are very normal. (The only difference between you and venture capitalist is that he is getting paid to gamble with someone else’s money). If you must use more than ten slides to explain your business, you probably don’t have a business. The ten topics that a venture capitalist cares about are:
1.    Problem
2.    Your solution
3.    Business model
4.    Underlying magic/technology
5.    Marketing and sales
6.    Competition
7.    Team
8.    Projections and milestones
9.    Status and timeline
10.    Summary and call to action
•  Twenty minutes. You should give your ten slides in twenty minutes. Sure, you have an hour time slot, but you’re using a Windows laptop, so it will take forty minutes to make it work with the projector. Even if setup goes perfectly, people will arrive late and have to leave early. In a perfect world, you give your pitch in twenty minutes, and you have forty minutes left for discussion.

(PRWEB) April 17, 2013

Alterity has partnered with B2B CFO® since 2012 and for the second consecutive year, Alterity will exhibit ACCTivate! as a presenting sponsor during the B2B CFO Annual Meeting. The meeting will include partners, service providers, sponsors, speakers and guests. ACCTivate! will be the only featured business and inventory software at the meeting.

ACCTivate! Vice President of Sales, Erik Moeller, will present ACCTivate! on April 27. The session will give attendees the opportunity to learn how ACCTivate! brings a company together in a single system for business operations – supply chain and inventory control; business visibility and management; and sales and customer management.

“The B2B CFO Annual meeting is the perfect opportunity for us to show qualified CFO’s how ACCTivate! can help small and mid-sized companies in the wholesale distribution and manufacturing markets,” Moeller said.

With more than 210 partners, B2B CFO provides CFO services to companies in need of a senior-level executive to improve their business on an affordable as-needed basis.

About Alterity, Inc.: Alterity, the creators of ACCTivate! Business and Inventory Software for QuickBooks and Intacct, helps companies solve their inventory, warehousing and distribution needs, while also delivering a complete business management system.

ACCTivate! is a feature-rich inventory and distribution solution designed for QuickBooks and Intacct that enables companies to gain control of their business and manage everything from inventory to customer service management – all delivered in an interactive interface complete with robust reporting and a dashboard for turning data into management information. ACCTivate! is distributed in the United States and internationally. Try the free trial today to experience the power of ACCTivate!.

To conclude this series of posts,

This is the time for companies to look inside and ensure that the fundamentals of running their business are strong. At a minimum, management should look at the following four areas.

Internal Control Procedures

This is the time that companies should revisit the quality of their internal control procedures and ensure that they are appropriate for the current working environment. Strong controls ensure that company assets are protected from theft and fraud (a significant risk in today’s economy!), and contribute to timely, accurate financial reporting.

Cash Management

Management should ensure that daily cash balances are reported. The balances reported should be the cash held by the bank as well as the cash balance reported in the company’s general ledger.

Forecasting

Management must ensure that it has cash flow forecasts for at least the next quarter, but ideally on a rolling 12-month basis.

Training and Development

It is always important to ensure that the company has the right people in the right positions. Now more than ever, management should examine the core competencies of each job function and determine the skill sets of each of its employees to ensure that there are no gaps in skills covering those functions.

There are many other activities that management should undertake in its day-to-day oversight and stewardship of the company. Focusing on these four areas should go a long way toward not only strengthening your company’s current financial position, but also positioning your company to get through these very challenging times. The world around us is chaotic and complex to be sure, however, this is the time to be more introspective and strengthen the things that we can control. By so doing, we raise the prospects for getting through this difficult economic period and coming out the other side stronger and better positioned to create wealth and prosperity.

We are all feeling the pressure of the worst recession since the Great Depression. We see it in the news every day; we see long-established companies go out of business as we feel the effect of the Dow Jones and our shrinking investment portfolios. Many companies are in survival mode. So, what can business professionals do? I believe it is time to get back to basics. This is the time for companies to look inside and ensure that the fundamentals of running their business are strong. At a minimum, management should look at the following four areas.

Internal Control Procedures

This is the time that companies should revisit the quality of their internal control procedures and ensure that they are appropriate for the current working environment. Strong controls ensure that company assets are protected from theft and fraud (a significant risk in today’s economy!), and contribute to timely, accurate financial reporting.

Cash Management

Management should ensure that daily cash balances are reported. The balances reported should be the cash held by the bank as well as the cash balance reported in the company’s general ledger.

Forecasting

Management must ensure that it has cash flow forecasts for at least the next quarter, but ideally on a rolling 12-month basis.

Training and Development

It is always important to ensure that the company has the right people in the right positions. Now more than ever, management should examine the core competencies of each job function and determine the skill sets of each of its employees to ensure that there are no gaps in skills covering those functions.

There are many other activities that management should undertake in its day-to-day oversight and stewardship of the company. Focusing on these four areas should go a long way toward not only strengthening your company’s current financial position, but also positioning your company to get through these very challenging times. The world around us is chaotic and complex to be sure, however, this is the time to be more introspective and strengthen the things that we can control. By so doing, we raise the prospects for getting through this difficult economic period and coming out the other side stronger and better positioned to create wealth and prosperity.