Interested, or Committed?

I was listening to a podcast the other day discussing what is necessary to be a high performer. The host posed a thought-provoking question to the guest:

“Are you interested in high performance, or are you committed to high performance?”

There’s a big difference.

This question prompted me to increase my intensity now in order to get my Q4 projects wrapped up by December 31st.

Here are a few things I’m committed to now that may inspire you:

  • Time Blocking
  • Budget Wrap-Up
  • Process Documentation
  • Business Valuations

Time Blocking
I’ve returned to blocking time on my calendar to devote to projects – essentially making appointments with myself. I’ve done this in the past, but it seems that my day gets eaten up quickly with video calls and meetings, and I don’t schedule time for the other important things I need to get done. The simple act of blocking time on my calendar for projects as well as meetings has helped immensely.

Wrapping up 2022 budgets.
Most of my client’s 2022 budgets are very close to being solid. For smaller organizations this can be a quick and painless process, but as companies grow things become more complex. Why? Because we need to get other departments involved, the sales pipeline is fuzzy, new business segments are soaring/sinking, logistic and product costs are increasing, and there are questions about what is the fed going to do with interest rates. The key is to get the plans started and get the team engaged even with some incomplete information. Targets need to be aggressive, but also realistic (arguably). I just scheduled several working meetings and company presentations to kickoff 2022. Getting these dates on the calendar now helps get the budget solid by the end of the year.

Completing Process Documentation
As I’ve discussed before, I’m a huge advocate for writing procedures with the intent to simplify and improve. Documenting these can be an arduous process, but it helps with staff alignment, training, and process improvement. I’m working with one company now that wanted to focus on developing “best backroom practices.” The notion of best practices can be somewhat deceiving. Once we deem a procedure a “best practice,” we tend to stop looking for improvement or a better way with that particular procedure. Since organizational learning and process improvements need to be continuous, I instead encourage “better” practices. Best practices imply they have reached the endpoint. We should always be looking for better practices. So in this case, I guided them to change their mindset.

Business Valuations
Verbeck Associates has a license agreement with BizEquity to enable us to provide an efficient and accurate business valuation. Last month, we did three business valuations – one for a business sale and the other two to develop a value baseline. For those two, we are developing plans to increase the relevant key performance indicators with the goal to double the business value. These business owners are making better choices by simply understanding the things that increase their company’s overall value.

What are your big projects to wrap up by the end of the year? Set the deadline, block the time on your calendar, and commit to getting these done. If you want to achieve big things, you have to be more than just interested. You have to be committed. I am, and I can help you be, too. Contact me for help with any of the initiatives mentioned above!

Fourth and Final – Finish Strong and Be Ready

fourth quarter

The fourth quarter has started – the final quarter of the year.  In this fourth-and-final quarter, there are four things you should do in your business to stay strong and successful.

Get Your Team Energized to Finish the Year Strong and Be Ready for 2022

With most of my clients, I am focusing on helping them have a solid Q3 close and a strong finish to 2021.  In the quarterly review meetings, we are looking at the numbers and ensuring that everyone understands the business’s vision and long-term strategy.  I find that, generally, everyone is 70% aligned. We use the opportunity to increase that percentage by having an in-depth discussion of the historical quarter’s results, and then looking at the rest of the year and going into 2022 to align the teams’ vision and long-term strategies. Knowing where you stand can give you motivation and energy for what needs to happen next.

Ensure a Solid Q3 Close

If you’ve established effective processes and routines, your accounting staff should be keeping up with the necessary tasks to ensure you have accurate numbers and information for future decisions. If not, focus on getting these procedures polished (checklists are a great help to this) and getting your staff on board with doing them well EVERY month.

Get Your Short-term Targets in Focus

What are you hoping to see happen in your business during the fourth quarter? Write these goals down, narrowing them to be realistic, measurable, and fitting for your team.

Start the Budget Process

2022 will be here soon so you’ll need to have your budget in place to ensure an effective transition. It may be a simple matter of copying and tweaking this year’s budget. Or, you may have to revamp if, for example, some areas of income didn’t match your expectations. Get input from your staff. Consider cost-cutting measures or redirection of funds to more effective endeavors such as product development or marketing for next year.

Bonus Task

I find it interesting the statistic that 98% of business owners don’t know how much their business is worth.  Their business is their most valuable asset, yet most have no idea of its value until they decide it’s time to sell. I know several owners currently looking to transition out and “retire,” but the offers they are receiving are substantially less than they anticipated.   

In addition, not knowing the current value of your business makes it harder to intentionally increase it over time with well-informed decisions.

I suggest all business owners do a business valuation every few years. If you haven’t done this, let’s arrange to do one now. Our valuation process is inexpensive and efficient and you’ll be pleasantly surprised at how the information helps you as you head into 2022.

It’s Like Riding a Bike

Running a business is like riding a bike. Sometimes, you are pushing a reasonable pace with your eyes focused on the road ahead. Sometimes you are cranking up a hill, watching your feet push the pedals. And sometimes, you coast and enjoy the ride.

Now is not the time to coast.

Summer is (almost) officially over. It’s time to finish Q3 strong, look at the road ahead and ensure we are prepared for a great Q4. Time to finally wrap up last year’s taxes and start planning for 2022. If you’ve instituted good processes, this may feel like a steady ride at a reasonable pace. If you haven’t, it may feel like the uphill climb. But either way, DON’T COAST.

To prepare for Q3, do the following things now:

  • Have a solid August close – ensure your reporting is efficient and accurate.
  • Start developing your sales forecast for 2022.
  • Look at your current org chart and individual capabilities.
  • Plan time to get together with your leadership team to review the quarter.
  • Consider getting an assessment/valuation of your business to help your vision for 2022.

Let’s talk about that last suggestion for a bit.

98% of all business owners do not know the value of their business, even though it is likely their biggest personal asset. Many owners plan to eventually sell the business to fund their goals in later life. As with any asset, they should know the value of it, and learn the necessary steps to keep that value growing. But they are often focused on the day-to-day running and building of their businesses.

While we love to help your business implement solid core processes, consistent reporting, and overall improvements to allow for growth, profit, and cash flow, we’re also excited about a new service to help you assess and find out the actual value of your business.

Our new cost-effective valuation product walks you through a step-by-step process to determine what’s working, what needs improvement, and what your business is worth in dollars. We can also provide other assessments to help you determine strengths and challenges that impact your bottom line.

I’d love to tell you more about it! Contact me!

In the meantime, keep pedaling!

Develop a Mindset of Continuous Improvement

faucet

During the 2021 Summer Olympics, I was reminded of the Olympic Motto:

Citius, Altius, Fortius – which translates to Faster, Higher, Stronger.

Olympians have a mindset of continuous improvement. They are constantly wanting to do a little better. That same type of mindset can be very helpful to companies. It starts with evaluating where you are.

In our businesses, we need to do the same. At Verbeck Associates, several times a year, I’m hired to do a business assessment. Look under the hood. Review the financial statements. Look at the accounting processes and make recommendations for improvement. I look at all the business systems, the accounting procedures and controls, and the processes/duties assigned to each member of the accounting team. This generally leads to additional work aimed at resolving issues discovered during assessments.

I love doing these assessments, and I’m impressed by any company that wants to do them regularly. Why? Because the desire to assess a situation shows me that the organization has a mindset of continuous improvement. Companies that don’t care to be evaluated don’t care to improve.

One of my team members put it this way. We are called upon to come into an organization and clean things up. It’s as if we are janitors – we walk in and see a running faucet in the break room. The employees are busy mopping the floor from the overflow, but never turn the faucet off.

Sometimes it takes an outside, objective view of your business to see that the faucet is still running.

In the case of accounting processes, this may mean we are focusing so much on getting books closed and the reconciliations finished that we fail to see there’s a better way. The current process may be outdated, leading to stress and overwhelm, and it’s taking us far longer than it needs to.

Generally, the leadership of a company wants to improve (turn off the faucet) but that doesn’t mean individuals within the company do – some are more comfortable continuing to mop.

I’ve seen this phenomenon several times in my career. One example is clients that are months behind in reconciling their cash accounts, resulting in financials that haven’t been closed all year. This causes the owner to operate with a blindfold on.

The team is dedicated, but they can’t catch up with the day-to-day, perhaps because they are more comfortable using a mop than a wet vac to “clean up the mess.” Taking advantage of simple automated processes such as downloading transactions and sales information rather than entering data by hand would help them a lot, but they can’t get past the ingrained routine or fears of technology. Insisting on making paper copies and printing out every transaction rather than having a solid backup system adds hours to their week, when a simple scanner at the desk could be a workable compromise.

It seems that sometimes a team is afraid that efficient systems will eliminate their jobs. It’s simply not true. While there may be some that are ready to move to another position or company that is a better fit for them, team members who choose to learn and grow reap the benefits of professional development. They can be part of the exciting increase of value-add activities the organization can offer when not bogged down with outdated processes.

Like Olympians, we always need to continue to improve our business.  Our team needs to embrace technology and efficiency solutions to increase capabilities. New technology, new processes, and in some cases, new people, will help us get better at what we are doing. 

Do you and your company have a mindset of continuous improvement?

Contact me for an assessment of your organization.

Halftime: Preparing to Finish Well Using a Mid-Year Review

financial

Halftime. I’ve written about this before, but, the year is half over, and it’s a great time to schedule a mid-year review to look at your business’s first-half performance, take what you’ve learned, and re-forecast for a strong second half of your year.

I know a lot of people are going on vacations, but for me, while it’s wise to take a short break, mid-year is a time to contemplate my client’s performances and develop a plan to come out strong for the rest of the year. In fact, for some, an offsite half or full-day session is a perfect means for this exercise.

I have had a couple of full-day, offsite sessions with my clients already this year, and while it’s not absolutely necessary to carve out a full day, whatever time you can set aside is valuable for reviewing information, and re-forecasting the business plan.  Plus, it helps you distill Q3 action plans into several big quarterly goals and get the entire team on the same page.

A quick and thorough financial close process is essential in order to have the information you need.  We’ve talked a lot about that in the past, but a strong quick close paves the way for better decision-making. It gives you more confidence in the numbers and is more efficient. Regularly gather your performance statistics: sales by segment, gross margin, expense comparisons to budget and to prior years, and any capital /investment needs for the rest of the year.

At your halftime meeting or offsite, evaluate your team and have candid conversations to maximize performance.  Look at your sales department’s performance and marketing successes/failures.  Take a close look at the current data and strengthen your plan for the rest of the year.  Gather the facts, reevaluate your assumptions, and get your team all focused and rowing in the same direction. 

Whether you decide to have an offsite, or just take some time in the office, here is a Second Half Checklist to help you prepare for a proper halftime business review:

  • Gather overall 5 Performance Stats actual versus plan: Sales, Gross margin, Operating expenses, Net income, Asset velocity
  • Update the Org Chart
  • Obtain your Income statement by month – 2021
  • Download your Balance sheet by month – 2021
  • Print out your 2021 Budget by Month (original)
  • Collect an invoice register download or sales by segment data
  • Prepare documents for an Income statement comparisons: month to date versus budget versus last year: quarter to date versus budget versus last year, year to date versus budget versus last year.

Don’t miss the halftime opportunity to take stock, reevaluate, and develop action plans to improve performance, net income and cash flow.

I’d love to see if I can help! Contact me!

Improving Your Backroom

accounting

The “Backroom” (your finance and accounting department) has always been a vital piece of a company’s framework.  I’ve been pushing backroom efficiency since I was with KPMG 30 years ago.

Back then, most internal control and accounting processes were manual and spreadsheets were just coming on the scene.  Manual methods were often inefficient, inaccurate, and boring. The larger the company, the larger the accounting department needed to be. We needed enough people just to bill customers and post cash to accounts receivable.  Things have changed significantly now; we have automated solutions where we scale differently and efficiently.

Most businesses consider that their value comes from sales and marketing. They are always thinking about how to create customer value. The finance department exists to support the business’s value creation, and we need to operate it as effectively and efficiently as possible.

In my years of work in the turnaround and profit improvement space, I’ve encountered many bloated finance departments that have grown over the years, some because of company growth, but some because of using outdated and inefficient processes.

Companies should regularly evaluate the needed functions in the company’s admin support and backroom.  Take the employee’s names out of it, and create lists of what needs to be done and what positions should be accountable for it.  You can talk with the employee(s) who currently own the process … they may have ideas about streamlining or automating processes – or even let you know if they’d rather be doing something else!

Evaluation often leads to change, and some people handle change better than others. I’ve worked with several companies where the employee is unwilling to change – they aren’t interested in learning new ways to do things, like their routine, or lack confidence.  If an employee just won’t change or isn’t willing to grow, the best way to improve the process may be to change the person who does it.

I’m currently working with a company to create a start-to-finish process manual from the ground up. We are documenting every process.  We just finished tweaking the billing process to improve efficiency.  Implementing this improved process led to an immediate improvement in cash flow ($200,000!), a reduction in one full-time equivalent, and a much better forward-facing process for the customer.

Change like this is both rewarding and difficult. It’s not an easy decision to streamline staff, yet a healthy company cannot hang onto employees just for the sake of having people around that they like or that they don’t want to upset.  Are there other positions that person is a better fit for? Or have they contributed all they can and are unwilling to grow and change with the company? In the long run, it may be healthier for them, too, to find a better fit.

Evaluating, polishing, and documenting your backroom processes can also do the following:

  • Improve leadership skills – it makes owners and the leadership team step up and pay attention to what is taking time and money
  • Mitigate distractions – a step-by-step process helps employees stay focused, and if they happen to get distracted, be more quickly able to pick up where they left off
  • Provide a planning calendar – accounting processes are often tied to a calendar, so you’ll be building a planning tool that will  help you in the future
  • Create weekly checklists – having these written out will help if the current process owner suddenly isn’t available. It’s a tool for cross-training and prepping new employees to take on this task.
  • Encourage discipline – repeated routines help create needed “muscle memory” and could free up mental space for employees to problem-solve
  • Build efficiency – who doesn’t want a more efficient company? Comprehensive and documented processes streamline tasks for everyone involved and helps you avoid individuals adding their own, possibly unneeded, steps. (i.e. do you really need to make photocopies of everything if there is a computerized record – and backup – available?)

Does the idea of streamlining your backroom intrigue you? Let’s chat. My experience can help!

Five Good Reasons for Documenting Your Procedures

You repeat your core accounting processes on a daily, weekly, monthly, and yearly basis.  For some of you, they are so ingrained, you could almost do them in your sleep.  However, that’s not the best way to handle such important tasks, even if they are routine.  ±

Here are Five Good Reasons for Documenting Your Procedures

  1. Assist with cross-training and backup. If you depend on one person to take care of your accounting every month, what are you going to do if that person leaves the company, has to stop work due to health, or worse? If processes are well documented, you at least have a fighting chance to bring someone in to continue these routines with minimal interruption.
  2. Help you discover bottlenecks and inefficiencies.  While you (or your accounting staff) may do things as “we’ve always done it”, having to document each step may point out what could be eliminated, or what may need to be added.
  3. Give you the opportunity to do the required evaluation and documentation of your internal controls (steps required by accounting standards.)
  4. Align team accountabilities by addressing the who, what, where, when, why, and how.
  5. Ensure consistency. A checklist of steps in the order they should be taken streamlines processes and helps you avoid omissions.

 

Here are some procedures you should document:

  • Revenue Cycle, including receivables, receipts, and collections.
  • Disbursement Cycle, including purchases, payables, and disbursements.
  • Inventory and asset accounting
  • Payroll, HR tasks
  • Month-end close, journal entry process, and financial reporting

 

Steps to Documenting Well

For larger organizations, there is software to assist.  For smaller companies, a manual approach works well.  I like to prepare an overall flowchart of the process to ensure I’ve captured all the related source documents and systems, then prepare a general outline of the steps to complete the process, adding a brief narrative to supplement the flowchart.  To visualize this, see the EOS process documenter.

When documenting …

  • Interview process owners and record step-by-step instruction (using a tool like Screencastify can provide a great visual aid.)
  • Source documents to the general ledger.
  • Develop an overarching flowchart.
  • Walk back thru the process steps with the process owner(s).
  • Evaluated for process alignment and efficiency – eliminate any unnecessary steps.
  • Ensure the process is followed by all.
  • Regularly reassess for alignment and improvement

While documenting, you can also ensure that

  • There is a segregation of duties of risk areas and a one over one review plan.
  • Accounting systems have access controls.
  • Your physical assets are handled in a safe and secure manner.
  • Account Reconciliations are done regularly.
  • You have competent personnel in these roles.
  • There is a structure of approval authority.

While a tedious process, documented procedures help companies become more efficient and scalable.  It is well worth the time invested in a project like this.  If I can help, contact me!

Gear-up For Q2

Well, happy spring!  I hope you had a successful first quarter.

Now that Q1 is over – how did you make out with your first quarter goals?  For me, the year-end CPA audits are done, my “big rock” goals were completed, and my teams are ready to jump into the second quarter.  It feels good to finish strong, and I hope you did too.

If you didn’t finish as strong as you hoped, I urge you to get your first-quarter financial results wrapped up early and do a solid comparison to your projections.  Take another look at your 1-year plan to ensure that you are on target.

Also, set up a meeting with your banker to ensure they are up-to-date with your financials.  A strong relationship with your bank can be so important in good and bad times.  Banks don’t like surprises and will appreciate you being proactive. Review your year-end financials, first-quarter numbers, and forecast for the future so they can have a clear view and be confident that you know what you’re doing.

As the second quarter kicks off, it is a great time to evaluate your team. How did they perform over the quarter? Are the right people on the bus and in the right seats?  I’m currently going through an exercise with one of my clients to evaluate the finance team.  We are reviewing the org chart based only on accountabilities, not names.  We will be making some adjustments. We are starting with what needs to be done, then ensuring we have the right people in the right spots.

As I look back, Verbeck Associates and my clients had some huge goals for Q1 that seemed unreachable at the time … and yet … we nailed them.  We held each other accountable, reviewing the ‘Weekly Big 3’ weekly, and if someone is behind, we help them with resources and reprioritize priorities so we hit the targets.  That process was the key to our reaching those ambitious Q1 goals.

Let’s check on your progress:

Compare your Q1 financial results to your Q1 budget and to Q1 last year. Look at sales and gross margin by segment, overhead and payroll expenses, and cash flow. How did the quarter stack up compared to your plan and to last year?

If you’re behind on your goals – be honest – face it head-on and up your discipline. Don’t use the excuse you didn’t have enough time. There’s never enough time. You need to make time and keep your focus on the important things.

Now, set up your next 90 days. Set your “big rock” goals in place and get to it!

 

Q1 Review Time: Goals, Closing, Tasks

It’s almost the end of the first quarter of 2021. Hard to believe. That was quick!

Let’s take a look at a few things you should be reviewing as the quarter comes to a close.

Goals and Targets

Business leaders who want to have strong and profitable businesses tend to set big goals for the year, and often, per quarter.  How did you do with your goals?  I’m slightly behind on a couple of the “Rocks” (high priorities) that I intended to get done by the end of this quarter.  I still have a couple of weeks to turn up the heat and get them done, and so do you!

How are your financial results so far? Are you close to where you thought you’d be? There’s still time!

Q1 is tough for us accounting types. There’s a lot of activity, including closing the prior year, meetings with your CPA, preparing for taxes, finalizing your budget and goals, and communicating with your team.  It’s not unusual to miss some targets in Q1, even significantly.

There are three options if you are missing your targets already:

  • Realign
  • Refocus
  • Give up

Option three is already off the table for an intentional business leader. But realign if you discover that your sights were set too high, and refocus if you came close but didn’t quite make it. Perhaps there are a few details you can narrow in on for the next couple of weeks to hit the target.

Financials and Recordkeeping

I’m amazed at how few companies and organizations have a solid financial close process and still don’t use a simple closing checklist – every month.  I know it’s easy to try to wing it, but from experience, things will slip – not all balance sheet accounts will get reconciled, dates will pass without action, and the overall accuracy will degrade.  I’ve experienced this myself.  We need to maintain the monthly discipline of following a checklist – every month.

A monthly close should take no more than 10 days, and should actually take less time than that. Huge companies can do it – GE, a 95 BILLION dollar company with 250,000 employees, can close in three days.

I have one client that has a complex billing process.  When I began working with them, their month-end close took 30 days.  Not only did the slow billing process affect the close, but it also caused delays in customer payments and cash flow. By focusing on changing the process, we were not only able to improve the close timing, but accounts receivable turnover also increased significantly.

If you are having closing in 10 days or less, investigate what’s slowing the process down.  A recent survey indicated the month-end close (close to disclose) process has slowed due to internal levels of review, growing need to identify and consolidate more detail for financial statements and more time to check for errors.  While these all sound good, the problem seems to be that the close is run by memory rather than clear and specific protocols and checklists

With the quarter ending – plan now to get back to basics.  Get your financials closed quickly (download the closing checklist), compare to your forecasted results, determine what is necessary to get back on track, and plan out an action plan to get back on course.

Tasks and To-Dos

All work isn’t created equal, despite it all feeling urgent.  Step back and ask yourself

What is of highest value right now?

Sometimes, I will look for the path of least resistance.  I can still feel productive checking my email or knocking a small task or two off my list. But deep down, I know I’m avoiding the significant project or important initiative I should be working on.  I have found the following three actions helpful when this occurs, and suggest the following for you:

  1. Delegate routine tasks. An administrative assistant (in person or virtual) can help with recurring tasks so you can focus on what only YOU can do.
  2. Batch tasks. Try to do your “lower value” tasks in batches. Schedule time to process email, read professional development articles, clean up files, etc. as one appointment block so you can knock off a lot of administrative tasks at one time.
  3. Automate.  When possible, utilize apps and other systems to take care of routine details. Automatic payments help you avoid late charges. Weekly reminders through tools like Outlook or Google Assistant help you stop the “try not to forget to …” thoughts swirling in your head. Using tools that snooze email to a more appropriate time can keep you from feeling distracted by a full email inbox.

A quarterly review is invaluable in helping you, and your company, succeed.  I love to help clients grow stronger in their review/closing process. Is it time for some extra help? Schedule a free strategy call today!

 

Planning Sessions Lead to Success in Business

It seems like I’ve just finished my annual planning sessions with my clients and now the first month of the year is already a wrap!  I always come off these sessions excited about a new year.

The format of these sessions varies somewhat, but all have these basic elements:

  • Looking at the past year and acknowledging the good and the bad
  • Checking our numbers to see how they compare to what we projected last year
  • Asking ourselves if we accomplished the big goals we had set the previous year
  • Ensuring that we all have the same vision and look ahead three years, asking “Where do we want to be?”
  • Turning back to the annual plan to set revenue and net income targets so we can achieve the 3-year vision
  • Drilling down to establish what we want to accomplish in the next 90 days.

The teams I work with generally have 4-6 people on the leadership team.  We make an effort to block out two consecutive days with little interruption, to allow time for deep focus on these vital steps.  But you don’t have to have a team or two full days.

If you haven’t had an annual planning session (even if with yourself), get it done now. Evaluate your team to ensure that you have the right people in the right seats, and develop a two-page annual plan (20-page business plans tend to take a lot of time and generally end up sitting on a shelf collecting dust.)  Your two-page plan should contain:

Page 1:

  • Core values
  • Mission Statement
  • 3-year and 10-year vision (What do we look like in 3/10 years?)

Page 2:

  • One-year targets
  • Next 90 days goals
  • List of issues to address

The annual plan is just the start.  You should then book times for a quarterly review. At those meetings, ensure that you review your current 90-day goals and update/list new goals and issues to address over the coming 90 days.

With the correct team environment, these quarterly meetings and the annual in-depth meeting become essential and valuable components to a successful organization.

So now that month-one is under your belt, ask yourself

  • How am I/how are we performing?
  • Have I/we made progress on our 90-day goals?
  • Are January financials closed yet?
  • Did we send our December 31 trial balance to our CPA?
  • Have we been using a weekly scorecard for visibility and to ensure our leading performance indicators are tracking?
  • If we are off track, what are we doing to get back on? (If you get off track in the first months of the year, you will have a much harder time getting on track later in the year.)

It’s vital to make sure that you have closed your January financials timely and develop your strategic plan to conquer the upcoming year.  Utilizing these tools will help get an accurate picture of where you are and how you can do better.  Download the month-end closing checklist to verify that you are positioned well for success.