Published
Articles
Originally
Published in The Business Journal of CNY.
Know
your In-House Financial Manager
There are a
multitude of reasons to get to know your in-house financial person,
be it a CFO, Controller, Bookkeeper, or whatever title you have
chosen to bestow upon them. Mainly, they are the custodians and
purveyors of the most important information you can generate
in your business. Secondarily, there is the potential of fraud,
theft, and simple complacency and confusion that can cause your
company untold harm with vendors, customers, and other internal
and external bodies. And finally, if you do not communicate to them
what you need to run your business (if you know) and how you prefer
to see it, how can they provide it?
Their integrity
first, and than the integrity of the information they provide your
company generally determines the well being of your company. No,
you can not depend on your CPA or Accountant to help! You must establish
a bond, as Owner to Financial Manager, that assures you that you
have all of the above bases covered. I have been involved in over
15 cases of fraud of various degrees, and worse, mass incompetence
to larger degrees that can destroy companies if left unchecked.
The financial
function is NOT a sidelight of your business, but rather the heart
of it. The person and team generating that information to you can
make or break your company; that simple!
In almost every
case when I first begin with a client, disarray and potential theft
is clearly possible. Because of the amount of trust an owner places
in this function, the potential for fraud gets higher. Most Financial
Managers COULD rob you blind before you or your accountant figured
it out. Fortunately, most do not. A large percentage of owners simply
do not understand the financial function enough to police it, let
alone drive it to provide essential information in a discernable
fashion.
The real (and
most expensive loss) comes from a lack of understanding on all sides
as to what information flow is key to the company, and the timeliness
and presentation of same. This position should be providing you
and your managers with control information to address issues within
the company before they become costly. This position must
be the company policeman, a control freak who demands good information
coming to him, and puts out information that is timely, accurate,
and easily understood.
This information
goes well beyond month-end financial statements, and gets into day
to day benchmarks, and measurement against same. Owners and Financial
Managers should meet one-on-one weekly to design new reports
in formats that provide critical information. A good financial manager
will suggest what you need, but than again, a good owner will demand
what they need. If the match is not perfect (as it rarely is), than
a compromise needs to be implemented where both owner and Financial
Manager work together towards providing meaningful information flow
and paths.
Once reports,
systems, and procedures are designed and customized to fit your
company's specific needs, and fill the voids unique to the company,
much of the ongoing work is maintenance, and refining and interpreting.
Don't assume that your Financial Manager knows exactly what you
and your managers need. It is truly a joint effort.
Have checking
month-end bank statements go to you, unopened. Review each check
to be sure you agree with it. Don't be afraid to question those
you don't "remember". Ask for backup and detail on any
questionable payments. You should have seen this before anyway.
Also have an
independent source that you totally trust (you?) look at all incoming
cash receipts, in any form. Log them and be assured that deposits
to the company account match them.
In general,
make your financial people aware that there are random checks
and balances to protect the company, not to impugn their integrity.
Random checking, and the awareness of it, prevent a multitude of
potential problems, not just here, but in many areas.
Review weekly
at a minimum Accounts Payable and Accounts Receivable agings, and
ask questions on old issues on either. Stay in touch with your money,
coming and going.
Together, design
daily and weekly "flash reports" to keep you and your
managers aware of the critical happenings in the company. The more
pertinent and germane information distributed, shared, and discussed,
the better run the company. You can stop problems before they get
out of control, and take advantage of opportunities before they
vanish.
Information
flow needs to be structured in such a way that no one is ever surprised,
or waiting for month-end to know what is going on.
The top financial
position in your company is unquestionably a salaried position,
due to the nature of the timing of the work. That position often
needs to work early, and stay late, while on occasion, may take
down time in non-peak periods to stay fresh. This position is often
controlled by vendors, customers, outside sources, and owners.
Now, think about
your financial manager and ask yourself what would happen if they
were not there. Would your business continue, and although maybe
hit some bumps, move forward and flourish? Are you providing a backup
for this position, who can, at a minimum, perform all the necessary
day-to-day functions? Who would make deposits, pay bills, and generate
those reports you and your managers have learned to depend on? Be
sure you have a capable backup. There is too much to risk.
Go out now and
get more involved. You will benefit from it without a doubt.
Dennis Hoppe is President of Change Management Implementation, Inc. in Brockport, NY. He has been a small business advisor to owners of hundreds of companies since 1989. Visit his web sites at www.dhoppe.com and www.hmcexecutivecoaching.com, or call him at 800-724-3525. |
