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Strategy for Managing Cash

managing cash

Does your company have a strategy for managing cash

Many companies have established procedures for purchasing materials, collecting customer payments, and paying vendors.

But often people either do not communicate these procedures or simply don’t follow them consistently.

Even when everyone is aware of and follows the established protocol, your system may be flawed. Before we show an example, you need to know how to manage cash flow

Know How to Manage Cash Flow

We all know that cash is king – liquidity is essential for survival. Many entrepreneurs only know how much is in the bank, but they don’t understand how much cash they actually have. So, how does one manage cash flow?

First, you need tools. 

Here are a few tools that can help a company manage cash flow:



Manage and Work Your Operating Cycle

Then you need to manage and work your operating cycle. Your operating cycle is “how many days it takes to turn purchases of inventory into cash receipts from its eventual sale”. It indicates true liquidity – how quickly you can turn your assets into cash. Calculate how long your operating cycle is using the following formula:

Operating cycle = DIO + DSO – DPO

Watch Your Expenses

Watch your expenses carefully. If you do not have an eye on SG&A and procedures on what can be purchased, then you risk racking up unnecessary overhead. Think about too much inventory, unnecessary equipment replacements, extreme marketing budgets, etc. 

Use Cash Wisely

Use your cash wisely. Always be thinking about will this add value to my company? when spending your valuable cash. If you will not see a return on your investment, then consider spending the cash elsewhere. 

Collect Quicker

Another method to manage (and improve) cash flow is to collect quicker. This is a great method to use if you are in a cash crunch and can only make small improvements. For example, there is a $10 million company that collected their accounts receivable every 365 days. They had a lot of cash tied up. If they improved their DSO 5 days, that would be an extra $137,000 of free cash flow

Example of Strategy for Managing Cash

Let’s look at an example of a strategy for managing cash flow. Imagine that Company A has 120 days of inventory on hand. They collect receivables in 60 days. And they pay payables within 30 days.  Even assuming that this is their established cash management strategy and everyone follows it, Company A will still find itself in a cash crunch. This is because of the disparity of time that cash is tied up in inventory and receivables versus the speed with which it pays its payables.

So what can Company A do to free up cash?  Here’s a link to an article that talks about how to develop a strategy for managing cash and techniques to improve cash flow.


 

Strategy for Managing Cash, How to Manage Cash Flow

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What Happens When Companies Don’t Have Internal Controls

While we never aim to scare our clients and readers, we have a huge plethora of war stories about what happens when companies don’t have internal controls. Just in my 18+ years of experience, I’ve compiled all the crazy stories for you today. 

What Happens When Companies Don’t Have Internal Controls 

So, what happens when companies don’t have internal controls? They open themselves up for theft, embezzlement, and liability. If there are no controls over what’s going on inside, then there is no control over cash flow, profitability, etc. It also “gives permission” to your team to do as they please and when it pleases them.  They may or may not be making decisions in the best interest of the company.  But without internal controls, they are likely less careful with the decisions they make.  Have you ever noticed how easy it is for a child to spend their parent’s money, but if it was their own money they are less likely to spend frivolously?

War Stories | What Happens When There Are NO Internal Controls 

In my experience, I have gathered so many war stories on what happens when there are no internal controls. Read about some of my most unforgettable below.  

My Most Trusted Accountant and Advisor 

Many years ago, while I was part of the audit team, I had a client who had the same accountant for 20+ years – we’ll call her Sheila. She has been with the company since it opened its doors and was the owner’s most trusted confidant and advisor. Sheila was in complete control of the receivable and payables.  There was no oversight over Sheila’s position. When I started to look at their accounting records, there were several red flags…

Sheila was very defensive and abrasive when I came into the office and during the review phase of the engagement.  She mentioned several times it was okay for me to work remotely.  She wanted me to sit outside of her office, even though her office was large and had a meeting table and several chairs. Intuitively, I knew something was off with her.

I also noticed that the company cut thousands of checks every month to different companies. Sheila cut them and signed them herself.  The business owner trusted Sheila and gave her access to manage the bank account and accounting records.

The biggest red flag was discovered during the audit of the transactions.  There were several inconsistencies with who the checks were being written to and how they were recorded in the accounting system.  It appeared Sheila would have the checks payable to herself and immediately go back into the system and change the name to a made-up vendor.  After months of due diligence and investigation, it was discovered that she had stolen at least a quarter of a million dollars in just the last 10 years of her employment. While this hurts the owner, the owner gave less trust at face value and implemented internal controls to regain trust in accountants.

Creating Checks and Balances with Internal Controls

In another instance, the Chief Operating Officer of a company approved several supplier invoices.  The accounts payable department processed the invoice and paid the supplier without further questioning. It took at least a year before the company learned that the COO created this false company, approved the invoices and received payments for personal gain.

Therefore, it is critical to have internal control at all levels of the company with different teams in place to create the check and balances it needs.  Internal control would the purchasing group validate the supplier, approve the purchase order before submitting the order to accounts payable.  Generally, operations would have received a receiving document once goods/services have been provided with a signature of the person receiving the goods/services.  Accounts payable would receive the final invoice and match it against the approved purchase order and receiving document.

 

What I Learned About Internal Controls 

There are several things I learned about internal controls when I was in audit and now even as a CFO 

Trust Your Gut 

If your gut is telling you something is wrong or off, it is worth investigating. When I have followed my gut, I have either found something wrong or found comfort that everything is okay. But those few times I did not trust my intuition, I missed steps to prevent fraud, etc.  

Never Do Anything Without Oversight 

As a CFO, business owner, entrepreneur, and accountant, I have learned that no one is too high not to have oversight. If I cut all the checks and sign them, that leaves it all up to me. Thankfully, I know myself and I would never do anything criminal! However, not all people are like me. There are, unfortunately, individuals that are motivated by rationalization, pressure, and/or opportunity. Oversight helps protect all parties – even yourself.  

So that is what happens when companies don’t have internal controls – lack of control.

what happens when companies don't have internal controls, When Companies Don't Have Internal Controls

what happens when companies don't have internal controls, When Companies Don't Have Internal Controls

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When to Outsource or Why Outsource at All?

As a financial leader of your organization, it’s important that you understand how your time works and what you are spending your time on. In today’s blog, we’re taking a look at when to outsource accounting or specific tasks and services and why outsource at all. Before we go into when, first, let’s understand, what is outsourcing? Many of you have heard the term, but don’t really know what it means.

Outsourcing is simply delegating and paying someone outside of your organization to do a service for you that you cannot do or do not have time to do.

Examining Your Daily Routines

For example, think about your daily routines. Think about what you currently do. The list may add up quickly if you’re like me and wear many hats.

Put a star next to the things that you struggle to find time to do in the first place.

In your personal lives, it could be mowing the lawn or changing your car’s oil or cooking yourself.

For example, I find myself as a business owner operating a franchise struggling to find time to really prep and cook dinner each night. So what we do often is go out and pick up food – essentially paying someone to cook our food for us. We could either dine there or take it home.

Time Value

It’s all about time value. Are you spending your time on what you or your company values most?

When examining your daily routines, do you catch yourself saying “I don’t have time…”?

“I don’t have time to mow the lawn.”

“There’s no time to clean my house.”

“I don’t have time to close the books because I’m out there running my business.”

Whatever those time consuming tasks are, it may be worth outsourcing to another person or agency. 

By freeing up your time as a CFO, you can reallocate that time to more important tasks – such as being your CEO’s trusted advisor. Learn how to become the trusted advisor your CEO needs.

When to Outsource Accounting

For example, you might have to hire a bookkeeper in your organization for them to come out and enter the transactions on a daily basis. For me, that’s important to outsource because I need to be thinking at a higher level as a Controller/CFO – not entering transactions. There will always be someone less expensive to do that. 

So really when we say we don’t have time, it is because of one of several reasons. We don’t want to spend our time on something else if someone else can do it for cheaper (and if it energizes them more). Plus, it may be time to start outsourcing accounting when you want to:

  • Make more money for you
  • Bring you more value
  • Do what you enjoy doing more

For example, entering transactions for month close is dry work and it wears on me. But I love coaching leaders how to be more effective in their roles and make their decisions more impactful. If I’m bombarded with transactions, I cannot coach leaders – which is more valuable to me and the bottom line.

On a personal note, when I do not have to cook dinner, I have an opportunity to spend more time with my kids. It also frees up my time to help my kids with homework and build memories with them. I can also read a book for personal growth or enjoyment. There’s so many opportunities out there for you to actually do things that you actually enjoy. 

Outsourcing accounting is just one area where you may add value to your company. Continue to do things that add value or free up your time so that you may add value. Click here to download our guide on how to be a trusted advisor to your CEO to help them improve your company’s value.

When to Outsource, When to Outsource Accounting, Why Outsource

Why Outsource At All

One of the top reasons why companies outsource at all is that they may be more efficient. When I outsource, I am hiring someone that might be more knowledgeable. If I am a business owner who does not know how to record certain transactions, then consider the time it will take to learn that skill (and the time you are not spending on improving profits and cash flow). Even if you wanted to implement Quickbooks so that you can start recording transactions (a one-time set up), it may be worth handing that off to someone more knowledgeable in Quickbooks so that you can focus on other things you are more knowledgeable in. 

Those are things you consider when to start outsourcing.

The goal is to create more time, more energy, and free you up to do something that can potentially make you more money.

Examples When Considering Outsourcing

To further explain the need to outsource, it’s important to consider roles outside of the accounting and finance departments.

If you are a good sales person for your organization, then you don’t want to spend your time behind a desk all day trying to enter your transactions. If you don’t have a lot of transactions, then that’s a perfect sign that you need to get out there and start making those sales for increased transactions for your business to actually record.

Outsourcing is a Key to Growing

I think that outsourcing is a key to growing. It is no different from a leader wanting to delegate the tasks that…

  • You just don’t have any time to do
  • You need others to do so that you can focus on what you are great at doing from a very high level

Now, at The Strategic CFO, we have several ways for you to tap into or start outsourcing individuals so that you can actually build on your business.

Consulting

We have accounting managers, controllers, and CFOs that are ready to deploy and add real value where it’s not currently being optimized. In our consulting practice, we work in several capacities, whether it be an Interim CFO role, financial and operational reporting, mergers and acquisitions, pre-audit preparation, etc. Click here to learn more about our consulting practice.

For example, your accounting manager, controller, or CFO may

  • Not exist yet (brand new hire)
  • Be on maternity leave
  • Take 3 months off to travel through Europe (I wish!)
  • Need extra help because your company is going through an audit for the very first time

Life happens regardless of what you plan for. That’s why we’re here to step in when you need it. We will come in and help you with getting the helping hand you need to be more efficient with your current team. Need hiring and training? We do that too. These are all different reasons why you may need to outsource. We are here as a boutique firm to help you.

When to Outsource, When to Outsource Accounting, Why Outsource

Coaching Workshops

There are also opportunities for you to come in and take workshops at our office, in an online setting, or at your office. For example, you can learn about what your leadership style is. Are you a Type A person that can’t just let go of doing the little tasks? By learning about yourself, you start to outsource or delegate what you are not strong at and focus on what you are great at. As a result, you can continue to grow the business.

We offer a variety of workshops to…

Your CEO needs an advisor they can trust. Learn what they expect from their CFO and how to become the trusted advisor your CEO needs in this whitepaper.

When to Outsource, When to Outsource Accounting, Why Outsource

When to Outsource, When to Outsource Accounting, Why Outsource

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Pitfalls to Avoid When Growing Your Business

A strong economy drives business growth. I think most of us can agree on that. Growth is usually good…

But if it is not controlled growth, it simply will not be sustainable.

In this blog, I outline several pitfalls to avoid when growing your business (especially in a high growth scenario). It’s all about managing the growth properly.

We have two current clients that are experiencing high growth, and they can barely make payroll.

With a pipeline of huge sales, how can this be possible…?

Their lack of planning on systems and procedures has also caused the management to not sleep well at night.

SCFO Lab Members: The reason most income statement projections fail is because of a lack of ability to accurately project sales! Start the Sales Genie EP now.

What Happens in a High Growth Scenario?

So, what happens in a high growth scenario? It should be all good news… The problem is that many times the decision maker(s) of a high growth company have never experienced high growth. Sometimes, these can be startups or a business that developed a new product.

If you have not experienced it, then it really is hard to imagine all the things that can take place.

Example of a High Growth Scenario

Let’s look at an example of a high growth scenario in a made-up company…

You are a manufacturer of widgets and you own a manufacturing facility. You have 50 employees before the company is about to explode in growth.

Your VP of Business Development or VP of Sales brings you new contracts that will significantly change the size of your company.  These contracts will double, triple, or even quadruple your business in the next 18-24 months.

So no worry about generating sales….

But there are several questions that need to be asked and pitfalls to avoid in this company.

Pitfalls to Avoid When Growing Your Business

Inventory: How are you going to fill all those orders?

You need to purchase a lot of inventory of raw material. In addition, your purchasing transactions just tripled in dollars and quantity. Finally, you have enough machines to manufacture items for the next 12 months… But next year, you will need to acquire more machines to keep up with demand.

Labor: What about labor?

The purchasing person is working already 50 hour weeks, and you know you will need to hire another purchasing person. Your plant labor needs to increase to compensate with the increased workload.

Right now, your 3 person accounting team includes 2 bookkeepers and a controller. You realize you need a cost accountant.

Systems, Process and Procedures

You have used a basic accounting system for 10 years, but you realize that you have outgrown the accounting system. It is not the right system because it does not handle cost accounting or standard costs. You want to integrate purchasing and inventory modules.

For years, you kept inventory and work-in-process on spreadsheets. Now, the dozens of spreadsheets are not reconciling. It’s time to automate inventory.

The once per year physical count of inventory is no longer enough. You need to have cycle counts and maybe at least a full physical count quarterly.

For years, you have operated informally, but you now you realize you need to have written policies and procedures.

Accounting

You have run your business on a hybrid cash/accrual system, never really got to full accrual accounting, and never really worried about GAAP financial statements. Maybe you should…

You never considered having your financial statements audited; however, with all this growth, you might sell one day. Having your financial statements audited would add value to your business.

Your company is growing so much, you need more than financial statements that tell you what happened in the past. Now, you need projections, budgets, and dashboards.

It’s time for a strategic financial partner. It’s time for a CFO.

Click here to access our Goldilocks Sales Method, and learn how to build your sales pipeline and project accurately.

Human Resources

Your admin person that did a great job all these years is now dealing with 3 or 4 times as many employees. It’s time to hire someone that has a good understanding of labor laws.

Payroll was done in house. Now with so many hourly people and manual time sheets, it’s time to upgrade and integrate payroll to the accounting system or have it outsourced.

Consider automated time keeping and get away from the multiple spreadsheets.

Legal and Tax

Your new sales take you out of State. Now, you are selling in 5 different States.

Have you created nexus in these other States? They have State taxes… Oops!

You had to hire a few people on the ground in the other States; your labor laws just got really complicated.

Sales and Use tax… Are you paying the correct taxes, not paying them, or over paying them?

You developed a new process or Intellectual Property (“I.P.”). Did you register this? Did your attorney suggest maybe creating a new legal entity that has the I.P.?

By creating the new legal entity or new legal entities, did you realize you just created a lot of complex accounting work by having all those legal entities?

Note: We recently had a client that created 19 legal entities because their attorney wanted to “protect” them from everything. Now, they had to consolidate all those entities with hundreds of intercompany transactions.

What is your Exit Strategy?

You will be quadrupling the size of your business in the next 2-3 years. You thought to yourself one day… I might want to sell this business.

What does it take to sell your larger company?

It takes time to set a strategy for an exit. It takes time to “professionalize” management and your back office.

Do you have a succession plan so that the business does not look like a one man show?

Do you have a 3-year budget with projections?

SCFO Lab Members: If you want to build your exit strategy and/or access your readiness for market, check out the Exit Strategy EP

How to Have Sustainable High Growth

I have hit on some of the basic topics that come up in a high growth scenario. There are many more things to consider.

The first thing that comes to mind is how are you going to pay for all this?

Do you have sufficient working capital?

Sometimes, you can manage working capital and have sustainable growth.

Many times, you need some sort of financing because of the timing differences in working capital. You cannot afford to sustain this high growth with out the financing.

Cash and working capital are key to the sustainable growth.

But just as important is having the right people. Not just having the right people on the bus… But having them in the right seat on the bus is critical. Not everyone is meant to sit in the same seat in a larger company. This applies to the management team as well as employees.

I have actually seen situations in high growth companies where the person that really needed to be fired was the owner or CEO.  Because the CEO of a $5 million dollar company is not necessarily the same CEO of a $50 million dollar company.

Don’t get me wrong… The ownership does not have to change. You can still own the business. But that does not mean you need to be an employee running the business.

Summary

In order to have sustainable high growth that will allow you to sleep well at night consider the above items but you must have the following…

  • Enough working capital
  • The right people in the right seats “on the bus”
  • More and different systems, process, and procedures
  • A strategic plan that will allow you to have a sustainable bigger company

Projections are a helpful way to grow sustainably and avoid an uncontrollable high growth scenario. Download our free Goldilocks Sales Method to start building your pipeline and projecting accurately.

Pitfalls to Avoid When Growing Your Business

Pitfalls to Avoid When Growing Your Business

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Selling Your Business to a Private Equity Group

Private Equity companies are companies that have raised capital from investors and they have created funds. Each fund may have its own legal mandate. These are common examples of mandates:

  • Invests only in oil and gas companies
  • Is agnostic to what industry it invests in
  • Invests only in companies it controls

Private Equity companies come in many different colors and flavors.

They can be a very good resource for capital when an owner is looking to exit, or partially exit (“take some money off of the table”).

Oftentimes, entrepreneurs or founders (the seller) never thought of or did not know that Private Equity was an alternative; thus, I wanted to cover how selling your business to a private equity group may be a good option for you in this Blog.

Private Equity as a Buyer

Private Equity firms (“PE”) can be a very good alternative and buyer for your business.

They have liquidity…

They have talented financial and operational professionals on staff…

And they can usually get a deal/transaction completed in a very reasonable period of time.

Most PE will not waste your time.

They will tell you up front after one or two meetings if they are a “real” buyer.

In the past year, I saw some statistics that quoted that there is nearly one trillion dollars in PE dollars on the sidelines ready to invest. That is an incredible amount of money ready to invest.

But this is what you need to know if you are thinking about selling your business to a private equity group. This is critical and can make your life pleasant or miserable.

Once you find the PE firm that is purchasing your company, most likely they are purchasing the majority of the equity in the business and they are purchasing a controlling interest.

As an entrepreneur, founder, and business owner, you have lived in your company for many years.

You have enjoyed a comfortable life style…

You have the management reports that you need and you felt were enough…

And you have set your own agenda.

Most importantly, you do not answer to anyone!

LIFE IS GOOD.

If you are selling your business to a private equity group, then consider getting rid of any destroyers in your business that may be destroying value. Download the Top 10 Destroyers of Value to learn what those destroyers are and how to get rid of them.

Stages of a Private Equity Relationship

In my 30 plus years of experience, these are the stages of a private equity relationship that I have observed for some entrepreneurs. It’s a lot like marriage!

Dating Stage

The private equity firm approaches you and your business. There are some really nice dinners, great friendly meetings. There are multiple tours of your business. People understand each other. Everything looks like this is a great fit!

Engagement Stage

After many visits, conference calls, and review of some basic company and financial information, you sign the Letter of Intent “LOI”. You find your self engaged to the PE firm.

It’s all good.

There is a big prize on the horizon, and you can’t wait for the deal to close.

This stage might last between 60 days to 6 months.

Married Stage

The deal has closed! Yeah, it’s all good…

The cash has hit your bank account for your 70% of the business, and you still maintain 30% of the business. The PE group has promised a great relationship and lots of capital if you ever need it for growth.

Wow!

From now on, you can only double your money. Life is still good!

But now… You get the first request to deliver a monthly reporting package on a timely basis.

That means that you – the CEO of a company you own 30% of – must deliver on the 10th day of the following month a report to the PE group. You better have good numbers, and you better explain any variances to the penny.

Remember, you are dealing with very smart, analytical professionals that can smell BS a mile away.

So, BS will not cut it.

Month 3, 4, and 5 have now passed…

You have had many Board meetings where you are now the subject of interrogation. You have to come up with answers to variance from budget, but you sometimes cannot explain them because for the last 20 years, you have run the business based on a gut feeling and it has worked.

Now, you have a room of MBAs in their 30s asking you questions.

Stress starts to build.

Month 6, 7, and 8…

Yikes! You hate the thought of the next Board meeting.

You are starting to question the relationship you have with the PE firm. Those great expensive dinners during the dating stage are meaningless.

What have you done?

You are not enjoying going to work every day.

As a matter of fact, you now have to take calls on weekends and get permission to take a vacation!

Divorce

Finally, we reach the last stage…

One or two years have passed since the close of the transaction. You have had countless Board meetings, and you have suffered though all the interrogation. They have treated you like a kid and someone thirty years younger than you who is new to the business is telling you how to run “your business”.

The company you built.

You now only own 30%.

And you want out…

Reality

Selling to a PE firm is still a great option. In the U.S., PE firms have a lot of liquidity and can get a deal done. They can afford to pay you a reasonable price for your business, or part of your business.

There is nothing wrong with any of that.

What is wrong is that the business owner, founder, and/or seller does not understand what the requirements are after the sale process.

Requirements After Selling Your Business to a Private Equity Group

So, what is required after selling your business to a private equity group?

  • Professional environment
  • Detailed, reliable, timely financial statements
  • Board meetings where you (the seller) provide answers to questions and any variances
  • You as the CEO with now only 30% will be held accountable to respond to the PE group that as the majority owner
  • The CEO will be questioned and interrogated by the controlling owners of the business
  • You can not take off and head to the ranch on Thursday… You need to behave as a responsible EMPLOYEE of the business
  • Be humble
  • Your _ _ _ is on the line to respond to the owners that now control your business.
  • You sold your business. You are an employee.  Most likely, you have never been an employee.
  • If you can honestly accept this new role, you will be fine. If you think you still call the shots after the closing of the transaction, you will be hating life.

Selling to PE Firms can be a wonderful experience if you know what is on the other side and if you are willing to take on a new role, one as an employee.

If you are not open to being the employee that answers questions and will be held accountable, then pause and consider what it takes to sell to a PE Group.

If you are considering selling your business to a private equity group, then first see if there are any “destroyers” in your business that may be taking value away. Read through our free Top 10 Destroyers of Value whitepaper to learn more.

Selling Your Business to a Private Equity Group

Selling Your Business to a Private Equity Group

 

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How to Lead an ERP/Accounting System Implementation

In my 28+ year career, I have seen countless ERP system implementations and accounting system implementations.

While some have been very successful and made a huge difference in the company, I have seen disasters.

Millions of dollars spent over budget.

Complete failure for the system implementation.

This is one of my “hot boxes” when I hear consulting clients, coaching participants, colleagues, and companies in my network considering new systems.

If you follow my steps on how to lead an ERP system selection process (included in this blog), then you will save thousands to millions of dollars depending on the size of your company.

The biggest disaster was with a company that did not follow any of the steps listed below. Their original budget of $8 million went to over $30 million, and if that wasn’t bad enough, they lost nearly half their revenue because of that bad system implementation.

Reasons For Selecting a New ERP System

Before I go into how to lead an ERP system selection process, let’s look at some reasons for selecting a new ERP system.  I will use the term ERP to include accounting systems as well (although they can be two different things). But they do have common challenges and I refer to them as one in this blog.

There are many reasons why you may be shopping for a new system.

Some reasons include:

  • Buying your first system
  • Outgrowing your current your system
  • Entering a different industry through growth or acquisition
  • Wanting better technology

The system selection process and system implementation process can be very expensive – thus tying up you cash flow. Learn about other ways to improve your cash flow. 

Download the 25 Ways to Improve Cash Flow


Mistakes Made During ERP System Selection Process

Over the years, I have seen or been involved with so many different systems being implemented. While I am not an implementation expert by any means, I have been involved with enough of them that I feel very strong about the right way to implement a system. When I have seen failed system implementations, they all have many common variables.

So, I came up with my list of “must haves” for a system implementation.

As a financial leader, you need to be spearheading the ERP selection process.  You want to make sure it is done right because it is well documented that a system implementation gone wrong can cost millions of dollars of over run and precious time.

11 Tips on Avoiding a Failed Implementation

Critical items that will spare you from a failed implementation:

  1. Do not set arbitrary dates for “Go Live”; be flexible
  2. A new system is NOT an I.T. project. This is a very common mistake made. Do not allow your I.T. Manager to serve as the project manager. They will have some involvement, but it must be measured.
  3. Go through a System Selection Process
  4. After you select a system, make sure the implementer blue prints your process and system, and you sign off on it
  5. Be open to changing how you operate/process; if you do not, then you will want the system to fit your process and this will cost you dearly in customization fees
  6. Have a designated Project Manager that represents your interest, not the software company’s
  7. Avoid customization; remember, you will pay up front for customization, and you will pay again when ever there is a update in version or technology because now you are stuck with a customized system
  8. Test the system, and process thoroughly in a sandbox environment; do not proceed until the system does what you want
  9. Consider running parallel old system and new systems for at least 1 or two closes
  10. Provide substantial training to your employees
  11. Be prepared to change your go live date

Go Through System Selection Process

There are many firms that do the system selection process for you.

They come in and evaluate your requirements for this system.

Then they narrow down the choices from dozens to a handful.

This not only helps the company not get overwhelmed by the number of choices, but it also helps the company find solutions they may not have known to look for. These system selection firms are experts in this field. If you want to do it right, then hire an outside firm.

It is worth every penny and will likely save you a lot of money in the future.

Assign a Project Manager for ERP Implementation

Because this is a huge undertaking, it cannot be managed by someone who…

a) does not represent your interest

b) is in your I.T. department

c) does not understand your operation and processes.

This can be someone for your organization, but you might have to hire someone from the outside.

Run a Blue Print / Test Before ERP Implementation

The Blue Print designed represents your operations and process, so you must fully understand it and sign off on it.

This is part of your contract for the new system.

Once you sign off on it, the burden is on you.

Test your new system in a sandbox environment. This testing can also be incorporated with training your staff. Making errors in the sandbox environment will not affect your business.

Errors post Go Live will affect your business.

Be Open to Change

While you are working with the system selection firm, you may not check everything off your list. While it’s tempting to just say customize it, it may be better (and less expensive) to change the way you do things to fit the system. When you customize these systems, you increase the chances of it breaking when there are updates, requiring more support, and being harder to adjust when you need it to.

By customizing your system, you are significantly increasing the cost of the implementation and future maintenance of the system.

Be open to change how you do things today and try to adapt to the system.

Provide Expensive Training

Now that you have invested in the system and started the actual implementation, you need to provide extensive (and expensive) training for your team BEFORE YOU GO LIVE.

The training should be on site, not remote.

They will always offer remote training because it is cheaper, but it is not the same as on site training.

The last thing that you want to run into is not investing in training and no one using the system.

This training will not be given in a couple hours; it will probably take weeks. Invest in it to get the greatest return on investment. Or you risk them using the system and making mistakes because they were not properly trained. I have seen way too many examples of systems implemented and little to know remote training.

Run 1 or 2 Closes Parallel

What I recommend to every client and company implementing a new system is to run 1 or 2 month end closes parallel. This will help avoid disasters by getting rid of the existing system prematurely and smooth out any kinks or breaks in the new system.

I always get the same response… “this is a lot of work and will cost me more man hours”.

Yes, it will.

But you will avoid a blow up in the future.


Running 2 systems for 2 months can be costly – restricting your cash flow. To find other ways to improve cash flow when leading an ERP implementation, click the button below to download our 25 Ways to Improve Cash Flow whitepaper.

Download the 25 Ways to Improve Cash Flow


Be Flexible with the “Go Live” Date

Many times, the CEO or another executive driving the investment sets an arbitrary “go live” date.

I have seen many cases where a CEO wants to launch the new system January 1 and has 50 people working around the clock…

That’s a sure way to create a disaster.

Have a goal… But do not have a hard deadline because there will always be something you did not plan for. 

I recently spoke to a CFO of a successful company, and she was telling me about their recent new system implementation. I was ready to hear another horror story… But she surprised me!

She told me it was a great experience. They had no real big issues and stayed with in the budget and timeline.

I asked her to please tell me what they did to be successful.

She basically listed the items 1-11 above.  It is a coincidence that I have listed those items for years now.

But it proved my point.

Implementing a new ERP system is expensive, so if you’re company isn’t cash rich, then you may need to improve cash flow in other areas of your business to keep you afloat. Download our 25 Ways to Improve Cash Flow whitepaper and start making a big impact on cash flow.

ERP Selection Process, ERP System Selection Process 

ERP Selection Process, ERP System Selection Process 

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Quotes Every Financial Leader Needs to Read

A few weeks ago, I started another series of our Financial Leadership Workshop, and in Day 1, we discuss that paradigm shift that needs to take place to go from accounting to financial leadershipSo, I compiled all the quotes from all of my curriculum that make me think… How can I lead my company differently? What can I do to better serve my clients? Take a look at following quotes every financial leader needs to read. Leave a comment below to suggest any other quotes and/or your take on the quotes I listed.

Quotes Every Financial Leader Needs to Read

While each of the following quotes is focused on a specific need or issue, I believe that every CFO, CEO, and financial leader needs to explore what each of these quotes mean.

Having a Plan

So often, entrepreneurs do not have a plan. We hear horror stories of executives telling their teams that there is no plan. Having no plan is a plan and it usually ends in disaster. Or maybe you have a plan but it is in your head and not documented.  You must get your plan down in writing.  Do you remember Captain Sullenberger landing the plane in the Hudson River on that chilly winter day? Here’s his take on having a plan.

“During every minute of the flight, I was confident I can solve the next problem. My first officer, Jeff Skiles, and I did what airline pilots do: we followed our training, and our philosophy of life. We never gave up.  Having a plan enabled us to keep our hope alive. There’s always a way out of even the toughest spot. You can survive.” – Capt. Chesley B. Sullenberger III

Role of a Leader

Do you know the role of a leader? Condoleezza Rice, former Secretary of State, said the following about a leader’s role.

“The role of a leader is to inspire people to a common goal and enable them to get there.”– Condoleezza Rice


Are you financially leading your company (or trying to)? We are starting a new series of our Financial Leadership Workshop this March 2019. Click the button below to learn more about what this coaching workshop is all about.

Learn More About the Financial Leadership Workshop


Leadership Habits

“The 8th Habit is to find your voice and inspire others to find theirs.” – Stephen R. Covey

Attraction

“The iron rule of nature is: you get what you reward for. If you want ants to come, you put sugar on the floor”– Charles Mundger

The Rest is Just Details

Our very own founder, Jim Wilkinson, had this saying that business is pretty simple… It’s all about sales! When a financial leader is able to shift their mindset from accounting to supporting sales and enabling sales to grow, then you become a whole lot more effective. Read more about this phrase here.

“It’s all about sales; the rest is just details!” – Jim Wilkinson, founder of The Strategic CFO

Budgeting

There are several budgeting quotes every financial leader needs to read.

“A well-constructed numerical estimate is worth a thousand words.”  – Charles Schultze, former Director of the US Bureau of Budget

Budgeting is the bane of corporate America.”  – Jack Welch, former CEO of GE

“Without a yardstick, there is no measurement And without measurement, there is no control.”  – Pravin Shah

The Hedgehog concept – created by Jim Collins – is when companies identify what they do best and focus on that. For example, a hedgehog knows how to defend itself. That’s what it does best! It does not try to expend time or energy hiding or fighting.

“The purpose of budgeting in a good-to-great company is not to decide how much each activity gets, but to decide which areas fit the hedgehog concept and should be full funded and which should not be funded at all.” – Jim Collins

“The only things that saves us from the bureaucracy is its inefficiency.” – Eugene McCarthy, US Senator

Problem Solving

Equip yourself with multiple tools, and more specifically, the right tool.

“If the only tool you have is a hammer, then every problem looks like a nail!” – Abraham Maslow

My Own Quotes

Here are two of my own quotes I use with entrepreneurs and coaching participants over the years:

“I do not believe in sacred cows.”

Working capital is like your diet; if you do not manage it, then it can kill you.”

What other quotes have changed the way you lead your company? Leave them in the comments below. Also, click to access our 7 Habits of Highly Effective CFOs – this is everything CEOs have told us what they want from their CFO.

quotes every financial leader needs to read

Quotes Every Financial Leader Needs to Read

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