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A Tale of Two Bank Accounts

technology substitutes bank accounts

Do you ever have those thoughts that haunt you in the middle of the night? Well, for me, it was 2 AM one night and I thought to myself, “Why on earth do I have two bank accounts?!”

As time passes and technology progresses, the need for multiple bank accounts seems irrelevant. Think about it – you have twice, maybe three times the burden of maintaining, tracking, and paying for multiple  accounts. There are many reasons someone would want to, so let me share mine with you.

Reasons for Having a Separate Payroll Account

Security

Assuming you hand out physical checks to your employees, having a separate payroll account can keep employees from having access to your operating bank account number.  Since most payroll accounts are only funded at the time of a payroll run, the company’s dollar exposure to theft is limited.

Separate accounts for payroll and accounts payable enhances internal controls and enables the company to choose which individuals within the company have access to the bank accounts.  The person processing A/P checks might not be the person you want having access to your payroll account.

Hacking is also a major issue, especially in finance. Many people believe that a second bank account will make sure payment is available only when needed. In case of a frozen bank account, lost credit cards, or stolen identity, a separate bank account is a good fallback.

Organizing Tasks

If you have many employees and many vendors, reconciling one account with all transactions can be messy.  Having separate accounts for payroll and operating expenses can streamline the reconciliation process.

When you have a separate payroll account, it also makes easier to locate lost, stolen or forged payroll checks.

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Our Thoughts…

A business may have good reasons for separate bank accounts, but here are a couple of reasons why you might reconsider.

1. Electronic Payroll Processing

In the old days, you only put enough in payroll to prevent fraud, make the bank reconciliation easier, and limit authority. You can do this all electronically now. There are apps and websites available to help with payroll. Additionally, they include fraud prevention and aid with taxes. The need for a separate bank account with manual tracking is obsolete, because technology has your back!

2. Apps to Deal with Operating Expenses

technology substitutes bank accountsYour operating account generally handles customer deposits and vendor payments. Businesses
may also use this separate account to pay for other overhead expenses such as sales dinners, store purchases, etc.

But again, technology has simplified this process. I attended a conference a couple of months ago, and one of the vendors focused on automating day-to-day transactions within companies. Many vendors offer auto-draft and many customers pay via ACH.

Accounting software such as Quickbooks interfaces directly with your credit card account allowing you to automatically upload, code and approve transactions in minutes rather than the hours it took just a few short years ago.

There are many more reasons to have multiple bank accounts, but many more reasons not to. For every new bank account created, there are hundreds of apps and websites to serve the same purpose.

Embracing Change

Speaking of change, you should reconsider the way you’re doing things since times are changing. Are your business habits the best practice? I’m 60 years old. There, I said it. Yet I work with young entrepreneurs every year. Why am I 60 years old and thinking like a baby entrepreneur? Because I made the conscious decision to adapt and change. You can, too.

“That’s cute, but don’t tell anyone about it.”

Ever heard of Kodak, and how it failed? Kodak is a perfect example of how missing your technology window might destroy you in the long run. In 1975, Steve Sasson invented the first digital camera. However, management replied, “That’s cute, but don’t tell anyone about it” (via The New York Times). Not long after, Sony came out with the first digital camera to be sold.

What might have happened, if Kodak actually supported the new digital movement? Could they have avoided bankruptcy and held onto their status as an industry leader? They might have been the company to look to for more technologies, but instead, the management of Kodak was in denial. We can all learn from this, and trust technology to handle some of our business.

Don’t be a Luddite

In my experience, many financial leaders are late adopters of technology. If there is a new and easier way to implement a task, the financial leaders are the last to get on board. Imagine how that trickles down throughout the business – the managers are the last to implement the change, the employees, and then the customers. Pretty soon, you’ll be irrelevant compared to the competition. How do we stay relevant in our industries? By adapting to change.

As we explained in our blog, “Are you a Luddite?” technology is not stealing jobs, it is creating new roles. Technology can eliminate the need for multiple bank accounts and make things easier for you. Don’t make things more complicated for your business than you need to!

Conclusion

The technology movement is a hot button topic – even when discussing multiple bank accounts. This is because there are so many technologies for so many purposes.

Depending on your business, you may need to open another bank account. Whether you have another location, or if you have a separate entity under your business, you may consider this option. However, you’ll be paying extra bank fees, manually tracking double the account activity, and reconciling twice as many accounts. Your business should grow, not the number of accounts you have to fund it.

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Are you a Luddite?

Now that the furor over Brexit has simmered down and some of the excitement has worn off, it’s interesting to note the chatter about the root cause of the decision.  One of the theories put forward most loudly is that those in favor of leaving the EU were heavily represented by workers in the industrial regions of Great Britain and those who voted to stay were mostly comprised of workers in the financial centers of London.  The “stay” faction thrives on access to free trade and globalization while the “leave” group feels they have been harmed due to globalization.

All the uproar of Brexit puts me in mind of another struggle over a very similar issue in Great Britain that occurred over two hundred years ago (albeit with a very different outcome).  The parallels are quite interesting…

financial ludditeThe Luddites

Back in early 19th century, a “battle” broke out between textile workers and the proponents of technology that essentially eliminated these workers’ profession. Thanks to the Industrial Revolution, these laborers didn’t have any more work.

The Industrial Revolution’s push to implement new technologies that would lead to the obsolescence of these manual jobs created a region-wide rebellion. Northwestern England faced military force from the rest of England who agreed with industrialization.

This rebellion of the working class laborers gained a folk hero in the form of Ned Ludd.  Ludd allegedly destroyed 2 stocking frames in a fit of rage in the late 1700s, and was nicknamed “the machine destroyer.”

What is a Luddite?

A Luddite, in short, is someone who denies the emergence of technology and refuses to adapt. The term Luddite fell into use in the 1800s as part of the rising tide of discontent among the English working class.  Initially, this term referred to individuals who, like Ned Ludd, were known to smash machines in an attempt to forestall the advance of technology.  Eventually, all who opposed the Industrial Revolution were called Luddites.

This description (Luddite) shares two sides: those who reject technology and those who adapt and utilize technology to their advantage.  Since the early 1800s, many have not used this term widely until the 20th century. The modern Luddite is more likely to be called a “technophobe.”

Luddite to Neo-Luddism

Neo-Luddism is a relatively recent philosophy that opposes many different forms of technology.  You can see elements of Neo-Luddism today in movements such as Brexit.

The EU referendum had two parties: Brexit (Anti-EU labor parties) and Pro-EU Labor parties.  Those for Brexit were generally located in the same northwestern region where the term Luddite was born. Globalization has hurt that region. The advancement of technology is seen as something bad, whereas London (a financial hub) optimizes technology to their benefit.

Neo-Luddism isn’t only a British phenomenon.  Ever heard of the Rust Belt?  It’s the region between New York and the Midwest where steel manufacturing and other forms of manufacturing were once the dominant industry. Because of the decline in industrial demand, the once lively industrial hub is now rusted.  Many of the companies in that area failed to combat off-shoring or outsourcing. They did they because they neglected to adapt to better technologies.

The philosophy of Neo-Luddism can have major financial implications. Regions that were once thriving are now hubs for decay and crime. These formerly great cities struggle to break free of this “Financial Luddism” and reinvent themselves.

Are you a financial luddite?

What is a financial Luddite?  If you’ve read any of our posts, you’ve heard us say (sometimes shout) that the role of a Controller or accountant is becoming automated.  These roles must adapt to new technologies or they will soon go the way of the weaver in the Industrial Revolution.

How often are you implementing new softwares, programs, or technologies that can automate some of your role, while allowing you to focus on more value-added tasks?

In a study published by Accenture in 2014, they found that 43% of C-suite executives believed their sales team adopted new or better technologies. Only 20% of the same group believed that their financial teams were doing the same.

Why is it that?  Over the past 25 years consulting with CFOs, I’ve noticed that financial people tend to be late adopters. They are the people that are now just getting a smart phone. Whereas salesmen got their iPhone 1 early 2007 when it was first launched. While a regular flip phone fulfills its role as a mobile device, the industry now demands that you have a fully functioning computer that can fit in the palm of your hand.

Dr. Christian Campagna, managing director of Accenture Strategy, said that “there is also an emerging role for the CFO in driving and assessing digital technology investments.”  Technology and all things digital have become the backbone upon which we operate. For example, look back 10-20 years. The Internet was not particularly prevalent. Now, if you don’t have your smart device to Google a question, you feel lost in the wilderness. Well, maybe that’s a little dramatic.  You get the gist.  Technology is an asset that should not only embraced, but optimized.

Luddite to Wingman

Technology is not stealing jobs. Rather technology is creating new roles. The advancement of technology still requires people. We haven’t quite reached the iRobot stage where artificial intelligence takes over our role completely…

Begin to transform your thought process from:

“Technology is the worst and is useless

to

“Technology is my best friend and is able to help me perform my job better.”

This transition from thinking like a Luddite to a wingman is imperative to achieve success. CEOs have clearly stated that they want their CFOs or financial leaders to be a wingman. Typically, a CEO has a sales background and are more of the early-adopter personality. A wingman needs to emerge from the Luddite age and turn into someone who adopts new technology.  Learn from the Luddites – you can’t fight the march of progress so, lead, follow, or get out of the way.

How to be a Wingman

Dr. Campagna put it best,

“The finance function has played a vital role in helping companies to overcome the challenges of the past few years, and the Chief Financial Officer (CFO) is now the Chief Executive Officer’s (CEO) go-to partner for driving operational transformation and strategic execution. CFOs have helped companies to impose the discipline over costs, cash and capital that has been necessary for survival, and advised business leaders on how to allocate scarce resources against a highly challenging backdrop. Such influence is even clearer among high-performance businesses. Thus the CFO can be the architect of business value, providing the means, the tools and the acumen to design for and deliver valuable business outcomes.”

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HOW TO BE A WINGMAN

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