Tag Archives | technology

Financial Leadership in the Digital Age

There is more information available today than in another other age before. It’s overwhelming. Instead of having verbal conversations with one another, there is a room of people on their phones or laptops communicating with other people around the world. We are processing thousands (if not millions) of pieces of information a day. And that’s making the role of the financial leader more difficult. There is simply too much information. So, how do you navigate financial leadership in the digital age?

First, take a look around the office. How much of your team’s work in on a device? How does your team look visibly (tired and exhausted or alert and awake)? If you go to any news source (Wall Street Journal, New York Times, etc.), notice how many articles are about technology and anything digital. Almost every article has some tech or digital component to it. This issue impacts financial leaders all around the world.

Financial Leadership in the Digital Age

Too Much Processing of Information

News channels, Facebook, Twitter, Instagram, Youtube, TV shows, financial statements, reports, contracts… Every piece of information we take in from the moment we wake up to the moment our eyes shut is simply overwhelming. There is too much processing of information occurring, and it has the risk of destroying a company’s value. A company’s leadership needs to be on guard of how much information they are processing each day. An article Fast Company published says, “Our brains have the ability to process the information we take in, but at a cost: We can have trouble separating the trivial from the important, and all this information processing makes us tired.” Our brains can only hold so much – much like a bandwidth of Internet. Once we go over that bandwidth, then we start to lose or forget information – even the most important information.

So, what does one do? They focus on a few key metrics rather than all the metrics. Click here to start identifying those key metrics with our KPI Discovery Cheatsheet.

Financial Leadership in the Digital Age

Financial leadership in the digital age is continuing to evolve and involve more areas in business than accounting. Already, financial leaders take a role in operations (productivity, efficiency, etc.), investment decisions, strategic planning, and human resources. I tell any CEO hiring a CFO that the CFO should be good enough or better to take on the role of a CEO.

Have a Team to Process the Information

As the financial leader, you have the opportunity to defer the role of sifting through all the information and data. Have your accounting department analyze all the information and package it into the most important information that you need to make strategic decisions. The CFO sits on a lot of information to begin with. With a team’s support, the CFO can focus on the most important information.

Financial Leadership in the Digital Age

Focus on Key Performance Indicators

Financial leaders in the digital age need to identify the key performance indicators (KPIs) that really matter in the business. If they don’t identify those KPIs, then they risk being overrun by data and may miss something important – result in injury, lawsuit, fines, etc.  With current systems that are properly installed, you can have thousands of bits of information in your monthly report.  But may I ask, what do you really need to make decisions?

Today, a client asked me if I wanted to see the daily reports. I asked what is in the daily report. The client responded with, “everything”. It included man hours, throughput, downtime, what was sold, was was wasted, HR information on who clocked in late and who was on time, literally everything on a daily basis. My response was simply “no” because  I do not need to see everything every day because I am running the company as an Interim-CEO. Instead, I want to see data that is meaningful, weekly, and information that will lead me to make business decisions. If we have over time one day of the week and none the rest of the week, then that will not lead me to make any business decision in this case.

Since so much data is available real time, be sure to gather and analyze that which is relevant and will lead you to make a decision.

Hire the Right Team

CFOs need to reevaluate which positions they are adding to their accounting department. Consider positions like data scientists, data security professionals, statisticians, and IT delivery specialists to add to your team. If the digital age is creeping into every area of business (especially accounting), then you need to have people with more experience in data, security, and analysis.

Adopt and Adapt to Technology

McKinsey recently reported that “the average capital project reaching completion 20 months behind schedule and 80 percent over budget.” Why? Because the stakeholders (project managers and contractors) in these capital projects are resisting technology. This is just one example of how resisting technology is a technology driven world will have an impact on the bottom line. If your company is already utilizing technology, then think of areas that you could be using more technology to reduce costs. If your company is still operating in the proverbial Stone Age, then it’s time to bring in a consultant or a team to implement a digital component. That could be an accounting system, a customer relationship management (CRM) system, an optimized website, etc.

In another example, retailers everywhere are having to change their business models to cater to the buy-now demand that customers have taken up. Retailers are creating e-commerce sites, closing brick and mortar stores, and managing inventory entirely different all because of technology. Recently, even grocery stores have been competing with companies, like Instacart and Favor, who are doing the shopping for customers that do not want to shop by creating their own delivery services.

Automation Plus Analysis

Over the years, the automation has creeped into finance and accounting departments. While at first, many in accounting were terrified that it would make their roles obsolete, we are seeing something different. You can only automate so much. In the end, business is all about humans. You cannot automate humans. What does that mean exactly? That means that now accountants are able to do more with the data than punching the information into spreadsheets, systems, etc. They can now spend their time analyzing the data, and thus, they become more valuable to the firm.

In a Wall Street Journal article, Paul McDonald from Robert Half says that, “companies plan to move the expertise needed to modernize their finance departments in-house, even as the process brings about more automation to routine tasks.”

Stay Focused in the Digital Age

So, how does one stay focused in the digital age? It starts with knowing what information is important enough to earn your attention and what information is simply a distraction. Start measuring your company’s KPIs today with our KPI Discovery Cheatsheet.

Financial Leadership in the Digital Age
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5 Signs It’s Time to Restructure Your Company 

signs it's time to restructure your companyOver the course of my 28+ years of financial experience, I’ve had a number of restructuring transactions. What I have found is that many companies do not know when it’s time to restructure their company. Instead, they wait until it’s too late and it becomes a liquidation event.  Restructuring can mean different things, there are restructuring engagements that take place through the legal system such as bankruptcy, and there are out-of-court restructuring.  In this blog when I mention “restructuring,” I am referring to out-of-court restructuring. In this week’s blog, we’re looking at the 5 signs it’s time to restructure your company.

What is Restructuring?

Restructuring is when you change internal operations processes, positioning in the marketplace, restructure debt, modify your operations and work towards becoming a more profitable and cash flow positive business. There are several reasons why companies undergo restructuring.  Usually, they are feeling a financial pinch. Most business leaders actually wait to long to restructure their business. In 2014 with the fall in oil prices, I actually saw companies with direct impact wait to make any changes. Those that saw the writing on the wall and took aggressive action early on are the ones that survived. Whenever you see external or internal factors affecting your cash flow and financial performance, you need to take a hard look at them and do not wait to make changes.

Several of the signs its time to restructure are also destroyers of value. If you are crafting your exit strategy now, then download our Top 10 Destroyers of Value to make sure you don’t leave any money on the table.

Signs It’s Time to Restructure Your Company

Now, you know what restructuring is. The next question is… When? There are several signs it’s time to restructure your company, but we’re going to look at the top 5 indicators that things need to change.

signs it's time to restructure your company

1. Trends Are Not Looking Good

Hopefully you have dashboards in place and financial reports that allow you to track trends such as your trailing twelve months margins, ratios and a 13 week cash flow forecast in addition to an annual budget. If these tools are painting a picture that your business is not performing, then corrective action should take place sooner than later.  If after your corrective actions, the trends are still negative, then you may consider a broader restructuring of your business.

2. Over-Leveraged

For the past 10 years, the cost of money has been cheap. Banks, asset-based lenders, and investors are all looking to place money to work. With low interest rates and excess liquidity, companies have had access to cash in the form of debt. Debt is not all that bad if it is managed wisely and you do not exceed the amount of debt that your balance sheet can handle. The ease of acquiring debt has led to some companies having to much debt  – over-leveraged.

What is too much debt? Well it depends on your business and your balance sheet. Commercial banks have the most conservative ratios, but I would say that even some of those may lead to too much debt. If you have too much debt, then you may find yourself needing to restructure your company. If the debt is more than you can pay, then you will likely find yourself in a legal reorganization, such as court protection through a bankruptcy process.

An investor will not invest in a company that has too much debt. If you are seeking investment, financing, or want to sell, then learn about the Top 10 Destroyers of Value.

3. Changing Markets

I can think of two current markets that have changed or are changing today. If you are in these either of these markets, then you will need to consider restructuring your business. The first is the retail real estate market businesses that own malls or large shopping centers. Online sales have totally changed this market. Large department stores are disappearing as more and more retail customers are shopping online. Owners of malls in many areas are having to restructure their business and find alternate uses for the real estate. The second is the off-shore oil and gas industry. This sector has not recovered yet, and it is going to be a long haul. Boat companies, offshore suppliers, and service companies are having to come up with a new way to survive.

If you find yourself in a market that is either disappearing or dramatically shrinking, then you need to take drastic action and restructure your business. If it is a permanent change in the market, such as the market change of renting movies to Netflix, then you may find yourself in the same position as Blockbuster which just disappeared. Hopefully, the executives and your Board of Directors have a keen eye on the markets you are in and how technology is affecting them.

4. Environmental & Technology

The world has become smarter about taking care of our environment. Technology is helping us do this more and more efficiently. 20 years go, an electric car was more of a concept only and cost prohibitive from a manufacturing standpoint. Today, there are several cars in the market that are more affordable and manufacturers are bringing prices down every year and new models coming out.  The major automakers know this and are planning ahead.  For 100 years now, cars have run on on oil based products. If your business is tied to gasoline engines, hopefully you are looking to restructure your manufacturing or market. The environment can also bring major changes. Do not think of just taking care of the environment versus pollution, but bad weather can also force you to change. Sometimes, for the better. I was talking to a client recently in the mid west part of the country. They can not find contractors to fix roofs because they are all down in the Gulf Coast.  How about a new roofing business in the mid west? They continue to have the need.

signs it's time to restructure your company

5. Regulatory Environment

Government is getting bigger and bigger. Every year, there are more and more regulations changing how the business world operates. If you are in a market that has new regulations, then this may be something that will cause you to change how you operate. You may find yourself restructuring your business to either adapt to the new regulations. Or you may find your self restructuring your business to get away from the regulated environment.

Protect Your Company From Destroyers of Value

Restructuring your company protects your company from destroyers of value; however, you should always be looking at how to improve the value of your company. Locate other areas that are destroying the value of your company with our free Top 10 Destroyers of Value whitepaper.

signs it's time to restructure your company

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Outsourced Workers: Do You Need More Hats or More People?

Outsourcing is something that has always existed, but has seemed to become the “norm” for most companies. outsourced workersRightly so, outsourced workers are an easy solution for financial leaders to mitigate costs.

The big question we’re asking is: Do You Need More Hats or More People?

If you’re looking at outsourcing, the first step is to complete an internal analysis to study your strengths and weaknesses. Need guidance in conducting an internal analysis? Download the free Internal Analysis Worksheet now. 

This is our third and final blog of our “are you wearing too many hats?” blog series. Initially, we started with the concept of having “too many hats“… meaning you as a financial leader have been given additional roles that go outside of what you thought you signed up for.

In our last blog, we discussed how millennials transition our CFO roles from traditional “CFO hats” using more innovative tactics. We also analyzed how technology may be able to help you complete the unfinished tasks in your company.

CFOs are currently struggling because of their many hats. What do you do when the weight of responsibility is too much?

Our Answer is Delegation

I recently moderated a Q & A panel of three CFOs, and heard very different answers from all three when discussing how to handle their “too many hats.” An interesting response was delegation, and handling too many tasks. How do you delegate these tasks, and who do you delegate them to?

One solution is outsourcing.

How Technology Connects You to Outsourced Workers

As discussed in our last blog, technology impacts a company by relieving some of the responsibilities on individuals.  Routine tasks can often be performed by computers, freeing up workers to spend their time on more value-added tasks.

Due to cloud computing and improved applications, outsourcing your work is a lot easier and cheaper. 

How Much Does Outsourcing Save You?

I know what you’re thinking… “Why don’t we just polish what we’re lacking on and allocate our budget to that?”

Some projects are more costly than others. For perspective, let’s say you were starting a new company and needed to design the website. The costs of hiring programmers and engineers in house would be tens, maybe hundreds of thousands of dollars. Compare this to a few thousand you can pay to workers outside of your company.

When starting your own company, you should also consider outsourcing projects that you are unfamiliar with. Although it is important to learn all aspects of a company, you don’t need to do it all at once. Having outsourced workers saves you money and time and provides expertise that you may currently lack.

In my own company, we outsource a lot of projects nationally and internationally (particularly with the one-time deals). We even outsource the projects to other companies, not just freelanced workers. Because our current staff is not as familiar with graphic design, we hire freelancers to do our designs and white-papers. We come up with the content, however, which reflects how employees provide the value-added information in a company.

What Should You Outsource?

We want to make sure that the tasks we delegate are the tasks that don’t necessarily make us money. What does that mean? Here are a few that we recommend you consider outsourcing:

A better question would be, what can you not outsource?


Click here to download: The Guide to Outsourcing Your Bookkeeping & Accounting for SMBs


The Risks of Outsourcing

Although outsourcing is a great solution to get rid of some of your hats, you may want to be wary of what you assign…

Value-Added versus Non-Value-Added Tasks

Often, we have to decide which tasks are more important than others. Even within the office, you have to choose which tasks to hand off to other trusted employees, and which tasks you need to complete yourself.

Typically, you would choose the value-added tasks because you, as a financial leader, are meant to add value to the company. You don’t want to assign important tasks to freelancers or offshore outsourced employees, because (presumably) no one does it as well as you do. Which brings me to my next point…

Do you find yourself gradually outsourcing more tasks for your company, rather than handling them yourself? Download this free Internal Analysis white-paper to find out why.

Laziness to Learn

So you’ve got a good set of employees, as well as outsourced workers. The budget is comfortable and your company is running smoothly. No one wants to change a system if it’s working fine, right?

Wrong.

As a CFO or financial leader, you are meant to be the wingman to the CEO of your company. The company should always seek to grow and adapt to new systems and technologies the business world has to offer. Remember that outsourcing is only meant to take some weight off of your head, not take all of your hats away completely!

The point of outsourcing is to take hats off. If you find that you are outsourcing any of your core competencies, it’s time to conduct an internal analysis.

Cyber-Security Issues

Keep in mind, whoever you outsource your tasks to will need access to some of your company’s information such as passwords, financial account information, etc. There are often cyber-security issues that occur, putting hundreds or thousands of people’s information at risk.

When deciding what information to release to your outsourced parties, the first priority you should protect is the financial information – your company’s and your customer’s information. If you can, avoid giving third party companies access to any financial information. Most platforms allow you to create “moderator,” “contributor,” “editor,” or any other variation that is other than “administrator.”

Government Regulation

Outsourcing government-regulated tasks can be a little tricky, particularly with countries that do not have the same regulations. This issue is industry-specific. Some examples would be insurance, medical, and financial services.

Cultural Barriers

When you outsource to workers who have a language barrier, time difference, or just a generally different way of handling projects, it may be a bit more difficult to execute a task. Companies have to be cautious for the sake of time, because one cannot hand a project to an outsourced worker who needs training constantly.

This is where adaptation comes in… In our company, we freelance our graphics to outsourced workers in the Philippines. We have to prepare our instructions and content a week, sometimes two, in advance. Why? Because of the time difference and the resources available to our contracted worker. We want to make sure his needs are accommodated as well as our own, and we adapted to his way of doing business.

Conclusion of Having “Too Many Hats”

There are always risks in trying new things in your company – in adapting to new business systems and technologies. In this three-part series of “wearing too many hats as a CFO“, we explored solutions such as millennial tactics, technology, and outsourcing.

The drive of a millennial + experience of older generations = success in your company.

Adaptability is key – Technology is created to help you.

Outsourcing can lessen the number of “hats” you wear as a CFO.

Regardless of the functions that you decide to outsource, conducting an internal analysis will help confirm your core competencies and identify areas that could easily be outsourced. Download your free Internal Analysis worksheet to start developing and enhancing your strengths as well as start reducing and resolving your weaknesses.

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Millennials: The Hippies of the 21st Century

millennialsTwo weeks ago, I posed the question, “Are the millennials the hippies of the 21st century?” in front of 200 CFOs and Controllers. Almost immediately, dozens of hands were popping up in the air to tell about their worst millennial experience.

Learn how to recruit star-quality team members that will improve value in your company (even millennials…)! 

Last week, we discussed the value of a CFO/Controller and if you, as a CFO, are wearing too many hats. We also considered how the life cycle of a CFO in a company fits into this “wearing of too many hats“.  So you have too many hats.  How would you feel if millennials took over some of those hats? When I inquired about this at the conference, I only got one response.

Bad.

Why do so many business professionals see the millennial generation in such a harsh light? On the other hand, why do millennials see our generation as “too traditional“, and “stuck in our ways”? A more important question that you should be asking yourself is… why do we let this get in the way of the productivity within our businesses?

Baby Boomers and Generation X

For the purposes of this blog, we’re going to lump together the Baby Boomers and Generation X. Why? Even though these two generations are starkly different from one another, they have one thing in common. They single-handedly created the Millennial generation.

Consider this… The millennial generation is the only generation ever where technology was always prevalent.

Somewhere along the way, both Baby Boomers and Generation X have conformed to a similar lifestyle. This is partially due to their larger responsibilities such as children, finances, and demanding careers. Growing up without the prevalence of technology we see today, both Baby Boomers and Generation X had to learn to operate within the bounds of relationships and etiquette. These valuable assets are often lacking in a techno-obsessed millennial population, and it’s our responsibility to share our experience with the younger generation and demonstrate how valuable people skills can be.

Orwellian Logic

millennial generationOne of the things millennials must watch out for is to not prefer technology over relationships. I don’t think I’ve seen a single millennial without a phone on-hand. (This is actually true for most people nowadays, not only millennials.)

But there’s a catch. With the newest apps and information shared on the internet, it is difficult to go places without phones and tablets. It’s a fast-paced lifestyle; everyone thinks that if they leave their phones and tablets behind, they will miss something amazing and completely life-changing… And unfortunately people miss what happens right in front of them, because their eyes are glued to what’s happening on their screens!

At this rate, we’ll end up like a George Orwell novel: a dystopian society where humans are enslaved to technology and lose all free will.

Would you hire a millennial on your team? Download the free 5 Guiding Principles For Recruiting a Star-Quality Team to learn how to recruit star-quality candidates in any generation! A bad hire could be catastrophic to your company; who knows, maybe you’ll find a millennial that fits in your organization.

Millennial Generation

A “millennial” is technically anyone from the age of 8 to 27 years of age. As those in their 20s are emerging and eventually will dominate the working class, we’re coming into the millennial generation.

What does that mean exactly? Most assuredly, technology is going to be a vital part of the working class.

New Technology, New Generation

Like we mentioned earlier, the millennial generation is pretty much the only generation to use technology beginning in the cradle, literally.  (Ever see a harried mother give her baby her iPhone to play with?)  The majority of the new generation have no idea what it’s like to mail something, unless their jobs pertain to clerical work. Grandparents of millennials  (Traditionalists and/or Baby Boomers) mail letters to their grandchildren for their birthdays, but what about the grandparents? Texts, emails, Facebook messages are the new “letters.”

The same goes with millennials in business. Technology has opened up new ways of doing business, including telecommuting, work hours, when and how information is communicated. Traditionally, “work-life balance” meant that you had to mold your life around your work. With millennials, “work-life balance” means molding your work around your life. This is possible because of cloud computing, and telecommuting (aka, the ability to work in your bunny slippers at home).

Is it a cycle?

The title of this blog is “Millennials: the hippies of the 21st century” for a reason. In the 1960s, the “millennials” of that era were known as “hippies” because they believed in free love, non-materialism, being your own person. We (assuming you’re as old as I am) were the taboo generation because we broke with social norms.

But around their mid-30s, these “hippies” got married and became parents. They became doctors and attorneys. They no longer believe in what they used to believe (or they’ve tempered their beliefs to get along). Millennials want to give back to society, have quick results, and think everyone should win. Are we wrong to assume that they will wake up and realize what we did in 10-15 years from now?

Teamwork Makes the Dream Work

Now that we’ve been through the differences between the “old” generations and the “new” generation, I will reiterate my question… why do we let this get in the way of the productivity within our businesses?

The great part about working with the millennial generation in a business is mixing the “old” with the “new.” I’ve been working with students from the Wolff Center for Entrepreneurship at the University of Houston for over 5 years now, and we’ve learned a lot from each other.  Throughout these 5 years, my business has changed significantly. I completely dropped my office, because my “millennial” interns showed me more cost-efficient ways to work through the internet. Similarly, I teach them how to be flexible when working with non-millennials and how important business relationships are.

The key is… compromise. Sometimes I get emails at 2:00 in the morning because millennials tend to work outside of the 9am-5pm range (maybe they like to binge-watch the latest series on Netflix before settling down to work…). I was a little surprised the first time it happened. But now, I sit down with them and outline their projects in advance. This is because there is an expectation on both sides that it will be done in a window of time. They decide their hours… as long as the job gets done.

Millennials have drive and passion.

Baby boomers/Generation X have ambition and experience.

Experience of a baby boomer + Drive of a millennial = Success in your company.

Conclusion of Part II

In the end, we can’t be stuck in our ways (yes, millennials, I’m talking to you too). We should learn how to optimize our resources and learn from each other. As the millennials progress into the working class, they are going to be more and more involved in the business. Regardless of how you feel about millennials, you still need to recruit a star-quality team in order to succeed. In order to determine which candidates are the right fit for your company, download and access your free white paper, 5 Guiding Principles For Recruiting a Star-Quality Team.

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Cloud Computing: The Good, The Bad, & The Ugly

As I sat in my car, stuck in Houston traffic, I looked around and saw many other people stuck in a similar situation – frustrated, impatient, and banging their heads against the wheel. How easy would it be to never go into work, avoid traffic, and just stay at home or work at a local coffee shop all day? More companies are adapting to working remotely, and collaborating from home is increasingly easier… thanks to the Cloud.

What’s the Point of Cloud Computing?

For an example of why a company would switch to cloud computing, I need look no further than my own backyard.

The Strategic CFO started out as a service company, doing business through face-to-face consulting. We were one of the first in the market as a consulting firm for CFOs. Eventually, that market was flooded with competitors who offered similar, if not more services. Although we have developed additional services over the years, we have recently begun allocating more of our budget on the web and cloud technology, rather than spending money on a big office to support a more traditional model of business.

Long gone are the days where it is necessary for a company to have an office in order to be “in business.”

Technological luddites who aren’t quick enough to accept technology as the market is shifting may see their overhead skyrocket and may even find themselves in financial crisis. Having been in this industry for over 25 years, I’ve found this to be a common issue in many companies.

Cloud Computing Benefits

Cloud computing helps companies cut long-term costs. There are many advantages to being part of the cloud, such as no need for office space, more storage, flexible availability, and ultimately tracking Key Performance Indicators easier.

Telecommuting vs. Office Space

As mentioned, some businesses don’t operate in an office. Instead, many businesses are experimenting with telecommuting (or “working remotely”) and foregoing their expensive office rent. I once had a client who was entirely virtual – I never even met the person. For all I know, that client could have been working in their pajama pants!

Previously, we spent thousands of dollars a month in rent, yet we were rarely in the office because we were interacting with clients in their offices or via the web. That was when we knew we had to get rid of this expense. The decision to switch from the office to telecommuting using the cloud saved us easily around $40,000 a year. That budget was then allocated to other areas in our company that were growing. Reallocating liquid assets has helped us be more flexible and able to shift with the market.

Less Hardware, More Storage

In the early days of computing, data was stored on huge supercomputers that were virtually impossible to move. This made it difficult to share information or work on projects that contained a lot of data.

Now, there are many platforms to store, create, and share data. Apps such as Quickbooks and InfusionSoft perform services that were previously performed on computers and hard drives.  By working in the cloud, a company can easily expand their ability to store information. Some companies even offer unlimited storage with a subscription package – an industry that was started as a direct result of cloud technology.  Even better, these companies will back up your data nightly – a practice often neglected by many businesses.

Anywhere, Anytime Availability

Another benefit of cloud computing is the availability of information from any location, and on any platform of technology. Like we mentioned earlier, the cloud allows for global collaboration and minimal miscommunication. As long as you have an internet connection, team members can access the same information from anywhere.  This can lead to huge leaps in productivity.

This contrasts greatly from traditional companies, where you have to ask multiple different people for data and do a lot of number crunching because the data varies. For entrepreneurial companies, this transparency is a blessing gift-wrapped and presented beautifully. For large corporations, this could be a security disaster. Thankfully, this “anywhere, anytime availability” can be controlled to reduce security risks while still improving productivity.

Eight years ago, Hurricane Ike made landfall in Houston, TX. It’s been estimated that 2.8 to 4.5 million people were without power – including our offices (where our standalone server containing all of our client files lived).  All but a couple of consultants had power at their homes, but couldn’t log into the server because our office had no power.  Had we been in the cloud, my employees could have logged on from their homes and stayed productive despite Mother Nature’s wrath.

Track the KPIs of your business

With cloud technology, it is also easier to track the KPIs of your customers and employees – hence, your overall business. CRM (customer relationship management) systems such as HubSpot, SalesForce, and InfusionSoft track the activity of both your customers and your employees, and analyze the data in real-time.

How does this help track KPIs? Well, for one, software can perform services that traditional companies need to gather multiple pieces of information from the employees quickly, analyze the numbers, and then make the reports.

Secondly, the data is communicated universally across the organization and is more accurate.

Finally, with faster number-crunching, you can more quickly resolve issues and grow your business.

Is your company having issues tracking (or even identifying) your KPIs? Download your free KPI Discovery Cheatsheet today by clicking here.

Disadvantages of Cloud Computing

With any type of technology, there are bound to be issues. Some of these disadvantages can be so problematic that they scare more people away than they bring in. The important thing is to analyze whether the benefits outweigh the risks

Integrating the change with your employees

On-boarding employees is a critical step that you have to undertake unless you want to risk high employee turnover. Likewise, implementing a new system calls for your company being responsible for on-boarding and training employees to to use it.

Integrating change with your employees will generally result in one of two outcomes: everyone embraces change or everyone sees change as evil so they’ve nailed their feet to the ground.

Security

When considering switching to the cloud, the biggest question you hear is “what about security?” Having all important documents and resources in hard copy form seems like the better alternative for some people; but when you think about it, the security issues with hard copies and the cloud are similar.

If the office catches on fire and you don’t have any backups, you find yourself in a bit of a situation. Likewise, cloud computing requires backups and continual updates to structure your system in a way that it becomes more and more difficult for the bad guy (or fire in the physical world) to hack into your system.

Technical Issues

Security isn’t the only issue to consider when switching to a cloud environment.  Sometimes, honest mistakes can occur that can cause setbacks. Occasionally, I and many others in my network mistakenly delete something without making a backup. Thankfully, we have not found ourselves in too much of a pinch as a result of our haste; but that’s not to say that technical issues can’t severely hurt a company.

Like it or not, cloud computing is probably here to stay.  It’s a powerful tool to not only save the costs associated with storing and accessing data, but can result in huge productivity gains due to greater access to information.  The improvement you can see in these key indicators might itself be enough justification to make the switch. 

Want help determining what key indicators you should be watching?  Download our KPI Discovery Cheatsheet here.

Cloud Computing Benefits

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A Forward-Thinking Driven Business

We are halfway through 2016 and, as technology rapidly progresses, the expectation for financial leaders to be practicing forward-thinking driven business is growing. It’s easy to fall into a habit of valuing historical data over forward-looking information.  So how can you go from being historically-minded to forward thinking?

First things first… Would you drive a car only looking in the rear view mirror?forward-thinking driven businessOf course, you wouldn’t! That’s dangerous.

So why would you drive your company only looking backwards at historical information?

There are two ways financial leaders can use historical information:

  • those that use historical data and put it to work
  • those that use historical data but don’t put it to work

Don’t get me wrong, historical data is important. It’s used to project sales, calculate trends, etc. You can use it for a number of things. But it can’t be the only thing that you use.

Particularly as technology advances seemingly every 6 months, you have to be forward thinking and analytical.

Historically-Minded vs. Forward-Thinking

Let’s look at the difference of being historically-minded versus forward-thinking.

forward-thinking driven business

Historically-Minded

A historically-minded financial leader would look at the financials to the right to learn that this month, they lost $2000. This type of financial leader would go through Weeks 1 through 5 blissfully unaware that trouble was brewing.  They might have a feeling that things aren’t going well, but they aren’t really sure.

However, it isn’t until Week 6 when they receive the financial statements that they realize that the company lost money this month. If only there was a way that they could have known about the losses sooner…

Forward-Thinking

forwardForward thinking starts with forward-looking reports.  A forward-thinking financial leader notices in his or her flash report for Week 1 that they are struggling. Instead of waiting until Week 6 to find out that month end would show a $2000 loss, they could take corrective action to fix the problem before it got any worse.

This thought process allows you to adjust projections for sales and inventory, manage your human capital, and address any cash flow issues.

Forward thinking also adds value to your position as a CFO

Technological Advances = Automation

So why should you care?  You aren’t responsible for the financial results of the company, just reporting the numbers, right?

Not if you want to stay relevant (and employed).  We’ve seen automation take the place of humans in factories for years.  But what you might not realize is that automation is quickly coming (and in some cases, is already here) to the accounting world as well.  In the not-too-distant future, look for smart accounting systems that can capture financial information and produce financial statements with the push of a button.  Not good for you if all you’re doing is cranking out financial reports…

Here’s what we’re seeing about how automation is affecting the workplace.

forward-thinking driven businessCertain roles, such as bookkeeping and accounting, are becoming automated jobs. It’s expected that these services are delivered accurately and on demand, something computers are great at.  The work can either be cognitive or manual.

Non-routine jobs are those that cannot be automated. They either require skills that can’t (at least for now) be accomplished by technology or take a great deal of skill, talent and independent thinking.  Again, the work can be either cognitive or manual in nature.

Example 1 – Routine Jobs

A CEO has to make a decision about whether to continue paying a bookkeeper or to onboard a new accounting system to automate financials. The bookkeeper has made several mistakes over the past couple of months that could have severely impacted projections if not caught early. The new accounting system automates every invoice and payment before a single person can touch the invoice. This position is routine because you can easily replace it with an automated system while still ensuring the accuracy and efficiency for a lower cost.

Example 2 – Non-routine Jobs

A chief of staff in a hospital is facing a decision about whether or not to automate neurosurgery. If the chief of staff decides to automate the role of a neurosurgeon, she risks losing customizability and efficiency as a robot cannot see every cell of a cancerous tumor. Sure, a neurosurgeon is human and will make mistakes. But a neurosurgeon has approximately 8 years of school with 4 more years of training and probably have 5-15 years under their belt. In this case, the neurosurgeon’s skill and ability to adapt to conditions on the ground is what makes them valuable and their job difficult to fully automate.

So what should you do if you find yourself in a routine role?  You should assist in automating those tasks that you can. Then, shift over to non-routine tasks such as analysis and problem-solving.  Adding value in this way will ensure that you stay relevant despite advances in technology.

Pyramid of CFO Value

forward-thinking driven businessThe Pyramid of CFO Value demonstrates how you can move from the routine tasks of accounting and compliance to the non-routine task of being a trusted advisor to your CEO.

People often look at the CFO as an accounting and/or compliance figure in the grand scheme of a company. As we start from the bottom of the pyramid (accounting/compliance), we find that this type of job function is most likely going to be automated.

Particularly as continuous accounting becomes more widely used, this financial function will progress into an automated system. Continuous accounting is just the start of new automation processes that pertain to large sources of data. Accounting technology such as continuous accounting establishes a precedent for timely, cost-effective, and/or high-quality improvements for business.

As you move up the pyramid of value, your role becomes more difficult to automate due to the training and experience necessary to successfully carry out these tasks. Since a good CFO improves profits and cash flow by 1-2%, you can essentially make yourself un-automatable (yes, I made that word up).

Where You’re Going

It’s all about where you’re going, not where you’ve been. A Flash Report is an excellent way to look into the future. It assesses KPIs, or key performance indicators, in order to create a periodic snapshot of key financial and operational data. This weekly assessment gives you the capability to not solely rely on historical financial statements to run your business.

As a management tool, it enables you to monitor and review profitability, productivity, and liquidity on a weekly basis.

forward-thinking driven business

Start driving with your eyes open. Discover why your KPIs are so important to be forward thinking. Download your KPI Discovery Cheatsheet today to start managing your financials as a forward-thinker. 

forward-thinking driven business

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Continuous Accounting: The New Age of Accounting

See Also:
Reducing Your Cash Conversion Cycle
Key Performance Indicators (KPI’s)
Accounting Principles 1, 2, and 3
Accounting Principles 5, 6, and 7

Continuous Accounting: The New Age of Accounting

Continuous Accounting is the new age of accounting. It provides a more efficient way to review financial performance in a real-time automated process, and a trustworthy, repeatable accounting cycle to forecast future results. It also gives the financial department a larger role in strategy and planning.

The Old Model: Record-to-Report (R2R) Accounting

The traditional model consists of a linear record-to-report process for accounting. In order to complete a record keeping process, a company must report certain tasks and responsibilities pertaining to the company’s financials. Expect these to be completed by the end of the period – which can last anywhere from two weeks to two months. Store and manage the data in a large computer processor. Disadvantages of this process include:

  1. The data accumulated over a large period of time have a greater chance for error with unreconciled transactions
  2. Inaccuracy and misrepresentation
  3. Takes up too much time and loses effectiveness of team

The New ModelFinancial Strategies with Cloud-Based Technology

Managers and financial leaders cannot afford to wait a month to two months for reports to be processed. This is what bookkeepers tend to do. Continuous accounting changes the prolonging process from period-end to a day-to-day basis. The cloud platform is capable of recognizing and verifying information constantly and repeatedly, thus enabling it to be “continuous.”  This evenly distributes work rather than accumulating large amounts of tasks over time. Continuous accounting is an organized alternative to the old model of record-to-report accounting.


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Shifting Business to the Continuous Accounting Platform

In the past, bookkeepers would record with accumulated reports, which would process a month at a time at least. With the matching principle, the company matches the expenses that are incurred during the same period the revenue is recognized (or the time the service was performed). Instead of recording in batches, modify the accounting system record as they occurred. Now, the next progression is to continuously reconcile accounts and analyze detail. In order to do this, have companies automate their systems. Otherwise, bank statements and other records would have to be linked and reconciled daily.

The New Age of Accounting

Advantages of Continuous Accounting

1. Continuous Accounting processes financial information faster than before.

Certain companies depend on a faster cash conversion cycle, in which case this technology would be useful. Instead of reviewing financial information every month or so, continuous accounting will complete the processes day-by-day. The processing of financial information will be quicker, and key performance indicators will become more apparent and easier to fix. This allows financial leaders to eliminate risk and take action proactively and defensively.

2. Automated systems improve the productivity of the accounting departments.

Increased automation should result in the benefit of improved productivity. This reduces costs because taking the manual systems, rather than automatically through continuous accounting, and applying them everyday would be cost-prohibitive.

Disadvantages of Continuous Accounting

1. Adapting the finance departments to a new way of accounting.

Implementing change is always a challenge, especially when a department, trained for 10, 20, 3o years on how to properly perform accounting, does it. Larger companies would benefit from continuous accounting more than smaller companies, where new, younger, more adaptable people work. However, the disadvantage of switching from traditional accounting to this new automated technology is that the larger companies have employees that have worked as an accountant for 25+ years and aren’t as adaptable.

2. Financial statements may not be as accurate. 

Instead of waiting a couple of weeks before submitting invoices or reports, continuous accounting processes the information right away. This leaves little time to adjust and organize data. By using continuous accounting, the financial leader succumbs to having financial statements 90% accurate rather than the expected 100%.

How Continuous Accounting Affects the Future of Finance

Technology itself is changing finance departments globally. Continuous Accounting is just the start of new automation processes that pertain to large sources of data. Technology such as Continuous Accounting establishes a precedent for timely, cost-effective, and/or high-quality improvements for business.

New Age of Accounting, continuous accounting

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New Age of Accounting, continuous accounting

 

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