Acknowledge Your Troubles

Any business or other organization will face a myriad of problems and struggles on an ongoing basis. That is a fact of life. It’s the responsibility of management to address and resolve these troubles as they arise. Over time, if enough issues are ignored by complacent or incompetent leaders and managers, trouble will begin to brew within the organization. Left unidentified or unresolved, these problems will worsen, oftentimes to a point of severe crisis. Denial and rationalization of the increasing troubles is a common response by business leaders; this is a recipe for disaster. Astute executives and managers, on the other hand, will proactively look for signs of trouble. I addressed this in an earlier blog post entitled, “Early-Warning Signs of a Troubled Company.” Once an honest, enterprise-wide appraisal of the nature and severity of the organization’s problems has been completed, it’s critical for the business leader to fully and accurately acknowledge the situation as it exists. Now is not the time to put your head in the sand and pretend that things are just fine.

Minimize the “Paralysis of Analysis” Period

After you’ve accepted the reality of your troubles, the tendency is to over-analyze the situation and over-complicate things, especially if they are severe. Wanting to develop the absolute perfect profit improvement plan or turnaround strategy, we can devote too much time thinking and stressing about the problems. This can paralyze us and seriously impede our ability to make timely decisions. Yes, we need to carefully assess the situation and develop detailed and prudent plans, but time can be of critical essence at this early stage. Consequently, there are several distinct steps to follow when you recognize your organization is in trouble. For example, take action early and don’t waste time; seek competent legal help; communicate with creditors and employees; and stop the cash bleeding. Each of these recommended actions are described in a Forensic Accounting Today blog post entitled, “Tips for the Troubled Company.”

Evaluate Your Options…and Pick One!

As you’re taking the initial steps suggested in the above paragraph, it’s important for you to identify the basic courses of action, or options, from which you can choose. You’ll probably want to take advantage of outside legal, financial, and other advisors to help you in this process, especially if your organization has reached the mid-to-late stage level of distress. What’s needed, fairly quickly, is a comprehensive, in-depth assessment of the business to ascertain its overall viability. This should provide you with the information needed to make an informed selection of one of two fundamental options: a) To commit yourself to resolving the troubles at hand via a prudent business plan and strategy, or b) to simply shut the business down. If you opt to do nothing, in effect you’re choosing to let the organization die, even if it does so over an extended period of time. The key, then, is to intelligently evaluate your options and make a definite choice.

Create and Commit to a New Business Plan

Assuming you’ve elected to commit yourself to turning your company around, a key next step is to develop a new business plan. Depending on how long it’s been since you’ve gone through this process, it may be wise to start fresh, taking a hard look at every aspect of the business. This will include analyzing such things as your products and services, customers and suppliers, processes and technology, management team and staff capabilities, financial history and forecasts, facilities, as well as the industry, market size, and competition. Your core values should be woven pervasively throughout the business plan, and specific goals and action plans should be included for every area of the organization. You, as the leader of the organization, should be passionately committed to achieving the plan and you should insist that all key executives and managers are as well.

Get Back in the Driver’s Seat and Insist on Accountability

Many organizations get into trouble because their leaders and other key personnel become complacent. When a company reaches a certain level of success, the tendency is for its management team to begin to relax. The subconscious thinking is that the business can run somewhat on autopilot. This may or may not be a factor in your organization’s current troubles. Regardless, what’s needed now is a definite all hands on board effort to turnaround your organization. You must insert yourself squarely in the driver’s seat of the company and take hold of the steering wheel with both hands. In addition, it’s imperative for you to keep your eyes wide open and be keenly focused on everything important to your organizational success. To help with this, you’ll want to develop key performance indicators and metrics for all areas of your business, assign managers over each one, and then monitor their performance and hold them accountable to desired levels of productivity. It’s also very important to take things one step further. You, the organization’s leader, should subject yourself to strict oversight by your board of directors or one or more trusted and capable persons. Allow them to regularly hold you accountable to the performance measures that are set for yourself in connection with your leadership role.

Running a business or other organization is a challenging ordeal, even when everything seems to be operating without major problems. When troubles become apparent, especially when their severity threatens the survival of the organization, the task can seem monumentally difficult. As outlined above, meeting your problems head on and embracing the commitment to work through them is the wise thing to do. There is no guarantee your efforts will yield all the positive results you seek, however, it’s certain that a worse outcome would stem from the alternative route of denial, rationalization, anger, fear, and paralysis.

What do you think? Have you been a leader, executive, or manager of a troubled organization, and if so, what worked and didn’t work in your situation?

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At certain times, your organization might need expertise or assistance, but lack the resources. Maybe you’re relocating or just starting up your business, and having trouble recruiting qualified staff. In these and many other situations, outsourcing all or part of your financial operations can make sense.

Some evidence suggests outsourcing is on the rise. According to the Everest Research Group, finance and accounting outsourcing grew in the corporate sector by 11 percent in 2009 and is predicted to grow by upwards of 20 percent in 2010. Small businesses and nonprofits are joining the trend as well. A 2008 study conducted by the Management Assistance Group (MAG), a nonprofit research and consulting firm in Washington DC, identified outsourcing as a cost-effective strategy for long-term savings and improvement of back office services.

The decision to outsource is a difficult one. In evaluating whether it might work for your entity, consider potential challenges and benefits.

Challenges: loss of control and building trust - When you deal with in-house personnel, you have more control over schedules, processes, and output. By outsourcing, you are relying on an outside contractor to provide key services to your organization. By establishing expectations at the start of the engagement, you can help eliminate surprises for both sides. In order for outsourcing to be successful, you need to be able to trust that your finances are being handled properly and the output is correct. The MAG report found that many leaders of small nonprofits worry outside providers won’t understand the needs of their organization. This can be alleviated if you research the qualifications of your provider and ask for references. Make sure the company you choose has experience and knowledge about your industry.

Benefits: capacity management, costing savings, and specialized expertise - Research the qualifications of your provider and ask for references. In most situations, outsourcing will save you money, because you are only paying for the accounting time that you need, and you have no benefits costs. Working with an outsourcing provider gives you access to people who are specialists. They most likely work with a broad base of clients similar to your organization and are able to draw on those experiences to help you make improvements. There is no single way to outsource. Each organization’s needs are different, and what works for one company might not work for another. Some prefer to have a blended scenario, with an in-house accounting team supplemented by outsourcing assistance, while others opt to outsource the entire department. And for some organizations, outsourcing may not be the best fit. Consider your circumstances, needs, and comfort level, then speak with potential service providers to determine the right solution.

By Carolyn Mollen, an outsourcing manager with LarsonAllen.

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“This is the third post in my Microsoft partnership, and it’s all about numbers. The topic is crafting your financial forecast to include in your pitch. Bill Reichert, my partner at Garage Technology Ventures, created an Excel model and wrote this blog post. There’s a lesson in this too: Get the best person for the job. His grasp of financial models and how to present them exceeds mine by two orders of magnitude.

The purpose of financial projections

When it comes to financial projections, there are two types of entrepreneurs: first, the “visionary entrepreneur” who considers financial projections silly, so she makes up numbers that look good to investors; second, the “intense entrepreneur” who develops an 10,000 cell spreadsheet that includes the number of licenses of Microsoft Office that he needs to buy in year five…”

Read the entire article

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• When, and from what sources, cash is expected to be received, and opportunities for accelerating cash receipts;
• When, and for what purposes, cash is expected to be spent, and opportunities for delaying and renegotiating expenditures;
• Advance recognition of expected cash shortfalls, and opportunities for obtaining new and/or renegotiated debt and equity financing.

A properly-prepared and maintained TWCF model offers relief in troubled-business situations because under the “knowledge is power” concept, the tool serves as a road-map for those responsible for navigating turbulent periods of cash shortages.

For more info: 13-Week Cash Flow Model Creates Clear Communication Channels

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Jeff was instrumental in the revamp and rebranding of the Forensic and Valuation Services Section (FVS Section) of the GSCPA where new, innovative ideas and programs were implemented. Examples include updating their mission statement and key goals, utilizing LinkedIn groups as a networking tool for their members, surveying section members, and hosting the annual GSCPA Fraud and Forensic Accounting Conference in which over 140 participants attended last year. He and three other fellow CFF Champions from Georgia were featured on a nationwide AICPA conference call held in June to discuss the role of the GSCPA’s FVS Section in assisting forensics practitioners and promoting the CFF credential. He also initiated and moderated an informal knowledge-sharing meeting at the recent AICPA National Forensic Accounting Conference.

In addition, the AICPA appointed Jeff as a member of the CFF Credential Committee for the 2011-12 volunteer service year. The purpose of this committee is to develop and maintain qualification requirements for credential applicants; to serve as technical advisor regarding the education offerings necessary to support the pathway for becoming a credential holder; to serve as technical advisor regarding the education offerings credential holders need to maintain and expand their expertise; and to develop and maintain initiatives to recruit and retain credential holders.

Source: Nov/Dec issue of the GSCPA ”Currrent Accounts” publication

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