Setting Goals

How do you work with a volunteer board to develop the Mission, Vision and Values statements for a charity in one day? You engage Fay Booker, that's how.

Last year I was invited to become the Treasurer at Ewart Angus Homes, which runs two Toronto facilities for people with Alzheimer Disease, Ewart Angus Home and Cedarhurst. The homes are based on the work of Dr. John Tooth, who found that while there was no cure for Alzheimer Disease, the dementia could be slowed down significantly if the following principles are followed:

• Residents should live in a house which as far as possible resembles the home they have lived in all their lives.
• Food must be cooked in each house.
• Each resident must have a single bedroom with private bathroom to which he or she may bring personal possessions and memorabilia.
• Residents should be able as far as possible to carry on the routines to which they have been accustomed.
• Each house must have its own secure garden in which the residents may wander safely.
• Each house must have a wet-weather wandering loop as well as provision for garden wandering in good weather.
• The number of residents in each house should be kept as small as economically practicable.

Like many charities, we have significant challenges, such as securing sustainable funding and keeping our volunteers from burning out. We also face the health care risks borne by much larger organizations, such as clinics and hospitals. We decided it was time to take a Saturday and come to grips with where we are going and how we will get there. One of our members recommended Fay.

I have been in visioning exercises run by professional facilitators before. What made this one different was:

1. Fay has current, practical experience in our industry, and
2. She was not afraid to park issues in order to keep the group's focus.

Fay knew the environment in which we operate. She had a firm command of the risks and challenges we face, so she was able to ask pointed questions that went to the heart of our operations.

Other planning sessions I have been in have been bogged down by "wordsmithing", i.e. using the group's time to craft the exact wording. Fay focused on getting the common themes and ideas down on paper, then she had an associate put them together to form a working wording. We were thus able to push forward and leave the fine tuning for another day.

The result was that we actually finished a little early and all took away a plan to convert our good intentions into concrete actions. That reminds me, we have a Board meeting tomorrow and I have things to prepare . . .

Business Goals & Drivers

"What are your business goals? What drives your company?" These might seem to be odd questions for someone implementing your accounting software to ask, yet the answers to them will make a major difference to the success of your new system.

The most famous acronym in goal setting is "SMART":

• S - Specific
• M - Measurable
• A - Attainable
• R - Realistic
• T - Timebound

Let's focus on Measurable. If you know what your goals are, you can ensure that your accounting system is set up to measure them. For example, let's say that one of your goals is to get 50% of your sales from new customers and 50% from existing customers, but your accounting system just has a single account for sales. Measuring your progress towards this goal could be a tedious process of downloading all the year to date sales to a spreadsheet and then manually divided into "New" and "Existing". If you build your goal into your accounting system, you could have separate accounts for New Customer Sales and Existing Customer Sales and the invoices could be coded properly at the time of sale so that it becomes easy to monitor your success.

Business drivers are also an important part of system design. Simply put, they are the economic events which have a profound effect on your results, such as changing exchange rates or fluctuating commodity prices. When a client manager said to me, if our costs go over budget, it will be due to these four things, I was delighted, because I could make sure that separate accounts were created in each of those four areas so their effect could be isolated and analyzed.

What drives your business and how do you measure success?

Business Simulation in a Virtual World

For the past several months I have been participating in a business simulation in the world of virtual fashion. Unlike other simulations, I was struck by how "real world" this experience felt. Our goal was to make a splash in an industry already dominated by entrenched players. Did we succeed? Like the real world, the answer was unclear. In fact, measuring our success was a challenge all in itself. What we achieved:

• Exposure in virtual media (without having to buy space), including print, blog and TV coverage,
• Solid attendance to virtual fashion shows and events,
• An increasing blog readership,
• A tightly knit, energetic team that enjoyed working together.

Our team was made of volunteers geographically spread from Poland to Australia, with the majority being in the U.S.A. Times zones and cultural differences played their usual role.

Things that did not surprise me:

• Lack of communication was the biggest culprit for problems we faced,
• The number of times people did not perform what they said they would do,
• The number of times I didn't do what I said I would.

Things that did surprise me:

• Being able to see a representation of someone (their customizable avatar), really helped get to know them. The avatars took on a personality over time.
• Training worked well in the virtual world where all the chat can be saved and reviewed later and where the instructor is able to demonstrate to the students. While it was possible to have private chats on the side during instruction, these did not seem to interfere with learning.
  
• Meetings also worked well. In fact, if you were distracted for whatever reason, it was handy to be able to scroll back through the chat history to pick up the thread. While I can't explain it, virtual meetings kept my attention so much better than conference calls.
  
• Nobody gets drowned out when everyone is communicating in text. The system displays ALL contributions to the discussion.
• Most Important Lesson: the self confidence achieved by facing challenges in the virtual world spilled over into the real world. It's just like a flight simulator for a pilot.

Many companies are experimenting with work in a virtual world. Even with all its distractions and imperfections, I think it's the way to go.

10 Things You Should Try to Barter For Before Buying

In their blog post 10 Things You Should Try to Barter For Before Buying, Infomean recommends that you barter for your accounting software. It made the fourth position on their list. It sounds like a good idea, doesn't it? Software is so expensive, so any way you can reduce the price is good, right?

Unfortunately, you get what you pay for with accounting software and focusing on the price alone ignores the cost and the quality of the implementation. Typically implementation costs are higher than the software and if the system is poorly implemented, the total cost of ownership can be several times the original cost of the software, as you scramble to fix data or work around software issues.

One place I worked used an accounting system because it came free with their minicomputer. Someone else's friend set himself up as an accounting system vendor then gave his not-for-resale copy of the software to my client. In both cases, while the software was free, guess how good the support was. In the first case, minimal and in the second, non existent (because it was an unlicensed copy).

Your accounting system is the back bone of your business. Beware of freebies!

Lulu-LEMON?

The last thing a CEO wants to have is the reputation of choking on success:

"We're dealing with a class A problem - more sales than forecast," Robert Meers, chief executive officer at Vancouver-based Lululemon, told the company's first conference call with analysts late yesterday.

. . .

Mr. Meers referred to inventory snags at newer stores in New York and Chicago. But the troubles are even more widespread, John Currie, the company's chief financial officer, said in an interview later [as reported by the Toronto Globe and Mail].

The buzzword is "scalability", the ability for a system to expand quickly and easily as a company grows. The idea is that the same system that was effective and affordable when you were a small company can grow with you as you expand, so you never have to go through the pain of a conversion. In my experience, there are four dimensions to scalability:

1. Software - Obviously the choice of system is critical
2. Hardware - You need to be able to increase not just your head office database size, but also add local servers where required
3. Design - How you set up your departments, chart of accounts, inventory items, customers and vendors has a huge bearing on how easy it is to grow. Also consider the way you report on the key drivers of your business. Will your management reports still give you the information you need to make decisions if the company triples in size?
4. People and Processes - You should be able to expand the business with minimal growth of the administration. At the same time, you need to know at what point to add new staff. Having all of your procedures written down is extremely valuable when looking at adding satellite offices or expanding your operations. Also, make sure you minimize manual processes at month end so that growth does not slow down your reporting.
   

I know how unimportant the accounting system can seem when you are planning the big push into a foreign country, but a few hours spent on system design during the initial planning can reap HUGE rewards when those sales materialize. After all you don't want to be called a "Lemon".

Accounting Software: Why Switch?

In his blog, "The Poetry of Marketing", Jim Behrle asks that immortal question: why switch accounting software?

Should your company use a new accounting software program or should you simply just go with what you have? There are many advantages to using software as opposed to relying on your employees. First, here are some of the reasons why you need to have the latest accounting software in order to keep your business on track.

Jim lists some basic issues clearly aimed at small business owners, to which I would add:

Have you discussed your needs with a professional accountant experienced in systems implementation?

If the answer is "no", then I wouldn't necessarily switch accounting software. The first step is to determine what you need and the second is to see if your existing system will meet those needs.

What can a professional accountant do for you?

• Help you create a structure that emphasizes the business drivers that are important to you. For example, if you rely on customers or vendors in the United States, then changes in profit due to the USD exchange rate should be easily identified.
• Help you create financial reports that are easy to read and act upon.
• Train you and your staff so that the transactions be entered easily and the reports created quickly.
• If it turns out your system needs replacement, they can help you select the appropriate new one (or upgrade of the existing one).

But please don't wait until the end of the year or when the tax returns are due before taking action. The best time to change systems is the slowest time of year for your business.

Accounting gets a shot of adrenaline

Neil McIntyre had some nice things to say about this blog in his blog. Thanks, Neil! I tried to leave a comment on your blog, but kept getting a fatal error.

Thanks also for the note about Francine's blog. I guess the entry I saw when creating my blog roll looked satirical to me. I have updated mine.

M.E.S.S. Revisited

From my earlier post, you know that Manually Entered SpreadSheets ("M.E.S.S.") are my nemesis. Not only are they time consuming to create and maintain, but they are also difficult to audit. As anyone who has been through a Sarbanes-Oxley (Bill 198) review knows, spreadsheets represent a significant control risk because of how easily errors can be introduced without detection. For example:

At this point you should ensure that there are the appropriate backup procedures for the spreadsheet. Ideally you will have documentation to support the spreadsheet as well. Then on an annual or biannual basis spreadsheets should be revisited, comparisons run on the tested versions and the audit trail reviewed to ensure that it is still functioning as required. Needless to say, any significant changes made to the model should be carefully considered, documented and re-tested at the time the changes are made.

In short, spreadsheets need to be considered as a separate financial computer system and all the controls associated with a financial system need to be applied to the extent the spreadsheet is to be relied upon for financial reporting. All of a sudden your "simple" spreadsheet is expensive to audit!

Currently I am working on a project to eliminate financial spreadsheets for an international client. Significant areas include:

• Multilevel consolidations,
  
• Canadian & US GAAP adjustments, and
  
• Tax valuations.

Luckily, this project is part of a larger implementation so I was able to participate in the re-design of the chart of accounts. We have come up with a way to isolate the international subsidiaries' raw data from the different GAAP and tax adjustments, all within the same Microsoft Dynamics GP (Great Plains) general ledger. When the client wants a US GAAP statement, they just add the US GAAP adjustments to the raw data using a pre-coded report in the FRx report writer. No M.E.S.S.!

Getting the Message Across

[source]

They say that confession is good for the soul. I have a confession to make: I never understood the value of graphics in financial reporting. I never created graphs in Excel. I even thought that it was all just window dressing for the published financial statements or sales presentations.

I missed the point.

Accounting is all about communications and, as an accountant, it is my responsibility to be sure that the message is understood. It isn't enough to expect that the users will look at my tables of numbers and draw the same conclusions that I have.

I attended a communications session by Eagle's Flight a few years ago. The trainer made the point that people tend to put their message out there and take the attitude "Well, I've done my part." If you want effective communications, you have to take responsibility for both the sending and the receiving of the message. You have to take into account how your stakeholders take in messages. Some people are just confused by spreadsheets. Take sales statistics for example. Rather than just presenting a list of customer sales sorted by city and decreasing amount, you can now plot your customers on a map of Canada with larger circles for higher sales and create a powerful visual that has an immediate impact.

Sometimes, it's just a question of presentation. I watched a demonstration of an Excel add-in for Microsoft Dynamics GP (Great Plains) where the sales person showed how the sales table with last year comparison figures could be automatically uploaded from GP and summarized for viewing and querying. Then he turned it around and asked, "Which customers didn't buy from me this year?" He then showed a graph of all the customers where sales this year were less than last year. There were audible gasps in the audience because the impact of the graph was clear: send a salesperson out to each of these customers. I could be cynical here and say that the table and the graph said exactly the same thing, because they did. The difference was that the table was just statistics produced by accounting and the graph was a call to action.

So, if you are an accountant and you feel your message to management is not getting across, I highly recommend you try a graphical approach. You'll be glad you did.