Tuesday, 30 October 2007


On page B5 of today's Toronto Globe and Mail newspaper is an announcement by UBS Investment Bank. It caught my eye because of how glum the three executives pictured appear. The announcement is for the promotions of Jim Estey, Rick Meslin and Alain Auclair, something you would think would make them smile.

The same paper has a clue as to why these men aren't happy:

GENEVA -- Swiss bank UBS AG, already writing down the value of some assets by $3.4-billion (U.S.), warned investors yesterday that its fourth-quarter results may be hit by a further downturn in the U.S. housing and mortgage markets.
but I would argue that now, more than ever, is the time to be showing some energy. Maybe a sunny smile conveys the wrong message, but they should at least be displaying steely resolve or iron determination.

The leader's attitude has everything to do with the success of the organization. This is just as true for your internal team as the external shareholders. If you can't see your way through to a better future, then start planning until you do. While business is all about being objective and hard headed, leading is all about inspiring and energizing the team. This may be particularly difficult if you are introverted or not a people person, but it is vital to your success. If you can't be the cheerleader for your team, find someone who can and work with them.

So, smile!

Thursday, 18 October 2007

What Would You Do With a Half Hour?

Re-energizing the accounting staff is a major part of re-energizing your system. Here's a question to ask them: "What would you do if your work took a half hour less each day?" After you weed through the joke answers, you'll find people who have great ideas about addressing those important but not necessarily urgent tasks that are dropping off the list because of a lack of time.

Now, take those good intentions and strategize with the staff member about how THEY are going to recover that time. Look for ways that you can leverage your existing technology to achieve them. Make sure the strategy is documented on the employee's goals for their next review.

Result: they will feel empowered, listened to and more energetic. Oh, and you just might end up with a better accounting system!

How To Reconcile

Have you seen this situation?

  1. Two accounts don't reconcile (e.g. intercompany accounts between two subsidiaries or the subledger and the GL control account)
  2. A spreadsheet is created
  3. Several adjustments are attempted
  4. The reconciler spends days on the problem but does not finish
  5. Result: A frustration wrapped in a disappointment inside an annoyance!
A company now has a software package called RecWizard to help you with reconciliations, but here is an approach that only requires a spreadsheet. The key is having a methodology. Rather than diving in with random adjustments, start eliminating sources of mistakes, so that you can narrow down the places to look. For example, let's say that the Accounts Receivable Aged Trial Balance (ATB) doesn't agree with the GL balance at October 31.

  1. Limit Time - check the balances at the end of previous months to figure out which month contains the error.
  2. Limit Sources - Accounts receivable consists of invoices, cash receipts and adjustments. Check the subtotals for the sources for the month so you can narrow down to one source. Check that the difference(s) you found in the sources totals to the amount of the discrepancy.
  3. Match ALL the transactions - Download all the detail transactions for the identified source and month into a spreadsheet and use a common field (e.g. your system's transaction number) to link between the GL transactions and the AR transactions. The total of your unmatched transactions should equal the total difference identified in step 2.
  4. Eliminate all the transactions that match and investigate the remaining transactions.
  5. Document what you have done so that others can follow the adjustments you make.
  6. Change procedures so that whatever caused the problem does not recurr.
Hint: whenever you are comparing two columns of numbers, take the time to get them sorted in the same order so that you can see the differences easily.

Reconciliations are time wasters and frustrating no matter how good your methodology. The best cure is always prevention.

Wednesday, 10 October 2007

Turn Arounds: 1. Stop the Bleeding

This is an occasional series about the accounting side of business turnarounds, where a company makes a serious effort to get back on its feet.

Two things that all turnarounds have in common: high stress and low money. Even if you are backed by someone with deep pockets, you have to prove your worth first.

Clearly the first step is like triage in a war hospital: determine what injuries need to be examined first. Start with the cash inflows and outflows. What cash needs to be paid immediately, what deferred and what cash can be collected? Ensure that the procedures are in place to update those lists daily.

The next priority for the accountant should be information: who needs what reports when? Ensure that operations (e.g. the warehouse, the factory, the sales locations etc.) are getting what they need, so that the business can continue to run. Check that the other stakeholders are getting what they need, particularly the funders such as the bank and active shareholders. Make an appointment to see each funder personally, particularly if you have been parachuted into the situation. Your goals are

  1. To establish or maintain a good relationship,
  2. To demonstrate that the situation is under control and
  3. To establish a line of communication so that the stakeholder knows when to expect updates on the situation.
Don't forget financial reporting, particularly to the government. Companies in trouble often have poor internal financial reporting. Set a target, such as having the monthly financial reports available in 5 business days after the month end. Setting and meeting targets will go along way to re-establishing trust in the financial statements.

Equally important is the accounting team. They will need to be re-energized. Accounting is often the unsung hero of the company: if you drop in late at night and there is one light on in the office, chances are it will be the accountant. To the extent that you are able, tell the accounting team on what the plan is. You want to fight rumors with facts. Create a calendar of all the tasks that need to happen in accounting each week, month, quarter and year and ensure that someone is responsible for each one. Look for chances for people to take on additional responsibilities. You may not be able to pay them more, but you can certainly recognize and praise their efforts. One failing many accountants have is the tendency to take too much on ourselves and burn out.

Next installment: Technology Triage.

Tuesday, 9 October 2007

Specialized vs. Multipurpose Software

"Overseeing and managing costs on the construction of a new facility with eight buildings is much too complex for traditional accounting software," said Jerry Fye, deputy director of finance for the Austin Children's Shelter, in a release.

Foundation Software, a developer of customized software for construction contractors, donated software, training and support to allow the Shelter to manage its construction project.

This raises the question of when to go with "traditional" or multipurpose software and when to go with a system designed for a specific purpose or industry.

If I were developing software for a specific industry and I wanted it to link into an accounting system, I would NOT try to reinvent the wheel. I would build the links to one or more packages that are popular with the companies in my target market. Rather than build yet another general ledger for medium sized businesses for example, I would bridge to Great Plains or Navision (Microsoft Dynamics GP or NAV). That way I get to stick with what I know (e.g. construction projects) and take advantage of someone else's success.

This goes for custom development as well. One of my clients was in the entertainment industry and wanted to sell tickets to customers online. Part of the project design was to integrate tightly to the accounting system so they would not have to re-key the transactions. They also decided that they did not want to have to do the programming to calculate all the taxes when the accounting system (Great Plains) already did such a good job of it. So they had their web site pass the information to the accounting system once the customer had placed the order. The accounting system then calculated taxes and shipping charges and passed the information back to the web site so the customer could enter the payment information. The result: a system where every piece does what it's good at and the headache of updating the tax tables is left to the experts: the accountants!