Turnarounds: 2. Technology Triage

The first article in this series talked about the initial things to do in an accounting turnaround. This one is about the accounting system itself. The first step is triage: determining if the system is good to go, walking wounded or a dead man standing.

The brutal reality is that in a turnaround situation there may not be a budget available to upgrade the technology. In addition, the existing technology may be old. Here are a few ideas about how to make the best of what you have:

1. A better chart of accounts - If the staff is spending time analyzing accounts to separate different kinds of transactions, then create new accounts and define what kinds of transaction go in each.
2. One-size-fits-all financial statements - Talk to the managers about what they need. The sales manager needs different detail than the production manager, for example.
3. Inflexible Reporting - Older systems did not come with flexible report writers that let you create custom reports, but you can often retrofit a report writer to an older system, even if all it does is copy the contents of a file into a spreadsheet.
4. Version 1.0 - Check with the software developer whether you are on the current version. You might even be eligible for a free upgrade. If there is a user group, talk to them about what to do to bring the system up to date.

Giving management and other stakeholders (e.g. the bank) better, faster financial reporting goes a long way towards re-establishing trust in the accounting system. Your time spent on technology triage will be well spent.

Next installment: Finding a New System

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.