CFO2Go Blog

One of our CFO’s, Dan Cote’, was at a recent Master Builder’s Association meeting and was speaking with one of the member contractors about how he just put the finishing touches on the house he built.  The contractor quietly laughed and said, “Never thought I’d see a CFO building houses.”

To which Dan smiled and replied back, “I can’t believe contractors try to manage their own accounting.”

The conversation was all in good fun, but it brings up a good point.  After Dan is done building his house, a certified professional needs to inspect his work, point out any mistakes he made, give advice on what he needs to do to fix any issues and may even lend a hand if Dan doesn’t know exactly how to do something.

When it comes to your business’ accounting, nobody MAKES you have your financials inspected before you continue running your business.  Just as a guy like Dan wouldn’t let friends and family come to a BBQ on his new deck without having it inspected, you should be sure to have a professional checking the numbers of your business on a regular basis to ensure the safety of your company and the employees working for you.

It’s always fun to take on pet projects that are a little outside of your day to day work, but be sure you have the pro’s checking your work and looking out for you at the end of the day.  We want to see your business succeed and it’s always better to be safe than sorry.

Selling the unexpected
Finding hidden assets could save your business

So often in a business we sell what we sell, meaning the product or service we produce or acquire. In business, we need to look beyond the traditional model of products and services in these tough times and look within our business to see what we may have missed that can bring value.

In a recent engagement with a client, it was obvious they were struggling financially and doubtful if they would make it through this recession. We did all the things you do in a business to survive — increased sales calls on specific customers, cut costs where appropriate and resized to support the current level of sales. We also deferred bonus and salary for the CEO and cut and froze staff salaries and benefits.

Once the usual list was exhausted, we still had more work to do. So we renegotiated our outstanding debt with our major vendors. Even with all this effort, if the economy does not pick up the company still has a substantial debt load that needs to be addressed in the future.

Next we started looking within the business for a different solution. We discovered that over the last 30 years the company had gathered valuable information including drawings and programs to produce tools for specific customers. These items were long since expensed and the value of the drawings was never captured on the balance sheet of the company.

We held a brainstorming session with the CEO and key staff to explore ways to leverage these assets. We realized that the drawings and programs were of value to vendors we had in our industry in Korea that provide tools to customers in foreign markets we do not serve.

Outcome: The company is now discussing the sale of the drawings and programs to Korean vendors. Leveraging these assets could potentially provide the needed capital to pay the extended debt.

Tip: Look around your company for those hidden assets – they could save your business.

We all believe in the importance of customer service but how many truly emphasize this with their employees. How many times have you called a company and received a lukewarm response or worse? If you haven’t done so recently, listen carefully to how your employees treat your customers and implement training as necessary. After all it is much less expensive to retain an existing customer than to sell a new one.

CFO Tip #4 – Accounts Receivable & Accounts Payable
Do your customers have net 90 terms on your Accounts Receivable?  Change it to Net 30.  Is it possible to negotiate your Accounts Payable from Net 30 to Net 90?  Pretty simple right…well you better beat your customers/vendors to the punch just in case they read this too.  This ties in with the “Cash is King” point that you’ll see in our next post.  If you’re the first to negotiate more favorable payment terms, you’ll also be the one holding the cash.

CFO Tip #3 – Watch Your Expenses
This sounds like a pretty simple piece of advice, but you’d be amazed at how many companies are trying to maintain a certain type of lifestyle in their business rather than focusing on ensuring their survival. (*cough* – banking industry)  Cut back on authorized signers on your accounts, take away employee credit cards and make them fill out expense reports, take a close look at your vendors and pay close attention to your expenses for the next 3 months.  It’s amazing what most businesses find…

Keep checking back for #2 & #1 next week, or subscribe to our RSS Feed!

I have been requesting that one of my clients “shop” his medical insurance with other carriers to see if there was an opportunity to save some premiums.  Each year, he “didn’t have time” and his agent was “taking care of him”.

When the policy was coming up for renewal late last year, I again suggested he shop.  This time he did and discovered he would save over $28,000 in premiums this year and provide better coverage for his employees.

Moral of the story: Keep your agent honest by checking out other options elsewhere. Don’t let them become lazy on your behalf. Also, take advantage of any programs offered through associations that you may belong to. These organizations can sometimes provide better coverage at lower rates due to the age group of the census.

CFO Tip #6 – Find Additional Revenue Opportunities
You’d be surprised at where you can find additional revenue opportunities within your company.  Take an inventory of ALL your company’s assets.  Hardware, software, employee talents, company data and (my personal favorite) intellectual property.  We had one client who manufactured a piece of equipment and was able to license the blueprints and IP to another company for a few million…cash.  Where else can your company find additional revenue?

CFO Tip #5 – Talk to Your Banker
A lot of companies tend to avoid their banker in rough financial times and usually this stems from a sort of embarrassment about your company’s position.  Get over it, times are rough for everyone.  You NEED to be talking to your banker so they know where you stand.  Chances are your banker has other clients that are doing worse and they’ll be the first ones that the bank cracks down on.  The more you talk to your banker, the better your relationship and the more likely he/she is to HELP your survive.

Keep checking back for #4 & #3 next week, or subscribe to our RSS Feed!

CFO Tip #8 – Look for Distributions
Sales forces are expensive.  Marketing isn’t free.  Are there other distribution channels that you can utilize where you may receive lower margins, but will severely decrease your overhead?  Remember our mantra, Cash is King.  Freeing up overhead means more money in the bank.  Your growth rate may slow down a bit, but your long-term outlook will be dramatically improved.  Don’t be afraid to make game-changing decisions if your books are solid and it changes your long-term outlook for the better.  This may be a move you should have made long ago, but were too comfortable to make the jump.

CFO Tip #7 – Evolve Your Business
The cool thing about an economic change is that it forces us to adapt.  Companies had the luxury of taking their time in switching from paper to radio, and again from radio to television.  But now the next change is to the internet and I see companies everywhere who are still relying on the Yellow Pages.  How’s that working out for you?  Don’t answer that question without considering where your company COULD be if you used some of the new financial, marketing and management tools available today.  The Yellow Pages may be helping you pay the bills, but your company could be seeing a 300% increase if you evolved your business a little.  It’s time to start thinking out of the box.

With all the “down economy” financial advising our principals have been doing lately, we decided to pull together a Top 10 list of things your company should be doing to weather the storm:

CFO Tip #10 – Keep Talking
The truly amazing thing about business is the people you meet and how these connections come around to benefit everyone.  Don’t hole up in your office, NOW is the time to be out networking.  Meet people in your area, make friends, lend a hand to someone…be a good member of your business community.  As Richard Branson put it [I’m paraphrasing here] “Business opportunities are a dime-a-dozen, you need to be smart enough to filter out the bad ones, but there are enough good ones to keep us all busy.”  Go meet people.  Talk about your business.  Talk about your successes and especially your challenges.  You never know when you’re talking to someone with the power to help you or the idea that will completely change your business for the better.  But DON’T fall into the deadly pitfall of networking just for your own personal benefit, people can smell this from a mile away and nobody will want to lend you a hand.  Be a good member of your networks, be interested in other people’s businesses, ask questions, offer free advice, meet people for coffee…the more people enjoy your company and respect your expertise, the better the chances that they’ll offer up their help if you need it.

CFO Tip #9 – Renegotiate Your Contracts
Many larger, well established companies will have no problem re-negotiating your contract from a short-term to a long-term, especially if they’re really enjoying your product/service.  We had a client who offered a service to a major company in the Seattle area.  They re-negotiated a 1-year contract to a 3-year contract AND worked in a 15% price increase.  Even if you don’t get the price increase, a 3-year contract ensures long-term revenues and may just be enough to ensure your company’s survival.  Be creative and don’t be afraid to ASK.  The answer is always “No” until you ask.

Keep checking back for #8 & #7 next week!