Red to Black (eBook)

Secrets of a Savvy Cfo to Run Your Business Successfully

Larry M. Cooper (Autor)

eBook Download: EPUB

2019 | 1. Auflage
200 Seiten
10-10-10 Publishing (Verlag)
978-1-77277-292-0 (ISBN)

Infos

The book RedtoBlack outlines all the typical fundamental areas and subjects handled in a finance department. This is especially important for non-financial executives who may not have the background in finance and have to rely extensively on their CFO. RedtoBlack will quickly accelerate your learning curve about what is important in a finance department, what questions to ask to get the most out of that department and how to best deploy the finance team to be value adders to your business. In this book the business owner reader gets the benefit of being introduced to the many processes and sound financial fundamentals that represent the disciplined approach for operating a business that Larry as a CFO has implemented in many businesses and those that have been important to the good management of the businesses. This book would absolutely be of assistance to any Owner/Manager. There are many things taught for an Owner/Manager that are best practices. It is a great reference source to any Owner/Manager.

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Getting Started

This book is written on the premise that you have created some type of legal entity that will be the reporting vehicle for the business. This could be an incorporated company or a partnership, or some other legal structure. Please get proper legal and taxation advice for what is the best structure for your business. Don’t skimp on this advice. (More on professional advisors, your team, later in the book.)

Regardless of the legal structure of your company, or any company, regardless of size, you need to keep a set of books. We have all heard this phrase, but what does it really mean? In simple terms, it is a set of records organized according to the standards that accountants learn, so that any knowledgeable financial person, upon seeing the financial records, knows what these records say.

There are a few fundamental aspects that are common to all sets of books:

• Reporting currency

• Account structure

• Accounting calendar

Reporting Currency: the currency in which the business conducts most of its transactions. As an example, a Canadian business operating in Canada, with mainly Canadian customers, will likely charge those customers in $CDN. The same business may or may not buy its products or services from suppliers in Canada or out of Canada, yet it would start with $CDN in its business and, as necessary, either pay in $CDN or buy other currencies (e.g., $US) using its $CDN. Therefore, we say its reporting currency is $CDN.

Account Structure: the list of accounts in your financial reporting system. There are typically both balance sheet and income statement accounts that, when taken together, form the basis for the financial statements. Every business will have a chart of accounts, where there are many accounts that are common, and some that are unique to the business or industry. This account structure will form the basis for preparing financial statements, so it is very important to do proper planning as to what you want reported monthly, to decide on these accounts at the beginning.

Accounting Calendar: the normal period of time that is reported on. In most cases, it is the calendar month. However, in the retail business, each week is seen as the same, so there are 52 reporting periods that are summarized into 13 financial reporting periods. This is done for comparable reporting at any time of the year.

The decision on these areas needs to be made prior to selecting your accounting software, to ensure that the software will fulfill your reporting requirements. In other words, if you wanted to do retail reporting, is the software able to handle 13 financial reporting periods without customization? If customization were required, this likely indicates that your choice of software is not the best match for your business, since you can probably find software that does not require customization.

It should be clear that the decision on setting up the books is not just an accounting exercise. You either need an experienced financial professional who knows and understands your business, or someone in senior management should be participating in the initial decision making to create the chart of accounts. I have seen numerous instances where the financial statements are produced, and someone in senior management wants to know about a certain expense in much greater detail than is being recorded in the chart of accounts. This oversight creates a large amount of work to go back to the base transactions and re-categorize them into this more detailed reporting. That is why it is wise to get senior management involved in the initial setup, to avoid redoing this type of work.

Software

It should be obvious that in today’s times, any accounting department records will be using some type of accounting software. There is virtually no limit to the number of different software packages. Accordingly, it becomes extremely difficult to decide which accounting software will best serve the needs of your business. The most important recommendation I can give to you is that you recognize that the most important part of this decision must be done with thorough investigation and planning. This likely means consulting with colleagues, accounting advisors, and any other person you respect who may provide you with some useful information about the accounting software that they have experience with.

No accounting software is implemented effectively without a thorough plan. I am sure you have heard the phrase, measure twice, saw once. This is exactly the best piece of advice when choosing accounting software. Many businesses rush the implementation of accounting software, only to be disappointed by the performance once they’re using it. Therefore, take heed to put together a plan with responsibilities and timelines that are realistic.

You will likely have many software experts present to you that their software solves all your business needs. You need some set of criteria to decide in an objective manner which software will best meet your needs. The best first step that I can recommend to you is to prepare a list of all the aspects of the accounting software that you want delivered for your business. When you are then considering different software packages, you would actually create a score sheet for each individual software, compared to your predetermined list. In this way, you will maintain your objectivity and be able to easily eliminate those software packages that clearly are insufficient for your business. This will also allow you to maintain your objectivity and not be swayed by effective sales people.

One area that I have experienced, which is probably the most effective to get you the best answer for your business, is talking to other users. The software company that you select will likely introduce you to some of their clients. This is a good start. Of course, there is an inherent bias. These companies, and individuals working in them, have been handpicked to talk with you, because they, in fact, are using that company’s software, and have been happy with it. That doesn’t mean that it is right for your business. Well before you start the process of investigating software packages, I encourage you to join some sort of user group, where you can meet like-minded people who are making the same evaluations, on an objective basis, with no bias. In this way, you will become educated well before you start meeting the software companies, and thus be in a better position ask the right questions.

Just to give you an indication of the wide variety of accounting software packages available, here is a brief list:

• QuickBooks

• Sage

• FreshBooks

• Xero

• Zoho

• Interact

• Wave

• SAP

• Dynamics Great Plains

• Blackbaud

My intent of listing this sample size of accounting software is to better enlighten you on the extensive amount of options. That is why a project to select accounting software is complicated. There are truly an extensive number of choices. It’s for this reason that you must be well organized before you start the exercise; otherwise, you will likely be unduly influenced by good software salesmen. Not to put them down, but their job is to sell you their company software, and they will tell a very compelling story. Your job is to sift through this large quantity of information, and then boil it down to what will do the best for your company.

Staffing

In Chapter 9, I will provide an extensive discussion about the various types of positions in any finance department. At this early juncture in the book, I want to make you aware of the fundamental type of work that is required to be done by any finance department.

Every finance department, no matter what size, will have somebody in charge. For simplicity, I will call the top position in any finance department, Chief Financial Officer (CFO). The CFO is the most experienced and capable financial professional in your finance department. They are typically a certified professional accountant (CPA) for larger companies, but at a minimum, regardless of the size of your company, they have the requisite knowledge and experience of running the financial affairs of your company. Their key role is to provide financial leadership in your company, and supervise whatever staff are in the finance department.

The size of your company will be one of the key determinants of the number of staff in your finance department, and this will also determine how many people are doing what is referred to as the transaction processing. In simple terms, transaction processing means the actual recording of each transaction your business does into the accounting records.

There are typically two fundamental types of transactions: customers paying you, and you paying your suppliers, to whom you are a customer. Customers, who are paying you, are paying for the invoices that you have sent to them, for the product and/or service that was billed to them (accounts receivable). Payments that you make to your supplier are for goods and/or services that the supplier provided to you (accounts payable).

The staff who perform the work on accounts receivable and accounts payable are usually the most junior positions. Even in today’s sophisticated state of computerization, the...

Produkt-Details

• Erscheint lt. Verlag: 28.5.2019
• Vorwort: Raymond Aaron
• Sprache: englisch
• Themenwelt: Wirtschaft ► Betriebswirtschaft / Management ► Finanzierung
• ISBN-10: 1-77277-292-5 / 1772772925
• ISBN-13: 978-1-77277-292-0 / 9781772772920