Staffing Issues – Should They Go?

As business owners work to get more done with less, they depend on their staff to work harder for the benefit of the business. Annual performance reviews don’t always provide a complete window into the work that staff is doing or motivate improved performance. Sometimes it just feels like “things aren’t getting done right.” And, the longer staff has been with the company, the more difficult they are to replace with every passing year.

Bringing Value Through CFO Insights

There is a dichotomy when we reach the C-Suite. In some companies, there is a revolving door for the CFO, as they get blamed for lackluster company performance. In other companies, where the CFO has long served as a trusted advisor, dissatisfaction at long term declining performance is glossed over because of past successes. The decision to make a change at that level is never easy. What procedures are buried in the head of the CFO rather than being written down? What important issues will fall by the wayside because of the change?

• Business – Printing Company
• Location – Joliet, Illinois
• Sales – $37 million
• Ownership – Single owner

Initial Contact –

The business owner had recently hired a Chief Operating Officer to take over day to day operations of the company. It became apparent that the CFO, a long-time trusted advisor, was getting behind in her work and providing less information about how the company was running. The owner was interested in taking a smaller role, but needed more information to help guide the new COO. She reached out for advice in restructuring her accounting and finance function, looking for a new approach, more transparency, and better results.

Significant Findings and Recommendations:

Accounting and Finance

The company is in its second generation, and the owner had hired the CFO 15 years earlier, when she first became CEO. As the company grew, the CFO hired her own son as the Controller, even though he lacked a finance background. As a result, internal controls are lacking. The finance and accounting department operates behind a curtain of inside information. Reporting isn’t GAAP and was incomplete and slow in coming. The CFO brushed off complaints of inadequate reporting and was unwilling to establish a working relationship with the new COO.

Recommendations

• Restructure accounting and finance, replacing the CFO and weak Controller with a part time CFO and a strong operationally based Controller, saving significant money and putting emphasis on operational finance improvement. Evaluate remaining staff for skill level and retrain where possible. Replace staff where needed with people having deep experience with the company’s specific software. This shortens integration time, and brings new knowledge and expertise to the team.
• Immediately move the company to GAAP, accrual-based accounting. Establish regular month end account reviews, and simple spreadsheets to provide background for accrual entries. Review prepaids and accruals on a monthly basis.
• Segregate roles of the CFO, Controller and accounting staff to provide for better internal controls and oversight. Formalize those in a written policy so that lines of review are well established.
• Establish a formal monthly close process with definitive timelines and due dates to allow for proper reporting to CEO and Board on a timely basis. Reporting should include KPIs and dashboards to allow senior management to review progress of the company to best practices and better results.

Core Policies and Procedures

Like many entrepreneurial businesses, the company relies on the knowledge of its tenured staff to handle key processes on a consistent basis and pass those processes and procedures on to new employees. While this works for small companies, when companies grow to middle market size, the staff gets too large, and has too many layers to have a sustainable and consistent knowledge transfer.

Recommendations

• Establish job descriptions for staff in all departments, making sure that everyone is in the best position for their background and skill and is cross trained to assist when needed.
• Develop a formal credit and collections policy. This way, credit decisions can be processed by line staff rather than the CEO. Collections should be followed up regularly. Waiting till invoices are 30 days past due delays collections by an additional month, leading customers to wait till they get called before payment.
• Put in place a formal purchasing and payment policy, which will provide better internal controls. There is risk in having one person do all levels of the purchasing and payment process. Assigning different people the responsibility for entering new vendors, issuing purchase orders, and making payments secures the company’s cash, and assures that it’s paid out properly.
• Schedule regular company review meetings so that each department head can provide financial reports, sales reports, and reports on plant operations to the whole management team. This allows strategic decisions to be made by the whole team, and promotes accountability and ownership of the decisions that drive the company forward.

As companies grow, there is credit to be passed around to those who have helped build it. But nobody can sit on their laurels. The health of the company is based on the procedures and data that are provided by senior management, and especially the CFO. Within that office lies the primary operational data that is the result of the company’s efforts, and the financial information, KPIs and dashboards that provide answers to the ultimate question, “How are we doing?” Without a regular stream of accurate information, it’s difficult for line employees, managers and ultimately the company to move forward.

Just as any employee needs to contribute to the ongoing good of the company, the CFO and other C-Suite executives must contribute to the company on an ongoing basis. The age-old question, “what have you done for me today?” is just as relevant for senior management as the line employee. If they are not willing to pull their weight, it’s time to find someone else to do the job.