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Many CEOs of companies running in difficulty blame their accountants for not doing their job properly. Regardless of the blame game, it is a matter of fact that a CEO can use the doubts or worries of the performance of the accounting function in building the foundations for a brighter future for the company overall. We are sharing a story based on real events, to show you have we approached the situation.
The case
Thursday afternoon a friend suddenly calls. This friend owns a small business, and we know that he is one of the experts on the field. Afterall we are one of his company’s clients and we trust and respect him. So, we devote all of our attention and our time.
During the call he asks for help if we know any good accountant. Well, what happened, what is the matter, we kindly ask? He explains that he is not happy with his accountant because he makes a lot of mistakes. Well, that is interesting. We thought how the founder and CEO of a small company can know that the accountant makes errors. What kind of errors would that be? The only way to know is to ask, and so we did.
The response we got was rather direct. According to our friend, the errors were misestimations of payroll costs. They were due to lack of knowledge regarding payroll hours, something crucial, given that the company delivers services. So, we explained to him that we will investigate the matter and arranged to discuss again after 5 days. That was sufficient time to make our research on the matter and so we did.
What is the problem?
We followed a three-step approach, as we had to be effective in our communication and efficient with our time.
1. The first step was to start our research from the company’s history. When was the company founded? How much capital was invested? What was the company’s financial performance for the past 7 years? Going through the history of the company we had a thorough picture of the main points that we had to address and their evolution throughout time.
2. The second point is making industry analysis. We tried to find out which were the key players in the industry. Having identified the largest five competitors, we tried to make comparisons regarding their financial performance and establish some benchmarks. Throughout this process we acquainted ourselves with the different types of services offered by the industry. We managed to have a picture of the main evolutions in the industry.
3. The third step is to consolidate this knowledge into one simple, plain and condensed report that was the basis of our discussion with our friend.
Drawing the canvas
We explained a simple and thorough multi-step process that had the following scope:
Address the main problem – describe the problem along with the different roots. Explain the different approaches that are needed in solving this situation, while creating the necessary organizational culture in ensuring that the problem is to be refrained from happening again
Providing monthly historical analysis of the financial performance of the company. the performance will be analyzed both from a profitability point of view as well as from a balance sheet point of view.
Building the foundations for setting targets for the next year. These targets will be included in the budget for the coming year and are only part of the overall KPIs (key performance indicators) that will lead to the company to profitable course. The financial performance will be linked with an overall index of indicators reflecting both the quantitative as well as the qualitative performance of the company.
Solving the matter, while setting the path for a profitable future!
From that point onwards, the company is set to a path of operating and financial excellence. We use the power of numbers in creating the organizational culture of excellence and aligning all departments with the overall company’s objectives. Measuring the performance of the company and analyzing it on a monthly basis sets the pace for forwarding the company’s matters. Building the budgets, sets the management in discussing the medium term horizon of the company, along with the trends in industry.
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