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We lead businesses during challenging times

By | Business Consulting, News

We have seen our world change overnight. Forced to embrace a new sense of normalcy, this is a time of uncertainty when businesses need deep experience and flexibility.

Warren Whitney serves clients in the areas of Strategy, Finance/Accounting, Human Resources, and Technology/Operations. We provide fractional leadership to successfully transition businesses during disruptive times.

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March 2020: Learning how to operate in our new business world

By | Business Consulting, News
During the COVID-19 global health crisis, we are forced to adapt to a new way of life. Warren Whitney is committed to serving our clients to guide them through these challenging times. Our firm’s business operations continue and our team has the technology to work effectively remotely. Our priority is to protect the health and safety of our employees, clients, and their families while maintaining a consistent level of service for our clients and businesses in need.
The team at Warren Whitney has compiled their thoughts on how to start thinking strategically to best navigate through these uncharted waters.
DEVELOP A MULTI-LAYERED FINANCIAL PLAN. You need to understand the financial implications and to act quickly. What happens if business reduction lasts for weeks? Or longer? Consider various “what-if” scenarios. Inquire about your business interruption insurance. Do you have an existing policy with dread disease coverage? Be sure to review the following:
1) Expenses – by line item and due date
2) Cash flow – How much cash do you have on hand? How much do you need?
3) Accounts receivable and collection efforts
4) Accounts payable — be in communication with your vendors regarding delays
BEWARE OF HACKERS AND CONSIDER CYBER SECURITY INSURANCE. With companies quickly moving to remote work environments, hackers are aggressively looking to exploit any flaws. Be diligent and don’t click on links from unknown sources. It is not too late to talk to your broker about getting insurance for cyber security or social engineering policies.
REFER TO YOUR COMPANY “EMERGENCY OR DISASTER RECOVERY PLANS”. This should include policies regarding:
1) Remote work.
2) Who is “essential personnel” to adequately keep the business running.
3) Paid time off and how it can be handled. Employees can file for unemployment
if their office is closed and they are not getting paid time off. They do not have
to be in a terminated status to file for unemployment.
4) Allowing employees to stay home if they are scared, at-risk or uncomfortable
at work.
REMOTE WORK IS DIFFERENT FROM OFFICE WORK. Employees need to set their own schedules and be able to deal with different distractions (e.g. kids, phone calls, etc.). Don’t underestimate the change and potential impact. Clearly communicate who employees should call with questions or issues, during and after work hours.
THINK CREATIVELY. In these uncertain times, you may need to be creative. This will mean different things for different companies. Consider unique ways you can make your business stronger.
BRING THE WORK YOU DO TO THE DIGITAL FRONTIER. How can your business adapt to offer services digitally? For example, on-line teaching classes, or offering webinars. The goal is to keep your business top of mind.
CONSIDER CLOUD ACCOUNTING SYSTEMS. To allow for accounting data to be easily accessible, consider cloud-based accounting systems. In cloud computing, users access software applications remotely though the Internet. Remember to ensure adequate security protection.
KEEP WORKING. Unless you have been asked not to work at all (e.g., some non-exempt positions), keep working, most likely from home. Utilize smart tools and practice healthy habits. Limit social engagement and leverage technology.
REMEMBER THE BASICS.  
1) Password protection and current anti-virus systems are critical for remote devices,
 even if they are owned by the employee and not controlled by the company.
2) Companies need to consider whether remote users will be able to print or store
any confidential information on their laptops or Home PCs. Tools are available that
can prevent downloading or printing of any information from personal devices.
EMBRACE SCREEN SHARING, AUDIO/VIDEO CONFERENCING, AND REMOTE ACCESS SOFTWARE. There are many software options to choose from; some are paid services, but several are free. Here are examples of systems that are commonly used:
-Zoom
-Microsoft Teams
-Skype
-Google Hangouts
-TeamViewer
-Join.me
-GoToMeeting
-Web Ex
-Slack
-VPN Connections
-UBER Conference
-Chrome Remote Desktop
-Windows Remote Desktop
If you have any questions or seek further clarifications on these items, please call us at 804.282.9566. Warren Whitney is available to evaluate your new operating environment. Our fractional assistance and project work can help you think through decisions. We can put together cash flow projections, manage HR issues, and devise a strategic plan. We Make Potential Happen.

 

 

Warren Whitney named 2020 Best Places to Work in Virginia

By | News

Warren Whitney was recently named as one of the 2020 Best Places to Work in Virginia. The annual list of the Best Places to Work in Virginia was created by Virginia Business Magazine and Best Companies Group.

This statewide survey and awards program is designed to identify, recognize and honor the best places of employment in Virginia, benefiting the state’s economy, workforce and businesses. The 2020 Best Places to Work in Virginia list is made up of 100 companies.

To be considered for participation, companies had to fulfill the following eligibility requirements:

– Be a for-profit, not-for-profit business or government entity;

– Be a publicly or privately held business;

– Have a facility in the state of Virginia;

– Have at least 15 employees working in the state of Virginia; and

– Be in business a minimum of 1 year.

Companies from across the state entered the two-part survey process to determine the Best Places to Work in Virginia. The first part consisted of evaluating each nominated company’s workplace policies, practices, philosophy, systems and demographics. This part of the process was worth approximately 25% of the total evaluation. The second part consisted of an employee survey to measure the employee experience. This part of the process was worth approximately 75% of the total evaluation. The combined scores determined the top companies and the final ranking. Best Companies Group managed the overall registration and survey process in Virginia and also analyzed the data and used their expertise to determine the final ranking.

The final rankings will be announced at an awards luncheon on January 31, 2020, at the Boar’s Head Inn in Charlottesville.

For more information on the Best Places to Work in Virginia program, visit www.BestPlacesToWorkVA.com.

December 2019: A CEO’s Guide to Secure Financing for your Growing Business

By | Business Consulting, Finance & Accounting, News

Author: Stephanie Ford

Good news/bad news: Your business is expanding and achieving projected growth. The rush of growth is exciting, but it comes with a new challenge – access to capital to maintain momentum. In any credit market, financing can be tricky to obtain. You might already know this first hand — have you applied for a commercial loan and been rejected? Feeling anxious and unsure how to move forward? Here are steps to best prepare for your next meeting with a commercial banker.

Before joining Warren Whitney, I spent 12 years as a commercial banker. The better prepared a business owner was for the request, the more likely they would receive financing.  Owners that came to me with a binder chock full of financial statements, detailed reports, and a strategic business plan were impressive. Entrepreneurs that provided few concrete materials and simply shared a stream of consciousness of their ideas gave me little to work with. How to position yourself to get funding for your business is critical in today’s credit markets. Preparing a request for financing should be taken seriously, and good preparation will yield better results. Here is a framework for thinking about your approach.

  1. Think hard about why you need to borrow. Specifically identify the purpose and develop a business case for the need to borrow and repayment.  The best way to do this is to prepare monthly cash flow projections of sources and uses of cash.  This prediction of needs and surplus will help to identify how much you need to borrow and how quickly your business can repay the loan.  The purpose of your borrowing need will also help to determine what type of loan is best for your company, such as a revolving line of credit for working capital needs or a term loan for permanent improvements to real estate or equipment purchases.
  2. The more complete a package of information you can provide to the bank, the better. If you have a business plan, share it with your banker.  In addition to 3 years of financial statements and tax returns, also include any other key reports that you use to run your business.  This may seem excessive, yet even routine reports such as an accounts receivable aging and accounts payable aging aid in giving the banker insight to your customer management and diversification.  Be sure to share any key metrics that are valid for your industry, such as inventory turns, job costing reports, days to market, customer returns, utilization rates, etc.  Providing organizational charts and competitive industry details is also valuable.
  3. Just as important as preparing your loan request package, give serious evaluation to the bank and banker you want to work with. Financial institutions vary widely in strength, size approach and focus.  Consider what is important to you: branch convenience, technology & services, commercial focus & approval process, legal lending limit, or ability for the bank to grow with you over time, etc.  Think about whether these needs are best met by working with a large national institution, a strong regional player, or a small community bank.  Once you have a sense of the type of institution that would best fit your business, research to determine the best local contact at that bank for you.  Most commercial banks have several bankers in one department with a manager above them. Finding the right person and personality for you to build a long-lasting relationship with can make all the difference in the growth of your business over time, particularly through the tough years.

The classic 5 C’s of Credit has been an excellent guide for many over the years on the borrowing process. If you can imagine yourself in the shoes of the banker, thinking through their concerns, it will help you prepare your request and business case.

Character

During the entire request process, the banker is also evaluating your character to try to determine if you would be a trustworthy borrower.  So be sure to have your personal finances in order as well.  Complete a detailed personal financial statement (any bank can provide you their form), know your credit score, and clear up any incorrect items with the credit bureaus. Provide background about your relevant experience and track record of profitability and repayment ability. This can also include any prior company experiences. Most of all, be forthcoming with both the good and any downside to your experience.  Bankers never like surprises.

Capacity

You should know that the bank will be examining your financial statements and then calculating certain financial ratios. Two of the most critical ratios are leverage and debt service coverage. Leverage is measured by debt/net worth, and the lower the better.  While the target varies per industry, a good guideline is under 2:1. Cash flow is a measure of income/debt payments or more specifically EBITDA/(prior year’s current maturities of long term debt + interest expense).  It is essential that this ratio exceeds 1.2:1.0, no matter your industry.  The higher the better as you want to show the bank you have sufficient cash flow to service your debt along with a cushion for good margin.

The key takeaway: it is good if you are able to calculate these in advance so that you can anticipate how favorably your numbers will be viewed in the eyes of the bank.

Capital

This refers to your net worth or equity value in the business which is determined by the value of your assets less the amount of your liabilities (how much you own minus how much you owe).   The higher your net worth, clearly the better.

Note: negative net worth is a red flag to the bank and a sign you may still be at the level of borrowing from friends and family or other non-traditional sources such as factoring receivables or venture funding.

Collateral

After the bank examines your cash flow repayment ability, they then look to collateral.  Consider your business assets and personal assets you have available to offer. This may include real estate, investments, accounts receivable, inventory, equipment, and even your personal residences.  How large and liquid are they in relation to the loan you are requesting?  The reality is, they should be larger than your loan request as banks discount the value of most assets and only lend 40%-80% against most assets.

Conditions

Since our economy has been strong for many years, this is a great time to position you and your company for a bank partner – one that will stand with you through the tougher times that may be ahead. However, if you have encountered any difficult spots in your business in the past few years, address them upfront.  Prepare to tell the story of your business and how you worked through the challenging times. Different banks may also have different tolerances for different industries.  This may be based on the performance of the industry overall, the bank’s experience in that industry or their amount of current exposure to that industry.  Ask about their preferences to find a better match and increase your success rate. Remember, no industry was untouched in the “great recession.”  If you were operating your company then, how you faced those challenging times (or any others since) will be insightful.

Be aware that in the technology-driven and cost-conscious banking world, many financiers have moved to automated underwriting and credit scoring for not only personal credit needs, but also for commercial lending in certain cases.  Generally speaking, the smaller a loan request it is (and the larger the bank), the more likely it is to be subject to automated underwriting.  And the larger the loan request and with more complex the companies and legal entities, then it is more likely to be underwritten by a banker or analyst who takes the time to know you and your company’s story.

Navigating financing strategy in today’s market can be complex.  To put your best foot forward, much preparation is needed.  Seek the guidance of an advisor(s) for input into your request and positioning.  Warren Whitney’s team of Fractional CFO’s can be a valuable resource in this process. To learn more, contact Stephanie Ford at sford@warrenwhitney.com or 804.282.9566.

November 2019: Board Governance – Plan for 2020

By | Board Development, Business Consulting, News

Contributor: Janet Marsh

Perhaps you are familiar with the quote often attributed to Benjamin Franklin, “If you fail to plan, you are planning to fail.” There are no truer words when dealing with high-stake initiatives, such as board governance.

Now is the time to develop your board’s Plan for 2020 to reach a higher level of effectiveness. Good governance is a direct reflection on the performance of your organization, and these Top 10 Tips provide ways to develop a high-performing board. Read More

October 2019: The New Overtime Rule

By | Business Consulting, Human Resources, News

Contributor: Kevin Grey, Warren Whitney’s Human Resource Director

WHAT BUSINESS OWNERS NEED TO KNOW

On September 24, 2019, the U.S. Department of Labor (DOL) announced a final rule increasing the earning threshold to exempt executive, administrative, and professional workers from the Fair Labor Standards Act (FLSA) minimum wage and overtime pay requirements.

The new rule, effective January 1, 2020, raises the federal overtime exemption threshold from $23,660 per year ($455 per week) to $35,568 per year ($684 per week). This law was last updated 15 years ago.

To better understand the new overtime law, Warren Whitney’s Human Resource Director, Kevin Grey, explains:

  • The meaning of the new federal overtime rule
  • Ways to be cost-effective
  • How to communicate the change to affected employees
  • Penalties for non-compliance

 1) The meaning of the new federal overtime rule

This law impacts employees currently classified as salary exempt that are making over $23,660 a year and under $35,568 a year. For these employees, you will be required to:

  • Reclassify the employee as non-exempt (if appropriate).
  • Compensate the employee at time-and-a-half as overtime pay for any hours worked in excess of 40 hours a week.

Employers should analyze their salary exempt workforce in consideration of the new threshold and communicate any changes to the affected employees before it takes effect on January 1st, 2020. This is a good time to update your position descriptions as you conduct your review.

There are additional provisions under the final rule to consider:

  • The duties requirements for these employees remains the same.
  • Non-discretionary bonuses and incentive payments (including commissions) may be used to satisfy up to 10% of the new salary level requirement.
  • The annual salary level for classified highly compensated employees is being raised from the current level of $100,000 per year to $107,432 per year.
  • The final rule does not include automatic increases to the threshold.

2) Ways to Be Cost-Effective and minimize the impact on your balance sheet

 i. Pay Overtime as Necessary

If your employees typically work 40 hours a week and occasionally or seasonally work overtime, it might be advantageous to reclassify them as non-exempt. In this scenario, you would budget for overtime instead of raising their yearly salaries above the threshold. Limit workers’ hours to 40 hours a week. If possible, redistribute workloads to ensure that non-exempt employees remain within a 40-hour workweek.

ii. Hire Temporary Workers

To limit your non-exempt employees to a 40-hour workweek, you may find the need for the occasional temporary worker to meet business demands. Hiring temporary workers can be more cost-effective than either raising salaries to be above the threshold or paying overtime.

iii. Raise Salaries above the Threshold

If you have employees consistently working more than 40 hours a week and these employees are already being compensated at or near the salary threshold, it might be worth considering raising salaries above the $35,568 threshold. However, keep in mind that the employees’ duties must pass the Duties Test required by the FLSA. In the event of a DOL audit, the job description must support the exemption. If it is not within your budget to increase salaries, you will have to reclassify the salary exempt positions to non-exempt.

3) Be sensitive when communicating the change

There are employees who tie professional esteem to being salary exempt. If you determine that paying on an hourly non-exempt basis is more cost-effective for your business, be sensitive to the affected employees when communicating the changes.  Even if there is no change to their income or duties, they may perceive their now non-exempt position to have less professional status.

In Virginia’s particularly tight labor market, effectively disseminating information to your workforce is important to ensure your employees don’t feel slighted as your business moves to ensure compliance with new regulations.

 4) DOL Penalties for non-compliance under the FLSA

Penalties and sanctions for non-compliance with the FLSA are severe and aren’t a risk worth taking. In addition to the back payment of lost wages to all affected employees, willful violators may be prosecuted criminally and fined up to $10,000. A second conviction of violating the FLSA can result in imprisonment. Employers with repeated violations may be subject to fines of $1,000 per incident.

All businesses must comply with FLSA rules to not only avoid penalties and/or sanctions but to also protect their most important investment; their employees. Warren Whitney’s Human Resource professionals have hands-on experience helping organizations with HR compliance. If you have questions about the new overtime rule or other compliance-related issues, please contact Kevin Grey at 804.282.9566 or kgrey@warrenwhitney.com.

Learn more about Kevin Grey www.warrenwhitney.com/kevin-grey/

September 2019: Fraud — Threat & Reality in your Business

By | Finance & Accounting, News

Contributor: Richard Kannan, Warren Whitney Finance & Accounting Director

The larger the company, the bigger the risk of fraud, right? Well, not necessarily. On a relative basis, smaller organizations may be at greater risk. The average fraud loss for companies with less than 100 Employees is $200,000, versus larger businesses where the average fraud loss is $104,0001. Fraud losses occur when there are NOT proper controls put in place. When small to medium-sized businesses have a leaner accounting team or one person with too much authority, they become vulnerable. The fact is that inadequate controls create opportunities for fraudulent activities.

American criminologist, Donald Cressey, developed the “Fraud Triangle” theory which explains the factors that can lead to fraud and unethical behavior as:

  • Opportunity (i.e. Lack of internal controls)
  • Pressure (i.e. Personal finances in jeopardy)
  • Rationalization (Reasoning decreases with #1 & #2)

The combination of these three factors can turn individuals you wouldn’t suspect into a fraudster. Fortunately, as business leaders, you can take control and identify the points of weakness to deter fraudulent activity. The critical element is identifying the vulnerable areas to address immediately by establishing the proper protocols.

INTERNAL CONTROLS

Half (50%) of all fraud cases in small businesses occur due to a lack of internal controls1. The below list of real-life scenarios exemplifies how easily it happens and how it can be prevented.

REAL LIFE SCENARIOS HIGHLIGHT VULNERABILITIES IN THE SYSTEM

Scenario #1: A checking account number was used to print checks made out to the fraudster. Checks were written to an account and all available funds were transferred out as soon as funds were available. The checks continued to be written until the bank caught on and stopped payment immediately. The fraudster disappeared with the money.

Lesson Learned: Bank controls would have prevented this from happening. Banks offer “Positive Pay” protocols which will not allow checks to clear unless the company registers the check number and amount. This simple and inexpensive control will prevent checks from being hijacked.

Scenario #2: A bookkeeper wrote checks to herself using familiar amounts to the owner (i.e. monthly truck payments, rent, etc.). She shared the account reconciliation with the owner every month. The owner, who trusted his bookkeeper, conducted only a cursory review.

Lesson Learned: A trusted employee scammed her employer in a clever way. This is where business owners need a clearly defined approach to reviewing checking accounts, reconciliation, and spending.

Scenario #3: A vendor’s email account was hacked. The hacker sent an email from the hacked account to the vendor’s client requesting a large payment along with new wiring instructions. The client did not question the email and the wire was sent to the fraudsters account and the money was lost.

Lesson Learned: Always confirm payment method changes. This may require a face to face discussion, or a phone call to a known member at the organization to confirm the changes.

Scenario #4: A CFO stole $500K over 2 ½ years by sending cash from the entity’s operating account to a PayPal account he controlled. The company had no reason to dispute PayPal since the transactions were on the bank statement. The CFO controlled the bank reconciliations and nobody reviewed them or the bank statements. The fraud survived two annual audits (proving you can’t expect auditors to identify fraud). The scheme was caught when the numbers got too big to hide.

Lesson Learned: Always review your company’s bank reconciliations. Your controller should have a clear listing of all the cash movement tools.

Scenario #5: A bookkeeper “borrowed” money from a small company by writing checks to herself instead of paying the payroll taxes. Because the bank statements were not being reviewed, nobody realized that the payroll taxes were not being paid. The bookkeeper was caught when the IRS sent notices for unpaid taxes.

Lesson Learned: A defined review/checklist of the bank reconciliations is critical. Be sure to include aged reconciliation items, names of payees, etc.

Scenario #6: A bookkeeper was making her car payments with a company debit card. She would open the mail and scan the bank statement. She then used PDF editing software to change the description from her bank account to a company vendor. She then presented the doctored bank statement to the owner for approval. No one could tell the statements had been altered.

Lesson Learned: Always print out the company bank statements and/or look up the balances online to confirm that the document is legitimate.

The overall lesson learned in these scenarios is not to give one-person complete authority of your banking transactions – establish procedures for checks and balances.

These simple, smart changes can enhance the leanest team’s internal controls:

  1. Implement “Positive Pay” with your bank accounts so that all checks are registered by check number and amount with the bank. Checks for varied amounts or non-valid check numbers will not clear.
  2. Review your checking account reconciliations – use a formal checklist to make sure you have the appropriate levels of review.
  3. Do not allow your bookkeeper to control credit or debit cards, regardless of how much you trust them.
  4. Add wire controls with the bank – all wires/ACH require two people – one to initiate and one to approve.
  5. Implement individual access passwords for each person for bank, ledger, investment account, credit cards, and PayPal.
  6. Never change payment information without directly confirming the change with the authorized person.

Warren Whitney’s team of Fractional CFOs and Controllers can assist your business to enhance your internal control environment. We have experience in helping businesses with limited accounting staff and strategically align with your goals and objectives.

To learn more about how to mitigate fraud in your business, contact Richard Kannan at rkannan@warrenwhitney.com or 804.282.9566

[1] Association of Certified Fraud Examiners, 2018.

August 2019: Preparing for the Next Gen of Nonprofit CEOs

By | News, Nonprofit, Strategy

Contributor: Katherine Whitney, Warren Whitney Co-Founder and Director

Preparing for the Next Gen of Nonprofit CEOs

As organizations change, we will see many opportunities for new nonprofit CEOs. If you are part of the leadership of a nonprofit, there are steps you should take. Alternatively, if you are outside of the field and want your career path to lead to becoming a nonprofit CEO / Executive Director, you also should be preparing.

Nonprofit CEO Succession Planning

Every nonprofit should have a succession plan and many do. But when it comes time to select a new CEO, you may find there are some important steps left to complete.

  1. Form a search committee. It is a board’s responsibility to select the next CEO, but who should be on the search committee? We recommend at least one person who knows the organization well and at least one person who is newer to the Board and who has several years left in his/her term. A best practice is to include the expected next board chair, perhaps as the committee chair.
  2. Be clear about the search committee’s role. Begin with what’s needed for the role and attributes. The committee and the board should be clear about whether the search committee’s job is to present one candidate to the board for approval or to present the top two or three final candidates for the board to debate the final selection. We recommend the first approach.
  3. Assess the position and direction of the organization to determine the skills and experience needed in the next CEO. This analysis is vital to help candidates self-assess whether this is the right opportunity for them, and it will serve as a guide for the search committee to evaluate final candidates. Avoid letting the pendulum swing to the far side of the skills and attributes of the current CEO. It is understandable to want attributes that the current CEO lacks, but a big swing is often too much of a shift for staff and boards to handle.
  4. Check the market to determine competitive compensation. Long-term CEOs may have allowed the board to slip out of the competitive range in compensation. It’s best to negotiate compensation with a good understanding of what’s reasonable and what the organization is able to pay.

These steps will help you prepare to move forward on your own or with the help of a search consultant.

Nonprofit Professional Career Development

Do you want to be a nonprofit CEO? That question isn’t just a lead into an article on “how to become…” it’s the first question you should ask yourself after you assume that, to have a career successful for you, that should be your goal. There are many important roles in nonprofits, and if becoming a nonprofit CEO is your dream, make sure you’re ready to handle responsibilities such as:

  • Raising money. With very few exceptions, a nonprofit CEO’s top responsibility is to raise money for the organization. The CEO is the outward face, telling the story to increase awareness, building relationships, and ultimately making the “ask.” If that doesn’t sound like fun, you should rethink the path.
  • Analyzing your financial position. While you may be able to get some help here from your Finance Director/CFO or from board members, in the end, you have to understand the financial drivers and the impact operating decisions have on your financial position.
  • Managing people. Most rewarding, you have the opportunity to help others develop in their careers and to carry out your worthwhile mission. Along the way, however, you’ll have to address performance problems and possibly terminate employees for any of a number of reasons.

If you can check the “yes, I want to do that” box on those areas, read on for some suggestions.

  1. Round out your experience. If you are in the program or operations side of your organization, find a way to get involved in Development/Fundraising. Learn more about your organization’s development goals, and find ways to support them. Help with grant writing and grant management; participate in calls; take seminars to learn how fundraising works. If you are on the development side, look for ways to get experience in managing people. Many smaller nonprofits have only one or two development professionals; as a CEO, it’s likely that you’ll manage a team. Build some type of proof that you’ll be able to lead a team.
  2. Learn how to analyze financial positions. Take some classes. Become responsible for creating and managing part of your organization’s budget. Review your organization’s financial statements to make sure you understand them.
  3. Build your network. There’s often so much to do between job responsibilities and family that networking gets pushed aside. When you’re known in the community, you’ll find that interesting opportunities to advance your career come your way more often.
  4. Make sure your personal financial house is in order. Your credit history matters. If you make the list of finalists for a CEO position, it’s likely that you’ll have a background and credit checks run. If you can’t manage your personal finances, the hiring committee should wonder whether you can manage the organization’s.

Finally, when you find yourself as a candidate for a CEO job, make sure you do your homework and ask thoughtful questions. It will impress the search committee, and it may keep you from jumping at an opportunity that really is too good to be true. Every job opening and job search should be a two-way process. As a candidate, you are “selling” your capabilities, and you are also committing the next stage in your career to the new organization, so be sure you are investing wisely.

To learn more about board development, please contact Katherine Whitney at 804.282.9566 or kwhitney@warrenwhitney.com .

July 2019: Financial Management for the Non-Financial Leader

By | Finance & Accounting, News

Contributor: Gene Gregory, Warren Whitney Finance & Accounting Director

Financial Management for the Non-Financial Leader

Whether you have just bought the company or have risen through the ranks, as the CEO, President, or Executive Director, you are responsible for overseeing operations, ensuring financial sustainability, and managing the organization.

If your career path has been in operations, business development or fundraising, you may feel your financial acumen is insufficient.  With this lack of experience, you question how can you be confident in your role and responsibility for financial sustainability.

This is not an unusual scenario.  The non-financial leader often carries this burden and can feel inadequately trained.  If this is what you face, below are recommendations to follow for your organization’s financial health.

  1. Internal Controls

Spend some time to make sure you understand how financial transactions flow through your organization.  Look for any concentration of duties or conflicts of interest that create risk.  Make sure there are clear lines of authority for all financial affairs; consider both the physical and virtual security of the organization’s assets. Remember assets may be “virtual”.

KEY POINT

“Cash is King”!  Embezzlement of cash is the most frequent means of misappropriation of an organization’s assets.  A simple monthly review of the bank statement might identify issues and, at a minimum, puts your staff on notice that you are paying attention to the details.

  1. Financial Reporting

Financial reports summarize your organization’s financial activities and position.  Your accounting department should produce consistent and accurate financial statements.   At a minimum, receive and review:

  • The monthly income statement that measures revenue and expenses.
  • The balance sheet that highlights assets owned, debts owed, and net equity.
  • The cash flow statement that shows how cash is being earned and used.

If your organization has significant accounts receivable, large capital expenses (building, equipment, etc.), or debt service requirements, the cash flow statement may tell a different story from the income statement.

Reviewing monthly and YTD income and cash flow statements will explain how the organization is progressing (or regressing).  Comparative statements showing current results and positions compared to past results and positions will identify trends.  Comparison to budgeted activities (see #3 below) will show how closely you are following your plan.  Ideally, your staff and system(s) can report activity at the “business unit” level that is important to your organization (i.e., division, location, department, program).

Make sure your reports are relevant to your needs.  External reporting likely requires financial statements prepared in accordance with the Generally Accepted Accounting Principles (GAAP); however, you may need a different view or format to make good business decisions.

  1. Budgets

Budgets are essential to good financial management because they project future revenue and spending.  Your budget should be your roadmap to operations.  Even if your operational managers lack budgeting experience, have them participate in the process.

Without a budget, your organization will “fly blind.”  The budget outlines your operational plan in terms of revenues and expenses.  How do your operations generate revenue? What is the expense structure of your organization?  Asking yourself these questions and reviewing the company’s past expenditures will help guide the process (Note- Units of sales or services usually have predictable revenue values).

As mentioned above, reporting financial results versus the budget shows how you are doing against your planned operation.  This comparison may indicate a need for greater skill in planning and budgeting or for a change in operations.

KEY POINT

  • Admit what you don’t know and seek help. Learn how to relate basic financial statements to your operation, mission, and financial health.
  • Make sure your leadership team and program managers can relate basic financial statements to the operation, mission, and financial health.
  • Your accounting staff must understand how operations work and why they are relevant.
  1. Outside Resources

Learn from the advisors who support your organization.

  • Your banker can share observations about your financial position. Banks offer many financial services, and you can learn a lot by investigating those services (even if you don’t adopt them).
  • Your audit firm will have a good financial perspective because they work with other similar organizations. While the practices of their other clients are confidential, they will have general observations they can share.  Many CPA firms offer newsletters and seminars on financial topics that impact industry, businesses, and operations.
  • Your payroll service provider (if you use one) is a good source for employment regulations.
  • Your benefits broker understands market trends for health, retirement, and other benefits. They may also be a resource for employment laws and regulations.
  • Your property, casualty, and liability insurance broker can provide a profile of organizational risk and suggest ways to mitigate it.
  • Investment managers have a perspective on the economic outlook that may be useful in organizational planning.
  • Peers from other organizations can provide their point of view and you may find shared solutions to issues.
  • Industry and community organizations may provide “capacity building” assistance for smaller organizations.
  • Professional associations offer industry learning opportunities.
  • Many, many more resources exist. Think about opportunities within your community.

Warren Whitney

Many of our clients have found that our accounting and finance professional offer an efficient and effective solution to financial management.  Our professionals work on an ongoing, part-time, fractional basis to provide a cost-effective way to supplement your finance function and build for the future. To learn more about financial management, please contact Gene Gregory at 804.977.6693 or ggregory@warrenwhitney.com