Welcome!
We're heading into the last
quarter of the year - budget time, for those on a
12/31 fiscal calendar. Who is the budget guru in
your
organization? If you're counting on your staff
accountant to take the initiative in that or other
planning tasks, you may be disappointed. Read
on...
Best regards,
Bradlee T. Howe
Financial Managers Trust
|
How Many Beans Should A
Beancounter Count?
I thought that I had hired the wrong
person.
Twenty years ago, having been a "single shingle"
financial consultant to smaller companies for a couple
of years, I decided to hire
someone to help me crunch the numbers for my
clients.
I wanted someone who was well-grounded in debits
and credits, detail-oriented, meticulous, able to sit in
one place and work
tirelessly with data. The perfect
accountant.
But I also wanted a person who could initiate contact
on-site with my clients, who could deal with the
ambiguity of long-range
budgets, who would happily help clients collect
delinquent receivables, and who could persuade the
client's employees to embrace
the procedural changes that we recommended.
The perfect finance manager.
The combination doesn't exist - at least not at an
entry level.
It turned out that I had hired a financial person.
Jeanne was great with the CEOs and the rest of the
management teams, but she
wasn't much help to the companies' staff
accountants - she had only an MBA's overview of
accounting. She had never run a set of
accounting books.
So we focused Jeanne's energies on clients with
financial issues. She dealt very effectively
with
the balance sheet - collecting stretched-out
accounts receivable,
pacifying long-term creditors, restructuring bank
financing - and managing
budgets. She solved financial problems.
We soon added Chuck to our staff for the clients with
accounting issues - confusion
between cash- and
accrual-basis accounting, inability to allocate
revenues and expenses to the appropriate accounts,
unreconciled account
balances - the stuff that affects the
income
statement. Chuck was the consummate
beancounter - he solved accounting
problems.
For most smaller organizations, the first challenge in
the finance and accounting area is to get timely and
accurate numbers.
You want. . .
- To distinguish between revenues,
which are booked on the income statement when
they are earned, and cash
receipts, which are recorded on the balance
sheet as they are received.
- To record revenues and expenses in the right
month. Your September rent payment should
show up on the September
income statement, whether you paid it on August
31st or September 2nd.
- To match your revenues with the related
expenses. When you record a sale of a product
or service in September, you
should record as well all of the expenses associated
with that sale, including sales commissions that may
not be disbursed until the
customer pays you next month.
- To accrue for revenues and expenses not yet
invoiced. Got a vendor who's slow in billing
you? Estimate the cost
without the invoice (a good Purchase Order system
will reflect the agreed-on price) and plug it in as an
accrual for the month that you
incurred the expense.
- To be consistent in classifying revenues and
expenses. When the bill for repairing the copier
comes in, don't enter it in
"Office Expense" this quarter and in "Repair and
Maintenance" next.
These are some of the things that a good staff
accountant learns in Accounting 101 and then
practices for the rest of his/her career.
Jeanne had a theoretical knowledge of this, but
Chuck was the person who had actually implemented
the procedures and was
rigorous in maintaining them. Yes, he was an
historian, and he lacked her flexibility in dealing with
the ambiguities of budgeting and
forecasting, but when you looked at his monthly
reports, you didn't need to interpolate or make
allowance for omissions.
His
work was the basic building block; her efforts created
the framework for the financial plan.
Don't hire the wrong person. Despite the advent
of excellent accounting software, a competent
accountant still needs to know
debits and credits, journal entries, the reconciliation
process, and have a good feel for numbers.
We test our clients' accounting candidates for these
qualifications, and you can too: simply
reply to
this email with your request, and we'll forward to
you a complimentary copy of "Financial Managers' 28
Question Accounting
Quiz."
(And unlike the SATs or the GMATs we'll
even send along the
answers to help you evaluate your next candidate for
an accounting position!)
|
Alligator Bites
How many beans should a beancounter
earn?
In the process of hiring full-time people to succeed
us with several clients this year, we went on-line in
search of salary guidance from
Accountemps, from Salary.com,
and even from the DOL's Bureau of Labor
Statistics. We found that
comparable data is not easy to come by: those
three, and others, emphasize larger companies and
end up with very broad salary
ranges.
So, having hired accounting people at
various levels for four different clients this year, we
offer the following basis for
comparison:
- Staff Accountant - For $3M
Boston service provider and would-be manufacturer;
four years experience; BA in
acctg.; handles all accounting functions reporting to
the president. $42,000.
- Accounting Manager - For $15M
Central Mass. manufacturer; 10-15 years experience;
coordinates work of three
others; some H.R.; reports to the president.
$58,000.
- Senior Accounting Manager - For
same Central Mass. company after first person left
for personal reasons; job was
upgraded to include budgeting and cost accounting.
20 years experience. $70,000.
- Controller - For $11M Southeastern
Mass. consumer products manufacturer; handles all
accounting with staff of
two; reports to president and works closely with
outside investors and Board on budgets, forecasts,
expense control, and financial
analysis. 12 years experience. MBA. $82,000.
- Senior Controller - For $35M
Westchester County service provider; reports to
president while overseeing staff of five
with multi-site operation, each with own detailed
budget and monthly reporting; heavy analytical work;
bank relations; risk
management; real estate oversight. Twenty years'
experience. CPA. $130,000.
This is the normal career progression for excellent
accountants, each of whom is
primarily focused on internal company issues. For all
of them, full accrual-basis accounting provides
the foundation for everything else
that they do. It all starts with timely and accurate
monthly financial statements.
|
About Us
Financial Managers helps the managers of smaller
companies and non-profit organizations develop
reliable financial information for operational
decisions.
On an affordable retainer basis, FM serves as
the
part-time controller and senior financial manager for
multiple clients, leading them to profitability and
positive cash flow.
The goal is for the organization
to outgrow Financial Manager's services, at which
time FM will take the lead in identifying and hiring the
right full-time financial person for the firm, and effect
a smooth transition to his or her management.
|
|
|
|
EMAIL SUBSCRIPTION
|
|
Enter your e-mail address here to subscribe to "Howe's Bayou."
|
|
DRAINING
THE SWAMP
|
|
"Numbers And Metrics
You Can Use
Right
Now"
Budgeting. It's the closest to strategic
planning that
a lot of smaller organizations ever get.
Many never
get even that far, living month-to-month, or even
week-to-week without a road map.
To get started on budgeting, consider just
four key elements:
- Revenue
- Marketing
- Staffing
- Capital Expenses
The new budget for almost every other line item
flows from your decisions
in these four areas, and can be fairly straightforward.
Any budgeting effort is better than nothing, so
dust off that Excel software and let's get started...
...in next month's issue.
|
|
