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Can You Do This in Your Excel Budgeting Model–Move the Years Field Around?

All Articles, Financial Modeling

When I’m working on financial models, I like lots of flexibility. And that’s why I rarely use Excel for these projects.

I generally use one of two financial modeling tools–one of those is Quantrix.

Flexibility? Absolutely–more so than Tony Horton’s when he does Yoga X in P90X.

Excel Is Hard to Manipulate When It Comes to Column and Row Headings

Does the below look familiar? Notice the date row is generally going to be fixed in every worksheet like the one below.

Suppose you don’t want to scroll over 36 or 48 months to the right to enter data.

There has to be a better way for toggling the column heading in the financial model.

Well, there is a way.

Quantrix Allows a User to Manipulate Column and Row Headers

Quantrix is one of the most powerful financial modeling tools on the market for small to mid-sized businesses. While column and row manipulation is one of its X Factors, the tool can do so much more. Here’s what I mean by maneuvering the Years field around the model.

Pretty cool stuff.

But wait till you see what completed driver-based financial modeling can do for your business.

Incidentally, if you are a CFO, controller, FP&A professional, or an analyst creating and managing financial models and want to see the power of Quantrix, you really need to check out the YouTube channel created by Rich Lopez. That dude rocks!

Roaming Your Way to Financial Fitness – A Closer Look at Return on Assets Managed

All Articles, Financials

John Jorgensen possessed one of the greatest manufacturing minds that I have ever encountered. He was a long-time president of Orscheln Company and Ortech, both Missouri-based businesses.

One of John’s favorite business measures was ROAM, short for return on assets managed. He felt it was a holistic measure that best described the financial performance of a company because it was not a one-dimensional key result indicator.

While John served mid-sized businesses, I believe his opinion is applicable to small businesses.

Advice for a Talented MBA Marketing Student

All Articles, Columbia, Marketing

Quick, how many counties does Missouri have? No Wikipedia cheating.

Maybe you’re not from Missouri, but rest assured it’s not just the home of great baseball teams (the Royals and the Cardinals), but the Show Me State ranks in the top 5 by number of counties–114, and that’s not counting St. Louis, which does not belong to a county (it’s considered an independent city).

So what?

No, not at all. This was the first conversation I had during lunch with Trevor Monnig, the CFO of Missouri-based Pro Food Systems and his step-son Zach Mason, an MBA student enrolled at the University of Missouri.

Trevor’s first financial role was in internal auditing and later M&A for the hospitality and hotel management organization owned by John Q. Hammons.

On Trevor’s first day on the job, John Q. himself did not ask Trevor what the average room rate or occupancy level was for his hotels. Instead, it was, “How many counties are there in Missouri?”

I wish he would have asked me. My answer would have been, “Way too many.”

Enough of Missouri counties. On to the good stuff.

Are You a Pinball CEO?

All Articles, Management

I became an entrepreneur in 1972 when I started a Grit Newspaper route, some 60-plus loyal customers strong.

I was rich. Who needed a bank? I had my clip-on money changer that held quarters, dimes, and nickels. Life was great until I started hanging out with friends at Lahnam’s Cafe when my route was over. Then my money started disappearing.

You see, I had a seductress (yeah, even at 12).

The 12-Year-Old Who Became Intoxicated with a Pinball Machine

I finished my weekly route each Thursday around 2:45 p.m. Charlie and Jim would be at Lanham’s, and I wanted to hang out with them afterwards. They were older, and it wasn’t cool to let a younger kid tag along.

But I was different–I had the money changer. So I was accepted. Besides, my dad was bigger than Jim’s dad.

For a while, I was disciplined. Just one Coke (it was probably Double Cola–back then, soda pop was a Coke). Otherwise, I was a miser. No, check that. I was miserly. Whatever.

And then she caught my eye. Love at first sight. She was beautiful, lights and all. She was the newest hit at Lahnam’s Cafe.

As I approached her, I gave her my first quarter. I was hooked. And, you probably need to know that I was painfully shy. The heck with shyness, I was aggressive. Nothing would get in my way. Nothing!

Pinball Machines – Such a Waste of Money

Why, why, why, why, why? No, as a little kid, I was not aware of the Japanese 5 Whys Paradigm.

I had spent my profits, all of them. I’m estimating $2.50 or slightly more that first day. To make matters worse, I ate into the money needed to buy next week’s papers. Mom wasn’t going to like this.

Looking back, the answer is obvious. My favorite part of the experience was the ball ricocheting back and forth, causing the bumpers to light up and release pulsating ringing sounds delightful to those young ears.

It was mesmerizing. I wasn’t sure what to look at, the ball zigzagging from bumper to bumper, or the back of the machine which kept flipping the digits of the scoreboard so fast you couldn’t even track it.

Like I said, it was intoxicating. Another quarter, then another, and another. Heck, I had the change machine. I was a bottomless coin pit, or so it seemed.

So What’s a Pinball CEO?

Periodically, I’ll work with a CEO who reminds me of that pinball machine sucking so many quarters from me, the same quarters that kept my baseball card collection from growing.

What I mean is they’ll go to one business seminar, then a monthly CEO workshop, then an industry benchmarking group, then rinse and repeat. There’s more–business books, audio courses, online courses. Rinse and repeat.

These are the CEOs that are intoxicated with learning and knowledge. They want more. They can’t get enough.

I pity the staff of those CEOs. Heck, I even pity the CFOs serving these CEOs. We start on one initiative only for it to be replaced by the newest flavor of the month.

In short, the pinball CEO is the person who keeps bouncing back and forth from idea to idea. That silver ball bearing is the CEO. The bumpers represent new ideas, new concepts, new flavors of the month.

There’s Certainly Nothing Wrong with CEO Professional Development

Personally, I take learning seriously at my advanced age of 50-something. I’m usually taking at least one to two courses at any one time. Currently, I’m taking a course in Sabermetrics and another in Ruby on Rails, but I do so for relaxation and to keep my mind challenged.

I’m very guarded with my learning. I know that whatever I learn, I’ll forget it in 3 to 4 days unless I apply it. Even then, I need to keep applying my learning, or I’ll lose it. So I try to keep my focus narrow from year to year when it comes to my reading and learning program.

I’m reminded of Watson’s observation of Sherlock Holmes that he knew very little of literature, philosophy, and politics.

I consider that a man’s brain originally is like a little empty attic, and you have to stock it with such furniture as you choose. A fool takes in all the lumber of every sort that he comes across, so that the knowledge which might be useful to him gets crowded out, or at best is jumbled up with a lot of other things, so that he has a difficulty in laying his hands upon it.

Now the skillful workman is very careful indeed as to what he takes into his brain-attic. He will have nothing but the tools which may help him in doing his work, but of these he has a large assortment, and all in the most perfect order. It is a mistake to think that this little room has elastic walls and can distend to any extent.

Depend upon it, there comes a time when for any addition of knowledge, you forget something that you knew before. It is of the highest importance, therefore, not to have useless facts elbowing out the useful ones. Sherlock Holmes

Be Strategic with Your Professional Development

Most CEOs lead a strategic planning exercise each year. Consider the same for your learning and professional development. That goes for learning, workshops, everything. Consider a theme for the year. That keeps your learning focused. You’ll be more likely to retain and apply what you hear.

Here are a few more ideas:

1. Go on business book diet and read nothing but biographies, history, and philosophy. You will be amazed at the insights you will gain from reading non-business books.

As I write this, I have just finished Unbroken. Two weeks earlier, I completed Boys in the Boat. These books are inspiring, moving, and thought-provoking. When I’m having a bad day, I’ll always think of what Louie Zamperini endured as a prisoner of war. My problems will never compare to his. He is now a source of inspiration. The newest leadership book can never match these great biographies.

2. Cut back on some of those CEO groups. One is fine. Try ditching the others for just one year. Note if your business performance drops. If so, make adjustments.

3. I’m reminded of a Pat Flynn podcast talking about just in time learning. The concept is simple. Learn what you need to know today. Forget the shotgun approach. Just in time learning keeps you from wasting time on topics you’ll never get around to applying.

4. Most importantly, seek input from a business coach asking him/her if they think focus is a problem for you and your business. My observation is that pinball CEOs have a hard time staying on topic and keeping an eye on their true north. The reasoning is simple–too many ideas are being chased.

Stay Focused, Even with Your Learning

An old German proverb states, “Who begins too much accomplishes little.”

In short, stay focused in the area of professional development. The pinball machine robbed me of my quarters.

Too many avenues for learning can be robbing you of your precious time. You also run the risk of distracting your team and the course you charted earlier towards one or two key objectives for the year.

Be better than that 12-year-old who gave in to a foolish machine. You are not a pinball CEO.

Epilogue

Rest in peace Lanham’s Cafe. I miss your burgers and fries. I accept that I gave you a small fortune, so be it.

As I turn back the pages of time, my biggest regret is giving away that little coin changing machine that I wore proudly on my belt during those Thursday paper routes.

Rest in peace, Lanham’s Cafe.

The former Lanham's Cafe located off U.S. Highway 24 in Madison, Missouri. — The former Lanham’s Cafe located off U.S. Highway 24 in Madison, Missouri.

Are Intercompany Billings Stressing Out Your Accountant?

Accounting, All Articles

I hate intercompany accounting. Not because it’s hard. But because it’s rarely done by small businesses. And if the finance department makes some attempt at intercompany transactions, it’s done poorly. That is, until I get involved. Then it’s done right.

Is that arrogance? Probably. But not really. I just like rock-solid processes and clean financials that are meaningful. And that’s why I have no patience for poor intercompany accounting practices.

So let’s dive in.

Getting Down to Business – Leasing Employees to Sister Businesses

Nearly all of my clients own multiple businesses. A handful own businesses where employees are leased to sister companies. And at the risk of being snarky, I call it employee sharing when the parent company is not being reimbursed by the child company.

In these situations, we need to create accounting transactions whereby the company leasing the employee is reimbursed for that labor. If that’s not done, their earnings will be understated, and thus meaningless.

Likewise, if the company using that leased labor is not billed, their earnings will be overstated–again, meaningless financials.

My preference is to have the parent company leasing the employee to the child company to actually submit a bill as though it looks like a third-party transaction. This keeps the business transaction clean and auditable (as in a good documentation trail).

A Step-by-Step Process for Employee Intercompany Billings

Intercompany accounting does not have to be hard. We just need a process. And here it is:

Name the process.
Provide the purpose.
Give a big-picture overview of the process.
Document the steps.
Use a simple grid to determine how much to bill.

Don’t Be Silly, Employee Leasing Is Not Income

I believe I’ve seen it all in the world of small business accounting. I’ve seen small business controllers code rebates of varying kinds to income, even over-payments. Would you expect anything less when it comes to intercompany billings for employee leasing?

When I try to explain to small business accountants that intercompany billings for expense reimbursement are not income, I sometimes get a blank stare.

Then I pop the question. “Are we in the employee leasing business?”

“No,” they say.

Then, they get it (I think).

I want to see the parent company code the leasing invoices to the child company to an account called Reimbursed Wages which offset overall compensation costs. The presentation will look similar to the P&L excerpt below:

For the child company, the presentation will change to the following:

The discussion above applied to reimbursements related to intercompany employee leasing. The same concepts apply to other reimbursements.

Don’t make this harder than it needs to be. Keep it simple by designing great systems and processes.

Above all, remember the purpose. We want each company’s expenses to line up with their revenues. We need to know how each company is truly performing. We cannot do that without proper intercompany accounting.

Image from Ryan McGuire at Gratisography.

Is Days Sales Outstanding (DSO) Just a Financial Vanity Metric?

All Articles, Financials, Management

When I take on a new client, I generally obtain 60 to 72 months of P&L and balance sheet data.

Among the scores of metrics I blow out from my financial modeling system is DSO, or days sales outstanding. Nearly always, that number is going to hover around 30 days. My focus isn’t on the number per se. I’m looking for trends, positive or negative.

Would you believe I never used DSO to measure my own performance when I worked full-time as a CFO and controller in the W-2 world?

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