Last year we worked with a client in the furniture distribution business, a successful, rapidly growing company with retail customers across the country and suppliers across the globe. They asked us to help them integrate the financial systems of a company they had just acquired, and we stepped up and did that. They were happy with the result and decided to move on.
But the support they needed was considerably greater than the support they asked for and got from us. They didn’t sense anything else was broken, as the phrase goes, so didn’t see the need to fix anything. We saw it differently, not just because we like to sell more services (and of course we do) but because they needed systems and process changes to support that strong growth that they didn’t want to deal with. In effect they were content to stay where they were unless something broke in plain view. They ignored the risk that when systems and processes break down during periods of rapid growth, usually ignored or minimized because there’s no time to deal with them, the result is usually a more costly and painful fix when it’s no longer possible to ignore the impact.
Some of the changes they needed but were unwilling to take action on:
- Banking relationships of the owners (not part of management) and those of the company were commingled, so that the company couldn’t make banking decisions independent of the owners’ needs and constraints, not to mention the potential legal conflicts that could arise. That is a no-no unless your business is that of a sole proprietor in which the two really are one and the same.
- The company’s financial reporting lacked the enhancements that make out-of-the-box reports more understandable and usable by non-financial users, such as the owners – non-technical labels, KPIs for all key operational and financial metrics that are key to the business, explanatory narratives accompanying the numbers. If the principals gloss over everything but the income statement because they don’t fully understand them, that’s a problem that should need no explaining.
- Having just made an acquisition, they were not able to separately track and report the performance of their now integrated business, to see if it was truly meeting the goals that had driven the acquisition decision to begin with. That makes it easier to assume those goals are being met, rather than measure them separately and risk visible evidence that they are not. Maybe a conscious agenda by the champions of the deal, maybe not.
- These days any growing company has to work hard to hire people, and then keep current with benefits and employment law to keep them happy and engaged. But the company had no HR department leader who could do all that – if they’d had time – and the idea of engaging a PEO or similar outsource support, and overseeing that support, is more often than not a part of the CFO’s responsibility, not the CEO’s as in our client case. As a result, no proactive effort, lots of reactive effort, more risk on a variety of fronts.
My point: They settled. You shouldn’t. Are you?
We are Your CFO for Rent.
