Discover tips on how to adapt to the new delivery schedule by the U.S. Postal Service:

Published January 12, 2012 by David M. Katz, CFO.com

The U.S. Postal Service’s decision to end next-day delivery could tie up millions of dollars in working capital.

Delivery by letter carriers seems so old-fashioned that it’s been called “snail mail” for years. Yet, as it turns out, most of Corporate America’s invoices still get delivered that way. And the U.S. Postal Service’s December 5 decision to move first-class mail to a two-to-three-day standard seems sure to slow down bill collection for companies large and small.

Indeed, the move could cost a U.S. company with $10 billion in revenues up to $100 million in working capital as a result of its impact on accounts receivable, according to Veronica Heald, a practice leader at REL Consulting, a division of The Hackett Group that focuses on working capital. (CFO is developing a working capital benchmarking product in partnership with REL.)

The impact of the mail delay will be felt in at least two ways, says the consultant, who estimates that 60% of payments received in the United States are via checks in the mail. There will be lags in both the distribution of invoices and the receipt of payments, she adds. Click here to read full story.

Published by Miami Herald, January 16, 2012 by  James Cassel

Small businesses have a responsibility to evaluate their lending relationships and to look for signs of lender fatigue.

What’s the best way to collect money due your business? The answer is surprisingly simple: ask for it.

One caveat, though: sending out yet another past due notice doesn’t count. Collections-by-mail is an exercise in futility. What you need is direct contact. Pick up the phone and call someone. Most customers will talk to you. If the individual refuses kick it upstairs.

When on the phone, there are three things to remember: commitment, commitment, commitment. Whatever it is – an assurance to pay, a promise to investigate, an agreement to seek authorization – be sure to get some type of commitment. Also be sure to set a clear time to call back for follow up.

If you’re overburdened with collections responsibilities, remember the Pareto principle – namely that roughly 80% of the effects come from 20% of the causes. Applied to collections, this means that approximately 20% of your past due accounts are responsible for 80% of your past due money. Sort your past due accounts from highest to lowest in terms of dollar amount and this will become self-evident. Then, start making your calls top-downward. Keep a record of the commitments and times for your follow-up – and do a new 80/20 analysis every week.

It’s a business truism that what gets measured gets done – and this is as true for collections as for any other aspect of your business. To measure your collections performance, start by calculating your accounts receivable days and use this metric as your benchmark. We’ve seen dramatic results – such as receivable days cut in half in just a matter of months.

It’s also important to keep your collector incentivized. Paying a monthly bonus based on each day of reduction works particularly well. If your monthly sales are $500k then each day would be worth roughly $17k. A $50 bonus for each day reduction is a good deal for everyone. When your receivables are under control, adjust the bonus based on a new target so that you can maintain control and still provide the incentive.

Remember, the squeaky wheel gets the oil. Your customers may have limited resources – but they’ll pay you before they pay a silent vendor.

If you need help setting up a collections program let us know. The CFO Connection will be happy to help.

When you work with The CFO Connection, you get a dedicated CFO that acts as an integral member of your executive team – helping you make decisions and drive initiatives that move your company forward. The model is not project-by-project. To the contrary, the relationship is designed for enduring business continuity and value. Your CFO, provided at a reasonable cost, remains connected to your company, building relationships within your organization that pay off in the near and long-term alike.

After twelve years of delivering CFOs according to this model, The CFO Connection knows that it works. On more than one occasion throughout our history we have successfully replaced full time CFOs – delivering more value at less cost to our business partners. We have never been told that we do not give enough support.

The model is based on a combination of on-site and off-site support. This includes visits throughout the month coupled with off-site connections throughout the course of the relationship, either by telephone, email, or remote desktop support. While on-site, we review and set things in motion. While off-site, we monitor and direct. This allows us to have a continuous influence on your organization on a daily basis. It also delivers to you the expertise of a permanent, highly experienced CFO at a fraction of the cost of a full time executive-level position.

Strategic planning is a concept that many businesses embrace only with a sense of wariness. This is because the process is often rooted in “feel good” language and visionary aspirations. The typical CFO prefers a little more meat on the bone.

So how do we put the “plan” back in strategic planning? This is done by focusing on the customer and adding the concept of profitably to the process.

Starting with the customer is important. If you do not define your customer well, then you won’t know what resources to employ, how to go to market, or what business to accept or reject. If you try to be all things to all people, then you make no one happy in the end.

Defining your customers and their needs helps you position your products and services. Keep in mind that what you identify as a customer need may not necessarily align with your customer’s buying criteria. For example, many customers will evaluate you not so much on how you meet their needs, but by how you compare to the competition. If you offer something that is too much better than the next guy, you could price yourself out of the market. The point, of course, isn’t to settle for mediocrity. Rather, when positioning your products and services, simply spend some time thinking about what your customers need and what they think they need.

Once you have your customers down, it’s time to focus on profitable growth. Start with long term objectives – perhaps five years out but maybe shorter. Next, define what you need to do in the short term to realize these objectives. Both long term objectives and short term activities need to be realistic, easy to communicate, and measurable. For example, let’s say your long term objective is to double your sales in five years. This may be ambitious, but it’s doable, clear, and easy to evaluate. Your short term objective in such a scenario might be to expand your sales force by 10% in the first quarter. Equally doable, clear, and easy to evaluate.

Of course, a 10% increase in your sales force over several quarters doesn’t automatically translate into a doubling of sales. And even if it did, you have to consider the impact of the cost of the sales force on profit margin. Which brings us to the importance of reporting.

To realize your goals, you need to put a solid reporting/feedback mechanism in place. By defining your activities well, you can better understand their costs and judge whether or not they’re realistic. If they’re not, then reset your sights. Good reporting highlights both your opportunities and vulnerabilities. It also tells you where to put your resources and when to re-evaluate your strategy.

The purpose to this approach is to put quantifiers and measurements on an otherwise highly visionary and therefore qualitative exercise. If you remain realistic and set at least some of the measurements for your objectives in P&L terms, then you can put yourself on better footing for profitable growth.

Where’s the White Space in Your Organization? 

Don

Most companies organize vertically. The CEO sits on top and subordinate corporate roles report up the chain of command.

Take a look at the typical org chart and you’ll see this thinking played out on paper. There’s only one problem: customers don’t experience your company vertically. They experience it horizontally.

To your customers, the chain of command is irrelevant. What your customers care about is whether or not different parts of your business communicate effectively with one another.

Let’s say I order a pair of high-end hiking boots for a planned trek up the Kilimanjaro. Does the shipping department know that I want the boots tomorrow instead of next week? Or what if I have to return them because they don’t fit correctly? Will the customer service rep have a record of my purchase? And will I be able to get a new pair before I leave for Africa?

This example – admittedly simplified – gets at the problem of “white space.” Here’s what Wikipedia has to say about it.

“White Space  … is the area between the boxes in an organization chart or the area between the different functions: Very often no one is in charge or responsible for the White Space. The important handoffs between functions are happening here, and this is very often the area where an organization has the greatest potential for improvements.”

White space, in other words, is about cross-functional coordination within the enterprise. Do it poorly and you’ll be surprised at the problems it can cause. If I don’t get my boots in time for my African trek, for example, I’m going somewhere else – and you’ve just lost a customer.

In a sense, it all comes down to focusing on the customer. The goal is to deliver consistent customer experiences where customers feel like they’re dealing with a single entity rather than a collection of independent actors.

Yet some companies take this idea in the wrong direction with the concept of the “internal customer.” Here, groups treat one another as they would any other customer. The hope is to foster cross-functional harmony – but in the end it simply fosters an inward-looking organization.

It’s always better to keep your eye on your real customers – and to do whatever you can to keep them happy. One method that works well is to form smaller cross-functional units within the enterprise where different roles come together – all benefiting from direct customer contact. For example, you may put sales reps, engineers and financial management people in a single division focused on, say, small businesses. Thus when a sales rep hears back from a customer that something doesn’t work, the engineer – or somebody else on the team – hears it as well. The idea is simple: put more people in front of the customer. In the end, this makes your organization more customer-focused.

For a deeper dive into this subject, see the book that started it all: Improving Performance: How to Manage the White Space in the Organization Chart by Geary A. Rummler and Alan P. Brache.

White collar productivity is notoriously difficult to measure. Some estimates have it as low as 50%. It could a bit higher, maybe a bit lower. But that’s the point: we don’t really know.

What we do know is that it’s lower than it should be. For example, there’s plenty of evidence that it lags quite substantially behind blue collar productivity. Why?

One of the main reasons is that IT investments aimed at increasing productivity have focused predominantly on operational execution – which falls into the domain of blue collar work. White collar work is far more difficult to pin down.

Focused more on strategic concerns, white collar work often involves a lot of meetings, discussions and collaboration with colleagues.  While some of this is necessary, much of it acts as a productivity-killer.

A lack of measurements, meanwhile, leaves many white collar workers to prove their value the old fashion way – by working longer hours. But longer hours do not necessarily mean better results.

The CFO Connection offers a solid solution to productivity-killing situations and we are appreciated by our clients.

Our seasoned pros understand the importance of being productive. When we engage a client, we hit the ground running – with no training required. And while we work intimately with management teams to meet corporate objectives, we keep the water cooler at an arm’s length and meetings to an absolute minimum.

Because we work on a part-time basis, we’re also less entangled with organizational politics. At the same time, we’re high powered professionals with long track records of success. This brings instant respect – which allows us to get to work quickly so that we can be productive as soon as possible.