CFO Hacks! Have a Plan, Stan!

I’m going to start out by noting that what you really need is a process, and not a plan.  However I couldn’t come up with anything sufficiently catchy based on the word “process” and Paul Simon was kind enough to provide a clever line that involved “plan”, which is close enough to a process. Albeit, it required some alterations.

So, to sum up, the goal here is processes, and this applies even if your name is not Stan.

So let’s get on with it, shall we?

In my last post, I talked about the importance of having good work habits, that is, getting get work done according to set schedules. That way it doesn’t pile up into some enormous monster. In this post, I want to talk about how that work gets done, once you sit down to do it.  Namely, processes.

Small organization pitfalls

In larger organizations, there tend to be much more extensive finance and HR departments and correspondingly much more extensive systems of steps for dealing with financial, administrative and operational functions. Furthermore, this work is often done by people who (1) do it all day and (2) have all day, every day, to do it.

That is generally not the case in startups or small businesses.  Time is limited. Resources are limited. People are limited.   And a lot of finance, administrative and operational tasks end up being done by people who:

  • are seriously overworked;
  • are filling multiple roles;
  • are trying to keep 17 balls up in the air; and
  • may not really know what they are doing when it comes to this particular ball. 🙂

The result?  Mistakes.  Tasks falling through the cracks.  And worst of all, a feeling of being frantic, overwhelmed and out of control.

None of these are going to do much to improve productivity.  🙁

The solution? Process it. 

To set up a process is to decide how a given task it to be performed.  For example:

  • You decide that you are going to pay suppliers once a month. You adopt this process for collecting, reviewing and approving invoices, and for issuing payments to your suppliers.
  • You decide to issue invoices once a month. You would love to do it weekly, but you just don’t have enough time! You set up a simple process.
    • You cross reference your sales order list with sales team records to make sure you have all of the sales orders on hand.
    • You review all open sales orders to see if they can be invoiced.
    • As needed, you touch base with your operations team to get the status of jobs which were in process and to see if they can now be invoiced.
    • Based on the preceding steps, you write up a list of invoices to be issued.
    • You create all of the invoices, placing a check next to each item as the invoice is created.
    • You send the invoices to the clients, and place a second check next to each item as it is sent.
    • Finally, where you need additional information from operations or the client in order to invoice (e.g. a report showing results of an advertising campaign), you send an email. You make a list of these as well.
    • You know you generally get responses back within a week. For now, you put that “open item” list to the side. A week from now, you will pick up this list, review the responses, and issue any additional invoices that can go out.
  • Payroll needs to be processed at the end of every month. It’s being done by an external payroll provider.  You sit with your payroll provider to discuss how this should be managed. In the end, you agree to adopt this process for collecting payroll information, sending it to your payroll provider, reviewing the payroll calculations and issuing payments.  You also agree that information for payroll will be provided using this standard template.
  • You have Board meetings every quarter. You adopt these practices to make sure that you (and your legal counsel) have proper records of these meetings in general and Board decisions in particular.
  • You need to make sure that all of your employees sign NDA’s and Invention Assignment Agreements. Instead of deciding on a case-by-case basis whether it is needed (where you may be exposed as employees change positions or work on new projects), you have your standard employment agreement template drawn up to include the NDA and Invention Assignment agreement and set up a standard practice that all employees sign off on all of these documents before they start to work.

And the overall theme?

Each of the above processes are intended to turn what has the potential to be a center of chaos (e.g. paying individual suppliers the moment you receive their invoices) into a clear, methodical series of steps.  Each involves giving the particular task an appropriate measure of time, attention and thought.  Where appropriate, each incorporates a review process, so as to minimize errors. In short, each process should result in your controlling the task, as opposed to it controlling you.

As with scheduling, the specific tasks involved will vary greatly from company to company.  If you don’t have sales yet, you won’t need a process for issuing invoices.  If you are a one-man show, with no Board, you don’t need a process for collecting Board minutes and decisions.  The key thing here is that you identify what tasks need to addressed at your company. If you are not sure about how to properly manage them, that is, what your process should look like, ask!  Depending on the particular task to be dealt with, your legal counsel, accountant, bookkeeper, payroll provider or auditor may be able to provide guidance.  Another great resource are your industry peers who already have processes in place; ask them what they are doing, and what has worked or has not worked for them.