CFOWise

The Collapse of the Entrepreneur’s Office Manager

When a business first starts, the founder is focused on getting customers.  Once that starts to happen and cash-in starts to exceed cash-out each month, the founder is quick to shed bookkeeping, cash management, and other administrative tasks to someone else.

The person hired to take all of this on quickly begins to wear many hats – receptionist, bookkeeper, accounting clerk, data entry clerk, assistant to the founder, customer service support, marketing support, human resources, sales support, and sometimes they even come in and clean the office on the weekends for a little extra money.  I have found that women are more often hired than men in this position because there seems to be an over-arching stereotype that women manage details better than men.  I neither subscribe to or deny the stereotype – I am merely acknowledging that it exists.  This person will end up with a title like office manager, meaning they handle a lot of the details no one else wants or has time for and they become a critical element of keeping the business running from an administrative stand-point.

As this person absorbs all of these activities their perceived value contribution to the business is high, although they wear so many hats and have to cover so many areas of the business that they really don’t master any of them.  In addition, they usually lack the experience and education to handle certain tasks they’re expected to do, especially when it comes to accounting and finance.

As a business progresses in its life-cycle this person does their best to keep the books in a spreadsheet or a low-cost off-the-shelf accounting software package, like QuickBooks.  While they have done their absolute best to make this effective, their lack of education and experience in accounting means that even with all their effort they are not able to provide much meaningful, timely, or accurate information/data to the people running the business.

This person becomes frustrated because they sense they are not doing enough, even though, considering the circumstances, they work long hours and care a great deal for the company.  Nobody likes a job where they feel inadequate or incompetent.  They may even try to get some training in accounting or the software package the company uses, but the training is usually so generic that it is hard to apply to the actual day-to-day operations and functions of the software in the business.

At this point the business owner is not getting the information he needs to run the business.  So he continues to trust his gut and makes far too many decisions based on the balance in his bank account instead of his actual business performance.  This leads to some bad decisions and the business struggles to grow as a result.  Yes, bad accounting can actually hinder the growth of a company!

The collapse of the Office Manager position comes as parts and pieces of the their responsibilities are peeled off and given to newly hired employees with more experience and expertise in those respective fields.  As this happens, the only work left is the low-paying duties like receptionist and data entry, and they are far over-paid for those functions.  Their position is ultimately eliminated, and very few of the people initially in the role survive with the company.  They were hired to be a “jack” of many trades, but the growth of the company has facilitated specialization and their master-of-none skills leave them without a job.

There is a way to avoid this tragedy, and I will discuss it in Solve the Mystery of Staffing Your Accounting Department on the American Express OPEN Forum.

Servant Leadership – Graduation Speech

On a recent stroll down memory lane, I came across the following speech I gave at the graduation ceremony for my MBA class from the University of Georgia.  The speech was delivered on May 9th, 2003, and here is it for your enjoyment, just as I gave it 7 years ago:

20 Indicators Your Financials are Wrong

I have looked at a lot of financial statements over the last five years from at least 250 different companies in almost every industry imaginable.  They all had one thing in common – they were, in some way, wrong.  This is a major challenge of most start-up, emerging, and medium-sized businesses.

Inventory – The Crucible of Success

How do you write about inventory management in an interesting and compelling way?  I made an attempt with a comparison to Hoover Dam in my most recent article on American Express OPEN Forum:

The One-Sided Effect of Healthcare Reform

Entrepreneurs, by their very nature, are usually very skilled at figuring out how to create opportunities out of even the most dire of circumstances.  They regard health care reform no differently.

Now that the dust has settled on this new legislation and employers are waiting to see what else transpires between now and 2014, let me shed a little perspective on how small business owners and entrepreneurs are planning to comply with the reforms.  Interestingly, the people that will feel the brunt of this impact are the employees, not the employers.

OVER 50 EMPLOYEES

Businesses with over 50 employees will be subject to a penalty of over $2,000 per year for not covering their employees.  This is steep, and amounts to a 5% increase in labor costs for an employee that makes $40,000/year.  In a recession in which double-digit percent margins have almost become extinct, how will these businesses survive such an increase?

The answer is quite simple.  The objective is to render the increased health care costs neutral to the firm’s overall labor cost structure.  I have heard many employers that will be impacted by this explain that it will have to be the employees who pay for it, primarily through wage and other benefit decreases.  So, it ultimately comes out of the employee’s pocket, not the employer.

UNDER 50 EMPLOYEES

Although businesses with fewer than 50 employees will not be subject to a penalty in 2014, they will be eligible for significant tax credits for covering their employees with health insurance.  Certainly the tax credits pale in their monetary benefit when compared to the cost for small employers to cover their employees, which means the business owners and entrepreneurs will figure out how to make the employees pay for at least the difference.

ONE-SIDED EFFECT

My point is that the average hard-working American will pay for this health care reform, not businesses.  We will see wages and other benefits decrease to offset the costs of health care.  I doubt this is the result legislators wanted, but it will certainly be the reality.

WILL PUTTING THE BURDEN ON EMPLOYERS WORK?

There are two common reasons these employers are not offering health insurance.  First, their industry’s business model does not have enough room in it.  Second, the employees do not value health insurance offerings from their employers.

By forcing employers who have operated their businesses without offering health care to their employees, this legislation is trying to tinker with proven business models and employee compensation packages that were not broken.  As we approach 2014, most businesses will prepare for implementing health care reform by “tweaking” their overall compensation programs to create a zero-sum result for the company rather than trying to absorb the costs into their business model with no additional value perceived by their employees.

What is your Definition of Success?

I was recently asked this question – “What is your definition of success?”  I thought back to a few conversations I had with an entrepreneur a few years ago and his issues with the word “success.”

Why the Economy will Rebound Faster than Employment

I have seen it happen over and over again.  Entrepreneurs and business owners hire people and then they grow to like them.  They build a culture of family and they genuinely feel a sense of pride in and responsibility for providing employment and security for so many families.

Then, when times get tough, they struggle to let people go because of this same sense of pride and responsibility.  These same entrepreneurs don’t hesitate to sell equipment, downsize their office, or cut other non-human expenses.  So why can’t they just look at their employees as an asset or a piece of equipment to sell or dispose of when they need to lean-up their operations?

I know, this question sounds silly.  Obviously we don’t build much of a real relationship with a piece of equipment, and we don’t personally know of a wife and five kids that the piece of equipment is trying to support.  So, what does this have to do with our ongoing high levels of unemployment in this country?

We have all heard the statistic from the SBA that that just over half of private employees are employed by small businesses.  And I would argue that the small businesses are those that have more of a tendency to view their employees as real people and real families – in fact, sometimes a good portion of their employees are family members.  In this context, I submit that owners and executives of the small businesses of America are still wounded from having to let people go during the recession.

Where a few years ago it was common to see entrepreneurs hire a new person at even the prospect of the need, these same entrepreneurs, still bruised from some tough times, are much more hesitant to pull the trigger on new hires.  Phrases like: “Let’s hold off on hiring until we are absolutely certain we need another person,” and “I’m fine to authorize overtime until we can really justify adding to the staff,” have become the new norm.

Even though the Business Outlook Survey published in CFO Magazine is predicting double-digit rates of growth in both earnings and capital spending over the next 12 months, it is also predicting much slower employment growth.  When asked why employment would lag behind other positive trends, two of the top three responses highlighted the reliance on :

- 44% plan to increase productivity per employee

- 37% will increase production efficiency

Entrepreneurs are simply asking for more from their current employees and looking to technology and automation to grow.  They learned their lesson and, as a result, are accelerating our economy’s change to a more efficient playing field, relying on people to add high-level value than fulfill lower-level tasks.

So, as the economy rebounds, it only makes sense that employment will lag behind.

4 Signs You Need a CFO

My most recent post at American Express OPEN forum is about how a business owner or entrepreneur knows that it might be time to hire a Chief Financial Officer (CFO).

Receiving Feedback is Always Appreciated

Everyone needs to receive feedback.  It always makes you feel better when that feedback is positive.  I was very grateful to receive a letter from a client today.  It’s great to get positive feedback about our cfo services.  It is a pleasure to serve this and all of the rest of my clients!

4 Secrets of Meaningful Projections

I have spent a lot of time recently reviewing, updating, and implementing financial projections into various businesses.  These activities prompted me to write the following article for American Express Open Forum: 4 Secrets of Meaningful Projections .

The main take-aways include the need to make them real and the need to use them.  Completing them does represent a task that you can check off of a list, never to return to your projections again.  Their real strategic and competitive value is in using them regularly.  Enjoy.