Will IFRS Make CPAs a Requirement for SOX Compliant Boards?

By: Tracy Levine, President, Advantage Talent, Inc.

Most articles about IFRS have been technical in nature. The focus has been on what items will be accounted for differently under IFRS versus GAAP. Little attention has been given to how the switch to IFRS will affect corporate governance. While the SEC supports the switch to IFRS, they have expressed concern that the switch will cause a short term SOX compliance issue as it relates to financial experts on the audit committee. Under SOX at least one member of the Audit Committee must be defined as an Audit Committee Expert. The SEC defines an Audit Committee Financial expert as a person who has the following attributes:

An understanding of generally accepted accounting principles and financial statements;………………..Under the final rules, a person must have acquired such attributes through any one or more of the following:

(1) Education and experience as a principal financial officer, principal accounting officer, controller, public accountant or auditor or experience in one or more positions that involve the performance of similar functions;

(2) Experience actively supervising a principal financial officer, principal accounting officer, controller, public accountant, auditor or person performing similar functions;

(3) Experience overseeing or assessing the performance of companies or public accountants with respect to the preparation, auditing or evaluation of financial statements; or

(4) Other relevant experience.

Under the final rules the SEC makes it clear that just because someone was already serving on an Audit Committee did not mean they could automatically be grandfathered in as the Audit Committee Financial Expert. It further states that the fact that a person has experience as a public accountant or auditor, a principal financial officer, controller or principal accounting officer or experience in a similar position would not, by itself, justify the board of directors in deeming the person to be an Audit Committee Financial expert.

(http://www.sec.gov/rules/final/33-8177.htm)

The rules of the game are changing. An understanding of GAAP is no longer going to be the starting benchmark. IFRS knowledge is going to be the starting benchmark. Audit Committee Financial Experts familiar with IFRS are going to be in short supply. Very few financial experts have the prerequisite experience to qualify as the expert under SOX. One of the groups actively preparing for and educating their members about the switch to IFRS is Certified Public Accountants (CPA). Starting in 2011, the CPA Exam will include testing on IFRS. A CPA is required to finish a predetermined amount of Continuing Professional Education (CPE) each year to keep their licenses current. For the last couple of years they have been able to take numerous CPE Classes on IFRS. Putting a CPA with IFRS training on the Audit Committee may be one of the steps companies may have to take to protect themselves from litigation.

Shareholders have become very litigious. Many feel the gatekeepers have failed miserably and left the shareholders with diminished assets. The Security Police and Fire Professionals of America are suing Goldman Sachs and Morgan Stanley over large bonuses and losses sustained by investors. The Atlanta Firefighters’ Pension Fund is suing their custodian, Chicago-based Northern Trust, over risky investments. These are just a few examples of shareholders lashing out.  Corporate Boards run the risk of finding themselves the next group of gatekeepers subject to shareholder litigation. If the company loses money or fraud is discovered, shareholders might put forth litigation challenging the competence of the Audit Committee Expert, the Audit Committee members and of corporate decisions approved by audit committees who are alleged to have lacked the necessary competence.

The Securities and Exchange Commission is soliciting comments on this issue and several others related to IFRS and Corporate Governance. If you are interested in commenting on this issue, the SEC requests the following:

DATES: Comments should be received on or before October 18, 2010.

ADDRESSES: Comments may be submitted by any of the following methods:

Electronic Comments

•Use the Commission’s Internet comment form

(http://www.sec.gov/rules/other.shtml);

•Send an e-mail to rule-comments@sec.gov. Please include File Number 4-608 on the

subject line; or

•Use the Federal eRulemaking Portal (http://www.regulations.gov). Follow the instructions for submitting comments.

Paper Comments

•Send paper comments in triplicate to

Elizabeth M. Murphy, Secretary

Securities and Exchange Commission

100 F Street, NE

Washington, DC 20549–1090.

All submissions should refer to File No. 4-608. This file number should be included on the subject line if e-mail is used.

Click the following link to read about all of the Coporate Governance Issues being addressed by the SEC:   http://www.sec.gov/rules/other/2010/33-9134.pdf

Why Do Senior Financial Professionals Change Jobs?

Although issues of business volatility and unemployment continue to garner a large share of the headlines in business journals today, the trend of rapid business change has been accelerating for several years. This tendency toward change impacts companies of all sizes, whether public or private. The combination of a dynamic business environment and the recent economic downturn has caused many Financial Executives and their employers to rethink their stance on employment stability. Financial Executive change in employment every two or three years is no longer unusual, and many employers are beginning to consider a break in employment to be the norm.

Even though tolerance of job change is increasing, there is still a large contingent of employers who believe that executives who have not been working in their current job for at least the last 5 years are somehow ‘tainted.’ The common perception is that job change can only be the result of deficient job performance or poor decision-making skills related to choice of employer. This is an out of date belief that does not correlate with the reality of the business environment during the last 10 years. The volatility in the US economy has created a new host of reasons why senior Financial Executives change jobs. The following are examples of these causes of job change and the impact on Senior Financial Executives and their employers.

  • Change in control, the new guard wants a new CFO. Often a CFO will find that he or she is in a position where the senior management team and / or members of the board are replaced (partially or completely) by new leadership team members. New teams often bring with them new perceptions of the skills required by the senior financial executive, or they have a person in mind who they have worked with in the past and trust to execute their new agenda. When this happens, the sitting CFO often loses out to the goals of the new team. The company suffers the loss of institutional knowledge in exchange for their perception of a brighter future.
  • Change in strategy, new skills needed. Because of the velocity of change in the economy, often the only reason that an employee is hired by a company is that a problem exists in the company, and the hiring authorities believe that the candidate for the position can solve the problem. These problems can be very specific and tactical, or more general and strategic. A person who is hired to ‘clean up’ finance and accounting departments may find themselves with a clean and fully functioning department, but the CFO’s boss may have acquired a new vision, i.e. an Initial Public Offering, or a strategy of Merger and Acquisition that the CFO is not experienced in. If the CFO is not able to sell the remaining members of the leadership team that he or she can handle the new strategy, the CFO will be looking for new employment.
  • Major problem is solved, overhead mentality of CEO. If a CFO is hired to solve a specific major problem and handles that problem, there is an inherent risk that there may not be another major problem to solve. Once everything is running smoothly, the CFO is at risk of being considered ‘overhead’ by the remaining members of the leadership team. Some management teams do not recognize a distinction between a controller and a CFO. They feel that once the problem is solved, only the controller’s services are required. Because management is under continuous pressure to eliminate components of overhead, a CFO who is perceived as being overhead is usually terminated quickly.
  • Company is acquired, replication of CFO. Successful companies are often acquired. After the acquisition, there is often a period of post-acquisition integration of the acquirer and the target company. Depending on the complexity of the combined entities and the philosophy of the surviving board of directors and the CEO, that period may fall within a range of as little as a few days or as much as several years. Unless the CFO of the company being acquired has a significantly stronger skill set than the CFO of the company doing the acquiring, the CFO of the target company will often be eliminated by the end of the post-acquisition integration period.
  • Company fails. CFO’s occasionally join companies that ultimately go out of business. Obviously the lack of a paycheck from a company will cause this CFO to search for another opportunity.
  • Politics. Although most company executives claim that politics are not a factor in their organization, many companies continue to be subject to the political agenda of members of the executive leadership team. If a CFO does not see eye to eye with the initiatives of other executive team members, the company may search for a new CFO.
  • Fraud is identified by the CFO, and CFO leaves. In cases where fraud of others is identified by the CFO, the results are mixed. In some situations, the executive team will do the ‘right thing’ and terminate the offending party and fix the problem. At other times, executives will try to sweep the issue ‘under the rug’ in an attempt to put some time and distance between them and the perpetrator, with the hope that the issue will not be exposed again later. If the CFO fights to clean up the fraud in this situation, the reaction of the remaining members of the leadership team often leads to dismissal of the CFO. In other situations, the CFO leaves the company in frustration.
  • Not truly a CFO position. Often a CFO will work for a company that does not differentiate between a CFO and a ‘Head Accountant’. This CFO often comes to the conclusion that they would rather hold CFO responsibilities. If an opportunity comes to them to work at a company that provides acceptable challenge in a true CFO role and enhanced compensation, the CFO may leave to take the better opportunity.

Experience shows that in many cases, the only difference between employed and unemployed people looking for a new opportunity for employment is the timing and impact of forces outside of the Financial Executive’s control. Some Financial Executives are able to identify opportunities to move to a new employer before they find themselves in a state of transition, and others are unable to avoid unemployment. No matter how much importance a Financial Executive places on continuous employment, there are in fact some environments where the risk of being employed is much higher than any reward that may come from working there. When an Executive joins a company, he or she receives 3 proverbial keys; the key to their office, the key to the bathroom, and the key to the closet where the skeletons are kept. Sometimes the skeletons in the closet are scarier than being in job transition.

Some companies are weak and/or on the edge of insolvency, and others create a CFO position that is not worthy of a credible CFO. A CFO may take a calculated risk to take on one of these new positions with the knowledge that they will grow professionally if they take the ‘special’ role. Jobs in this category may have limited duration. Also, transparency of public companies is questionable at best, and is often close to nonexistent for private companies. As a result, even the best due diligence by a CFO candidate will often not uncover some of the risks identified above. Most people with an understanding of the reasons why CFOs frequently change jobs will also understand that finding stability in a job is often more a matter of luck than skill.

It is obviously much less expensive for an employer to maintain a stable work force. Employers may have valid reasons for demanding stable employees, but if these employers maintain their absolute requirement for longevity, they will miss out on a huge pool of candidates who are capable of doing an effective job for them.

Just because a Financial Executive has worked for the same employer for the last twelve years, doesn’t guarantee that they will be successful in maintaining longevity in a new work environment. Proven flexibility can be very valuable to a Financial Executive as they enter a new employment assignment. People who have a variety of employer experiences have proven that they have most likely exercised their ’employment flexibility muscle’ and can most likely adapt to new environments easily.

The Devil Went Down to GA: Goldman Sachs vs. Credit Suisse-Noncompete Agreements

AtlantaBy: Tracy Levine, President, Advantage Talent Inc.

In February of this year, Credit Suisse lured away seven of Goldman Sachs’ top Wealth Managers.  Purportedly some were offered upwards of $10 million to move to Credit Suisse.  According to some of the articles written, Credit Suisse is the devil, and companies like them are the reason Georgia needs to change their view on noncompete and non-solicitation agreements.  It is amazing how much media this situation got in Atlanta that was not just gossipy news but highly politically charged news.  I am sure the defection did hurt Goldman Sach’s business.   However, Goldman Sach’s is hardly the poster child for reform.

How shocking, a Wall Street firm stole top talent from another top Wall Street firm.  Wrong.  This is not shocking at all and is business as usual. The top Wall Street Firms have been raiding each other’s top employees for decades.  In this instance, Goldman Sachs filed a lawsuit not against Credit Suisse, but against the seven wealth managers.  It was voluntarily dismissed the next day.  What makes this situation so ironic is that Goldman Sachs is no saint.  This is a situation of what is “good for the goose is good for the gander.”  In 2010, I believe the score is Goldman Sachs 55 and Credit Suisse 7.  Earlier this year, Vestra, a Goldman Sachs backed UK company lured an estimated 55 employees from UBS.  Shocking really shocking…..not.

Full disclosure: Back in the 1990’s, I was an employee who was lured away from Credit Suisse, then Credit Suisse First Boston, by Smith Barney with 3 other employees.  In that point in time very few people had non-solicitation agreements.  Obviously, Credit Suisse has more than thrived since then to have the money to lure people from Goldman Sachs for millions of dollars.  Over the past three decades, it hasn’t been unusual for the very top Directors and other top employees to be lured away from one Wall Street firm to join another and lured back by the original firm in a year or two.    

So why has this business as usual situation in Georgia led to many trumpeting the horn for stricter noncompete and non-solicitation agreements?  Wall Street already has a current master agreement that all Wall Street Firms and Investment Firms are encouraged to sign that says a firm will honor nonsolicit/non-compete employment agreements.  If Goldman Sach thought honoring non-solicitation and noncompete agreements were good for business in the long run, they would have signed it.  Or was it their arrogance of being one of the biggest or strongest bullies on the block that made them feel immune to the ramifications of not playing nice with others?  Credit Suisse is another firm that has up to this point not signed the agreement either; probably for the same reasons as Goldman Sachs.

Noncompete and non-solicitation agreements have been problematic for both employers and employees in Georgia’s current environment.  I agree Georgia needs to review their approach to non-solicitation agreements and noncompete agreements.  However, it needs to be viewed in a real context and not the lens of hyperbole.  Goldman Sachs is not a victim but the recipient of their own practices.  Yes, they might lose millions of dollars.  I am sure UBS probably lost millions of dollars also when Vestra hired their employees.

In the real world, it is not appropriate to leave each contract brought before the court to individual judge’s discretion on whether they are enforceable or not.  The Georgia Courts’ approach with these type of contracts is a little like defining pornography…I know a bad contract when I see one.  On the flipside it is not o.k. to go too far the other way by changing the Georgia Constitution to the point it makes it impossible for an employee to work for up to three years after leaving a company due to corporate downsizing.

In November, the public is going to be asked to vote to make the following changes to the Georgia Constitution in regards to non-solicitation and noncompete agreements.

H.B. 173, codified in relevant part at O.C.G.A. §§ 13-8-2.1 and 13-8-50 to -59, provides for a host of revisions to the current status of Georgia law on restrictive covenants.

  • Georgia courts will be allowed to partially enforce restrictive covenants that are otherwise overbroad, thus reversing Georgia’s strict and longstanding “no blue-penciling” rule;
  • provides that in-term restrictive covenants will not be considered unreasonable because they lack specific limitations on the scope of activity, duration, or territory, as long as the covenants promote or protect the purpose or subject matter of the agreement or deter any potential conflict of interest;
  • establishes a presumption that post-employment noncompete agreements with a duration of two years or less are reasonable;
  • establishes a presumption that post-employment customer and employee non-solicitation agreements with a duration of three years or less are reasonable;
  • permits employers to extend post-employment restrictions on customer solicitation to customers and potential customers with whom an employee did not have actual contact as long as, within two years prior to the date of termination, the employee supervised the employer’s dealings with the customer, obtained confidential information about the customer, or earned compensation, commissions, or other earnings as a result of the customer’s purchase of the employer’s products or services; and
  • permits employers to enforce post-employment restrictions on employee solicitation that lack an express reference to a geographic area.

See Paul Hastings Client Alert for complete information.

It is about time that Georgia did away with the non-blue penciling law that made it hard for employers to have any kind of meaningful protection.  The rub for the employee is that Georgia is an “at will” state.  A company can end your employment at anytime.  This wouldn’t be such an issue if noncompete and non-solicit agreements were only being signed by the very top level executives.  Up until recently, they were the only employees asked to sign such agreements.  Now many companies make all employees sign a non-solicit or noncompete agreement whether they are a top level executive or integral to the overall big picture or not.  It is hard to discern what the appropriate balance is for protecting the employer, the employee and the public’s intrinsic right to have free competition and the right to do business with whomever they want.

I would like to hear your thoughts on the amendments to the Georgia Constitution.  Is it not enough of a change? Does it go too far? Or do the changes strike the right balance? Why do you believe that some of the Wall Street firms don’t see the advantage of agreeing to honor nonsolicitation/noncompete agreements and completely ignore employment agreements?

2010 Proxy Season Voting Rule Changes and impact to the CFO

By: Tracy Levine, President, Advantage Talent, Inc.

The big news this proxy season is the SEC’s vote to prohibit brokers from discretionary voting of stock the firm holds for their clients, in Board Elections.  Shareholder Advocates see this as a hard won victory that has been in the works since 2006.  Corporations worry that the new rule will be disruptive to the functioning of Corporate Boards and the Proxy Process.  For many years there has been a fight brewing with large activist shareholders and corporations.  Corporations have been mostly successful in keeping shareholder activists’ candidates out of the Proxy and off of the Director Slate.  Campaigns to change the rules have mostly been unsuccessful.  With the SEC approving the amendment to NYSE Rule 452, the activist groups may have achieved their goal in a roundabout way. 

A.) What does this new rule mean to a CFO?  In most companies the CFO is ultimately responsible for all SEC filings, including making sure that the proxy is mailed out to shareholders on time for the Annual Board Meeting.  This process has been getting easier with the advent of e-Proxy Voting.  In the past, the proxy votes were tallied to see if there was a quorum to elect the typically unopposed slate of Directors.  With the success of blocking non-management nominees from the slate, the activist shareholders were left with two choices: (1) Wage an expensive legal battle or (2) Vote no or withhold votes for the proposed slate.  Voting No or withholding votes most of the time did not effectuate change.  Brokers typically cast their clients’ votes with management.  It was not their job to be activists.  Therefore, the corporation was able to fairly easily reach a quorum for their chosen slate.

With the amendment of NYSE Rule 452, corporations may not be able to get a quorum as easily as before when activist shareholders choose to vote no or withhold votes.  Corporations can no longer depend on the Brokers to be the deciding vote and the votes used to reach a majority quorum.  CFOs may have to start to budget more money to send out more notices to garner shareholder votes in order to reach a quorum.  It could be a very expensive exercise.  Complicating this issue is the new access to E-Proxy voting.  It is cheaper for the company but so far shareholder voting has not gone up but instead has gone down with the transition to E-Proxy Voting.

 B.) What does this new rule mean to a CFO?   Numbers, Numbers, Numbers.  Now all shareholders will be holding management more accountable on a quarter to quarter basis.  Management may be in the untenable situation of being afraid to carryout good long term strategic plans because in the short term the plan does not produce immediate results or has a temporary negative impact due to implementation costs.

C.) What does this new rule mean to a CFO?   On the positive side, CFOs who have been in the position of having to tell the CEO and Board of Directors….NO, now have a powerful ally in the shareholders.

For a good summary of how the Amendment to NYSE Rule 452 may affect your corporation read:  Willkie, Farr, & Gallagher, LLP: Discretionary Voting by Brokers Prohibited in Director Elections

Read the SEC Announcement at http://edgar.sec.gov/rules/sro/nyseamex/2010/34-61292.pdf

20 Questions for determining whether a Contractor is a W-2 vs. 1099 Independent Contractor

By: Tracy Levine, President, Advantage Talent, Inc.

Becoming an Independent Contractor is a great way for Executives in transition to earn money in this tight economy. For Corporations that have downsized and need help, Executive Consultants can be the answer. However, it is important that Companies engage these Consultants correctly. The IRS and DOJ are cracking down on employers who claim contractors as 1099 contractors when they are not. There is much more to a contract than negotiating the hourly rate. When negotiating a contract, it is important to consult the appropriate professionals, such as, an attorney and/or a tax accountant or go through a Executive Staffing firm. In fact, under the IRS Code most Financial Executive Consultants do not qualify as 1099 Contractors!

Employee status under common law. Generally, a worker who performs services for your Company is your employee if you have the right to control what will be done and how it will be done. This is so, even when you give the employee freedom of action. What matters is that you have the right to control the details of how the services are performed. If an employer-employee relationship exists, it does not matter what it is called. The employee may be called an agent or independent contractor. It also does not matter how payments are measured or paid, what they are called, or if the employee works full or part time. (IRS Publication 15, Circular E, 2008 Pg. 8)” The IRS has provided examples of what is and is not a W-2 Employee vs. a 1099 Independent Contractor.

The corporation that classifies a W-2 employee as a 1099 Contractor faces the following fines:

*A breakdown of back tax penalties(http://tinyurl.com/5u0d):

15.30 % Social Security Tax (on income up to the cap, plus 2.9 % of income above that cap),

20.00 % Federal Income Tax, +6.20 %

Unemployment Insurance, 41.50 % of the contractor’s pay (IRS 3509).

If it is determined to be intentional, there can be jail time involved.

The Federal Government is not the only one cracking down on employers who misclassify W-2 Employees as 1099 Independent Contractors. Many states have become aggressive on preventing what they see as Corporations not paying taxes that are duly owed. In this economy where budgets are short at the Federal and State Levels, the agencies are demanding stricter adherence to employee tax laws.

Some of the red flags for the IRS include a former employee hired back as a 1099 Contractor. A contract-to-hire where the employee starts off as a 1099 employee then converts to a W-2 Employee. If someone is acting as a Contract Interim CEO, CFO or Controller for a company while the company looks for a permanent solution, or while someone is out on sick leave or maternity leave, under the IRS 20 Questions (see below) these situations would probably fail as a 1099 Contract Position.

According to information published by the IRS, around $64 million in taxes and penalties were collected from over 800 companies that misclassified workers in the most recent year reported. These numbers are only going to continue to go up as the IRS has promised to randomly audit several thousand companies. The Federal Government Accountability Office estimated that employee misclassification resulted in the underpayment of an estimated $2.72 billion in Social Security taxes, unemployment insurance taxes and income taxes in 2006, the last year for which figures are available.

It is important for both Companies and Interim Executives to set up the appropriate relationship in the beginning for the protection of everyone involved. In the current environment, now is not the time to be a do-it-yourself contract negotiator and leave out the experts. A full summary can be found at http://www.irs.gov/pub/irs-pdf/p15a.pdf .  If you fill out a Form SS-8  (http://www.irs.gov/pub/irs-pdf/fss8.pdf), the IRS will help you determine whether the contract employee should be classified as  a W-2 Employee or a 1099 Contractor.

For information on how Advantage Talent, Inc. can help you, please contact Michael Levine at Mlevine@AdvantageTalentInc.com.

The following is a list of 20 questions the IRS uses to determine if a worker is an independent contractor or employee. The answer of yes to any one of the questions (except #16) may mean the worker is an employee.

1. Is the worker required to comply with instructions about when, where and how the work is done?
2. Is the worker provided training that would enable him/her to perform a job in a particular method or manner?
3. Are the services provided by the worker an integral part of the business’ operations?
4. Must the services be rendered personally?
5. Does the business hire, supervise, or pay assistants to help the worker on the job?
6. Is there a continuing relationship between the worker and the person for whom the services are performed?
7. Does the recipient of the services set the work schedule?
8. Is the worker required to devote his/her full time to the person he/she performs services for?
9. Is the work performed at the place of business of the company or at specific places set by the company?
10. Does the recipient of the services direct the sequence in which the work must be done?
11. Are regular oral or written reports required to be submitted by the worker?
12. Is the method of payment hourly, weekly, monthly (as opposed to commission or by the job?)
13. Are business and/or traveling expenses reimbursed?
14. Does the company furnish tools and materials used by the worker?
15. Has the worker failed to invest in equipment or facilities used to provide the services?
16. Does the arrangement put the person in a position or realizing either a profit or loss on the work?
17. Does the worker perform services exclusively for the company rather than working for a number of companies at the same time?
18. Does the worker in fact make his/her services regularly available to the general public?
19. Is the worker subject to dismissal for reasons other than non-performance of the contract specifications?
20. Can the worker terminate his/her relationship without incurring a liability for failure to complete the job?

www.AdvantageTalentInc.com

A Shift in the Burden of the Liquidity Crunch

Liquidity is tight.  CFOs are doing whatever they can to keep a reserve of ‘dry powder’ cash.  This includes stretching account payables as far as possible, even if it means alienating some long term vendors.  Many vendors have been slammed by a surge of unpaid bills.  Now these same companies are receiving notifications that customers are going to take longer to pay.  The following is typical of the wording included:

“We are changing our payment policy to 90 days effective (Month/Day), 2009. Please plan your cash flow requirements accordingly.”

                With these two simple sentences, the CFO of one company is effectively sharing the credit pressure with another CFO.  Changing the payment policy puts additional pressure on the vendor to increase their bank borrowings and to increase the timeframe in which this company takes to pay their vendors. An end to this cycle does not seem to be possible in the near term, as the economy continues to experience negative momentum.  As a result the accounts receivable DSO (days sales outstanding) will continue to increase, and an associated increase of time to pay vendors.  To make this less painful for all parties involved, CFOs are taking steps to improve their partnerships by being open as to why the action of stretching the payment cycle is being taken.  Sending a clear message that the steps are not arbitrary and will not be forever goes a long way.

By: Tracy Levine, President, Advantage Talent, Inc.    TLevine@AdvantageTalentInc.com

Dashboards:Managing the Information Flow for Meaningful Strategic Planning

Ultimately, it is up to the CFO to make sure that the financial information that is shared with other members of the Executive Management Team, the Board of Directors or the Private Equity Group accurately reflects the true health of the company and the performance of the company so that relevant strategic planning can be implemented.  To help streamline the information and to have a more timely flow of information, many companies are using Dashboards with varying degrees of success and satisfaction.

A good dashboard delivers information in a customized manner that is tailored to the industry and the individual company.  Effective dashboards all have the following characteristics: 1.) Includes meaningful key performance indicators; 2.) User friendly summaries that are timely and transparent so that management can be proactive instead of reactive in running the business; 3.) Allows management to use a collaborative approach to create best practices; 4.) Effectively and accurately tracks performance indicators, such as, profitability, backlog, cash flow requirements, inventory levels, receivables management, etc.

Some of the red flags of an ineffective dashboard are the following: 1.) Reams of data that provides minimal insight; 2.) Lack of ability for customization which is particularly a problem for businesses that have grown rapidly through acquisitions where each subsidiary is using a different system; 3.) Excessive readjustments to information, incomplete information or incorrect information that renders the reports minimally useful; 4.) Lack of buy in by management of the importance of assuring the information is entered in a timely manner.   Most managers are expected to do more with less time and resources.  They are forced to prioritize their work and filling in the information for the dashboard rarely makes it to the top of anyone’s list.  This is particularly true of sales management which is typically paid on closing deals not on the amount of reports that are filled out.  Getting buy in by others and showing them the value of participating is vital to gathering complete financial data.

Cost Cutting without Sacrificing Human Capital

In the current economy, corporations are asking Senior Management to take a closer look at the bottom line and cut costs.  This creates a koan for the CFO.  The dismal state of the economy has necessitated that corporations eliminate jobs for short term survival and economic health.  A global approach using cold hard numbers and math is the deciding factor on the percentage of jobs that have to be eliminated. 

A common concern among CFO’s is how do you keep from decimating and sacrificing the company’s human capital that will be needed when it is time to turn the company in a positive direction or to support growth when the economy rebounds.

Companies are taking the follow actions to reduce cost without sacrificing the human capital that they had already invested in developing.  The following were some of the steps being taken: 

1.) Reducing work week hours;

2.) Implementing partial month furloughs;

3.) Creating situations where employees can job share; and

4.) Reducing the pay of employees.   

These measures save money for the company while allowing the company to retain more of its human capital.  However, it creates a unique environment that management has to address.  Many employees just see these steps as a precursor to the next reduction in force.  Senior Management needs to clearly communicate their vision for the future of the company and how the employees are an integral part of this success.

The Financial Professional’s Role in Communicating with the Sales Organization

        Many managers from both the Accounting Team and the Sales Team have made the same observation.  Communication between Accounting and Sales is often like trying to mix oil and water.  It’s not done easily.

        In this case, flexibility is ‘king’ when it comes to communications between Accounting and Sales.  The Financial Professionals thought process is ‘I need all of the important information, at the right time, in the right format, and it must be accurate’.  The sales manager and members of the sales team think ‘I’m being held accountable by management to hit my sales numbers … forms, what forms; I don’t have time for paperwork?’

         The Accounting team must become more flexible in their communications with the Sales teams, and must in fact ‘sell’ to the Sales team why certain information provided by the Sales organization to Accounting is required to fully support the Sales organization, and that Accounting can help Sales teams sell more products/services when information flow is effective.  The Accounting team needs to know which vendors to pay first to assure there is adequate inventory to sell during the next spike in demand.  Financial Managers also need to understand sales trends so that requests may be made to the bank for funding of special sales initiatives.  Without good information flow, both Accounting and Sales will be frustrated, and the Sales team will sell less than they otherwise should.

Personal Bankruptcy and its effect on your ability to get a job

By Tracy Levine, President, Advantage Talent, Inc.

Nothing is more taboo to discuss for a Financial Executive than personal bankruptcy.  It seems to many that somehow it is more shameful than the CEO down the street who also filed for bankruptcy. Unfortunately, for many Americans and particularly financial executives personal bankruptcy has become a reality. As the news reports show, people across the board have been directly affected by brokerage firm closings, bank closings, company closings or company downsizing. Home foreclosures continued to rise throughout the end of 2008 and beginning of 2009. Economists are not predicting a quick recovery.

For anyone who has applied for a financial position recently you know that it has become common practice for firms to run a “routine” credit check. It is my understanding that Section 525 of the U.S. Bankruptcy Code prohibits discrimination based solely on bankruptcy.  Typically, no one will come right out and say that they will not consider a candidate based on personal bankruptcy but will come up with numerous other excuses that are not prohibited by law.

Traditionally, companies are not keen on hiring a financial executive that has gone through personal bankruptcy. There is the perception that somehow the personal bankruptcy has a direct correlation to a persons’ financial acumen and that a company is at a higher risk of white collar crime by an employee that has filed for bankruptcy or that a bankruptcy directly correlates with the person’s ability to be an intelligent effective manager of the company’s assets . There are no statistics to bear out either of these erroneous beliefs.

As we have seen with the executives of Bear Stearns and Lehman and the alleged ponzi scheme orchestrated by Madoff, a good credit rating does not equal financial acumen or correlate with extreme honesty and effective management of the company’s assets.  In the current economy, corporations need to shift their prospective or miss out on possible exceptional candidates. Candidates need to be up front and honest about personal bankruptcies with a short explanation and then focus on what skills they bring to the table. Honesty goes a long way in overcoming obstacles.