Thursday, December 30, 2010

Change (December 2010)

In my practice, one of the things that I often deal with is change . . . or sometimes lack thereof. I see companies at both ends of the spectrum when it comes to change. Some are in a constant state of flux – desperately trying to change in order to find something that works. Others are so afraid of change they won’t try anything new. I talked a company during 2010 uses green ledger sheets for their accounting! They are wedded to the past.

Some companies are trying to do a little bit of everything and aren’t doing anything well. This is almost always a recipe for disaster. When companies don’t commit to goals and objectives it is easy for them to lose their way. They may start down a path only to change direction before they are able to see results. They are always “sticking their toe in the water” to gauge the temperature but never diving in and committing to an idea or objective. They are dabbling. They have tried to change so many times that future attempts are lost on the organization. These are the companies that are in a constant state of flux. Chaos rules.

At the other end of the spectrum are companies (usually guided by a single majority owner) that are afraid of committing to change. They continue to do things the way they have always done them. As a result, their market share erodes or they end up owning 100% of a shrinking market. Their competitors have walked away. In rare cases this may be a lucrative spot, but in most they are serving a handful of customers who have refused to change as well. Often, the company is serving the current owner but doesn’t have a robust future (and won’t unless the next generation of management shakes things up and moves the company forward).

It’s that time of year where most companies are wrapping up 2010 activity and thinking about 2011. It’s a natural time to ask oneself what you want the company to look like at the end of 2011. Will you be satisfied if your company looks the same at the end of next year as it does today?

In order to truly be successful, one has to commit to an objective. If you’re a company that dabbles and is in a constant state of flux, it’s important to decide on a few key priorities and stick to them. On the other hand, if you’re one of those companies that are afraid to change, I’d encourage you to start making incremental changes in order to build momentum. Meaningful change is hard. But anything worthwhile comes at a price.

What do you want to change during 2011?

If your business could benefit from fractional CFO services, I would welcome the chance to speak with you. Please give me a call at (314) 863-6637 or send an email to

your cash is flowing. know where.®

Ken Homza
Copyright @ 2010 Homza Consulting, Inc.

Tuesday, November 30, 2010

Don't Be Too Much Like The Big Guys! (November 2010)

For small companies, emulating the practices of “the big guys” usually has value. There is a reason why the big guys have been successful and gotten big. But they should only be emulated to a point. They have resources that the small guys don’t and that needs to be considered.

Financial statements should be treated differently in big companies vs. small. Yes, in both you are going for predictability and understanding, but in small companies, they must be simpler and easier for the management team to understand. They must also cause focus.

In big companies, you have a finance staff to understand, explain, provide variance analysis and make sure people are watching. Despite some notable exceptions (Enron & WorldCom, for example) big companies are actually pretty good at this. Internal financial analysts spend their days understanding changes and variances and can report to senior management. They watch the income statement, balance sheet, statement of cash flows and understand how these three statements relate to each other.

Small companies are different; they have neither the staff nor the depth of understanding. Accordingly, their financial statements must provide more focus on key issues. Where big companies often use the balance sheet to smooth certain income statement trends, small companies should use the income statement to shine a light on period to period variances.

In big companies, there is a reserve booked each period for bad debt. Usually this is a percentage of sales and insulates any month from a large bad debt write-off. If managed properly, this is an appropriate practice. In a small company, this same practice takes the focus off the income and onto the balance sheet (which unfortunately, receives only minimal attention). While it helps match revenue and expenses, it also tends to obscure bad debt issues which management needs to understand so that they can manage credit and customer relationships. Before deciding how to treat an issue like this in your company, consider the management team and their understanding of the issue.

Another example I saw was a company that accrued legal expenses monthly (buried deeply in the SG&A line). The result was that they actually used the accrual account to put money onto the income statement when needed. They were managing results. Not only were they fooling the Board, but they were fooling themselves. They didn’t understand their own financial statements. I stopped this immediately. While I use this practice for predictable expenses (dividing the known cost of the annual audit by 12 is a good example), doing the same thing with an unpredictable item such as legal expenses hides the true cost from the income statement and makes a cost that is already difficult to control virtually impossible to control.

The bottom line is that financial statements are a tool. The CFO or Controller has to consider management’s expertise before making decisions about the best practice of looking at monthly statements with the goal of improving that understanding over time. Of course, at year end, GAAP (Generally Accepted Accounting Principles) prevails, and monthly statements should follow GAAP as closely as possible – but with an eye toward simplicity, transparency and understanding.

If your business could benefit from fractional CFO services, I would welcome the chance to speak with you. Please give me a call at (314) 863-6637 or send an email to

your cash is flowing. know where.®

Ken Homza
Copyright @ 2010 Homza Consulting, Inc.

Sunday, October 31, 2010

Competing Silos (October 2010)

Last month, I wrote “Is Ignorance Bliss?” which was about the effect that a lack of perspective on a company’s financial situation has on an organization. One of the side effects of this is silos within an organization. While the lack of financial perspective isn’t the sole cause of a silo-ed organization, I certainly believe it is a contributing factor.

“The silo effect” is people working only with their own or departmental goals in mind, often to the detriment of other departments or the entire organization. I almost always find that there is a lack of perspective on financial performance for the organization as a whole. People simply don’t understand the “bigger picture”. It’s often not their fault. No one has ever given them the data and facts, even in a limited fashion.

Rather than pulling together and fighting against the competition, people end up fighting with each other for internal resources. Victories are about winning vis-à-vis other departments. People consider it a “win” when they get to add a person and another department doesn’t. When they get above average raises for their people. Or when one department gets new computers while another doesn’t. These “victories” are often based upon the political influence of department heads (i.e. how effectively they lobby their points) as opposed to the optimum allocation of resources within an organization. This is destructive to the organization, causes further competition, resentment by the “losing” departments, and contributes to an apathetic attitude toward the decision making process.

I believe people are naturally competitive. If that is true, then why not give them someone to compete against that is healthy to the organization? Otherwise that competitive energy will end up hurting the organization rather than helping it. Employees will end up competing with each other as opposed to your competitors in the marketplace.

There is story that at one point in the history of Anheuser-Busch they launched a “Kill Miller” campaign. Think about that. Two words and everyone in the company knew the objective. Moreover, it could be measured in terms of market share. Ultimately, everyone would know how the company was doing in its quest.

I spent five years at LensCrafters. The leadership team there clearly knew how to focus the organization’s competitive juices toward company objectives. There were times when it was simply inspiring to see the entire organization focus on an objective . . . and exhilarating to be part of accomplishing the goal.

If it is a given that people in your organization are going to compete (and I believe that to be the case), then give them something to compete against that is healthy to the organization. Make sure they know that the true competition is about winning customers in the marketplace and providing better products and services than the next guy. Not about who gets a new desk or office chair or which department gets a slightly bigger share ot the raise pool.

If your business could benefit from fractional CFO services, I would welcome the chance to speak with you. Please give me a call at (314) 863-6637 or send an email to

your cash is flowing. know where.®

Ken Homza
Copyright @ 2010 Homza Consulting, Inc.

Monday, September 27, 2010

Is Ignorance Bliss? (September 2010)

There is an old saying, “Ignorance is Bliss?” But is it really? I often see key managers in organizations operating with little or no knowledge of the company’s financial situation. While this may allow them to go about their duties without the burden of understanding the financial position of the company, it doesn’t allow them to help the business as much as they should.

While I’m not suggesting that everyone in the organization have a detailed understanding of financial performance, it is important for key managers to have a working knowledge of the financial facts so that they can make business decisions with that perspective in mind. Too often (particularly in poor performing organizations), I see companies where the CEO tries to shelter the rest of the organization from dealing with the facts.

On the flip side, successful organizations tend to share financial performance measures much more broadly than do poor performing organizations. I don’t think this is coincidence. Nor do I think it is because successful organizations are proud to share their results while poor performing are ashamed to do so (although that is likely true). I think there is a cause and effect relationship.

Organizations that find a way to share financial performance measures and, more importantly, reward employees for overall performance, get better results. Employees throughout the organization can work toward a common goal and have a financial perspective (if not a detailed understanding) for decision making. They better understand why management takes certain actions and can make decisions that are consistent with those of senior management.

If the “grass roots” of the organization has no appreciation for the financial performance of the firm, you often find them making decisions that are in direct opposition to those that more senior management is making. Nowhere is this more apparent than in struggling organizations where employees are “empowered” to make spending decisions but lack the proper context with which to make those decisions.

Imagine trying to row a boat with other people if there was no agreement on which direction you wanted the boat to go. How effective do you think you would be compared to a boat with people all rowing in the same direction at the same pace?

Think about your organization. Is ignorance really bliss?

If your business could benefit from fractional CFO services, I would welcome the chance to speak with you. Please give me a call at (314) 863-6637 or send an email to

your cash is flowing. know where.®

Ken Homza
Copyright @ 2010 Homza Consulting, Inc.

Tuesday, August 31, 2010

Are You Busy or Bored? (August 2010)

Are you busy or bored at work? It’s a question worth asking and the answer can probably give you insights into your company’s financial position even if you’ve never seen an income statement or balance sheet.

If you’re busy (and there never seems to be enough hours in the day), odds are that your company is staffed appropriately and is profitable. This is especially true if you look back several years and realize that you and those around you are doing more with less, have improved processes, and are more efficient than you were several years ago. Frankly, this is what it takes just to stay even with the competition in the marketplace.

If you’re bored . . . and you can tell that others around you are bored at work, chances are that your company is struggling financially. Regardless of your role, you’d better be busy enough that you’re adding value well beyond your salary. And I don’t mean 10% or 20% more . . . that’s not even enough to cover employment taxes and fringe benefits. I’m talking about adding value of 2x, 3x, 5x or even 10x your salary. Depending upon your industry, that’s what it takes to pay for corporate overhead, capital investment, and to earn a fair return for the shareholders who have invested in your company.

If you and those around you are bored, you’d better do something about it because either one of two things is going to happen. Either someone is going to realize it and single you out as a cost reduction opportunity or your company will not survive very much longer. It may take months, even years, but eventually the company will wither and die. Even if it doesn’t go out of business completely, it will be a lifeless shell where people are showing up but are just going through the motions. Sooner or later, however, chances are that you’ll end up unemployed.

I recently heard about a factory worker who was frustrated about his plant closing. At the same time, he admitted to being bored at work and “hardly working” for years. What’s amazing is that he really didn’t make the connection that it was the actions (or lack thereof) and those around him that brought about his state of unemployment. Sure, he held onto a job longer than he should have, but no company can survive a large percentage of unproductive employees indefinitely.

Whether you make twenty thousand, two hundred thousand, or two million dollars per year, you have to add more value to the business than you’re taking out in order for the company to survive.

So, as you go about your next work day, ask yourself if you are busy or bored? Regardless of the answer, ask yourself if there are ways you and your co-workers can add more value to the business? Adding value is the best way of assuring continued employment by working for a profitable company.

If your business could benefit from fractional CFO services, I would welcome the chance to speak with you. Please give me a call at (314) 863-6637 or send an email to

Saturday, July 31, 2010

Are You Working On The Business? (July 2010)

There is a question that often gets asked, particularly of small business owners. That is: Are you working “on” the business or working “in” the business? While the distinction may sound small, it is critically important.

Too many small business owners find themselves working “in” the business. This means they are working on day to day operational issues. They are interacting with customers, employees and vendors. They are dealing with near term financial issues. They may actually be responsible for a major functional area of the business rather than having someone take care of it for them and only involve them in key decisions.

While resources are always tight in small businesses (they are also tight in well run large businesses), if a business is to rise to the next level, a substantial amount of time must be spent thinking and acting on the issues that will help the business get there. This is what is generally meant as working “on” the business.

Working on the business is about opening up new sales & distribution channels as opposed to chasing the next sale. It is working with your team to develop a long range strategic & financial plan. It is understanding the sustainable growth model of the business (see last month’s newsletter). It is having discussions with the Board about forming strategic alliances that could help the company in the long term. It is thinking about where the market is going and being ready for (or leading) marketplace shifts that you see occurring. It is about understanding what the customer needs, how they perceive your product or service against those needs, and how you can deliver better against any gap. It is about understanding the overall competitive landscape. And it is about understanding the enterprise value that you are creating.

Obviously, I could go on and site countless examples of activities that have more to do with working on the business than in the business. The key point, however, is that unless the CEO and top management team spend time and energy working on long term strategic business issues, they are likely to find themselves doing the same thing over and over year after year with about the same result. A good business doesn’t stand still. It is always striving to move forward.

When resources are tight and time is limited (both of which are usually the case) it is always difficult to find time for issues which are don’t impact the business today or tomorrow. But without the foresight to focus on the “the bigger picture”, it is unlikely that the business will move forward in any meaningful way.

Ask yourself: What you are doing today which will alter the course of your business over the next three to five years? If the answer is “nothing” then carve out the time to tackle some of the longer term issues that are important to the business. You’ll be glad that you did!

If your business could benefit from fractional CFO services, I would welcome the chance to speak with you. Please give me a call at (314) 863-6637 or send an email to

Wednesday, June 30, 2010

Sustainable Growth (June 2010)

Some time ago, I worked with a formula called the sustainable growth rate model. Generally, it takes a company’s profit margins, the amount it wishes to retain for growth (as opposed to pay out as compensation to management or dividends to investors) and compares this amount to the projected net assets required to support growth. It also factors in the company’s leverage ratio – how much it finances through debt versus equity.

For those of you who haven’t thought in mathematical equations since being tested on them at the end of the semester (myself included), let me try to put that in plain English. Generally, the after tax profit margin minus dividends paid out to shareholders leaves capital available for growth. Every dollar of growth requires so much capital to support it. Depending upon the life cycle of the company, this may be made up of funds for working capital (accounts receivable for example), or it may be capital expenditures for capacity expansion. Whatever the specific make up, the point is that there is a certain amount of growth a company can support based upon internally generated funds. Further, most companies operate with a certain ratio of debt and equity (as a company grows, it can generally support more debt). Growth beyond that must be supported by additional outside capital either by issuing new equity or increasing the leverage of the firm. Whether the company chooses to fund expansion with debt or equity will determine the amount of leverage and therefore financing risk that the business takes on.

Obviously, just because a formula determines a growth rate doesn’t mean a company can actually grow at that rate. Market and competitive factors as well as the company’s management team are critical factors. The formula is simply meant to suggest the maximum rate at which the company can grow given certain financial assumptions.

The rate at which a company grows and how it chooses to finance its growth, however, is an issue that every company must deal with one way or another. Either they choose to grow with internally generated capital, to issue new equity, to borrow to fund growth, or ultimately not to grow beyond their comfort zone. Some companies spend time thinking about these issues during their strategic planning process. Others may simply operate within their comfort zone which is an implicit decision about leverage, growth and risk tolerance guided by the ownership/management group.

If you believe you have growth opportunities ahead of you, it’s worth spending some time working through various growth assumptions and how those might be financed over both the short and long term.

If your business could benefit from fractional CFO services, I would welcome the chance to speak with you. Please give me a call at (314) 863-6637 or send an email to

your cash is flowing. know where.®

Ken Homza
Copyright @ 2010 Homza Consulting, Inc.

Friday, May 28, 2010

Differentiate (May 2010)

How do you differentiate your product or service? Even better, how do your customers perceive the differentiation between you and your competitors? These are important questions. And you should answer the first before you attempt to answer the second. It will give you a basis for determining whether you perceive your business in the same way as your customers. Don’t be surprised if your customers perceive your product or service differently than you.

And in case anyone reading this has forgotten: “The customer is always right”. I can think of a number of businesses who were arrogant enough to believe the customer “didn’t get it”. Frankly, they may have been right. But it doesn’t matter; the customer took their dollars elsewhere and those arrogant businesses exist no more.

Find out why customers use your product or service and how you can improve upon it. What keeps them coming back . . . and what will bring them back more frequently or cause them to recommend your business to someone else?

Differentiation is important in both good times and bad. In good times, it allows companies to enjoy higher volumes, profit margins, and expansion. In bad times, it can be the difference between life and death. Generally, players that are able to differentiate themselves from their competitors survive. Customers find a reason to go there (in good times and bad). Companies that deliver a “me-too” experience don’t build customer loyalty. In good times, customers might try someplace else in the hopes of having a better experience. In bad times, customers are all the more tempted to price shop or forgo their purchase altogether.

Think of some recent closures and ask yourself if they differentiated in the marketplace.

Linens-N-Things closed while Bed Bath & Beyond survived. Given the lack of differentiation between the stores, it’s not surprising that one of them was left behind. From a consumer perspective, I can’t think of a reason to favor one over the other.

I think the story is similar with Circuit City who closed and Best Buy who survived. Two big box retailers were fighting in a crowded space. From my home, I could get either one easily but I can’t think of a single compelling reason to have chosen one over the other.

Does anyone remember Hechinger’s of Builder’s Square? They were two of the earlier big box home improvement centers who were beaten by competitors (Lowe’s and Home Depot) who, as far as I can tell, simply built bigger boxes.

A few of these examples continue to exist as on line retailers, but they are mere shadows of their former selves. In any space, businesses need to earn consumers dollars and therefore the right to exist. Without a strong differentiation from competitors, a business is much more vulnerable and therefore more likely to suffer from pricing pressures, loss of market share, and eventual failure.

If your business could benefit from fractional CFO services, I would welcome the chance to speak with you. Please give me a call at (314) 863-6637 or send an email to

your cash is flowing. know where.®

Ken Homza
Copyright @ 2010 Homza Consulting, Inc.

Thursday, April 29, 2010

Set The Agenda (April 2010)

If you don’t set the agenda, one will be set for you. Guaranteed.

Even if you do take the initiative and set an agenda, there is some chance that the boss will overrule you on some or even all of it, but at least you have taken a shot. Whether you’re in finance or any other discipline it’s important to walk in (to a meeting, your Monday morning, whatever) with a plan. To do otherwise is to let the thoughts of others or the events of the day control you. Not a good idea.

Instead, take a few moments or as long as is necessary to set the agenda. Before you start your day or walk into a meeting, put paper to pencil and make a plan. It will both show initiative and forethought. Ultimately, those are qualities that people are looking for in leaders.

Think about how a meeting might turn out differently under these two scenarios.

Scenario 1: You walk into a meeting to discuss your plan for the week, month, year, project, etc. Only you have no plan. The next thing you know the boss is throwing ideas your way. Some good -- some not so good. Or worse, some good, some really bad. At this point, you’re stuck. You either accept those ideas or you end up arguing or negotiating about them. In either event, you’ve lost the opportunity to influence control over your work and your time.

Scenario 2: You walk into the same meeting with your own agenda. You have a plan and the boss sees that you took the time to think about business needs and priorities. Whether the boss agrees with all of your ideas or not, you’re likely to walk out with 80% of your plan in place. In fact, if the boss is busy, he or she might leave it alone if they disagree with small parts of it. They’ll move on to things are higher priorities for them and you’ll end up with your plan accepted in its entirety. And even if they disagree with most of it and make substantial changes, they’ll likely respect the fact that you cared enough to present your thoughts.

Always come forward with your agenda. In the best case, it gives you a chance to exercise greater control and take action based upon what you think is in the best interest of the company. In the worst case, it lets those above you and around you know that you are acting like a leader. Think about it, what do you want from your employees? Someone to come into your office and say: “Boss, what should I do?” or “Here’s my plan.” The answer is obvious.

If your business could benefit from fractional CFO services, I would welcome the chance to speak with you. Please give me a call at (314) 863-6637 or send an email to

your cash is flowing. know where.®

Ken Homza
Copyright @ 2010 Homza Consulting, Inc.

Tuesday, March 30, 2010

Assess The Situation (March 2010)

I am all for action. Frankly, my bias is toward digging in and starting work rather than developing a detailed action plan of what needs to be done. That being said, in solving any problem you need a general direction of where you are going and the facts about any problem that you are trying to solve.

Some years ago, I saw a technology executive in action during several “moments of crisis”. When all of those around him were scurrying about, he would retreat to his office for some peace and quiet. At first, it appeared that he wasn’t engaged. But quite the opposite was true. He was trying to assess the situation before taking action. Generally, he went through the process of trying to understand: What do we know? What don’t we know? What do we need to know? What facts are available to us that we don’t yet have? What won’t we be able to know no matter how much time we spend trying to find out?

It was with this background that he would develop several theories about what was wrong and what actions he could take to get more information to help him better understand the problem. It was from this that he started to work on solutions.

By comparison, others around him were making assumptions about the cause of the problem and proposing solutions based upon those assumptions. Often the actions they took did nothing to solve the problem and only caused a delay as their “solutions” were implemented. When they failed to solve the problem, it was back to the drawing board (or in this case, guessing board). The end result was that it took longer to solve the problem than it should have.

Whenever you’re dealing with a problem, it’s important to get a handle on the facts. While it might be uncomfortable to stop and assess the problem in the midst of a crisis, it is far more efficient than trying solutions that may or may not be appropriate under the circumstances. That way, you can be sure that your actions are appropriate and are improving the situation – not just providing action for action’s sake!

If your business could benefit from fractional CFO services, I would welcome the chance to speak with you. Please give me a call at (314) 863-6637 or send an email to

your cash is flowing. know where.®

Ken Homza
Copyright @ 2010 Homza Consulting, Inc.

Monday, March 1, 2010

To Whom Are You Accountable (February 2010)

One of the trickier problems for smaller businesses is accountability of “the boss.” Whether it is a sole proprietor, family owned business, or one that is majority controlled with “silent” minority partners, accountability is often a real issue. I’ve found that organizations where there is a strong measure of accountability perform better than those where accountability is weak.

While it might sound great to some to operate in an environment where they are not held accountable to a higher authority, the truth is that accountability drives results. It is easy to allow things to slide or not be as challenging as one should when no one is “looking over your shoulder.” It happens to all but the most driven of us.

I’ve worked (both as an employee and a consultant) for both kinds of organizations. Ultimately, I would much rather deal with the stresses of accountability than those that typically come without it, which is an organization that underperforms.

In any organization, it’s important for the leader to hold his or her direct reports accountable, for them to hold the next level down accountable, and so on down the line. The problem in an organization where the top person isn’t accountable is that it starts to set a precedent. That person doesn’t feel the pressure of accountability to a higher authority and over time this lack of accountability can creep into the organization. Sooner or later, you have an organization where people are showing up, but aren’t necessarily driven to improve performance day in and day out.

So, what should a business owner or manager do if no one is holding them accountable? They need to create accountability. While this can be as formal as having a Board of Directors, it can be as informal as finding trusted advisors or mentors who can provide a level of accountability on a monthly or quarterly basis.

One of the roles that I often play for my clients is to be this accountability factor in organizations. I either do this directly or by ensuring that there is regular reporting and transparency to the Board or other stakeholders.

If you are serious about improving your business, I’d suggest that you create an accountability framework for yourself. If you’re not ready to reach out to others, create a list of “MUST DO” items (not “should”, “want” or “hope” to do but “MUST” do) and hold yourself accountable for the results. I’d be surprised if you don’t see an improvement in your business performance after the first quarter. From there, things should only get better.

If your business could benefit from fractional CFO services, I would welcome the chance to speak with you. Please give me a call at (314) 863-6637 or send an email to

your cash is flowing. know where.®

Ken Homza
Copyright @ 2010 Homza Consulting, Inc.

Water The Plants! (January 2010)

Believe it or not, one of the first things that I look for when I walk into an office is whether anyone waters the plants? While I care about the health and welfare of the plants, what I am really looking for is whether anyone goes above and beyond to take care of little things that are usually not in anyone’s job description. I think it immediately gives one a sense of an organization.

In any company, there are many items which fall outside of job descriptions. No job description anticipates everything that happens (or should happen) every day. And while most job descriptions have an “all other” category, it’s how people actually interpret those catch all statements that determines how an organization functions.

Last month, I wrote about how small mistakes, often at the lowest levels of the organization, can take significant time and energy to fix (and usually at a much higher level in the organization). The same is true not just of mistakes, but of day to day activities that are necessary for an organization to function. Ultimately, it’s people taking care of issues early and preventing them from becoming major problems that allows everyone in the organization to perform at the highest possible level. The further down the organization chart that a necessary activity can occur or a problem solved then the more effectively that organization is able to operate.

Organizational performance is governed by the performance of every individual within it. It doesn’t matter how great a sales superstar you might have in your company, if the people responsible for delivery aren’t doing so effectively, customers will eventually get tired of dealing with the organization’s incompetence and find another source. And if that sales superstar has to step in and “fix problems”, the time spent doing that can’t be devoted to making more sales.

Everyone in the organization only has so much bandwidth. Every time anyone is forced to deal with an issue that could have been handled further down the organization, then they are not operating at their highest and best use. This limits their effectiveness and the company’s ability to achieve its full potential.

As is usually the case, I could cite countless examples of people being forced to dive down into the organization to deal with something that could have (and more importantly, should have) been handled by another resource. As a fractional CFO, my job is to not only to oversee the finance function, but to take things off the plate of the CEO and other executives allowing them to manage items that they are uniquely qualified to handle.

Of course, by this point, it should be obvious that watering the plants is just an example (albeit a visible one) of day to day functions that need to happen smoothly in order for an organization to be achieve its potential. So, when you walk into your office next, do more, so everyone else can too!

If your business could benefit from fractional CFO services, I would welcome the chance to speak with you. Please give me a call at (314) 863-6637 or send an email to

your cash is flowing. know where.®

Ken Homza
Copyright @ 2010 Homza Consulting, Inc.

Strive For Perfection (December 2009)

Everyone makes mistakes. I used to work with someone who said: “Show me a man who doesn’t make mistakes and I’ll show you a man who’s not doing anything.” While, true, this is no reason not to strive for perfection. While some mistakes are harmless and can even go unnoticed (an insignificant typo, for example) others are costly.

If one could take the income statement for a business and capture “mistakes” (just like we capture rent or any other line item), I think everyone would be surprised by the result. Mistakes have a ripple effect almost no matter where they start in the organization. Unless caught immediately, there is often substantially more work involved in fixing the problem than in performing the original task. Furthermore, the resources required to fix the mistake are usually “higher up the food chain” and are therefore more expensive. If we could calculate the cost of mistakes, we could make thoughtful decisions about how much to spend to address the various underlying issues. Unfortunately, unless you are in a manufacturing environment that tracks rework costs, the vast majority of the expense of fixing mistakes is “swept under the rug.”

As you think about improving the effectiveness of your organization, think about the source of mistakes and what you can do to eliminate them. While I’m tempted to cite some examples of costly mistakes I have seen over the years, I certainly wouldn’t want anyone to recognize themselves and take this article as an indictment of their performance. Moreover, I don’t want to give the impression that I’m above a mistake from time to time. No one is.

Since it can take hours to fix a mistake that often could have been prevented with a few extra minutes, it’s almost always worth the time to do some root cause analysis. Once the cause is understood, then “brainstorming” some ways to fix the problem is the next step. Below are some questions which are intended to provide some “food for thought” as you work your way through this process.

o Would a change to procedures help?
o Do mistakes stem from a particular vendor?
o Does a process need to be better documented?
o Does the person making the mistake know about the issue or are they in need of some feedback so that they can be aware of the problem?
o Is there a mechanical or technology fix that would identify the issue sooner or prevent it from occurring?
o Could someone inspect or review the work before it moves along in the process?
o Might a class or some training help the person doing the work?
o Is a change in staff necessary?

Obviously, this list isn’t all inclusive; rather it is intended to stimulate discussion.

I’d encourage every organization to take action to minimize errors in 2010 thereby improving overall business performance. The time and energy spent fixing errors can certainly be more productively deployed growing the business and better serving the customer.

If your business could benefit from fractional CFO services, I would welcome the chance to speak with you. Please give me a call at (314) 863-6637 or send an email to

your cash is flowing. know where.®

Ken Homza
Copyright @ 2009 Homza Consulting, Inc.

Only The First Two Digits Matter (November 2009)

I spend a fair amount of my time developing financial forecasts. As we approach year end, everyone is thinking about 2010. What are expected revenues? What changes will we make in our cost structure (either by necessity or choice)? What will the bottom line look like compared to 2009?

This effort is (or should be) one of collaboration. Generally, the finance person responsible for actually producing the forecast should be receiving input from sales, marketing, service delivery, administration, production, research & development, the executive team and perhaps even the Board of Directors with respect to their thoughts about the upcoming year (or perhaps multiple years). Furthermore, it is best that this input be when “everyone is sitting around the table” as opposed to being sent only to the finance person. This allows everyone the opportunity to challenge each other’s assumption and make sure that they are all on the same page. It’s important that if the plan calls for a ten percent increase in revenue versus the prior year, for example, that everyone is planning their resources accordingly.

As you move through your planning process (either as the person responsible for pulling together the forecast or a participant), it’s important to step back, think strategically and not allow oneself to get mired in the details. Think about what is happening within your company, the competitive environment in your industry, and economic factors generally.

Often, I like to say only the first two digits matter! Why? Because we are dealing with a forecast. By its very definition, it is an estimate and therefore wrong at least to some extent! The question isn’t whether the forecast is wrong, rather it is by how much? I have seen people spend an inordinate amount of time trying to be very precise in their forecast, but miss the big picture. Too often, I’ll see people develop extremely complex formulas to forecast a line item without thinking about the big picture. To develop a forecast without the benefit of the context of historical trends, volume, and “the bigger picture” in mind is a recipe for disaster.

While I don’t mean to suggest one should not “sweat the details”, it’s also important to keep in mind that time is a finite resource and it’s important to focus your efforts where they will have the most value.

If you are forecasting an expense line item of some $50,000, then the digits after the comma are neither material nor predictable. The same is true if you are forecasting a profit picture of $10,500,000 dollars. In this case, even though the potential value of whether that “5” ends up being a 1 or a 9 is significant, one’s ability to forecast it is relatively small. For new businesses, even getting the first digit of the revenue forecast right can be a challenge.

If you are paying attention to how your forecast relates to prior periods, percent to revenue, month to month trends, industry norms and external factors, then you’ll probably end up with a forecast that is reasonable. With these thoughts in mind, I wish you the best of luck in developing your 2010 plans.

If your business could benefit from fractional CFO services, I would welcome the chance to speak with you. Please give me a call at (314) 863-6637 or send an email to

your cash is flowing. know where.®

Ken Homza
Copyright @ 2009 Homza Consulting, Inc.

Too Many Lines (October 2009)

During the last couple of weeks, I’ve had the opportunity to review a few new income statements. What I saw was pretty typical . . . too many lines. Both had over 150 line items. It is clear that the information that I reviewed is not being used to manage the business. There is just no clear organization to the income statement.

The issue is less the actual number of line items than the fact that they are not subtotaled into any logical order. I organized one of these income statements into 23 lines. The largest expense item was for employee costs which accounted for 77% of total expenses (more about that later). My “all other” line item (I almost always have one of these) accounted for only 7% of total costs.

Income statements like the ones I describe often fail to use account numbers. Lacking account numbers, the usual default is that the income statement is organized alphabetically. Just what are the chances that the most important line items in any business start with “A” and the least important ones start with “Z”? Obviously, the answer is “very little”.

Capturing 77% of your costs in one line item provides no detail on the single biggest expenditure of the business. Knowing that 77% of your cost is for payroll doesn’t tell you anything about how those dollars are deployed across departments or activities.

I also see too many line items that just aren’t material to the business. Some are so small that they have only had a few hundred dollars of expenditures in them on an annual basis. As long as you can get to the detail, these should be grouped into a few larger accounts which will likely provide some month to month consistency for forecasting purposes at the same time as well as being easier to review each month.

Hare are a few thoughts about organizing financial information in a way that is meaningful to the reader (usually the executive management team). Ultimately, the goal of these statements is to be a tool. With that in mind, I’d suggest:

o Organize around your most significant costs – use cost centers rather than more line items if you want to understand costs by department.
o Know that you will have some miscellaneous costs, but as long as you can get to the detail, you don’t need a line item for every $200 item.
o Use account numbers to avoid confusion between income and balance sheet items.
o Talk to your accountant about where non-operating costs should be captured. Too often these end up in the middle of the income statement. Typical examples are interest expense and interest income (I frequently see the latter in the revenue category).
o Learn how to properly record payroll expenses; these are usually booked incorrectly every pay period and the outside CPA makes a correcting entry at year end. Why not book them correctly each payroll period?
o Book an estimated depreciation amount every month. Sure, there will be a true-up at year end, but you should know approximately how much fixed asset depreciation you need to cover each month.

If your business could benefit from fractional CFO services, I would welcome the chance to speak with you. Please give me a call at (314) 863-6637 or send an email to

your cash is flowing. know where.®

Ken Homza
Copyright @ 2009 Homza Consulting, Inc.

I Love A Good Audit (September 2009)

Last month, I wrote about the many questions that are part of our business day. To some extent, an audit is all about asking and answering questions about the financials statements of a business and whether or not they accurately reflect the underlying health of that business. The title of this article might surprise many because it actually stems from a comment someone made to me when I mentioned the audit process. They said “that sounds painful”. I suppose some people view the financial audit process as painful and in fact, I suppose that they can be in some cases. But I think there are three important factors to avoid this situation.

First, it’s attitude. One has to review the audit process as an important feedback loop. It’s an opportunity to have an objective review of the financial practices of the business and find opportunities for improvement. If your view is to defend every journal entry you have made throughout the year so that there are no changes, then the process will indeed be painful. If on the other hand, you view it as an opportunity to understand another point of view and reconcile and agree upon any differences, then it becomes about understanding your business better.

Second, it’s important to accept this feedback and work it through your subsequent year’s financial process. It makes no sense to have the auditors provide adjusting journal entries at the end of each year if you continue the same practices as before only to have the auditors make the same adjustments period after period. I recently came across a company that was making payroll entries incorrectly every two weeks. When I questioned this, the person said that the auditors gave them adjusting entries to fix it. I never understand the thinking behind this process. So I asked, “What if we spend thirty minutes and I show you how to do this correctly?” She said, “that would be great, no one’s ever offered to do that for me before!” To me, this makes far more sense. The person doing the work has learned something new and increased their skill set. Management gets a more accurate view of the financial results sooner (rather than waiting for adjustments) and we’ve taken an unnecessary piece of work away from the outside accountants thereby reducing fees.

Third, it’s having the “right” auditors for your company. The firm should be able to give your company the attention that you need and staff it with people who take the time to understand your business and are comfortable dealing with the level of complexity that your business entails. No one audit firm is right for all companies. The big firms tend to be overkill for the small companies and small firms can’t handle the complexity or staff to the needs of Fortune 500 companies.

If your firm isn’t helping you move forward, I’d recommend asking business associates for referrals and interviewing other firms. Many of the companies with whom I work are small to medium sized businesses with a fair degree of complexity and need a firm that will take the time to understand the business, can handle relatively complex issues, work hard to improve the process and are sensitive to costs. I’d be happy to recommend just such a firm to anyone who might be interested.

If your business could benefit from fractional CFO services, I would welcome the chance to speak with you. Please give me a call at (314) 863-6637 or send an email to

your cash is flowing. know where.®

Ken Homza
Copyright @ 2009 Homza Consulting, Inc.

Questions (August 2009)

My work day is filled with questions. Depending upon the day, the client, and the specific role I am playing, determines whether I am the one asking the questions or answering them. But in either case, the underlying motivation is almost always the same. How do we improve the business?

Perhaps every question sent through email, vmail, text message, IM, fax, memo, etc. ought to begin with the phrase “In order to help me better understand and improve the business, would you please . . .” But the truth is that almost none of them begin this way.

As a result, it’s easy for people become offended by some of the questions that are being asked and the implied “tone” in the questions. This happens to all of us, and can often be more frustrating than the question itself. With that in mind, it’s important to take a step back and remind ourselves of the actual motivation . . . to better understand or improve the business.

Most important business decisions are made by getting input from people with various backgrounds. The required expertise may include product, technical, finance, sales, marketing, manufacturing, operations, etc. Even in the same company, and even when that company is small, people from various disciplines often speak “different languages”. Terms, phrases, and abbreviations that may be clear to people who work together all day, may not be clear to people from other departments or to people who operate outside of the company walls (bankers, Board Members, consultants, and the like).

As a result, it’s critical that people do their best to answer questions in a way that is clear to the person doing the asking! This means taking extra time to provide information and detail that may be second nature to the people answering. It may also mean “taking people back” to the last conversation and reminding them of a few of the basic facts and context that they may have forgotten.

For example, I recently got a request to spend $5,000 on capital equipment at one of my clients. While this request was fairly well presented I still went back and asked how it tied to the capital equipment budget we reviewed the week prior before signing off. I wanted to make sure it was for a budgeted item and the amount was in line with our prior discussion.

It’s also important to keep in mind that the answers to questions tend to beget more questions. As people build their understanding of the business, they will continually drill down to the next level of detail. And if a question remains unanswered, it’s a pretty good bet that it will keep coming up until they are ultimately answered.

So, the next time that you are answering a business question (perhaps the same question more than once), remember that it’s probably worth a few extra minutes to provide the context needed so that the person asking clearly understands the answer . . . and even then, be ready for “the follow-up”!

Next month . . . “I Love A Good Audit”!

If your business could benefit from fractional CFO services, I would welcome the chance to speak with you. Please give me a call at (314) 863-6637 or send an email to

your cash is flowing. know where.®

Ken Homza
Copyright @ 2009 Homza Consulting, Inc.

OK to Pay (July 2009)

The normal process of approving accounts payable is for someone who actually received the goods or services to indicate that the invoice is both correct and that the goods or services were appropriately received. Often, this is often indicated by the phrase “OK to Pay” or simply “OK” written on the invoice. But what do these words really mean? I’ve come to learn that it really depends upon whose initials appear beneath the phrase.

In some cases it means “I have reviewed this invoice, it is accurate in terms of what we agreed to pay, the goods or services have been received, are of good quality, and as a responsible member of the company, I approve payment.” Of course, none of those “other words” are actually written on the invoice, they are just implied. When one of these crosses my desk, they are almost always paid within terms.

In other cases, “it means, “I am scribbling my name at the bottom of this invoice to get it off my desk.” Just like in the first case, those words aren’t on the page either, but trust me, they are very much part of the message. These invoices almost always get challenged which delays the payment process.

The trick for the finance professional is to know who provides them with the first answer and who is providing the second. If you are part of the payment chain, from the CFO to the accounts payable staff, it’s your job to figure this out.

Let me give you two examples that actually came across my desk within the last month. The first was lease termination paperwork that offered a buyout price of $5,900. I challenged this number and after one voice mail, I got a message indicating that they could do it at $4,728. This saved my client $1,172. In another case, we were closing out a maintenance contract and being billed for a 30 day notification period. There were some extenuating circumstances, so I asked the person who had indicated that the invoice was “OK to Pay” if he had challenged it. It was pretty clear that he had not. Again, a quick phone call went to the vendor. They agreed to waive the 30 day notification period saving $1,443.

The point of these two examples isn’t to toot my own horn (frankly, reviewing invoices before payment is one of the simplest things that I do). But it is a good illustration how just being “on the ball” can translate into significant savings for the company.

If you’re part of the finance group, learn which people are diligent about approving invoices and which are just going through the motions. And if you’re one of those people responsible for approving invoices, spend a few minutes thinking about the invoice before you initial it for payment. You might be the one able to save your company money.

If your business could benefit from fractional CFO services, I would welcome the chance to speak with you. Please give me a call at (314) 863-6637 or send an email to

your cash is flowing. know where.®

Ken Homza
Copyright @ 2009 Homza Consulting, Inc.

Watch The Stong Links Too . . . (June 2009)

Last month, I wrote about “The Weakest Link” and referred to the old adage “a chain is only as strong as its weakest link”. I made the argument that the same holds true in any organization and that those weak links can become bottlenecks and hold the entire organization back. Within a few hours of publishing that piece, I got an email from one of my readers. It said: “This nails it for me. I get frustrated because I get overloaded and I know others are waiting on me. I used to be able to keep up, but it's just too much any more.” At first, I laughed. But it immediately donned on me that not only can your weakest links be a bottleneck but so can some of your strongest links!

The person who wrote this is clearly a strong link. But the problem with strong links is that over time, too much pressure can be put on “their section of the chain”. Unlike a real chain where every link must support the same load, we all know that certain parts of an organization carry a bigger burden than others. So, while the answer for weak links is generally to get them out of the organization, the answer for strong links is quite different. Usually, it’s finding a way of restructuring their job so that they can add as much value as possible. In other words, they should be performing tasks that they are uniquely qualified to do, not something that could be delegated to others. This of course, assumes that the strong links are willing to delegate; sometimes they are not which can be the reason they are overloaded in the first place. Still, a solution needs to be found that keeps them from being bottlenecks.

More importantly, these people also need sufficient free time to be able to think about ways to improve both their own function as well as the rest of the organization. Generally they can offer helpful feedback to areas outside of their own. When a strong link is so busy that all he or she can do is to “keep up” with the day-to-day demands placed upon them, then they don’t have the free time to be able to contribute in a more meaningful way. The lack of “thought time” (which has become increasingly pervasive in the business world) both limits their contribution to the organization as well as their ability to grow their own career – this serves neither them nor the company well.

So while weak links can clearly limit an organization’s performance, so can over reliance on strong links. If you see someone in your organization that is generally a strong performer but is starting to become a bottleneck, then it is well worth your time to investigate further and understand both the root cause and what can be done to resolve the situation.

If your business could benefit from fractional CFO services, I would welcome the chance to speak with you. Please give me a call at (314) 863-6637 or send an email to

your cash is flowing. know where.®

Ken Homza
Copyright @ 2009 Homza Consulting, Inc.

The Weakest Link (May 2009)

Last month, I talked about the amount of risk that businesses take on through various initiatives. Today, I’d like to address a topic that people usually put into the risk category but which I think goes to the subject of business performance. Often, employers refer to the risks to the business if a certain individual were to leave the company. They’ll openly wonder about what would happen if a certain employee “got hit by a bus”. Well, in all of my years in the work force, I’ve been fortunate enough to never actually know of an employee who got hit by the proverbial bus. Of course, we all know that the real risk people are concerned about is what would happen if this person just “up and quit” one day with little notice. Again, this is something that rarely happens. Most employees are professional enough to give at least two weeks notice. There may be times when they do not want to do so, but they recognize that it is in their long term best interest.

The underlying concern, of course, is that one individual is the only one who knows how to perform certain critical business functions and therefore the organization is held hostage to him or her. These functions are usually not well documented nor understood by others. Unlike employees getting run over by buses, this is a phenomenon that I’ve seen time and again in the business world. And time and again, companies adapt. Usually, there is not so much that is a mystery that others don’t understand and the customary two week notice is sufficient for companies to find a way to fill any gaps. Moreover, it’s often the case that some of those critical, mysterious functions can be performed differently to reach the same end result. Sometimes, they don’t need to be performed at all!

I believe that the real issue with critical functions being understood by only one person is less about that person leaving the organization and more about day to day business performance. Often the person described above is a bottleneck to the rest of the organization. Their lack of action on a particular item can cause the entire company to grind to a halt. Other employees can become unproductive as they enter a “wait state”. More importantly, customers are kept waiting resulting in lost revenue in the short term and lost customers in the long term as they find another company who will provide more timely service. To add insult to injury, it is sometimes the case that the employee who is so critical in one area is an underperformer in others. Overall, the business would benefit if it were no longer held hostage by him or her.

While I have never seen an employee get hit by the proverbial bus, I have seen an employee who is a gating factor in almost every company with which I have ever come in contact. If you look around your organization, chances are that you’ll find an employee who is a bottleneck in a critical area and thereby limiting the performance of the entire organization.

One key to improving company performance is to search out and eliminate underperforming resources. It is an old saying, but “a chain is only as strong as its weakest link”. The same holds true in any organization.

If your business could benefit from fractional CFO services, I would welcome the chance to speak with you. Please give me a call at (314) 863-6637 or send an email to

your cash is flowing. know where.®

Ken Homza
Copyright @ 2009 Homza Consulting, Inc.

Risk (April 2009)

All businesses take some amount of risk. Just opening the doors for the first time involves the risk of capital and labor. From then on, every business decision could be thought of as a risk reward trade-off. For most decisions, we probably don’t take the time to think of them in that light. We go about our day to day activities and accept the risks in our business. But there are certain decisions where one should definitely be thinking about risk and how it affects the overall business.

I believe many businesses become more risky over time. While most small businesses don’t specifically measure investment activities versus their risk adjusted cost of capital, larger businesses (certainly the Fortune 500) do so regularly. But even these businesses are not necessarily good at it. Too often, they tend to assume that all of the projects they undertake have the same risk profile.

For the moment, let’s assume that there are only three risk categories (high, medium and low) and that the business operates in the middle (medium). Let’s also assume that a fair return on those projects is 20% for high risk projects, 15% for medium, and 10% for low. The specific numbers in this case are not meant to suggest that they are the correct return ratios for any particular business, but merely for illustration.

Over time, a business will look at many investment opportunities. If they measure all of them against a medium (15%) investment threshold without considering individual project risk the result will be a shifting of risk over time. Low risk projects won’t meet the medium risk threshold and will get denied (even though one shouldn’t expect them to achieve as high a return because they are safer). The high risk projects will disproportionally exceed the return threshold because they aren’t being held to a high enough standard. More of these projects will get approved (and a higher than anticipated amount will fail). The ultimate result will likely be a business whose risk profile shifts over time.

Think about what has happened in the financial services markets lately. There is a strong argument to be made that there was a lack of understanding of the risk of the underlying investments. Simply put, historical mortgage default rates (and therefore risk) of people who used “traditional” mortgages with 20% down payments is lower than that of highly leveraged “nothing down” borrowers. Using assumptions based upon the former group to underpin investments in the latter group resulted in a mismatch of the risk-return paradigm.

So, how does a small business deal with assessing risk? To start, I would suggest thinking about the risk profile of individual project decisions and ask some questions. Are the assumptions conservative or aggressive? Have we completed a similar project before? What is our confidence that we can achieve the result? Can we accurately measure the results? How have others fared in similar circumstances?

If you conclude that a project is high risk, make sure that you are getting adequately compensated for that risk. On the other hand, if the investment opportunity is low risk, it should not be ignored just because it doesn’t meet a preset threshold that doesn’t consider that fact.

If your business could benefit from fractional CFO services, I would welcome the chance to speak with you. Please give me a call at (314) 863-6637 or send an email to

your cash is flowing. know where.®

Ken Homza
Copyright @ 2009 Homza Consulting, Inc.

Truthful Financial Statements Are A Mirror (March 2009)

Truthful financial statements are a mirror. They are a reflection of what is happening in the business on a day to day basis. They reflect the decisions that management is making and the efficiency (or lack thereof) with which they run their business. Unfortunately, I know of too many operating executives who believe that the financial statements are something that the “accountants do”.

The fact that they feel disconnected between their actions and the financial statements means that something is wrong somewhere. Maybe it’s a lack of communication between operating and financial management. At times, financial results simply aren’t shared and at other times they are not shared with the proper context. Perhaps operating management is insulated by a parent organization from the economic realities of their actions. Or it might be that while short term results appear to be good, the long term consequences of their actions have not yet caught up with them. And then there are times when financial management takes enough actions that they make the sick patient appear relatively healthy (they stretch payables, refinance, provide intercompany loans, or find one-time gains that offset operating losses). Whatever the reason, nothing good can come from this disconnect.

If you’re part of operating management, it’s your responsibility to seek to fully understand the financial results of your organization. If you’re part of financial management, it is your responsibility to do your very best to make sure that operating management understands the financial ramifications of their decisions.

Unfortunately, a lack of understanding of the financial results by operating management is not as rare an occurrence as one might think. I’ve come across a number of companies where this is the case. Often, a finance person gets a call to help when the company is in trouble. When they “dig in”, they find that while the company is financially troubled, the root cause of the problems are sales, operational, quality, service, delivery or some other issue. Although it’s sometimes the case that the finance or accounting staff is incompetent (which means that the debits and credits do not accurately reflect the business operations), this can almost be considered good news as it is the easiest problem to fix.

Notice that I started this newsletter with the word “truthful”. We have all heard of cases where results are not truthful and there is an intentional misstatement of fact. Those misstatements often involve debates around estimates (which are a common part of complex accounting issues). For smaller companies, however, the facts are pretty clear and can be easily interpreted.

Financial statements reflect the operations of the company . . . use them to your advantage.

If your business could benefit from fractional CFO services, I would welcome the chance to speak with you. Please give me a call at (314) 863-6637 or send an email to

your cash is flowing. know where.®

Ken Homza
Copyright @ 2009 Homza Consulting, Inc.

End The Debate . . . Decide! (February 2009)

I think business debate is good. But I am a product of my early career environment. I spent the first ten years of my career at Unisys Corporation. Unisys was (and probably still is) predominantly an engineering company. Open debate was common, vigorous and expected. You could disagree with the CEO as long as it was done respectfully and with the goal of finding the best answer.

After ten years in that environment I moved to LensCrafters. For me, it was culture shock. The style which had earned me promotions and achievement awards at Unisys was neither welcomed nor appreciated. Open debate was frowned upon. The culture respected and expected behind the scenes consensus building. Executive meetings were much more about ratification than vigorous debate.

Which approach is better? They both have their strengths and weaknesses. While the decision making process at LensCrafters tended to be time consuming, once a decision was reached the force of the entire organization was brought to bear against execution. Everyone was committed to the goal and it showed. The company set big goals and generally achieved them. At times, however, the need to satisfy so many constituents meant that the decision was less than optimal. At Unisys decisions were reached more quickly without extended negotiations. That made it easier to set direction. But at times, after the fact negotiations could hamper execution and limit organization effectiveness.

As with many things in life, balance is key. There is room for open debate . . . but only to a point. There are times when it clearly becomes obstructionist and does not further the organization’s goals. At times like this, it is up to leadership to step in and end the debate.

Whether you are in a leadership role or a participant in the debate, ask yourself if it is serving the organization’s goals or whether it is serving some other interest?

Clearly we are in a down economic environment and it is now more important than ever for companies to act clearly and decisively. As you participate in or lead the decision making process at your organization, it’s important to consider how long and hard to debate an issue. Once all opinions are heard, there is a point where the organization is better served by moving forward in a definite direction rather than languishing without a decision.

End The Debate . . . Decide!

If your business could benefit from fractional CFO services, I would welcome the chance to speak with you. Please give me a call at (314) 863-6637 or send an email to

your cash is flowing. know where.®

Ken Homza
Copyright @ 2009 Homza Consulting, Inc.

Don’t Just Survive . . . Thrive! (January 2009)

Most companies have either just completed or are diligently trying to finish their budgets and plans for 2009. Given the tumultuous 2008 and the similar start to 2009, it’s easy to imagine that many companies are thinking about what it will take to survive this year. While it’s obviously critical that you survive, it’s also a good time to think about setting your sights a little higher. Ask yourself, “What will it take to thrive in 2009 and beyond?”

While that might seem like a difficult (if not impossible) notion to contemplate, especially in some industries, difficult times often make for opportunities. During slow economic times, there is normally a shake out of the weakest players in every industry. While that can be unfortunate, it’s also part of the economic reality in which we live. But when the business cycle turns, as it invariably will, there will be more opportunity for those that remain. The question at hand is: What can you do today to position yourself for a stronger tomorrow?

o Is this the time to think about picking up new talent that may now be available?
o Can you use any slowdown in your core business to develop new lines of products or services by deploying people and resources to other areas?
o If your staff is a bit slower than usual, can that time be used for training or to upgrade their skills?
o Are there opportunities to do more for your current customers?
o Might there be some areas where you should increase spending as opposed to only thinking of cutting back?
o Is there an opportunity to purchase a struggling competitor?

I realize that this is somewhat “out-of-the-box” thinking but that is what is required for a company to be successful. 2009 will likely present a number of challenges for both big and small companies. How companies respond to those challenges will be the difference between those that survive 2009 and those that are poised to thrive when the economy improves.

Search for the negatives in your business and eliminate them. Whether it is relationships with underperforming vendors, employees, or even problem customers, now is not the time to be carrying extra baggage. Take corrective action. There are others who would welcome a relationship with your business during difficult times.

Set your sights high. Look for the opportunities that difficult times present and take advantage of them to the greatest extent possible. Search for ways to become a stronger player in your marketplace. Make yourself memorable to your customers and give them a reason to maintain an on-going relationship with you.

If your business could benefit from fractional CFO services, I would welcome the chance to speak with you. Please give me a call at (314) 863-6637 or send an email to

your cash is flowing. know where.®

Ken Homza
Copyright @ 2009 Homza Consulting, Inc.

The Ripple Effect (December 2008)

If there is one thing that causes inefficiency in the work place more than any other, I think it may be ripple effect of missed deadlines. Generally, missed deadlines come in two forms. One is the simple passing of a deadline without it being met. But the other, somewhat more difficult to assess, is when a deadline is met with inadequate information or work product being provided. Whether we are talking about the flow of internal information or the provision of a product or service to a customer, the result is the same. Ultimately, that missed deadline causes a ripple effect throughout the receiving organization and is the cause of substantial inefficiency.

Much like tossing a pebble in a pond, the effect doesn’t stop immediately but continues almost indefinitely. A missed deadline causes others to spend time waiting (never a productive task), changing their work plan (also known as “scrambling”), and going back to ask people when they will provide what they have already failed to deliver (my least favorite activity).

Many times, we don’t know or think of the effect of not delivering on a commitment to someone on the other side. While I have never tried to calculate this cost, I have no doubt it is substantial. Perhaps if we could calculate the cost, and somehow charge it back when someone didn’t deliver as promised, it would solve the problem. While major construction projects often impose penalties when the final deadline is missed, the same doesn’t hold true in most day to day activities.

Think of what happens when someone doesn’t deliver upon a commitment to you. In the best case, that causes increased pressure on you to do your part in a shorter amount of time and still meet your commitments. In the worst case, the ripple in the pond continues to the detriment of companies, departments and people you may have never thought about (or even know about).

Perhaps the worst part of the ripple effect is that it is so very difficult to stop once started. Obviously, there is no way to “unthrow” that stone in the pond. It simply has to run its course (or in the business world, someone has to go to the extra mile to meet their commitments even though they got a late start). Obviously, the best course is to not let the ripples start. Realizing how big a problem can become, we should all take extra care to not be the pebble in the first place; and that starts with all of us meeting our commitments on a daily basis.

While there are many things that businesses need to do to prepare for 2009, clarifying expectations around deadlines is certainly one that will add value throughout the year. Ultimately, it gives everyone the chance to be more productive and that is something that will be appreciated by both your employees and your customers. It might even increase your “top line”!

If your business could benefit from fractional CFO services, I would welcome the chance to speak with you. Please give me a call at (314) 863-6637 or send an email to

your cash is flowing. know where.

The (Voting) Process (November 2008)

As the 2008 Presidential Elections fade from our collective memory, I’d like to ask you to take a look back and think about the voting process. No, not the two years running up to November 4th, how you selected your candidate, political spending or any of the important things leading up to the selection of our next President. Rather, I’d like to ask you to think about the time from when you got to the polling place until you left. More specifically, think about the process that you went through that day.

Some of us were fortunate enough to go to polling places with short lines but many of us had a bit of a wait (a small price to pay for the right and privilege of voting). But as I stood in line that afternoon, making small talk with the people ahead and behind me in line, I couldn’t help think about the process that was going on in front of me. For the record, my wait was about an hour. During that time, the first thing that I noticed is that there were always at least six voting machines open. Clearly that didn’t seem to be the problem that was holding up the line. Next, I looked at the six stations that were designated for certain letters of the alphabet (A-D, E-H, and so on). These weren’t busy either. Finally, I looked at the first station. There was one person looking at everyone’s voter ID card and handing them a white slip of paper after making a few notations on it. This person wasn’t comparing voter ID cards to any roll or list. There were just looking at the voter ID card and handing out a white slip of paper to be taken to the next station. This was the bottleneck and (at least in my district) the cause of the long line of people waiting to vote. I wondered, what’s the purpose of this task? Is it important to the process? Could it be eliminated? Why couldn’t there be two people performing it? Couldn’t we apply some computer power? How about voter cards with a magnetic strip? In a time when almost every task in our lives has computer processing associated with it (think about how few daily tasks are completely void of computer processing) couldn’t something be done to improve this process?

In any event, the purpose here (despite what it may seem) is not to figure out how to save time at the polls four years from now (although saving a few hours for millions of Americans is probably worth some time and effort). But rather, it is to point out the value of standing back and observing the processes in your business. Too often, we are so busy facing the day-to-day challenges in our businesses that we fail to take the time to stand back and simply observe the process. Given the opportunity, one can often find improvements by asking the simple question: Why?

Force yourself to take some time away from actually working in your business and stand back and observe what happens day-to-day. If you don’t feel you can be objective, ask a trusted friend or colleague to do it for you. I have little doubt that you’ll find opportunities for improvement if you spend the time to look at the process in your business.

If your business could benefit from fractional CFO services, I would welcome the chance to speak with you. Please give me a call at (314) 863-6637 or send an email to

your cash is flowing. know where.

Copyright @ 2008 Homza Consulting, Inc.

Planning In Volatile Times (October 2008)

There is an old saying: “When opportunity knocks, answer the door.” But in these volatile times, it is hard to know whether you are looking at an opportunity or not!? One can get whiplash just watching the stock market with prices up or down 10% in a single day. Take your eye off the ball for even a short period of time and the environment in which you are operating can be different than when you last looked.

During one of my first corporate jobs, I often wondered why the treasurer waited to make decisions. As I got to know both him and the company, I learned that it wasn’t procrastination, but keeping options open. At the time, we had some relatively straight forward financing decisions. It was common practice for us not to “pull the trigger” until the last possible moment. There was a lot of merit to that practice and over the years it added substantial value to the company. I often wonder if those decision makers still operate in the same manner or if they are more opportunistic in their actions. Today, what seems like an opportunity one moment can appear to be an expensive proposition the next.

There is always an opportunity to capitalize on short term market fluctuations. But the key is recognizing that fluctuations (in some cases, bubbles) are short term. People have short memories. In 1999 and early 2000 we thought internet stocks would increase forever (I certainly wish I had sold at the first sign of a downturn). A few years ago, many thought they should buy the biggest house possible (with the minimum down payment) because “everyone knew” housing prices would keep going up at 20% a year and was an easy way to make money. More recently, we had predictions by “the experts” that gas and oil prices would continue to soar after hitting $4.00 per gallon at the pump. After pushing nearly $150 per barrel just a few months ago, oil prices are under $70 per barrel as I write this newsletter.

The lesson to be learned here is that nothing lasts forever. It can’t. The laws of economics dictate that behaviors will change. Those who take advantage of short term market opportunities profit. Those that react to them after the fact will lose. Those that sit tight and place long term bets will likely be okay (in the long run), but it will be a roller coaster ride along the way.

With that in mind, unless your business is taking advantage of a window of opportunity, business decision making should be long term focused. It’s certainly advisable to take advantage of short term opportunities, but it’s important that they are recognized as just that. Extrapolating short term trends into the distant future is often a mistake. Don’t react. Plan.

If your business could benefit from fractional CFO services, I would welcome the chance to speak with you. Please give me a call at (314) 863-6637 or send an email to

your cash is flowing. know where.

Copyright @ 2008 Homza Consulting, Inc.

33.33% of Life Is Just Showing Up! (September 2008)

According to the internet, Woody Allen is responsible for the quote: “90% of Life Is Just Showing Up”. While I’m not sure what the exact percentage should be, I’d argue that it’s no more than one-third. While showing up is necessary, it’s rarely sufficient to accomplishing very much at all.

Amazingly, there are times that people don’t even bother to show up. And I mean this quite literally. I’ve seen people go through the interview process, get the job, and then just not show up on the first day of employment. If I hadn’t seen it more than once, I’d have assumed it was a fluke; but it’s not. I’ve witnessed it twice during the past several quarters and it just makes me wonder what people must be thinking!?

Furthermore, is it really even worth anyone’s time if all that someone does is just show up? Frankly, there is more to it than that. Whatever you are doing, it’s worth doing more than just showing up. You only get out of any endeavor what you put into it. And it takes more than mailing in a performance.

We all have days when it takes everything we have just to show up and get through the task at hand. But on most days, it takes a lot more than just showing up to make anything happen be it in business, sports, personal lives, etc.

So rather than thinking that 90% of it is just showing up, perhaps it’s more reasonable to think that 33.33% of life is showing up, 33.33% of life is preparing, and 33.33% of life is about being in the moment and being fully engaged in the task at hand.

I used to train in karate (I hate saying “used to”). I can assure you that karate is a pursuit where just showing up won’t cut it. It might surprise many to know that when training in karate one never gets hit. Really, it’s true. Rather, one fails to block a punch or kick from an opponent. While the result (ending a class bruised and battered) is the same, the attitude and the discipline that philosophy instills are quite different. It’s not about being there and something happening to you, it’s about being responsible for what happens (whether it’s good or bad).

Business, like life, isn’t about just showing up. It’s a mix of preparation, being in the right position, and execution. As you think about your business, think about the areas where people, departments, divisions, etc. believe that 90% of life is just showing up. These are opportunity areas where you can improve performance. Tell them that you heard only 33.33% of life is just showing up and start to question the other two-thirds of their time (sorry, Woody).

If your business could benefit from fractional CFO services, I would welcome the chance to speak with you. Please give me a call at (314) 863-6637 or send an email to

your cash is flowing. know where.

Copyright @ 2010 Homza Consulting, Inc.

Fix Your Small Problems First! (August 2008)

While I realize that the title of this newsletter might sound counter intuitive, it is a thought worth considering. Fix your small problems first. We all know that many books have been written about prioritization and tackling the A’s before the B’s and C’s. Still, I think there is a certain logic that suggests tackling small problems first might make sense. To be clear, I’m talking about real problems. I am not talking about cleaning your desk and sharpening pencils so that you’ll be ready to tackle the big problems. That kind of activity is procrastination pure and simple. Instead, I’m advocating a strategy of dealing with small issues before they become big problems.

Ask yourself, is it more likely that a small problem will go away or become a big problem later? I think we all know the answer. It is far more likely that left unattended, the small problem will become a bigger problem later. Just in case you need a few examples to get you started, consider these.

• Have you ever seen a minor roof leak go away? Generally, small leaks turn into bigger leaks. For the record, I tried the “hope it will go away” strategy with this problem recently and ended up calling a roofer last week.
• Have you ever seen a problem employee become a solid performer without intervention? Most likely the answer is no. Generally, the problem employee, at best, remains a small problem. At worst, that person infects others in the organization, or does something that seriously endangers the organization’s health or reputation.
• Have you ever had small a problem with a vendor or customer that went unresolved? Perhaps it’s a small billing dispute. As time goes on, it compounds until it becomes a bigger issue. Eventually, solving it involves higher levels of management and possibly consultation with legal counsel.

Hopefully, by now, you can see that the logic in dealing with small problems first is to keep them from becoming big problems later. Fixing problems early usually requires a relatively small (when compared to the amount required to fix it later) amount of time and energy. It’s the difference between putting out a brush fire and putting out a forest fire!

If you feel as if you are constantly dealing with crisis situations, think about whether decisive action early on may have prevented some of these situations from becoming a crisis in the first place. Occasionally, there are some problems that you can “wait out”, but most times the problem only gets worse.

Obviously, I’m not suggesting that anyone ignore big problems in their business, but as we approach the Labor Day weekend, find a few minutes to step back from the day to day issues in your business and consider whether there are some brush fires burning in your business that you can extinguish quickly and easily before they become forest fires!

If your business could benefit from fractional CFO services, I would welcome the chance to speak with you. Please give me a call at (314) 863-6637 or send an email to

your cash is flowing. know where.

Copyright @ 2008 Homza Consulting, Inc.

Step One (July 2008)

With all of the computing power that has been applied to business over the last 30 years, I sometimes wonder if it has produced any better information!? Yes, we have reams of data but there are times when it serves very little purpose because it is not organized into useful information. As I write this, I can think of two recent examples of companies that produce reports that aren’t of much value. In one case, it was (past tense because it is now fixed) an income statement that was poorly organized and couldn’t produce meaningful customer profitability information. In another case it is (current tense because I just read the report this morning) a summary of weekly activity that can’t be reconciled to resources deployed. Even if one understood this report perfectly, it would add little to understanding the business.

From these two examples, comes the title for this newsletter: “Step One” is to develop meaningful reporting for your business. If you do not have information at hand today, I can assure you that this step will not help your business this week (yes, I said “not”). Generally, useful business information is the result of looking at trends over time and developing an understanding of the relationship between key pieces of information. I think it takes half a dozen time periods (6 weeks of activity reporting and 6 months for income statements, for example) to start to draw meaningful conclusions. But I have almost always found that once you start to look at this information you will see trends and ask questions which will lead to ways to improve the business.

In the first case, we started at the beginning of February and reorganized the income statement effective January 1. When we close June, we will have six months of good data. Yes, the first several months were difficult because it felt like we took a step backwards. We had no trend information as compared to bad trend information previously (even that, I would consider an improvement, however). Bad information serves no purpose other than to distract at best and to mislead at worst. In the other case, we started last week. By the end of July, we’ll have enough information that we should be able to affect the business and have a better result (increased profits) in the third quarter.

One of the reasons that I believe that people don’t focus on better reporting is the lack of immediacy of the result. As I mentioned, it is highly unlikely that working on better reporting this week (the first week of July 2008) will solve any problems before we take our 4th of July break. We tend to be so very short term focused that we spend the majority of our time focusing on the problems of the day as opposed activities that will benefit us in the long run. But that doesn’t mean it’s not worth doing!

Given that it is going to take six months for you to develop good income statement reporting, if you start today, you’ll probably start to identify opportunity areas in your business in three months and have good information by year end. That will allow you to enter 2009 with a strong basis of information and to plan to be more profitable in 2009 than 2008.

Every day that you wait is opportunity (and profits) lost. Don’t delay, take “Step One” today!

If your business could benefit from fractional CFO services, I would welcome the chance to speak with you. Please give me a call at (314) 863-6637 or send an email to

your cash is flowing. know where.

Copyright @ 2010 Homza Consulting, Inc.