New Location for Finance Matters Blog!

The archive of these monthly newsletters has moved and is now posted at the Resources section of my website.   Please check out newer editions (including all past articles), get the RSS feed or sign up for the newsletter at homza.com

Should You Fire You? (July 2014)

I recently had lunch with a colleague and the subject of my monthly newsletter came up. I jokingly said that I should fire the guy responsible for building and maintaining my email list. Frankly, he’s not very good at it.  The problem is that the guy is me.  And, yes, I should fire myself from this role and find someone on whom I rely upon and that is better at it than me and have decided to do just that!

There are things that we all do in our role of running our individual companies that at which we do not excel. But for one reason or another, we have never taken the time or energy to find a suitable replacement.   Maybe it is because there is no one around us who immediately comes to mind, maybe it seems like a task no one else could do, or it is so small that it doesn’t seem to be worth the time to delegate.  Maybe you tried to delegate the item before but that effort failed so it landed back on your plate. Whatever the reason, I think it is incumbent upon all of us to seek to understand where we are our own roadblock to success.  

Further, think about the cost of doing something yourself that someone else could do better.   Don’t measure this against your hourly salary, but rather measure this against the highest and best use of your time. How much value could you generate for the business if you were operating at your maximum rather than doing something that is of less value? 

For some, it may be easiest to start with themselves and for others, this may be the most difficult place to start. But, one should consider the cost of not having everyone operating at their maximum value.  

Years ago when I was in a corporate job, my boss walked into my office and asked why I had our administrative assistant working on spreadsheets and performing financial analysis.  Without skipping a beat, I replied:  “Because she can”.  I had learned that our administrative assistant was taking courses to complete her degree in finance.  Not only were we leveraging a hidden skill set and helping her develop, but we were freeing up others to work at higher levels in the organization. 

Every organization should seek to get the most out of every employee . . . not by asking them to work draconian hours, but by seeking out their strengths and encouraging them to grow with the company. Part of this is constantly looking for ways to bring new talent in at the bottom of the organization so that those who have been around a while are able to move into higher level roles or take on greater responsibility in order to maximize their potential and that of the company at the same time.

The effect of this over the long term is a more efficient organization that is “firing on all cylinders”.  In other words, the organization maximizes revenue while minimizing cost which shows up as stronger profits on the bottom line. 

Ask yourself, do you have people that you should fire from certain roles that could be better accomplished by someone lower and more cost efficient in the organization structure?

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

The archive of these monthly newsletters is also posted at the Resources section of homza.com which you can visit for more information. 

your cash is flowing.  know where.^®    
Ken Homza   
Copyright @ 2014 Homza Consulting, Inc.

What Can You Learn From A Waterfall? (June 2014)

The other morning my five year old asked what I was doing and I said I was starting to write my monthly newsletter.  He said, “Daddy, why don’t you write about our waterfall?” It didn’t take me long to realize that our waterfall is a great analogy for the cash flow of a business and obviously fits nicely with my tag line:  Your Cash Is Flowing.  Know Where.  

Cash flow is critical to a business and much like water flowing in a stream to a waterfall; it’s very difficult to stop the flow. You can divert it, change its path, create a pool, or make use of damns, but you can’t bring water to a stop other than finding a way to shut it off at the source.  

There are places along the path of our waterfall where the water seems to be very still, others where it is moving at a moderate place and others where it is crashing over the waterfall with a great amount of force. There are places where the water splits between two different paths and later comes back together. There are still others where it ducks underground for a while and then pops up later. Some of the water takes a very direct path while some meanders from top to bottom.  Some dirt and rocks get washed away while some hold firm.  Along its journey from top to bottom, the water can carry important things (like sticks and leaves) that we send down from the top to see how long they take to get to the bottom.
 
Think about your business. Money comes in daily and goes out daily. The key is to make decisions about the outflow of money that maximize the success and profitability of the business.  Often this means looking for places where you can stop or slow a rate of spending so that the same dollars can be used elsewhere. It might also mean making a long term investment in capital equipment or technology in order to increase cash flow at a point in the future. 

The path to the waterfall has both calm sections where the water seems to be barely moving and chaotic sections where the water has a lot of turbulence.  Does your business have periods or perhaps departments that are calm while others are turbulent? The turbulence in the water is caused by rocks that interrupt the smooth flow of the water.  Do you have unnecessary obstacles in your business?

We are able to walk along a path beside the waterfall from top to bottom . . . and while I tend to take it in stride, my little guy always finds something new . . . a stray golf ball or a rock shaped like a turtle on our last adventure. If you walk along the path of your business, are you observant enough to find something new with each trip? If not, perhaps you should have someone join you on that walk and see what they observe about your business.  Whether it’s something that your firm does exceptionally well or seems to be a practice in need of change, you’ll likely learn something from the observation. 

For any business, it’s about getting customer dollars into the top of the flow and managing the path and efficiency of that flow to ensure that you optimize (note that I did not say maximize) company profitability. 

Finally, at the bottom of the waterfall is a large pool of water.  Think of this as the accumulation of capital resulting from the cash flow of your business.  When you look at your balance sheet, can you see the accumulation of capital resulting from your efforts?

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   

 

For more information, visit www.homza.com

your cash is flowing.  know where.^®    
Ken Homza   
Copyright @ 2014 Homza Consulting, Inc.

Do You Have An Effective Board? (May 2014)

What is the role of your board?  While I realize that many small companies have neither an official or unofficial board, bigger companies have a board of directors. Articles abound about the purpose of a board of directors and I would encourage readers to find a few and understand the legal responsibilities of a board. But meeting the legal requirements doesn’t speak to whether the board is effective and legal requirements are not the subject of this article (I’ll leave that to the lawyers). 

This newsletter is about whether your board is effective.  Some of you may have been involved with multiple boards over the course of your career, but some reading this may be working with their first board or may not even have a board of directors or advisors for their business (I’ll use directors and advisors interchangeably for purposes of this discussion).  

Let me share with you my view of the characteristic of both good and bad boards. 

Good

·   Consist of people with subject matter expertise who bring additional and broad perspective to the company

·   Ask thought provoking questions about the strategy of the business and seek to understand why certain paths are being recommended over others

·   Bring strategic relationships to the table

·   Challenge management thinking in an effort to be helpful

·   Independently verify information about the business and industry

·   Dot the legal i’s and cross the legal t’s but have a broader purpose

 

Bad

·   Bring limited outside perspective and do not fully understand the company operations

·   Either ask no questions at all or turn the board meeting into a detailed operational review

·   Rely solely on management as a source for information about the company

·   Offer little in terms of relationship building to the company and industry

·    Are such good friends with the CEO that they will not challenge him or her and exist merely to ratify decisions

·    Focus on the procedural and meeting the minimum legal requirements of their responsibilities

While I rarely serve as a member of the board for my client companies, I am almost always in attendance at meetings.  Over the years, I have attended countless board meetings and recently attended one of the best.  

A good board can help management guide and transform a company while a bad board can sit idly by and watch a company fail (and in fact, hasten that failure).  I have personally seen both. 

If you do not have a board, I would encourage you to start to build one.  Over the life of your company, it could add tremendous strategic value and could be the key difference between success and failure if times get tough.  If you have an effective board, embrace it and leverage it to the best of your abilities.  Finally, if you have an ineffective board, deliver a wake-up call.  Tell members what you expect and start to replace those who do not deliver.

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   For more information, visit www.homza.com

your cash is flowing.  know where.^®    
Ken Homza   
Copyright @ 2014 Homza Consulting, Inc.

Putting The Customer Last (April 2014)

What do my doctor’s office and the local Chevrolet dealer have in common?  Recently, they both decided to put the customer last.  While my doctor’s office probably considers me a patient as opposed to a customer, people have choices when it comes to medical care just like they do with any other service. And poor service usually means customers choosing to spend their dollars elsewhere.  

On a recent afternoon, the Chevy dealer explained to me why my wife’s car (which was in their shop to correct a problem with a prior repair that they had made) would not be ready at the end of the day despite a 7:00 AM appointment. You see, they have a “policy” which states that they assign the same technician who did the original repair to correct any customer satisfaction issues.   While that sounds good in theory, in practice it just aggravated the situation as that technician was overbooked that day.  Rather than have someone else resolve the issue, they decided that their policy should superseded good customer service and the customer would just have to wait another day to get their car back. The fact that they didn’t call me to give me an update and that I had to call them near the very end of the day to check on the status of the car just made matters worse. 

On the same day, I drove to my doctor’s office as they couldn’t manage to return a phone call to schedule a routine test. They seem to have a plethora of procedures about who returns which calls, at what times, and also seem to have a policy that every call goes straight to voice mail.  I have never had them answer a call. As I walked into the waiting room, I could hear the person at the front desk ask a very sweet looking elderly woman to fill out a survey on the office phone system.  She (in a not so sweet voice) replied, “Your phone system is terrible – I can never get through.”   I followed up with, “I drove here because you don’t return calls.”  With that, I was ushered straight through to meet with the person responsible for scheduling. 

In both instances, those in charge don’t seem to appreciate the customers’ perspective and are abiding by rules, practices and procedures that ultimately put the customer last.  The result of this lack of customer perspective is that over time, the customer will decide to choose another provider.  

Too often companies let policies and procedures get in the way of good customer service.  When I start to work with a new client, I frequently deal with issues that don’t originate in the finance and accounting departments but have tremendous financial impact over time.  The above are just two examples of customer service issues which have financial impact by reducing top line revenue and bottom line profitability. 

As you think about your business, ask yourself, do you have policies and procedures which end up putting the customer last?  And if so, have you thought about the financial impact they might have?  Wouldn’t it be better to fix these issues and improve customer service and your bottom line at the same time?

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   For more information, visit www.homza.com 

your cash is flowing.  know where.^®    
Ken Homza   
Copyright @ 2014 Homza Consulting, Inc.

Hustle (March 2014)

Do your employees hustle . . . and do you give them a reason to? The other day a young man came walking up my driveway with a leaf rake. Usually I rake the leaves myself – I actually enjoy it; but I was busy and getting ready for vacation so I met him at the door before he even knocked. He gave me a price range (I agreed to the high end of the range – after all, this was a young guy on spring break trying to make a few extra bucks – so why not be generous).  I went back to my office and worked.  

 Forty-five minutes later, he knocked on the door. I was amazed how quickly he had finished  . . . and at how thoroughly he had done the job.  He proudly announced he was the “fastest leaf raker around” and told me he had been doing it since he was seven years old. This guy had just made about $50 per hour raking leaves . . .  and I was glad to pay it. Before he left, he said can’t make any money raking leaves by the hour!

Many mornings I am among the first to arrive at my local coffee and bagel shop. Sometimes, I’ll see the people who service the restaurants pull up and make their morning delivery.  They are always hustling -- moving as fast as they can. These people get paid by the amount of product they deliver with a customer service component included in their compensation package.  They are not hourly employees.  In some ways, they are in business for themselves because what they earn is based upon their own productivity. 

Many years ago when I was about 13 years old, I used to help a neighbor deliver milk. He owned the route. He hustled and hired me so he could get done faster. 

By now, I’m sure you see the common thread. So ask yourself, do you give your employees a reason to hustle?  Are there incentives in place for those who perform better than average? Are top performers recognized, can they get promoted, do they make more money if they perform at their best?

Providing proper incentives and motivations for employees is an important role of the executive team. I am called upon multiple times every year to work with various executive teams on designing employee incentive plans.  Every CFO should take an active role in this process.  

Below is a fable that I heard years ago . . . the exact source is somewhat unclear but I have always liked the message. 

Every morning in Africa, a gazelle wakes up. It knows it must run faster than the fastest lion or it will be killed. Every morning a lion wakes up. It knows it must outrun the slowest gazelle or it will starve to death. It doesn’t matter whether you are a lion or a gazelle: when the sun comes up, you’d better be running.

When the sun comes up, are you and your employees running?

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   For more information, visit www.homza.com 

your cash is flowing.  know where.^®    
Ken Homza   
Copyright @ 2014 Homza Consulting, Inc.

Pay More Taxes (February 2014)

There, I said it, pay more taxes.  While most people react negatively to paying more taxes, I actually think it ought to be everyone’s goal!   As tax deadlines approach (March 17 this year for corporate returns and April 15 for individuals, partnerships, and trusts) few are facing those days with the thought of delight about paying more taxes. 

This newsletter is not about tax policy or the politics in Washington, DC.  Aside from voting, contributing to the candidate of one’s choice, being politically active, or running for office, all that any of us can do is operate within the rules that exist at any particular point in time. Rather, this newsletter is about recognizing that there is a broader scope to the finance function other than the preparation of tax returns.  I have seen some business owners put so little emphasis on the finance function that I believe they wouldn’t even have an accounting system but for the need to file tax returns.

Businesses that utilize no financial resources other than a CPA who specializes in tax preparation are short changing themselves.  If the CPA has the desire and abilities to provide a broader scope of services, business owners who don’t extend the engagement beyond the narrow scope of tax planning and preparation are missing the bigger picture.  Clearly, proper preparation of tax filings and related long term tax planning is an important function.   Of course, minimize your tax liability for a given level of income.   But if you only engage a financial partner for tax work, either by their choosing or yours, then you are missing a substantial portion of value that the finance function can and should be adding to your organization.  

I have actually seen business owners react favorably to the statement, “Good news, you don’t owe any taxes; you lost money last year.”  The goal of a business isn’t to avoid paying taxes; the goal of a business is to maximize profitability and cash flow.  Businesses without a sustained level of profitability lack the capital accumulation that is necessary for growth and to survive economic downturns.  They are disadvantaging themselves when it comes time to exit because they are more likely to end up selling under distress conditions, have smaller top-line, and lower EBITDA, compared to businesses that had a broader financial strategy in place.

Broadly speaking the finance function is about providing an understanding of how sales, operations, manufacturing, R&D, administrative areas, etc. relate to each other and contribute to the profitability of the enterprise.  A good finance function helps you understand the competitive landscape and make decisions about how to maximize your potential.   It provides decision support, valuable insights, and contributes to the long term strategic direction of the firm in order to enhance shareholder value. 

So, go ahead.   Make more money . . . pay more taxes . . . isn’t that better than the alternative?

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   For more information, visit www.homza.com 


your cash is flowing.  know where.^®    
Ken Homza   
Copyright @ 2014 Homza Consulting, Inc.

Are You Using The Right Tools? (January 2014)

Like many others, I worked construction jobs during my high-school and college days.  I remember one particular job remodeling a bar when the boss asked me to knock a hole in a solid concrete wall for an electrical outlet.  He handed me a hammer and chisel (and a small hammer at that).   I’d been doing this kind of work long enough to know those weren’t the best tools for the job and had worked around the boss long enough to know it was no use arguing with him about it.  Fortunately, another contractor I also worked for arrived as I was starting to work.  I asked him if I could borrow his electric demolition hammer and a few minutes later the job was done. The boss had a surprised look on his face when I asked:  “What’s next?”

Obviously, I no longer work construction, but the underlying lesson remains valuable to this day.    Are you using the right tools for the job?   I can’t count the number of times that I have started to work with clients and find that their financial reporting is lacking, they have multiple unanswered questions about their business, and people are busy compiling data but have very little useful information.   At the same time, I find they are versions behind important software upgrades, are using outdated versions of Excel, and their computers are painfully slow (one recently suggested I use a laptop at their office which is the same model as one I retired years ago . . . no, thanks).   Equally frustrating, people don’t know how to use the tools that they do have (they haven’t been to a training course to enhance their skills in years).  

People cannot be at their most productive if they don’t’ have the right tools and aren’t properly trained.  A true craftsman would never set out to work without making sure his saw was sharp and he had the right hammer for the job.  Why should professionals in your office attempt to do their job with anything less?   You might as well ask them to perform with one hand tied behind their back while hopping on one leg.

I once experienced this exact situation with a new client that was two major releases behind in software upgrades to their ERP (Enterprise Resource Planning) system.  There were upgrades available at no cost except for the time and energy it takes to put them in place.  They literally had the tools at their disposal but were choosing not to use them.  We moved ahead with the first major release upgrade (a necessary step) and plan to follow with the second shortly thereafter.   

Whatever job you are doing, ask yourself if you are using the right tools for the job?  Consider whether you have upgraded your software releases lately and take the time and energy to explore what new capabilities are available to you.  Think about how some simple software changes or upgrades can improve work flow changes to streamline processes and produce a better result at the same time.   

In addition to having the right tools, make sure your people know how to use them.   Too often, companies avoid spending on a $1,000 training course and then spend $10,000 paying that same employee to get the job done in an inefficient manner over the next twelve months.    

Finally, eliminate any “that’s the way we’ve always done it” attitudes from your company.   Continually search for new and better ways to do things and challenge whether or not current processes are the best approach (particularly in light of new and ever changing software tools).    

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    For more information, visit www.homza.com 


your cash is flowing.  know where.^®    
Ken Homza   
Copyright @ 2014 Homza Consulting, Inc.

What's Driving You? (December 2013)

Last month, I asked “What Are You Driving?” which was targeted at the change and results for which you are responsible rather than the car that gets you to work and back.  Today, I’d ask a different but related question:  “What’s Driving You?”   Why do you get up and go to work in the morning? 

For all of us, this answer is different, but unless it involves something that you are passionate about, then it’s unlikely you are going to get the maximum result.  Money may provide some short term spark, but money alone is never a sufficient driver to lead to extraordinary results.   Over time, people grow accustomed to a certain level of income and the dollars that may have provided motivation at one point become an expectation.  

For most, the passion that drives comes from making a difference and feeling that our efforts have favorably impacted others or are appreciated.  As you think about your company, department, or even your own individual performance, ask yourself what is driving force?  What is causing you to wake up every morning and try to make a difference?  If you’ve lost sight of it, I’d encourage you to find a way to reconnect with the passion that may have fueled you at one point in time.  

I was once on a due diligence trip to a steel fabricator.  The business was a mess.  Operations were disorganized, bids didn’t seem to bear any relationship to costs, accounting was in poor shape – I could go on and on.  But the key finding was that the founder started as an artist working in steel.  At some point, he did some small fabrication work to pay the bills in order to support his artistic passion. Over time, the fabrication work had taken over and was consuming 100% of his time and had extinguished the fire that driven the entrepreneur and artist.  Instead of doing something that he was passionate about he found that owning a business was preventing him from doing what he loved.  And because he had no passion for the business, he wasn’t doing it very well; so it wasn’t even meeting the minimum standard that he had set for it – to pay his bills and provide a livelihood.  

He would have been better off being an employee in steel fabrication company . . . at least then he would have had a “9 to 5” job and could have used his weekends and evenings to pursue his artistic endeavors.  But as any business owner can attest, running a business is rarely a “9 to 5” endeavor. 

The purpose of a business is to support the dreams of the business owner, whatever they may be, not to quench them.   Think about this as you go about your day . . . what is the passion that fuels your performance?

As we wrap up another year, I’d like to thank all of you who read this monthly newsletter and especially those who take a moment to drop me a note and share your own thoughts about the topic of the month.   Wishing you a happy, healthy and productive 2014!   

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     For more information, visit www.homza.com 

your cash is flowing.  know where.^®    
Ken Homza   
Copyright @ 2013 Homza Consulting, Inc.

What Are You Driving? (November 2013)

Clearly, that’s a question that can be taken more than one way.  If the headline brought to mind the vehicle that gets you to work, around town, and on family vacations, that’s a reasonable way to think about the question.  But I actually meant it quite differently.  

Rather, what is the agenda that you are pushing forward every day?  What key difference are you trying to make in your job, be it at the executive level or elsewhere in the organization?   Do you start your day with a mission that you are trying to advance or are you just trying to complete tasks that, while necessary, serve no larger purpose?   Do you have a vision for your company or your department that provides a framework upon which you decide which items are worthy of your time and which are not?  

People (and therefore companies) who approach their roles with a vision of what they are trying to accomplish have a framework for making decisions.  That is not to say that the vision won’t change (in fact, it should be reviewed when facts come to light which would suggest it is not the best approach).  Nor is it to say you won’t have days just keeping the train on the tracks (we all have days like that despite our best efforts to be forward thinking).  

But having a vision allows you to not only set your own course but it provides a vehicle to communicate how others should approach their roles as well.  Not only do you have a vision and framework for approaching your work but that vision can be shared with those around you.  When those around you are making decisions, they can then apply that same framework and determine to what extent their actions are consistent with the longer term goals.  If they find that they are operating in a manner that they believe to be inconsistent with that vision, they can raise their hand and have a discussion about those actions and determine if there is something different they could be doing that is more consistent with the longer term direction.

Unless you are trying to drive something and invoke change, then your destiny will ultimately be controlled by people and circumstances around you rather than by yourself.   That is almost always less than ideal. 

If you find yourself or your company in this situation, then it is time for a change. Take the initiative and stake out a vision.  Putting that first stake in the ground doesn’t have to be a long, drawn out process but it does require some focused energy and thinking.  I recently sketched out a 2014 vision for the finance and accounting group of one of my clients.   After having solicited input from some key constituents, I spent an hour with the team and a blank sheet of paper on an easel.  By the end of that hour, we had thoughts around eight key initiatives that we could use to transform the department and positively impact the business over the coming year.  

Are we finished?   No.  We will have to decide upon specific actions and work over the next year in order to make significant progress.  But we have charted a course and are on our way.   

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     For more information, visit www.homza.com 

your cash is flowing.  know where.^®    
Ken Homza   
Copyright @ 2013 Homza Consulting, Inc.

Doing Things "Righter" (October 2013)

Last month I wrote about Strategy vs. Execution and one of my readers wrote back and defined the terms as “Doing the Right Things”  (strategy) vs. “Doing Things Right” (execution).    I have never heard it expressed quite so simply before.  I almost always find that simpler is better as simple provides clarity.   Therefore, that saying has stuck with me and will for a very long time.    

While I enjoy working on strategic issues I find that most companies devote much of their time and energy to day-to-day execution.   Things that should work like a well-oiled machine often don’t.  And the cumulative effect of not “doing things right” shows up on the income statement.     

But what exactly does “right” mean when it comes to a particular work process or outcome?  In many instances, right is not simply the opposite of wrong but rather is somewhere on the continuum of just OK to truly excellent or exceptional.     

There are times when “good enough” actually is all that is needed and going beyond the minimum standard doesn’t add any value.  But in most instances, performance is measured on a continuum of outcomes and constantly striving to do better is critical.   In these instances, it is not just about doing things right, it is about doing things “righter” than you did them yesterday.     

It is important to always seek to improve business processes.  While a process that was put in place years ago may be working, that doesn’t mean it is at optimal efficiency.   Customers change, products and services change, new competitors spring up while old ones fade away, and technology has dramatically changed the way we all live and work.   That means that business processes need to change as well.   

This isn’t limited to your core manufacturing or service processes (although those are critical) but also includes your HR practices, accounting procedures, customer service interactions, and everything else you do in your organization.   Think about it, even janitorial staffs have had to change their processes to deal with recycling as opposed to throwing everything in the trash. 

In a world where change is the ever present constant, it’s more important than ever to ask if your business processes are not just keeping pace with the times but helping your company outperform its competitors. 

Are you doing things “righter” today than you did them yesterday?  

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    For more information, visit www.homza.com 

your cash is flowing.  know where.^®     
Ken Homza   
Copyright @ 2013 Homza Consulting, Inc.