Bring on a financial executive? Now may be the time
By Don Worfolk
As a printing company owner or chief executive officer, do any of these scenarios sound familiar?

• Payday is around the corner and you’re not sure you can cover it. Receivables simply aren’t collected fast enough.
• Margins are shrinking, but expenses aren’t.
• Employees are vital to your success, yet efforts to raise their productivity and efficiency may damage morale.
• OSHA and environmental violations can be costly, but you don’t have the time to oversee them.
• Your business is growing and you wonder if you have sufficient capital (human and financial) to sustain your growth. Or, you’re falling behind your competition. Perhaps you should upgrade to new technology, acquire a new product line or buy a competitor.
• You’ve survived the industry’s vicissitudes without a financial executive, but if you want to grow your business profitably, can you afford to be without one?

Value of financial leadership
A financial executive can make contributions at two levels. First, he or she can relieve you of day-to-day responsibilities that are essential, but consume your time, including those in areas beyond finance such as contract administration, commercial insurance and plant productivity. Furthermore, improvements made by a financial executive in many of those areas will enhance cash flow and profitability. Second, he or she can work with you to address fundamental issues that will shape your company’s future.

Managing the day-to-day
If sales are sufficient but cash is tight, two areas in which a financial executive will concentrate are billing and collections. In billing, if the time between shipping and invoicing a job is more than two days, it’s too long, and it’s costing you cash. Author alterations need to be recorded as memo entries to jobs (and customers informed) as they occur, not during billing. Freight cost, with a markup, should be charged to jobs as incurred. Only a minimal review of jobs should be necessary prior to billing, to ensure that paper and outside service charges appear normal and that the invoice amount is appropriate.

Days sales outstanding in receivables should not exceed 45, assuming your terms are net 30. Acting proactively, a financial executive will introduce an early-call and follow-up procedure. Two weeks after an invoice is mailed the customer should be called to be sure there is no problem with the invoice, that it is entered into accounts payable and that it will be paid within terms. Just before 30 days, the customer should be called to confirm that the invoice will be paid on time.

If value added is dropping and paper prices are locked in, a determined financial executive will work with your sales and production managers to negotiate more favorable prices from outside vendors of design, production and finishing services.

When it comes to expenses, some of the less obvious ones should be analyzed. Who on your staff can tell you that you’re getting the optimum combination of service and pricing on your contracts, such as HVAC, shop towels and recycled paper waste? Someone needs to introduce competition to the mix, and it shouldn’t have to be you. This is something a financial executive can do for you.

Who on your staff is keeping track of contract expiration dates? Many lease and service contracts require 30 to 90 days advance notice for cancellation. If you miss the critical notification date on an equipment lease, for example, you’re not likely to get your money back for the months in which you make unnecessary payments. If you miss the notification date on your communications contract, it may not be as serious, but you may lose out on a money-saving package an aggressive rival might be offering, such as tying data and voice into a single T1, with free web-hosting services.

It takes time and effort to determine if you’re getting the fairest pricing on your risk coverage. When was the last time you approached other brokers for competitive quotes? When did you last sit down with your own broker to ensure that assets are properly accounted for and are neither over nor under-covered? A financial executive does this as a matter of course.

You may be getting month-end financials, but aren’t given an explanation of cost overruns either by job or in the sales, general, and administrative categories. If you don’t know what went wrong, how can you fix it? A financial executive’s analysis would answer these questions.

Is anyone measuring and reporting productivity and efficiency to you every month, at least by department? If the ratio of chargeable time to total time in any given production department is consistently below your budgeted productivity level, you may be overstaffed. Efficiency, the measure of cost incurred versus cost estimated for production jobs, reflects employee performance. If the comparison is consistently unfavorable, the employee may need training or the standards may need re-evaluation.

Any decision involving employees should be clearly conveyed both to the affected employees and to the work force overall. While retraining and performance monitoring are routinely understood, the justification for work force reduction should be handled with greater forethought. A financial executive can help you prepare for the tough questions employees will undoubtedly raise.

Regulatory issues can be vexing, time consuming and costly. Perhaps so, but a regulatory issue, if ignored, can place an employee in jeopardy, the company at risk for a lawsuit, or can prompt a disgruntled employee to report an infraction anonymously. A resourceful financial executive can help bring you into compliance.

These scenarios illustrate only some of the ways a financial executive can enhance your company’s profitability and cash flow, and free your time for other responsibilities. Consider, too, the advantage of having a colleague with whom you can address concerns that may have a profound effect on your company’s future.

Partnering for the future
Late financial statements, lack of analysis of results, and absence of reliable profit and loss and cash forecasts may underlie a more profound shortcoming: lack of a business plan and financial forecasts supported by sound assumptions and workable strategies. A financial executive can not only provide the tools for the plan and forecasts, but more importantly help you develop the assumptions and strategies that underpin them.

This is the second level at which a financial executive can add value: being your advisor. Running a company is hard enough. Running it by yourself denies you the valuable input a financial executive can provide. He or she can address with you the critical issues that may make the difference between a growing, profitable company and a stagnating one.

Suppose financial forecasting reveals a need for additional capital to sustain your growth. A financial executive can negotiate a working capital line, equipment financing for capital asset additions, inform you if covenants imposed by the bank are achievable, and explore long-term debt and equity financing alternatives for you.

A financial executive can help you determine if your work force is adequate in number and skill level to manage the growth you foresee. This applies to support staff and managers as well as to production employees. Furthermore, he or she can help you evaluate the need for a more advanced information technology system—-one that’s consistent with the level and complexity of your operations as the business grows.

Finally, consider these questions, possibly vital to your future, for which collaboration with a financial executive would be invaluable:

1. Should you acquire or expand digital color printing capability, acquire a competitor, or add fulfillment to broaden service to your customers?

2. Are your customers happy? How do you know? Perhaps you should consider a “Voice of the Customer” survey to identify any shortcomings in your most important customer relationships.

3. Do your employees extend themselves to the limit to ensure product quality and customer gratification? Level of rework and frequency of late deliveries are good indicators of a problem and as such need to be appropriately monitored on a timely basis.

4. Finally, have you identified and worked hard to consistently implement the culture which you feel best suits your business? Are your values clearly and consistently communicated to your employees, customers and vendors in word and deed?

A financial executive can provide critical perspective in answering these questions, as well as partner with you in implementing your value system.

Bottom line
By now you may be wondering about the cost of bringing a financial executive on board. You can start by identifying the areas in which you are foregoing savings, either real or in terms of the value of your own time. The sum of missed savings and profits and the dollar value of your misspent time is your “opportunity cost.” Then compare the opportunity cost with the out-of-pocket cost of hiring a financial executive.

Today there are other options if you feel you do not need or cannot afford an additional full-time employee. One is to bring on a financial executive on a part-time basis. This allows you to have the expertise, but at a reduced total annual cost. As an alternative, consider hiring a financial executive on a project basis to address specific issues as they arise. This would lower your total annual cost while allowing you to bring in financial leadership when you need it, for as long as you need it.

Having a financial executive can “pay for itself” through the improvements in financial results and operations that he or she helps to achieve. It’s a choice whose consequences may have significant impact on the profitability of your business for years to come.

About the author: Don Worfolk is a chief financial officer partner in Tatum Partners, LLP, a national professional services firm that provides executive-level financial and information technology leadership to companies undergoing significant change. Worfolk worked for 15 years as a senior-level financial and operations officer at Champagne/Lafayette Communications Inc. and one of its predecessor companies. He can be reached at 978-263-9645 or by e-mail at .