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Copyright 2009 BetterManagement.comVisionary perspectives for management insights
The Top 20 Mistakes Made
by Corporate AccountantsDavid ParmenterCEO, waymark solutions limited
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Copyright 2009 BetterManagement.comVisionary perspectives for management insights
The Top 20 Mistakes Made
by Corporate AccountantsDavid ParmenterCEO, waymark solutions limited
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David Parmenterwaymark solutions limited
Website: www.waymark.co.nz
Blog: www.davidparmenter.com
Email: [email protected]
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Corporate accountants better practices on
www.bettermanagement.com
1. Decision based reporting
2. Quick month-endsday 3 or less
3. Quarterly rolling planning
4. A two week annual planning process the building block forquarterly rolling planning
5. 50+ ways to improve your accounts payable function
6. Winning KPIs (8 audio casts)
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#1 Having over 80 account codes for the P/L
Separate account only if they represent at least 1% orgreater of total expenses (max 40 to 60 account codes)
Separate codes only if revenues represent over 3% or
greater of total revenue (max 15 to 20 account codes)
To a stupid question ask what are they going to do with info
answer 42 or
skilled management accountant investigate 6 weeks of
expenditure and then annualize the number Appoint a hard-nosed keeper of the chart of accounts
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#2 Monthly re-forecasting of the
year-end position
Flawed on four counts:
Why should one bad month, one good monthtranslate into a change of year-end position?
The forecast is a top-top forecast with little inputand no buy-in from the budget holders
Two months before year-end managementappear to ignore the oncoming year
Management and the Board know what evernumber you have told them is wrong!
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Fast light touch quarterly rolling forecast
The x marks the month the forecast is done (2nd or
3rd week in month)
Important that the purple numbers are quick cuts as
they are fine tuned later on
Red numbers create the new benchmarks for reporting
and funding
J un J ul A u g S ep O c t N o v D e c J an F eb M a r A pr M a y J un J ul A u g S ep O c t N o v D ec J an F e b M a r A p r M a y J un J u l A u g S ep Oc t N ov D e c
X 18 m onths
X 18 m onthsX 18 m onths
X 18 m on th s
X
X Q uarterly upd ate of roll ing forecast (during 2nd wee k)
Forec ast m onthly in detai l (50% of forecast t ime sp ent gett ing it r ight)
Forecast mo nthly
Forecast in quarter ly spl its , although so me budget holders m ay wan t to do i t monthly
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#3 Investing in a complex G/L and
upgrading unnecessarily
Task of the G/L is very simple, recording the expenditure andrevenueSAP?
The midwives of these monsters are freshly minted MBAs -
no sign of accountants with grey hair
Often core services of complex G/L could be delivered by adedicated system outside G/L for a fraction of the cost
A CFO of a 500 FTE company uses MYOB, a $500 package
Too frequent upgrades - I too would be issuing upgrades every
time I wanted to improve my bottom-line
Changing the G/L writes-off some of your experienced staff for
three to five monthsand you do not get thanked
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Investing in a complex G/L and upgrading
unnecessarilycont.
You really only need to acquire a new G/L ifyour existing G/L does not support 21st century
accounts payable options
Stick with your existing system and maximize itsuse, especially all the accounts payable features
storing scanned images of purchase invoices on G/L
electronic ordering
electronic receipting of goods & services
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#4 Letting Excel dominate the finance system
Excel never was intended to be a core financial system
Need a moratorium banning any new Excel models
KPMG have said that for every 150 rows of a
spreadsheet there is a 90% chance of a logic error
Excel is great for doing a diagram, a one-off costing,
being a table of numbers
Excel has no place in reporting, forecasting, budgeting
Nor is it a tool for a NASA space program
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We need to embrace the new tools
A drill-down tool so budget holders never needto look at the G/L
A planning tool for forecasting and recording the
annual plan
A reporting tool to replace the procedure of
dumping the monthly numbers to the G/L
Balanced scorecard tools for displaying
performance measures
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#5 Doing another annual planjust like
the last one
The nightmare of three to four months arguing over
resource allocation when nobody knows the answer
The endless cut-back rounds, the game playing, the
spend-it or lose-it-mentality is not befitting the 21stcentury
Worked for Julius Caesar but certainly not for us
When was the last time you were thanked for the
annual planning process?
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The annual planning process is not
adding value, instead it is:
Undermining an efficient allocation ofresources
Encouraging dysfunctional budget holder
behavior Negating the value of monthly variance
reporting
Consuming huge amounts of time - Board,
SMT, budget holders, assistants, finance team.
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Annual planway forward
Cost out the time spent on the last annual planuse Excel!
Research alternatives
read Jeremy Hopes work Reinventing the CFO,Harvard Business School Press
www.bettermanagement.com has a quarterly rollingplanning in a web seminar and article
acquire my white papers on quarterly rollingplanning from www.davidparmenter.com
Prepare a sales pitch using emotional drivers
http://www.davidparmenter.com/http://www.davidparmenter.com/ -
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#6 Avoid monthly phasing
The two major mistakes of an AP process:
monthly analysis to estimate an annual figure
monthly AP estimates used as a reporting yardstick
Monthly phasing has undermined the value of
month-end reports Quarterly phasing of data adequate
Fine tune the monthly targets just before the
relevant quarter starts
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#7 Giving budget holders an annual
entitlement
Giving budget holders an annual entitlement tofunding is the worst form of management we
have ever presided over
Portioning out cake at a nine-year-olds birthday
party
J un J ul A ug S ep O c t N ov D ec J an F eb M a r A pr M ay J un J ul A u g S ep O c t N o v D ec J an F e b M a r A p r M a y J un J u l A u g S ep O ct N ov D ec
X 1 8 m onths
X 18 m o nths
X 18 m onth s
X 18 m o nths
XX Q uarterly upda te of rol ling forecast (during 2nd week)
Fo recast m onthly in detai l (50% o f foreca st t ime sp ent gett ing i t r ight)
Forecast m onthly
Fo recast in quarterly spl its, althoug h som e budget holders m ay wan t to do i t monthly
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Only funding the next quarter helps in
many ways:
Spend it or lose it can no longer work
Budget holders find it nearly impossible to hide
their reserves in the next three month period
BHs are encouraged to seek funding for newinitiatives
BHs will be weaned off from asking for annual
entitlements they do not need
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#8 Budgeting at account code level
Never needed to set targets at acct code level
Limit the categories that budget holders need to
forecast to no more than 12
Allow the budget holders to have some flexibilityin the categories to best reflect their operation
Planning tool can easily cope with mapping of
general ledger (G/L) codes to categories
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Budgeting at category level
Stationery 4,556
Uniforms 3,325
Cleaning 1,245
Miscellaneous 7,654
Consumables 2,367
Tea & coffee 2,134
kitchen utensils 14521,426 Consumables 21,400
Salaries and wages 25,567,678 Salaries and wages 27,400,000
Taxes 2,488,888 Taxes 2,900,000
Temporary staff 2,456,532 Other employment costs 4,200,000
Contract workers 2,342,345Students 234,567
33,090,010 Employment costs 34,500,000
Old detailed approach Forecasting by categories
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#9 Producing numbing monthly financial
reports
Huge cost of M/E reporting300 pages +
Locks the accounting team into being a
processing centre
Month-end reporting does not create much value(the horse has bolted)
Part of the trifecta of lost opportunities
CEOs want more advisory time In the briefcase for three days
Business unitOperating Statement for the period ending 31 January 20XX
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Business unit
P/L
(3 break-outslides)
Month $000s Year-To-Date $000s Full Year $000s
Act Bud Var Act Bud Var Budget Forecast
Revenue
1,430 1,380 50 Revenue 1 5,720 5,520 200 17,200 16,6001,430 1,380 50 Total Revenue 5,720 5,520 200 17,200 16,600
Less
267 215 -52 Commissions 1,066 860 -206 3,200 2,6001,164 1,165 -2 Gross Profit 4,654 4,660 -6 14,000 14,000
Expenses
278 262 -16 Expense 1 1,240 1,046 -194 3,300 3,100218 212 -6 Expense 2 672 848 176 2,600 2,500188 182 -6 Expense 3 752 728 -24 2,300 2,200158 152 -6 Expense 4 632 608 -24 1,900 1,800128 122 -6 Expense 5 512 488 -24 1,500 1,50051 60 9 Expense 6 673 642 -32 1,000 1,200
1,020 990 -30 Total Expenses 4,080 3,960 -120 12,200 11,900144 175 -32 Surplus/(Deficit) 574 700 -126 1,800 2,100
Major Costs
0
200
400
600
800
1000
Nov-05
Dec-05
Jan-06
Feb-06
Mar-06
Apr-06
May-06
Jun-06
Jul-06
Aug-06
Sep-06
Oct-06
Nov-06
Dec-06
Jan-07
$000s
Commissions Expense 1 Expense 2 Expense 3
highlights:
1. Xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx
xxxxxxxxxxxxxxx xxxxxxxxx xxxxxxx xxxxxxxxxxxx xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx
2. Xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx xxxxxxxxx xxxxxxx xxxxxxxxxxxx xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx
3. Xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx
xxxxxxxxxxxxxxx xxxxxxxxx xxxxxxx xxxxxxxxxxxx xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx
4. Xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx
xxxxxxxxxxxxxxx xxxxxxxxx xxxxxxx xxxxxxxxxxxx xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx
0
20
40
60
80
100
Nov-05
Dec-05
Jan-06
Feb-06
Mar-06
Apr-06
May-06
Jun-06
Jul-06
Aug-06
Sep-06
Oct-06
Nov-06
Dec-06
Jan-07
0
60
120
180
240
300
Vis itor numbers Operational wages
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Month $000s Year-To-Date $000s Full Year $000s
Act Bud Var Act Bud Var Budget ForecastRevenue
1,430 1,380 50 Revenue 1 5,720 5,520 200 17,200 16,6001,430 1,380 50 Total Revenue 5,720 5,520 200 17,200 16,600
Less
267 215 -52 Commissions 1,066 860 -206 3,200 2,6001,164 1,165 -2 Gross Profit 4,654 4,660 -6 14,000 14,000
Expenses278 262 -16 Expense 1 1,240 1,046 -194 3,300 3,100218 212 -6 Expense 2 672 848 176 2,600 2,500188 182 -6 Expense 3 752 728 -24 2,300 2,200158 152 -6 Expense 4 632 608 -24 1,900 1,800128 122 -6 Expense 5 512 488 -24 1,500 1,50051 60 9 Expense 6 673 642 -32 1,000 1,200
1,020 990 -30 Total Expenses 4,080 3,960 -120 12,200 11,900144 175 -32 Surplus/(Deficit) 574 700 -126 1,800 2,100
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Major Costs
0
200
400
600
800
1000
Nov-05
Dec-05
Jan-06
Feb-06
Mar-06
Apr-06
May-06
Jun-06
Jul-06
Aug-06
Sep-06
Oct-06
Nov-06
Dec-06
Jan-07
$000s
Commissions Expense 1 Expense 2 Expense 3
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0
20
40
60
80
100
Nov-05
Dec-05
Jan-06
Feb-06
Mar-06
Apr-06
May-06
Jun-06
Jul-06
Aug-06
Sep-06
Oct-06
Nov-06
Dec-06
Jan-07
0
60
120
180
240
300
Visitor numbers Operational wages
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#10 Reporting on the wrong measures
Short-circuited the process Lack of understanding of what we are looking for
Lack of SMT involvement
Never established a project team Never looked for critical success factors
4 t f f
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4 types of performance measures
PIs&RIs
KRIs
peel to the core
to find the KPIs
KPIs
peel the skin tofind the PIs
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Where to start
See www.bettermanagement.com for a series of webseminars and articles -they are all free.
Purchase my white paper - www.davidparmenter.com
which includes electronic version of templates,
checklists, workshop agendas etc. Obtain my KPI book Key performance indicators
developing implementing and using winning KPIs
Read Kaplan & Nortons book Translating strategy
into action the balanced scorecard
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# 11 Selling change by logic
Car sales person analogy Emotional drivers differ:
SMT - looking a fool in front of the Board, impact on
their bonus, short term focus
management - not invented by me, will behave basedon their perception, skeptical
staffjob security, impact on existing workload,
perception of what management will do
Selling the change
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Selling the change
Collect data on impact of current performance measures (*)
Read papers on www.bettermanagement.com Prepare the sales pitch for change (*)
Pre-sell the sales pitch to the influencers
Make the sales pitch
Plan and execute a focus group workshop with oracles fromaround the organization (*)
Seek a green light for the way forward (*)
* David Parmenter web casts on bettermanagement.com
#12 Allowing month-end reporting to go
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#12 Allowing month-end reporting to go
past three working days
When I was a corporate accountant each month-endwas a disaster waiting to happen
Quick month-end reporting has been around since theearly 90s
Now day one and virtual reporting are thebenchmarks
Part of the trifecta of lost opportunities
Look at www.bettermanagement.com
For my white paper quick month-end reporting byday three or less go to www.davidparmenter.com
http://www.bettermanagement.com/http://www.davidparmenter.com/http://www.davidparmenter.com/http://www.bettermanagement.com/ -
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#14 Using Julius Caesars calendar as a
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#14 Using Julius Caesars calendar as a
reporting tool
Creates 12 dramas a year Why not close-off on the last or nearest
Friday/Saturday of every month?
The benefits of this include:
precise four or five-week months
comparisons more meaningful
systems are rolled over at the weekend
budget holders know what to do without instructions!
At year-end movement will be taken up in theauditors overs and unders schedule!
#15 Letting emails dominate our day
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#15 Letting emails dominate our day
Why do accountants need to see emails 24/7, at the weekend,
at a friends party, etc. Nobody dies because we have not looked at our emails
unlike a paramedic, a surgeon, an anesthetist
Looking at emails first thing in the day is the most destructive
habit you can have! Eight week challenge - Look at emails two or three times
during the working day and never before 10:30am!
Eliminate weekend business emailsthe world will still go
around!
Read my Pareto 80/20 rule for Corporate Accountants formore tips- www.davidparmenter.com
#16 Not producing enough daily/weekly
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#16 Not producing enough daily/weekly
decision-based reports
KPIs should be reported 24/7, daily , weekly yesterdays sales reported by 9am the following day
transactions with key customers reported on a weekly
basis
reporting some weekly information of key direct costs
weekly non-financial performance indicators in a
balanced scorecard
weekly reporting on late projects and late reports
#17 Not investing enough in
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g g
Accounts Payable
Use the electronic ordering system in AP Scanning of invoiceselectronic approval
Organize all major suppliers to supply electronic
invoices with GL codes! Load remittances onto your website for suppliers to
downloadpassword protected
Acquire a web based expense claim system
Introduce the purchase card for BHs
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#19 Not celebrating enough
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#19 Not celebrating enough
An accounting team who were too busy to even
organize their Xmas celebration A celebration is a great communication tool
Schedule your next celebration and make it happen: celebrate every project completion
hold a staff meeting in a caf once a month and shout the wholeteam coffees and muffins
set up a regime where birthdays are honored and celebrated
shout the team to a lunch-time visit to the cinema
for Xmas give your staff optionscinema x5 instead offunction
during team meetings ensure that at least three team membersare thanked
# 20 Getting sucked into activity based
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costing/ activity based management
Jeremy Hope of Beyond budgeting fame has pointed outthe fallacy of activity based costing
These systems cost a lot to put in and to maintain
provide information of dubious quality
run 24/7 when you only need such information infrequently If you feel ABC is necessary make sure you have sorted
out all the other areas I have mentioned first
Read Jeremy Hopes work on www.BBRT.com and his
book Reinventing the CFO ISBN 1-59139-945-9.
These books came out in 07
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These books came out in 07
Go to www.davidparmenter.com for the link to Amazon
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Thank you for participating in
this audio seminar
Please keep in touch about your progress
See www.davidparmenter.com for my speaking
engagements, white papers, etc.
Q ti & A S i
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Copyright 2009 BetterManagement.comVisionary perspectives for management insights
Question & Answer Session
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David Parmenter
waymark solutions limited
Website: www.waymark.co.nz
Blog: www.davidparmenter.comEmail: [email protected]
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Copyright 2009 BetterManagement.comVisionary perspectives for management insights
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