Friday is July 4th also known as ‘Independence Day’.  Like Memorial Day and Veterans Day, July 4th is also a day of remembrance which inspires  us to look back at our founding fathers and what they did to help build this nation into what it is today.

When I was a young Army wife my new husband and I were posted overseas to Ethiopia.  Obviously, I was hoping for an assignment somewhere in Europe so we could travel the continent.  Living in Asmara, Ethiopia was quite an experience and a story for another day.  I had always appreciated and valued being an American.  My father fought in World War II.  My grandparents were immigrants that had fled persecution at the turn of the 20th century.  I knew how important it was to be an American.  Arriving back in America after a year and a half was the happiest day of my life.  I had learned even more during that time what a privilege it was to call America home.

Let’s be honest, there are too many countries in the world today locking their people in.  We are challenged by how to handle all the people that want to come to America, not leave it.  That says a great deal about our democracy.

Against the backdrop of America is how we have always been the greatest nation on earth.  Not only because we have fed ourselves and a large part of the world.  Not only because our constitution has become the guiding light under which we operate, but because we are a nation of laws.  For the most part, we are a law abiding country.  However, the underlying need for compliance with our laws still permeates every level of our society.  Financial reporting has taken some blows in the last few years.  Passage of Sarbanes-Oxley has attempted to curtail executives from falsifying the financial performance of their companies.  Now the CEO and CFO must sign and certify the financial statements of publicly held companies.

As accountants, we have an ethical duty to perform our responsibilities within the laws of our nation, and of standard setting bodies which govern our activities.

But I also know that many of you are put under great pressure to stray from the ethical standards to which you should adhere.  This can be a problem for many.  My advice to you………… sure that you know what the moral and ethical standards of your company are or for the company who is proposing to hire you.  Knowing this up front will probably help you avoid those sticky situations you are sometimes confronted with.  Remember, some of the biggest fraud cases like World Com and others ended with the controller going to jail as well as other top executives.  I can tell you that these things don’t happen overnight.  It is not one big violation they are asking for at first, it is the little ones that maybe stretch the line but don’t cross it until one day, it is a short step over the line.

I  believe that our founders were honest men who cherished freedom and democracy.  That comes with a price.  We should all be doing whatever we can to make sure we support the laws of our country and our licenses, if you have one.  After all, that is a very small price to pay for us on the home front.

Have a very happy and safe July 4th…….see you next week.




Why should a simple thing like our Chart of Accounts (COA)  be the subject of any in depth discussion.  Here’s why:

  • Your COA is the foundation on which all financial reporting, planning and analysis will be based
  • A ‘thin’ COA reduces key entry errors and correcting Journal Entries
  • The larger the COA the more difficult future consolidations will become

As a member of The Institute of Finance & Management Controller’s Section, I found there are published articles regarding the impact of ‘messy’ COA’s on financial reporting.  But to address the question this article poses, here are the ‘five reasons your Chart of Accounts may be out of control’ and why’:

  1. Anyone can create a new General Ledger account
  2. Anyone can change a General Ledger account
  3. Numerous acquisitions of companies with their own COA’s.
  4. Entities created within your company with the same G/L Account title but different G/L Account number
  5. Too many manual journal entries & post-closing entries

One of the most difficult and challenging aspects to cleaning up a Chart of Accounts is prior year histories.  What will happen to them?  Does your software provide a way  to map G/L accounts to a consolidated financial statement?  Where do you begin?  Here are a few ‘suggestions’ to consider:

  • Stop the bleeding!  Restrict access to the creation of G/L Accounts to only a few people within the Finance/Accounting Department.
  • Restrict access to entering Manual Journal Entries to only a few people within the Finance/Accounting Department.
  • Involve your software vendor for your accounting system and have them assist you in developing a plan of action
  • Involve your outside accounting firm in assisting you with cleaning up your COA.
  • If available, implement the use of Sub-Ledger accounts that roll up to your main G/L Account (this provides further detail for financial and comparative analysis)
  • From the day your software is installed and you receive training, continue learning and training to stay up-to-date on changes and upgrades.

The first step to solving the Chart of Accounts problem is to recognize that you have one.  If you can relate to  any of the five signs shown above it’s time to start laying the groundwork to fix it.  But you cannot fix what is broken if you don’t have the tools or don’t understand how they work.

Do you have a story to tell about how you cleaned up your Chart of Accounts proliferation problem?  Let me hear from you.








Due Diligence – ‘Falling In Love & Other Pitfalls’ – Part II


For many people, the work of acquiring companies is an exciting and invigorating process.  It can improve morale and provide new motivation for the Controller/CFO and finance team.  This is where we get to put our accounting skills to work.  We’re glad to see our business growing (and usually  glad that we are the acquirer not the acquired company).

Making an acquisition is not something that happens in a vacuum or a sterile environment.  If you are working closely with the target company, you get to know the people.  Sometimes you can even bond with them.  You may fall in love with the idea of new challenges, new people, new projects.  When this happens, we have a tendency to filter out those little warning signs and even some big warning signs.  When this happens we have moved into a situation where we are no longer independent.  This poses serious risks for you and your company.  There is not a simple solution to this problem.  I have been a victim of the ‘falling in love’ syndrome and experienced deep disappointment when an acquisition failed to go through.  I think the more experienced we are, the better able we are to remove the emotion from the equation.  What are some ways to avoid this? (Back to my checklists):

  • Start two checklists:  One is for pros and one for cons.  Be honest and list every good reason why this purchase should not be made (even if you are the only one that will see this list)
  • Referring back to Part I and understanding why the business is for sale………..the reasons may belong on your ‘cons’ checklist.
  • Try to think of yourself as the consultant on the acquisition project.  If you were brought in from the outside to assist in evaluating and valuing the business, it would be assumed that your findings would be based on the fact pattern alone.
  • Remember – everyone at the target company will be on their best behavior and any eyesores or outward manifestations of a problem could well be hidden from you.
  • Generally,  a company attorney is involved.  Attorneys are very risk averse and often get a lot of push back as they write or review  Purchase Agreements.  Make sure you understand the risks from the attorney’s point of view.
  • There are different ways of structuring a purchase, primarily stock or asset purchase.  Your attorney should be your guide.
  • Most acquisitions transpire under the veil of confidentiality.  It is difficult then to find out what suppliers of the target think about the company, or anyone else for that matter.   A supplier can often provide some great information on their customers.

I urge you to remember that in most cases, if the current acquisition doesn’t work out, take your buying power elsewhere and find a better investment for your company.  It is a lot easier to buy a company then it is to shut it down after a couple of years as an under performing asset.

DUE DILIGENCE…….do you have a checklist? – Part I


I want to talk about the minefield I call ‘Due Diligence’.  I also want each of you to understand that your particular industries may be very different and thus require different kinds and levels of due diligence.  Therefore, you need to consult with your outside accounting firms and/or attorney(s)  for further discussion.

I am fortunate to have been involved in a number of acquisitions over the years, some big and some not so big.  It’s a great area of accounting and financial work which allows you to understand how businesses operate from the ground level.  However, this is an area that requires collaboration between people who are knowledgeable in such matters, such as your company attorney and outside accounting firm.

If you happen to be working for a publicly held company, most of those companies have well developed processes and procedures to guide them through the process.  But what are some of the things  (and certainly not all) you should be worry about.  Many small to medium enterprises (SME’s) achieve growth through acquiring other businesses………..sometimes in the same industry and sometimes not.  If you are a controller involved in or leading the acquisition team, be careful.  If the acquisition goes great and prospers, those who brought it to the table will generally get the credit, not you.  That’s fine.   If it fails during the process or turns out to be a dud after acquisition, you will likely be tainted by it or directly blamed.  If you have ever participated in the acquisition process, you should have built a checklist the first time and then refined and modified it as acquisitions were made.  But if you have no experience, you need to study how this process works and begin to build your checklist.  .  There are some great examples out there on the Internet, and on websites like if you are a member. I also recommend you visit the website of John Wiley & Co for books and manuals that might be of assistance.  Pitfalls abound in the acquisition business.  Trust me.

Critical to the process of buying a company is understanding that there can be limiting factors to its’ success.  First, understand why the company is for sale.  Reasons may include:

  • Owner wants to cash out and retire
  • Owner lacks capital to remain in business
  • Owner is afraid of continued credit risk
  • Owner does not feel capable of managing his company’s continued growth (result of rapid growth)
  • Owner is seeing a decline in his business
  • Owner is struggling with compliance issues (this can be an expensive area depending on your industry)

There are numerous reasons but I think the above covers a lot of them.  Whatever the reason, you need to apply the same due diligence learning why it is  for sale that you would if you were buying a previously owned home for your family.  Wouldn’t you ask the homeowner  ‘why are you moving?’, ‘how are the schools in this district?’, ‘what about the crime rate?’, etc.  You need an honest answer about why the business is for sale just as much as why that home is for sale.

Another area requiring skepticism, from my own past experience, is the appraisal that you are presented with.  Many businessmen, realizing the time has come to sell, will pay for an appraisal.  However,  the true value of a business is what someone is willing to pay in an arm’s length transaction.  I have seen a number of big appraisal books, plenty of drawings and photos, etc.  They can be works of art, and they are not cheap.  Do not accept an appraisal as the gospel.  Unfortunately there are not a lot of comparatives out there.  In the home buying business yes, not in the business buying business.  That’s a serious challenge.

Next week we will talk more about the acquisition process.  By the way, that includes a discussion of ‘falling in love’!

In the meantime if you have any questions, submit them below.










Did you watch Episode 1 last night of AMC’s new series ‘Halt & Catch Fire’?  It takes us back to the seventies and eighties amid the development of the desktop computer.  The ‘HCF’ (halt & catch fire)  command unleashed simultaneous instructions for programs to compete for superiority in the race to control the computer.  Ultimately, the p.c. became uncontrollable.

To say that there has been exponential growth in software and hardware development since then  is an understatement.  And somewhere along the way, it has become all about the software with hardware a secondary issue.

Looking back, I believe we are now in the fourth revolution of computing.  First, the invention of MS-DOS the Microsoft Disk Operating System which, as we all know, made Bill Gates a billionaire (and all of his friends too).  Second, was the development of a desktop size computer and chips  containing all the computing power of the old IBM mainframe computer rooms that would fit on top of your desk.  Third,  the evolution of software as it became the priority dictating what hardware you invested in.  And now we are entering into the forth revolution of the ‘Cloud’ and ‘Big Data’.

Why should controllers be concerned? Is there a lesson in here somewhere?  One of the greatest challenges for hardware developers back then was the lack of a common p.c. architecture.  Then, as now,  Apple went its own way starting with their GUI (graphical user interface)  computing system and then there were the rest, a host of different brands that may or may not have had a standard architectual design.  To remedy the situation, a group of seven companies in the p.c. industry came together to agree on a common design which meant that one could run the same software on different brands of computers.  That means that you can run your company with a hodge podge of Dell or Lenovo or HP computers.  Even clones for those left in that market.  What’s the point?  You can interface your computers because of those  pc architecture standards developed so many years ago.

I’m betting that there are a number of you out there who went to work in growing companies who had no purchasing policy except ‘least cost’ when adding p.c.’s to the network.  Lucky for you, that common architecture agreement which is still in place today eliminates some of the sin of buying just on price.  But ultimately, that can be costly.

As companies grow, the challenges of keeping up with computing needs are numerous.  I have my own personal story to tell about a huge challenge.  My company had a corporate HQ as well as numerous facilities doing very different things spread throughout our state.  Where the program was once locally installed on each computer, we migrated to installing it on our server.  This put pressure on our Terminal Servers.  The symptoms of something going wrong began to show themselves early on with repeated reboots at the remote facilities.  Within six months we were facing a crisis as the servers began to fail under the pressure of so many users logged on.  To remedy this, the company was faced with a needed restructure of the systems which would end up costing almost $250,000.  Essentially, we were catching up with several years of capital expenditures we had not felt necessary.  So here is my advice to all of you who are in charge of I.T. investment policy or involved at all in investment decisions:

1) Have standards – decide on which P.C. line makes the best sense for your business.  The same goes for printers, scanners and possibly other peripherals that might come into play.  If nothing else, hopefully you can push for volume discounts from your hardware supplier.

2) Set a ‘p.c. turns’ policy.  For instance, power users such as corporate employees may need to have their p.c.’s replaced every 2 1/2 to 3 years.  A remote user who does little work except online as they process transactions into the system could probably have a turn rate of ‘4 to 5’ years.  You will have to be the judge of that.

3) Even if you are ‘expensing’ your p.c.’s, printers and scanners, see if you can add them to your fixed asset ledger or, if not, an access database or excel spreadsheet to keep track of all of them, with the same basic information as appears in your asset ledger listing.  Be sure to show the name of the person assigned the p.c. and keep up with any transfers or employee changes.

4) Establish a 3-4  year capital spending plan that includes all hardware & software purchases necessary.  Be sure to include annual technology training costs.   Update it each year.  Share it with your CFO or CIO (if you have these people on board).

5) Maintain open and constant communication with your software vendor(s).  Be sure you are on top of their plans to for minor and major updates and upgrades.  One of the most serious consequences of failing to do this can be when they announce a coming upgrade along with the hardware requirements and only a small percentage of your p.c.’s are upgrade worthy!  We are talking some serious money here based on the size of your company.  This is why having a ‘turn policy’ is so important.  I believe that you should turn 25% of your p.c.’s and laptops and tablets annually (and that is a bare bones minimum percentage).

Remember – the advice given above is not based on your specific company and its requirements.  It is given as a guideline only and is not all inclusive.  I can’t emphasize how important any planning with regard to I.T. investment is.  The last thing you want in a thriving and growing business is for it to ‘halt and catch fire’ somewhere inside your I.T. infrastructure.




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