WHY SALES EXCEPTION REPORTING can pay for itself! – (Part II)

Image result for stacks of paperwork

If you did not read the blog post last week regarding the Sales Exception Reporting mechanism, please go back and read it now.

We ended our discussion last week by stating that for the Sales Exception Report to work you have to set certain criteria.  In most large companies with a big product ‘catalog’ they have some kind of grouping.  Let’s take a cosmetics company.  They will group their product as follows:

  • Face
  • Lips
  • Eyes
  • Hair

You might call these ‘departments’ just as you would in a Department Store.  So let’s set up our report as follows:

  • For ‘Face’ Department show all sales with Gross Margins less than zero or greater than 50%.
  • For ‘Lips’ Department show all sales with Gross Margins less than 5% or greater than 30%
  • For ‘Eyes’ Department show all sales with Gross Margins less than 2% or greater than 60%.
  • For ‘Hair’ Department show all sales with Gross Margins less than 0% or greater than 25%

Now we have the parameters for our new report.  For some, you may need to ask your software vendor to design and deliver the report.  You may be able to build an Excel spreadsheet that can handle it but a hard coded report is preferable as long as it is not cost prohibitive.

Accurate cost of goods sold per unit of measure of product is critical.  If you don’t have an accurate and reliable (not perfect) costing system, the report will not be effective.

In reviewing your report, you are looking for two things:

  • Is the cost right
  • Is the Selling Price Correct

Compared to fifty years ago when prices did not change from day to day at the grocery store or the gas station, prices were much more stable.  But now, even with the technology that allows price scanning (UPC Coding) we believe we are keeping up.  But a price scan depends on what a human being entered into the system somewhere along the line.

Who among us has not been to the grocery store or a big box hardware center and seen the price ring up incorrectly.  The item has been put on sale based on the signage where you picked it up but the sale price has not been entered.  Conversely,  prices increasing the Selling Price may not have been updated.  Someone needs to monitor how items are being priced and more significantly, losses that may be generated through bad costing or errors in unit sales price.

Sales Exception Reporting is the essence of ‘Management by Exception’.  Not looking at everything but just those things you defined as outside the expected result.

If you have any questions on this topic, please feel free to contact me.



I’m working for a rather large client right now to help them build out a corporate infrastructure in a newly created headquarters operation.  There is a lot of involved,  in depth accounting required.  However, because of turnover they have realized that they must document their accounting and finance processes, policies and procedures.  This is an enormous job that we will be undertaking.  Many businesses, large and small, simply do not have an accounting manual or anything close to that.

Let’s imagine that tomorrow, your boss comes to you and says you need to create an Accounting Manual and an Operations Manual and you have three months to get it done.  Where would you start?

First, don’t start from ‘Ground Zero’.  Take a look at Steven Bragg’s work which can be found at http://www.wiley.com.  I have his Fifth Edition of Accounting Policies & Procedures and it is a great publication.  Use its’ many templates and forms and customize them to your particular company.  You will be light years ahead of starting from scratch.  There are other manuals you might already have on your bookshelf.   Many of them are really very good.

Second,  don’t think you can just copy  your documentation verbatim.  To document processes and procedures, you have to spend time interviewing people who are involved in the work you are documenting.  You will quickly find that not everything in a book you are using relates directly to your line of business.  You must CUSTOMIZE, CUSTOMIZE, CUSTOMIZE.  That takes time.  However, if you don’t you will be caught in the act of short cutting your way through the project.  USER input is critical.  Users will need to test your processes & procedures  for relevance and accuracy.  Users will have to keep you updated on changes in a process, policy or procedure.  You might consider forming a USER Committee to help you build the necessary manuals.

Third, three months is an ambitious timeline for such a large project.  If you have a Microsoft Exchange Server you might want to use a shared drive to put your documentation out there for employees in an electronic form. (Always check with your I.T. department before you begin uploading to the drive).   If you have a website, take a look at getting your employees behind a locked door requiring log-in with user name and password required.  (Be sure you get the o.k. from your I.T. Department).

Fourth, you must realize that an Accounting Manual or Operations Manual cannot become a static set of documents.  Don’t pat yourself on the back and think ‘job well done’ when the deadline is met.  The end of the project timeline also means the beginning of a commitment to update, edit and modify the manuals you and your committee  have created.  Obviously, it would be much easier if it was all in electronic form.  Doing the same for printed manuals is almost impossible in a big company because of the large number of books that may have to be updated, reprinted and distributed.

It’s quite a project but the payoff should be substantial.  Truthfully, you may have a working manual at the end of ninety days,  but you probably still have work to refine it.  Remember, as controller, you simply don’t have the time to do it all.  Delegating some of this work, with your oversight, will be key to meeting any deadline you might have.






Lion Picture for Website




Every now and then I see something that just resonates with me.  It could be a phrase or a video or a picture.  So when I saw the picture of the lions and the tag line ‘Surround Yourself With People On the Same Mission as You’,  I knew I had to write about it.

A few years ago Mission statements were very popular but I don’t see the emphasis on them that there once was.  Maybe your company has one.  If so, do you know what it is?  Do your employees know what it is?  If you were asked to write a Mission Statement for your Accounting and Finance group, what would it be and why does it matter?

I have an admission to make.  I’ve never liked the word ‘teamwork’.  If you’re the Atlanta Braves it’s fine.  But a group of professionals should be encouraged to think independently.  The ability to problem solve should be valued even more than the ablity to get along with everyone in the group.  Independent thinkers don’t always have the best social skills but that doesn’t mean they aren’t intelligent people.  I will admit they can be somewhat difficult to manage but Controllers & CFO’s should interact with them on a more frequent basis to make sure they won’t self destruct inside your group.

Let’s face it, every day those of us who roam through Linked In, Facebook, e-mail, text messages, etc. are bombarded with advertisements, white papers, webinar offerings, etc.  We want to stay up-to-date but how in the world can we and still do our job.  I believe that we should first put a top priority on information that helps us align with our Mission Statement.


  1. It focuses everyone in your group on the meaning of what  each member should be doing.
  2. When hiring it sets the stage for who it is you really need to add to your group (can they live by your creed?)
  3. It explains to others what your group does (and hopefully why)
  4. It provides a philosophy for the group to live by
  5. It becomes the driving force behind what you do

Sample:  Our Finance Group’s Mission Statement -‘ To report the historical & map the future by using the best data we can’ …. or ‘to support our corporation using the right numbers’ .  I will leave it to you to come up with the right mission statement.

Let’s face it, most people know what the mission of the Credit Department is (collect all the money) or the Mail Room (deliver all the mail) but Finance and Accounting  departments are not that transparent to most people outside the finance and accounting functions.  And maybe it isn’t even clear to some of your new hires either.

Finally, get your group together around the conference table and start brainstorming it.  And if you’d rather keep it private among your group then incorporate it into your group meetings and correspondence between each other.

I don’t know if the Lions in the picture have a written mission statement posted somewhere in their den, but you can be sure they are all on the same page in this picture (most likely food!).  How do I know that?  Because they are all headed in the same direction.




You Should be Reading This………

Here’s a new book I’m adding to my Recommended Business Reading List:

SCALING UP EXCELLENCE by Robert I. Sutton & Huggy Rao.   When you get Tom Peters to write a recommendation quoted on your back cover…..well then this is a book worth reading.


It’s back to school today for many students.  And, it’s back to work today for controllers facing the first full work week of the year.

So, with that said, I am going to launch my first annual ‘The Everyday Controller’ list of predictions for 2014 in America.

  1. I predict that the U.S. Government and other governmental bodies should become your new best friend this year.  In years past, many small companies have felt safe flying under the radar of compliance.  I would suggest that this will not be so easily accomplished.  Build a history of compliance with the various agencies you must deal with including the IRS, your state’s environmental division, city and county officials, etc.  Regulatory oversight is not going away.  Build a proven track record of compliance and you will most likely reduce your company’s overall risk.
  2. I predict that your skills as a Controller in a growing company will be tested.  Companies experiencing rapid growth face their own set of challenges including finding and training new personnel, maintaining internal controls, working capital forecasting and many others.  In companies with both a controller and a CFO, the controller is normally working on the frontlines.  All controllers should make sure that there are open lines of communications with employees.  I cannot tell you how many disasters were averted because someone gave me a heads up.  Keep your door open as much as you possibly can.
  3. I predict that the single greatest challenge you will face in 2014 is keeping all your personnel happy.  In today’s world of work, many employees expect the flexibility to be able to attend functions during the day at a child’s school or to utilize FMLA to care for a sick parent.  It’s the 21st century.  And people want more than just money from their jobs.  They want choice, opportunity, challenges, flexibility and to be heard and respected.
  4. I predict that as a Controller, if you fail to keep up your personal and professional development eventually you will be seen as living in the past, doing things the old way, and even possibly ‘obsolete’.  You are a professional.  Even if you are not a CPA or CMA, you should take advantage of the courses offered for them.  Take a course on Internal Control, or Tax.  There are a number of courses that are specific to industry such as construction and the restaurant business.  Find ways to interact with others in your profession.

It is too easy to live your life at work careening from one crisis, one fire, to another.  If you don’t come to life except when something has gone wrong, you probably need to start building in a daily routine.  Develop projects you want to work on.   For instance an accounting manual for your company may be needed.  If you’re on an Exchange Server developing some of its capabilities.  Have a set time each week to meet with your staff.  Maybe even an hour or two a week for that professional development track.

Finally, having lived and traveled across the world, I can safely say that America is the business engine of the world.  You should be proud to be a part of that no matter how large or small.


I love books.  I inherited that trait from my parents.

In today’s post I am going to talk about some of my favorite business books and why they made my list.  Some of the smartest and forward thinking business people I have known are avid readers.  And, they are willing to share their favorites.  It also shows that you love what you do and have committed to lifelong learning in order to stay current and relevant.

There are thousands of books out  there championing the latest business buzz words.  There’s no harm in reading them, but, there are some good magazines like CFO Magazine that can present them in a much shorter version.

What makes a good business book is a matter of personal opinion.  Some of them do stand out more than others.  So, without further conversation, below are a few of my favorites.

THE CHECKLIST MANIFESTO – Author: Atul Gawande Published: 2009

I’d describe it as thought provoking and insightful.  It’s a fascinating read and never boring.  Dr. Gawande wrote this book while a surgeon at a major hospital.  If you are a list maker, you’ll agree with his premise that checklists are critical in more ways than you might think.  The section on how big buildings are constructed through the management of lists is enlightening and the reader can find many ways to apply these lessons to their own careers.  See how list making can organize and streamline your life a a controller as well as your personal life.

OUTLIERS – Author: Malcolm Gladwell  Published: 2008

Author of ‘The Tipping Point’ and the recently published ‘David & Goliath’ Gladwell gives new meaning to ‘thinking outside the box’.   While the anecdotal stories in each chapter will definitely broaden your thoughts about the subjects presented, it’s really a book about how data can provide proof that our assumptions are questionable at best.  I think the lesson learned is to look beneath the surface, to investigate and open your mind to other possibilities.  I think the accounting regimen we are taught in school is just that, regimented thinking.  As controllers, how can you reorganize or streamline your business, if needed, when you can’t think openly enough to see there is a problem.  You’ll find this a great read and one you won’t soon forget.

DOUBLE ENTRY – Author: Jane Gleeson White Published: 2011

Attention all accountants and accounting students.  This book is for you.  It’s strange that in Accounting 101 or 102 they don’t teach the history of double entry bookkeeping.  ‘Double Entry’ is subtitled ‘How the Merchants of Venice Created Modern Finance’.  It’s a small book but understanding how Luca Pacioli developed debits and credits and two sided entries which must balance provides a foundation for our understanding of how what we practice as accountants was developed.

If you have a budding accounting student you know, this book is for him or her.  I recommend you read it before you wrap it!

MAKING IT ALL WORK – Author: David Allen Published: 01/01/2008

In 2001 David Allen published his best selling book ‘Getting Things Done’.  ‘Making It All Work’ is a follow up to that book and where I discovered the author.

Gone are the days where managers, even top executives, had secretaries or administrative assistants.  They’ve been replaced by laptops, tablets and desktop computing.  There’s no one to hand you a paper phone message, or take dictation, or file your paperwork.  On top of that, all of us have more projects, emergencies, fires, personnel, etc. competing for our time.  It’s all exhausting!  His subtitle is ‘Winning at the Game of Work and the Business of Life’.  Treat this book like a manual that you refer to often as you try to squeeze more time out of your day to be truly productive.

ORGANIZED FOR SUCCESS – Author: Stephanie Winston Published: 2004

Stephanie Winston first became known when she published her ‘The Organized Executive’ over thirty years ago.  Of course, her ‘Organized for Success’ is much more current, it is still nine years old.  I agree, a lot has changed during that time.  However, the bones of the book concentrates on those things that keep us all from being more productive in our daily work life.  I consider ‘The Organized Executive’ and ‘Organized for Success’ a basic primer on how to fill the role of an executive based on how others have succeeded.

I recommend you also treat ‘Organized for Success’ as a manual you will refer to over and over.

You should be able to find all these books on www.amazon.com.  Pick one and dedicate yourself to some personal enrichment drawn from the pages of the books I have recommended.  Good Reading!

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