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.




Think Like a Consultant! “How to Streamline Your Company from the Inside” – Part III

As we move into Part III, it’s time to follow up on the ‘scenarios’ presented in Part II.  We presented two different scenarios in which the Controller reported back to the owner his/her findings on two fairly significant (at least to the owner) mistakes that occurred.  In both cases, the Controller gained understanding of how these events happened.  However, there was no INVESTIGATION!  The controller did not ask ‘Why’ (or, how did this happen and what can we do to prevent this from happening again?)  I would want to insure it wouldn’t happen again, just to prevent the pain and embarrassment of events like this that fell under my watch.  with that said, let’s explore Scenario I.

As you will recall, in Scenario I, the company paid the same bill twice resulting in a duplicate payment of $100,000.  Based on the annual earnings of the company, this was a material event.  In fact, the $100,000 was to pay for a capital investment.  It’s time to have a meeting which includes your purchasing agent/employee and your Accounts Payable Department.   Does your company have a documented Capital Expenditures process?  A good process includes a ‘Faceplate’ that includes the justification for the expenditure, what division the expenditure is for, as well as signature lines for top management/owner(s).  Once the sheet is approved, it should be returned to the Purchasing Manager.  At that time, a P.O. should be written.  If the P.O. is electronically generated, a copy should be marked as the ‘Payment Copy’ (in the absence of a software solution provided for tracking these kind of payments).  In the case of a manual P.O. from a P.O. book, it should be policy as to which copy is attached to the Vendor invoice.  It should be the policy that when the vendor invoice is received it should be routed to the Purchasing Manager who checks it for accuracy against the P.O. and attachs the payment company.  Policy would prevent the creation of additional payment copies which would flag when a duplicate invoice was presented.  As the Controller, it should be your responsibility to insure that invoices of any amount are not paid twice.  It is one thing to pay a $75.00 invoice twice and quite another to pay a $100,000 invoice twice.  It may be necessary to have some different policies in Accounts Payable based on the amount of vendor invoices. Before you develop or change any policy or procedure, you should always get input from the employees in Purchasing and Accounts Payable.  Feedback and input is critical to creating an efficient and streamlined organization.  It doesn’t mean you have to act on every idea or concern however, you need to hear them.

DIAGNOSIS:  Either you had no policy in place, with procedures for handling payments of capital expenditures or they were not followed.

In Scenario II, there were numerous violations of policy and internal control procedures.  However, that said, as the Controller, you need to know that people who want to steal or mishandle assets will always be a part of the equation.  They are the ones that have no respect for rules, policies and management authority.  Therefore, there must be ways to monitor constantly by keeping a close watch on your inventory assets (or your cash).  Scenario II involves missing inventory.  The manager was put on probation and one would hope someone in HR or Management will monitor the employee.  Where do you as controller fit in?  It’s time for a meeting.  You have a problem with your Inventory team.  Not everyone on a count team is trained to conduct inventories so as to reveal cover ups.  In Scenario II, the count team took the word of the manager and essentially aided in falsifying the inventory.  I am not saying they were complicit, which generally they are not.  Simply  uneducated in why, when confronted with a manager asking them to write down a number on the physical inventory count sheet representing product they cannot see, they should call you.  Therefore, the weak link is really the count team.   Meet with all persons that participate in inventory audits and review the event.  Talk about how important it is to report a problem with an inventory count.  Also, emphasize that their notes about any ‘outside the norm’ counts are so important.

DIAGNOSIS:  Your count team had a lack of training to prepare them for handling the events described in Scenario II.



Before you begin developing forms/checklists, you have to begin with a written policy.  If you’re looking for help on how to do this, enter Capital Spending Policy or Capital Expenditures Policy into your favorite search engine (Google, Bing, etc.).  You should find plenty of ideas.  If you need some help with this, just leave a comment.


Your count teams need the following:  Written policy on how they will plan and execute the physical inventory.  A printed worksheet listing the products at a given location.  Sheets to attach notes, drawings, etc.  A Physical Inventory CUTOFF Worksheet.  There should always be a count team leader responsible for collecting all the information.  Please note that the Physical Inventory CUTOFF Worksheet should reflect cutoff numbers of invoices, receiving documents, credit memos, etc.  It should also be signed by the Location manager as well as the Count Team Leader.

Again, you can probably find some of these by using a search engine.

REFERENCEThe Accounting Procedures Guidebook by Steven Bragg covers almost every subject a Controller will be exposed to.  In addition, he has some wonderful forms peppered throughout the guidebook.  You should be able to find everything you need to know in his Chapters on Inventory and Capital spending.  I’ve read every page as a result of purchasing it through CPE Link for a self-study course to earn CPE’s.  It reads like a consultant’s guidebook.

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