Tag: CFO

2013 Audit Season: Joke #4


Inventory CountI remember a few years ago, during a business lunch, somebody was recapping an episode from one of the numerous crime series all networks are running to compete against each other.  My head was preoccupied with the business purpose of the meeting, nevertheless I do recall that the murder plot turned on a discovery that one of the characters, a compulsive gambler, bet his classy wife's sexual favors in poker and lost.  FBI questioned if the payoff actually took place.  Of course, it did: the real gamblers are "men of honor."  When asked how the pimped out wife handled it, the winner said, "She was willing, but not happy."  I bet this is the best line the screenwriter who churns out this pedestrian crap has ever written! 

Willing, but not happy…  The state of mind applicable to so many situations.  This is exactly how all corporate accountants feel about financial audits, lenders' exams, investors' due diligence, etc.  Commercial and fiscal needs of our employers throw us at mercy of the outsiders: we are forced to carve out time from our main responsibilities and open ourselves up to various poking, probing, and testing.  Oh, we totally understand the importance and the unavoidable necessity of it.  Frequently,  it's our own search for new financing resources that culminates in these proceedings.  Yes, we are totally willing, but we are not happy to go through with it.

I devoted two whole chapters (29 and 30) of CFO Techniques to advising readers on how to deal with auditors, keep yourself focused on the ultimate benefits for the company, and minimize the pains of distraction and intrusion.  It helps to remind yourself that your company needs it more than the one that sends people to conduct the examinations.

And I have to say, most of these specialists of prodding are well aware of the invasive nature of their jobs.  They understand that a financial executive abides by their standards and accommodates all their requirements, because he wants good results, and that this puts a CFO or a Controller into a subservient position. Many auditors are very apologetic for the endless interruptions, inquiries, requests, follow-ups, etc.

Of course, there are always exceptions…

For the CFO with exposure to international measurement systems from this season's joke #2, the last stage of the bank's field exam included physical inventory counts at three locations specifically selected by the bank.  This is habitually done by auditors and examiners in order to (a) establish the presence of various inventories and (b) verify the accuracy of the subject's records.  Obviously, nobody at the audited company has any impact on the choices of locations, timing, or people sent to perform the task.  In fact, the CFO, who every year faces a financial audit and three bank exams, never knows who the hell the counters (usually junior auditors) are. 

This time was bound to be different.  One of the locations the bank selected was the company's storage in Savannah, GA.  A day before the scheduled visit the CFO gets a phone call.  An agitated young man in the receiver tells her that he is from the bank's Jacksonville office and that, according to Google Maps, the drive is 2 hours and 40 minutes each way.  "And it's Friday!  This is outrageous," he says.

The CFO was perplexed: anyone who had dealt with these matters even for one month would know that she had nothing to do with the rookie's plight; that, if it was up to her, she would much rather avoid the scrutiny.  Considering her executive position and professional status, she could've just hung up on this wimp.  But she is the one with a sense of humor, remember?  So, she asked the boy, "Well, what would you like me to do?  Move the inventory to Jacksonville, or cancel your visit?"

"Could you, please, cancel it?" was a hopeful answer.     

2013 Audit Season: Joke #3


Cartoon-Confusion-Question-Mark-300x300A bank's field examiner (read my previous
joke if you don't know who that is) comes to review books and records of a company in the NYC's Financial District.

The company leases space in one of those pre-furnished/pre-wired office suites setups with reception services, heavy-duty business equipment, and highly presentable conference rooms shared by various renters.

(Educational  Side Note:
It's a very profitable business. I believe Regus, headquartered in Luxembourg,
is the largest player in the world. Started only in 1989, today it has presence
in 99 countries, operating over 1400 centers. During my career I have dealt with Regus in Amsterdam, London, Moscow, Frankfurt, and New York.)

Those who have never been in such places don't realize that owners try very hard to maximize the rentable footage and fit into the space as many offices as they can without violating occupancy regulations. There could be, like, 120 companies, some of them consisting of a single employee, on one floor. And, therefore, during business hours it never feels empty or quiet. People are coming, going, walking by. The noise level is much higher than in a conventional business space: at any given moment one can hear at least three phone conversations and virtually participate in two neighboring meetings – one with a real estate attorney and another with an advertisement outfit specializing in cosmetics. It's pretty much your garden-variety beehive that sometimes gives an impression of being even more populous than it actually is.

One of the specific aspects of the office suites is the absence of companies' signs and name plaques – just the numbers on the doors. Yet, if you give the name of the company you are visiting to the doormen, they will direct you to the right floor. There, receptionists will not act surprise when you ask for a particular person and will call him or her up right away. (I mean, there is a reason why these businesses are doing
well.)

This is how the field examiner found her way to the company's CFO, with whom she was in contact after the assignment was scheduled.  The auditor was set up in a separate room next to the CFO's office.  Most of the electronic communications and data exchanges transpired between the two of them.  The supporting documentation was provided by the CFO's staff.  But in the hallways, reception areas,  at the coffee station in the kitchen, through the open doors of multiple offices – everywhere the visiting woman saw, to put it mildly, quite a few people.

Please keep in mind, this is a little story about a person of numbers. Moreover, one of the key requirements of qualified auditors is their ability to gage the validity of the data in front of them. The examiners cannot possibly look at every recorded transaction – they make representative selections for documentary proofs; they construct trends; they look at schedules and statements; and they must apply analytical scrutiny and critical thinking to every number to make sure that it makes sense in the context of the examination's scope.

For example, it is expected of an auditor, who already studied a company's Profit & Loss statement, to understand the physical reality of annual rent expense of $85,000 (especially in NYC's Financial District) and annual payroll of $1 million. Call me crazy,
but I don't think one needs to have a business degree and a CPA to interpret these numbers. I mean, any logical person can effortlessly come to the correct conclusion, right?  One can only hope.

The field work was going very smoothly; the company's finance and accounting staff was well prepared and accommodating; the books were clean and the paper trail was flawlessly coherent. Yet, at the very end, when the auditor was reviewing prior exams'
statistical questionnaires to see if anything required an update, all of a sudden she hit a stumbling block…

She walks over to the CFO with the papers in her hand, looking genuinely puzzled. She points out to a section in the questionnaire, "It says here that the total number of
employees is 10." Now, it's CFO's turn to be baffled as she doesn't understand
why this is so surprising, "Yes, that's correct. Ten total."

The field examiner looks into the CFO's face, still confused, "But I thought this whole floor was you…"

Job Search: Unemployment & Depression


At the end of February, The Ladders featured Debra Donston-Miller's article Depression is Making Unemployment Longer, which reiterated the well-known fact that unemployment walks hand in hand with depression and anxiety, and that, in turn, diminishes your ability to get employed. 

It's a vicious circle, you know.   A person looses his job – that's on its own is a hard blow to his ego.  Nevertheless, he gets right on all job boards – Monster, CareerBuilder, etc.  – posts his resume and applies to every single opening that matches his qualifications.  As time goes by, he keeps lowering his expectations – now applications go out to jobs with smaller titles and lower salaries.  Still, the response is not too hot.  

Nowadays, the statistical probability of converting applications into a recruiter's or hiring manager's interest is around 2% for high-level financial professionals – CFOs, Controllers, Financial Directors, etc.  The national numbers of people not being able to find employment in one, sometimes two, and more years are scary. 

While you are waiting for the sparks in the dark, your spirits get lower and lower.  You become listless, loose interest in everything – depression really kicks in.  The anxiety of not being able to support yourself when the savings and unemployment compensation run out gets overwhelming.  You swing between over-hype of appraising your possession for possible liquidation and inability to move a muscle.

Still, you force yourself to apply every day, you do your networking, ask people around.  Finally, quantity turns into quality: you've sent out 100 resumes and someone finally called you.   You've had a positive response after the phone interview and now you are going for a face-to-face appointment.  Anxiety floods you – the workspace environment, which you have not experienced for several months, seems so alien to you. 

You are prepared, though – you are a seasoned executive with superior qualifications, a likable person, well-spoken, know how to handle yourself.  The interview seems to go well, but there are so many candidates, and you might have said something wrong just because the depression and anxiety ate some of your confidence away.  Every day you wait for a call back, but nobody ever does; nobody even sends an email to let you know that you did not qualify – people don't do those sort of polite things anymore.

Now, you are loosing hope altogether: it is more and more difficult to make yourself even to look at the job listings.  It seems like staring at the television screen all day without seeing what's on is a better option…

You know what?  I am not going to tell you that it will get better.  I am not a fortune teller.  I don't know it, but neither do you.  Yes, it's fucking tough out there!  As I always say,  we live in a new economic reality.  The truth is that you may need to rethink your entire life.  But you cannot let the depression eating away your time.  FIGHT IT!  Do you know what happens with every single day you waste on giving in to nothingness? It disappears and you will never get it back. 

The Ladders' article quoted cognitive behavioral psychologist Deb Brown, who suggests creating a routine for yourself as one of the helpful tools.  My readers know how big I am on time-management and routines.  Whether you are fighting the unemployment depression or job frustration, scheduling your time and filling your day with meaningful tasks always helps.   And when you are unemployed, you have an opportunity to do things that you never had time for before: study Spanish with that Rosetta Stone pack you've got for your birthday two years ago; transfer all those home videos onto DVDs, get yourself fit.  

You don't really need more than two-three hours a day to look for new openings and apply.  Spend the rest of your free time (FREE TIME – when do we have it otherwise?) catching up on your life.  And don't be a prisoner of your schedule either – let go of it for a day, when you feel frustrated.

And listen, even if things with employment never get better and some drastic decisions will need to be made, at least you will not need to look back at the long stretch of a complete misery right before that.       

The Clueless Boss of a Frustrated Downshifter


Confused-animals-are-funny15-300x260The economy and the resulting miserable state of the job market forced many financial executives to downshift, i.e. take jobs way below their levels of expertise, authority, and adequate compensation.  It's been almost a year since I wrote about the heartbreaking reality of first finding such a position and then accepting it for the sake of having food on the table and keeping the roof over your family's head.  Yet, the painful topic is still relevant.

But let's look a little further.  We have an opportunity to examine an interesting situation brought to my attention by an actual downshifter – a former CFO of a, now defunct, $500-million-dollar firm.  After a year of a futile job-hunting he accepted, at 50% of his former compensation, a Controller's position in a young and small ($30 million) company, ran by two owners – a female CEO and her partner with a COO title.  

How many times did I write about accidental bosses?  And here we go again: this business has started because the two partners got lucky. They were in the right place at the right time with extensive connections and sufficient funding at hand.  Neither of them actually needed it to survive, but the opportunity were too exciting to pass up. 

Guess what?  The CEO never led a company before.  She never even worked in a commercial enterprise.  Her partner has an MBA from an Ivy League school, but he only worked overseas.  Neither have the chops to make good executives, yet both have undeniable talents and a lot of enthusiasm.  She is a sales ace and the toughest negotiator you can find.  He is incredibly detailed-oriented.

Not only that they managed to get the company off the ground eight years ago, they kept it growing with minimal labor resources, including  a single bookkeeper.  Hiring a senior financial person was definitely not among their priorities. Until…  Some people are just born lucky.  An even bigger  opportunity presented itself.  To implement it they needed more capital.  The dogged COO wore down one of the major banks into providing them with a substantial trade finance line.  Among bank's mandates was hiring a proper Controller. 

Enter our former CFO.

Because both execs are not very clear on the leadership functions, the division of responsibilities is blurred.  The COO was in charge of the Controller's hiring.  The CEO never even saw the candidate's resume or salary history.  When COO decided that this is their guy, the CEO was called in for a minute to shake the future Controller's hand.  

Yet, once our downshifter started working there, he realized that the woman's word was the final authority on pretty much all other issues.  Now, because she lacks corporate experience, she is not capable of assessing the Controller's performance.  In her mind, any other accountant would provide the same input as this guy, who managed in the first three months to correct more procedural, systematic, recording, and administrative errors than he did in 25 years before this job. Moreover, he contributes into the company's strategic decisions.  All that for a price of a low-brow peripheral Controller.  The CEO has no clue that what she's got was a gift; that she got very lucky again and obtained an Hermes bag for the price of a Coach.

This is a big problem.  If your boss doesn't understand your value, she cannot appreciate your contribution. The fact that someone with lower qualifications and less experience would not be able to attend to the sophisticated tasks you accomplish remains unnoticed.  As a result, you are helping to better the company without a chance for a fair reward. 

What to do in this situation?  You are not the type to brag every time you do something extraordinary.  The first thought comes to mind is to re-introduce yourself.  The guy who hired you didn't share your resume with his partner, so give her one together with your salary history.  You can say, "I understand you've never had a chance to look at it before and I think it's not fair for either of us."   I know some people will say it's tasteless, but the options here are limited.

Secondly, you must propose a proper evaluation system for all staff members.  Because these people have no idea how to go about it, they will turn to you.  This is your chance!  Provide them with the format that allows employees to list their own accomplishments.  Then, make sure that reviews are actually conducted.

Finally, if you don't get satisfactory acknowledgement anyway, start looking for another job.  Maybe you will be luckier this time around.  It's like I always say, employment at will works both ways: they can separate from you at any time, but so can you.

Joke of the Week: The Linguistic Pitfalls of International Trade


ImagesBelieve it or not, but a few of my readers actually complain that sometimes my posts are "too technical."  I guess, they forget that, even though I manage to squeeze a ton of cultural references here,  this is primarily a business blog and some of the topics will be amusing and/or relevant only to financial professionals, executive managers, and business owners.

Well, even though this may further aggravate the merriment seekers, I cannot pass on the opportunity to share the following 100% true episode that has occurred in one import/export company early last week.  It's just so hilarious (at least to me)! 

Here is the premise.  English has become a common language of international business many years ago.  Of course, there are other linguistic possibilities: if transacting parties are both Latin American, they will use Spanish; employees of a company in Shanghai will speak Mandarin to their counterparts in Guangdong region.  But I guarantee that communications between, let's say, a Turkish manufacturer and a Dutch banker, or a Latvian banker and a Swiss financial broker, will be conducted in English. 

Of course, a Korean supplier has no choice but to employ English to communicate her concerns about a Letter of Credit (LC) provided as a form of payment by an American importer.  The document itself is prepared in English for crying out loud.  Still, it's a foreign language – some linguistic pitfalls are unavoidable.  

Those who work in international trade or read my book CFO Techniques know that LCs are very strict documents treated in a very literal manner by the banks responsible for making sure that a supplier gets paid only if and when it complies with conditions stipulated in the buyer's LC.  For example, the shipping documents (most frequently these are Bills of Lading (BLs)) must be prepared in accordance with the importer's requirements.

Now, enter a young and anxious clerk at the Seoul office of the said Korean supplier.  She is responsible for putting together all documents to be presented at the bank so that her employer can get paid $2,745,000 for 1500 mt of the product that just sailed away.  She knows very well that the papers must be in full compliance with the LC.  She is a novice and feels a lot of pressure to do it right.  On top of that, it's all in English, and, even though she is pretty good with it, the stress makes her paranoid.  Basically, she is a nervous wreck. 

One thing in particular bothers her the most.  So, she writes the following email to the customer's CFO:

"LC request is 'FREIGHT PAYABLE WITHING 7 DAYS OF SHIPMENT DATE' but the shipping line put on Bill of Lading 'FREIGHT PAYABLE WITHIN 7 DAYS OF SHIPPING DATE'.  Please urgently ask the shipping agent to revise the BL."[sic]

The American CFO, who has dealt with the international trade issues for many years, had a good laugh reading it, thought that the girl needs some Xanax, and replied:

"Relax.  The difference between the words 'SHIPMENT DATE' and 'SHIPPING DATE' will not be construed as discrepancy by ANY bank as these phrases mean EXACTLY THE SAME."

Hey, it's all good.  At least she didn't have to gesture and guess.