A Year in Review & 2017 Outlook

Posted March 2, 2017 by keithmcaslan
Categories: Uncategorized

DENVER, CO, January 26, 2017 – Wednesday January 25th of this year, ACG-Denver, the Association for Corporate Growth, held their Corporate Executive Breakfast – A Year in Review & 2017 Outlook.

These events are exclusively for C-Level executives and business owners of companies with annual revenue greater than $5M whose role is not the sale or provision of services to customers, but rather managing and growing the company, and senior executives performing similar roles in larger companies

From awaiting the outcomes of Brexit to the U.S. election and simply” regulation limbo”, deals remained dormant. And yet, deals did happen. The guest-speaker’s challenge was to outline what were the realities of successful deals and how will this influence business conducted in 2017?

The panel assembled for the breakfast-event held at the Embassy Suites Downtown Convention Center in Denver represented four of the most dynamic sectors of our economy – Energy, Housing. Private Equity and Healthcare. Panelists were asked to reflect on their industry’s 2016 and discuss their expectations for 2017.

The morning’s panel of quest-speakers included JC Energy’s CEO, Keith McAslan. Mr. McAslan is a sought after speaker and lecturer on Mergers & Acquisitions having over 35 years’ experience and having authored three books: “Business Owners Handbook”, “Due Diligence Secrets” and “Internal Controls”.

As such, Mr. McAslan was asked for his advice on buying or selling a family business “I like to start with the seller of any business and ask them – This business is your baby – your child… Are you willing to sell your baby? For many sellers – they get wide-eyed and this is an opportunity for the seller to think introspectively and decide if selling the business is really what they want to do. Once the seller has committed to selling the business, then it’s time to move the process forward.”

For any business owner sincere in looking to sell their business, Mr. McAslan had 5 important suggestions:

  1. Begin preparing to sell the business 2-3 years in advance of the anticiapated transaction timeframe. Focus on the business’ financials thoroughly scrubbing the income statement, balance sheet and cash flow statement these up and removing any personal expenses, etc.
  2. Engage an experienced firm to perform buyer due diligence on your company to uncover any issues that can be addressed before initiating the sale process.
  3. Make sure your management-team is in place. Any buyer will want to know that the team is able to continue the businesses success in the sellers absence.
  4. Make sure you understand the anticipated valuation of the business, accounting for any ad-backs and deductions to EBITDA.
  5. Clearly define and articulate a growth strategy for the business so the buyer understands the upside potential.

Focusing on the Energy sector within the state of Colorado, several questions were asked of Mr. McAslan, some of these follow:

QUESTION #1 – What is the energy outlook for the Denver region in 2017?

Response by: Mr. McAslan“The greater Wattenberg Field and Denver Julesburg Basin commonly known as the DJ Basin has become one of the lower cost basins from a drilling and completion perspective. Given the dramatic increases in takeaway capacity via the Pony Express pipeline the DJ Basin will experience a modest increase in production.” 

QUESTION #2 – If the price per barrel goes up why doesn’t production increase?

Response by: Mr. McAslan: “The industry is recovering from a collapse in crude oil price and companies are not willing to invest capital to increase drilling and production until the price stabilizes and sets a new benchmark.” 

QUESTION #3 – Where do you see Natural Gas going?

Response by: Mr. McAslan: “Currently, Natural Gas is selling around $3.50 per mcf in the US, however in the rest of the world it sells about $10.00 per mcf. As the US increases exports of Natural Gas the global pricing will blend and stabilize around $5-$6 per mcf (million cubic feet). The pricing creates positive economics for the US producers and will incentivize drilling of new wells” 

QUESTION #4 – Are there any Technology Advances to lower costs in oil and gas?

Response by: Mr. McAslan“Saudi Arabia in 2014 lowered oil prices in an effort to drive US shale producers out of the oil and gas business, so that the US would return as one of their largest customers. However, US producers focused efforts to utilize technology advances to drive down the costs of drilling and deliver oil at lower costs to survive at the reduced pricing levels. This has resulted in increased production primarily in the Periman Basin, Delaware, Marcellus and Utica, and to a lesser extent in the DJ Basin. The technology productivity improvements driving cost down were in completion technology; new drilling designs to allow wells to be drilled in less time, yielding the ability to profitably grow production in the $40 per bbl range” 

ACG Denver’s esteemed panelists also included Matt Hicks, Managing Partner, Excellere Parnters; Gino Maurelli, Shareholder, Brownstein Hyatt Farber Schreck; Peter Niederman, CEO Kentwood Real Estate – and was moderated by Tony Giordano, President & Managing Director, BKD Corporate Finance.

About JC Energy: JC Energy is a privately held operations oriented private investment firm based in Denver, Colorado focused on acquiring companies with purchase prices between $10 Million and $250 million and investing in three asset classes: Energy, Real Estate and Industrial Businesses. For more information on JC Energy, visit their site: http://www.jc.energy

About ACG-Denver: The Association for Corporate Growth (ACG) is the global community for middle market M&A dealmakers and business leaders focused on driving growth. ACG members have access to data, content and networking opportunities to find the opportunities; capital and knowledge they need to drive and sustain corporate growth. Founded in 1954, ACG has grown to more than 12,000 members organized in 54 chapters throughout North America, Europe and Asia.( For more information, please visit http://www.acg.org).

Association for Corporate growth (ACG) Panelist for M&A: Year in Review & 2017

Posted January 11, 2017 by keithmcaslan
Categories: Uncategorized

acg-panelist-jan-2017

Tis’ the Season – for Budgeting!

Posted December 13, 2010 by keithmcaslan
Categories: Business Management, Business Plan, Business Strategy, Cash Management, CEO, CFO, Colorado CFO, Financial Management, Incentive Compensation, Trusted ADvisor, Uncategorized, virtual CFO

By Marty Koenig, Founder & CEO and Keith McAslan, Partner, CxO To Go

Introduction:

Tis’ the season where everyone is thinking about the upcoming holidays, skiing in the mountains, as December is a short month and business is either slowing down or going crazy to hit year end numbers.  However, if you didn’t begin your 2011 business plan process in October or November for the New Year, December Tis’ the season to accelerate strategic and tactical planning to prepare your business for the new year.

Your company’s business plan can be one of your most important business documents – IF it is well written and usable. A plan that is unrealistic, too simplistic or a monstrosity parked in a binder is useless. Depending on the need of the business, the business plan will have different characteristics. In some cases, it might be necessary to have two versions of your business plan.

If the plan is to be used to attain funding from financial institutions or investors, its tone will be geared for that type of reader. The business must be described as a well conceived and viable business. Investors want to assess the comprehensiveness of the idea and/or the products and services. They will vet the management team and their experience and the financials will be rigorously reviewed. The business plan must not only be compelling, but thorough and detailed.

If the plan is to be used by an entrepreneur who intends to use the plan as a road map for his or her business, it will be written with the goals of the business in mind. Attention to the objectives of each goal and steps to achieve those goals will be included. Practical financial projections are included and the emphasis is on the requirements for starting and growing a profitable business.

Process Methodology

In addition to the Executive Summary (which provides a synopsis of the plan) a business plan is made up of five distinct sections; each with important components. An appendix may be included if there is substantial supporting content to reinforce statements made in the plan.

By following the outline below, a thorough plan can be crafted narrating the purpose of the company, your products and services, how you going to produce, market and sell your products and services, who and how you will manage the business and how it will be financed and sustain profitability.

Some of these sections will be one or two sentences in length. It is not necessary to have an abundance of words. Brevity with specific content is preferable.  Depending on the type of your business and your point in the organization lifecycle, some of these sections will be more robust than others. A few sections may not be pertinent to your business at all.

It is important to remember that your plan will only be as good and thorough as the information you share.

1. Description of Business

a. Company description

i. Legal company name, dba’s, brand names, model names, web domain names, legal form of company, ownership, business location(s), patents, etc.

b. Company mission and vision and values

i. Statement of company purpose or objective

ii. Long term vision, goals, business strategies

iii. Value statement of the firm

c. Market opportunity or concept

i. Description of your industry

1. industry maturity, seasonality affects, economic factors,  government regulations, technology advances

ii. Industry analysis and trends

1. size and growth of your industry

2. distribution channels

iii. Strategic opportunities within the industry

d. Stage of development

i. Clear sense of how far along the company is in terms of development, customers, revenue, technology, etc.

e. Overview of products and services

i. Description of all products and services. What need do they fill?  How do they save time or money? Why should someone buy?

f. Milestones

i. Outline of milestones achieved to date

ii. Future milestones to measure success

g. Community involvement and social responsibility

h. Exit plan / Strategy

2. Marketing

a. Target market

i. Thorough understanding of your customers

ii. Distinct, meaningful characteristics of market segments

iii. Demographic information

b. Marketing and sales strategy

i. Market size and trends

ii. Your company’s message (product, price, promotion and

place)

iii. Marketing vehicles and tactics

iv. Marketing budget

v. Sales structure and channels (sales personnel and process)

vi. Sales projections

c. Competition and market research

i. Competitive assessment

ii. Customer perceptions

iii. Competitive operational factors

iv. Market share distribution

v. Future competitors

d. SWOT Analysis (Strengths, Weaknesses, Opportunities and Threats)

i. Your strategic position (advantages and barriers)

ii. Risk analysis

3. Operations

a. Day to day functions of your company

b. Facilities

c. Production plans

d. Supply and distribution

e. Order fulfillment

f. Customer service

g. Research and development

h. Financial control

i. Technology plan and budget

4. Management and Organization

a. Histories and capabilities of management team

b. Personnel requirements

c. Compensations and incentives

d. Board of Directors, Advisory Boards and Consultants

e. Management style

5. Finances

a. Income Statement

b. Cash Flow Projections

c. Balance Sheet

d. Break-even Analysis

e. Sources and uses of funds

Conclusion

The Business plan should be a living document that guides the CEO and management team on a strategic and tactical course for the fiscal year, not just a document that sits on the shelf and collects dust.  In the course of your business operations, it may be necessary to update assumptions, financial projections, and milestones.

About the Authors:

Marty Koenig is the Founder & CEO of CxO To Go LLC. He has experience with companies as small as $100,000 and as large as Fortune 30. He re-architected, grew and sold businesses, has led multibillion-dollar contracts with Fortune 100s and helped dozens of small companies get capital attractive. He has extensive experience leading their growth in just about every area: finance & accounting, business development, operations, sales, marketing, turnarounds and capital strategy.  Marty is the Chief Financial Officer, Chief Operating Officer, and Chief Strategy officer for his private clients.  Mr. Koenig is a lifetime business practitioner who now uses his experience to help other companies create success and increase company value.

Keith McAslan is a Partner at CxO To Go LLC. He is a senior business executive with extensive experience in finance and operations for manufacturing, distribution, technology, health care and private equity industries as a CFO, COO, CEO and Managing Director.  He has demonstrated success to successfully grow businesses organically, and through acquisitions, and led several turn-arounds. Keith was nominated for the Denver Business Journal 2010  CFO of the Year for turning around and selling a domestic manufacturer of hand tools 90 days for a double digit multiple of EBITDA and saving over 400 jobs in Colorado.

Available for delivery in late December is the latest book by Marty Koenig and Keith McAslan – Business Owner’s Handbook – Focus on Management of Money and Leadership to Increase Your Company Value.

Proposed Lease Accounting Changes Impact Commercial Real Estate

Posted September 27, 2010 by keithmcaslan
Categories: Business Management, Business Strategy, Cash Management, CEO, CFO, Colorado CFO, Commercial Real Estate, CPA, Debt Financing, Due Diligence, Financial Management, Financing, Leasing, Lender Financing, Operating Lease, Private Equity, virtual CFO

By Keith McAslan, Partner, CxO To Go

Introduction:

The Financial Accounting Standards Board (FASB) on August, 17, 2010 released their “exposure draft” requiring companies to record nearly all leases on their balance sheets as a “right to use” asset, and a corresponding “future lease payment – liability”.  What does this mean to your business in layman terms?  This proposal in essence does away with operating leases; all leases (unless immaterial) would be capitalized using the present value of the minimum lease payments.  Therefore, businesses who in the past had off-balance sheet lease obligations, must now record these obligations on their balance sheet.

A key point to consider with regards to the proposed lease accounting changes is that, in all likelihood, existing operating leases, signed prior to the implementation of the new rules, will require reclassification as capital leases that must be accounted for on the balance sheet. This means that real estate professionals must immediately consider the effect that existing and planned leases will have on financial statements once the proposed rules are implemented. Since operating lease obligations can represent a larger liability than all balance sheet assets combined, lease reclassification can significantly alter the businesses balance sheet.

The impact of recording these lease obligations on the balance sheet can have multiple impacts, such as: businesses needing to alert their lenders as they will now be non-compliant with their loan covenants, negotiating new loan covenants with the lenders due to the restated financial statements, ratios used to evaluate a businesses potential of credit will be adversely impacted and the restatement of a lessee’s financial statement once the change takes effect may result in a lower equity balance, and changes to various accounting ratios

The conceptual basis for lease accounting would change from determining when “substantially all the benefits and risks of ownership” have been transferred, to recognizing “right to use” as an asset and apportioning assets (and obligations) between the lessee and the lessor.

As part of FASB’s announcement, the Board stated that in their view “the current accounting in this area does not clearly portray the resources and obligations arising from lease transactions.” This suggests that the final result will likely require more leasing activity to be reflected on the balance sheet than is currently the case. In other words, many, perhaps virtually all, leases now considered operating are likely to be considered capital under the new standards. Thus, many companies with large operating lease portfolios are likely to see a material change on their corporate financial statements.

Part of the purpose for this is to coordinate lease accounting standards with the International Accounting Standards Board (IASB), which sets accounting standards for Europe and many other countries. The IASB and FASB currently have substantial differences in their treatment of leases; particularly notable is that the “bright line” tests of FAS 13 (whether the lease term is 75% or more of the economic life, and whether the present value of the rents is 90% or more of the fair value) are not used by the IASB, which prefers a “facts and circumstances” approach that entails more judgment calls. Both, however, have the concept of capital (or finance) and operating leases, however the dividing line is drawn between such leases.

The FASB will accept public comments on this proposed change through December 15, 2010.  If FASB makes a final decision in 2011 regarding this proposed change to lease accounting, the new rules will go into effect in 2013.

Additionally, the staff of the Securities and Exchange Commission reported in a report mandated under Sarbanes-Oxley, that the amount of operating leases which are kept off the balance sheet is estimated at $1.25 trillion that would be transferred to corporate balance sheets if this proposed accounting change is adopted.

Commercial Real Estate:

The impact on the Commercial Real Estate market would be substantial and will have a significant impact on commercial tenants and landlords.  David Nebiker, Managing Partner of ProTenant (a commercial real estate firm that focuses on assisting Denver and regional companies to strategize, develop, and implement long-term, comprehensive facility solutions) added “this proposed change not only effects the tenants and landlords, but brokers as it increases the complexity of lease agreements and provides a strong impetus for tenants to execute shorter term leases”.

The shorter term leases create financing issues for property owners as lenders and investors prefer longer term leases to secure their investment.  Therefore, landlords should secure financing for purchase or refinance prior to the implementation of this regulation, as financing will be considerably more difficult the future.

This accounting change will increase the administrative burden on companies and the leasing premium for single tenant buildings will effectively be eliminated.  John McAslan an Associate at ProTenant added “the impact of this proposed change will have a significant impact on leasing behavior. Lessors of single tenant buildings will ask themselves why not just own the building, if I have to record it on my financial statements anyway?”

Under the proposed rules, tenants would have to capitalize the present value of virtually all “likely” lease obligations on the corporate balance sheets.  FASB views leasing essentially as a form of financing in which the landlord is letting a tenant use a capital asset, in exchange for a lease payment that includes the principal and interest, similar to a mortgage.

David Nebiker said “the regulators have missed the point of why most businesses lease and that is for flexibility as their workforce expands and contracts, as location needs change, and businesses would rather invest their cash in producing revenue growth, rather than owning real estate.”

The proposed accounting changes will also impact landlords, especially business that are publically traded or have public debt with audited financial statements.  Mall owners and trusts will required to perform analysis for each tenant located in their buildings or malls, analyzing the terms of occupancy and contingent lease rates.

Proactive landlords, tenants and brokers need to familiarize themselves with the proposed standards that could take effect in 2013 and begin to negotiate leases accordingly.

Conclusion:

The end result of this proposed lease accounting change is a greater compliance burden for the lessee as all leases will have a deferred tax component, will be carried on the balance sheet, will require periodic reassessment and may require more detailed financial statement disclosure.

Therefore, lessors need to know how to structure and sell transactions that will be desirable to lessees in the future. Many lessees will realize that the new rules take away the off balance sheet benefits FASB 13 afforded them in the past, and will determine leasing to be a less beneficial option. They may also see the new standards as being more cumbersome and complicated to account for and disclose. Finally, it will become a challenge for every lessor and commercial real estate broker to find a new approach for marketing commercial real estate leases that make them more attractive than owning.

However, this proposed accounting change to FAS 13 could potentially stimulate a lack luster commercial real estate market in 2011 and 2012 as businesses decided to purchase property rather than deal with the administrative issues of leasing in 2013 and beyond.

In conclusion, it is recommended that landlords and tenants begin preparing for this change by reviewing their leases with their commercial real estate broker and discussing the financial ramifications with their CFO, outside accountant and tax accountant to avoid potential financial surprises if/when the accounting changes are adopted.

Both David Nebiker and John McAslan of ProTenant indicated their entire corporate team are continually educating themselves and advising their clients about these potential changes on a pro-active basis.

Addendum – Definition of Capital and Operating Leases:

The basic concept of lease accounting is that some leases are merely rentals, whereas others are effectively purchases. As an example, if a company rents office space for a year, the space is worth nearly as much at the end of the year as when the lease started; the company is simply using it for a short period of time, and this is an example of an operating lease.

However, if a company leases a computer for five years, and at the end of the lease the computer is nearly worthless. The lessor (the company who receives the lease payments) anticipates this, and charges the lessee (the company who uses the asset) a lease payment that will recover all of the lease’s costs, including a profit.  This transaction is called a capital lease, however it is essentially a purchase with a loan, as such an asset and liability must be recorded on the lessee’s financial statements. Essentially, the capital lease payments are considered repayments of a loan; depreciation and interest expense, rather than lease expense, are then recorded on the income statement.

Operating leases do not normally affect a company’s balance sheet. There is, however, one exception. If a lease has scheduled changes in the lease payment (for instance, a planned increase for inflation, or a lease holiday for the first six months), the rent expense is to be recognized on an equal basis over the life of the lease. The difference between the lease expense recognized and the lease actually paid is considered a deferred liability (for the lessee, if the leases are increasing) or asset (if decreasing).

Whether capital or operating, the future minimum lease commitments must also be disclosed as a footnote in the financial statements. The lease commitment must be broken out by year for the first five years, and then all remaining rents are combined.

A lease is capital if any one of the following four tests is met:
1) The lease conveys ownership to the lessee at the end of the lease term;
2) The lessee has an option to purchase the asset at a bargain price at the end of the lease term
3) The term of the lease is 75% or more of the economic life of the asset.
4) The present value of the rents, using the lessee’s incremental borrowing rate, is 90% or more of the fair market value of the asset.

Each of these criteria, and their components, are described in more detail in FAS 13 (codified as section L10 of the FASB Current Text or ASC 840 of the Codification).

About the Author:

Keith McAslan is a Partner with CxO To Go a national professional services company headquartered in Denver, Colorado that provides on-demand C-Level expertise and best practices to client companies on a part time, flexible, and affordable basis. Keith is sought after to provide advisory services as the Trusted Advisor to Owners and CEO’s. By utilizing his extensive experience as a successful financial and operational C-level executive, Keith brings a results driven leadership style to complex situations.

McAslan’s expertise includes: financial advisory; management consulting; part time, interim & virtual CFO, COO and CEO; debt and equity financing; turnaround management; acquisition and divestiture advisory. Most recently Keith, was instrumental in the successful sale of Western Forge to Ideal Industries. As the interim CFO with finance and private investment transaction experience, he guided the management team through the complex sale and due diligence process completing the sale from prospective buyer presentation to close within 60 days.   Please contact Keith at 303-520-2493, www.cxotogo.com, or kmcaslan@CxOToGo.com to discuss your business needs.

The Ultimate “Cash is King” Template for Business

Posted September 13, 2010 by keithmcaslan
Categories: Business Management, Business Plan, Business Strategy, Cash Management, CEO, CFO, Colorado CFO, Credit, Debt Financing, Financial Management, Financing, Lender Financing, Tax Planning, Uncategorized, virtual CFO

By Keith McAslan, Partner, CxO To Go

Introduction:

Most CEO’s and small/medium business owners only review the financial position of the business with their Bookkeeper/Controller two to three weeks after the month has ended.  This is like driving your car forward while looking exclusively in the rear view mirror – it doesn’t work.  Most CEO’s and business owners focus on the “bottom line” (net income, EBIT or EBITDA), and fail to recognize that “Cash is King”!  If you talk to your Banker, or your CFO, or other successful business owners, they will all direct you to focus on cash as the key metric for success.

Do you know what your current cash balance in the bank is today?  How about at the end of the week?  Any problems meeting your payroll or accounts payable obligations? So what tool are you using to monitor and project your cash?

The Dashboard-Cashboard is the ultimate “Cash is King Template”, as it is a  tool that is forward looking and helps the businesses understand the drivers of cash and projects the future cash position.

The Key Benefits of the Dashboard – Cashboard

The benefits of a business implementing a weekly Dashboard-Cashboard include:

  • It provides a forward looking perspective to the cash position of the company for the week ahead and identifies any potential cash issues.
  • When combined with a 13 week cash flow forecast the CEO and leadership team always have knowledge of the cash road map and can take pro-active action if required.
  • The order board and sales funnel provide insight to the effectiveness of the sales efforts and highlight any potential revenue shortfalls or significant orders pending for the team to take action.
  • The Dashboard-Cashboard becomes part of the weekly business review and all key leadership members become keenly aware of the importance of cash and can take action ranging from:  communicating to vendors and deferring payments, sales staff assisting in the collection of receivables, focusing the sales staff on moving customers through the sales funnel and closing orders.
  • Once the organization is focused on cash on a real time basis versus reviewing the results of operations three weeks after the month is over, they take ownership and realized they can individually impact the success of the business.
  • The bookkeeper/Controller now becomes an active member in managing the business and not just the “Bean Counters” who reports after the fact and can help guide the business.

Dashboard – Cashboard example:


Conclusion:

Businesses that implement a Dashboard-Cashboard typically are more successful than businesses that do not have one, because they are pro-actively managing the business, looking forward and adapting to changing financial circumstances.  However, it is highly recommended that a business implement a 13 week cash flow forecast discipline in conjunction with the Dashboard-Cashboard.  Additionally, successful businesses typically have a monthly financial forecasting process that projects sales, capital expenditures, operating expenses, profitability and issue a twelve month income statement, balance sheet and cash flow analysis.  CxO To Go™ executives work along side the CEO and leadership team to produce professional, sophisticated, effective and standardized financial projections (CFOCast™).

CEO’s and owners of small/medium business should have a part time/virtual CFO with financial and operational experience to supplement their skills and experience.  The inclusion of a part time/virtual CFO as the “Trusted Advisor” to the leadership team enhances the overall capability of the business and is a key component towards the future success of the business.

About the Author:

Keith McAslan is a Partner with CxO To Go a national professional services company headquartered in Denver, Colorado that provides on-demand C-Level expertise and best practices to client companies on a part time, flexible, and affordable basis. Keith is sought after to provide advisory services as the Trusted Advisor to Owners and CEO’s. By utilizing his extensive experience as a successful financial and operational C-level executive, Keith brings a results driven leadership style to complex situations.

McAslan’s expertise includes: financial advisory; management consulting; part time, interim & virtual CFO, COO and CEO; debt and equity financing; turnaround management; acquisition and divestiture advisory. Most recently Keith, was instrumental in the successful sale of Western Forge to Ideal Industries. As the interim CFO with finance and private investment transaction experience, he guided the management team through the complex sale and due diligence process completing the sale from prospective buyer presentation to close within 60 days.   Please contact Keith at 303-520-2493, www.cxotogo.com, or kmcaslan@CxOToGo.com to discuss your business needs.

What All Successful CEO’s Know

Posted August 17, 2010 by keithmcaslan
Categories: Business Management, Business Plan, Business Strategy, CEO, CFO, Colorado CFO, Exit Strategy, Financial Management, Human Resources, Mergers & Acquisitions, Portfolio Company, Private Equity, Trusted ADvisor

You can’t run the business alone

By Keith McAslan, Partner, CxO To Go

Introduction:

Many CEO’s and small/medium business owners do not have a Board of Advisors, or Board of Directors to help hold them accountable and direct the business towards the ultimate goal of monetization with an exit strategy. If the business cannot afford a full time CFO, a part time CFO with a broad based business experience can be that “Trusted Advisor”. Ideally the CFO who is the “Trusted Advisor” not only has financial experience, but operating experience as well to provide global insight to issues facing the business.

The Value Add:

The CFO who becomes the “Trusted Advisor” to the CEO delivers results-driven, professional counsel and solutions for complex situations. The key benefits for the CEO and the organization having a “Trusted Advisor” include:

· The CEO can think and act like an entrepreneur, focusing on business growth and customers.

· A “Trusted Advisor” who is an accomplished financial/operational executive quickly understands the key issues and can support the CEO, providing alternatives and recommendations to complex problems as part of the decision making process.

· Allows the CEO to think strategically, but provides the additional bandwidth to implement effective tactics.

· Drives the CEO and the business to plan for the long term building annual business plans and three year strategic plans.

· Provides a higher level of analytical support relating the results from operations to the financial statements and explains the variances to budget and the prior year.

· Helps identify key company initiatives on which to focus and in what priority sequence.

· Prepares the CEO and the business for an ultimate exit strategy to monetize the investment

· Provides an external challenge to the CEO’s decision-making process, the Trusted Advisor doesn’t tell the CEO what they want to hear, but tells them what they need to hear.

· Ensures all perspectives are considered in the decision making process to arrive at the best decision for the business.

· Execute decisions – most businesses in crisis have the common problem of either not making decision on a timely basis or making the wrong decisions.

· Develop and implement operational plans based on the strategy developed in the business plan

· Uses prior broad based industry experience to ensure the marketing, sales, engineering, manufacturing, logistics and human resources are executing according to best practices.

· Provides treasury and capital market support to secure funding alternatives and interfaces with the lenders regarding the performance of the business

· The “Trusted Advisor” becomes the coach, mentor and key confidant of the CEO and the one person the CEO relies on the most for unbiased, straightforward communication.

The Key Benefits of the “Trusted Advisor”

  • Sustainability – Business answers from an experienced “Trusted Advisor” provides unbiased, on-target, and unencumbered feedback.
  • Accountability – The more accountability the CEO and the business have the better everyone will perform. Without accountability, goals will be missed instead of made. The “Trusted Advisor” provides accountability, measurement, and metrics from the CEO down to ensure goals are more than just wish lists!
  • Focus – The CEO gets to focus on the most urgent and important things, so the company produces the results it seeks in its business and strategic plans.
  • Trust – The “Trusted Advisor” has developed a relationship of trust with the CEO by demonstrating, credibility, reliability, respect, business acumen and transparency.
  • Communication – The CEO and the “Trusted Advisor” communicate frequently and openly about all issues impacting the business, with the “Trusted Advisor” providing a safe sounding board for the CEO.
  • Networking – The “Trusted Advisor” typically has a network of business contacts that expands the CEO’s network and provides the business greater reach in the business community.
  • Succession Planning – Together the CEO and “Trusted Advisor” develop succession and contingency  plans to secure the enterprise value of the company and increase its ultimate worth at exit.

Conclusion:

CEO’s and owners of small/medium business should have a “Trusted Advisor” with financial and operational experience to supplement their skills and experience. The inclusion of a “Trusted Advisor” to the leadership team enhances the overall capability of the business and is a key component towards the future success of the business.  This check and balance with a “Trusted Advisor” who is the key partner to the CEO is a common tread that surfaces when examining successful CEO’s.

Author:

Keith McAslan is a Partner with CxO To Go a national professional services company headquartered in Denver, Colorado that provides on-demand C-Level expertise and best practices to client companies on a part time, flexible, and affordable basis. Keith is sought after to provide advisory services as the Trusted Advisor to Owners and CEO’s. By utilizing his extensive experience as a successful financial and operational C-level executive, Keith brings a results driven leadership style to complex situations.

McAslan’s expertise includes: financial advisory; management consulting; part time, interim & virtual CFO, COO and CEO; debt and equity financing; turnaround management; acquisition and divestiture advisory. Most recently Keith, was instrumental in the successful sale of Western Forge to Ideal Industries. As the interim CFO with finance and private investment transaction experience, he guided the management team through the complex sale and due diligence process completing the sale from prospective buyer presentation to close within 60 days.   Keith’s performance at Western Forge earned him a nomination for the Denver Business Journal 2010 CFO of the Year.  Please contact Keith at 303-520-2493, www.cxotogo.com, or kmcaslan@CxOToGo.com to discuss your business needs.

25 Questions to Ask When Hiring a CPA

Posted July 8, 2010 by keithmcaslan
Categories: Business Management, Business Strategy, Cash Management, CEO, CFO, Colorado CFO, CPA, Financial Management, Tax Planning, Trusted ADvisor

The following outline is provided for small and medium businesses who are interested in engaging a CPA firm to provide tax and bookkeeping services and not sure what questions to ask prospective firms during the interview phase of discussions.

Question #1: Is timely service delivered?

Accounting information can get out of date quickly. Except for annual information, most accounting information should be no more than 10-30 days old. You should be able to access your up-to-date information and your CPA quickly and easily.  This question is applicable if the business uses the CPA to close the books rather than have an internal accountant, Controller and/or CFO.

A proficient CPA makes it a habit to get back to clients as quickly as possible. Phone messages and emails should be replied to the day they are left – or no later than the following day.

Question #2: Do the same people always service our account?

Ideally the same person (Partner, Manager or Senior) should work with the business — not whoever is available at the time. That way a relationship can be built where the accountant and you are comfortable with each other.

Question #3: What services beyond the usual reporting and number-crunching are offered?  (Note:  this question is specifically intended for outsourced firms who are providing booking services, as well as tax)

A CPA firm who offers bookkeeping services needs to be more than just a data entry clerk.  It’s their duty as an advisor to make sure the information they receive makes sense. If it doesn’t, they should ask questions and seek clarity.

Question #4: How can the CPA firm help your business make more money? control expenses?  reduce taxes?

The answer to this question will help you find out if the firm is interested in your business. Did they review the financial information you provided prior to the interview? Did they make sure you understood the accounting concepts, instead of tossing off a bunch of jargon? Do they have creative ideas to increase revenue? reduce expenses? reorganize the business?  A proficient CPA’s goal to save you more in taxes — it is also in his best interest that you succeed.

Question #5: Do you believe we are paying too much, too little, or just the right amount of tax?  Explain your logic?

Beyond simply preparing tax forms, a CPA should be involved in business planning throughout the year. Typically, a quarterly review should be scheduled to ensure books and records are in order. This also allows the CPA time to advise clients about their businesses so they function with peak tax efficiency.

Because most business owners pay too much in taxes, a proficient CPA will analyze the tax situation from the form of entity to all legal means to plan and minimize all taxes paid.

Question #6: Do you consider your CPA firm to be tech-savvy?

Small business accounting software has made powerful accounting tools available to everyone. But these accounting packages (QuickBooks) are only as useful to the person who installs and runs the application. For this reason, a proficient CPA can help you install and set up a set of books, while also requesting them for review.

Question #7: Who are your other clients? WE would like to speak to a few references.

Imagine this scenario: You hire an accountant based on the assumption he understands the basics of your business. Then, you find out he’s never had a client like you before. Instead, he’s only prepared tax forms for wealthy individuals who don’t own businesses.

Avoid this disaster by asking about the accountant’s clients. If they are businesses similar to yours, that’s a good sign. In asking about clients, you will also want to understand the CPA’s work schedule and whether he has the time and resources to support you adequately.

Question #8: What kind of creative business advice will you offer the business? Tax reduction strategy? Corporate Structure changes? Social Media expertise? Web site? Cash Management? Budgeting? Forecasting? Capital Structure?

Advising clients on what they can do to grow and set goals, as well as discussing issues, are all part of a proficient CPA’s services. Together, this allows you to discover what works for your business so funds are used wisely.

Question #9: Why should I use you?

Ask the question and just listen for the answer. You should feel like the CPA really cares about your success.

Question #10: What kind of credentials do you have? What school did you attend? Where is your CAP license?

Tax professionals are usually certified public accountants (CPAs), enrolled agents (EAs) or unenrolled preparers.

Question #11: How much professional education do your associates get annually?

Just passing the test to be a CPA or an EA isn’t enough. With the tax code and interpretations of the code changing every year, continuing education is really essential. EAs are required to have 72 hours of continuing education in a three-year period; each state sets its own requirements for CPAs.

Many tax professionals take more than the minimum requirement for continuing education. Although more training doesn’t necessarily mean the tax pro will be superior, it’s certainly not a bad sign.

Question #12: Who will I be interacting with? Partner, Manager, Senior?

Many tax firms assign more than one person to a client’s return. You probably don’t need to know how the “back room” operates, but you want to know if the person you’re interviewing is the one who will be able to answer your questions about your return.

Question #13: What’s your policy on returning phone calls? emails?

A common complaint often heard from businesses about their CPA’s is the long wait for returned phone calls or email messages. CPA’s aren’t famous for their communication skills. It’s not unreasonable to ask how long you should expect to wait to have a call or email returned. Asking also lets your CPA know you do want your calls and emails returned promptly.

Question #14: Are you available outside of the tax season?

Some tax preparers are seasonal. They are available only the first four months of the year, or their offices are close for a few months each year. If you expect year-round access, you need to make sure the tax professional is available.

Question #15: Are you a corporation of CPAs or an individual CPA that has their own business?

If you opt for the corporation, find out if you’ll be dealing with one particular person, or will it be whoever answers the phone when you call. It’s best to have one person to build a relationship with.

Question #16: When do you work? Are you available after hours for calls and emails if needed?

What are the CPA’s hours of operation? Make sure that you can call him at hours that are convenient for you.

Question #17: Do you conduct your own business and personal affairs in a reasonably efficient and sensible way?

Ask questions about the CPA’s approach to getting and serving clients, the role of staff, the use of technology – including computers, communications equipment and the Internet — as well as ways of keeping current, research methods, management of files and records, etc.

Question #18: Will my computer and/or I be serviced by you, a partner or junior accountants?

Many CPA firms train new associates at the client’s expense. Be sure you get what you pay for.

Question #19: How are your fees calculated? Will you be charging me for every phone discussion?

To avoid friction later, it is essential to discuss the CPA’s fee structure. Tax professionals may bill by the hour, form, overall return or some combination. After reviewing your previous returns and interviewing you, a tax professional should be able to give you a good-faith estimate of costs. If the CPA uses a time-based system, discuss the hourly rate of the accountant and staff, overhead expense reimbursement (what is the cost of a fax?) and whether certain time is not billed.

Find out now whether a simple two-minute phone call or a one-page fax means an hour of billable time. If that’s the case, run for the door.

Question #20: What can I do to help you with your work and keep your fees to a minimum?

A great deal of your accountant’s time can be saved by preparing information beforehand. Find out if your CPA is willing to work with you to offload this work to your firm.

Question #21: Do you perceive any conflicts of interest?

CPAs work for dozens of firms and scores and sometimes hundreds of individuals. You should inquire if any of your direct competition is represented by the firm. If so, inquire as to how this conflict is handled.

Question #22: How long have you been a Certified Public Accountant, and what other licenses do you hold?

You should inquire with the state CPA organization to discover if there have been any disciplinary actions entered. Some accountants also have credentials as financial planners (PFS), securities representatives, business valuation experts, even lawyers. Check web directories and websites (e.g., http://www.CPAdirectory.com)

Question #23: How well have you integrated computers and the Internet into your practice, and has it enabled you to do more for the clients at less cost?

Integrating your computer files with your CPA’s files can save time and money — and increase accuracy. Doing so over the Internet makes it even simpler. Find out how your CPA uses the Internet. Does he have his own website? If so, check it out and ask questions about the resources available on it. Find out how you can interact with him and his computer systems to make work flow more efficient, while enabling both of you to stay in touch.

Question #24: How do you plan on communicating and how frequently with our Controller and/or CFO?

Be sure the CPA is willing to be part of your team and work with your staff to ensure success.

Question #25: Why should we hire your firm versus another CPA firm?

This is a good closing question to see how the firm responds and see if they were listening to your needs and really offer a competitive advantage or are just another me too firm.

The Author:

Keith McAslan is a Partner with CxO To Go a national professional services company headquartered in Denver, Colorado that provides on-demand C-Level expertise and best practices to client companies on a part time, flexible, and affordable basis. Keith is sought after to provide advisory services as the trusted advisor to Owners and CEO’s. By utilizing his extensive experience as a successful financial and operational C-level executive, McAslan brings a results driven leadership style to complex situations.

McAslan’s expertise includes: financial advisory; management consulting; part time, interim & virtual CFO, COO and CEO; debt and equity financing; turnaround management; acquisition and divestiture advisory. Most recently Keith, was instrumental in the successful sale of Western Forge to Ideal Industries. As the interim CFO with finance and private investment transaction experience, guided the management team through the sale and due diligence process completing the sale from prospective buyer presentation to close within 60 days.   Contact Keith at 303-520-2493, www.cxotogo.com, or kmcaslan@CxOToGo.com to discuss your business needs.