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Start-Up Fun. A Fiscal Year Review…

July 25th, 2013 Comments off

I think I have been living the adage of “time flies when you’re having fun…”.  I realized yesterday that it had been almost a full two months since my last blog entry and I was a bit mortified. Especially when I try and keep a strong discipline in all aspects of my life. However, when I look back on what has been happening the last 60-days, it’s easy to see how that could have happened. With the final wrap-up of an ERP implementation and the closing of our first fiscal year, it’s been a crazy few months. But it’s not just the last few months, it’s the satisfaction of looking back over the last year and seeing what we have been able to accomplish as a team. While I’m obviously not going to share financial results or product development achievements, the growth and operational achievements are something for the team to be proud of.

When I first started with Cylance, we were all of 7 employees, I was given a laptop with Quickbooks installed on it, and the company had signed on with a PEO to administer our payroll and benefits. The company’s founder, Stuart McClure, had just started to implement his vision and we were working out of a living room. At that point, you couldn’t have asked for a cleaner slate to move the company forward. Fast forward to now and you realize how much of a transformation this company has gone through.

While I continued to use Quickbooks for a short amount of time, we put tremendous effort into bringing a sales management platform online to manage the opportunities we were already seeing coming into the company. Once we had the confidence we had effectively installed the first phase of our automation, we moved on to implement an additional platform aimed at the management of our professional services business. How do you make effective business decisions if you don’t have the ability to measure your business? A rhetorical question I know, but those needs can easily be lost in a hectic start-up environment. Once we were about halfway through that effort, we already knew that we were going to have to upgrade the Finance side of the house so we could have seamless integration of all three platforms. Hence, the process started to interview ERP candidates. I started having bad flashbacks to the SAP implementation I had carved myself out of a year prior. However, we aligned ourselves with a great partner and the calendar was set to bring the final piece online. As with everything else, we committed to the calendar and executed to the exact day and brought all elements of the business online with platforms that will support us for years to come.

Time for a break…right? Not even close. The next big step, with a VERY underestimated effort of what it would take, was to extract ourselves from our PEO parent on payroll and benefits and bring that entire effort in house. This might have been more painful than the SAP implementation, but a worthwhile endeavor. Again, a full interviewing of partner candidates. In the end, we were able to achieve savings, enhance our benefits offering to employees, and be the master of our destiny with regards to program management. We successfully brought our benefits offering online and on time, as well as bringing all payroll processing internal.

What a year it’s been. But wait…there’s more. Toss in the scouting for a new corporate office, 3 different office moves before we settled permanently, an increase in our employee count from 7 to 60, the development of a remarkable team, customer base, and marketing results that would make most established companies envious. Ok, now for a break….right?

We’re not just knocking on the door of our 2014 fiscal year, but we’re kicking it in. It’s still a target rich environment and the task list is longer than Santa’s naughty & nice list in December. At the end of the day, you need to look back on the day, the week, and ultimately, the last year and feel satisfaction with what you’ve accomplished. Start-ups are not for the faint of heart and you need to stay motivated and driven. It’s easy to stay that way when you have a mission you’re committed to and a team that is equally committed.

Thanks for reading…

Jeffrey Ishmael

When Not All ERP Implementations Are Created Equal…

January 7th, 2013 Comments off

As a Finance leader, one of the projects you can always count on having to lead, or at least becoming a key stakeholder in, is the implementation of an ERP program. For myself, I’ve been “lucky” enough to participate or lead the implementation of Fourth Shift, MAS-200, Oracle, and most recently the global SAP initiative with DC Shoes and Quiksilver. All of those projects were with companies that were relatively mature, had established revenue streams, and long histories to contend with in the implementation. However, with a start-up, the rules are entirely different and there’s actually a slightly higher degree of difficulty.
With the SAP implementation at DC/Quiksilver, there was not only the history to deal with, but the “democracy” of finding a solution that everyone could agree on. Not to mention, we also had to go through the process of outlining our processes for the consultants, which up until that point, were mostly undocumented. That SAP implementation became more of an S&OP project as we found ourselves scrutinizing internal process more than the ERP systems we were entertaining as solutions. Nonetheless, there was significant history that played a key contributor in finding the proper solution for our business.

For a start-up, what do you have? Yes, you might have a business plan, but at that point, it is basically still a vision. A vision that does not have a definitive, or at least realized, revenue streams, established & matured expense structures, or even the functional area titles that have been tested and affirmed. While the business plan will be the 95% version and the blue print everyone refers to, it is still subject to change…and will change. That’s the one level of certainty in a start-up. With that in mind, you are then tasked with defining your needs and the vision of the company to the consultants. You need to be able to take an honest look, while understanding the business well enough, lead the consultants through the process and outline your specific needs, not just in the current time, but for the needs your business will have 2-5 years down the line.

Your solution will not be based on what platform is offering the best end of year discount and implementation package, but the best solution for what the business will need and the ability to accommodate the growth and properly report on its activities. At a start-up, you better be able to honestly assess what the needs of your company are down to every level or you shouldn’t be in the position. At a start-up, you won’t have a team of consultants doing the heavy lifting…it’s going to be you. You’ll be the one building the import files, building the vendor files, and configuring the general ledger structure to report at the desired level of detail. You’ll be the one defining the customer and product hierarchies for your management reporting.

It’s definitely a much more challenging task than an implementation for an established company. But then again, that’s what makes life at a start-up so much fun and a test/testament to what you’ve really been doing during your career.

Thanks for reading…

Jeffrey Ishmael

San Diego FP&A Summit – A Prelude….

February 24th, 2010 Comments off

            Tomorrow I’m being given the opportunity to speak at the San Diego FP&A Summit, which is sponsored by the IE Group ( www.theiegroup.com ). I was a bit hesitant in the beginning, but once I spoke with Richard Bracchi and realized the line-up he was putting together there was no way I could decline. We also started talking about what subject I might be tasked to speak on. It didn’t take long with I saw the topic of KPIs on the list. A subject that is near and dear to my professional heart! Besides, how in the heck do you drive improved performance without have metrics in place to measure all the triggers you need to pull?

            After the presentation tomorrow I’ll post my full presentation, but I had a great time assembling what I hope will be a valuable presentation for those in attendance. I get a sincere kick out of discussing this topic with my peers….

Ask most Finance professionals how they measure their business and they’ll cite our typical tools….

      Income Statement

      Cash Flow Statement

      Balance Sheet

       These are merely reporting mechanisms for the true tools that we use to measure our respective businesses.

 

       What are the KPIs that help you make your business decisions?

       How do you create value for the Company in the absence of such critical reporting?

       How do you price a Service Offering when you don’t know your costs?

       How do you formulate staffing decisions when you don’t know how hours are consumed?

       How do you drive improvements when you don’t even know where the waste is?

These are only some of the questions we’ll be addressing tomorrow….

Thanks for reading . . . .

Jeffrey Ishmael

Achieving Your Annual Goal with Base Hits….

November 11th, 2009 Comments off

     It seems that the more that I work with Managers in the different functional areas of a company, I have seen a particular theme in the approach to planning annual revenue and profitability targets.  The majority of the “players” are looking to have a new product or sales initiative to be their “home run” for the year.  With this approach, there is a significant level of risk in relying on a single initiative to achieve the annual plan.  Once that “home run” becomes a single or double, or perhaps a strike-out, you’re left scrambling in the last few innings of the year to come up alternatives, which will usually be a poor band-aid to the original plan.

 

     Rather than the “home run” approach, I have looked to securing “base hits” throughout the year and providing consistent and incremental successes to achieving the annual plan.  While I’m not really a baseball fan, it seems like the most appropriate analogy. While not glamorous in it’s approach, it’s a prudent approach to hitting your annual plan without carrying too high a level of risk for the company or your personal reputation.

 

     In one of the previous companies I worked with, you could take the view that for every additional $200k that could be dropped to the bottom line that EBIT could be increased by 100bp.  This essentially became my goal.  Not a single $200k improvement, nor was it a $2 million improvement, but multiple “base hits” of $200k.  I started scrubbing every element of our annual operating budget, both from a manufacturing perspective as well as a base cost perspective.

 

  1. Employee Procurement fees.  During one year we had nearly $500k in related expenses, primarily driven by individual managers being allowed to use external recruiters at their discretion.  The entire process was diverted back to H.R. where they centralized the process and control of expenses.

 

  1. Facility fees.  As we looked at what was happening in the local real estate market we believed that there was an opportunity to negotiate an early lease renewal with the property owner.  Knowing there were a few elements we could use in our favor, we negotiated a new 5-yr contract at a reduced rate with some additional incentives.

  1. Overtime expense.  This was another area that had no significant control.  Once we starting tracking O/T statistics and publishing our “Top-10” list of departments with the highest levels there was a “peer effect” that came into play and levels soon came down.

  1. Labor productivity.  About 30% of our annual operating budget was attributed to Field Services.  Through extensive work we had identified what the hourly cost rate was under the current productivity levels.  At that point, we simply identified blocks of hours that would equate to a $200k decrease in expenses and fall to the bottom line.

     None of these approaches were terribly glamorous, but they were highly effective and when taken in their cumulative effect, ended up increasing our EBIT performance.  Since we were not a company that was fortunate enough to be in a high-growth and high-margin industry, we had to look to improving our internal performance and ensuring that our resources were used in the most efficient manner.

 

     Another project that I had worked on extensively with our corporate offices in France was to improve the performance of a particular business segment. In the early stages of identifying what our approach would be I drafted a proposal that I referred to as “Project Galibier”.  For those who know me personally, I am a committed and aggressively competitive person on the bike.  For me, I particularly like the challenge of the high mountains as you can see immediately who has been training….or who hasn’t.  If you’re not a Tour de France fan, there is a legendary climb of the Tour called the Col du Galibier.  It’s a 30km climb that reaches a summit of about 8,700 feet.  For an ascent of this nature, it’s not about who set’s a fast tempo and rides away in the early stage.  It’s about pacing yourself on the climb, knowing the goal, and the resources it takes to get their first (wattage regulation, hydration, breathing, etc…).

 

     For this reason, I chose the Galibier for my project name.  It was a turnaround plan aimed at taking methodical steps and understanding what the end result was.  It was not about speed and disruption of resources, but about collaboration, teamwork, and to understand what the end goal was.  We were not in a sprint but in a race of endurance for a longer term payoff.

 

     I have found that taking this approach at both a top line corporate view, as well as a business unit view, has provided me a good platform for increasing performance and profitability.  I will always welcome the Sales group coming to the table with their next “home run” and how fantastic it’s going to be, but I certainly don’t want that to be the basis for my annual operating plan.  I would rather take a more prudent approach and incorporate a risk-reduced portion of it and be pleasantly surprised.  Obviously this approach won’t work if you’re talking about committing to a “home run” project that involves a multi-year approach with capital expenditures and significant increases in headcount. 

 

     This is where solid relationships with the other functional areas are key so that you can collaboratively decide what the contingency plans are if you only end up achieving anything less than a home run…which you can likely count on.

 

     While it’s certainly not the most glamorous way to achieve your annual results, I’ll stick with the “base hits” any quarter of the year.

 

Thanks for reading…..

 

Jeffrey Ishmael

Avoiding a System Conversion Gone Bad….

June 19th, 2009 Comments off

                We all have our horror stories about system conversions gone bad.  I’ve worked under a CFO who had to deal with an absolute nightmare, and I’m hearing from colleagues about the completely botched conversion currently happening with a previous employer.  The one commonality among all the poor conversions I have seen is that the conversion, if gone bad, can mean a serious blow to the momentum of a career, or worse, the loss of a position.  It’s a rhetorical statement to say how critical the systems are to the decision-making process, reporting process, and every other lifeline for the company, but it never seems that it’s taken in that serious a tone when being planned for. The approach is usually like any other project, with the underlying and maybe unstated belief, that any shortfalls can be addressed once we go live. I’ve seen it in $35 million companies and I’m seeing it in a $6 billion multi-national organization.

                At my current company, we are in the planning stages for a system conversion and anticipate finalizing the bid inside of the next 2-3 weeks.  We plan on going live at the beginning of Q4-09. The primary drivers for us is to replace a system that has been “customized” to the level that it can’t appropriately support the company, as well as put a new system in place that can accommodate multiple currencies.  Funny enough, an absent feature for a company that does 30% of it’s business internationally. Is this a Finance-driven project as far as the management, coordination of demos, bid submissions, and defining the scope of services –Yes. Will the final decision on what platform is chosen by made by Finance – NO!

                From my perspective, working in a smaller entity, I can work with any of the platforms that are on the table for consideration. They all have the tools for me to conduct my monthly reporting, develop detailed forecasts, and be able to maintain a platform that will be approved for any audit or review. What I am ensuring in the beginning of this process is that our Sales and Logistics groups fully endorse the product that we are considering.  That we have a platform that will track all the necessary data for our customers, can drill down into the data at a region or customer type level, and that we can plan marketing strategies based on easily polled information. I want to ensure that we have full visibility on incoming product, standard costs and the ability to track all variances, ease of entry/change for purchase orders…the list goes on and on. If we don’t have a platform that sufficiently supports the Sales and Inventory Logistic functions then I have nothing to report on.

                The key in the process is to ensure that all the necessary parties are brought to the table, have a forum to hear their concerns about current functionality, and that the majority of their concerns will be addressed in the upgrade. It’s not about finding the latest and greatest Finance bells & whistles and making everything else accommodate…it’s about having a full endorsement by the team and choosing a platform that all parties embrace. A platform where the team sees a quantum change in the functionality, embraces the change, and actually uses the functionality on a day:day basis. If you want a system conversion to go bad, work the process in a silo, exclude key users from the process, and then announce to everyone what they will be using after Date X. Worse yet, keep the silo effect in play during the needs assessment, ignore the major processes in your business, and worse yet, the needs of your customer. To simple an overview?  No. Go with the latter and you’ll have a whole new project – Career Transition.

Thanks for Reading . . . .

Jeffrey Ishmael

My final views on Executive Dashboards….

March 17th, 2009 Comments off

            My last two postings spent a little more time summarizing the different approaches that can be taken in developing an EIS platform. In this last installment I want to discuss the remaining elements that I chose to include in our first generation rollout. In the last posting we discussed the approach to Order / Revenue reporting.  Now it’s worth summarizing my approach to Operating Expenses, Balance Sheet, and Ratios. Again, it’s worth noting that this level of reporting is intended to only provide a quick “temperature” on what is happening with the Company.

 

            With respect to Operating Expenses, I chose to include this area since there’s always a need to keep tabs on major expense areas. I’m not interested in just a blended topline number, I’m interested in knowing what is happening in key expense areas. Out of the dozens of expenses, I chose to include only 12 that I would want to track on a constant basis. These ranged from 3rd Party Logistics, Advertising, and Bad Debt, to Professional Services and Travel. However, while the remainders of our reporting metrics will be reported on a weekly basis, these are only being updated on a monthly basis. Then why don’t we just hold this for review in our standard financial reporting? I chose to include because I want our OpEx to be a constant data source that our entire team will be conditioned into being sensitive to and not paying attention to on strictly a monthly basis.  With the reporting of the 12 areas I chose, we’ll be able to have constant oversight on almost 85% of our Operating Expenses.

 

            Next up, I wanted to focus on Balance Sheet accounts.  Again, I wanted to focus on those areas that should be tracked on a constant basis and not lost sight of.  We’re obviously following Cash/Cash Equivalents and Inventory, but I’ve taken a slightly different approach for A/P and A/R. For our Receivables, I chose to focus only on the 90+ column. We’re routinely seeing accounts in the Current to 60-day column, but my blood pressure starts going up when they hit the 90+ column.  I want to know if this column is growing.  Similar approach on the Payables side. I want to know if our A/P group is behind in paying vendors or if we are staying current, which is why I chose to follow the Past-Due column. Similarly, I will also be following the amount of early pay discounts that we are taking with vendors.  I want this number increasing every week. Since we have the ability to easily meet payables, I want to push the calendar a little more and start taking discounts.

 

            Last, but not least, were the E-Commerce/Dealer metrics and the basic financial ratios. I chose to include newly opened dealers, closed dealers, inactive dealers, as well as 5-key metrics for our E-Commerce efforts. Considering the current environment, I kept the financial ratios to the top level considerations of working capital rations, DSO, inventory turns, etc..  As mentioned in my first post, the intent of an EIS platform is not to be a data dump.

            -It’s intended to give a very top level view of what is happening with the Company.

            -It’s not intended to replace any of your financial reporting.

            -It’s intended to be an indicator of what further reporting needs to be addressed if there is a problem.

            -It’s not a static tool, but one that is dynamic to the needs of the Company.

 

Thanks for reading . . . .

 

Jeffrey Ishmael

Sales & Ops Planning: Where do I start . . .?

September 16th, 2008 Comments off

My apologies again, but it has been a very hectic couple of weeks between a client project and possible career considerations. But let’s jump back in with a link to our last post of Sales & Operations Planning (S&OP). As I’ve mentioned, this is not a simple process and will reach across the entire organization. In my last post I outlined the significant funtional areas that will be involved in such a project. Let’s keep pushing down and look at some of the steps involved and where we’re headed in our further analysis.

Please note that each one of the areas listed below is an entire discussion in themselves and deserving of a dedicated post. However, there are 5-key steps that that fall within the S&OP process. These steps include:

1. Data Gathering.
2. Demand Planning.
3. Supply Planning.
4. Preliminary S&OP Review.
5. Executive Review.

The amount of data that will contribute to this process is extensive and will range from your closed financials, to bookings, pending projects, and other considerations potentially affecting the Forecast. The data gathering will extend into data points relative to the Production process and the ability to deliver on Forecast in the necessary time constraints. There will be various time considerations with respect to the short-term and long-term goals, both of which will be considered in this process.

When I was first brought in to be a part of this process, I had no prior S&OP experience and was a bit frustrated at being pulled away from my “core duties” and having to spend time on a process that seemed more “Production-oriented”. However, it didn’t take much more than the project introduction to see the value that this project was going to play in the validation of our financial forecasts and to bring an even higher degree of accountability and transparency to the planning process. It also further strengthened what was already a healthy relationship with the Production department. From a Finance-perspective, it allows for a much higher level of information support and accuracy in budgeting, forecasting, and more importantly, working capital management.

Thanks for reading . . . .

Pending projects – September topics planned

August 29th, 2008 Comments off

Today is really turning into one of those days where it’s not quite coming together for a quality update and I’ve really tried to focus on Quality versus Quantity in my postings. Maybe it’s partly due to the looming holiday weekend & that its also been an incredibly busy week. Between a client project I’ve been working this week, as well as “meetings” with a number of other companies, recharging the batteries are key this weekend.

However, I have been thinking about all the topics I do want to address in the coming weeks. I’ve been trying to schedule more time to address these since I think they’ll be very interesting subjects to table. I really want to address points #2 and #3 since these have the potential to have far reaching implications in the conversion to IFRS. Some of what I had in mind:

1. Further breakdowns of the Sales & Operations Planning (S&OP) process and the development of a white paper on this topic.
2. Revenue recognition and the differences between IFRS and GAAP.
3. Fair Value reporting and the differences between IFRS and GAAP.
4. Overviews of the Budget/Forecast process as it relates to a traditional 4-quarter view versus the implementation of a rolling 5-quarter approach.
5. SEC reporting and the differing levels of transparency between companies in the same industry. (Not all 10-K’s are created equal….)

I also need to compile a few of my multiple updates into a single white paper, such as the Internal Audit thread. I’ve also created an account on SlideShare where I plan on posting some of my slide presentations. Looks like it’s going to be a busy month ahead…..

Thanks for reading . . . .

Sales & Operations Planning – why should you care?

August 26th, 2008 Comments off

In a more recent topic of discussion last week, I touched on one of the more significant efforts that we had kicked off – an extensive S&OP initiative. In my opening commentary I touched on the reasons that caused, and in some cases, necessitated our commitment to this process. But for those that had not gone through this process previously, myself included, we needed to have a clear understanding of what the process meant and the efforts we would need to commit.

S&OP 101: As a group that had a a high number of newbies, we had to know the basics. At the most basic level, S&OP is an Executive Decision making process that involves all key areas of the organization, including Sales & Marketing, Manufacturing, Design / Engineering / R&D, Finance, and Logistics, which are then coordinated to optimize the planning and forecasting efforts of the organization to efficiently utilize available resources. Depending on the size and nature of the organization, some of the functional areas may change, but bottom line, it involves EFFECTIVE communication among all functional areas. It comes down to an achieving an effective balance between the Supply and Demand forces placed on the firm.

For the firm and the participants involved, this is not a project that involves capturing some improvements in cost, but a firm commitment to the changing of processes and almost retooling the input process in your forecasting. But this should involve only a few areas….right? Let’s take a look at some of the areas that will likely be targeted for review in this process:
1. Statistic, Marketing, and Management Analysis.
2. Review of the Analysis for use within long-term and short-term forecasting efforts.
3. Review of the demand plan, supply plan, shipments, deliveries, and scheduling efforts.
4. Review of bills of materials, bills of resources, and capacity constraints.
5. Assessment of materials and resources in support of short-term and long-term capacity planning.

So when it comes down to Sales & Operations Planning, any member of executive management should care that their resources are being deployed in the most efficient manner. Although results might be good, and on Budget, how much better could company be performing if this effort were undertaken?

Thanks for reading . . . .

Projects: Sales & Operations Planning

August 12th, 2008 Comments off

During a career we can look back & recall projects that shaped our experience level and positioned us better to take on new challenges presented in our career. Some of those projects also involve pulling together such a large group of folks that it simply eclipses any “projects” you might have encountered during your B-school stint. For myself, one of these projects was the Sales & Operations Planning (S&OP) implementation that was started during our integration with APC. This was a project that was kicked off with a North American meeting that pulled together approximately 40 key individuals throughout NAM and was introduced by the company President. There were also other global kick-off meetings that happened in the other regions. This was a major corporate effort.

As the company moved farther into the implementation process, it became clear that there were going to be some major challenges to effectively integrate our two entities and leverage our operational resources. However, in the short-term, there were a number of issues to address. At a consolidated level, there were a number of potential concerns in this $6.5b merger. Primarily:
1. The potential for declining customer service levels.
2. Inaccurate sales forecasts.
3. Declining product margins.
4. Rising inventory levels.
5. Misaligned performance metrics.

Any one of the potential areas of risk listed above had the ability to materially effect our results and compound an already difficult integration process. As we kicked off the meeting, this was a process that many were not familiar with and there were only a few that had gone through a similar situation with previous employers. The meeting was focused on covering some key areas such as:
1. Why were we implementing S&OP? What are some the signs that would signal such an effort?
2. Conduct and overview of S&OP and the efforts we should anticipate would be necessary.
3. We needed to review the common terminology that would be utilized globally in this effort.
4. We need to review the necessary roles & responsibilities for this effort and individuals assigned.
5. What was the anticipated timeline?

It’s pretty apparent from just this topline synopsis that this is not a multi-week project. This was a project that was anticipated to take the better part of a year to complete and fully implement. This was a project that was going to involve just about every functional area in the organization and had an equally opportunistic ability to improve our financial results and improve our working capital performance. I do plan on covering the elements of this implementation in more detail in further postings. If you have participated in an S&OP implementation I’d love to hear from you…

Thanks for reading . . . .