Are You Looking for Business Advice in all the Wrong Places?

BY: ANDREW FRAIZER, MBA, CFA CFA, NJMEP BUSINESS GROWTH SERVICES (BGS) RESOURCE 
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Your retired uncle Bob who ran a barbershop may not be the best person to advise you on your manufacturing company. The key to running a successful manufacturing business is making good decisions. However, you cannot make good decisions without timely accurate information and analysis. It is impossible to know everything you need to know as a business owner, so it is imperative to get help. Where do you go for competent advice and access to the right information? 

The greatest fear of many entrepreneurs is “The Numbers” which many business owners avoid like the plague. Whether it is not knowing where to find them, what to do with them, how to use them or just plain old don’t want to know –sometimes ignorance is bliss, but not necessarily prudent. To make good business decisions you must know your numbers and incorporate that knowledge into your decision-making process. Fortunately, you just need to know the Key Performance Indicators (KPIs) for your business. It is critical to have the right finance team to provide what you need, but you must be knowledgeable enough to ensure they provide the information you need, in the right format on a timely basis.  

You must understand that “Finance is not Accounting, and Accounting is not Finance,” just like “Mechanical Engineering is not Electrical Engineering, and Electrical Engineering is not Mechanical Engineering.” With this understanding you can assemble the financial team that you and your business require.  

According to Investopedia, “Accounting is the process of recording financial transactions pertaining to a business. The accounting process includes summarizing, analyzing and reporting these transactions to oversight agencies, regulators and tax collection entities. The financial statements used in accounting are a concise summary of financial transactions over an accounting period, summarizing a company’s operations, financial position and cash flows.” View it as focusing on “The Numbers” from the past and extremely quantitative, meaning that they tend to get the same (or very similar) answers given the same information. Therefore, accountants are extremely good at being focused and detail oriented so that they can tell you exactly what happened.  

Investopedia says that “Finance is a term for matters regarding the management, creation, and study of money and investments. Finance can be broadly divided into three categories: public finance, corporate finance and personal finance. Consider it focusing on “The Numbers” in the future which is quantitative, but also qualitative because nobody really knows what the future holds, and in finance people come up with different results given the same information. That is why the stock market works with prices and values changing constantly. Therefore, finance is an inexact science and finance people need to be good at assessing, analyzing, modeling, and then recommending solutions. 

Accounting related roles:

• Accounts Receivable (AR) / Accounts Payable (AP) Clerk  
• Bookkeeper  
• Tax Preparer  
• Accountant  
• Certified Professional Accountant (CPA)  
• Controller  

Key finance related roles:

• Banker  
• Broker  
• Financial Planner / Wealth Management / Estate Planning  
• Financial Analyst  
• Mergers and Acquisitions  
• Chief Financial Officer (CFO) 

Most manufacturing company owners I work with are dissatisfied with their bookkeeper and/or accountant for various reasons. I often encounter businesses whose accountant minimized the amount of taxes they needed to pay but later the business owners have difficulty getting financing and/or obtain a decent offer if they are trying to sell because they do not appear profitable enough. 

Manufacturing businesses often do not have anyone on their team who has expertise in finance, resulting in cash flow issues, low or no growth and/or significant difficulty accessing capital. When companies grow there is usually a drain on cash since investments are generally made in advance of growing profitability. Your company can easily run out of cash by growing too fast, especially if you do not have good financial planning and cash flow management practices. 

Certainly, there are many finance and accounting people and firms with varying levels of ability, capabilities, capacity, products, services, depth and breadth. There are some that can cover multiple roles while there are others who may not be able to be effective in any of the roles. So how do you choose the right one(s)? How do you find them? And How do you know if they are qualified?  

The first step in finding the right accounting/finance team member(s) is to become as knowledgeable as possible about the role you expect them to play. You must also determine whether you need them full-time, part-time, or just occasionally for special circumstances. Also, consider whether you need their expertise in-house or externally on a fractional, outsource, consulting, contingency, contract, commission, or retainer basis.  

You should treat the selection process for accounting/finance team members like you are hiring a new employee by assessing their knowledge, wisdom, and experience plus asking for references. Beyond resumes and paper credentials, ask how are they uniquely qualified to help you. Do they have Industry knowledge? Have they ever been a business owner? Do they take a narrow or holistic perspective? You should not choose someone just because they know more than you or were referred by someone you know. 

Sourcing potential finance/accounting team members can be a challenge. NJMEP is a great place to start! Advisory boards, business networking groups, and chambers of commerce are also potential sources for talent. In addition, referrals from other business owners are worth considering. It is a marriage in that finding the right mates is priceless. 

Andrew Frazier, MBA, CFA is The Business Growth Pro and CFO. He empowers business owners to maximize the value of their companies by helping them to Grow Revenue, Increase Profit, and Obtain Financing. His expertise is business strategy and financial management which he employs for business owners through his expert coaching, consulting, and training services. Andrew is also author of “Running Your Small Business Like A Pro; The More You grow, The Faster You Grow.” Visit www.AndrewFrazier360. com to learn more.