Here is a fictitious story. But how true could it be?

Our company’s quarterly financial results were just announced. Our loss was unexpectedly double last quarter’s loss, and we have now been in the red each quarter for over a year. How can this be happening to us? Our company has been profitable for decades!

I can track the meetings, phone calls, and e-mails among our managers from the moment the CFO’s staff calculated this quarter’s disappointing financial statement.

The Blame Game

When our CEO first received and saw the bad news, she immediately questioned the CFO as to whether there was an accounting error. Nope. The CFO reported that sales were down 2 percent, but the bottom line tanked at the product gross profit margin line and it worsened further at the operating profit level due to overbudget distribution, selling, and marketing expenses.

The CEO called our Operations VP into her office and asked what happened. Our Operations VP pointed his finger at the excessive distribution expenses – specifically, all the emergency premium shipments.

The CEO called our materials manager into her office for an explanation. He observed that production was missing many customer order ship due dates, requiring costly overnight and premium shipping expenses to lessen the damage to our customers’ satisfaction and loyalty. He pointed his finger at the production manager. more

If your company looks to cut costs this year, it will probably look outside the realm of GRC.

Thirty-three percent of companies expect their compliance budgets to increase in 2010, and almost one in five companies expects to hire additional staff during the next 12 months, according to a survey jointly conducted by the Society of Corporate Compliance and Ethics (SCCE) and the Health Care Compliance Association (HCCA).

While that sounds optimistic, it should not suggest that 2009 was as difficult for GRC functions as it was for other areas of most corporations. The survey also indicates that nearly 75 percent of companies either kept compliance spending even or increased it in 2009 (compared to 2008).

A three-page summary of the survey findings is available here. ###

Announcing a $3.2 billion tax credit for manufacturers of clean energy technologies last week, President Obama noted that “building a robust clean energy sector is how we will create the jobs of the future — jobs that pay well and can’t be outsourced.”

It’s a comforting thought — at least a job in a solar cell production facility can’t disappear over the phone lines to a provider in Bangalore. But clean-tech manufacturing companies can still walk, taking their green jobs with them. And, chances are, many of them will do precisely that if — as must surely happen at some point — the tax and regulatory climate turns less favorable to their industry. more

Remember the heady days of the dot-com boom when any company with a PowerPoint and a white paper could use stock options to lure product developers and drive them toward a promised IPO? The economy and the market have cooled considerably since then, and regulators have piled on rules to curb the most egregious option abuses. Although IPO action barely shows a pulse today, stock options still remain an effective incentive in a compensation strategy.

Not managing stock options correctly can get a company in trouble. Broadcom Corp. recently agreed to pay $160.5 million to settle investor claims relating to the networking and communications chip maker’s stock options accounting, as reported by the Wall Street Journal. Similarly, last month, Reuters reported that Comverse Technology Inc. settled a class-action lawsuit over stock options backdating for $225 million.

These are headlines your organization doesn’t need. more

As I noted last week, cash management remains front-and-center for many corporate treasurers and CFOs. So, it’s not surprising that more than four in five of the 130 finance executives who participated in a recent study from Aberdeen Group said that their firm’s focus on cash management had increased over the past 12 months. The study, “The 3-Part Balancing Act of Cash Management,” is available on Aberdeen’s Web site.

What is surprising is the mix of steps that best-in-class companies have taken to navigate the economic downturn and credit crunch. For this study, best-in-class firms were those with lower-than-average days-sales-outstanding (DSO), which is one measure of receivables management, says Nasreen Quibria, senior analyst with Aberdeen and an author of the study. DSO was 21 days at the top firms, versus 72 days at the firms that made up the bottom 30 percent of companies, aka the laggards. The other measurement used to distinguish the high-flyers from the rest was the accuracy of their cash flow forecast. Best-in-class firms were able to nail their forecasts 84 percent of the time, versus 51 percent for the laggards.

Managers at best-in-class firms have upended conventional cash management wisdom. “The traditional ethos has been to stretch payables and collect interest off the float,” Quibria notes. According to the study, however, the mean days-payable-outstanding (DPO) number at best-in-class companies was 34 days, versus 56 at laggard companies. As a result, the top firms were better able to capture discounts and avoid late fees. more