A colleague of mine recently intrigued me with his belief that many businesses “can’t see the trees in the forest”! He contends that the “forest” in this case is the financial performance of the entire business which is displayed through its income, balance sheet, and cash flow statements. We would all agree that important “forest level” operating performance measures can be determined from these statements, including return on invested capital and cash flow return on investment. But what about how the “trees” (individual components such as business units, products, services, or customers) are performing?

Most businesses rely on “gross profit” (sales minus cost of goods sold) to measure product and customer performance. This simple profit measure ignores the product’s specific effect on general & administrative expenses or on the various balance sheet assets and liabilities. Using just gross profit, we can’t see the ROI (return on investment) on individual products, services, and customers. And there no doubt can be great difficulty and expense in distributing each account in the income statement and balance sheet to each product or service sold or to a customer.

Tom Welsh introduced me to his concept of Value Point Accounting (VPA) to address measuring performance at a more granular level. He believes that VPA is a low-cost way to get at ROI information and provide an advantage over competitors who manage by gross profit. more

Does anyone really enjoy the budgeting, planning, and forecasting exercises that we all do?

The budgeting process is all too often an endurance contest. It usually involves multiple negotiations to achieve some randomly selected incremental improvement. Often it is guided by a few senior executives who decide that they need to achieve some target in order to get their bonus once they “make the number.” And making the number usually occurs some 15 or more months after setting the target!

I just returned from the 9th Annual Beyond Budgeting Conference in Dallas. During the conference, I heard several sports analogies used to describe the current state of affairs in the budgeting/planning/forecasting world. It hit me that in reality the annual budget process really is more like pro wrestling than most sports.

What the heck am I talking about? Well … as you read this, think about the planning process that your organization uses. more

Aaahhh … springtime! That wonderful time of year when the weather starts to warm up, days get longer, and we all take a deep breath. Yep … life is great. After all, for many folks the annual audit cycle is wrapped up and we are just right in between corporate and individual tax deadlines (without extensions, of course). Oh, the relief!!

Now we can start to put away all those records of the past and forget about them. But should we?

The answer is: “Not really.”

“Oh,no!! You mean we have to deal with records retention? How mundane of you!”

Well, the answer to that is a resounding “Yes!”

Records retention is an issue that affects us both as businesses and as individuals. It is important that you understand and actively manage the retention of your records. The road is littered with the cases of businesses that lacked good processes for managing the retention of their documents and electronic records, which ended up costing them in later lawsuits or other legal proceedings. Individuals run similar risks when it comes to tax audits or legal matters such as divorce or estate settlements. We could all do ourselves a favor by being sure we know as businesses or individuals what to save, what not to save, and how long to keep it.

For businesses records, management is not just about what to keep. It also is about what NOT to keep. It isn’t necessarily wise to keep everything forever because you think it is good to have “just in case.” Keeping certain records for long periods can be just as bad as not having the records at all. Sometimes records that could have and should have been destroyed as a part of a routine and LEGAL records management program can become dangerous and very expensive if a lawsuit is filed and extensive discovery is involved.

So what to do … what to do? more

Back in August 2009 (seems like a long time ago) I posted “It’s the People in the Process Who Matter” on this blog. The general premise of that post was that most business process and internal control failures start and end with people. It starts with people who make decisions to design and implement (or not) proper control systems that ensure that their organization is protected, that its assets are used in efficient and effective ways, and that the organization is not adversely impacted through someone’s fraudulent activities. It then moves to the people responsible for ensuring that the control processes operate and remain effective.

In the last week or so, I have read articles on two rather disparate topics that brought these thoughts back to mind. more

As follow-on to my last Process Points posting, this blog considers the same premise when it comes to the FCPA.

Complying with the requirements of the Foreign Corrupt Practices Act (FCPA) is not an easy task. And while FCPA compliance can be one of those “out of sight, out of mind” tasks, you might want to be sure your organization understands how FCPA might apply.

Why? Well, it seems that FCPA enforcement activity by the U.S. Department of Justice and the SEC has surged recently. Around the globe, other countries also appear to be stepping up how they address issues of corruption. (See “Ungreasing the Wheels” in The Economist.)

And if any of these authorities determines that you are in violation of FCPA regulations or their country’s laws, those violations can lead to hefty fines, prison time, and other fallout (e.g., negative publicity) that most corporations or individuals don’t want!

A quick refresher: The FCPA makes it illegal for a U.S. issuer, domestic concern, or certain foreign issuers of securities to directly or indirectly bribe foreign government officials through payments or gifts of any value to obtain or retain business or to secure an improper business advantage. In addition, the FCPA also requires organizations to keep books and records that accurately reflect all transactions and to maintain adequate internal accounting controls.

Companies often struggle with several aspects of FCPA compliance such as understanding FCPA requirements and obligations, and creating, implementing and enforcing policies and procedures related to FCPA controls. Not only are these aspects a challenge, but so are the expensive and detailed investigations that must take place once possible FCPA violations are surfaced.

So what should you do to address effective FCPA compliance management? more