Games People Play - for big money in this case!

Well, I guess Wall Street showed those foolish folks in Congress who has the power, didn't they? And before that Congress showed those greedy bankers they don't have to rush to their rescue, didn't they? And before that? You can take this pretty far back before you find someone who wasn't being greedy or arrogant or blind. Make no mistake about it - this is a contest to see who really controls the economy in this country. And one thing is certain, neither of the contestants thinks it's you and me. We're just the PR pawns in their power struggle, the folks they both say they want to help while they pick our pockets to line their own, or to grow their power base, or to simply get re-elected.

There. I got that off my chest. Can't do anything about it except tell you how I feel. And if you feel the same way you could tell someone. And they could tell someone. Hey, maybe I can do something about it. But only if you and I team up to do it together. How? Well, here's my suggestion:

Tell your congressional representative to get off his/her duff and get this thing passed! It's a horrible bill except that it's far better than the alternative. Not in the long term, when everything will right itself as it always does; but in the short term the bankers will make our lives miserable if we don't save them so they can lend back to us the money they got from us through Uncle Sam.

But there's more we've got to do. After this thing gets signed, we've got to get our reps to do something really meaningful for a change. We've got to get them to enact real reform in the banking system. Not from the ideas that the banking industry lobbyists or congressional staffers will propose, but from the minds of our best economists and experts on financial systems. So at least one of these two groups has less opportunity to get rich at our expense by finding still another loophole in the banking and securities laws.

Then go to the polls and take care of the other contestant.

As always, I welcome your comments.

Stupid headlines!

This item caught my eye as I was catching up on the news this morning:

WASHINGTON (MarketWatch) -- U.S. retail sales unexpectedly fell in August, pushed lower by plunging gasoline prices, according to Commerce Department data released Friday.

Huh??? Gas prices down, so retail shopping is down? What are you smoking, dude? If that sentence had read 'sales pushed higher by plunging gas prices' I wouldn't have stopped, because we've been hearing that for a couple years. But this headline made me stop. Of course, down in the bowels of the article the writer quoted his source which said the opposite, and properly so. But the point is, when the financial world is in a near panic mode and looking over its' shoulder for the next train wreck, we're going to read irrational stuff in the media. If you're an investor or in a business where the state of the global economy is critical to your business, you've got to ignore the panic scripts. Read the statistics and ignore the interpretations of those statistics. Then draw your own conclusions. You'll be ready when your market is ready.

As always, I welcome your comments.

Huh? What's he taking about?

A Wall Street Journal reporter wrote a piece on hedge funds looking to find bargains in beaten down bank stocks. At one point he wrote this paragraph about the hedge fund investors:

"Since it is harder for investors to borrow money at reasonable rates, they won't be eager to be buyers unless prices are marked down further. That all suggests troubles in the financial market will get worse before they get better. And most of the money being raised seems aimed at investing in distressed companies, not securities, suggesting more write-downs of mortgage-related assets if housing doesn't perk up."

What the h--- does that mean and how does he get from Point A to Point B? If you can explain that, you're smarter than I am. Does this validate the snide comments we hear about financial reporters or am I missing something here?

As always, your comments are welcome.

How to salvage a half-baked turkey!

Launching a new product is for some like birthing a baby. For others it’s more like cooking a bird you’ve never prepared before. Something can and probably will go wrong. The question is how easy will it be to fix it. But let’s suppose your new product turns out to be a real turkey, and you have a warehouse full of half-cooked birds that aren’t going to sell at anywhere near list price. What do you do? How do you maximize your profit or at least minimize your loss?

We discussed this topic today in a management seminar I was leading, and I’ll share with you the same ideas that I gave them: Today is a new beginning. Incremental profit from today on is the only meaningful measure of success going forward. Later on you can berate the poor soul who made the decision to take the product on, but today it’s about making a good decision to optimize profits from a bad situation.

So consider this: Everything you have spent through today is sunk cost. It’s gone. You can’t change your mind and unwind it, or return your new product and start over. But what you spend from today on, and what you sell from today on, and what you earn from today on, is all that matters. This is a useful application of the concept of Contribution Profit, which is Net Sales less all variable costs of getting and fulfilling the sale. From today on, every dollar you can produce in Contribution Profit from your turkey will add directly to your bottom line. It may not produce the profit you once envisioned, but it will reduce your loss or produce a bottom line that is improved over where you are today.

And that sounds like a good management decision to me.

As always, I welcome your comments.

Procurement software? Bah, Humbug!

The Wall Street Journal carried an article this week discussing web spending tools, that is to say software that helps businesses control costs by telling them where they’re spending their money. It’s called procurement software and it sells for big bucks to big companies. Most companies are not big companies, and most of them can get the same results by learning how to read their own financial reports, IF they also learn how to ask for the information they don’t see in the standard forms their software spits out every month.

Too many managers are frustrated because they don’t see what they need or they don’t understand what they see and they don’t know what to do about it. They don’t understand what is possible and reasonable to expect from their financial departments, so they accept that it’s a different language and they lower their expectations. With all due respect to their skills, I call this Financial Illiteracy.

Some of the most creative CEOs I’ve known keep numbers on the back of an envelope – or the equivalent – because it’s the only think they understand. How sad is that? If you know anyone in that state of affairs, do them a huge favor. Tell them to call me.

As always, I welcome your comments.

Internal Audit and the CFO - inherent conflict of interest?

I was reading an interview with the WorldCom whistle blower, once the vice president in charge of internal audit at WorldCom. She made a comment that every CEO whose company has an internal audit function should read. She said having that function report to the CFO, a common situation because of the kind of work internal auditors do, is an inherent conflict of interest for the CFO. The conflict is that much of the work done by internal auditors involves reviewing the work performed by people who work for the CFO. The likelihood of internal auditors reporting problems in their boss's organization seems somewhat problematic, if you think about it.

Her point was that the internal audit team should report to the audit committee of the board of directors, and I agree. Lacking that, such as in a privately owned company that doesn't have an audit committee, that reporting relationship should be to the CEO. The problem: the CEO probably doesn't want the direct responsibility of managing a function whose activities are so foreign to what he/she feels comfortable with. My message to the CEO: get over it! These people can keep you out of trouble and make your company run better.

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If you don't like the sound of "internal controls" then how about "integrity and efficiency controls?" Learn what it takes to oversee these mechanisms in your company, and that includes internal audit. And if your company is over $50 million or so in sales and you don't have a separate internal audit function, you should be worried. If you don't know why you should be worried, call me to talk about a coaching relationship.

I welcome your comments.

At last! Help for administrators and non-management professionals!

In my just released eBook, Finance for Administrative Assistants, I provide a basic overview of finance for administrators and non-management professionals who want to broaden their understanding of financial documents and how to interact with the finance department. NO technical jargon! Guaranteed!

This eBook is ideal for administrative assistants and other support personnel whose jobs require them to have a basic knowledge of finance. We all rely on the finance department for information. This eBook will show you how to read the reports you will most likely see and how to better understand the information in them so that you are helping to make informed decisions that support your company’s profitability and financial management goals. It will also help you get information that you may not even know is available.

My new eBook, available at http://www.genesiciliano.com/, gives a basic overview of how finance departments work and the information they provide. This provides administrative assistants – and other support personnel who are accountable to those responsible for business results – with the tools they need to provide better support and to enhance their value to the company.

The value of the finance department is in the information they provide. Employees of all levels, in all departments need financial information in almost every decision they make, though few of them really understand the resources they have available and how to use them.

People who don’t work in finance are often completely intimidated by the financial department and the work they do. The goal is really to demystify finance and make it clear that everyone can – and should – learn the basics. Get yours today at http://www.genesiciliano.com/

The not-for-profit dilemma: forecasting revenues

I forgot to mention earlier that I presented my first webinar a few weeks ago, a content-rich 50 minutes for over 700 of our not-for-profit readers who are involved with forecasting the revenues of a service agency. I covered a host of dos and don'ts, opportunities to take advantage of and pitfalls to avoid, with some Q&A at the end. Also answered a bunch of questions from registered listeners after the program was over.

You can still register and hear the program, see the slides that I used, and even download the presentation, by going to the American Marketing Association page where it's stored. The link is: http://www.marketingpower.com/webcast448.php

If you're responsible for revenue forecasting or budgeting for a nonprofit agency, or if you assist someone who has that responsibility, or if you're on the board of directors for a charity or a foundation, or even if you just want to be, you've got to hear this program. Afterwards, if you have questions, send me an email and I'll respond personally.