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C-Suite Fintech Advisory Workshop NYC Rebranded ! Fintech Workshop Advisory (Fin-WAVE) – Catch it !

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Join the group and prepare to attend on the 3rd Thursday monthly, next date Thursday, October 21st, 2:30PM
Please plan to join Fin-WAVE: Fintech Workshop Advisory for our regular 3rd Thursday Monthly Roundtable – Fintech Challenges & Opportunities. This month on Thursday, October 21, 2021 at 2:30 Eastern, Richard Fay, Principal in Wolf & Company’s Assurance Group, will lead a discussion on the Future of Fintech: Driving Bank Innovation!
 Register at this link https://lnkd.in/efAjYnyU

What Does an Outsourced CFO Firm Do?

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By: Allan Tepper
Before we dive into this topic, let’s define what an outsourced CFO firm is. An outsourced CFO (or Controller) will provide the same functions as a full-time CFO, but the relationship is that of a vendor as opposed to an employee. Typically, as a vendor, there are no payments for vacation, no year-end bonuses, no stock-based compensation and no severance payments.
In addition, the company will only typically be billed for the amount of time the outsourced CFO provides. For smaller companies, this could be an attractive option. Many smaller companies need the thought leadership and execution skills of a highly competent full-time CFO, but don’t need someone five days a week, thereby saving money.
For midsized companies, an outsourced CFO is generally needed to fill a gap between a departing and arriving CFO. Further, for companies looking for an exit, hiring a full-time CFO may not be a viable option as the acquirer may already have a CFO.
Finally, for companies of all sizes, an outsourced CFO firm may provide all of the above and senior-level consulting services. For instance, company management may need help with work paper preparation for an upcoming audit, may need help in exit readiness, may need to stop declining profits, may need better decision-making reports, may need a new accounting system and may need almost anything else that requires highly experienced accounting and finance skills.
Firms consisting of mostly CFOs and Controllers should have the depth of talent to address many of the above in a quality and timely manner. But there is one more factor. Experience. Some firms may have hundreds of years of collective experience. That may prove very valuable when addressing complex, time sensitive projects.

How can a CFO squeeze more time out of the day?

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By Allan Tepper, Co-founder and Senior Managing Partner, CFO Consulting Partners LLC

Did anyone ever tell you that you had to work smarter rather than harder? But how does one do that? Is it even true?

As a co-founder of a CFO consulting firm, I have seen many CFOs who work enormous hours. There was one CFO we were consulting with that arrived before anyone in the office, was the last one to leave, worked on the train to and from the office and worked until midnight most nights and on weekends. In the end, that job ended in failure.
As a CFO, before starting my consulting firm, I too sometimes burned the midnight oil. I sympathize with those hard working CFOs and Controllers. There is a lot of work to do.
When one is working so hard, though, the little ways to improve efficiency and effectiveness just aren’t that apparent. This reminds me of a newspaper cartoon I saw many years ago. In it, the captain in a 19th century battle Is shown leading his troops. The troops are standing in a straight line armed with rifles and bayonets. The enemy is not too far away, also standing in a straight line. Behind the captain stands a water boy with the forerunner of a machine gun, the Gatling gun. The water boy taps the captain on the shoulder, at which point the captain shouts, not now! He says, Don’t you see I have a war to fight?
So, I believe it is true that one has to work smarter and not harder. That means listening to others, having the time to plan and taking the time to think.
Here are some illustrative problems I have seen over the years where one can work smarter:
  • Problem: Not fully utilizing a basic module of an accounting system. One client kept track of accounts receivable on an excel schedule, even though the accounting system was fully capable of handling.
  • Problem: Not setting up recurring entries. I call it, set it and forget it. In most accounting systems, one can set up recurring entries. In essence, you set it once and let the system book the entries automatically. This is especially helpful with prepaid expenses, but has as many applications as one’s imagination.
  • Problem: Too much use of Excel. We have all seen so many examples of this. Often, we have seen the comparison of monthly actuals to budgets all done in Excel. In most every case, this could have easily been done within the accounting system.
  • Problem: Too busy to stop and think how to tweak the process to make it more productive. Some processes you use may work, but may be overly complicated, error prone and time consuming. To fix this, it requires the time to sit back and figure how to do the same task in less time and/or with less errors. It could be as simple as automating one task that opens up a bottleneck.
  • Problem: Staff not adequate trained, and /or incorrect staff in the role and/or staff resistant to change. We have seen many cases where the existing staff just about refuses to do things differently. To fix this, I saw one manager say. The bus, figuratively speaking, will be leaving soon, and it’s your choice to board it or be left behind. Most boarded the bus. He then gave the existing staff new roles and/or tasks, trained in his way. A bit time consuming, but it resulted in significant efficiencies over time.

Ten Keys to CFO Success

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By Allan Tepper, Co-founder and Senior Managing Partner, CFO Consulting Partners LLC

I am often asked what critical elements are needed for CFO success. While there are no guarantees, here are ten questions that may help determine the answer. The more YES answers, the better.

  1. Are you an active and respected member of your Senior Management Team?
  2. Can you/do you talk frequently and fluently to the senior management team about the key drivers of your business (i.e., volumes, ratios, pricing, etc.), and about the external variables affecting the business (i.e., the economy, the industry trends, the competitors, the risks, etc.)?
  3. Is your department adequately staffed with high quality people, and is the staff viewed as efficient and internally-client driven?
  4. When you report bad news, are you criticized? Have you put practices in place to identify and mitigate risks, so that when bad news happens, it is reported as one of the identified risks that went south?
  5. Is your day-to-day department well managed? Do you provide your services quickly and in a quality manner? Is your own office neat and well organized? Do you consistently work more than 10-hour days?
  6. Do you feel more like a guiding light to growth and profitability than a policeman in your company?
  7. Do you ever lose track of the fact that both internal and external customer satisfaction is Job Number 1?
  8. Would your boss say you think like a businessperson – growth, profitability, ROE, empowerment, motivation, a prudent amount of risk taking, etc.? Would they say you strike the right balance between the big picture and the details?
  9. Have you implemented a sound planning, budgeting and forecasting process? If so, do you have monthly or quarterly meetings with the profit center leaders to review results and identify risks?
  10. Is your audit or review completed within four months after the end of your fiscal year?

C-Suite Fintech Advisory Workshop NYC by CFO Consulting Partners, Founding Sponsor

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C-Suite Fintech Advisory Workshop NYC was intended to be an in-person monthly pizza & beer networking event at our co-working space, The Home of FinTech | Rise, created by Barclays, sponsored by CFO Consulting Partners, LLC, the Financial Management Consulting firm.
For now, we’ve been meeting on Zoom to discuss trends, answer questions and network every month on the 2nd Thursday at 11:30AM Eastern and membership has grown to 220 people over the last several months.
Fintech Advisory Recap
CFO Consulting Partners LLC is the ‘C-Suite Fintech Advisory Workshop NYC’ Meetup founding sponsor – A financial Management consulting firm providing CFO services to boards, CEOs and CFOs of small and middle market companies and startups at all stages of growth.

CFO Consulting Partners is the founding sponsor of the C-Suite Fintech Advisory Workshop NYC group on MeetUp.com

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CFO Consulting Partners is the founding sponsor of the C-Suite Fintech Advisory Workshop NYC group on MeetUp.com. Pre-pandemic the group was intended to be an in-person monthly discussion and networking event at our co-working space, The Home of FinTech | Rise, created by Barclays, For now, we’ve been meeting on Zoom the 2nd Thursday of each month at 11:30AM Eastern to discuss FinTech trends, answer questions and network. Membership has grown to 183 people over the last several months.

The next webinar will be held on March 11th. We welcome anyone who is interested in exploring FinTech from the C-Suite perspective. You can join the group by visiting MeetUp.com , creating an account and joining the C-Suite Fintech Advisory Workshop NYC group. Below is a recap of the discussions since our start in August 2020.

Part 3 of 3: Building a Stronger Financial Management Process: The Audit: Don’t Get Scared, Get Organized

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This is the third of a series of three short newsletters on how to stay ahead of finance process issues and prevent these challenges from becoming more significant problems.  Each newsletter has addressed a different aspect of these challenges: Producing Data, Garbage In, Garbage Out, and The Audit: Don’t Get Scared, Get Organized (today’s topic).

As noted in the first two newsletters, a strong finance team is critical to the success of any company.  One of the roles of the finance team is to prepare for and manage the external audit of the company’s financial statements.  Several of the points covered in the previous newsletter, regarding controls over spreadsheets and data management, will also be helpful in preparing for the audit, but we recommend some specific steps below.

Challenge – The External Audit Takes an Inordinate Amount of Time to Complete 

Many companies have experienced this, and it is human nature to blame the auditors, but there is usually more going on here.  Here are some of the symptoms:

  • Documentation requested by the auditors is difficult to locate or does not agree with the accounting records. Documents that do not support recorded amounts are considered errors by the auditors, so they need to expand their testing and the expanded testing often finds more errors.
  • The audit takes much longer than planned, so accounting firm staff are reallocated to other commitments and replaced by staff new to the audit.
  • Once problems start Auditors are no longer committed to deliverable dates and are reluctant to commit to new dates, audit cost overruns become obvious and a sore point in the relationship with the auditors.
  • Audit fatigue sets in on both sides and it becomes very difficult to manage the process.

Action Plan, Step One – Prepare Well in Advance for the Audit

  • Review issues experienced in the prior audit and take steps to correct them before the audit begins.  If certain transactions, or a class of transactions, have been challenging to audit in the past, or are new to the company, consider performing an ‘internal audit’ of those transactions so the issues with their documentation can be addressed before the audit begins.
  • Request a detailed timeline from the external auditors that includes key deliverables to and from them.  Last year’s listing of schedules ‘Prepared by Client’ is a good place to start.
  • If the audit includes multiple locations, make sure the reporting from the auditors at the other locations to the auditors in the center is included.  The auditors at the center, particularly at the staff level, may not see this as ‘their problem.’

Action Plan, Step Two – Proactively Manage the Audit

  • Insist on frequent (and brief) meetings between key audit firm and company personnel to assess progress.  These meetings should be more often than once a week during the “heat” of the audit, daily 15 minute ‘stand-up’ meetings are a good idea during this period.
  • The objective of these meetings is to timely find and address issues (e.g., exactly who is to give what to whom).
  • On a weekly basis these meetings should seek to reaffirm that all parties remain committed to the ultimate deliverable of a signed audit opinion on the required date.  Auditors may be reluctant to raise a concern about timing of completion in these meetings, as it can be a difficult conversation, but it is important to identify any potential problem early so it can be addressed.

Conclusion

A Company can achieve an effective and efficient audit by starting to plan well in advance of when the audit work is to be done and proactively managing the process from start to finish.

SEC Modernizes Disclosure for Banking Registrants

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Announcement of Final Rule

On September 11, 2020, the Securities and Exchange Commission announced that it has adopted rules to update and expand the statistical disclosures that bank and savings and loan registrants provide to investors, in light of changes in this sector over the past 30 years. The rules also eliminate certain disclosure items that are duplicative of other Commission rules and requirements of U.S. GAAP or IFRS. The rules replace Industry Guide 3, Statistical Disclosure by Bank Holding Companies (Guide 3), with updated disclosure requirements in a new Subpart 1400 of Regulation S-K (Subpart 1400). SEC Chairman Jay Clayton said “Guide 3 has not been substantively updated for more than 30 years. The changes we are adopting today are designed to elicit better disclosures for investors and add efficiencies to the compliance efforts of registrants.”  (https://www.sec.gov/news/press-release/2020-205)

Modernization of Statistical Disclosures for Bank and Savings and Loan Registrants

The rules update the disclosures that investors receive and eliminate overlap with Commission rules, U.S. GAAP or IFRS. The updated statistical disclosure requirements are codified as a new Subpart 1400 of Regulation S-K and Industry Guide 3, Statistical Disclosure by Bank Holding Companies is rescinded.

Disclosure Requirements

The Commission’s rules require disclosure about the following:

  • Distribution of assets, liabilities and stockholders’ equity, the related interest income and expense, and interest rates and interest differential (Average Balance, Interest and Yield/Rate Analysis and Rate/Volume Analysis)
  • Weighted average yield of investments in debt securities by maturity
  • Maturity analysis of the loan portfolio including the amounts that have predetermined interest rates and floating or adjustable interest rates
  • Certain credit ratios and the discussion of the factors which explain material changes in the ratios, or their related components during the periods presented
  • The allowance for credit losses by loan category
  • Bank deposits including average amounts and rate paid and amounts that are uninsured

A detailed discussion of the changes to each of the disclosure requirements follows in Appendix A.

Applicability

The new rules apply to bank and savings and loan registrants. Guide 3, by its terms, applied to bank holding companies but was widely adopted by savings and loan holding companies and other registrants with material lending and deposit gathering activities.

The rules apply to domestic registrants, including Regulation A issuers, and to foreign registrants. The disclosure requirements are linked to categories or classes of financial instruments disclosed in the registrant’s U.S. GAAP or IFRS financial statements, aligning the reporting period statistical disclosure requirements with those required to be presented in the financial statements, and explicitly exempting IFRS registrants from certain of the disclosure requirements that are not applicable under IFRS.

Impact of Changes

Significant new disclosures include weighted average yield of debt investment securities by maturity, maturity analysis of loan portfolios, expanded credit ratios and factors explaining changes in those ratios and uninsured time deposits including a breakdown by maturity. Certain ratios required in Guide 3 (return on assets, return on equity, dividend payout, and equity to assets) are eliminated from Subpart 1400 but are likely to continue. These ratios are not unique to bank and savings and loan registrants, and the Commission’s guidance on MD&A already requires registrants to identify and discuss key performance measures when they are used to manage the business and would be material to investors.

Location of Disclosure Requirements and XBRL

Consistent with existing Guide 3, the disclosures of new Subpart 1400 are not required to be presented in the notes to the financial statements. Therefore, if disclosures are provided outside the financial statements, for instance in the MD&A sections, the disclosures would not be required to be audited, nor would they be subject to the Commission’s requirement to file financial statements in a machine-readable format using XBRL.

What’s Next?

The rules will be effective 30 days after publication in the Federal Register and will apply to fiscal years ending on or after December 15, 2021. Voluntary compliance with the new rules will be accepted in advance of the mandatory compliance date however the new rules must be adopted in their entirety. Guide 3 will be rescinded effective January 1, 2023.

Notice to Readers

This publication has been carefully prepared, but it necessarily contains information in summary form and is therefore intended for general guidance only; it is not intended to be a substitute for detailed research or the exercise of professional judgment. The information presented in this publication should not be construed as legal, tax, accounting, or any other professional advice or service. CFO Consulting Partners LLC can accept no responsibility for loss occasioned to any person acting or refraining from action as a result of any material in this publication. You should consult with professional advisors familiar with your factual situation for advice concerning specific audit, tax or other matters before making any decisions.

 

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Appendix A: SEC Modernizes Disclosure for Banking Registrants 

– Outline of Requirements of Subpart 1400 of Regulation S-K

 

Distribution of Assets, Liabilities and Stockholders’ Equity; Interest Rate and Interest Differential (Average Balance, Interest and Yield/Rate Analysis and Rate/Volume Analysis)

Item 1402 of Regulation S-K:

  • Codifies all of the average balance sheet, interest and yield/rate analysis and rate/volume analysis disclosure items currently in Item I of Guide 3
  • Requires segregation of domestic and foreign activities, if applicable
  • The categories enumerated in Item 1402(a) must be included, if material
  • Additionally, registrants are required to separate (1) federal funds sold from securities purchased with agreements to resell and (2) federal funds purchased from securities sold under agreements to repurchase and to disaggregate commercial paper, if material.

Investment Portfolio

Item 1403 of Regulation S-K:

  • Codifies the requirement to disclose weighted average yield for each range of maturities by category of debt securities required to be disclosed in the registrant’s U.S. GAAP or IFRS financial statements
  • Applies to debt securities that are not carried at fair value through earnings.
  • Eliminates requirement for certain disclosure items in Item II of Guide 3 as these items substantially overlap with U.S. GAAP and IFRS disclosure requirements:
    • book value information
    • the maturity analysis of book value information
    • the disclosures  related to investments exceeding 10% of stockholders’ equity

Loan Portfolio

Item 1404 of Regulation S-K:

  • Item 1404(a):
    • Codifies the requirement to disclose the maturity by loan category disclosure currently called for by Item III.B of Guide 3, with the loan categories based on the categories required by U.S. GAAP or IFRS in the financial statements
    • Requires additional maturity categories to provide investors with sufficient information on the potential interest rate risk associated with the loans in the portfolio
    • Codifies the existing Guide 3 instruction stating the determination of maturities should be based on contractual terms
    • Also codifies the language, as proposed, regarding the “rollover policy” for these disclosures
    • To the extent non-contractual rollovers or extensions are included for purposes of measuring the allowance for credit losses under U.S. GAAP or IFRS, such non-contractual rollovers or extensions should be included for purposes of the maturities classification and the policy should be briefly disclosed
  • Item 1404(b):
    • Codifies the disclosure items in Item III.B of Guide 3 regarding the total amount of loans due after one year that have (a) predetermined interest rates or (b) floating or adjustable interest rates
    • Specifies that this disclosure should also be disaggregated by the loan categories disclosed in the registrant’s U.S. GAAP or IFRS financial statements to promote consistency of loan portfolio disclosures throughout a registrant’s filing, and elicit trend information about interest income and potential interest rate risk
    • The final rules require additional maturity categories (1) after five years through 15 years, and (2) after 15 years
    • The additional maturity categories
      • o    will elicit more decision-relevant information for investors by capturing the maturity periods of commonly offered residential mortgage loan products, such as 15-year and 30-year residential mortgages
      • o   residential mortgage loans would no longer be classified in a single maturity category
      • o   the loans would move through the maturity categories until they are paid off or sold, such that over time, even 30-year residential mortgage loans would migrate into different maturity categories
      • Eliminates the loan category disclosure items in Item III.A of Guide 3, the loan portfolio risk element disclosure items in Item III.C, or the other interest bearing asset disclosure items in Item III.D

Allowance for Credit Losses

Item 1405 of Regulation S-X:

  • Disclosure of the ratio of net charge-offs during the period to average loans outstanding based on the loan categories required to be disclosed in the registrant’s U.S. GAAP or IFRS financial statements, instead of on a consolidated basis as called for by Guide 3
  • Requires disclosure of the following new credit ratios on a consolidated basis, along with each of the components used in their calculation:
    • (1) Allowance for Credit Losses to Total Loans
    • (2) Nonaccrual Loans to Total Loans
    • (3) Allowance for Credit Losses to Nonaccrual Loans.
    • (4) Discussion of the factors that drove material changes in the ratios, or related components, during the periods presented
  • IFRS registrants are not required to disclose the ratio of nonaccrual loans to total loans or the allowance for credit losses to nonaccrual loans, as there is no concept of nonaccrual loans in IFRS
  • Requires registrants to provide the tabular allocation of the allowance disclosure called for by Item IV.B of Guide 3, except that the allocation would be based on the loan categories presented in the U.S. GAAP financial statements, instead of the loan categories specified in Item IV.B of Guide 3

Deposits

Item 1406 of Regulation S-X:

  • Codifies the majority of the disclosure items in Item V of Guide 3, with some revisions
  • Defines uninsured deposits for bank and savings and loan registrants that are U.S. federally insured depository institutions as the portion of deposit accounts in U.S. offices that exceed the FDIC insurance limit or similar state deposit insurance regimes and amounts in any other uninsured investment or deposit accounts that are classified as deposits and not subject to any federal or state deposit insurance regimes
  • Requires foreign bank and savings and loan registrants to disclose the definition of uninsured deposits appropriate for their country of domicile
  • The rules require disclosure of:
    • (1) U.S. time deposits in excess of the FDIC insurance limit
    • (2) time deposits that are otherwise uninsured by time remaining until maturity of: (A) three months or less; (B) over three through six 57 months; (C) over six through 12 months; and (D) over 12 months

Certain Existing Guide 3 Disclosures That Are Not Codified in Subpart 1400 of Regulation S-K

  1. A. Return on Equity and Assets – Item VI of Guide 3 calls for disclosure of four specific ratios for each reported period, including return on assets, return on equity, a dividend payout ratio, and an equity to assets ratio. The requirement to disclose these ratios is not included in Subpart 1400 as these ratios are not unique to bank and savings and loan registrants, and the Commission’s guidance on MD&A already requires registrants to identify and discuss key performance measures when they are used to manage the business and would be material to investors.
  2. B. Short Term Borrowings The new rules do not codify the short-term borrowing disclosure items in Item VII of Guide 3 in their current form. Instead, Item 1402 of Regulation S-K codifies the average balance and related average rate paid for each major category of interest-bearing liability disclosures currently called for by Item I.B.1 and I.B.3 of Guide 3, and requires disaggregation of the major categories of interest-bearing liabilities to include those referenced in Item VII of Guide 3 and Article 9 of Regulation S-X. Other existing disclosure items in Item VII are not included as they are substantially covered by existing Commission rules and the financial statement requirements.

Written by CFOCP Director, Larry Davis (ldavis@cfoconsultingpartners.com)

Part 2 of 3: Building a Stronger Financial Management Process: Garbage In, Garbage Out

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This is the second of a series of three short newsletters on how to stay ahead of finance process issues and prevent these challenges from becoming more significant problems.  Each newsletter addresses a different aspect of these challenges: Producing Data, Consuming or Using Data (today’s topic), and Preparing for and Managing the Audit.

As noted in Part 1 of 3, Producing Data, a strong finance team is critical to the success of any company.  In Part 1 we covered challenges and action plans around the process for producing timely reporting of business results and indicators.  There are similar potential pitfalls when it comes to using or consuming the data to make business decisions.

Challenge — Lack of Clarity on Required General Ledger Account Details

Accurate data in the general ledger, and in supporting systems populated by staff outside the finance team, is critical.  Bookkeeping and data entry errors make it difficult to rely on the information in the systems without laborious data cleansing exercises and adjustments.  Also, if inclusion of a few digits in the account code when booking entries makes the difference in how information is processed, they must be used consistently.  If not, this can lead to unmatched debits and credits, inflation of the balance sheet and eventual write-offs that could have been avoided.

Action Plan — Document the Process and Train the Team

  • Ensure that requirements for posting entries are well understood by the accounting, finance, and operations teams
  • Train the staff that processes entries to supporting systems to eliminate errors.  Perhaps a visual aid with exactly how to book various entries may help
  • Enable automated error checking, and reconciliation capabilities to the extent possible
  • Have the accounting team review a sampling of entries monthly before the close as an opportunity to reinforce training and to randomly test for errors as part of a quality control process

Challenge — Over-Reliance on Spreadsheet Links for Reports and Analysis

An integrated system, whether finance and accounting or multi-function, is often beyond the resources of many organizations, both in terms of the cost and the time to convert from old process to new. As a result, finance, risk, and other staff often rely on spreadsheets which can proliferate and become very complex.  With a strong foundation of process management and internal controls these tools can still support the needs of many organizations and make an eventual systems conversion far easier when the time comes.

Action Plan – Implement Data Management to Bring New Resilience to the Process

  • Produce an inventory of recurring reports and analysis – this is also a great opportunity to eliminate redundant or unused reporting
  • Review the data elements comprising the reports, including the source and definition, and to the extent that sources for similar elements vary, identify and agree on the source and definition – in effect, a data source inventory
  • Ensure that numbers are consistent across various reports by always using the data source inventory so, if and when spreadsheet links break, the data source inventory takes away the guesswork

Challenge — Financial Reporting Doesn’t Address Needs of Decision Makers   

Financial reports should drive discussion through presentation of trend analysis, period and budget comparisons, and relevant metrics.  If there are no questions or discussion when the CFO presents the financials, perhaps the information presented is no longer relevant.

Action Plan — Design Financial Reporting to Drive Performance  

  • Focus reporting on performance by identifying the key indicators that are most critical to driving success
  • Include trend graphs to drive clarity on over / under performance and generate discussion on decisions and actions required to get back on track
  • Ensure that variance explanations versus prior year, budget and prior month are clear – this is important from a control perspective as well as for the analysis of business performance

 

NEXT –  Part 3 of 3: BUILDING A STRONGER FINANCIAL MANAGEMENT PROCESS – PREPARING FOR AND MANAGING THE AUDIT

Written by Paul Karr, Director (pkarr@cfoconsultingpartners.com) and Rob Milrod, Director (rmilrod@cfoconsultingpartners.com)

Newsletter: Cash Forecasting

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Cash forecasting, always important, becomes even more highly critical during times of economic disruption. Here are some key points to consider for an effective process:

1. Use a segmented approach to avoid over forecasting cash inflows. Consider customer segment, size, and seasonality – tax time could drive slower payment behavior for all types of clients.

2. Experiment with data that helps differentiate slower payers, e.g. credit ratings, industry, etc., to inform the forecast and contribute to faster collections.

3. Test solutions that help manage the lag between payments and collections; For example, tying accounts receivable team compensation to timely invoice issuance, offering discounts to slower paying customers for prompt payments, and perhaps requiring a partial upfront deposit from customers who regularly pay late.

4. Organize the forecasting approach and outputs in a consistent manner so that the accuracy of prior forecasts can be assessed. and so that it’s clear where to adjust management’s estimates.

5. For cash outflows, communication across the management team can make or break this process. Especially in a start-up where monthly spend patterns based on history are not available, there is no steady state to rely on. Management team members should regularly discuss and consolidate their outlooks for daily cash receipts and disbursements.

6. Start with prior bank statement activity to come up with typical monthly recurring items.

7. Map key bank statement items to actual expense so that the expense patterns in business plans and budgets can provide context for the cash forecast.

8. Identify cash items already expensed and therefore not in management’s outlook, as well as future capital outlays.

9. A detailed aging, accounts payable for outflows and accounts receivable for inflows, is a ready source of information for future cash flows and is extremely helpful in cash forecasting.
10. Take into account any cash flow benefits from the new Coronavirus Aid, Relief, and. Economic Security Act.

If CFO Consulting Partners can help your organization with additional support and skill sets of experienced accounting and finance professionals, please do not hesitate to contact us.

We hope your families, employees, and colleagues remain safe and healthy during these unprecedented times.

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