Some of the best types of online tools to save you time Jun 25, 2015, 8:20 am By Heidi Carmack Pfaffroth

Especially in a small business, when employees and owners are often wearing many hats, it can be hard to keep up on everything that needs to happen while also improving efficiency.

Here’s one more idea you might want to consider: Are there financial tasks you can take online?

It can be difficult to relinquish control when you’re a small-business owner—small mistakes can have big costs and the success of your business means everything to you. However, you may want to consider the ways you could improve efficiency by unloading a few tasks, or even one, to an online system that is safe, secure and easy-to-use.

A recent study of more than 800 small business owners showed that 66 percent of respondents said they were likely to switch banks for a superior mobile offering for business accounts. While many small business owners struggle to know where to give up control, numbers show that you’ve probably at least thought about online and mobile solutions for your business.

Below are some ideas for types of tasks you may be able to take online that could have a big impact on your time. If your banker hasn’t offered these tools, make sure you ask, because you might be missing out on some time-savers.

Online business banking. One of the most basic things you can do is sign up for online banking and get help from your financial institution in creating an online account. Having real-time access to your transactions and other account services online can save you time and energy—instead of waiting for all your papers, receipts and documents to come in so you can reconcile, you can keep track using the internet from any location at any hour, day or night. Most likely, your financial institution will also allow you to do things like transfer funds, send ACH pay to employees and send money by wire transfer. Since more than half of small-business owners work more than 40 hours per week, you’re probably working when your bank is closed. With online banking you can get more done, when it works for you.

You might also consider finding out if you can grant customized account access to authorized staff, to make sure you have checks and balances within your organization.

Non-analyzed ACH and wires. Non-analyzed ACH or wires provides small-business customers who send minimal wires or process few ACHs the ability to send wires and initiate ACH items using online business banking. Once you learn how to use this service that is likely offered in your online banking, you can save time and money by paying your employees from home.

Bill pay service. Do you use a bill pay service for your personal bills? This simple service may be available for your business banking, allowing you to make payments via the internet to any checking account without writing a check. You can schedule payments you know you will have due, and have payees ready for other payments that are more variable. Then, when you need to track incoming invoices or bills, you can login and look at your payment history. If you have an online login for your business banking account, you can likely set it up directly from there.

Fraud protection for business. Some financial institutions offer fraud protections unique to business customers, since different types of or volume of transactions may require unique protections. Ask your financial institution if they offer a service that ensures that they checks they write are cashed by the correct parties or if they offer downloadable software that will help protect their computer from hackers that try to steal online banking information. These are a couple of the services I usually offer to business customers, and your financial institution might also.

Remote deposit. One way you might be able to save time is with remote deposit of checks. Look for a service at your financial institution that allows you to remotely capture checks with your mobile device. You may be charged a fee, so weigh the cost of the fee with the cost of your time and travel to deposit in a bank. You may find that the cost savings in your time is worth the cost of the associated fees. You might also consider a remote deposit product that allows you to scan checks with a small scanning device and make deposits from any location. It is likely that you can save some time and expense with some type of remote deposit service so make sure you talk to your banker about the options that could be available.

Accept online payments. One easy way to save time for small businesses, non-profits and other organizations is to accept online payments or donations directly from a customer’s bank account or with bank cards. This is ideal for organizations that do have access to or the need for an online shopping cart but want to provide the convenience of online payments or donations for their customers. This may benefit business owners and managers by improving your cash flow because of timely deposits. While you might not need a whole suite of online payment systems, even having a way to accept a smaller number of payments could save time.

While setting your business up to use online tools might take a small investment of time at first—to find out what your financial institution offers and learn to use the tools that will be valuable for you—you’ll likely save more time in the end. If you’re looking for a way to improve efficiencies in your organization, consider how you can take a few time-intensive financial tasks online.

Employee Competencies Drive Operational, Customer, and Financial Success Jun 18, 2015, 8:53 am By Heidi Carmack Pfaffroth

Guest post by Richard H. Tyson, CEObuilder

Guest blogger Tyson is starting a series here about open book management. Make sure you check back for additional articles!

The reader of my last several articles may well wonder how far I intend to extend open-book management. To date, I have suggested that open-book management should encompass financial, customer and operating metrics. The operations, processes and/or systems of any business drive the outcomes experienced by customers—and customer satisfaction (or the lack thereof) drives financial outcomes.

The question I now raise is: What drives operational effectiveness and efficiency? Since, in almost all cases, people run the operations of business ventures, it is safe to say that people are responsible for the success or failure of any system or process. It is imperative, then, to thoroughly train employees to perform the operational tasks of the business in an exemplary way.

Operational competencies of an enterprise’s staff are leading indicators which create the lagging indicators embodied in operational metrics. Open-book management should, therefore, include “competency measures” that demonstrate each employee’s ability to perform the tasks that will effectively and efficiently deliver the outcomes desired by customers, who will, in turn, spend their cash for those outcomes.

Unfortunately, most small businesses (and many larger ones) do not adequately train their employees, much less test for and measure their competencies. The most common training method is what I call “training by osmosis.” This approach places new hires with experienced individuals, to whom they are to “pay attention.” After a day or two of being exposed to this expert, they are deemed ready for prime-time! Sadly, too often this newbie is set up for failure, having little or no sense of real competency (Editor’s note: For training help, see Ken Burnett’s series).

For manual tasks, I recommend a substantially modified version of osmosis training. It is referred to as See-Hear-Say-Do. The first step is simply to observe the experienced employee performing the task. Questions may or may not be asked by the newcomer at this point. Next, the trainer repeats performing the task, this time stating aloud each specific element that constitutes the full process. The new employee listens and observes with an intense focus on what is being done. The third step engages the learner by having him/her tell the experienced employee what to do, step by step. The trainer will proceed to perform the task only when the instructions given are correct. The trainer will prompt the learner where necessary to assure that understanding has been achieved. The final step requires the newcomer to actually perform the task, while repeating aloud each step.  

The process of seeing, hearing, saying and doing exposes the learner four times to the task and its inherent processes—and engages the senses of sight, hearing and speech, thus increasing recall and competency. This process should be repeated on at least a daily basis over a period of time until all measures of effective and efficient competency are assured.

For cognitive tasks, the principles that drive operational tasks must first be understood. Interactive teaching that engages the learner and allows them to paraphrase what they have learned is best here. Once this understanding is achieved, training should focus on the specific application of the principles taught in the context of the business. This can often be best accomplished using case studies of real experiences in the business. Having shared these applications of key business principles, learners should make a firm commitment to applying what they have learned, followed by a series of training experiences, which may be administered through case studies or real job situations. These experiences should then be followed by a careful review and critique by trainers regarding the new employee’s ability to perform the cognitive tasks desired. The process should be repeated until competency is assured.

In all cases, training should begin with the end in mind. All employees should understand—and be able to discuss in their own words—the linkage between financial, customer and operating outcomes and their own competencies. Owners, CEOs and other executives must recognize that the metrics which assure employee competencies are among the most important key performance indicators in any company. When these recognitions are firmly in place, the probability of business success increases considerably.

Richard Tyson is the founder, principal owner and president of CEObuilder, which provides forums for consulting and coaching to executives in small businesses. For 22 years, CEObuilder has successfully brought about an outstanding financial return for CEO and executive clients through providing leading-edge content in the areas of strategizing, team-building, problem-solving and managing for results, as well as the use of proprietary learning and coaching models.

How to help protect your money and get the support you need as you age Jun 15, 2015, 8:51 am By Heidi Carmack Pfaffroth

It’s World Elder Abuse Awareness Day. Something you can do? Share this graphic to spread the word about an effective way to help combat fraud against seniors.

If you’re thinking about fraud against seniors (up to $1 million a day here in Utah!) but aren’t sure how to protect yourself or your loved ones, start with some simple, but effective ways to put checks in place and combat different types of fraud. Seniors can maintain independence and still have a helper looking out for fraud with all or part of the account structure suggested in this infographic. Share the graphic online or, for a printed version, call 800-815-BANK.

Five important questions when you’re thinking about merchant services Jun 11, 2015, 8:11 am By Heidi Carmack Pfaffroth

Guest post by Richard Gray

Utah has a thriving business culture with business providing many different products and services. There’s no doubt, then, that a variety of businesses require a variety of merchant services. Merchant-services providers have solutions that are right for you, solutions that work for you and solutions that may hinder your business goals. Here are some questions that can help guide you in making sure your business is using merchant services to reach your goals.

Let’s start with a question that every good merchant-services provider should be asking their customers—you. Think about whether your provider knows this about your business.

What is the most important product or service your business offers? Your merchant-services provider should know the most important part of your business so they can offer the solutions that make the most sense for you. It’s easy to think of merchant services as just the ability to accept online payments or use a credit card machine, but there are so many different offerings in the merchant-services industry that there is often a nuanced solution that fits different businesses more perfectly than a generic solution. If your provider couldn’t answer this, consider re-thinking what they’re offering you.

Talk to your provider about the merchant services you’re using, the problems they are or aren’t solving for you and your goals. Make sure they understand your distribution channels and the value your business offers. This may aid your provider in finding the best solution instead of a solution.

The questions below may help you to discover where there is room for improvement in the merchant services you’re using.

What are other solutions to my merchant-services problem? Ask your provider this question. If you think you need a PIN pad so customers can use debit cards at your store, make sure you’re also taking the time to describe what service you offer your customers and what your customers expect from you. Perhaps there is a better, easier solution for you and your customers. Maybe a device that allows you to take payments on your phone is more effective for the types of sales you’re making. Your merchant-services provider should have answers and more than one solution for you, with different opportunity costs and benefits for you to weigh.

The next three questions you should ask yourself now and then make a note to revisit regularly after you find a merchant-services provider that works for you.

How is my merchant-services provider helping me to get my money faster? Answering this question is a step in understanding how the services you’re using are improving your bottom line. Your merchant services should be able to provide a payment solution that is faster for you and more convenient than other merchant-services solutions—make sure it is. Looking at the ways your merchant services provider is helping you to improve cash flow will help you to also see where your business or payments are getting caught up and can use a little improvement.

How is my merchant-services provider helping me to use technology to improve efficiency in my business? Is your merchant-services provider keeping you up to speed on changes in the industry or new technology? Are you using the same services you started with 10 years ago? Are your payment-acceptance channels EMV-chip enabled? In order to make sure your business is keeping up with what customers in your industry want and need, you need to be sure that your merchant services provider is keeping up with changes in technology.

How are the merchant services I’m using helping me to reach my business goals? Business owners are so busy and pulled in so many directions that it’s easy to get used to and caught up in the status quo. Asking this question of your team might not feel as immediate and urgent as making sure online payments are received smoothly, but it’s just as important. Make sure your actions are aligned with your strategy and helping you to reach your business goals. If you’re not sure whether they are, get back to why you needed a merchant services provider in the first place. You might find you need an adjustment in what you’re using, or maybe you just needed a reminder that your business is offering the right services for customer payment.

If there’s something that you feel is missing from the merchant services you’re using, or something your provider hasn’t offered, but you wish they had, ask! Your merchant services provider might not even know that you are looking for a solution in another area. Your merchant services provider won’t have impetus to improve unless you press on them a little. Help them to understand what problems you’re facing with merchant services so they have an opportunity to solve them.

With a thriving business community here, most readers are familiar with some type of merchant services. Asking these questions of your provider, your team and making sure your provider is asking you the right questions will help you to find the right solution for your business, not the right solution for the business next door.

Richard Gray is senior vice president of SBA lending at Bank of American Fork, Utah’s community bank leader, an Equal Housing Lender and Member FDIC. Richard has assisted local small businesses in obtaining SBA funding for more than 25 years. He served on the board of directors for nonprofit Kostopolus Dream Foundation and was the chairman for nonprofit Utah Microenterprise Loan Fund, Salt Lake City.

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Optimizing Your Cash Flow Using Open-Book Management Jun 04, 2015, 3:08 pm By Heidi Carmack Pfaffroth

Guest post by Richard H. Tyson, CEObuilder

Guest blogger Tyson is starting a series here about open book management. Make sure you check back for additional articles!

My last several articles have dealt with open-book management, a process in which data is shared with employees to help create desired results. My emphasis has been on achieving financial outcomes, since every business venture must make money.  In so doing, I have stressed that the majority of key performance indicators (KPIs) from financial statements are lagging indicators. They are the results of leading indicators that create those financial outcomes.

Today, I want to give attention to the leading indicators that most directly drive your financial results, specifically those metrics that define why your customers spend their scarce cash for your product or service.  This is the reality for all of us; in order to achieve financial success, we must serve the needs and wants of those who pay the bills.

Much has been written about the customer-driven company.  Marketing professionals appropriately focus here, giving excellent counsel regarding customer selection, and how to build and maintain customer loyalty. While offering valuable insight, these experts often fail to make the connection between the strategies they recommend and specific desired financial outcomes. And if they do reference these connections, they rarely focus attention on the measurement of those strategies and correlating them as the cause of desired financial outcomes.

For every customer and market segment in which you do business, customer outcome metrics should be developed. These should include:

A clear definition of the customer problem, need or desire you intend to solve. Even if you have been in business for decades, it’s a good idea to revisit this. From your definition, you will have the basis for determining how well you actually measure up in serving your customer. Often these metrics will include a measure of how well your competition does in meeting those needs as well.

New-customer acquisition measures, such as how well promotional offers create prospect attention, interest, desire and action. Specific metrics here might include sign-ups, downloads, coupon redemptions, referrals, purchases or testimonials. A/B testing can be employed to measure the effectiveness of any two advertising or web marketing strategies against each other, thereby allowing you to accurately determine which strategy creates the best results.

• Core competency factors. Metrics here objectively assess the importance of key elements in your value proposition. They are what you do best, such as providing a continuous stream of innovative products and services, a strong consultative relationship, leading-edge expertise, proven safety or security, on-time delivery, high quality or a myriad of other components unique to your company or brand. How well do these competencies align with solving your customers’ problems?

Often, two or more of these key elements are inherently in conflict. For instance, we often find that a manufacturer’s value proposition offers both short lead times and unerring quality. When customers are asked which of these they want, the answer is inevitably “Both!” However, when rush orders begin to compromise quality, the answer is not so clear. In fact, this conflict often marks the demise of customer loyalty—and the loss of the relationship. Avoiding this type of dilemma requires careful policy decisions, followed by continuous measurement of adherence to the policies chosen, as well as regular communication with customers.

• Customer retention. My clients have often sought an advocacy relationship with their customers; that is, they are not satisfied until their customers are so delighted with their relationship that the customers openly evangelize for the brand. One way to measure this leading indicator is to track your net promoter score (NPS). Based on customer surveys, NPS tracks the ratio of your customers who are likely to recommend your product or service (promoters) to those who are not likely to do so (detractors). By measuring the NPS on a regular basis, your company can ascertain whether customer retention is improving or declining. Further, it provides additional impetus to talk to your customers to better understand why they stay or leave!

The bottom line here is that if you want to have a bottom line, care and feeding of the customer is the key. To do this well, customer strategies must be clearly defined—and they must be tracked and measured to be sure that the correlation between those strategies and financial outcomes clearly exists.  The dashboards created to measure customer strategies should be included in your open-book management practices, i.e., shared openly with all of your employees. When you have done this, you will truly have a customer-driven company!

Richard Tyson is the founder, principal owner and president of CEObuilder, which provides forums for consulting and coaching to executives in small businesses. For 22 years, CEObuilder has successfully brought about an outstanding financial return for CEO and executive clients through providing leading-edge content in the areas of strategizing, team-building, problem-solving and managing for results, as well as the use of proprietary learning and coaching models.

Summer fun in Utah! Jun 01, 2015, 8:44 am By Heidi Carmack Pfaffroth

This summer, Bank of American Fork is celebrating Utah’s cities and the wonderful people that live in them. Join us for Community Appreciation Day at your local Bank of American Fork branch for free food, prizes, games and fun. And don’t forget to wave to us as we float through your city parade!

The extra fun this summer is that we’re also celebrating Seymour the Piggy Bank’s Sweet 16, so look for him when you see hot-air balloons and on our float, and use #SeymoursSweet16 when you post your photos!

See you around this summer!

CITY/BRANCH  PARADE INFO COMMUNITY APPRECIATION DAY
Alpine  August 8, 10 a.m. August 7, noon-2 p.m.
Bluffdale August 15, 9 a.m. N/A
American Fork   July 11, 9:30 a.m.            July 10, 9 a.m.-5 p.m.
Draper                July 18, 9 a.m.          July 17, 9 a.m.-5 p.m.
Eagle Mountain June 6, 10 a.m. N/A
Highland                August 1, 10 a.m.         July 31, 9 a.m.-5 p.m.
Lehi                       June 27, 10 a.m.         June 26, noon-2 p.m.
Murray                     July 4, 9 a.m.              TBD
Orem                       June 13, 7 p.m.         June 12, noon-2 p.m.
Pleasant Grove           June 20, 10 a.m.       June 19, noon-2 p.m.
Riverton                  July 3, 6:30 p.m.       July 2, 9 a.m.-5 p.m.
Sandy                     July 4, 6 p.m.             July 3, noon -2 p.m.
Saratoga Springs       June 13, 10 a.m.         June 12, 9 a.m.-5 p.m.
Spanish Fork             July 24, 9 a.m.                   July 22 & 23, 9 a.m.-5 p.m.
St. George September 19, 5 p.m. TBD

How Jan helped protect our customer’s money Apr 06, 2015, 9:16 am By Heidi Carmack Pfaffroth

How Jan helped protect our customer’s money

Learn about what you can do to reduce the risk of fraud.

The other day Jan told me about a recent fraud attempt that she dealt with in the customer service center. The fraudster was targeting a senior’s primary account and Jan was able to keep the fraudster away from the customer’s money until the customer and his son could close the account and open a new one. Later, the customer and his son learned a few things they could do to keep the customer’s money a little safer in the future. Here’s what happened, in Jan’s words.

I received a phone call soon after the customer-service center opened on a Thursday at around 7:30 in the morning. The man on the line requested to set up his account for online banking. I asked for some account information and he said he could provide each piece—which did I want? Since any of the options would do, he gave me the information I needed. Since I needed to verify his identity in order to set him up with online banking, he also gave me some identifying information. He had the right answers, but I just felt like something was off. I had this feeling that something was wrong.

I looked at his account at some information and notes—I felt sure that I wasn’t speaking with the real customer. A few details tipped me off that something wasn’t right. As I talked with him, I could tell it was not our customer. I decided to ask for a few more identifiers, just to be sure. Over the course of talking through more questions and answers, he answered most correctly, but one wrong. It was a mistake that the customer wouldn’t make, but a fraudster could.

I didn’t tell him which question he answered wrong, but I let the man on the phone know he needed to come in to the branch and show his ID so we could help him. In his friendly way, he said he was nearby and would be in when we opened.

After I put an alert and pending close on the account, I left a message for the branch manager near the customer to call me. Only a few minutes later, the customer and his son contacted us. We discovered that a fraudster told the customer that he won something and they needed information from him to put the money into his account. He gave his information to the friendly fraudster, who was the Las Vegas man I spoke with on the phone. The customer told his son about his “winnings”, who urged him to call the bank, as he suspected it was fraud. As soon as the branch opened, the customer and his son were there to close the account and open a new one.

Thanks to Jan’s years of experience and care for her customers, she knew not to just wait for the right answers and move forward with the fraudster’s request—she listened to her feeling and looked for some signs. If the fraudster—who had a lot of information about our customer—had been able to set up online banking, he could have easily wiped out our customer’s account in a few minutes, probably before our customer’s son would have heard about and suspected what was happening.

One advantage of keeping your money in a bank versus other places is that the bank will protect its customers in circumstances like these. Assuming that the real customer was not an accomplice to the fraud, and assuming that the customer notified the bank promptly, the bank would have reimbursed the customer the amount that was stolen. However, it’s better for everyone to prevent the fraud from happening so that no reimbursement is necessary. Even with reimbursement from a bank, fraud is a terrible inconvenience for our customers and an invasion of their privacy.

We can help you put a few extra checks and balances in place to reduce the risk of fraud. If you don’t need help managing your finances, but could use an extra set of eyes to watch for fraud, we can help you set up a helper with view-only access. They will be able to see what’s going on with your account, but can’t make any changes or transactions. They can watch for unusual transactions in real time and you can even set up alerts for types of transactions you don’t usually do.

Here’s one type of structure we often recommend:

If you need a little more help, you may want to consider opening a smaller, secondary account with an automatic transfer from your primary account each month that will cover your groceries or bills or whatever aspect of your finances you need help with. You can then add a trusted helper only to that smaller account. You can add a second helper with view-only access to watch over both accounts—to protect you and your first helper from fraud, suspected fraud or accusations. There are more ways we can help you set up the help you need—just talk to one of us and we can walk you through some of the options.

We care about you. Call us at 800-815-BANK or visit one of our locations to put some checks and balances in places. Visit here for more resources on seniors and fraud.

Take advantage of $5K tax deduction Apr 02, 2015, 5:29 pm By Heidi Carmack Pfaffroth

If you’re looking for a way to reduce your taxable income for your 2014 taxes, consider the advantages of an IRA—you have about a week to make contributions to an IRA for last year. Contributions to IRAs can be made as late as the first due date of a tax return, and can be considered retroactive to the previous tax year, so you can still make a qualifying IRA contribution and get the tax benefit if you qualify for your 2014 tax filing. For 2014 the dollar limits for IRA contributions are $5,500 if you are age 49 and younger, $6,500 if you are 50 and older.  If you don’t have an IRA, Bank of American Fork can help.

Bank of American Fork’s IRAs are held in CDs, not in the stock market, so you are guaranteed a safe return and you are covered by FDIC insurance. Unlike some banks, we don’t charge you holding fees or an annual fee. Depending on the type of IRA you choose and subject to IRS rules, you can earn tax-free or tax-deferred income. When you are eligible, you can receive distributions from the money in your IRA.

Here are the types of IRAs we offer:

Traditional IRA: Allows contributions of pre-tax income. Taxes are paid upon distribution.

• Roth IRA: Allows contributions of after-tax income, if qualified. Qualified distributions of principal and interest are tax-free. After retirement, distributions are not required.

• SEP IRA: SEP stands for Simplified Employee Pension. It allows a business to make contributions toward its employees’ retirement using IRAs. These are especially popular with sole proprietors, where the business owner and the employee are the same person. SEPs allow a higher maximum contribution than a Traditional or ROTH IRA. (See IRS for eligibility requirements)

At Bank of American Fork, variable-rate IRAs require only $10 to open, while fixed-rate IRAs can be opened with either a $500 or a $5,000 minimum opening deposit.

Don’t wait any longer to start your retirement savings and save on your taxes. Open an IRA today! At Bank of American Fork, our friendly staff can meet with you and show you firsthand how we can help you secure a strong financial future. Call 1-800-BANK to set an appointment. We look forward to speaking with you.

Consult your tax advisor for details.


Electronic payments to speed up this year and next Mar 16, 2015, 9:26 am By Heidi Carmack Pfaffroth

Consumers will see a change in how quickly funds are available.

Stella calls her dad, Christopher, and asks him to send money for her housing payment, which she needs, like, yesterday. And yes, now, in 2015, Christopher drives over to the nearest branch of the national bank he uses and deposits a paper check that will go into her account so the funds are available to Stella the next day. Christopher isn’t afraid of sending electronic payments or unfamiliar with his bank’s person-to-person payment service, it’s just that sending an electronic payment could mean that it will be three days before Stella can use the funds Christopher sends.

The good news for Christopher and Stella? Electronic payments should speed up, nationally, this year and next.

The Federal Reserve System just released its next steps in developing an infrastructure to speed up electronic payments and settlements.

When you make a person-to-person payment or send an electronic payment for a utility bill, the time it takes for your payment to process is affected by the Federal Reserve’s system on the back end. For consumers, the coming change means faster and more secure payments.

The Fed is launching a task force to find practical approaches to speeding up the system and to get feedback from industries involved in payments systems to find additional ways to offer greater speed, security, efficiency and cross-border options.

This year and the beginning of 2016, the Fed is laying out a policy framework for the new system and with the feedback from the task force, will begin implementing the practical solutions. The Fed has already identified a couple of ways it will change to speed up payments and make it safer. To improve security, the Fed will also expand its anti-fraud and payments risk management offerings. Its longer-term goal is weekend or 24-hour service, and added that it would promote greater use of same-day ACH and expand its international payment services.

As the Federal Reserve successfully implements policy to speed up its end of the electronic payments process, Bank of American Fork customers can expect to see any electronic payments they make through online banking speed up, including electronic bill pay, person-to-person payments and transfers between accounts. We’re always looking for ways to offer you better service so we monitor national financial news with you in mind—this is a story we’re excited about.

Since Stella lives less than a few hours away from Christopher while she’s attending college, Christopher has even considered driving to where she lives to drop off cash. Soon, electronic payments will be faster than sending the money by Pony Express, and Stella and Christopher won’t have to worry about being robbed on the trail by outlaw Jesse James.

Avoiding Failure-to-Launch with Open-Book Management Mar 12, 2015, 8:10 am By Heidi Carmack Pfaffroth

Guest post by Richard H. Tyson, CEObuilder

Guest blogger Tyson is starting a series here about open book management. Make sure you check back for additional articles!

My last several articles have stressed the importance of open-book management, a process whereby every employee uses financial data to help achieve desired business outcomes.  I have stressed the use of both income statement and balance sheet information, with an emphasis on profitability and—even more importantly—on cash flow.

Further, I have called attention to the fact that the majority of key performance indicators (KPIs) from financial statements are lagging indicators. These are the results of leading indicators, such as the number of sales calls, lean manufacturing techniques, expense controls, how fast you collect receivables, etc. By illuminating both leading and lagging indicators, virtually any organization will enjoy significant improvement in its performance, productivity and bottom line.

Conceptually, I have found that open-book management makes sense to nearly all CEOs and business owners. Paradoxically, however, very few seem to have the resolve to implement this practice in their own companies. Why? It boils down to a failure of making an unshakable commitment to the process.  I have found that a few essential questions often help firm up executive resolve to move forward with open-book:

• Have you clearly identified your desired outcomes?  Specifically, what enhancements would you like to see in your profitability and cash flow?

• What would be the benefits of these improvements? Specifically, will you have a stronger and more amicable relationship with your banker or equity investors? Will your company’s value be enhanced as an acquisition candidate? Will you simply have less stress and sleep better at night?

• What are the costs to enjoy those benefits? Will it require taking some time with your accountant to bring your financial statements up to date and perform some of the fundamental analyses I’ve discussed in my last several articles? Will that entail some out-of-pocket costs? Will you have to allow yourself to be vulnerable enough to openly share with your employees your financial warts? 

• Is it worth it? Commitment is almost always a function of cost-benefit. Do the benefits (improved profitability/cash flow, better relationships with the financial community, and less worry/better health) exceed the costs? If not, don’t bother with open-book! If, however, those benefits are attractive, then resolve to move forward.

One of the significant challenges of adopting open-book is where to start. First, consider the various actions you might take in launching open-book, and rank each action in terms of (1) its potential value to your company, and (2) how easy (or hard) implementation will be. Once each action is ranked according to these dimensions, you can easily place it on the following grid:

 

 Consider, for instance, the action of calculating (and improving) your company’s cash conversion cycle How valuable would an improvement of 10 days in your cash conversion cycle be? My experience says this would have extremely high value! How easy is this to do?  Well, it depends on how up to date and accurate your financials are, but let’s assume that it would take a bit of work to pull together what you need; we’ll call it “Hard to Do.”  So, the action of calculating and improving your cash conversion cycle would fall in the upper right quadrant.

With most who are new to open-book management, it is best to start with the upper left quadrant, as this represents “low-hanging fruit” and allows us to enjoy some early successes before moving to the more difficult high-value actions. One of my clients pursued open-book this way by doing two simple things: (1) he shared his monthly P&L with all of his employees, highlighting the fact that they had never enjoyed more than a 2 percent pre-tax net profit, and (2) he promoted the idea that they needed to exceed 6 percent pre-tax net for the current year.  This was very easy to do, but frankly, I doubted the value. However, I was wrong!  By launching open-book in this simple way, my client’s company did exceed six percent that year—and every year thereafter. Once his employees knew the profitability and the goal of the company, they began to look for ways to improve. “Easy to Do, High Value!”

Clearly, not every action under open-book management is easy, but I strongly recommend that all companies carefully consider the benefits of launching such a program. I believe you will see it is worth your commitment.

Richard Tyson is the founder, principal owner and president of CEObuilder, which provides forums for consulting and coaching to executives in small businesses. For 22 years, CEObuilder has successfully brought about an outstanding financial return for CEO and executive clients through providing leading-edge content in the areas of strategizing, team-building, problem-solving and managing for results, as well as the use of proprietary learning and coaching models.

 
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