Dog Day Afternoons

BrunsliSmallMy dog Brunsli is not fazed by the hot and humid weather, she just sleeps it away in the cooled house! Hope you are staying cool! Lots responded to my Lemonade request and it has been great to catch up with so many. It is still hot enough to have Lemonade, so don’t be shy….

This has been a summer of many distractions and also points to pause. Europe with its Brexit, multiple terrorist attacks, Deutsche Bank possibly in need of a bail out and overall currency fluctuations. This may indeed affect your business if you are doing business in Europe.

Here we are in the middle of the US presidential campaigns. It is not politics as usual……or is it?

Last week I attended the funeral of a client and dear colleague, Kevin Gosnell. Kevin was the CEO of T&K Asphalt Services, loving husband of Kathleen and father of three handsome sons. He died of ALS after a 15-month battle. What is so remarkable about Kevin is that once he was diagnosed with the incurable disease, he pulled out all plugs and decided to use his leadership skills from running his company and the Vistage group we shared, and bring the fragmented medical community together to pool funding and speed up research through ALS One with the hope to eventually have a cure. Take a look of the videos and support this great cause. Kevin is a hero in my eyes in how he took is death sentence public and made an incredible difference in a very short time. RIP Kevin and healing thoughts to his family.

Life intertwines with business as we all know. I am sure you are looking for the balance the way I have and figuring out where to draw the line. Take a moment these last few days of summer to reflect on where you are, what is good and what is possible to change.

Have you taken a closer look at the internal and external risks of your business? Most internal risks you can actually eliminate. What succession plans do you have in place?

Externally, mitigating risks for your business can be tricky, but being aware of the potential economic risks and implementing some buffers into your financial plans is a good strategy to consider.

Here is a blog post that may help you get started
https://nssblog.com/2015/11/09/de-risk-your-business/

Want to have a conversation over lemonade call me at 781-929-9125.
In the meantime, stay cool, Rudi

Conversation with an A-Player

Start a Conversation with Bob!

Bob Weber, MBA, has been a Managing Director with Next Stage Solutions, Inc. since 2012. Possessing extensive financial management experience, Bob is a global financial executive with over 40 years of Commercial and Operational Finance experience in the Life Science space, primarily within the MedTech and Pharmaceutical companies of healthcare giant Johnson & Johnson. In addition, he has been Director of Business Development for the J&J Orthopaedic Company; Vice President of Finance and Executive Committee member for a foreign based, privately owned Medical Diagnostic company; and been responsible for financial operations in the US, Canada, and the UK.

Over his career, Bob has assisted Company Leadership as business advisor in the development and execution of business strategies to support company growth objectives. These activities have ranged from new product evaluations/commercialization; negotiation of strategic business alliances; and implementation of critical business systems.

    

We are proud to present a sample of his accomplishments for both NSS and other organizations:

  • Participated in the worldwide commercialization of over 20 new products in highly regulated industries with combined revenue in excess of $500 Mil in annual sales.
  • Led development of formal strategic planning process for two $175 Mil worldwide business franchises with strategic goals, divisional objectives, and interactive financial planning capabilities.
  • Conducted comprehensive financial and business analysis that reduced manufacturing structure from nine facilities to three centers of excellence avoiding $2.5 Mil in consolidation costs.
  • Led pricing negotiations that shifted $5 Mil in profit margin from strategic business partner to company, while resetting the pricing matrix agreement for our future relationship.
  • Directed implementation of Activity-Based Management and developed operations performance measures for 7 manufacturing plants saving millions in cost reductions and elimination of non-value added expenses.
  • Negotiated numerous New Business Development agreements (distribution, licensing, and supply agreements) with annual sales in excess of $20 Mil.
  • Organized and led highly successful CFO searches for midmarket companies in expansion mode.

Are you looking at growth differently, or what we call nonlinear growth?  Bob is easy going and the guy to talk to.  He will be delighted to start a conversation with you.

Email Bob at weber@nextstagesolutions.com or

call 617-449-7728

NSS Expands Services

NSS Expands its Services Offer        

Compliance

We have a new team member at NSS! John Anderson, CPA, CISA, CISM, CGEIT, CITP joined us last April expanding the team’s capabilities measurably.

John leads the Business Systems and Integrations side for NSS as well as the Public Accountancy specialty. John has successfully assisted several audits, IPO’s and been trusted by some of Boston’s top CFO’s in preparing their companies for SOx Compliance … a significant core responsibility for any US Public CFO.

We want you to be aware of 2 new important SEC Rules and Regulations:

  1. The New PCAOB Review Criteria

NSS can help you get up to speed in this highly specialized field of finance. Consider the following questions:

  • Are your controls structured and detailed in the currently required granularity?
  • Do you have a detailed and documented review process in place, evidenced with retained documentation?
  • Do you have support around related IT controls that are requested today?
  1. New Regulation A+

This brand new regulation with its final rules and form amendments are in effect since June 19, 2015. This aspect of the JOBS Act has the potential to permanently change the way we raise capital in the US.

The mandate expands Regulations A+ into two tiers:

  • Tier 1: Annual offering limit of $20M, including no more than $6M on behalf of selling securities holders that are affiliates of the issuer or secondary offering.
  • Tier 2: Annual offering limit of $50M, including no more than $15M on behalf of selling securities holders that are affiliates of the issuer or secondary offering.

Issuers must file Regulation A+ offering statement with the Commission electronically on EDGAR.

John TV

If you are a public company CEO or CFO and find yourself in overdrive with all the compliance regulations, John can help you by stepping in and getting you the support you need.  Q3 is shortly upon us, so let us know sooner rather than later.

You can reach John at 978-837-0092 or email at john.anderson@nextstagesolutions.com

CFO Coaching & Mentoring

CFO Coaching & Mentoring at NSS

CFO Image

You have heard a lot about how the CFO position has become more complex and demanding over the years. Let’s also acknowledge, that a typical midmarket CFO oversees different parts of the finance spectrum. Sometimes they are called Controllers who do CFO level work and sometimes it’s the other way around. So for our point of view, let’s define this position as Head of Finance in your company.

The Head of Finance is often a person who has been with the organization for some time, and has enjoyed a number of promotions including a title promotion from Controller to CFO acknowledging the increased transactions associated with the business growth. More employees are added, additional markets entered and products introduced, and the financial management expectations become more and more complex.

The challenge for a growing business is you must now consider an operational and results driven CFO who is capable and has the time to discuss your growth opportunities. Ideally, you want your finance department to provide a valuable service to the organization, rather than be seen as an isolated department that provides results/numbers only. One who embraces walking the floor, talking with sales and operations and helps them problem solve with specific issues. The compliance and fiscal responsibilities are a given, delegated and with oversight by the CFO.

Has your Head of Finance kept up with professional development and courses to handle the increasing demands of their job? In all fairness, things get so busy and besides, an evolving CFO is not often asked to participate in key decisions and apply their respective business insight. The CEO or Business Owner is very loyal to that Head of Finance and typically wants things to work out.

Understanding and accepting that loyalty is the key reason for stability, NSS has developed a program to mentor and coach your existing Head of finance or CFO. Our program is unique in how we work with the existing CFO and allows for true on-the-job training and shadowing.

With our coaching and mentoring support, we emphasize the transition from being a technical expert to becoming a business leader, partner, and advisor. We have worked with CFOs and senior finance leaders who, just like you, needed an experienced, friendly and non-judgmental voice to get them to the other side of the financial spectrum.

Being at the top is lonely not just for the CEO but also for the CFO. Professional development for CFOs is typically geared towards the compliance side of finance.

This is a great opportunity for you to augment your CFO’s capabilities and offer this customized in-house and hands-on approach over a short period and get an important strategic program completed.

The NSS program incorporates a skill-set matrix methodology and an in-depth evaluation of your finance department’s capabilities. Both are critical components if your CFO is going to become a more active partner in the growth of your business.

Our well received coaching incorporates the project objectives, expectations and timeline with you and the executive team and is executed by the CFO with the assistance of an experienced NSS Growth Advisor with over 30+ years’ experience.

Please watch our Rudi Tuesday on Mentorship and give us a call to discuss our Coaching and Mentoring support further.

RudiTuesday Mentor

We are the only peer-to peer CFO group out there helping CFOs become more strategic and forward-looking. We work in a non-threatening, collegial way and are result driven to help your CFO be an effective partner to you and your business.

Staying status quo is not an option. If your incumbent CFO or Head of Finance cannot give you the decision-making support you need to grow and keep a competitive edge, then you are compromising the value of your business.

Call Bob Weber, Managing Director at NSS at 617. 449. 7728. He oversees the NSS Coaching and Mentoring program.

What CEOs must know about New Standards for Revenue Recognition

Revenue Recognition Principles as Promulgated in 2013

By Derek A. Smith, Managing Director, Next Stage Solutions, Inc. He is a CPA and Chartered Accountant and was a member of the AICPA Board of Examiners from 1998 to 2006.  The BOE sets the CPA examination. Contact: smith@nextstagesolutions.com

Major Changes to Consider The New Standard in 5 Steps
  • Affects both Public and Private companies

  • Must run parallel accounting systems for at least 2 years( private companies) and 3 years (public companies)

  • New standard is Principled based not Rules based

  • There is an opportunity for Judgment

  1. There must be a contract (either oral or written) with the customer
  2. The contract must spell out the separate performance obligations;
  3. The transaction price must be determinable;
  4. The transaction price must be allocatable to the separate performance obligations in the contract; and
  5. Individual performance obligation revenue will be recognized upon satisfaction of the individual performance obligation.

The Financial Accounting Standards Board (“FASB”) and the International Accounting Standards Board (“IASB”) have at long last completed their deliberations on the establishment of revenue recognition principles that are common wherever US GAAP and International Financial Reporting Standards (“IFRS”) are applied. The new standard will most likely be published in the second quarter of 2013. The new standard will be effective for fiscal years beginning after December 15, 2016 for public companies and December 15, 2017 for private companies. Entities will have the option to apply the standard retrospectively or to adjust opening retained earnings for the cumulative effect of accounting for contracts that are not completed under legacy GAAP at the adoption date.

Under US GAAP today there are at least eight different sources for determining how to account for revenue (for example ASC 985-605, Software: Revenue Recognition; ASC 605-35, Revenue Recognition: Construction-Type and Production-Type Contracts; and ASC 932-605 Extractive Activities – Oil and Gas: Revenue Recognition). These will all be replaced by the new standard.

Why you want to start sooner rather than later

While the launch date may seem far off, companies and their management teams need to understand that systems and processes are going to need adjustment to satisfy the
new guidelines. It is not appropriate to use an Excel spreadsheet to track the reporting obligations. Further, for any company that provides comparative financial statements, the results for the earlier periods will need to be recalibrated if the company applies the standard retrospectively. Public companies have to provide three years of comparative Statements of Activities.

What is the New Standard?

The core principle of the new standard is that “an entity shall recognize revenue that depicts the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods and services”. While there are some exceptions, the standard will apply to most transactions with customers.

The New Standard in 5 Steps

The new standard has five steps an entity must take in determining the recognition of revenue. They are as follows:

  1. There must be a contract (either oral or written) with the customer;
  2. The contract must spell out the separate performance obligations;
  3. The transaction price must be determinable;
  4. The transaction price must be allocatable to the separate performance obligations in the contract;
  5. Individual performance obligation revenue will be recognized upon satisfaction of the individual performance obligation.

1. Contract with a Customer

A contract must have commercial substance; the parties are committed to perform their respective obligations; each of the parties can identify their rights regarding the goods or services to be transferred; and the entity providing the goods or services can identify the payment terms for effecting the transfer. The standard addresses contract modifications and add-on obligations.

2. Separate Performance Obligations

The final standard will provide specific guidance on evaluating the goods and services in a contract to identify each separate performance obligation. While the final standard will not define goods or services, it will provide several examples including goods produced for sale, granting a license, and performing contractual acts. A good or service will represent a separate performance obligation if it meets both of the following criteria:

(i) It is capable of being distinct (that is, the customer can benefit from the good or service on its own or with other readily available resources); and

(ii) It is distinct in the context of the contract (that is, it is not highly dependent or highly interrelated with other promised goods or services).

The final standard will include other indicators (or similar indicators) of whether a good or service is distinct in the context of the contract.

3. Transaction Price

The third step in applying the new standard is to determine the transaction price. That is, an entity must determine the amount of consideration to which it expects to be entitled in exchange for the promised goods or services in the contract. The transaction price can be a fixed amount or can vary because of discounts, rebates, refunds, credits, incentives, performance bonuses/penalties, contingencies, price concessions, outcome-based fees, or other similar items. Under this model, an entity would estimate the transaction price by considering the effect of variable consideration, the time value of money (if a significant financing component is deemed to exist), noncash consideration, and consideration payable to the customer. Entities would use a probability-weighted approach to estimate a transaction price that is subject to variability (expected value) or an approach based on the single most likely amount, whichever is more predictive of the amount to which the entity would be entitled.

Note: Contingent consideration would only be included in the transaction price when an entity has a “high level of certainty” that the amount of revenue to be recognized would not be subject to future reversals.

4. Allocating the Transaction Price

Next, the entity must allocate the transaction price to the separate performance obligations. When a contract contains more than one separate performance obligation, an entity would allocate the transaction price to each separate performance obligation on a relative stand-alone selling price basis (with certain limited exceptions). The standard will note that the best evidence of stand-alone selling price is the price at which the good or service is sold separately by the entity. If the good or service is not sold separately, an entity will be required to estimate it by using an approach that maximizes the use of observable inputs. Acceptable estimation methods will include, but are not limited to, expected cost plus a margin, adjusted market assessment, and a residual approach (when the selling price is highly variable or uncertain)

5. Recognition of Revenue

The fifth and final step in the model is to recognize revenue when (or as) each separate performance obligation is satisfied. A performance obligation is deemed satisfied when control of the underlying goods or services (the “assets”) for the particular performance obligation is transferred to the customer. “Control” is defined under the proposed model as “the ability to direct the use of and obtain substantially all of the remaining benefits from the asset” underlying the good or service. In applying the proposed model, an entity will first evaluate whether control of a good or service is transferred over time. A performance obligation is deemed to be satisfied over time (i.e., control of the good or service is transferred over time) when at least one of the following is met:

The entity’s performance creates or enhances an asset (for example, work in process) that the customer controls as the asset is created or enhanced.

The customer receives and consumes the benefits of the entity’s performance as the entity performs, and another entity would not need to substantially re-perform the work the entity has completed to date.

The entity’s performance does not create an asset with an alternative use to the entity and the entity has a “right to payment for performance completed to date.”

If any of the criteria are met, an entity would be required to recognize revenue over time as control of the goods or services is transferred to the customer. In such case, an entity would recognize revenue by measuring progress toward satisfying the performance obligation in a manner that best depicts the transfer of goods or services to the customer. The standard will provide specific guidance on measuring progress toward completion, including the use and application of output and input methods.

Note: There is no reference to collectability of the revenue as currently exists in US GAAP. While there has to be a reasonable expectation of collectability the new standard does not impose a threshold such as “reasonably assured”. The standard setters have stated that any provision for bad debts must be prominently disclosed within operating expenses.

Other Considerations

As with any new standard, there are other items to consider in implementing the standard. They include the required disclosures to be included in the financial statements (hint: they are onerous), and for US companies the impact on accounting for income tax obligations. For example, the Internal Revenue Code addresses advance payments for goods and services and income from long-term contracts. Entities will need to evaluate how the new revenue recognition principles reconcile with income for tax purposes.

Next Steps

Discuss this issue and potential opportunity with your CFO at your earliest convenience.  For further information, please don’t hesitate to contact your Next Stage Solutions partner. It is not too soon to begin addressing the accounting and operational processes required to be modified to be in compliance with the new standard.

A Deep Bench of Financial Leadership – The NSS Team

Access to a Deep Bench with As-Needed Solution

The NSS Team offers financial expertise that large companies have access to but smaller companies typically do not.  Compromising with a one-person-do-it-all is no longer the only option. NSS has a part-time solution allowing small to medium sized companies to work with a deep bench of financial professionals and business partners. We have expanded our team with broader capabilities and specialties. Let me introduce you to this vibrant group of senior level professionals:

  • 180+ years of CFO/COO/Controller expertise
  • Our team has participated in 40+ M&A transactions on the sell and buy side in excess of $2.5Billion
  • 25+ ERP Process Flow Management Projects completed
  • Currently engaged in Part-time CFO, Full-time Interim CFO, Business Advisor and Controller

Frank M. Bahl, CPA, MBA, CGMA, FHFMA

Specialty:  Health Care and Construction, Cost Accounting

bahl@nextstagesolutions.com

Amy R. Feldman, CPA, MBA

Specialty: Retail, Software, Venture and Emerging Company Management and Finance

Feldman@nextstagesolutions.com

Derek A. Smith, CA, CPA, CGMA

Specialty: Software (Premise based and SAAS), and Professional Services

smith@nextstagesolutions.com

Robert M.  Weber, MBA

Specialty:  Life Sciences, Biotech, Medical Devices and Big Pharma

weber@nextstagesolutions.com

Ben Weller, MBA, CPA

Specialty:  Lean Manufacturing, Retail and Enterprise Business Systems

weller@nextstagesolutions.com


Want to meet with us? Give us a call today at 617-449-7728 or send us an email.


To CFO or not to CFO? Better Invest Now!

By Rudi Scheiber-Kurtz, CEO of Next Stage Solutions, Inc, a leading on-demand financial management advisory firm.

Are you tired of reading about the economy, the uncertainty, the election, Greece and the possible fall of the Euro when all you want to do is grow your business?

So many uncertainties and yet how do you calculate them into your forecasts? To CFO or not to CFO is firstly about whether you make the choice, or not, to work with a CFO and secondly, how to augment the missing expertise or skill set to work with your trusted CFO and/or Controller so not to harm sustainability and growth. Believe it or not, the right CFO can make all the difference. In this article we give you ideas and a checklist how to identify CFO capabilities that stretch way beyond the conventional CFO boundaries. We will explore ways to access or augment expertise without compromise.

Let us take a few minutes to explain why a CFO is so important to your growth and why you should invest in such a solution! What do your current finance functions look like?

Are any of the above people your partner who can offload some of your responsibilities so you can spend time ON the business? Do you gather information and problem solve 24/7 and have to make all the decisions on your own? Does the finance staff even have the time to work ON the business with you and what might be the barriers to your growth?

You see, with the right CFO you can actually delegate important executive level tasks. Controllers are very important in that they keep you compliant, give you the financial, monthly reports, take care of payroll and reconcile your bank statements, important but mostly tactical. The VP of Finance oversees the tactical side and provides administrative and HR support.

Let’s discuss the other side of finance, the strategic, forward–looking and value creating aspects of finance. Here are some examples of what your Accountant, Controller or VP of Finance do not do or help you with, but the CFO will:

The list above exemplifies what a cross-functional, modern CFO must bring to the table and where small and medium size companies make the biggest concession in hiring a ‘Jack of all Trades’ or one person who can do it all. They can’t, it is that simple. For them, a part-time team solution involving a CFO, Controller and Accountant is appropriate. To maintain sustainability or achieve growth, especially in a sluggish economy, you must consider alternative resources appropriate to your stage and size of company. You want to have most of the above items checked to eliminate business performance gaps.

Think about your strategy, expectations and goals and how you are going to achieve them before you go out and start a search for a CFO or Controller. Consider the next level of financial sophistication to meet your objectives and goals so that the value-driven support benefits your business growth and increases your valuation.

So often we see CEOs struggling with this issue of what the CFO should bring to the table and what a Controller takes care of.  Should they be strategic? Why are they not interested in your vision? Why do they never have the time?

The reasons vary by business, often we see that the CFO has to oversee all finance functions and is simply bogged down with all the daily, transactional tasks. The CFO should help you grow the business in a sustainable manner.  If s/he spends time working on monthly reports, then you are compromising and overpaying, because that is Controller work. In fact, a team will bring you more bang for the buck than one person who will accomplish some of the tasks some of the time. You may also consider augmenting the current CFO’s tasks or skill set with a consultant who can provide you the additional expertise needed to move your business forward. Frankly, no CFO knows everything in today’s complex business world, so budget for extra support to access the needed expertise.

In the table below we have identified key questions and expectations you want to set when searching for a CFO or identifying the resources gap between what you have and what you need.  Again, when the CFO is allowed to focus on the value drivers of the business, the results are value creation driven.  It takes soft skills to successfully achieve the hard skills. Communications is an important attribute and soft skill for a CFO to have, since the metrics and expectations (hard skills) you set for the employees are relationship based and require buy-in from all employees to succeed.

Once you create this gap analysis you will want to consider how to augment the missing capabilities. Let’s say you are a company with under $20M in revenue. You can rarely justify a fulltime CFO. The team approach to finance including a part-time CFO, Controller and Accountant is very effective. CFO Turnover is still close to 18 months and ends up a very costly event for a business. Think hiring bonuses, severance pay and more.  The CFO you have currently may no longer have the right skill set, especially since you want to double your growth over the next three years. Often s/he has become your trusted advisor but you easily can eliminate business performance gaps with a consultant.  A CFO Consultant is often better positioned to provide you frank and objective feedback on issues and problems that need fixing, whereas a fulltime employee might be more cautious.

Yes, it is a paradigm shift in how we think about the finance function and how much to expect from them. On the other hand, how we conduct business today has also shifted and gotten more complex. Tomorrow’s companies need to be agile and fast in making changes and corrections on the fly.

To CFO or not to CFO is an important decision to make for you and having the right CFO and finance function is where a profound difference will break down the barriers to growth. Take action today, evaluate your finance team, perform a gap analysis, budget for the appropriate resources and make the necessary corrections sooner than later.

Next Stage Solution benefits its clients because we set very high expectations for the CFO role, the FUTURECFO™, who brings the GPS of Finance™ tools and methodologies to the discussion. Our CFOs understand how to parse out the financial responsibilities so that you benefit from a strong compliance side with a Controller, to the business insights, metrics and growth opportunities from the CFO.  Our team approach gives you seamless support when you need it with capital efficiency and highest productivity. And no, you will not find our CFOs or Controllers doing Sudoku in their office!

With our assessment tools, we help eliminate business performance gaps and define the right finance functions for you. We’ll have a conversation about how to reach your aspirations and solve the upcoming challenges.

Take action today and give us a call at 617-449-7728 or contact me directly at scheiberkurtz@nexstagesolutions.com | http://www.nextstagesolutions.com

Articles of Interest Related to the FUTURECFO™:

For CFOs, A Move Past Finance – Wall Street Journal | July 31, 2012

As your Business Grows, don’t hesitate to hire a CFO – The Globe and Mail | June 18, 2012

Where Finance Efficiency meets Business Insight – 2010 IBM Global CFO Study: Where Finance Efficiency meets Business Insights | March 6, 2012

Moving from CA to CFO – A Competency Framework | Queen’s University | 2010