The Virtual CFO

Staffing a Growing Entrepreneurial Business – A Good Dilemma to Have

“If your company isn’t growing, it’s dying” (Old business adage)

Over the last couple of weeks, I’ve had conversations with several of my Virtual CFO clients about the growth of their businesses. One of the main topics of discussion has been how to maintain the culture of the business while adding staff to meet the demand caused by growth. In most cases, the culture of the organization is the reason the company is experiencing growth. This is why you have to be sensitive to your firm’s culture during its growth.

To me, this dilemma isn’t just theory, but rather circumstances I have faced at both of the entrepreneurial businesses I’ve owned.

In the 1990’s, I owned a logistics company that experienced substantial growth in its first year of operations. As a result, I made the decision to add staff and train them how perform all the functions I performed, including customer facing activities such as sales and customer service.

Now I am faced with the growth of my public accounting firm, CPA for Small Business, LLC. Last year, my company’s revenue was more than double that of the year before. As a result, I am on the cusp of not being able to personally handle all the work in need to perform for clients. I know I will have to add staff if I want my business to continue to grow.

As opposed to the staffing choices I made for my logistics company, I decided to add staff that will perform the functional level work at my public accounting firm and I will continue to handle the customer facing activities as well as high-level work such as reviewing and signing off on tax returns.

The growth staffing strategy scenarios I described above demonstrate the two basic choices that you, as a small business owner, have for staffing growth. They are:

1. Add customer facing staff who will carry out duties similar to those you, as the business owner, perform; or
2. Add functional level staff and continue performing the customer facing activities yourself.

Over the next few blog posts, I’ll address these two choices and discuss my experience with each. I’ll also talk about problems that can result from each of these choices as well as what can be done to successfully implement them.

Hopefully, after reading this blog series you will be able to choose the best alternative for staffing your businesses growth and while at the same time maintaining the culture that made the growth possible.

At the end of the day, deciding how to staff your company’s growth is a good dilemma to have.

After a Break, The Virtual CFO Blog is Back

I just looked at the Virtual CFO Blog and noticed that I hadn’t posted anything since April 6th. Well, that’s about to change. But I want you to know that there are several good reasons I haven’t blogged in almost two months.

The first, and primary reason, is that I had an extremely busy tax season. CPA for Small Business will be four years old in June and the volume of work I have is a sign of a growing and healthy practice.

Corporate (i.e., C- and S-Corp) taxes were due March 15th and personal and partnership taxes (including LLC’s) were due on April 15th. In this period, I prepared or filed extensions for approximately ninety clients and their businesses. It was a sprint for me from the middle of February through April. However, I am very grateful for the volume of work I had.

I have the coolest clients in Middle Tennessee and it’s an honor to serve them (or you, if you’re a client reading this <grin>).

The second reason is that on April 22nd (a week after April 15), I traveled to Haiti on a mission’s journey with Brentwood Baptist and Sweet Sleep . I am very glad I made this journey and I plan to blog about my experiences in future Virtual CFO Blog posts. I was honored and blessed to get to meet several entrepreneurs in Haiti. Hanging out with small business owners in Haiti showed me that the entrepreneurial spirit is alive and well in that country.

Third, I haven’t been in the office much since I returned from Haiti. Before and after returning (and for two clients, while I was in Haiti <vbg>), I scheduled a number of field work days outside the office. This has been a potpourri of field work: financial statement preparation, CFO services, assisting clients with their accounting systems, helping create and document administrative and operating policies and procedures, budgeting, short-, medium-, and long-range planning, etc. There was a bit of pent-up demand for field work created during tax season.

And finally, in May I had several clients who had the opportunity to present their company to venture capital firms and outside investors. This type of work is always pressing and I don’t mind making time in my schedule to support clients with these activities.

But now the seasonal rush is over, so it’s time for me to start writing regularly again on the  Virtual CFO Blog.

Thank you for reading this blog and I hope you enjoy the posts I will be writing in the future.

BTW, I have some blog series in mind, but please let me know if there is a small business or entrepreneurial topic you want me to blog about. Many of my previous blog series and posts came from suggestions, correspondence, and inquiries from readers.

Support for My April 22 Haiti Trip

Over the last three weeks, I have had a number of clients and friends ask how they could support my mission’s trip to Haiti later this month. I wrote a support blog a few weeks ago, but the trip I am on was not on the list on the Brentwood Baptist Church Missions web site (I had several people point this out to me). The April Haiti trip has been added to the mission’s website. I am also giving you information on how to pay with a check.

I’m sorry it’s taken so long to provide this information, it is tax season and fortunately, I’ve been rather busy.

On April 22nd, I will be going on a mission trip to Haiti through Sweet Sleep, a faith-based non-profit organization that provides beds for the world’s orphaned and abandoned children. I felt a tug in my heart from the first time I saw images of the devastation caused by the earthquake and was moved to respond as Brentwood Baptist showed video and announced plans to partner with teams already on the ground in Haiti.

 Our mission in Haiti will be to minister to children displaced by the recent earthquake.  Our team will be working at the orphanage and with Pastor Moises who was featured in the 3/21/10 60 Minutes segment about the lost children in Haiti in aftermath of the earthquake.  This story can be viewed here.

The cost for each team member to participate in this mission journey is $1,470.  Please do not feel pressured to give financially, but if you can help, please send your donation, made payable to Brentwood Baptist Church, to me at: 867 W. Hillwood Drive, Nashville, TN 37205.  This is a tax deductible contribution. A return envelope is enclosed for your convenience. Please do not send checks directly to Brentwood Baptist Church -- this will help to keep track of the goal.

If you do choose to make a gift, please write the following on the memo line of your check:  Haiti trip – Scot Justice.   

Donations can also be made on the secure site at Brentwood Baptist Missions, choose from the drop down menu:"Haiti April".

For more information about my trip, feel free to contact me. For more information about Sweet Sleep, visit their website at www.sweetsleep.org.  Please also be sure to read our team blog at www.sweetsleep.blogspot.com for daily updates from the team during our mission in Haiti.

Small Business Accounting Personnel – Chief Financial Officers

Chief Financial Officers (CFOs) are the top financial managers at small businesses. CFO’s provide small business owners with high-level financial management, analysis, and advice.

At many firms, the CFO is the right-hand man/woman to the owner. Generally, the owner takes care of sales and operations and the CFO handles the financial and administrative functions of the firm.

And as we all know, CFOs can be virtual as well <grin>.

The Virtual CFO is Going to Haiti in April and Would Like Your Support for the Trip

As you are aware, one of the worst natural disasters to hit the western hemisphere occurred in the Haitian capital, Port-au-Prince, on January 12th of this year. The current estimate of the death toll of the earthquake is 217,000. Time Magazine reports that “one-third of Haiti’s population, or about 3 million people, have been affected by the earthquake” and that “60% of the city’s buildings were shoddy and unstable”. This has left the nation with a huge humanitarian and health crises.

Over the last week, my wife Linda and I made the decision that I should travel to Haiti with a missions team from Brentwood Baptist Church the third week of April. I just feel that going on this trip is the right thing for me to do.

I told a couple of friends about the trip on Thursday over breakfast. One of them had a great comment, “You can’t fix all the problems affecting Haiti, but you can spend a week helping solve a small part of the problem”. And he’s right, I want to help.

One thing about the decision about my trip to Haiti in April is that the expenses associated with the trip were not in the family budget for the year. I practice what I preach and I have a 2010 business and family budget, so I’ll need help to support the expenses associated with the trip which are estimated to be about $1,500.

If you would like to help me travel to Haiti with the mission’s team, you can make a tax deductible charitable contribution at the Brentwood Baptist Missions contribution website. Under “Journey Participant Name or General Gift” please indicate that the donation is for “Scot Justice, Haiti April 2010 Trip” (my trip is not on the drop down menu yet). If you would like to contribute by cash or check, please let me know and I’ll work out the logistics with you.

And I wouldn’t be the Virtual CFO if I didn’t mention that if you make a donation by March 1, 2010 to charities providing earthquake relief in Haiti, you can claim the donation on your 2009 income tax return.

I hope I am able to blog and Tweet about my experiences while in Haiti, if Haiti's technology infrastructure will allow. I’ll also be blogging about the planning process as well as the trip.

Thanks in advance for your consideration and any support you can offer. A contribution of any size is welcome and much appreciated.

Small Business Accounting Personnel - Controllers

A controller is responsible for the functional accounting duties in a company. In small and entrepreneurial businesses, a controller is often a bookkeeper who possesses an accounting degree. In these firms, the controller often assists the owners with financial management activities as well.

You can think of a controller as the “buck stops here person” with respects to the functional aspects of your company’s accounting system and for administering and monitoring the policies and procedures for the system

In additional to these duties, small business controllers are often responsible for the following:

• Financial statement preparation:
• Prepare periodic tax returns such as payroll, sales and use taxes;
• Financial analysis and performance reports; and
• Cash flow management.

As a corporate chief financial officer (CFO), I knew that a good controller was worth their weight in gold. At my last CFO position, I was fortunate enough to have had the best controller I’ve ever worked with. Roland helped me greatly by staying on top of the accounting system, cash flows, and the daily accounting activities. This allowed me to concentrate on my financial management responsibilities. I couldn’t have had the success I had at that company without the Roland’s help.

Small Business Accounting Personnel - Bookkeepers

Bookkeepers are usually the first professional accounting personnel that you’ll hire at your small business. Bookkeepers are responsible for the functional activities of your company’s accounting, such as payroll, accounts payable, accounts receivable, invoicing, etc.

There isn’t really a standard for education or training for bookkeepers. I have seen excellent bookkeepers with high school degrees as well as junior college associate’s degrees and bachelor’s degrees. I have also seen poor bookkeepers who have these same levels of education. In general, good bookkeepers pay attention to detail, are intelligence, and have a desire to learn. Excellent bookkeepers look at themselves as professionals and strive to become better at their craft.

The main advantage of having a bookkeeper at a small business is that you have a professional performing your firm’s functional accounting duties. The downside is that there isn’t a standard to compare bookkeepers with, so you often have to trying someone out to see if they can perform the job. This can be expensive and frustrating. Additionally, many bookkeepers don’t have the experience to help with your company’s higher-level financial management needs, such as cash flow analysis and financial analysis that other professional accounting personnel have.

Kudos to CloudBerry Labs and Their Amazon S3 Backup Software

I have to say on the front end that backups aren’t sexy or exciting, but they are critical to your company’s continued operations in the event you have a disaster strike your firm. Disaster can take the form of PC failure, natural disasters, and theft.

When I opened CPA for Small Business, LLC , I made the decision to have a paperless office. I was successful in doing this in the first year, but as my practice grew the mounting cost of off-site backups made this less desirable. So after a year or so, I moved to a quasi-paperless office. Under this system, I kept critical documents in a paperless format, but kept uncritical documents in my filing cabinet kept workpapers.

Last year, I made the decision to move back to a completely paperless office. This was due to the economical costs of Amazon Simple Storage Service (Amazon S3) and CloudBerry’s Backup software.

CloudBerry Online Backup is a PC based backup client that allows you to save your documents to an Amazon S3 backup site. For a month, I tested the CloudBerry Backup and Amazon S3 Hosting before moving to it exclusively. I’ve been impressed with both Amazon S3 as well as CloudBerry’s AS3 client software.

One of the most important criteria for me with offsite backup software is encryption. What impressed me about CloudBerry’s Backup software is that there are eighteen different encryption logarithms to choose from. The number of encryption choices demonstrated to me that CloudBerry made data security a priority when developing the software.

The only thing I feel is lacking is the ability to password protect the application at the client-level. However, I read on CloudBerry Lab's support forum that this feature may be developed and available in future releases of the software.

I have also noticed that the backup speed is greater than the service I used before. I don’t know if this is due to network bottlenecks at my previous provider (i.e. many customers attempting to make evening backups) or that the encryption software is more efficient. Whichever it is, it has been nice to have daily backups take less than two hours as opposed to it taking four hours or more.

I’d also like to give kudos to CloudBerry Lab's sales and customer support. When I started the Virtual CFO Blog, I made the decision that I would not accept gratuities in exchange for blog posts or reviews.  I don’t ever want readers to think my opinion was swayed because I received something free.  By doing so, my credibility drops and my blog becomes an advertising platform and not a source of information for small business owners and entrepreneurs.

That said. CloudBerry licenses are for one computer. I have set up my laptop to serve as a “hot backup site” in the event my PC fails. I have all of the software I use in my public accounting practice installed on my laptop in the event I have a problem with my PC (which has happened once in the 3.5 years CPA for Small Business, LLC has been open). If there is a failure of my PC, all I have to do is boot up my laptop and retrieve the data I need from a backup and I’m in business.

With this in mind, I requested a second license for my laptop. CloudBerry’s support person sent me a second license with the request that I blog about the software. In my reply to this email, I explained my blog policy and offered to pay for the second license (to be fair, CloudBerry backup is affordable at $30/license, so it wouldn’t be a burden to buy a second license and the actual cost of ownership would still be well below that of the prior backup service I used). In response, the CloudBerry support person wrote to not worry about writing a blog posts and that I could keep the second license.

This series of events impressed me. Because of this response, I am able to write this blog post about CloudBerry Backup software and the service I received from their staff. I give them kudos for both their software and their service.

Small Business Accounting Personnel - Administrative Assistant and Clerks

The first person to handle the accounting for most small businesses is generally the owner. As the company grows, the owner starts to look for someone to take over these duties so they can concentrate on the sales and operations of the firm.

Often, the owner chooses to turn the accounting duties over to the firm’s administrative assistant or clerk. This happens because they are already employed by the business, which makes it cost effective to cross-training them to perform accounting activities. Another reason owners chose to have administrative assistants or clerks perform the accounting is that that they have already earned the trust of the owner in the other duties they perform.

The biggest advantage to using an administrative assistant or clerk for your company’s accounting is cost. The primary disadvantage is their lack of accounting knowledge, which can be overcome if you are fortunate enough to have someone in this role that is eager to learn. If not, you will eventually be faced with having to hire someone with the level of accounting knowledge that is needed for your firm.

Small Business Accounting Personnel

Every business needs a good financial reporting system. Accounting is the backbone of an organization because the performance of every area of a company (sales and marketing, production, warehousing, etc.) is reported through the accounting system.

A company’s owner is usually a small business’s first “accounting personnel”. As the business grows, the owner usually has less and less time to dedicate to the task, so the company hires an accounting staff member (or members) who are dedicated to performing the accounting duties.

From my professional observation, there is a natural progression of the type of accounting personnel a company hires. This progression is:

1. Administrative Assistant and Clerks
2. Bookkeepers
3. Controllers
4. Chief Financial Officers (CFOs)

Over the next few blog posts, I will be discussing in detail the types of accounting personnel that are found working in small business.