Outsourcing: You can’t afford not to!
By: William D. Mulholland, CPA

Frequently many small to mid-sized organizations are faced with the dilemma of how to properly staff their accounting departments. This couldn’t be truer than in the Washington Metropolitan Area which is rich in not-for-profits, trade associations, and start-up companies. In the smallest of organizations many times it is one individual, with little or no prior financial background, who is thrust into the role. The mid-sized versions are quite similar only that the same person may have a small clerical staff. The staff may be very good at their niche in the department, but they soon become frustrated at the lack of supervisory direction. Start-up companies have similar problems as often the founders wear too many different hats and critical accounting details vital to the business’s foundation get lost.

This situation is caused by a variety of reasons: 1. The CFO or Controller function may be an afterthought to the organization. Management is so consumed by the execution of their mission statement that that the proper accounting personnel are never put into place. After some time a staff member, hired for a completely different purpose, is asked to ‘fill in’ as the accountant until time permits to hire someone full-time. Significant time usually passes before this position is filled and by that time the accounting function is in disarray. 2. Hiring a CFO or Controller is often a very timely and difficult human resources decision. 3. Budgetary constraints may make it prohibitive to find someone with the necessary credentials. The organization is forced to make do until the cash flow situation improves. 4. The organization just feels they can do it themselves, and not until they struggle through a few audits do they admit that they should seek professional help.

I cannot tell you how many times that one of my colleagues or I have been called in to one of these situations. We are called in to perform financial archeology. The former CFO or Controller is long gone, the office is in ruins, accounts haven’t been reconciled in a few years, and the only reason we are called the first place is because the Board of Directors is asking management when the audit is scheduled to begin – and that’s for TWO fiscal years ago!

Outsourcing the CFO/Controller function can alleviate these situations without major disruption to the business and allows management to concentrate on the core business.

Efficiency and Flexibility - An outsourced CFO or Controller can be utilized on an as-needed basis. Whether it is to supervise your existing staff or to serve as sole financial presence to your organization, you never incur unnecessary expense.

Expertise - WM Group staffs outsourced positions with CPAs, with several years experience with not-for-profits and small to mid-sized businesses, able to deal with complex financial needs and to deliver accurate and timely financial reports. Everything is taken care of, from day-to-day operations to interfacing with auditors and financial institutions to presentations to Boards of Directors.

Affordability - No benefits to worry about. Forget the health insurance, 401K (403B), or paid vacations or time off. You only pay for the work performed.

Members of your organization - WM Group prides itself on becoming an integral, working member of your staff. With an interest in the total success of the organization, WM Group also provides a host of expert professionals who can assist the organization with a wide array of other services. It is our strongly held belief that it is the health and well being of the total organization that drives the financial results, so the WM Group mantra is to ensure that results are created, not just reported.

Marketing Dollars Should Be Last to Go
By: Brian M. Mulholland

I was the 29 year old Director of Marketing of the world famous Fontainebleau Hilton Resort in Miami Beach Florida, directing a staff of 35, a marketing budget of just over $2 Million, and responsible for generating sales of over $65 Million.

Arthur A. Surin, the hotel’s General Manager, bounded into my office one morning and told me I wasn’t spending enough money. Can you believe that? Times were tough, the economy was faltering, the resort not meeting current financial expectations, and yet Arthur Surin wanted more marketing dollars spent.

Arthur Surin was, and is, a very smart man. He understood what most corporate executives do not – that, since Adam and Eve, nothing happens until something is sold. An idea, a product, a service – they all require selling. And it costs money.

And yet, in my travels before and since that morning in Miami Beach two decades ago, I am still amazed that when times get tough, marketing dollars are the first to go. I just don’t get it.

Of course, the opposite should hold true. When your business is at 100%, you can relax advertising, sales and other efforts. But when you don’t have the business, it seems to me that the mailroom, the executive perks or the employee picnic should take the cut. When times are tough, this is the time to augment the sales troops, increase the advertising, pump up the public relations initiatives, and treat every customer as if they were your only customer, because they truly might be.

So, here are a few things I have learned from and since my friend Art:

1) It takes 6 months to find the executive washroom, let alone ask sales people to generate results. Vacancies in sales personnel are catastrophic to meeting budgets and forecasts. So, always have an additional sales executive “on tap”, anticipating a possible vacancy. Work hard to ensure that the initial training of these people is thorough, hands-on, compelling and results-driven. Keep the good sales people in your organization with realistic incentives, and frequent accolades on every selling achievement. In short, motivate, congratulate, invigorate!

2) When sales are off, or trends in your industry indicate an impending doom, hit the public relations network. Find news that is positive to report and report it. Network as if it were your last chance. And create events and occasions that let no one in on your gloom. When reporters would call me about occupancy declines in Miami Beach, I always responded that I didn’t know what they were talking about; business was prospering at the Fontainebleau. Why get on the negative bandwagon?

3) Advertise, but do it intelligently. You do not have to spend $2 Million anymore. In all deference to Arthur Surin, we didn’t have the Internet back then. E-Commerce solutions cost pennies now, compared to our dollars back then. Employ people who can find those solutions in your industry, region or market. Develop client lists of past, current, and potential customers and communicate with them.

4) Keep the customers you have. It is hard work to find a customer and yet so many companies are willing to let them go for frivolous reasons. Communicate with your current customers, take their pulse, let them know how much you value their business, and never let them go. It costs thousands of marketing dollars to find a new customer, so work hard to keep the ones you now enjoy.

5) Think twice before you fire or cut back the advertising agency, the pubic relations firm, or the marketing consultants. Remember what your grandmother said about “cutting off your nose to spite your face.” You need them now more than when you first hired them.

The great CEO’s – like Arthur Surin – understand that marketing “drives the car” of your company; without it, you simply can’t compete.

Malfeasance
By: Michael Nizankiewicz, PhD, CAE

I have been an association executive for more than thirty-four years, serving as the chief staff executive at state and national associations for more than thirty of those years. On two occasions I had to deal with malfeasance of board officers: a most unpleasant task.

The first occurred early in my career in the mid 1970’s. I had just been appointed as state director of a very well-known national association fighting a series of neuromuscular diseases. In this particular organization, summer was always a busy time with a flurry of fund-raising activities. On one of those busy days, a trusted volunteer informed me that the Treasurer of my executive committee was raising money and not turning those funds over to the organization. What made this especially distasteful is that he (the Treasurer) was using his two sons, both Boy Scouts, to solicit contributions on behalf of this organization. Of course, the two Scouts believed that their Dad was turning the monies raised over to the organization. The boys were not only acting in good faith, but also felt they were living up to the Scouting code through service to the community. Their Father knew that the youths wearing scouting uniforms gave incredible legitimacy to a sympathetic yet fooled public.

At the suggestion of the trusted volunteer, I met with two detectives from the local police department who showed me that this individual had a record of terminations from companies for malfeasance. Those companies terminated his employment, but did not go through the time and expense of prosecution. With the support of the Board President and the backing of the police department, I confronted this person, told him what I knew, and offered specific proof from a raffle where I had purchased a ticket from him, but had no record of the raffle proceeds being turned over to the association at the conclusion of the raffle. During that brief but uncomfortable meeting, the treasurer left the organization and never returned.

How did the trusted volunteer find out? He lived in the same neighborhood as the treasurer, and the treasurer was boasting to his neighbors how he was generating this extra, albeit illegal, money. Apparently this was something he had been doing for several years.

The second incident happened in the summer of 2000 when I served as the Chief Executive Officer of a national professional membership association. In this case, the Immediate Past President was discovered to have submitted doctored airline invoices during the time he served as president, and traveled extensively on behalf of the association. In April of that same year, I had joined this organization and quickly hired a trusted assistant. It was my assistant that noticed the carefully crafted documentation.

As it turned out, the spouse of this officer was a flight attendant for a major airline which gave him (the President) free flying privileges. The amount of the false charges amounted to almost $30,000 during the course of his presidency. As soon as the charade was discovered, I informed both the Board Treasurer and the current President. The Treasurer and I both flew to the city of residence of the now past-president and diplomatically confronted him with our findings. Following this was an emergency board meeting where the past-president was removed and asked to reimburse the amount taken illegitimately. Of course, he never did.

Many executives would agree that their worst duty is terminating an ineffective employee. While this may be true, in most cases the termination still winds up to be a win/win for both the organization and the individual who usually moves on to another, more satisfactory position.

But in dealing with malfeasance, there is no win/win. In most cases of malfeasance, the discovery usually comes from a disgruntled former employee (as was the case with the United Way Chief of the early 1990’s), or from very sloppy mistakes. Rarely does discovery come from a routine annual audit.

What this means is that every organization must have in place a series of checks and balances that assure transparency and oversight at every level. In associations, the CEO must work closely with her/his CFO or accountant to review every staff expense and general volunteer expenses. In turn the CEO and CFO should have their expenses scrutinized by the Treasurer.

In addition, as a preventative measure, every organization should do a criminal background check on every prospective employee, and also on every prospective board nominee through the nominating process. This was put into place by the professional membership organization referred to above.

As Senators Paul Sarbanes and Michael Oxley knew when their now famous Act was approved by Congress, theft occurs at the largest of corporations (Enron, Tyco, WorldCom, and Adelphi just to name a very few). When it happens at not-for-profit associations it is especially sad since the public places far greater trust in the good work done by not-for-profits. When that trust is breeched, regaining it can take years.

Prevention and adequate oversight is the best route to mitigate and eliminate the possibility of malfeasance.