“My first response to the overwhelming Covid-19 upheaval was to retreat to what was familiar” says Marvin, CEO of a professional services firm who’s been working with us recently.
When I asked what he did, he ticked off on his fingers “1) offer ‘Covid-19’ services in ALL CAPS because we felt everyone’s house was on fire; 2) make a long list of rules for employees working from home; and 3) dive into our financials to see where I could cut.”
“How did those work out for you?” I asked.
Marvin learned that most everyone looking for Covid-19 related services was expecting discounts or free advice. He realized that trusting his employees to put their clients first and focus on outputs, not time sheets or keyboard monitoring, was the best way to keep the business afloat. And he decided that a measured and comprehensive approach to reconfiguring their financials, not a cut-across-the-board mentality, was the way to ensure their financial future. He decided to look for ways to create gains when losses were making headlines.
The Next or New Normal is Now and Forever
What Marvin did was recognize that the pre-pandemic economy and way of life is gone permanently. Just as the universe recovered from the attacks of 9/11 with permanent changes large and small, so too will we create a new landscape. Eventually there will be a vaccine and herd immunity.
However, the economy can’t be in a suspended state for so long. Making permanent changes now allows your company, and the economy, to move forward. There will be disappointments and mistakes for sure, but there will also be many gains and companies and customers adapt and embrace what’s new and next.
Your CPA, CFO or accountant typically works to ensure your company’s financials reflect (look back at) the way your company does business. Your P&L accounts for your various revenue streams and related expenses, plus fixed costs and other specifics for your industry. Hopefully, you also have a cash flow report and your system is set up to generate flash reports on specific factors of your business that need daily/weekly attention.
Capturing the new normal in your financials must be driven by the CEO/Owner/Chief Executive because it’s that person who articulates the new normal business strategy: the products and services you offer; the customers and clients you offer them to; and the profit you require from every sale. Revising financials is not simply or solely an accounting department’s function.
Marvin’s case is a perfect illustration of the need for the firm’s accounting to reflect how the owner/chief executive sees the firm growing in the new normal. He and I worked closely on the company’s strategic statements. After we had a comprehensive list, we asked his accountant to revise the current financials to align with the new future. There were many elements that did align. And there were also significant areas that required changes in the accounting to align with the new strategic statements. That is, to align with the new normal.
Different Points of View
The Owner/Chief Executive and the accounting department have different points of view of the business. Not better or worse, but significantly different. The accountant’s biggest responsibility is recording the financial activity of the firm. This is backwards looking. He or she ensures that the records are accurate and that the financials meet the requirements of the IRS, banks, shareholders, and others.
The Owner/Chief Executive point of view is forward looking. What will the company do next? What will it offer to the market? How will it generate growth? What changes will it make regarding offerings, customers and clients and delivery of its value to buyers?
As you contemplate the permanent changes your company is making to thrive in the new or next normal, be sure that you require your accounting systems and process to follow, not lead.
Supporting Owners and Chief Executives
Susan Trivers and Trivers Consulting Group supports owners and chief executives to work towards a better future. We guide how you define “better future” and support you as you spread that vision throughout the company. We’re experts in all money matters for private services companies. If you want to be like Marvin, give us a call. 703-801-0345.