A better world with Microsoft Excel

For many of us, the Excel screen is an everyday sight, as familiar as the family cat.  But it is useful for many things besides number crunching:

Some amazing images have been created by Tatsuo Horiuchi.  

Like Hillary Clinton, you can use it to keep lists of your friends and enemies.

But for most people Excel is used for number crunching.  Abbott Katz runs the spreadsheetjournalism blog where he creates all kinds of Excel wizardry on subjects as diverse as baby names, London underground lines and left-handedness.  Wittily written, it's a great read if you enjoy getting the most out of Excel.

(But don't forget about the many disasters that are possible from misuse of Excel.  You might not have heard about the last item in this article.)

The pensions minefield

The world of pensions seems to get ever more complex and the Chancellor's recent budget has just added another layer of difficult decisions for the saver and retiree.  Stuart Jeffries in the Guardian has written an entertaining guide to help you understand what's going on.  The tone is somewhat cynical:

"David Retikin, director of operations at international investment specialist Pryce Warner International Group, was asked to comment on Osborne's budget ruling that pension holders need no longer buy annuities, he said: 'The budget now has most savers and investors assessing the best course of action by carefully reviewing their existing investment strategy.'

Superb optimism, Mr Retikin. ... He went on: 'Casual savers are optimistic, perhaps even overjoyed to learn that they'll benefit from the changes he's introduced.' Let's look at three words in that sentence – 'optimistic, perhaps overjoyed' – and replace them with 'dubious, probably baffled'. "

Low interest rates, poor annuity returns and the string of financial industry scandals may well be thought to justify the cynicism.  Jeffries ends on a point that may be troubling a lot of people:

"Why do we have to have private pensions at all when they involve so much of our contributions being gambled away on the stock market or funnelled into bonuses for fund managers, while the value of our pensions pots have been eroded? Wouldn't it have been better if all the money I've paid into pensions over the decades had gone to a not-for-profit organisation I could trust that invested those monies in things like hospitals, schools, railways and the rest of Britain's infrastructure? A rhetorical question, to be sure, and a crazy, financially naive dream, no doubt. But I freely admit, I'm not a pensions expert."

It would be interesting to hear any responses from true pensions experts.

The end of Windows XP

Microsoft end support for Windows XP on April 8 2014.  The 13 year old operating system, a big success in its day, has reached the end of the road.

If you have any computers running this software, they will still work normally on April 9th.  However, the constant upgrading and patching that goes on in the background will stop.  The end of support is a green light to hackers and virus writers meaning that these computers are practically certain to come under attack and may well quickly become unusable.

This is no small problem.  According to Net Applications, nearly 30% of the world was still using XP at the end of December 2013.

Sadly, there is no option but to upgrade or replace the XP computer, even if it remains perfectly serviceable.

What's the future of work?

Technological change at a breakneck pace means that many jobs are at risk of being replaced by automation or outsourcing.  A few years ago, driving a car was one task for which it was thought that computers could never replace humans.  Yet Google's driverless cars are now happily cruising the freeways of California, giving taxi drivers and truckers much to worry about.  

So what other jobs might be under threat?  Carl Benedikt Frey and Michael Osborne of the University of Oxford researched a wide variety of types of work and calculated the likelihood of jobs being lost to automation over the next two decades.  Bad news for shop workers, telemarketers and accountants, where the probability was well over 90%.  Better news for dentists, personal trainers and vicars, where the risk is well below 1%.  (Data from The Economist.)

It seems as though the safest place to be is a profession requiring person-to-person contact, where little standardisation of the work is possible.  There, or in a robot factory.

What's the value of virtual goods?

Politicians and commentators worry obsessively about movements in the GDP figures. John Naughton sets out the well known deficiencies in this measure:

"If a parent chooses to stay home to look after his or her children, then the "work" involved (producing stable and happy children?) doesn't get counted in the GDP. But if the same parent employs a nanny, then it does. People have pointed out that increasing GDP may simply be an indicator of how quickly we are boosting global warming rather than increasing social welfare: a gas-guzzling, high-emission SUV contributes the same amount to GDP as a thousand bicycles. And so on."

But there are further problems with the measure now that so much online activity involves free goods:

"Take Twitter. It has more than 230m active users, 100m of whom use the service daily to send 500m tweets. Since Twitter was founded, these users have dispatched more than 300 billion tweets. And in exchange for this wonderful service they have paid Twitter precisely £0.00.

Now you may baulk at the idea of tweets being "product", but they are what has turned Twitter into a company apparently worth $24bn. So there's economic value there, somewhere.

...when we eventually find a way of measuring the value of online activity, we might find that the economy has been growing nicely after all."

http://www.theguardian.com/technology/2013/nov/24/twitter-value-gdp-economists-naughton

Zombie companies and zombie banks

One of the surprising features of the lengthy economic crisis has been the low rate of corporate insolvencies. One theory has been that the UK is full of zombie companies that can't grow and are only kept alive by ultra-low interest rates.  Some even think that a rise in rates would be a good thing because it would kill off a lot of these businesses, allowing room for more viable businesses to grow.

In a Pieria article, Frances Coppola takes a look at the evidence and pretty much demolishes this argument.

"...lots of businesses don’t grow. Indeed, the majority of microbusinesses – sole traders and firms with fewer than 9 employees – not only don’t grow but have no desire to do so. Are they zombies? No. They are active economic agents contributing to the economy. We really can’t use the absence of growth as an indication that a company is not viable. Many of these companies happily bump along the bottom for decades...."

"...because it is widely believed that zombies are kept alive not just by low interest rates, but by damaged banks unable to take losses, there are calls for banks to “end forbearance” even if it means they fail themselves. This is madness. Every bank and building society in the UK has corporate debt on its books,  and almost every bank and building society in the UK has a damaged balance sheet which could not cope with large amounts of insolvencies. So banks cannot “end forbearance”.  Nor do we wish them to do so.  

Widespread losses across the entire UK banking sector would catapult the UK back into deep recession. I am no fan of damaged banks – indeed I have called for them to be bypassed so that the UK economy can get the credit it desperately needs. But that doesn’t mean that it would be sensible to bankrupt them all.

So it seems there is little evidence for the existence of zombie companies. But there is considerable evidence for the existence of zombie banks."

Great analysis from an economist who understands the real world.

Building a Better World from Company Data

A plug here for OpenCorporates, a free database of company information from around the world.

It brings together public record information from many different registers to give you access to information on, at today's count, over 61 million companies.

If you need to follow through and understand chains of shareholdings and directorships, particularly if these cross borders, then the information you need is on their website.

It's an invaluable resource and the people running it have the admirable goal of a more open and transparent world.  They deserve our support.

http://opencorporates.com/

How Hard Working are you?

Are you getting a bit tired of being told by politicians that you have to be 'Hard Working'?  
'Hard Working Families' and 'Work Hard and Play by the Rules' have become jarring clichés, robbed of their meaning by over-use.

For a lot of employees, hard work means doing longer hours for less money than previously with someone else taking the majority of the benefit.  And aren't we supposed to be working 'smarter not harder'?  That's certainly what most of us try to do.

And what's so great about hard work anyway?  Most people, while not being afraid of hard work, and giving it their all, go to work so that they can enjoy holidays, leisure, time with family & friends, whatever it is that makes life worthwhile.  Mary Evans of the LSE nails this canard here.  

" ...the vindication of what seems to be a mindless new religion, that of hard work, seems singularly pointless as well as inappropriate. Not only does this religion divert attention from more important questions about the morality of rewards (or the lack of them) but it also completely fails to ask questions about the value of work and its products. The doctrine of ‘hard working’ then becomes the worst kind of religion, refusing questions and possibilities, and all too likely to guarantee less the pious boredom of paradise than the life doomed to unrewarded servitude."

We'd all like to hear something a bit more uplifting from our leaders.

Preparing a Cash Flow Forecast - part 2

Here's the second part, which takes you step by step through preparing a forecast on Excel.

http://www.youtube.com/watch?v=3zpy6ImSC3o

Preparing a Cash Flow forecast part 1

I've made two videos on preparing a cash flow forecast.  Here is the introduction.

http://www.youtube.com/watch?v=5s2mW_psxMg

Shock news - a kinder, gentler Ryanair

Michael O'Leary has declared himself tired of the public abuse he receives about Ryanair's service and determined to improve.

He has pledged to soften Ryanair’s image and overhaul the airline’s customer relations strategy.

“We should try and eliminate things that unnecessarily piss people off,” said Mr O’Leary.

Lucy Kellaway notes that the regular on-line abuse the airline receives has had no effect. ("That extra £50-£100 difference between Ryanair and BA is taken not from your wallet but from your soul")  

However, O'Leary can no longer stomach the criticism he regularly suffers to his face, even when out with his children.

It's interesting that whatever we think about the power of social media, tackling a CEO in the off-line world may still be the best way to bring about change.

Banking Scandals

‘The public have a sense that advantage has been taken of them, that bankers have received huge rewards, that some of those rewards have not been properly earned, and in some cases have been obtained through dishonesty, and that these huge rewards are excessive, bearing little or no relation to the work done.’

So says John Lanchester, quoting the Parliamentary Commission on Banking Standards in a very readable overview of the mind-boggling banking scandals of recent years.  He categorises them as follows:-

First,  'the biggest of them all, the grotesque toxic-asset and derivative spree which took the global financial system to the edge of the abyss.  ...  The crisis and its consequences are too big to count as a scandal: they’re more like a climate.'

Second, the 'old-fashioned' banking scandals:  'Traders take financial instruments created to control risk and use them to make huge bets; sometimes they do it with their bosses’ approval, sometimes without. That’s just how they roll. Every now and then one of these bets goes wrong on a huge scale. The banks always claim they have procedures in place to control the relevant processes and manage the risks involved, until it turns out that they don’t.'  

There have been two of these recently.  'These losses were caused by Kweku Adoboli, the UBS wunderkind who lost £1.4 billion in 2011, and Bruno Iksil, the ‘London Whale’ at JPMorgan Chase, who in 2012 lost an amount described by his boss Jamie Dimon as ‘a tempest in a teacup’, until it turned out to be $6.2 billion.'

Third, banks wildly over-extending themselves through reckless lending.  The classic case here is HBOS.  'This was a traditional bank failure pure and simple. It was a case of a bank pursuing traditional banking activities and pursuing them badly. ... In other words, the single biggest factor in the collapse of HBOS was simple incompetence. And let’s not forget what happened next: when HBOS was clearly about to go broke, it was taken over by Lloyds, with the encouragement of the government. Unfortunately the extent of the losses was so great they ended up bringing Lloyds down too, and the new combined bank was bailed out by the taxpayer a month after the takeover.'

Fourth, LIBOR manipulation.  ‘This dwarfs by orders of magnitude any financial scam in the history of the markets'.  The full scorecard isn't yet in plain sight as cases wind through courts around the world, but especially in the litigious USA.  Total compensation costs are expected to run into tens of billions.

Fifth, 'sexier forms of overt criminality such as money laundering and drug dealing.'  Standard Chartered and HSBC have both been fined hundreds of millions of dollars in the USA.

Sixth, the RBS back-end payment system implosion of 2012.  The UK taxpayer paid out billions to keep the cash machines open in 2008, then RBS managed to shut them down from sheer incompetence.  ‘Completion of new home purchases were delayed, others were stranded abroad, another was threatened with the discontinuation of their life support machine in a Mexican hospital, and one man was held in prison.’

Seventh, PPI mis-selling.  The costs of this scandal keep going up and the latest estimate is £16 billion.  Lanchester feels this is the worst of all, 'because it involves a more basic breach of what banking is supposed to be about: looking after other people’s money. That’s the first thing that is qualitatively different about PPI; the second is that the misdeeds happened not inside rogue units of these huge global institutions but at the centre of their retail operations. This was an industry-wide, systematic cheating of the banks’ own customers.'

It's well worth reading in full and quoting whenever anybody tries to convince you that a large financial sector is a good thing for an economy or a country.

Keeping Your Suppliers Happy

Managing suppliers is an often neglected part of the financial manager's craft.  Everyone understands the importance of keeping customers happy (provided they pay their bills) but there can be a different attitude to suppliers, who are seen as a necessary evil at best, an annoying distraction at worst. There always seems to be a supplier kicking up trouble for you at the very time when you’re busiest with other things.

The positive side for you is that suppliers only want one thing from you – cash. If you can keep a steady flow of funds to them, they will not bother you.

This article sets out how to look after suppliers in a way that will minimise the distraction and the time spent.  

Key points:

• Work on your systems to ensure they are as efficient as possible

• Target a reduction in phone calls received from suppliers chasing money

• Build relationships internally and externally

• You may still have to delay payments, but don’t compromise your ethical standards

How secure is your data?

The recent revelations of the extent of Government surveillance of the internet have generated much commentary on the implications for individual privacy, as well as coverage of the attempts of those involved with the whistle-blowing to stay out of the hands of the law.  Surprisingly little has been written about the implications for the commercial world.

Firstly, you have to assume that your email and social media traffic is being capable of being read by at least the UK & USA governments.  For the vast majority of traffic, there's nothing that could possibly be of interest.  However, if you have business dealings with the Government, or if you're involved in any activities that may be seen to be on the edges of legality, then you should be worried.  This certainly applies if you're involved in 'tax mitigation' activity.

Secondly, the knowledge about how to crack internet security must be extremely widespread.  Edward Snowden was a lowly employee of a sub-contractor, but easily got to understand the entire scope of the NSA operation.  If someone in a similar position to Snowden decided to just take what he could and sell it to a foreign government, or criminal gang, would we ever know?  The technical knowledge of how to tap into communications must be in the hands of many thousands of people, with worrying implications for the security of corporate networks.

Thirdly, there is worrying evidence of intimidation of journalists going on.  Glenn Greenwald at 'The Guardian' and his colleagues are bravely standing up to this  If other journalists have given in to intimidation, then we probably wouldn't hear about it.  So we have to be sceptical whether we are getting all of the news and information we need in this area.

Fourthly, if you're concerned about data security, you should be very cautious about using products from large American or British suppliers.  Companies with data stored on American servers may well already be in breach of European data protection law.

And fifthly, a whistle blowing policy is essential for any organisation wishing to keep its reputation intact.

There are, I'm sure, many other implications of this affair which should be leading us all to rethink our use of technology.

Collecting Debts From Your Customers

It's a cliché that without cash flow a business will die. Collecting cash from customer is something that every business person needs to be an expert on. This article sets out some practical things you can do to improve your collection process.

Key Points

• Check out customers before you start to deal with them


• Understand why customers do not pay


• Build relationships internally and externally to improve your chances of getting paid


• Don't be afraid to get tough if a customer isn't paying

Why a medieval peasant got more vacation time than you

Reuters report that:

"Life for the medieval peasant was certainly no picnic. His life was shadowed by fear of famine, disease and bursts of warfare. His diet and personal hygiene left much to be desired. But despite his reputation as a miserable wretch, you might envy him one thing: his vacations.

Plowing and harvesting were backbreaking toil, but the peasant enjoyed anywhere from eight weeks to half the year off. The Church, mindful of how to keep a population from rebelling, enforced frequent mandatory holidays. Weddings, wakes and births might mean a week off quaffing ale to celebrate, and when wandering jugglers or sporting events came to town, the peasant expected time off for entertainment. There were labor-free Sundays, and when the plowing and harvesting seasons were over, the peasant got time to rest, too. In fact, economist Juliet Shor found that during periods of particularly high wages, such as 14th-century England, peasants might put in no more than 150 days a year.

... Go back 200, 300 or 400 years and you find that most people did not work very long hours at all. In addition to relaxing during long holidays, the medieval peasant took his sweet time eating meals, and the day often included time for an afternoon snooze. “The tempo of life was slow, even leisurely; the pace of work relaxed,” notes Shor. “Our ancestors may not have been rich, but they had an abundance of leisure.”

... As for the modern American worker? After a year on the job, she gets an average of eight vacation days annually.

... Ironically, this cult of endless toil doesn’t really help the bottom line. Study after study shows that overworking reduces productivity. On the other hand, performance increases after a vacation, and workers come back with restored energy and focus. The longer the vacation, the more relaxed and energized people feel upon returning to the office. "

That should cheer everyone up at the end of the holiday period!  Full article here

Budgeting and Forecasting for Business

Every business needs to plan ahead by forecasting the future. Done well, it is a powerful tool for steering and controlling the company. However, in too many cases, the process seems never-ending, is plagued with conflict and manoeuvring, and leads to short tempers & injured feelings.  

It is incumbent on you to approach it in a way which minimises the workload and the potential for stress. This article sets out some proven approaches to the process and helps you to deal with the vagaries of budgetary behaviour and game playing.  It is written from the point of view of a CFO.

Key Points

• Budgeting and forecasting is a business process before it is a financial one
• Plan and organise your process to the utmost
• Leave time for revisions and debate
• Use technology to the best effect
• Be alive to the behavioural aspects of budgeting
• Ensure the maximum involvement of operating managers

Cash Management for Business

Introduction

‘Cash is the life blood of a business.’ ‘Without cash a business will die.’ ‘Turnover vanity, profit sanity, cash flow reality.’ All terrible clichés, but no less true for all that. Keeping the cash flowing is the indispensable task of the finance function, on which the whole enterprise depends.

I've written an article here on how to manage cash flow in a business.

This article won’t tell you how to prepare a cash flow forecast – there are plenty of accounting manuals that can do that. It will tell you how to manage and improve your process so that you can maximise your business’s cash flow.

Key Points

• Cash management is the indispensable task of the finance function
• Make the bank manager your friend
• Involve selling and buying departments in improving cash flow
• Watch for fraud
• Forecast and monitor your cash performance

Board Presentations for Finance Professionals

The monthly results meeting is your chance to shine. You are centre stage; everyone will be listening to you and taking a detailed interest in what you say. Get it wrong and you will be written off as ineffective or incompetent. Get it right and the board will recognise your credibility, professionalism, and value to the business. It is a career-enhancing opportunity which is available to few other disciplines. This article outlines what you need to do before, during and after the meeting.

Before the meeting

Like any other activity, careful planning and preparation will give you the best results. Ensure that there is adequate time between your completion of the management accounts and the board meeting for you to carry out these preparation activities.

Flawless presentation

The reports that you will issue are going to be scrutinised in detail. Ensure that they are flawless:

• Tables add up correctly
• Formatting is consistent
• Cross references are correct. You need to be one step ahead of the smart director who will be looking out for inconsistencies in your figures.
• Grammar, syntax and spelling are completely correct. Use the automated checkers on your computer, but don't rely on them exclusively. If you aren't confident in your own written skills, get someone else to scrutinise the reports.
• Above all, you are relying on the management accounts to be correct and credible.

Logistics

If reports are to be distributed in paper form, check that each copy has all the correct pages before sending. Take a few spares with you to the meeting.

If the results are to be presented on a projector, ensure you have a back up plan in case of technology failure.

• A spare projector would be ideal.
• Ensure there are at least 2 computers available that could run the presentation.
• Have the presentation files on a memory stick for fast changeover.
• Have a hard copy of the presentation for your own reference. If the technology fails completely, you can quickly get paper copies run off.
• Practice connecting the computer to the projector and loading the presentation until you are completely comfortable with how it works.

Get to the meeting room early & stake out a good spot with plenty of space.

Check that the chairman has organised adequate seating, refreshments and coffee breaks.

Script

Think carefully about what you want to say & how you are going to say it. Reading out your report line by line will send the audience to sleep. You need to highlight the most salient points and invite questions.

You should always comment on sales & profit performance, on variance to budget and/or forecast, on changes from last year and on any unusual trends. Otherwise, if an item is on target, or has been discussed at a previous meeting, there's no need to raise it.

You do want to raise items that are unexpectedly good or bad, or where there is action needed.

Discussion

If you are going to raise a subject that may lead to criticism of another attendee of the meeting, you should always warn him or her about it beforehand. You should provide any counter-evidence and help develop the 'case for the defence'. Raising a subject without doing this will get you a reputation for being untrustworthy.

Consider what areas of the report are likely to be questioned and have your explanations ready. Also consider what areas are likely to lead to discussion and have additional evidence available if necessary.

If there are areas of particular controversy, it may be worth rehearsing what you are going to say. Better still is to practice your speech with somebody outside the business, if possible.

Additional data

You should have a data file prepared containing more detailed information than there is in the report. If you prepare this carefully, you should be ready for any questions that come your way.

During the meeting

Provided you've done your preparation thoroughly, the meeting itself should go smoothly.

• Stick to your script
• Answer questions as you go along, referring to your data file as required.
• Ensure you get over all the points you wanted to make.

If you are asked a question to which you don't know the answer, you should never bluff, but instead say 'I don't have the answer to that here, but will look it up and get back to you.'

If someone asks you a question that requires you to refer to your data file, you should set yourself a 20 second limit to find the information. Spending longer than that leafing through the file will make you appear disorganised and not on top of the numbers. Stop after 20 seconds and say. 'No, I don't have that with me. I'll look it up and get back to you.'

It's fine to say that once or twice a meeting, but any more and you probably haven't prepared in all the right areas.

Make notes during the meeting on actions and follow up questions allocated to you.

After the meeting

As soon as you can, take a few minutes to reflect on how you could have done better:

• Having different information available
• Answering questions in a different way
• Presenting the information more clearly

Be self-critical, but don't beat yourself up too much. You will have another meeting in a month's time at which you will be able to correct these faults. People will be impressed if they see you developing and learning from past experience.

If you have committed to get back to people with information, make sure you do that promptly.

Review any other actions from the meeting and ensure they are dealt with.

On a longer time frame, you should constantly be reviewing the contents of the reports that you present. Ask people what they need. Always be looking to remove items if they are not required. Most board reports are far too long and information could easily be removed without compromising the standard.

Your CEO is the key customer for the board report and you should consult him or her regularly about content.

Conclusion

Actors are only as good as their last performance. In presenting the monthly results, you have twelve opportunities a year to demonstrate your skill. Make sure you are constantly improving the way you do it and your true worth will be recognised.

Key Points

• Presenting monthly results is a golden opportunity for self promotion and career development
• Planning and preparation must be exact and thorough
• Have back up materials that will help you answer foreseeable questions
• After the meeting, reflect and learn from your experiences
• Follow up any actions promptly

Article Source: http://EzineArticles.com/7922863

Month End Closing - How to Have a Better Process

Month End closing is the bane of the finance person’s life – but also our main raison d’être. We have to meet demands for ever more detailed information, all of which must be understood and explained, in ever shorter time scales, while carrying on with our day to day responsibilities and not compromising professional standards. It’s no wonder we get stressed.

Fortunately there are some well proven techniques for making the process easier and more efficient. And because it happens twelve times a year, we have plenty of practice to get it right.  

The golden rules for stress-free closing:

·         Plan.          It needs to go like a military operation.

Everyone involved has to know what they are doing every day, & to have Finance on their back if they fall behind. A key step is to issue a timetable in advance to everyone involved.

·         Delegate.   Don’t do it all yourself, use the team and other departments.

Using other departments may take some persuasion and negotiation, but it’s about people taking responsibility for their areas. Finance is responsible for accounting, but not for sales, stock, purchasing etc & people in those areas have to play their part in the process.

·         Use technology.

                Almost any process can be improved with better use of IT.

·         Shorten time scales.

              It may sound like a recipe for more stress, but the quicker you can finish, the more time in a month you have when you aren’t doing closing. There’s also a lot that can be done before the end of the month.

·         Learn.        A continuous improvement approach must be adopted.

              All the time be looking for ways to make things quicker and more efficient. If you have an idea, make sure you write it down and put it into effect the following month. It may only save you a couple of minutes, but if you make a lot of small improvements, there can be a big difference in the closing process.

There's even more detailed guidance and suggestions here.