As the new CFO of a middle market decentralized technology company, there is a lot to initially assess both in operations and finance. One thing I realized quickly – our monthly close was exceeding two weeks. My 15 person accounting staff was spending half its time on an activity that adds little value to the bottom line besides reporting history!! Not only was it costly in itself – but the opportunity cost of the effort of not supporting the business was tremendous.

The situation was compounded in that we were owned by a public company and had large operations (and accounting teams) in California and Kansas, with everything being consolidated to my team in Florida. A quick assessment of what the Florida team was requesting monthly shed insight into the problem. The team was asking for everything related to sales, collections, returns, credits, billings, expenses, etc. Shocked, I realized they had enough information to re-compile the financial information – which was exactly what they were doing because the product line accountants were mostly admin with accounting skills. Delays in accounting information exacerbated the problem.

I set the goal of a 4-day close with the team (as shocked as they were) and began compiling a list of everything needed monthly from each business unit, including the date we needed the item and added the date actually received. This did two things: 1) Provided information to the product lines of all types of information we need to capture and 2) Established accountability as to whom is required to provide the data and the date. We quickly discovered that the limited expertise of the product line accountants and admin required us to consolidate some items within the local team. In other cases, this forced the product line to actually hire people capable of doing accounting. We tackled each hurdle one at a time and there were many – new issues developed as we dug deeper but, because we focused on one small issue at a time, were able to divide and conquer each issue.

The situation culminated into a few late nights in Florida where we successfully completed the final entries for the close at nearly 3:00 am on the 5^th day – 4 months after setting the goal. The message to the team by forcing the close to complete by 3:00 am was simple – we need results and need them now; and I will be there to help and also to ensure it happens. Now the team, product lines and management were all on board with the close requirements, with the efficiencies gained allowing us to devote resources to improve operations and provide better service to our customer (the product lines). 

Big Picture Thought: Minimize non-value added activities – they must be done effectively but at the lowest cost. Divide and conquer works even on seemingly insurmountable hurdles. Make sure that 1) goals are identified and quantified, 2) the team is aligned with the goals, 3) the champion is part of the process and 4) absolutely ensure the goal is consistently met. For historians or readers, a sense of urgency was created using the Death Ground Strategy of war – see Robert Greene’s The 33 Strategies of War.

About the author:
Mike Kovar is a CFO and Treasurer at Acra Lending, the largest Non-qualified mortgage originator and servicer in the nation. His executive experience spans key roles for large public, middle market and startups.  He is focused on efficiencies that increase shareholder value and has been involved in multiple successful exits. He is a CPA, CFA and has his MBA.