It seems like economic crisis and tough times are all we hear about these days. In a recent publication of Accounting Today an article appeared talking about the need for CPAs to step forth to provide assistance to small businesses. We need to provide guidance but small business people have to make a paradigm shift and realize they need help. They have been used to going without financial assistance for far too long and CPAs have been too focused on tax returns and financial statement preparation. Change needs to happen if businesses are to survive. My web site contains a lot of information both business owners and CPAs can use to survive the recession.CFO and Controllers of larger companies are also in a survival mode. They are laser focused on cash preservation and cost reduction. The key areas of focus include the following:
1. Preserving cash
2. Reducing costs
3. Reducing risk
4. Understanding expenditure patterns
5. Plugging holes in the dike
Over emphasis and indulgence on these factors can lead to overlooking some potential opportunities.

I think small business and larger organizations are missing the boat by placing all the emphasis on cutting back and hunkering down. Risk management should include looking for opportunities in addition to potential risk events that could adversely affect the company. Risk management should include considering opportunities to do a better job of purchasing and improving visibility on spending. Cash conversion efficiency includes managing accounts payable and inventories. These two areas represent a significant source of extra cash. It deserves additional focus and effort that will produce extra cash and liquidity.

Risk management includes effective planning and development of value propositions. Reevaluation of business strategies must be addressed since the old business model has shifted. New product lines and new markets need to be evaluated. More than likely the old rules no longer apply. Survival will depend on creating new visions and new strategies. These strategies then need to be linked to new marketing and sales programs. One of my clients is now spending a significant amount of effort developing new products and markets because the streams of revenue that existed just a few months ago no longer exist.

Operations and strategic planning when combined with sound financial management concepts and methodologies represent exactly how businesses need to deal with the economic crisis. Linked to these concepts are lean accounting and value stream analysis based on the voice of the customer.

I think this back to basics approach is what is required to cope with the challenges we face and represents the road less traveled to build healthy businesses and an economy that will survive the test of time.

Management philosophy is synonymous with “tone at the top” and provides direction as to how the organization will manage its financial reporting and articulate its objectives relative to internal control. Management attitude sets the foundation for financial reporting assertions and the application of accounting principles. The philosophy and operating style of management determines how financial reporting objectives and risk mitigation practices are established and executed.
Many smaller companies have entrepreneurial management teams that don’t always understand accounting and internal control processes. Promoting the importance of risk mitigation and appropriate interaction associated with transaction processing requirements is an adjustment for management teams of smaller companies. In many instances, adjustments need to be made so that all journal entries, together with the underlying assumptions and estimates, are properly authorized and supported by sufficient documen¬tation. Management operating style trickles down to employees, so there needs to be clear communication and application of business judgment so that qualified personnel are in place to perform effectively designed controls. It is critical for smaller organizations to ensure that management communicates effectively with employees as well as external parties relative to information linked to financial reporting objectives and the necessity for accurate and fairly presented financial reporting. Management needs to take financial reporting and internal control seriously by setting a “tone from the top” that is understood at all levels of the organization. Management philosophy and operating style needs to be “do as I do” and not just “do as I say.”