What is Cloud Accounting? – Part 2

What is cloud accounting? This is part 2 of a 3 part series.

Cloud accounting takes advantage of accounting and finance provided by an entity that is off-site and controlled by someone else. The ultimate cloud accounting is when you give up all control of your accounting and finance department to an outside source.

Think of a yahoo model. You give your cloud accounting address to all the people you want to send you information. The cloud accounting department takes the information, processes it and you login and see only the information you need to see. With yahoo email, you see the email message body and not all the code behind it. You do not see all the servers it passed through or all the filters that were applied and you probably do not care.

No apply that to accounting and finance. You get invoices from vendors. You biggest concern is the total aggregate of your vendor invoices, not the individual invoices. If you say you do, then what do the in-house accounting staff do? I bet the process the invoices and you get a monthly report of Accounts Payable and Vendor Balances. If, as a business owner or CFO or CEO, you are looking at each invoice, then something is wrong in your organization.

Now, cloud accounting uses technology and standard industry best practices to make that a seamless service. Your vendor invoices, client payments, and all other inputs are filtered through a system that ensures that the items are accurate and belong. exceptions are send to a manager who checks them and responds. Your reports are done on time and sent to you so you can make senior level decisions.

Sounds great!!

But so much can go wrong with this scenario. AND so much does go wrong. In part three, I will explain what can go wrong, how to probably choose a cloud accounting provider and how to properly implement (or manage an implementation) of a cloud accounting solution.

What is Cloud Accounting? – Part 1

What is the cloud? This is part 1 of a 3 part series.

This is a very good question and one that many companies are trying to define with their products. In this first part, I will try to define what the cloud is and where you see it every day.

Typically, the could refers to cloud computing. Cloud computing is defined in Wikipedia as a style of computing in which dynamically scalable and often virtualized resources are provided as a service over the Internet. Users need not have knowledge of, expertise in, or control over the technology infrastructure in the “cloud” that supports them.

Interesting, but what does that mean to you and me? A lot, actually. It basically means you use software or a system that you do not have to maintain, store, or care about. By using this service, you gain economies of scale of large storage and processing arrays, best practices by having learned persons managing the systems, and lower costs through the application of these principles.

I hear many people say they do not use cloud computing. But I argue that anyone reading this email is using cloud computing. Google mail (Gmail), Hotmail, Yahoo mail and similar services are all examples of cloud computing. I do not care where it is stored, how it is backed up, or who manages it. What matters is that I can access it and use it when I need it.

Online banking is another example. I can access my Bank of America account from any computer anywhere. I don’t know where they store my data and frankly I do not care. Other examples are Comcast On Demand, Facebook, Myspace, and a host of other online applications.

But businesses have more choices. Many software companies are putting their applications online and they are hosted as a Software as a Service (SaaS). SAP, Oracle, QuickBooks, and a host of other applications are now online and are classified as cloud computing applications.

What does this mean to the business owner? More and more applications are going online to the cloud. It is inevitable and should be embraced, not feared. It can be an incredible time and money saver.

In part 2 of this post, I will explain the concept of Cloud Accounting. In part 3, I will give the best practices for choosing and implementing cloud technology.

6 things your business CPA/tax filer will not tell you

Many CEO’s, entrepreneurs and companies have used a trusted CPA to prepare and submit corporate taxes. And  using the same tax preparers as your corporate financial advisers is becoming more common. But is this the best choice? Check out these 6 things your CPA will not tell you.

1. They are required by law and by their profession to be independent. Since Enron, the SEC, the AICPA, and other agencies have created walls between two parts of an organization that provide auditing and corporate advice on one side and tax preparation and filing  on the other.

2. Bookkeeping, Accounting and Finance are not their primary functions. Despite the A in their name, they are not trained to manage the corporate functions of accounting and finance efficiently and effectively.

3. Filing your taxes is their primary function. A CPA firm’s primary mission is to prepare and file corporate tax returns (or personal if a small firm) as accurately and completely as possible. Secondly, they provide auditing services.

4. When they give you corporate advice, they are considering their position first, not yours. If they are likely to lose their license or be prosecuted by the SEC, they are going to choose the option that has the least ramifications for you.

5. They wont discuss a lot of options. By providing more than one option, you may choose one that puts their company at risk. Consider the decisions that you have asked for advice on and check the options with others.

6. Your accounting and bookkeeping should be helping your company, not helping the IRS. By having a CPA firm run your bookkeeping and accounting, your books will be perfect (for a potential IRS audit). But will they be in line with your company’s goals and objectives? It is not illegal to run your books the best way to help your company, unless you are a tax filer.

The bottom line is that a CPA firm that does your taxes AND does your bookkeeping is always in conflict on the best choice. The conflict almost always leans towards the CPA firm’s favor. Don’t believe me? Ask your CPA about a decision that was made in light of these 6 points.

I cannot count the number of times I have consulted to a company and provided advice that was in conflict with the CPA’s but was in the best interest of the company.

Don

Follow up on a Government Owned Auto Company

Back in November, I wrote that there would be a government owned auto company. Although there was some tongue-in-cheek reference here, it seems it is coming true. Obama has ousted the CEO and most of the board, appointed his own, put money in (taxpayer money) and has taken control.

MSNBC.com wrote an article showing how this can be dangerous and how is it moving towards socialism.

U.S. plans key role in naming GM board

I believe is wrong to bail out companies. Banks, auto companies, anyone. They should be allowed to fail because someone always buys the parts that are worth anything. By propping them up, you are just giving the government too much power over business.

Here, if the CEO is the problem, the board should have done the firing. If the board is the problem, then the shareholders should have done the firing. The market does and will always vote for the right action. Why does the government think they can run a car company better?

OAN: I watched the news this weekend and they mentioned that there are people who still did not understand the banking crises. Starting this week, I am going to have a three part series on the banking crises for laymen. Stay tuned.

Cheap High Quality Employees – Help out your Alum

In the midst of this economic downturn, it is easy to forget about people that do not show up in the employment number but do show up at the job fairs. I am talking about soon to be or recent college graduates.

I have just started a new business and, like everyone else, am doing it with limited cash. I believe in the business and have been working hard to make it succeed. But I can use any help I can get.

I received a call about a month ago from a former employee that I recommended for graduate school. In a fright, he told me that despite rigorous effort, there were hardly any internships, paid or unpaid, and that many kids were not getting anything.

So I called my former school and asked if I could offer some unpaid internships to the students and would that help. Not only did she say yes, but she asked if 2009 graduates could apply as well. I was shocked. She said that the market is so tough, they newly minted MBAs are having troubles as well.

So, for all you small business owners. You should call your schools and look for internship candidates. I suggest you pay them expenses and some monthly stipend, but you can get some quality people very quickly.

They get solid work experience; you get cheap quality labor.

Have a great weekend!!

Don

Customer Service – My Verizon Story – Investing

I was accosted today. Not but a mugger or a vandal, but by Verizon’s customer service. I have included the letter I wrote to them so you can laugh at my dismay. But I also included it  because, to succeed in business, you must take care of your customer and this is a good example of how NOT to do that.

I know I push Great Customer Service on everyone, but it is true. Customer Service is the #1 sustaining value of any ongoing business. I use it in my businesses, I instill it in my employees, and I preach it to companies.

I also have made money in the stock market on this premise. For long term investing (over 6 months), I always use the customer service rule. If I have received great customer service; I buy. Terrible customer service, I sell. I also read that in a book somewhere but cannot find the title, so a nod to the author, whomever they were. So, I am selling my Verizon stock and suggest you do the same.

So, if you do not believe me that customer service is important (especially in a down economy), then be patient, you will not have to worry about it for long.

Don

Thursday, March 05, 2009

Verizon – New England

185 Franklin Street

Boston, MA 02107

Dear Sirs:

I am writing to complain about the customer service I have received today regarding your services. Throughout this letter, I will reference prices but they are but a catalyst for the poor service I am writing about.

I have been a Verizon landline customer for over 8 years. During that time, I have had up to 3 landlines. For the past 4 years or so, I have also been a Verizon wireless customer. I have even tried DSL service, even though I am too far away from the Central Office (CO).

So, this morning, I was called by a Verizon customer service rep, saying that we made a call to the UK, lasting 34 minutes and would cost almost $100. If we signed up for a plan for 5.99 per month, it would only cost $0.08 per minute. I felt this was outrageous, in today’s telecommunication age, to have a base rate of $3.00 per minute for international calls. I can get a better rate using phone cards. Anyway, I was presented with no other options, so I accepted the plan until I could do further research.

I reviewed my account and I am paying approx $75 per month for landline service. So, I called a few companies and found that the average for the same service is $30 per month (no discounts). I was shocked again. I was paying twice as much as average and being asked for more to receive what the others included.

So I called customer service to leave a complaint, to say that I was unhappy, and that I would be leaving Verizon (all accounts). A wonderful woman named Joanne answered. I explained I was unhappy and was leaving. Her first response was that if I removed features from my phone service, then the price per month would go down. So again, if I received less service than your competitors, you would charge me less per month but still more than them.

But here is the real winner. Joanne then explained that I was under an older plan and that if she just reentered the plan, I would get a rate around $35 per month. That is what she said but here is what I heard: I have been paying too much for my service for too long and no one bothers to tell me unless I complain.

I also heard that for Verizon, keeping $40 per month in revenue is more important that losing a customer.

So, from an apparently unvalued customer, I am reducing my account (I have removed all wireless) and I am transferring my landline to another provider this month.

Although I am only one customer, if you don’t change your customer service, your competitors WILL service them for you.

Sincerely,

Donald Noble

President/CEO

Boston Accounting Group, Inc

Why the DOW should be at 7000.

First let me say that I am sorry for the hiatus. I have started a new company which I have been putting a lot of effort into and will continue to put time into. But I felt it was time to get back to my writing.

So, if you are like everyone else today, you were watching the stock market. 6763 was the close. However, what is strange is that I am not panicking. Instead, I am looking at this as a correction if a very inflated market.

See, last year, I went back and downloaded 40 years of DJIA data. When I ran a very simple regression, I found that the DJIA should be around 7700. What you say? Impossible? Using only data from 1985 to 1995 as a base, I extrapolated the standard growth from that period. Why? Because in the late 1990′s, we were so caught up in the DOT.COM companies, that we started the bubble then. However, if I go back and take data from 1970 to 1995, the outlook is worse and says we should only be in the high 5000s, but I do not believe that.

So, using 7700, the DJIA is only off about 10%, which coincides with the about of decline in GDP we have seen recently. Shocker? I don’t think so.

We have been in a global economic bubble since 1995. Deluding ourselves that this kind of growth was sustainable. Robbing Peter to pay Paul is what is was.

I say this for a few reasons.

1. For those that have not gotten out of the market so far, well you are basically never going to see that money again. Sorry.

2. The DJIA will not hit 14000 anytime soon, so if that is your definition of a recovery, you will not see it.

3. Business should not look at the market and look at their customers. Something I have been saying, well, forever.

So, the next decade is going to see slow growth because realistic behavior is setting in. Mark my words.

Donald Noble

Boston Accounting Group

Well Virginia, it is not about real estate anymore!!!

It looks like it is time for a complete revolution in the retail space. I remember when, during the Internet revolution of the late 90s, that they said that retail brick and mortar stores would be obsolete within 5 years. As with all the predictions during that time, they were right but with the wrong time frames. Albeit slowly, we are seeing a definite decay of the storefront retailing locations, especially the larger stores.

The Wall Street Journal in an article today (Retailers Brace for Major Change) talk about lower profits and changing in products. They also talk about the debt load of these companies causing the biggest problem. I have another theory.

When I was in Grad school, my tam and I analyzed the Sears purchase of Kmart. In the end, we could barely make the numbers work using the assumptions of the deal makers. However, if we stripped out the real estate, we could not make the deal work at all. The assumption was that when they bought Kmart, some of the stores would be worth more as real estate than they discounted cash flow of the ongoing operation. That makes a big assumption, that there are other retailers (whom else would move into a large store) that would want the real estate.

So, I say it now, a collapse of the retail real estate space is imminent. In addition, if you see a valuation of a retail company that has a large real estate component, cut the value. It will not be worth the same.

These companies are not only going to have to change they current operations but also change the entire structure. You will see more large retailers consolidate. You will see more morphing of Internet and brick and morter. Hopefully you will see more quality of products and less cheap, low quality products.

So Virginia, we are not in Kansas anymore but retail is not about real estate anymore as well.

Don

P.S. I just skimmed some of the larger retailers. Sears, Kohl’s, Tj Maxx. I was shocked at home much real estate they have on their books (either as a direct asset or as a lease obligation). I am going to start looking at my retail investments.

What is the number one thing that businesses should focus on?

I have to admit, the current situation has most of my clients trying to figure out what steps to take to prepare for whatever happens, whether good or bad. So, they come to me and ask the usual questions of a CFO. How much cash should we hold? Should we consider fewer purchases? Is our money safe? What will the market do next year?

But very few ask me for my opinion on the most important questions they should be asking: How do we maintain/improve our customer service? Don’t think that is important? Read on……

Over the past two weeks, I have had some good and bad experiences with customer service that have really caused me to focus. First, I went to a Target to buy some sheets for my son’s dorm room. After looking for several minutes, I tried to find someone to help. When I finally located someone (in toys), I asked for help and he said it was not his department and walked away. I found the sheets on my own and went to the checkout. There were ~10 people waiting in line for two cashiers. Other employees were standing around. When I got to the checkout, I said Good Morning and the cashier barely looked at me and rushed me through (I am not surprised because I read an article about how sales metrics are reducing the conversation at checkouts). Now I thought, in a store where they are having slowing sales, they should be doing whatever possible to make the customer happy, but I guess not.

I then called my BMW dealer to have a flat tire repaired. I asked if I could bring it by today or should I make a formal appointment. The Service Rep said “I don’t think we can fit you in but I will check and then left me on hold for 10 minutes (I stayed on hold because I was in traffic). Then another person came on and asked what I wanted (exactly like that). I asked where the first rep went and he said that she went to lunch. Well, I hung up on that one.

Are these indicative of a downturn in an economy? Maybe, but read on.

I was looking at a new monitor for my computer. I have to admit, I only go to two websites anymore. www.tigerdirect.com and www.microcenter.com. At TigerDirect I purchase on-line, at Microcenter, I look for what is in the store and then drive there.  Anyway, Tigerdirect had a good price on a large monitor but I was not ready to buy just yet. I received an email from them on Sunday night stating that they were almost out of stock on the monitor and if I still wanted it they suggest I order now. No sales, not specials, just good customer service. I bought the monitor and it arrived 2 days later. Amazing customer service.

I have noticed that when the economy turns, the first thing that happens is that a polarization of customer service happens. Some companies push customer service and others don’t seem to care. To be honest, I think that is the difference between companies that survive and companies that fail.

Of course it is a challenge. Manager’s have to acquire new business, worry about old business, manage cash, and basically keep a company together. who has time to worry if employees are servicing the customers. Besides some fo the employees will not be here tomorrow so why try. WRONG! WRONG! WRONG! WRONG! I cannot stress this enough, WRONG!

If you focus on customer service, people remember. I do. I pay for customer service. I pay extra for customer service. Real and genuine customer service. If you make sure you are servicing your existing customers, your past customers, and your future customers the best you can, then other things will matter less.

Don’t believe me? Do this test. Keep a list of good and bad customer service you have received over the next month. Then in 6 months, see which companies are doing well and which are not. You will see the difference immediately.

It is strange to see a CFO talk about customer service as a priority over sales or cash flow but I truly believe this and will prove it to anyone who doubts me.

Don

Best Advice – Stop Watching the Stock Markets

You cannot get away from it. Everyone everywhere is watching the markets and commenting on it. “Hey, did you see what happened yesterday?”, or “Hey, how are your stocks doing?”

But this can be at best distracting and at worst destructive for business owners and managers. The stock market is one of the worst predictors of economic conditions. Consider that now we are more in a state of panic than rational thinking. Companies share prices are at or below the cash on hand per share. So people are selling without understanding the basic failure of the underlying asset. In addition, the stock market predicts a recession only 50% of the time.

Now, consider that although the stock market make go up and down, the share prices have little to do with general business. GM is in a sour shape, but they are still spending marketing and advertising dollars to solidify their brand and increase sales (although I think we will all agree it should be spent on better automobiles). AIG is in the tank but they are spending money and signing new policies everyday.

So, I am going to share some advice from the one CEO who taught me the most. He started a company and to it from $2MM per year to $200MM per year in 4 years. He went public and sold his company in the middle of the tech market tumble. He said to me “Do not even talk about the market. There are plenty of people who watch it and will tell you when you need to do something and it should not be you.” He also said that if you go into a sales meeting and someone starts talking about the markets, simply say that you have not been following closely because our business has been so good.

Please understand that I am paid to watch the markets (credit, stock, commodity, and international) for companies. As an independent CFO, I have to understand what is going on and what it means to my clients. Should we hoard cash, should we slow down spending, should we acquire a competitor? These are always on my mind as I watch. But I do not watch and groan, I watch and advise. I do not gamble and I do not fret.

If you are a business owner and the markets are on your mind for more than 5 minutes a day, that is too long. This is why a good CFO is worth a lot of money to a company. CFOs do not just balance the books, they ensure that the company is on a good financial footing and makes solid financial decisions. Sometimes these decisions are behind the scenes and sometimes then are more pronounced.

For each company having financial difficulty, there are more that are not. Many companies are strong and are spending. Many companies are weak and are spending. The point is that economic downturns are a part of all business cycles. Some are deeper and sharper than others but in the end, they all end and go back up.

I must add that I feel terrible at mass layoffs and companies that have to shut down, but from a purely economic standpoint, this is a revolution and should be taken that way. New companies will be formed from the old. New regulations will be enacted and old ones replaced. New leadership will be installed that will take the United States and other countries into the 21st Century properly.

Don