Friday, July 31, 2020

CFOs: FP&A and accounting must speak the same language

Photo by CoWomen on Unsplash

Author:  Robert Freedman@RobertFreedman


Poor coordination between backward-looking and forward-looking finance functions eats up time and resources better spent elsewhere.
If accounting and FP&A teams don't work in concert, they will waste valuable time each month trying to reconcile numbers, finance leaders said in a CFO Live virtual conference this week.

Inconsistencies between the two teams typically start with where they focus their attention, said Nayab Siddiqi, CFO and head of strategy at travel technology company REZY360.

Accounting teams, which are responsible for controls, compliance and reporting — traditionally backwards-looking functions — tend to focus on the balance sheet, while financial planning and analysis (FP&A) teams, which are responsible for forward-looking budgeting and forecasts, tend to focus on the P&L. FP&A teams typically account for a transaction one way — as an investment, for example — while the accounting team accounts for it as an expense.

"Once FP&A classifies something in their forecast in a certain way, and the accounting team doesn't know the nature of that transaction, they might classify that [as something different on] the balance sheet," Siddiqi said. "So, when they're comparing these, they won't find those numbers on the P&L, even though the transaction has already happened. Now, it takes a lot of time to find out where the transaction has been reported."

Process organization is the key to team communication, but, ultimately, coordination falls to the CFO, said Mirek Purpura, head of finance for Central Europe and Israel at Baxter International.

Purpura resolved a coordination problem by having the FP&A team look at the books while the accounting team was still in the process of closing them, rather than waiting until they closed.

"If an issue is spotted, it's a two-way street," Purpura said. "They can inform accounting if something happened correctly or not, and accounting can course-correct immediately. It's the role of CFO to enforce that kind of behavior between the two."

Siddiqi created a position between the two teams to ensure FP&A didn't spring any surprises on accounting after the books were closed, and vice versa.

"That person's responsibility is to keep coordination between the two functions by picking up the phone, calling them, and telling them what was going on in each of their functions," he said. "So, when reporting time comes, there are no [unanswered] questions."

Coordination is less of an issue in small organizations, because the two teams typically sit side by side and can stay in constant communication. It's more of an issue in big organizations, particularly ones operating in multiple countries, which might have hundreds of people on each team scattered across the globe, Siddiqi said.

Focus on drivers

Another way to keep teams working together is to train them to look at numbers in terms of business drivers. FP&A specialists tend to be better-equipped to do this, because translating business activity into financial terms is their job. But accounting staff can benefit from it as well.

"If they don't understand the levers moving the business, it can be difficult for them to connect these to financial transactions," Siddiqi said. "If that's not connected, anything they create won't be accurate, or close to accurate."

Purpura uses drivers to help speed his budgeting and forecasting. Previously, his FP&A team used more of a zero-based budgeting process, essentially starting the budget from scratch each cycle, but now, he uses historical numbers from accounting to create a baseline, freeing up FP&A staff to look only at drivers to determine which line items need changing.

"For something like travel and expenses, we automatically set a baseline for the teams going forward," he said. "That way, we're not focusing on the minutiae of details of things that are relatively consistent year-over-year. We've even started looking at baselining sales projections, based on historical information, especially in countries where they’re historically consistent, or based on leading indicator KPIs we can rely on. So FP&A can focus on the one-offs."

Siddiqi's FP&A team also uses drivers in their budgeting and forecasting. "Previously, we did roll-forward forecasting but now ... we look at different drivers, how they operate, and look at the different levers. How do they impact our numbers on the revenue or the cost side? And we translate them into their impact on our numbers."

For both teams, by improving coordination and collaboration on drivers, staff can focus more on higher value analytical work, and devote less time to reconciling differences in approach.

Friday, July 17, 2020

Financial Documents: What To Save And What You Can Throw Away

Written by: Kevin Payne Contributor

If you’re like many of us, the amount of paper that enters your home is hard to handle at times. From mail to receipts to documents, it’s a challenge to keep it all organized. While many businesses are moving toward paperless systems, it doesn’t feel that way when you look at the piles of financial papers in your home.

As you make life and financial decisions, there’s usually a paper trail. The same is true when you buy, sell or insure something. And after tax time every year, there’s another stack of documents to add to your files. What should you save, and what’s okay to toss in this week’s trash collection—by which we mean, what needs to be shredded and disposed of properly?

The main reason for filing away financial documents is to be able to defend your annual tax returns if needed, but there are other reasons to save certain types of paperwork. Here’s a quick guide to what to do with your financial documents: how long you need to save the important ones, how to store the documents you do retain and how to safely dispose of the rest.

How Long Should You Keep Financial Documents?

Some financial documents should be kept for the long term. Here’s a breakdown of documents to save, based on the time they should be kept.

Seven Years or Longer

When it comes to taxes, it’s best to keep any tax records for at least seven years. The IRS statute of limitations for auditing is three years. However, there are circumstances where they can go back as far as six or seven years, for example, if you underreported income by 25% or more. State statutes of limitations can vary, so check with a tax professional on the limitations in your state.

Your best bet is to hang on to your tax returns as long as possible. If you ever face a tax audit, then you’ll have all the information you need. You also should consider saving documents that verify the information on your returns for at least seven years, like W-2 and 1099 forms, receipts and payments. If you have receipts related to assets, like receipts for home remodeling projects, keep these for as long as you are the owner.
One Year

Documents that fall into this category include non-tax-related bank and credit card statements, investment statements, pay stubs and receipts for large purchases. Keep these records on hand for a year if you need them to support your current-year tax preparation or as proof of income when making a large purchase.

The Federal Trade Commission suggests holding on to your paid medical bills for a year before tossing them—unless you have an unresolved insurance dispute, in which case you would retain the medical bills until the dispute is resolved. Medical bills are confusing, and having records on hand to dispute payments or errors is wise.

Many banks and credit card issuers offer electronic statements now, so you may not need to keep paper copies on hand, which will cut down on excess clutter. If keeping other documents around longer term makes you anxious, you can opt to scan them to create electronic copies and then dispose of the original paper documents.
Less Than a Year

Some documents don’t need to take up valuable space in your home for very long. For example, don’t worry about keeping receipts unless they pertain to:

  • Products under warranty
  • Your tax returns
  • Insurance claims

You can toss most monthly bills after you pay them, or after the payments have credited to your bank statement. If you end up needing to go back to verify anything, see if you can access past bills through online account access. Many companies keep past bills and invoices available online for the past few months or longer.

Banks typically don’t mail canceled checks back to you anymore, but if yours does, most canceled checks are okay to shred once you’ve verified your bank statement is correct. Some canceled checks should be saved, though, if they are related to tax returns, like any charitable giving.

What Financial Documents Should You Keep Forever?

We’ve looked at documents that are okay to throw away after a specific time, but there are plenty of documents you should hold on to indefinitely. Important papers to save forever include:
  • Birth certificates
  • Social Security cards
  • Marriage certificates
  • Adoption papers
  • Death certificates
  • Passports
  • Wills and living wills
  • Powers of attorney
  • Legal filings
  • Military records
  • Retirement and pension plans
  • Inheritance documents
  • Beneficiary forms

For anything you’ve bought or insured, you should save the related documents for at least as long as you own them or until the warranty ends. It won’t hurt to keep them around longer, though, just to be safe. This includes titles, deeds, insurance policies, warranty documentation and more.

Health insurance policies and related documents are important to keep long term, too. So long as your health insurance is active, you should keep these records. If your coverage ended or you’ve moved to another insurance company, go ahead and toss paperwork once you’re sure you won’t need it. The same is true if you receive disability or unemployment benefits. Keep the documentation until you know you no longer need it.

If you have financial records or documents you aren’t sure you’ll need, err on the side of caution. Keep any documents until you are positive you don’t need them.

How to Store Financial Documents

You can cut down on clutter by creating a reliable system for storing your financial documents. Keeping your documents safe is equally important. When storing your documents, you’ll want a storage solution that is:
  • Easily accessible
  • Protected from theft
  • Protected from the environment/weather/damage
  • Well organized

Whether you have paper documents or electronic versions, here are options for storing your financial documents safely long term.
Paper Storage

Many people choose to keep documents stored in a filing cabinet. Use file folders to organize paperwork by subject, year or another method of your choice. Bankers boxes are another storage option, but these are more susceptible to water damage.

For your most important documents, a standard filing cabinet might not be enough. The use of a home safe may be a better option. Look for a safe that is fireproof and waterproof for maximum protection. A home safe doesn’t have to be elaborate or expensive, like something you’ve probably seen in the movies (no need for hidden wall safes behind artwork). A simple lockbox you can grab and go is perfect for storing documents in the event of a home fire or flood.

Safe deposit boxes used to be a popular method for storing valuables, including essential documents. Not all bank branches offer safe deposit boxes today, but it can be an option if you prefer keeping these documents offsite. Keep in mind that you are at the mercy of the financial institution as to when you can access your safe deposit box.
Electronic Storage

If you’d like to move toward less paper, there are plenty of digital storage options.

Many financial institutions and businesses now let you opt for electronic billing and statements, either through email or online account access. Some banks charge a fee for paper statements now, as electronic paperwork becomes more readily available.

For other documents, you can use a scanner to scan them into your computer, or you can take photos using your cell phone.

Keeping all of your documents on your computer isn’t very efficient and can bog down your system. Other digital storage options include external hard drives, like HDDs and SDDs, which are compact solutions for storing massive amounts of electronic data. An even more compact solution is storing electronic paperwork on a flash drive, although flash drives also are easier to misplace or damage.

If you go the digital route, it may be a good idea to create multiple backup copies in case one of them is damaged or fails. Digital backups take up much less space than having multiple paper copies of your important documents.

Another option is to go with cloud-based storage for essential paperwork. The past several years have seen an explosion of cloud-based solutions, including:
  • Dropbox
  • Google Drive
  • Microsoft OneDrive
  • iCloud
  • Amazon Cloud Drive
  • Box
  • NextCloud
  • iDrive
  • Carbonite

Using cloud-based storage not only saves on space, but also can be great for organizing and keeping your documents secure, since most services guarantee protection through encrypted networks. Many cloud-based solutions allow access through mobile devices, making your documents accessible almost anywhere in the world.

If you do end up choosing a digital storage solution, make sure you don’t need a physical copy or original document in the future. The last thing you want to do is shred something to save space, only to need it five years later.

How to Dispose of Old Financial Documents

Clearing your home of piles of old, useless paperwork is a wonderful feeling, but don’t scrap it with your weekly garbage collection. Most of these documents contain personal information you don’t want to have exposed.

According to a Federal Trade Commission (FTC) report, over 3.2 million consumer reports were filed with the Consumer Sentinel Network in 2019, and 20% of them involved identity theft. Throwing away documents with your trash exposes your information to anyone willing to do a little dirty work to steal your identity. You might not realize how much information is present on your old bills, statements, voided and canceled checks and other financial documents.

Here’s what could be present on the documents you want to throw away:
  • Full names
  • Physical addresses
  • Phone numbers
  • Account numbers
  • Routing numbers
  • Driver’s license numbers
  • Policy numbers
  • Usernames
  • Passwords
  • Membership information
  • Medical records
  • Signatures

Your best option is to shred any documents that contain sensitive information before tossing them. Either invest in a shredder for your home or utilize a professional shredding service. You will likely pay a fee for this service, but it’s a small price to keep your personal information safe.

Here are some retail stores that offer shredding services:
  • Office Depot
  • Office Max
  • Staples
  • The UPS Store
  • FedEx Office Print & Ship Centers

Many cities also hold free paper shredding days for residents. Check your city’s website for information regarding events like this.

A financial life necessarily involves a significant amount of documentation—from monthly bank statements to insurance documents to the various materials required to file your taxes. By learning what needs to stay and what’s free to go, you can minimize the amount of materials you accumulate over time.

Friday, July 10, 2020

University of St. Thomas “Faith and Entrepreneurship” STC Consulting

The University of St. Thomas Alumni Relations, & the McNair Institute for Entrepreneurism and Free Enterprise invited me to be a guest speaker at the “Seekers & Sages” Speaker series: “Faith and Entrepreneurship”

Is faith an indispensable tool for entrepreneurship? The Entrepreneurship journey requires faith and conviction that things will work out. Some of the common questions are:

1. Do I have the faith to start and grow my business?
2. Can I do it even though I have never done it in the past?
3. Should I do it even though I might not have all the answers in front of me?

You need strength that comes from your conviction that if you do to help the community, abundance will find you. You can help the community grow, be confident, be powerful, be faithful and you will achieve financial success. 3 key points:

1. Mission & purpose: You are an instrument of service. You were given the skills and the talent to help the community and to solve a problem.
2. The power of miracles: In the face of the impossible, unexpected things happen. You need to do the work.
3. Integrity: Work smart, be grateful, and never (NEVER) give up: Things will work out. Have the confidence to pursue your dreams. Did I mention NEVER give up?

Wednesday, July 1, 2020

7 Resources for 1099 Contractors During the Coronavirus Pandemic

Written by: Matthew D'Angelo, Contributor

These resources, from SBA loans to industry-specific grants, are available to freelancers, self-employed workers or independent contractors who are struggling financially.

From expanded unemployment benefits to industry-specific relief funds, there are options available for 1099 workers looking for financial relief during the COVID-19 pandemic. — Getty Images/hobo_018

COVID-19 is having an impact on all areas of the economy. From large businesses to smaller restaurants, everyone is having to adjust to a new normal in business activity. Freelancers and other 1099 contractors are no different. With several foundations, corporate relief funds and other financial programs emerging from a variety of industries, it’s not clear how freelance workers are being supported during this time.

Here is a list of seven resources for freelancers struggling through the COVID-19 pandemic, including a list of industry-specific grants and funds worth applying for as a freelancer, self-employed worker or independent contractor.

Expanded unemployment benefits

Due to COVID-19, independent contractors can qualify for unemployment payments from the government. In the past, this service was not available to freelancers and 1099 contractors. By following the steps specific to your state, you can qualify for relief and potentially a $600 weekly increase during this time. While this may be a long process to apply, it can help greatly once you’re approved. Be sure to stay up to date with your application and have an understanding of how your state’s unemployment relief is changing due to the virus.

The Small Business Administration

The SBA has announced extensive programs to help struggling small businesses during the coronavirus pandemic. While freelancers and other 1099 workers work on a contract basis, if you’ve established a business entity in your name, you may be able to qualify for a loan. In New York City alone, for example, loans with no interest are being offered to all businesses with less than 100 employees. Look into disaster relief loans and other financial assistance available in your state.

SBA debt relief
If you already have a loan through the SBA 7(a), Community Advantage, 504, and microloan programs, you can qualify for payment relief for up to six months. Again, while this isn’t a program specifically designed for freelancers, it can benefit those that have created business entities and are in debt with SBA.

Paycheck Protection Program

While initially only available for small businesses with 500 or more employees, the PPP program is being extended to independent contractors and other self-employed individuals. As of April 10, independent contractors and self-employed individuals can apply for a loan up to $100,000. Your actual loan will likely vary based on your specific situation. You can read more about the program here.

Industry-specific grants and relief funds

Depending on the industry you work within, there may be a grant or relief fund you can apply for. Below is a list of options you want to consider based on your industry. The industries include comedy, writing, contemporary arts and other creative freelance industries.


This is a curation website that gathers different grants and relief opportunities for small businesses and freelancers. GrantSpace is updated as new opportunities emerge. This service does not provide grants and relief funds for businesses, but instead curates them for easy access.


FreshBooks collects resources for small businesses and freelancers alike. It provides a comprehensive list specifically for freelancers that includes things like job opportunities, job board websites and other work options. This can be a good resource for freelance writers who’ve lost contracts due to coronavirus.