According to an article titled "Financial management better than perceived" which is pretty ironic, members of the defense department including Homeland Security are having a hard time producing financial statements.

"In the case of Homeland Security, the four-year-old department is still struggling to merge multiple entities with separate finance and accounting systems and procedures." (Aren't there automated systems that can handle volumes of transactions and even consolidations?)

The article goes on to explain the difficulties in accounting for volumes of transactions and includes this insight from Relmond P. Van Daniker, the association's executive director,  "As professionals, we say that we exist to provide information so people can make decisions. I'm not exactly sure what decisions people make relative to the financial statements. They come out after the fact and they're very thick."  (Sound familiar? )

Here's the part that really resonates, from Defense Comptroller Tina W. Jonas, " Improving financial management at Defense hinges on showing military leaders and managers why it's important to their mission."

It seems that the Defense department shares a common problem with businesses : the troops can't follow if they don't know where they are going.  Like this department, accounting professionals have to help their teams see the relevance of financial information, especially those people who are on the front line. 

When times are tough, businesses that haven't been able to reach their revenue targets start reducing expenses. So where do they cut? 

Typically, companies large and small look to cut "non-crucial" expenditures like marketing.  Funds for travel, marketing campaigns and events start to shrink at the end of every quarter.  And what does that mean for sales?  It means that pipelines are going to start shrinking.  The flow of activity that drives sales opportunities suddenly turns into a trickle.  Without travel funds, teams start to be disconnected, customers start to lose touch with their salesperson and deals become harder to win.  What happens as a result is that marketing strategies put into place at the beginning of the year get disrupted and activities become a jumble of disconnected campaigns. 

Teams learn to execute early in the year and become accustomed to managing decreasing budgets.  Sales begin to dwindle in the quarter following the cuts, and it is not until 6 months into the new year that the activity can be regenerated.   By then it is time for a cycle of new budget reductions and more creative marketing. 

So how does the sales department deal with the reduction in their pipeline? See sales discounts, below. 

The problem is that declining revenues are a long term issue.  Usually the revenue problem is related to product strategy, to aligning with customer needs, to identifying a unique angle and executing well.  Trying to fix a problem like that by reducing a short term expenditure is like trying to run a skii resort using only man made snow.  You might be okay for a few days, but eventually you're gonna be skiing on dirt. 

I am a graduate of the University of North Carolina in Chapel Hill, NC (God’s country.) One of the reasons I remain connected to Chapel Hill has nothing to do with the university.  It is an incredible store located in Chapel Hill called A Southern Season.  The store has an amazing atmosphere and features delicacies from candy to cookies to cheese, wine, and chutney.  Everything they sell is unique, often has a humorous angle to it, and is always of the highest quality.  It is the kind of place where I would happily sweep the floors just to get a discount on the 46 ounce tin of Cinnamon-Butter Almonds.  

Since I now reside on the West Coast, it is a special treat for me to be able to share southern treats like “Carolina Cheddar Cheese Straws”, Crooks Grits, or country ham with the uninitiated.  But what is more important for me is the faith I have in this company to illustrate what southern hospitality is all about.  Every person you deal with at this company makes them look good.  The phone staff that handles orders is efficient, cheerful and exceedingly knowledgeable.  The online ordering system is a breeze.  The one time I had a problem with a recipient getting a broken bottle of wine, it was replaced immediately.  Excellent quality, unique products, and a well run operation combine to make this one of my favorite shopping experiences.  

But there’s more.  Last night I returned from a trip to Toronto to find a box from A Southern Season sitting on my desk.  Inside was a leather box filled with candy and a note thanking me for being “an exceptional customer.”  The note further reminded me of the approaching holidays  (bummer, I’m already late on my holiday shopping.) It also included a list of the people who had received gifts from me last year so I could easily re-order.

Even if I wanted to stop sending the delectable treats to my friends and relatives, they would not allow it.  It’s true.  Sadly, the Chocolate Covered Cherries and Chocolate Cordials from A Southern Season are now as much a part of our family tradition as the cheese grits soufflé, and are more prized at the dinner table than my husband.  

I know I’m not really an exceptional customer, but it sure was nice to receive an unexpected gift on an ordinary day and feel for just a minute or two that I was special.  

Wouldn’t it be great if every business could provide that same kind of feeling for their customers?

Many businesses describe their fiscal goals in terms of an increase in revenues, typically expressed as a percentage of growth.

Here is the interview I would like to conduct with a hypothetical business owner who has that goal.  

Me: So your goal for 2008 is to grow revenues 8%?

Business A: Yes

Me: So what if your costs grow by 15% during that same period?

Business A:  Well I wouldn't want that to happen.  So maybe my goal should be to grow revenues by  8% while keeping costs at the same percentage.

Me:  So let's say you increase revenues by 8%, hold costs steady but fail to collect on any of those additional sales.

Business A:  Um, well I guess I need to make sure that all of those new sales are collectible. 

Me:  Okay, so let's just say you grow revenues 8%, hold costs steady, and still manage to collect on the new receivables that you have generated.  All of your employees have just notified you that they plan to resign on the last day of your fiscal year.  What are your chances for success in the next fiscal year?

My point is, a revenue growth target is NOT a business goal.  Neither is any other single business metric.  Businesses are formed for an express purpose.  Annual targets should be in support of that purpose.  And why is growth always an objective? 

Of course businesses need to generate a decent return for the owner or investors.  But where is the business headed long term?  You need to know the goal before you even start to talk about supporting it with sales targets, budgets and compensation models.