| Faced with a major
piece of new business, many
clients find they instantly need more
equipment, space, inventory, people and
working capital. They must obtain capital
quickly while simultaneously managing the
other, physical aspects of the total
are accustomed to pushing rather than
managing to get things done,
but even excellent financing can be lost
through poor management. Good management
can help clients successfully achieve
goals that expand their capabilities.
situations, CPAs have to help
clients focus on the business
priorities. Start by listing the
company’s immediate needs and working
out what has to be done in what order.
can be a great help —for
example, the CPA firm can take charge of
receivables and disbursements to ease
reassured when the business
communicates its progress frequently and
thoroughly; that’s a task CPAs can ably
perform for clients.
CPAs can help get
the right people. A strong
accounts-receivable person can ease
confusion. Timely and accurate financial
reporting is vital since everyone has to
know as soon as possible how well or
poorly the business is doing.
CPAs who consult on
extreme-growth projects must
adhere to ethical standards, know
business planning in its classic forms,
understand compliance regulations and
have the ability to be assertive with
and for the client.
Carl J. Lacher, CPA,
is president and a founding partner of
Lacher McDonald & Co., CPAs,
Seminole, Fla. His e-mail address is
When clients land a really big opportunity, it
rarely is unalloyed good news. To fulfill a
supersize order, companies often have to scramble
to ramp up and their risks increase dramatically.
In “extreme-growth” situations huge orders create
problems—from financing to accounting, taxes and
human resources—for modest operations. Here are
pointers to help clients secure capital, resources
and management skills to meet suddenly escalated
demands, along with real-life details from our
firm, Lacher MacDonald & Co., in Seminole,
KEY FACTORS: CAPITAL AND MIND-SET
A Faced with a major deal, small companies
may instantly need more equipment, space,
inventory and people to do the job. Their working
capital, adequate for existing operations, is
insufficient for such growth; they need to obtain
new capital quickly while simultaneously managing
the physical aspects of the opportunity.
Psychology is a factor, too. Entrepreneurs are
accustomed to pushing rather than managing to get
things done—but even excellent financing can be
lost through poor management. Good management and
advice, however, can help clients successfully
achieve goals that expand their capabilities. CPAs
can assist with staffing, accounting and treasury
functions and even become a liaison to a major
years after we fired a client for nonpayment, its
management came back to request our help with an
opportunity beyond its “wildest dreams.” The
company had hung in and had at last won a bid to
supply aprons and a few related dry-goods items to
a big box store. Its revenues would increase
tenfold in two years if it could deliver.
We agreed to help, but the company’s payment
history was a complicating factor. We set a limit
on how much our firm would carry in accounts
receivable; anything unpaid for more than one year
would impair our independence. The big box store’s
requirements were Draconian as well: It required
delivery within 10 days of placing an order,
including the initial one, and would penalize
mistakes in shipping and/or documents by reducing
the amount it paid.
WE WENT TO WORK
always helps to banish uncertainty, so the order
of business was to:
Help the owners focus.
First we helped the owners sort out
the priorities. We created flip charts of the
company’s immediate needs and worked out what had
to be done in what order. Our firm remained in
daily contact and averaged four face-to-face
meetings with the owners per week as the
Be flexible about solutions.
The company had no up-front capital
and also needed inventory, physical space and
equipment. The first big fix came when the owners
found a supplier who agreed to accept payment when
the company was paid, with the important
stipulation that payments be remitted to our firm;
we would split the funds between the supplier and
our client. An attorney helped us shape an
agreement specifying that we bore no legal
responsibility for the funds received.
established a dedicated bank account that was the
client’s property into which we put all receipts
and from which we made the split disbursements. We
never mingled this project money with the firm’s
or with the client’s general operating accounts,
over which we had no control.
Communicate thoroughly and widely.
More working capital surfaced when a
local group of retired businesspeople became aware
of the project and offered the company a loan.
This provided desperately needed funding for
equipment and was the catalyst that launched the
project. The group’s primary condition for
participation was a quarterly report from the
client, including a narrative description of
business progress, which we helped the owners
Help the client negotiate.
We learned early in the project that
helping to communicate the financial details
between our client and third parties would be our
greatest contribution to a successful outcome. The
client was too busy with operations while we had
the advantage of being impartial outsiders who
were able to speak the lingo.
One of the
client’s problems, for example, was that its
existing facility was woefully inadequate. In
fact, delivery of initial shipments was possible
only because a severe drought let the company
stack boxes on its front sidewalk for the freight
service pickup. We helped the client negotiate a
lease for a warehouse/office facility. It wasn’t
perfect, but it was a major improvement over the
Point the client in the right direction.
The big box store ordered, canceled
and had problems with the items; it returned one
apron model and took one case as a credit. We
convinced the client that hiring a very strong
accounts-receivable person could stop the
confusion and suggested it run an ad in the free
neighborhood paper to attract capable local
people. (In our experience, such papers make a
good resource for filling nontechnical positions).
The client took our advice, found someone—and its
collection experience with the big box store
Calm fears. The supplier
frequently was fearful about its accounts
receivable and inventory, so the client asked us
to visit its supplier’s big-city office several
times to allay any concerns. On behalf of the
client, we told the supplier, “If these millions
of sales dollars are not worth the risk, then kill
the deal—but you are being treated honestly.” Our
presence reassured the supplier, who needed to put
risk vs. return into perspective.
client did every inventory count, which matched an
almost full sample done by the supplier. It was an
added challenge to work with people who were very
suspicious—and prove their concerns groundless.
Get the right help. Timely
and accurate financial reporting was vital since
we all had to know as soon as possible how
business was going. We helped the client recruit
its controller by looking in our “resumes for
clients” file. We told her it would be the
experience of a career and, to this day, we all
agree. She had financial statements to us the
first working day of the month nearly without
fail—historical financial information was not
found the financing, the space and the supplier.
We provided the management consulting, business
planning and help with communications to make the
paperwork side of the equation work. We shared in
the delays, victories, shipments, hirings and
firings. Ultimately, the supplier bought the
client. We were paid in full for our work, and the
project was one of the most interesting of all our
Our firm’s takeaways from this
project included these lessons:
Informed but dispassionate
communication with company outsiders such as
investors and suppliers is a vital service CPA
firms can offer.
Strong control and reporting are best
achieved by helping the client hire the right
people for the jobs.
A CPA firm can serve as the central
point for collections and disbursements to satisfy
same lines, our firm had another major
opportunity—management consulting for a start-up
television station. Our services included
providing a forecast and attending almost all of
the client’s board of directors meetings for 12
years. Frequently, we injected independent
thinking that brought about changes in direction
or cooled emotions before they could escalate into
Starting out, we recognized the
Planning. The group of
founders had the advantage of possessing
significant radio broadcasting and business
management experience. But the issues that arose
early on were daunting: Could they obtain the
licenses, a combination of locations for remote
transmission with urban administration and attract
the right programming and advertisers? This was a
major task for the group but also a giant
The CEO focused on the dual
nature of the opportunity: first, to achieve
maximum operating success with limited resources
and, second, to position the station for the best
deal when a buyout opportunity appeared.
Documentation. The client
had funding for the initial work, but needed to
raise capital to go on the air. We helped build
the spreadsheets for the station’s potential
revenues and expenses, which ultimately became the
forecast. We projected how much it would cost to
start the operation—a figure necessary to enlist
investors. We also looked into securities issues
by bringing in an attorney who provided an
excellent set of guidelines. We held many meetings
with the CEO and top executives on the many
Our firm’s work to improve company
communication was as important as our accounting
input. As outsiders, we could see the operating
team lacked the time to address the information
needs of the investor group; the managers—although
highly experienced in broadcasting—were so busy
that investor communications could easily have
slipped. We witnessed several shareholder meetings
that started acrimoniously and ended harmoniously.
The CEO was a receptive person, and we told
him when we saw the need for improved
communication. We had attended so many business
meetings and teleconferences that we could cite
for him specific examples where he had shown great
skill at communicating to investors and others.
station’s credit policy raised a unique issue.
Revenue was vital; super-strict credit policies
could kill the business and, hence, were not an
option. The station took on some poorer
advertising accounts to initiate a revenue stream,
but as its position strengthened it was able to
attract more reliable customers. This constant
blending toward the middle to minimize bad debts
was a key component of the company’s success.
Firm financial management.
When a board member found a
qualified controller and the station asked for our
opinion, we voted emphatically “yes.” He improved
controls, reporting and timely flow of information
to management and was a valuable addition to the
Complex debt settlement.
Ultimately, the station was sold.
Tax planning was only part of the project. The
corporate involvement included vendor and customer
claims that could not be handed over to a buyer.
The client formed a trust to handle these claims
after the sale.
It was interesting to
watch as the owners collected on claims and as
claims against them were settled in their favor.
The tenacious CEO had fostered a transparent
climate and then assertively stood his ground
where necessary. Good information paid off. We
worked with management to distribute the funds and
close down the trust, a process that took more
than two years.
Along the way, we were
offered an equity position but refused it to
maintain our independence. Later several owners
told us how much they respected us for our
position. It was one of our best decisions.
We shared the experience of this company’s
coming to life and struggling through the first
years. It was truly a career-building and exciting
experience for everyone involved. Our firm’s
takeaways from this project included the
Informed, dispassionate communication
with people outside the management team, again,
was a vital service.
Working with knowledgeable managers
from a variety of backgrounds (many of whom we
would not otherwise have met) was an experience to
Good documentation empowered the
client to hold its positions and satisfactorily
settle any claims outstanding at the date of sale.
| Be a go-between:
Communicate clearly to company
outsiders as well as owners. |
Help the client
hire the best people for
financial control and reporting.
Suggest the client
put an ad in a free neighborhood
paper to attract highly capable
local people for nontechnical
Recommend a trust
for a complex post-sale
Make sure clients
maintain good documentation.
a local client has the chance of a lifetime, CPAs
can be its best advisers. Like our firm, you can
be a sounding board for clients who need guidance
and help to nurture their success. Major projects
require thinking outside the compliance-only box
and an understanding of business management based
on wide-ranging experience. Such projects are more
than just debits, credits and taxes—they offer the
excitement of challenge. Our clients’ technical
capabilities have landed the deals; we’ve helped
them make it work—and everyone has won.