Monthly Archives: May 2007

Tinkering, categorically, is allowed

In 2004, I was engaged to fix up an advertising business. They had plenty of revenue, but at the end of the financial year, the cupboard was always bare.

Coming in wearing a general manager’s hat, I had a whole series of questions to ask, including “why are we using these spreadsheets to tell us what is going on, rather than the accounting system”. Of course the owners had a whole lot of reasons, some valid, but the majority were complete bullsh*t.

One of the valid reasons was that the profit and loss statement wasn’t particularly useful.

Now having set up lots of accounting systems in my time as an accountant, I’d have to say that 99% of small businesses stick with the default installation because they don’t know what they can do and the power of a well-thought-through chart of accounts.

Packages like MYOB and Quicken always offer default charts of accounts for business types, but I would argue that you shouldn’t let yourself be seduced into using them as anything but an initial guide.

Take, for instance, your expenses. Most accounting systems come with a whole lot of default line items such as stationery, legal fees, rent, advertising and travel.

These types of classifications aren’t really useful as they only let you have a detailed view of your business, “hmm… stationery expense up last month, we’d better use less paper!”

What I like to do is take a more macro view of the business, to determine the top categories of expense, then populate each of those top categories with the line items appropriate to the business.

For instance the Churchill Club uses the following categories:

* Startup expenses.
* Financial expenses.
* Information technology.
* Marketing expenses.
* Office expenses.
* Professional services expenses.
* R&D expenses.
* Staff expenses.
* Telecommunications expense.
* Travel and accommodation expenses.

Inside each of theses categories, I have line items that reflect how the Churchill Club operates.

For instance, inside my professional services expenses category, I have line items for accounting fees and legal fees. Inside my marketing category I have line items for promotional materials, signage, website expenses and discounts given. (The website expense is there rather than in IT, because it’s a marketing activity, not an infrastructure activity.)

Because I have structured my expenses like this, I can simply compare things like, “Am I spending more on professional services than marketing?” Whoa – warning flags if that’s happening! But I can still drill down to determine how much I am spending on individual line items – for example, bloody accountant is costing me a fortune.

Also, by separating out my startup costs as a category, I can ensure that one off costs such as logo design don’t confuse my thinking about how much I am spending on marketing.

Plus, my line items are very specific to my business, rather than an attempt to use generic accounting words in an attempt to sound professional. For example, I have no staff amenities; however I do feed my advisory board once a quarter.

Those expenses are included in a line item called “advisory board amenities” listed under the staff expenses category. This is much more useful to me than thinking maybe we are going through too much coffee, or not enough!!.

Finally, I remove all those line items that always have zero values. Ask yourself; what’s the point of having a category for “overseas travel” if you never do it. Instead create line items for things you actually do, rather than shoving them somewhere they don’t fit.

If you spend lots of money on taxis and a little bit on parking and rental cars, why not have taxis as a separate line item from rental cars and parking. They can all sit under local travel so you know what this area of your business costs you.

Now the best thing about computerised accounting systems is that all is not lost. You can reorder your chart of accounts and change the names of line items, without losing all your data.

Go on; see how you can tweak your accoutning system to actually help you manage your business, not just track debtors.

Chuck your Monitor

Here’s a cool piece of software that can save you money.

Most small office networks have a file server. Now you can buy a monitor for that computer that will rarely get turned on, or you can use remote control software to operate the computer, without having to have a monitor or waste time moving over to the computer to operate it.

This remote control software is also handy in situations where you may want to have a look at a computer that you are no where near (or even your home computer). Its a great tool for troubleshooting.

Anyway the product PCAnywhere has been around for ever. What you don’t probably know is that for small solutions, you can use a product called VNC for free. That’s right, free as in it costs you nothing. Why would VNC do this? So if you want to use their bigger solutions, you will be already on their path and be happy to pay for an upgrade. But for most small users, this isn’t going to happen.

When installing VNC, you have to install it on two computers (kind of obvious). One computer is the server, the one your want to control. The other computer is setup to be the viewer, the computer you use to do the controlling.

Now you can achieve the same solution using Remote Assistance and Remote Desktop in Windows. Windows Remote solution under Windows XP is accessed via Control Panel -> System –>Remote. However both computers have to be using the correct version of Windows, and it’s a lot harder to connect up this solution when the computers reside on different networks. Effectively it means that you are unlikely to get it going without assistance.

VNC however works across any TCP/IP network, yes the Internet is a TCP/IP network. Plus comes in lots of different flavours, including windows, linux and even a java based version that runs on almost anything.

VNC is available at www.realnvc.com

Last will and testament.exe

My wife and I are at the lawyers, going through our will. The previous lawyer had made a number of mistakes, and then promptly left the firm, so it is up to the principal to fix our issues. The Maserati in his carport tells me this guy is either good at his job or good at charging.

So we go through this list of scenarios, some of which need to be changed, some deleted and some simply moved around in the document to make it easier to understand.

I notice that the lawyer renumbers each paragraph as he moves sequentially along, sometimes having to change the number again as he works his edits into the document. I think this is a very disciplined approach and must have been part of his lawyer training.

However, my wife and I have a large number of additions to make, to cover different situations. The lawyer is surprised we could generate so many additions, but we are allowing for situations he has not considered. It is only afterwards I realise what has happened.

Just as the lawyer relied on his training to move through the document and make edits, I relied on my IT training, which made me approach the document in a totally different way. It wasn’t a computer problem, a software engineering approach made sense. I used a basic programming construction, which probably now has a fancy name, but I call it the IF THEN ELSE decision. Virtually all programming languages have a version.

This construction is used in the following way:

IF condition exists (Say my wife is already dead when I die)
THEN carry out an action (Give everything to the kids)
ELSE carry out an alternative action (Give everything to the wife)

Now the lovely thing about this construction is that one IF THEN ELSE decision can be nested inside another. Programmers then indent the bits of text to make it easier to read. For instance:

IF my wife is already dead when I die
THEN

IF my children are all over 18
THEN give everything to the kids
ELSE give everything to my executor

ELSE Give everything to the wife

What a wonderful thing, software engineering converges into drafting my will. Software constructions can jump straight out of the computer and help me better order thoughts to get a logical outcome. Technical training can benefit the non-technical person.

Now I just have to figure out how to make a DO WHILE loop get me a Maserati.

Open Sauce

When I moved out of home I basically lived on pies, pizzas and takeaways. At the end of the first year, a friend of mine, Stewart, moved in and pointed out that he suspected that the black slime at the bottom of a cupboard had started life as a potato. I wanted to argue against his point but I hadn’t looked in the cupboard for months so wasn’t in a position to do so.

It occurred to me that my eating habits were so poor I risked dying of malnutrition, so I got my first recipe book. Actually my Mum bought it for me (thanks, Mum!). I had never been taught how to cook but I gave it a try and, as the years have gone past, I have improved. Today I cook probably 10 meals a fortnight, seven of which I have never cooked before and have chosen at random from a cookbook.

So the other night when we were at the local Chinese restaurant I started to wonder what the restaurant industry thought of recipe books. Clearly they are different business models, both chasing my food dollar.

This then led me to thinking: maybe this is what open source software is, rather than the great evil as it’s normally portrayed by mainstream software companies. Open source software is basically software that you can use for free and you can access the source code. The licensing means you can’t resell it, even if you alter it.

The mainstream software industry, comprising such companies as Microsoft, Adobe and Oracle, argue that because the programmers aren’t paid to produce open source software, there is no business model. Therefore if you support it, you will stifle innovation because no one will get paid, plus you will get a shoddy product as there is no champion to invest millions over years of product development.

My experience is quite different. Sure, there are no paid programmers producing the software, however there are a swathe of system administrators developing it for free, then being paid to support it. And I assure you, if you want to deploy a piece of open source software on a server, you will need to pay someone to help you do it and manage it in the future.

When I studied information technology in the 1980s there was basically only one type of computer person: “the computer person”. Today there are specialists: operators, system administrators, network engineers, programmers, database analysts, etc.

Open source software isn’t the devil, it is simply an aspect of competition between the programmers (who want to get paid to write the software) and the system administrators (who want to get paid to support the software).

From the user point of view it’s a bit like cooking for yourself. The first time you try it, it’s very scary, but after practice you realise its no big deal at all; in fact it will take you into some very interesting areas. A great place to start is www.sourceforge.net.

How I learnt to love bad customers

I think that my journey to love bad customers started with Warren. He was making a reasonable living out of multi-level marketing and wanted to embrace the internet.

Highly enthusiastic, Warren would never plan because planning and paperwork were beneath him. Instead, everything occurred at the last minute and had to be the latest technology because he was dynamic go-getter. Over a 12 month period, Warren taught me a variety of things about writing proposals, service delivery and collecting cash.

Warren taught me that my ideas are just as valuable as my work. He would endlessly ask for advice and insist it was part of the sales process and not chargeable. He taught me to write proposals for the consulting and initial design, not just provide it free.

He taught me to avoid showing costs for individual line items in my proposals if I could avoid it. If a costed item wasn’t the core deliverable, but part of a quality approach, he would ask for it to be removed to lower the cost.

Warren also helped me understand that the customer wants best quality for the lowest price. Offering him choices via more than one proposal, allowed me to negotiate in the quality/price/timing tradeoff.

Warren never bothered to keep any paperwork. He was a wheeler-dealer. To get paid, he would write “approved” on invoices and get us to claim them on his Diners Club.

At the end of our relationship, he rang Diners Club and advised them that he hadn’t approved a number of things we had claimed and that we were bad guys. I spent a lovely afternoon with Diners Club working through his file and proving we weren’t. I am glad he taught me to keep good records.

Finally, Warren taught me that no one respects lawyers’ warning letters. Go hard and sue as fast as you can. It appears that a lot more people respect a summons. Thank you, Warren.

Then there was Joe. Joe taught me to specify deliverables carefully because Joe would always fight to include as much as possible into a fixed price.

Dealing with Joe was difficult. He would also introduce additional items, “just add a little here, it’s nothing”. Downstream, of course, he would argue that we had not delivered in the timeframe we had promised, even though it was all his little changes that had created the differences.

While I was dealing with Joe, I was renovating my house. I found that I was signing variations on my house, and that even when there was no cost impact, there was always a time impact. “You want us to not fit out your kitchen? That will reduce your costs by $12,500 but your contract time is increased by 20 days.”

With Joe I started generating variation agreements: one-page documents that would get signed, or not signed at our weekly meetings. I found that there was never a complaint when this discipline was introduced from the beginning.

The there was Linda. She taught that me that I need to specify exactly how my warranty worked, because unless I told her upfront, I would always end up wasting time and pissing her off when she found out my work wasn’t guaranteed forever, even after her cousin had made some minor changes.

Finally there was Mark. Mark taught me that everyone is an expert. Mark used to look at my quotations for multimedia work and insist that it wouldn’t take as long as I forecast.

His position was that he shouldn’t have to pay for my time checking my work as I should be getting it right in the first place. Mark taught me to quote on deliverables, rather than provide hour estimates.

Thank you, guys.

$1.4 Billion

Thanks for the $1.4 billion industry statement John. However I’d be shocked if it had any impact.

One of the problems in Australia is that we love strategies, but not execution –– the details are seen to be beneath us. We also misuse the word ‘strategy’ endlessly. “My strategy will be to grab a coffee before the meeting, to make sure I’m focused”. Please!

Because we don’t like execution, we don’t learn. Bad strategy is normally classified as poor execution by foot soldiers. Larger enterprises then sack those responsible, effectively losing whatever learnings occurred and dooming themselves to repeat their mistakes.

Only organisations that are forced to learn from poor execution actually get better at it. Take for instance the army. They have a saying that a “sucking chest wound is nature’s way of saying you f**ked up your fieldcraft”. Because there are repercussions to poor execution, the organisation learns. The benefit of this is that both poor strategies and great strategies are executed well; you can then determine which is which.

Anyway, back to the industry statement.

My experience in 22 years of applying for government programs is that the people delivering the program always have the same position. We have an execution problem that isn’t being addressed.

If you haven’t received assistance before, they (the government agencies) look for reasons why you can’t this time either. Interestingly I have even been knocked back for programs that were simply registration as a supplier and were not competitive. Those running the program thought there were “more deserving applicants”. Thanks for that.

The reason I have been applying for government programs for 22 years is that every once and a while I forget that it will simply be a waste of time, and allow someone to talk me into applying for a program.

So my position now is “never again will I waste a moment of my time applying for a program”. I know I am not alone in this. So whom will these programs help? The businesses that are non-viable and have received assistance before, therefore are eligible again.