No Bull Business Blog

Cash vs. profit: 50% of execs, managers don’t know difference

 Excerpted from the Executive Report: What Non-Finance Managers Need to Know About Finance.

How business savvy are you and your managers? You might be surprised by how little many execs and managers know about the finance aspects of their business.

In a recent Harvard Business Review survey, a representative sample of 300 managers, from C-level execs to supervisors, did poorly on a financial literacy exam that was included.

The average score: 38%.

• More than 50% couldn’t describe the difference between “cash” and “profit.”
• Many couldn’t distinguish a balance sheet from an income statement.

Decisions made by managers who lack even basic business knowledge can put any company at risk.

It’s also the kind of knowledge shortfall many managers are reluctant to admit, or to seek help for.

Here are just two of the questions managers on the exam.

1. A company has more cash today when …

  a. All customers pay their bills sooner
  b. Accounts Receivable increases
  c. Retained earnings increases
  d. Profit increases

 

2. You should be pleased about your company’s financial status if …

  a. There is an increasing trend in Cost of Goods Sold (COGS)
  b. Cash flow is coming from company investing
  c. Cash flow is coming from company operations
  d. There is a negative trend in operating margin

 

So, how did you do? The answers: 1. a; 2. c

DIGGING DEEPER
Understanding the finance side of business is important. At the very least, execs and managers should know what the common finance terms of business are. To get a better understanding, read the Executive Report: What Non-Finance Managers Need to Know About Finance.

Beware: Scammers sending IRS e-mails

Tell your entire finance staff to be more vigilant than ever when opening their e-mail.

What to watch for: any message from IRS containing links to the service’s publications about business, excise, and exempt-organization tax compliance. (The e-mail also promises IRS help on one of the biggest finance headaches these days: retirement plans and IRAs.)

It’s a scam, says the taxman. When you click on the links, malware is downloaded that allows hackers access to your systems and passwords. Ouch. One good-intentioned click could prove very expensive.

Remind everyone: All legit IRS Web pages start with http://www.irs.gov

KEEPING A WATCH ON T&E:
The IRS pays a lot of attention to how you handle travel and entertainment expenses. To see the best practices, check out the Executive Report: T&E Best Practices: Complete Guide to Ensure Compliance

Are we headed for another Enron?

Corporate scandals have ebbed a bit in the six years since the Enron scandal, but that doesn't mean the people you're doing business with are more ethical.

Despite Sarbanes-Oxley and other government regulation, there's plenty of lying going on, says a recent report by the Ethics Resource Center. The report says that in the past year:

• More than half (56%) of employees surveyed had personally witnessed violations of company ethics standards, policy, or the law.  Many saw multiple violations.
• More than two of five employees (42%) who witnessed misconduct did not report it through any company channels.
• More than half (54%) of employees who witnessed but did not report misconduct believed that reporting would not lead to corrective action.
• More than a third (36%) of non-reporters feared retaliation from at least one source.

Cash advances: A T&E 'worst practice'

Excerpted from the Executive Report: T&E Best Practices: Complete Guide to Ensure Compliance

Employees who regularly have travel or entertainment expenses will ask for cash advances. Warning: Cash advances are seriously detrimental to T&E compliance.

They're considered a "worst practice." Their negative impact stems from a single reason: They effectively reduce an employee's incentive to complete paperwork.

Makes sense. Typical T&E reimbursements require a healthy bit of legwork before employees can expect to see their money returned. If handed money up-front, employees have little reason to keep track of paperwork and return it in a timely fashion.

That means A/P will have more money going out with less information coming in on how those funds are being spent - not exactly a rock-solid approach when it comes to information gathering and record retention.

Once money is in an employee's hands, there's little A/P can do to get the receipts and reports, other than putting a hold on future advances or reimbursements, or docking an employee's pay until the needed info is received.

ADDITONAL INFO:
There are a lot of smart things companies can do when handling travel and entertainment expenses. To see the best practices, check out the Executive Report: T&E Best Practices: Complete Guide to Ensure Compliance

Form I-9: Switch to new form NOW!

The new Form 1-9 is now required. So you'd better start using it before the Feds come checking. (The deadline was Dec. 26, 2007. They're getting tough on employee verification. You can get the standard info from the government.

But making sure you're in compliance can be the hardest part. To help, check out the Executive Report: Complete Guide to the New Form I-9: Everything You Need to Know to Ensure Compliance.

Feeling the squeeze: Fewer hours to save jobs

Companies are increasingly nervous about the economy. Latest sign: More companies are reducing the hours "full-time" employees work. The Wall Street Journal says the number has been steadily rising since August. The goal: Keep skilled workers in the company until demand increases for their products and services.

The strategy will work for some companies, but employees are taking a significant hit. Employees have been feeling the pain on the homefront for some time. Now they're working fewer hours and that means less pay. A typical cut is from 40 hours a week to 32.

If you do it, don't be surprised if some of your skilled workers start looking hard for another way to earn a living.

Most Difficult Conversation: Tell employee he smells!

When it comes to difficult conversations with employees, which ones cause the most angst for managers?

Firings? Nope.

Explaining why someone didn't get a raise? Guess again.

The most dreaded conversation:

Telling an employee that he or she smells!

And the easiest conversation?

Confronting an employee about having inappropriate photos on his or her computer.

In fact, managers don't mind giving an employee bad news if he or she deserves it. But they squirm when things aren't so cut and dry, says the survey by HR News Update and Communications Update of more than 900 managers and HR professionals. The managers were asked to rate each of 19 difficult conversations on a scale of 1 to 5 with 1 being the least difficult conversation and 5 being the most difficult.

The 5 Most Difficult Conversations (Total percentage those giving ratings of 4 or 5)

1. Telling an employee that he or she smells or has a hygiene problem (78.9%)
2. Telling an employee the company is downsizing and he or she will no longer have a job (73.8%)
3. Informing an employee that he or she is being demoted (68.4%)
4. Telling a hard working, valuable employee (but who doesn't have tremendous talent) that he or she isn't likely to rise any higher in the organization (67.6%)
5. Explaining to an employee this his or her spouse's behavior at a company event was unacceptable (53.4%)

The 9 Least Difficult Conversations (Total percentage those giving ratings of 1 or 2)

1. Confronting an employee who has porn on his or her computer (77.9%)
2. Confronting someone who is spending too much time on MySpace.com, etc. (74.9%)
3. Talking to an employee about begin tardy or missing work (72.9%)
4. Confronting an employee who is job hunting on company time (70.7%)
5. Confronting someone who has stolen from the organization (70.0%)
6. Confronting someone for sending inappropriate email (68.7%)
7. Confronting an employee who's blatantly lied (65.5%)
8. Firing an employee for cause (63.7%)
9. Confronting someone who is spending too much time on the phone (60.3%)

And the 5 Conversations with average ratings:

1. Explaining to an employee why he or she didn't get a promotion
2. Firing an employee for performance
3. Explaining to an employee that his or her clothing is inappropriate for the office
4. Telling a normally excellent employee his or her work is not up to par
5. Explaining to an employee why he or she didn't get a raise

ADDITIONAL HELP:
We've all had some of these “uncomfortable” conversations with employees. To help, you’re invited to check out the Executive Report: Handling Difficult Conversations with Employees: What Every Manager Needs to Know.

Are you using the NEW Form I-9 yet?

If you haven't started using the new Form I-9, better get on the stick. Deadline: Dec. 26, 2007. The Feds have made the first major changes to the form in 20 years. The biggest mistake that most employers make with I-9s - they ask new hires for too much documentation.

Outside its original purpose to control illegal immigration, Form I-9 is now clearly also being used as a security tool to identify which workers are on what work sites and to weed out people with potential ties to terrorist organizations. That creates a host of new liability issues for employers.

However, it’s also illegal to demand a host of documentation from prospective employees who speak with an accent or have foreign-sounding names if Mr. Jones and Miss Smith aren’t subjected to exactly the same process. That would be illegal employment discrimination.

As a result, employers today find themselves in a balancing act. Not only do they have to set their own standards for hiring and determine what could be "constructive knowledge" of the presence of illegal aliens among its workforce, but also how to avoid discrimination situations based on national origin.

ADDITIONAL HELP
You absolutely have to start using the new form, but making sure you're in compliance can be the hardest part. To help, check out the Executive Report: Complete Guide to the New Form I-9: Everything You Need to Know to Ensure Compliance.

Boss can’t spell? You’re lucky!

This might explain a few things. More than a third (35% actually) of entrepreneurs identify themselves as dyslexic, says a London professor. That's staggering when you consider that only 10% of the population is dyslexic.

But it makes sense. The study says dyslexics are:

• more likely than nondsylexics to delegate authority since they're used to getting others to help them read


• excel in oral communication


• extraordinarily creative in maneuvering around problems

Dyslexics have trained from childhood to identify people they can trust to help them. Their willingness to delegate authority gives them a great advantage over nondyslexic entrepreneurs who tend to be control freaks and do everything themselves, says the report in the New York Times.

Dyslexics tend to be hands-on who push very little paper. They lead by talking a lot, not writing memos and reading.

On the other end of the spectrum, only 1% of corporate managers are dyslexic.

Well-known dyslexic entrepreneurs: Richard Branson of Virgin Atlantic Airways; Charles Schwab, founder of the discount brokerage firm; and Paul Orfalea, founder of Kinkos. Orfalea also proudly admits to having Attention Deficit Hyperactivity Disorder.

"I get bored easily and that's a great motivator. I think everyone should have dyslexia and ADD."

What do these high-injury jobs have in common?

Which workers are more likely to suffer injuries on the job that lead to days away from work? The Bureau of Labor Statistics’ (BLS) latest report says the average rate of occupational injuries requiring days away from work (DAFW) in 2006 was 128 per 10,000 workers. These specific occupational categories have high injury rates:

• nursing aides, orderlies and attendants, 526 DAFW


• construction laborers, 488 DAFW


• freight, stock and material movers, 466 DAFW, and


• heavy and tractor-trailer truck drivers, 411 DAFW.

What do these four groups have in common? Sprains and strains are the major causes of their injuries.

BLS says the trunk, including the shoulders and back, is the most common body part affected.

ADDITIONAL INFO:
Even the slightest slip-up in an accident investigation can cost your company. To head off trouble, you're invited to consider the Executive Report: Accident Investigations and the Law: What You Should and Shouldn't Do.

Your next CEO? Women to watch

Interesting report in the Wall Street Journal. The number of women in top corporate jobs (particularly CEOs) has barely budged since 2002. But WSJ's Top 50 Women to Watch in 2008 indicates that the pipeline of talented women ready for top jobs has grown significantly. Read WSJ's report to see who they are.

Ante up: Negotiating “tells” to watch for

Playing poker is lot like negotiating business deals. The best "players" know how to read their opponents. In both worlds, savvy opponents try to act weak or appear uninterested, says Gregory Stebbins, author of PeopleSavvy for Sales Professionals.

These behaviors will tell you a lot about the person sitting across the negotiating table:

• The Stare-down: Often the tactic of the person in the weakest position. He or she tries to appear strong and confident.


• The Uninterested: If they're still at the table, then they're still interested. The uninterested tactic is usually a sign of strength.


• The Shakes: Don't misinterpret trembling, shaking hands as fear. More than likely the person is excited about the way the deal is going and is in a position of strength.


• The Sigh (or Shrug): Another attempt to hide a position of strength.


• The Chatterer: If the person across the table is normally quiet, but is now chatting up a storm, more than likely they're nervous and in a weak position.


• The Quiet Type: Top negotiators avoid unnecessary conversation. Important information often slips out during those asides.

The worst employees of 2007: Can you top ‘em?

What's the worst thing one of your employees has done? Can you top this list from Careerbuilder?

• Bank employees forgot a 73-year old woman was checking her safe deposit box and locked the building and went home. She was found by a cleaning person later that night.


• The postal carrier that was stealing money from birthday cards, etc.


• Employee, unhappy with his wages, decides to make up the difference by pushing his manager out of the way and helping himself to the cash register.


• The West Virginia ambulance driver arrested for driving impaired after running two red lights. He was stopped because he didn't turn his siren on.

See the full list here.

If you can top these, please share them by leaving a comment.

Weird business stories of the year

There's so much depressing business news out there, you could probably use a smile right about now.  So how about the weirdest business stories of the year! CNN lists the 15 weirdest of the year. A sampling:

• Alleged robber asks victim out for a date


• Employee takes 1 million screws home from factory


• Eau de Lawsuit: Woman sues over scent


• Workers killed after seeking raises


• 4 women fired for gossiping

Check the story for all 15.

Flying high - and IMing all the way

Not sure if this is good news or bad news. Starting next week, business travelers on JetBlue will be able to e-mail and IM in flight, reports the N.Y. Times. The No Bull Blog thinks most of us are too connected. We spend too much time "communicating" and not enough contemplating. But for execs who can't survive a couple of hours without "checking in," your prayers have been answered.