Yep, I’m back the saddle again. After the holiday break I am back out doing some financial statements training. This year I started out with a keynote luncheon for the ACFE or the Association of Certified Fraud Examiners in Dallas Texas. Sounds exciting right? Well of course it was.
It turns out that many of the examiners in this group are from law enforcement and do not have a formal financial background. On the other hand, there were examiners in the group that were seasoned finance professionals which made for an interesting combination.
I focused my remarks on the income statement and EBITDA. In that discussion we talked about the concept of cash flow and depreciation/amortization. What an exciting topic! I told a few stories I like about Worldcom and Warren Buffett which fit right into this topic. One key point I made that resonated with the group is that in many cases financial fraud is not that complex but rather simple. We also learn from the Worldcom example that many high level executives don’t really understand basic finance. At the Business Literacy Institute (BLI) we created a simple 21 question financial intelligence assessment and had managers at companies with at least 150 employees take it. The average score was 38%. (Results of that test are presented in a Harvard Business Review forethought article published in October 2009).
Another interesting point that came out of the session involved my manufacturing business, Setpoint Systems. At Setpoint we are completely open book. In other words we share income statement performance weekly and full statements every month. We share the numbers, train our people on what they mean and provide bonuses on performance. As I discussed our business the group realized that sharing numbers with employees and training them on what they mean is a great way to lower the possibility of fraud. Many eyes on the financials make fraud less likely. After the session a couple of attendees were interested in using open book concepts in their organizations.
It was quick trip to the Dallas area and I did not get a chance to take in the culinary delights of the area on this trip. I’m writing to you from the DFW TGI Friday….so nothing exciting there. I would like to make a shout out to the AFCE Dallas chapter President Tali Ploetz. Tali purchased our Financial Intelligence book, the graphic novel and our online training. She liked our stuff and had me come and speak. Thanks Tali, it was truly a wonderful day for finance.