In this episode of The Sound of Automation podcast, we talk to Wipfli partners Sean LaFortune and Brett Polglaze as they discuss managing and optimizing your business processes and financial operations for real-time insights, improved decision-making and increased operational efficiency.
Transcript:
Sean LaFortune 00:00
One of the very lowest hanging pieces of fruit that you can pluck when it comes to increasing your enterprise value is to take a look at your own internal structure and say to yourself, is there room for improvement? Can we take a look at what our ERP system is actually doing? Can we automate some processes so that we can take the human element out of it? And how repeatable are these processes? Those are really, really important questions that need to be answered.
And if the answer ends up becoming very people centric, as in the people that you have in place right now are the reason why processes are running correctly and smoothly, that presents a great deal of risk for a potential buyer. And it's one of the quickest ways that that buyer can reduce that acquisition price.
Intro/Outro Narrator 00:41
Welcome to The Sound Automation, brought to you by Wipfli, a top 20 advisory and accounting firm.
Bryan Powrozek 00:59
Hello and welcome to The Sound of Automation. I'm your host, Bryan Powrozek. On today's episode we're going to dive a little bit into anybody that's out there in the in the manufacturing community knows staffing is a big challenge and so we're going to we're going to try and present some some different options that might be available as as your company's trying to grow and trying to build some ways to look at how to get around some of those staffing challenges that that you might be running into.
So joining me today are two of my colleagues, Brett Polglais and Sean LaFortune. Before we get into the to the meat of the topic I figured give you both a chance to introduce yourselves and and kind of talk about some of the ways that that you help companies in this area.
So Brett you're first up on my screen so how about you want to go first?
Brett Polglaze 01:41
Thanks, Bryan. I'm Brett Polglaze. I'm a partner here at Wipfli, and I lead the group at Wipfli in our management consulting practice that we call operations.
In operations, we're really focused on our clients' business processes, helping them create a streamlined workflow, ultimately driving towards an efficient and effective process. What we're finding today along those lines, Bryan, is people are really interested in improving a process, not so much to make that process quicker, faster, just for quick and faster sake, but really because there's just a little bit of a talent shortage out there. And so the old adage of we can hire more people to grow, to scale along the lines of that is not really holding true anymore. So we need to think about how technology, how effective process design, how we really creatively think about leveraging tools like artificial intelligence, automation, et cetera, and really helps us overcome some of those lack of people, available people, frankly, and to be able to scale into that new opportunities that exist.
Bryan Powrozek 02:51
Excellent. Awesome. Thanks Brett and Sean, how about yourself?
Sean LaFortune 02:54
Yeah, my name is Sean LaFortune, and I'm a partner in our CAS service line, CAS being "client advisory service". Think about all things outsourced, right? When you think about your back office operations, certainly we represent accounting and finance. And my particular role is sort of segregated to the CFO's chair.
But CFO's controller, accounting manager support, as well as a host of other services that sort of fall under our umbrella from human resources to tech support, IT support managed services. Really, if you can think of a back office operation, we can support it and speak directly to Brett's points about that talent shortage. And really, ever since the COVID lockdowns back in 2020, people discovered that, you know, you were capable and able to be able to outsource a lot of functions that a lot of people for a long time really felt like had to be in office operations, accounting and finance being primary among those. And when it comes to talent shortage and looking at the lack of people that are available to be able to fill some of those roles in accounting and finance, outsourcing becomes sort of a very key component for them that not only can be relatively cost effective to hiring a full time person, but really take away some of some of the more key items that make operating a business in the back office difficult, like turnover, process automation, process improvements and really when it comes down to the expertise of the people sitting in those seats.
Bryan Powrozek 04:23
Well, thank you both for coming on. And yeah, obviously, you both touched on it there. But there's elements of the work you do that impact the staffing needs of a company and the ability of that company to kind of get the most out of the employees. So Sean, maybe let's start with you on the people side of things, right? Because I think that that's kind of at the core of all this.
I was on a webinar earlier today, and the one speaker talked about how, basically, in the next, by the end of this decade, 2030, all of the baby boomers will be at retirement age. And so you take that whole population out of the workforce. And so what are the ways that you see companies trying to address those staffing shortages, right? I think the traditional mindset is, oh, we lost a person in our accounting team, or our controller left, so we're just going to go out and hire a new controller. So what are you seeing within your client base?
Sean LaFortune 05:25
Very much a lot of that. I, in particular, work in a space called MRD, Manufacturing Retail Distribution. And what we've seen a lot of is when it came to the support in the back office, a lot of people kind of grew up in those positions and grew up in those organizations. So much of the time we saw sort of administrative support also sort of fill the accounting manager's desk over the years, right?
The accounts payable, accounts receivable. And then as over time, as the needs for better financial information became more and more apparent, you watch some of these people sort of stretch a little bit and try to fill into different roles, like a sort of a low-level controller or sometimes even a very, very low-level CFO. And as these businesses have expanded and the need for relevant and accurate financial information became more and more important, especially as some of these businesses took on additional shareholders or had other stakeholders into the mix with banking representations and private equity, the need for that information grew. But at the same time, they never really grew that side of their back office operation. They really just kind of piled more and more onto one person's plate. And then as time passed, you had somebody sitting in that chair 15, 20, 25 years. Well, all of a sudden, you not only have a lot of tribal knowledge that resides with that one individual, but really you have processes that have aged out, right? You have a lot of internal control procedures that really could stand from a lot of automation, a lot of updating. And as different companies go out to market to try and find talent to replace these people, they're finding talent shortages in abundance, especially in the accounting and finance sort of industry, if you will. And after it was discovered, COVID, that a lot of this work really could be sent home. A lot of people discovered, well, if it could be sent home, it can also be outsourced. And that's where we can kind of come in. We can learn the process and procedure. We can look for ways to be able to automate those processes. And we can take away that key component that they have of turnover, all the while working with a fully licensed and accredited CPA firm to know that the information that they're going to get is going to be reliable.
Bryan Powrozek 07:37
Yeah, you know, it's interesting something you mentioned there and something I, you know, have a lot of conversations with our clients about and when I'm at different trade shows and things like that is, you know, exactly what you kind of mentioned, right? If, if you hired somebody, let's say you hired somebody out of a public accounting firm to be your new controller, like they kind of get into that, that bubble, right, of working within the company and, and, you know, they continue to do professional education, things like that.
But the learning curve gets harder when you're, you're kind of in that environment, whereas, you know, looking at the outsourcing model, you know, you and your team are continually, you know, looking at what's the next, you know, the next tool that we can leverage, a way we can leverage and way to improve processes. So it's a nice benefit of, you know, going outside is that, you know, you have the teams that are focused on this and building those skills on a regular basis.
Sean LaFortune 08:30
Yeah. And that's, that's obviously a very key component, right? When you're working with, with a professional services firm, there's a lot of things that come with that, including, you know, sort of the professional delivery of those services, which means staying on top of not only the relevant laws that are in place, but also having access to a very robust and deep back bench to be able to support all of the various law changes surrounding not only taxation, but also when you're talking about sales tax related issues at the state level. We have an entire robust practice.
He referred to assault, which is state and local income tax, where there are a lot of things that largely would have just kind of gotten by an individual controller sitting in one chair, as opposed to being able to have access to that deep bench of professionals that are continuously supporting the organization.
Bryan Powrozek 09:20
And I guess, is this kind of an all or nothing strategy, that either you hire the person internal, or you're outsourcing it, or is there a way that you can kind of augment maybe a couple areas within your process if needed?
Sean LaFortune 09:38
100%. Yeah, all engagements are custom, right? So if you have somebody internally that, you know, you think is performing well, but there's just some key components or some areas that maybe we would like to see some upscaling in, you know, our teams can come in and help coach that individual. It does not necessarily have to be a situation where we take over the work for that person.
We can also step into different roles that are appropriate, right? So if you have somebody at the accounting and finance level and on the lowest levels, accounts payable, accounts receivable, bank reconciliations, our team can kind of come in and help bolster and button up the month end processing so that management's getting timely reports. So every engagement has sort of a full gamut of capability to customize that engagement. And really, at the end of the day, whatever your need is, is something that we can take a look and see if there's some sort of solution that we can provide for that team. It's definitely not an all or nothing. You never have to feel like I either go 100% this direction or I have to stay where I'm at.
Bryan Powrozek 10:39
Well, yeah, and that's, you know, I think the, you know, again, working with business owners and hearing them talk, you know, they, particularly the small to mid-sized market, right, where they're trying to establish, you know, grow and become more professional, you know, and oftentimes, you know, I work with a lot of automation companies, right? And they've, the owner came up, they're a technical person, you know, by background, they've learned all the other things, but they haven't been able to build out and kind of establish, you know, the full accounting processes and things like that.
And so, so having, you know, that's, that's kind of the first, I wouldn't say the first step, right? But when you're, if I'm a business owner, considering outsourcing this or bringing in somebody to augment my staff, you know, it's kind of making sure you have the process in place or establish some processes, kind of the first step in bringing somebody in.
Sean LaFortune 11:38
It can be a mix of things, right? And that's actually where we lean very heavily on Brett and his team, right? So process and procedure, for sure we have teams in place that we have a series of best practices, but if we really want to kind of button that side of the house up, we really like to lean heavily on Brett's team to be able to bring process and procedure in place when we're looking for key ways to automate processes, or we're looking for alternative ways to take a look at sort of accomplishing the same thing, but in a different manner that's more efficient and effective.
But there are several places we will work with where they have very strong internal control. And there's some places where the internal control is almost non-existent. And so each individual engagement kind of stands on its own from its own assessment.
Bryan Powrozek 12:24
So I guess, Brett, maybe to kind of pivot to you then and talk a bit about the establishing some of these processes. I guess, how does your team kind of look at that or approach that if, like I said, I'm a business owner. I know that I want to raise the level of professionalism within my accounting and finance function. I guess, how do they go about looking into that? And what's kind of the starting points for your team?
Brett Polglaze 12:53
Sure. This is really fun project types for our team is when we get to collaborate with Sean and his outsourced accounting team as well. We can kind of be the first boots on the ground, if you will, in talking to the business. What we try to do is just truly understand what's really happening.
Organizations may have policy procedures. They may have a manual of how you do things, but what you quickly uncover after talking with folks, setting them at ease a little bit, that we're here to help document what they're doing and help make their jobs a little bit easier, is you get an understanding of what it truly takes to get the job done on a day-to-day basis. A lot of times, people are doing a lot of work in the margins of those manuals, existing procedures, if you will. What we try to do is just really leverage and lean back on some of our process improvement theory and methodology that a lot of our projects are steeped in and just clearly and methodically document what does it take to get the job done. We start with a series of interviews. We look at using the tools of a value stream mapping. Step one, step two, step three. Of course, all of that is really steeped in an understanding of what are the outcomes they're trying to drive to. I think one of the things that Sean's team and my team do a really good job of collaborating on is if we have a role or a function, a controller, for instance, or we have a team, accounts payable or an entire accounting back office, we truly try to define what the end result is we're searching for. That then guides us in what are those questions? What level of detail do we need to dive into? What are the groups or individuals that we need to speak to? Then leveraging, again, some of those value stream mapping techniques, just getting very methodical in recording what's actually happening.
Bryan Powrozek 14:48
Yeah, and then that's, you know, obviously, that, you know, kind of plays back onto the people side of things, too, right? Because then, you know, I think I think I've seen that at some clients where, you know, maybe they're thinking, Oh, I if I had a controller, right, that would really, you know, solve all my problems.
But then as you really get into it, and you start looking at the process and where things are falling over, you know, they need more help on the on the bookkeeping side or someone to oversee the bookkeeping team on a day to day basis. And so, so as you're going through that, that kind of helps them inform the people component that Sean was talking about, right? Who you need, you know, how many people you need in those different roles, etc.
Brett Polglaze 15:28
Yeah, Bryan, one of the things that's interesting and that is an outcome of a lot of our conversations with our clients when we're documenting process is it's not so much that the people that we work with, their teams that they have capability issues, meaning they don't have the skills to execute the work of a bookkeeper or a controller or a CFO. It's that they don't have the capacity. There's just not enough time, hours in the day to get all those tasks done.
And what we found is, you know, many times we'll talk to a leader and they'll say, Oh, you know, Sean, he's a great guy. But he just can't get the job done on time. And I'm wondering if he's the right person for the job. And what we uncover and find out is, he's absolutely suited to do the job. And because he cares so much about that organization, he keeps saying yes, to new tasks when they come up. And he never has been offloaded or delegated anything that's on his plate, ultimately taking on too many tasks to be filled within a normal, normal day, normal week, normal month.
So we're able to uncover some of those areas as well, helping organizations understand what an optimal organizational structure is. Sometimes we can do some training, cross training, reassignment of roles and responsibilities, and or bringing in Sean and team to help augment that, that staff to kind of fully build out the needs of that, that accounting organization.
Bryan Powrozek 16:51
Excellent, and I'm guessing probably the same is true on the technology side, right? That if you're looking at it and you're saying, hey, you know, yeah, we can continue running these systems you have today, or maybe they don't even have a system, right? They still have the accounting person, you know, running checks and the owner signing them and things like that.
You know, I'm assuming that that process work you're doing also then can identify maybe there's a technology that they could implement that would help streamline or improve their overall function.
Brett Polglaze 17:25
Yeah, absolutely, Bryan. I heard this acronym 15 years ago, PPT, People, Process, and Technology, and it kind of looks like a three-legged stool. If any one of those components is not holding up or level with the other two components, that stool will tip over.
So there are many times where we'll be asked to come in and work with an organization to evaluate its people and its process. And I'll report back that the people are engaged, very smart, well-trained, roles and responsibilities are defined well. We'll look at the process and we'll say, you know what, that process is sound. There's appropriate control. It's meeting the objectives of the organization, but frankly, the technology is failing you. And that's what's really the hindrance to getting that job done rather than technology is a tool and should be a catalyst for us executing work in an organization. So that's where we start diving into then the assessment and the evaluation of technology platforms that are supporting the people and process of an organization.
Bryan Powrozek 18:28
And that in and of itself is a whole specialty, right? Because I think that having seen a number of my clients go through ERP selections or other processes, it's interesting to me the number of business owners and companies that try to go it alone, right?
Or they say, oh, we're gonna bring in the five people that touch this application the most and let them kind of sort it out. But almost to the point Sean made about, you know, one of the benefits of outsourcing, you know, some of those functions is that you're getting people who specialize in this area. The same can be said of, you know, of making sure you have the right technology, you know, stack in place, correct?
Brett Polglaze 19:12
Yeah, Bryan, leveraging experts to help you do a process that you maybe only do once or twice every decade, gosh, maybe once or twice every two decades, like pick new software is definitely worth the investment. Mitigates the risk that you choose the wrong package.
My background prior to my current role here was I did spend a lot of time implementing large ERP systems, enterprise resource planning systems into generally the manufacturing space. And that is a very difficult and disruptive project for an organization to undertake. An ERP system will almost touch everyone in an organization. It changes and upends those day-to-day work tasks that people do. It adds project work on top of already busy days and it can get frustrating. And my experience there was it's not so much that the tools didn't have the needs of a business, it's that the expectations were mismatched. An organization's expectation of a new ERP system was unrealistic or wasn't clearly communicated or those business outcomes weren't given to that vendor that was helping them implement XYZ ERP package. And that's where the misses happen. That's where you hear of cost overruns or rework or we need to go ahead and optimize the system after we go live and it's kind of a fire drill at that point. I believe that effective evaluation of software can really mitigate the risk of a miss on your larger spend, which is that ERP implementation.
Couple of the tips and tricks we ask people to think about is clearly understand what's driving the need to change. Software is sunsetting, we're growing, we've outpaced the capabilities or frankly, it's just aged technology. What does that software, that ERP system enable you to do? What are the business outcomes you're trying to drive? Or sometimes people lose sight of this. What are the competitive advantage processes that your business brings to the marketplace? Why do people come and work with you? People tend to treat every feature and function in an ERP the same in evaluation. And I believe that you need to focus on what are your core competencies and your competitive advantage processes and evaluate software through that lens. Which of those packages is gonna help you execute at a very high level, those things that make you special in the market.
Bryan Powrozek 21:33
Yeah, no, I agree completely. So let's, I guess last point then to kind of pull this all together, cause I know we started this off by talking about some strategies, which I think the outsourcing and getting your process in place will help tackle potentially some of the shortfall in resources.
But something that came up during our planning for this that I thought was important for listeners to hear is there's value to undertaking this activity beyond just the improvement you're gonna see in performance of your organization, right? Even if you go through the whole process mapping and you decide, okay, we're still gonna hire internally, the company is gonna function better, it's gonna function more efficiently, and you're ultimately gonna be able to raise the value of the enterprise, because it's going to become a more attractive business to a potential buyer. So Sean, maybe if you wouldn't mind just sharing some of your insights and your thoughts on that, as we were talking during the planning, just on how tackling some of these people issues in a strategic manner like this can ultimately really drive the value of your enterprise higher.
Sean LaFortune 22:52
If you're entertaining the idea of a potential sale of your business, you know, typically we hear a lot of business owners, they love the term three to five years, right? Every time you ask a business owner, when are you going to sell your business, they're all three to five years.
But as they contemplate that sale, right, there's a couple of ways that they can go about it. Obviously, if they'd like to pass it along to the next generation, that's a very different conversation than it is to entertain a sale from the outside. But one of the easiest and quickest ways that a savvy buyer who's coming to the table who's done this exercise before is going to be able to reduce your enterprise value is to start to look at some of the internal control structure that you have in place when it comes to the accounting and finance function. Because if they don't have reliable, repeatable processes from an internal control standpoint when it comes to the finances, there's a built-in inherent risk, right? And really, what it comes down to is that you want to be able to, as an organization, take away as many risk factors to a potential buyer as you can before they can even get to the table. Because as they start to dissect and peel apart that internal control structure that you have, if in fact they find that some processes just are not buttoned up, they're not necessarily going to dive in and start trying to peel apart all the individual transactions. They're going to look at it from a risk profile and say, nope, this is what we determine our risk factor to be based on the information that we have. And so as a result, we're going to remove X number of X from your X times EBITDA, right? And so they're just simply going to come in and say, this is how much we're going to reduce our purchase price by, now prove us wrong that these processes are actually in place.
So one of the very lowest hanging pieces of fruit that you can pluck when it comes to increasing your enterprise value, you talk about revenue streams, you talk about marketing efforts, you talk about cost mitigation. You can talk about suppliers and where you're procuring all of your material from. But one of the easiest and quickest ways is to take a look at your own internal structure and say to yourself, is there room for improvement? Can we take a look at what our ERP system is actually doing? Can we automate some processes so that we can take the human element out of it? How do we find a way to not create human forced error when it comes to running my accounting and finance operation? And how quickly can we get reliable information out of our system on a month end basis? And how repeatable are these processes? If we had somebody in our accounting and finance team find a new job or just decide to leave their position, are we able to backfill that position on the fly or are we watching a lot of tribal knowledge walk out the back door? Those are really, really important questions that need to be answered. And if the answer ends up becoming very people centric, as in the people that you have in place right now are the reason why processes are running correctly and smoothly, that presents a great deal of risk for a potential buyer.
And it's one of the quickest ways that that buyer can reduce that acquisition price.
Brett Polglaze 25:47
a little bit there Sean and Bryan. Buyers like systems.
Systems can be explained. Systems have a true criteria. We can see when a fault exists and generally a system will give you a repeatable answer. That's a well-oiled process as well.
Bryan Powrozek 26:04
Yeah, and I think that that's maybe the paradigm shift. And I'm not going to say that all business owners and leaders need to make that shift.
I think some understand it. But having talked to enough who look at it and say, oh, but that new ERP is going to cost me X. Or it's going to bring somebody in to work on these processes. It's going to cost me this. And just knowing that there is, yeah, you want a good ROI on it. But you've got to think about the return in terms of the enterprise value you're creating and making this business. Again, even if you're not selling in three to five years, you're selling in 10 years or whatever, it's still, in my opinion, just a great metric to keep in the back of your mind of the am I, are the decisions I'm making now, the strategic decisions I'm making driving enterprise value and making this company more attractive to a prospective buyer. I mean, that's not the only decision-making criteria. But it's something that business owners should keep in mind.
Sean LaFortune 27:06
Well, and to jump in and piggyback off that point, if you do not have reliable information, it makes it all that more difficult for a business owner to be able to be making appropriate decisions when it comes to what strategy to employ. Is there going to be a new product launch? Is there a new revenue stream? Is there a new market that we want to jump into? Is there a capex spend, a capital expenditure that we want to undertake so that we can get some significant return on placing a major piece of machinery into service? All of marketing strategies, all of those decisions oftentimes have to be driven off of good historical information. And if you haven't put processes in place to be able to derive that information, it just handicaps a business owner's ability to be able to make those future decisions.
And all of that ties together when you're trying to drive that enterprise value, which isn't just giving consideration to a sale, right? It has to do with the value that the business owner is ultimately driving to themselves and the whole reason why they're in business in the first place.
Brett Polglaze 28:08
Good point there, Sean. I didn't want people to think that the only way to leverage some of these thoughts was if you're positioning yourself for a sale.
Even just employing the right team, the right people to do the right jobs, effective systems and processes, that can eliminate indirect spend. And if we look at non-value add indirect spend, we can eliminate some of that and still get the throughput of the business or grow the throughput of the business. That indirect spend savings will drop right to the bottom line.
Bryan Powrozek 28:37
Actually, yeah, no, I think those are those are all great points and we're coming up on time here, but but Sean and Brett, I appreciate you both coming on and sharing your insights. As always, if if anything, that's, you know, Brett or Sean, you know, mentioned in the in the podcast is kind of hits home for you and it's something that you as a business owner have been struggling with, you know, go to Wipfli.com, you'll be able to track Brett and Sean down both through there. And and I appreciate you both taking some time and coming on the podcast today.
Intro/Outro Narrator 29:09
Thank you for tuning in. Don't forget to like us, subscribe, and share on social. To learn more about Wipfli, visit us at Wipfli.com. That's W-I-P-F-L-I.com. Perspective changes everything.
