Real Savings Comes From Small Savings

Having created hundreds of budgets for corporations and organizations, and consulted regarding finances to even more, I have observed that one of the most prevalent mindsets is that saving a little bit of money is insignificant, because of the overall size of the financial picture. However, merely because that is a prevalent attitude does not make it either correct or accurate, and in the cases of either reducing or closing deficits, or balancing budgets, is absolutely inaccurate.

It is quite rare, unless an organization decides upon "Draculean" cuts in a specific area, or discontinued certain limited time or one time expenditures, that most of the cost savings can be found by making large "cuts." In my experience, I have found that a large number of small reductions in numerous areas, while "counting nickels and dimes" is indeed the most effective way of developing a dramatically reduced amount of total expenditures.

In my more than three decades of involvement in this activity, I have almost routinely been able to save enormous sums merely by evaluating every expense, and seeing if there is a better way, a more effective way, and a less expensive way of achieving a goal. Many fiscal officers of organizations, because they are predominantly untrained or inadequately trained in the fiscal necessities of organizational management, appear to fail to grasp both the simplicity and methodology required.

I have been often asked if this is so simple, and it works, why don't more fiscal leaders utilize this technique? There is never a simple reason to explain why individuals do or do not do something in a specific way. I, however, tend to believe that the "small multiple cut" method requires more evaluation, more effort, and a greater amount of understanding than looking to just make big cuts. Many years ago, one of my bosses, who was the Executive Vice President of a financial services company, enjoyed using the adage, "You know how you eat the elephant? One bite at a time!"

I have written and spoken for many years about the dire need for organizations to prioritize and emphasize leadership training, development and qualification. As essential as overall leadership development is, it is far more dangerous when fiscal officers are ill-prepared than when others are. Organizations without control of their finances, and without financial and fiscal stability, rarely flourish.

Training Basics For Organization's Fiscal Leaders

Many organizations face unnecessary financial difficulties because the individuals in fiscal or financial leadership capacities are often untrained, and thus not optimally qualified for the position. In my three decades of involvement in these areas, I have discovered that, while most of the people that ascend to these positions are intelligent and well meaning, as well as educated, they do not fully understand all the responsibilities and duties involved with fiscal officer leadership.

Because of this, organizations should develop a professionally designed training program specifically geared to individuals who wish to be fiscal officers. Some of the items that these individuals should be trained in, include:

(1) Budget creation and familiarity are necessities. These individuals should understand what "zero-based" budgeting is, and its important applications to responsible fiscal guidance. Individuals should also be trained to properly read and interpret budgets, and to "read through" the voids in most budgets. Fiscal leaders must also understand items that should "red flag" potential problem areas. "Red flagging" means identifying portions of a budget that appear to conflict with reality, either because revenue figures are too optimistic, or expense figures too low. Budgeting should always underestimate revenues, while working with worst case expense scenarios. Responsible budgets should also always includes reserves for contingencies, such as maintenance, over-runs, etc.

(2) Fiscal officers must be familiar with the basics of negotiation. While every fiscal office need not be an expert negotiator, a fiscal officer must understand what is needed to be an effective negotiator, and have the ability to effectively and properly select a negotiator for his organization, that he can depend upon.

(3) Another area that must be understood is a basic understanding of contracts, including items such as "out clauses," liabilities, responsibilities, etc. A fiscal officer need not be the one to draw up a contract (that should be performed by a legal professional), but he should and must be able to understand what a contract contains, interpret it correctly, not make unwarranted assumptions, and have the ability to effectively communicate with his legal professional as to what terms and conditions he wants included in any contract. Fiscal officers must always insist upon maximum possible protections for his organization.

(4) A basic understanding of bookkeeping is another necessity. Training must be taken in what proper bookkeeping includes, and why. A fiscal officer must also learn ways to protect the organization's funds from improperly handling or mishandling by employees or staff members. I am constantly "shocked" when I observe organizations that do not use strict protections in terms of check signatories and limitations. Training must also be given on how and why a thorough invoicing and receipt system is a must!

(5) How an organization selects its accountant, and what type of review might be needed is another area of training that is important. Fiscal leaders must understand when a review or an audit is more appropriate, and in certain instances, when an audit might even be mandated by law. Since audits are far more expensive than reviews, it is important not to unnecessarily use audits, when they will not be needed for the specific purpose. These leaders must also be familiar with what to ask of an accountant, and what might be needed to select the best accountant for the organization's needs.

(6) Fiscal leaders must also be trained in interpreting all types of financial statements. They must also understand interest rates, dividends, prudent investing, and fiscal appropriateness.

Of course, these items are just a sampling of the type of training needed, and that should be required. For example, if the organization holds major events such as large meetings, conferences or conventions, these leaders must understand the financial necessities and ramifications involved.

In the long run, organizations that address their fiscal leadership maintain stronger financial conditions, and that optimizes their chances of achieving their desired mission.