A CEO and an independent CPA explain some advantages of having financial expertise provided out-of-house.
In only nine years, John Cwik's manufacturing company, Custom Window Systems, in Ocala, Fla., grew to $6.5 million in sales. The secret of his success? "My relationship with our company's outside certified public accountant, Michael Berryhill," Cwik responds. "We speak almost every day, and I consider him one of my most trusted business advisers. The company never could have grown to this point without him."
Back in the mid-1980s, those comments would have surprised even Cwik himself. "When the company was very young, I thought all we needed was an internal bookkeeper," Cwik recalls. "I hired Michael because we needed someone to compile our financial results for tax purposes."
But that arrangement soon proved inadequate, and Berryhill became more involved in the company. "Over the past eight years, Custom Window Systems averaged a 25% annual growth rate," the CPA notes. "That's when businesses are at their most vulnerable."
Why is fast growth problematic? "CEOs are usually so intent on top-line results that they don't pay attention to their bottom line or cash flow," Berryhill says. "Without someone watching the way rising costs of material, labor, and other needs affected revenue growth and profitability, Custom Window could have gotten into trouble very easily."
Some companies bring financial expertise in-house by hiring a midlevel accountant or even a chief financial officer. But Cwik decided that an outsider's vantage point could prove especially valuable. "Michael and his team visit our plant regularly, and they notice problems -- or see opportunities -- that we just don't notice because we're too close," Cwik says. The two men also stay in touch by telephone and through Cwik's visits to the CPA's nearby firm, Berryhill, Hoffman & Co.
"It's my job not only to prepare financial reports but also to ask John a lot of questions that he might not bother to ask himself," Berryhill says. "I need to make sure that he understands the rationale behind everything he and the company are doing." As an outsider, Berryhill adopts a somewhat iconoclastic attitude in his efforts to keep Custom Window on the most profitable growth track. Over the past year, for example, the CPA has challenged the company's most fundamental goal: fast growth. "I've been trying to help John see that slowing down can actually help Custom Window raise its profitability," Berryhill says.
At this point, Cwik is a convert, although he emphasizes that "it's hard to slow a company that's been growing this fast for this long." Still, he adds, "I can see that if we limit sales and cut overtime, we'll make more money in the end."