Email Jim at jim.thompson@ipulpmedia.com

"To everything there is a season, and a time to every purpose under heaven..." Ecclesiastes Chapter 3.

Sorry, I can tell you a time not to innovate. It is when you are tempted to play with the financial books.

This never turns out well. Well known players that tried to play with the books are Charles Ponzi, Jeffrey Skilling (Enron), Bernard Ebbers (WorldCom), Bernie Madoff, the pastor's wife at a church we previously attended, and the managers of a papermill that I walked into to assume duties.

In the last case, there were 8,000 tons of fictitious inventory in a mill making only 9,000 tons per month.

There is never a season in which to innovate when it comes to financial records.

Count your raw materials inventory every day. Count your finished goods inventory every day. And calculate everything in between every day.

Today you can do all this with computers and software. That is fine, but there can still be cheating. If you use computers and software to do this, and most likely you do, at least physically, manually count it once per week.

One day's fudging of production turns into two. Two turns into a week. A week turns into a month. You get the idea. Soon, you are in so deep you can never get out.

Stop. What is causing you to want to cheat is poor performance or poor market conditions. Adjust your behavior to fix the root cause problem.

In the mill that was described above, there was a carton plant attached. It had a modern warehouse loaded with product custom ordered by large, internationally recognized customers. Why was it sitting there? The contracts clearly stated that the customers had to take it after thirty days and had to pay for it in sixty. Enforcing these terms was the responsibility of the mill's sales staff. Once this was recognized by the new management, it was fixed.

The other side of the same coin is corporate edicts that you pay your bills in 60 or 90 days or more. This is another falsehood. In the long run, your suppliers will either raise their prices to cover their carrying costs or choose not to do business with you. This is a stupid way to do business.

Run an honest business. Count your inventories daily. Accept and offer thirty-day terms. And don't ever touch the books unless you are in the accounting department.

Be safe and we will talk next week.

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