Our Man in the Field: Security for Profit?

Translating your security budget into a form the accounting staff can understand and use


Speaking Bean
Speaking bean is a matter of simple understanding. Accounting people have their own language and their own methods of calculating, and they tend to look at outsiders as uneducated, financially inept turkeys. Accounting folks view spenders as folks that are trying to affect the profits with unorthodox and unnecessary capital spending. The bottom line is that unless it is presented properly, security spending is viewed as an expense.

So, you need to learn some things, such as the language, and their ideas.

First, you need to know the company's fiscal year. This is the time that the company books start a new year, and this moment is not necessarily attached to New Year's Day and fizzing bottles of champagne. It is the time, however, that all new budgets are put into play. Your big money requests need to arrive an average of 90 to 120 days prior to the end of the fiscal year in order for you to have time to present the case for your budget.

What is the debt to equity ratio? This is a number that is calculated against the cost of an object and its potential earnings. If you want to spend $20 for a $10 diamond, your debt to equity would be 2:1. That means you have two parts debt to one part asset ? the diamond isn't a good investment. If, however, the diamond increases in value, the debt to equity ratio would also change on the long term and could prove to be a good investment. Show how the debt will be offset by the value of an object or project and then determine if the investment is worthwhile.

Concern yourself with gross profit and net profit next. Gross profit is the money that is left over after the parts or fixed costs are removed. Net profit is the money that is left after all other expenses are removed. If you have a tool that you are selling for $20 and you have $2 worth of parts invested in making the tool, your gross profit is $18. After you take out the cost of production (salaries, utilities, rent, etc.) you have your net profit. The net goes to the bank!

What is the break-even point of your venture? Ask at what point you plan to have the debt paid off and start to work for profit. There is technically no net profit until the debt is paid off.

So at this point you are all looking cross-eyed and wondering what rock I walked out from under. Hang in there. Let's put together a plan.

First, lay out your system or system upgrade. Come to an upfront cost of installation. Now add your maintenance contract times five. Add these together and you have your five year cost. Notice that it is a bigger number than what you originally asked the bean counters for. Now you are being realistic and intelligent about the true cost of your security plan. The bean counters score you a point for being upfront.

Next, if you have guards and you are planning to add or remove any because of your upgrades, add in or subtract the cost of that guard for five years. Do this and the bean counters score you two more points.

Now, look at your history of losses. How much are they over the past three years? How much will your upgrade or new system cut these back? Be realistic and honest. Take this number times five and subtract it from your five-year costs. The bean counters score you three points. Keep this attitude going throughout your spreadsheet and you have created a profit/loss (P/L) statement.

Next write out the processes and plans of your security upgrade or system in plain language and attach these to your five-year P/L statement. Pretend that it is your money and you will want to account for everything. Make a few copies (minus the P/L statement) and distribute your plan to key people in the corporate office. Take the numbers package to the accounting department. If you can, deliver everything personally with a handshake and smile. A quick explanation should follow, and then you're done. You get a couple extra points from the bean counters.

OK, there is a bit more to the whole project, and I make it easy to the point of absurdity, but you can show cash profit and you can get your budgets approved.

Learn to speak bean and operate within their system. Knowing the points of the game can make you a player. If you need help, call me. With today's cell phone rates, the call will be cheap and the advice is usually free.