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Proper Accounting Practices Can Account for Greater Success




One of the educational sessions held during Honeywell’s First Alert Professional Convention at the JW Marriott Orlando Grande Lakes Resort Nov. 13-16 was “Ensuring Your Company’s Financial Health.” The class, led by Scottsdale, Ariz.-based Safeguard Security and Communications CEO and SECURITY SALES & INTEGRATION’s Editorial Advisory Board member John Jennings, reviewed the critical components of a security company’s financial statements.

This 75-minute session was brought alive by Jennings, a lively and engaging speaker who has grown his company 10-fold since the early 1990s. He opened up the discussion by invoking the wisdom and pertinence of the Serenity Prayer: God, give us grace to accept with serenity the things that cannot be changed, courage to change the things that should be changed, and the wisdom to distinguish the one from the other. What really helped raise the presentation above typical fare was Jennings’ willingness to let his own company’s actual financial statements serve as demonstration tools. He even offered to send them to whatever attendees were interested in them. Talk about nothing to hide!

John Jennings used his company as an example to illustrate sound security finance practices.

“You can’t track what you cannot measure,” said Jennings as he stressed the folly of flying by the seat of your pants as so many smaller security companies tend to do. “Cash flow should always be your No. 1 concern,” he said. “Look for the trends and then incorporate those metrics into how you operate your business.”

Some of the key calculations: Current Ratio (Current Assets / Current Liabilities), which Jennings said was the most important ratio; and the Creation Multiple (Net Installations Loss / RMR Created, which he said, “You’re OK with a figure of 20 months or less for your creation multiple.”

Among the other sage advice offered up by Jennings was that successful companies are those that bring in at least $100,000 in revenue for every full-time employee. “Do not take on any project worth more than 10 percent of your current business,” Jennings warned. He said doing so places a company in jeopardy because of the manpower and financial resources typically required, especially if it turns out to an insolvent or overly demanding customer.

Hopefully some of the sound financial management techniques featured in this course sunk in with most of the attendees, despite the security industry’s roots as small, entrepreneurial operators who may possess keen instincts but not necessarily formal business accounting expertise. Although an industry veteran I spoke with afterward said, “You know, that’s all well and good but I have always just fine doing things my way. Why change now?”   

To forge deeper into the mind of Jennings, be sure to check out my interview with him as part of a roundtable featured in January’s SSI issue. Also be sure to check elsewhere in Under Surveillance for more coverage from the First Alert Pro conference.

As always, thanks for reading.

Scott Goldfine

Editor-in-Chief

SECURITY SALES & INTEGRATION


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