Corporate Governance is the system encompassing the policies, processes, management and board activities directed towards ensuring accountability for Corporate policies and processes. Effective Corporate Governance can enhance a Company’s value by operating and controlling a company with a view to long term goals for corporate stakeholders. Services include assisting corporate boards maximize value, understand risks and evaluate opportunities.

Last year when Debra Pauli was hired to help a large, privately held company, the firm handed her a two-inch-thick monthly financial statement.

“I’d never seen so many numbers for a company of that size,” said Pauli, principal and founder of Corporate Financial Solutions LLC and an accountant for 30 years. “I boiled it down to a couple of pages of easily reviewable financial statements necessary for management to run the business.”

Transforming reporting systems that resemble data dumps into user-friendly resources is a passion for Pauli, a rare female certified turnaround professional (CTP) in Georgia and one of only 410 CTPs nationally.

When financial statements are too big and unwieldy, both problems and solutions tend to be overlooked, Pauli said.

“My focus is on making sure that companies develop their financial reporting so that it is more of a tool to run the business and not just a scorecard at the end of the month,” she added.

For example, when Pauli was hired to help a company in bankruptcy that was being purchased by a private equity group with due diligence, she quickly discovered that the CEO was basing decisions on incorrect margins, she said.

“Other issues that may drive a need for a turnaround professional include a business that is over-leveraged, a well-run company that suffers from a severe decline due to a market cycle or a crisis caused by an extraordinary event; also, a company can grow too fast,” she added.

Turnaround management as a formal specialty has been around since 1993 when the Association of Certified Turnaround Professionals (ACTP) founded the CTP program.

However, high-profile bankruptcies such as Delta Air Lines Inc. recently have increased public awareness of turnaround as a profession, Pauli said.

Pauli has a unique ability to relate to the complexity of a shop floor very quickly and grasp the crucial issues, said Leigh Fragnoli, president and CEO of Canton-based Aerosol Specialties LLC, which manufactures 2,200 products.

“Debra took the complexity of our business and broke it into 37 preset categories, so all I have to do is put a number into a costing sheet and I can automatically cost out the [project],” he said.

Pauli’s solution reduced a task that previously required an hour into one that takes minutes, enabling the company to get feedback to a customer more quickly, Fragnoli said.

Pauli started Corporate Financial Solutions in 1997 with the goal of helping small to midsized businesses deal with complex financial management issues.

She attained certification in 2003. The CTP certification process included six months of extensive reading and review, a three-day intensive course given by ACTP, followed by a very rigorous daylong test, Pauli said.

Pauli’s advice to any company that suspects it may need turnaround management assistance is to call in a professional early.

To prevent the need for turnaround assistance, invest in the financial side of the organization with good professionals; develop strategic plans, budgets and cash flow projections; and monitor them all closely, Pauli said.

Drum Roll: Turnaround Specialist Gets to the Core of Problems

Cash Flow is the Key
by Patti Ghezzi on April 1, 2009
While sailing on drought-ravaged Lake Lanier, Debra Pauli saw a metaphor for how the economy affects companies in crisis.

“When Lake Lanier is full, you don’t worry about hitting a tree top,” the Certified Turnaround Professional says. “But when the water is down and all those obstructions are exposed, you realize they were just below the surface.”

For many companies, the favorable economy masked problems. “That problem was always there, the high water was covering it up,” says Pauli, a graduate of Georgia State who is also a certified public accountant.

Pauli knows all about hidden problems company leaders don’t want to see. In 1997, she started Corporate Financial Solutions, a consulting practice that helps companies in crisis. In Georgia, Pauli was the first woman to receive certification as a turnaround specialist from the Association of Certified Turnaround Professionals. Statewide, there are 13 others with the designation, which reflects experience in crisis management and in the restructuring of troubled businesses.

Pauli helps companies merge, downsize, expand and figure out why they’re not making money. She can help a large company through a transition and work on the front end to help a small-business owner develop a sound plan and processes.

Often, she helps managers get real about deficiencies in allocating cost. “They think they’re making money on paper, but they don’t have their cost recognized,” she says. “They mislead themselves.”

In many companies, the in-house CPA is focused on compliance issues, unable to devote time to analyzing cost allocation. Pauli brings her depth of experience as well as fresh eyes to a problem. As an outsider, she can be frank with management.

Before striking out on her own, Pauli was controller of Oxford Industries, CFO of the U.S. subsidiary of a German-owned company and an audit manager for what is now Ernst & Young. She says she has gravitated in her career toward companies’ most challenging issues. “I like fixing problems, “ she says. “I thrive on adrenaline.”

She believed a consulting practice specializing in crisis management would always have clients. “There’s always someone with a problem,” she says, adding that she works with about two or three clients a year.

In good times, many companies fall into crisis because they grow too fast, and their processes cannot keep up. Sometimes, a company hires her to fix a small matter. Once Pauli gets in, she finds serious problems lurking beneath the surface.

The most common? “Cash flow, cash flow, cash flow,” she says. Many companies take a long-term view of cash, planning for 12 months, but they fail to consider short-term needs. For a company that has ups and downs, that can be devastating, Pauli says, recalling some insight a friend once gave her: “You haven’t lived until you have had to make payroll.”

Pauli recommends a weekly cash flow plan that covers at least 13 weeks.

The hardest part of Pauli’s job is when she gives a client advice, but the client doesn’t take it. “You have to have perspective on what you can control and what you can’t,” she says. It’s also hard when she gets emotionally invested in a company and then has to recommend drastic moves such as layoffs. “It’s incumbent on management to recognize if you’re able to save the corporation, you’re able to save some jobs and are positioned for a better day.”

Pauli once analyzed a company planning to merge with a company in another state. She had to recommend whether the Atlanta-based company should relocate to the other company’s city or vice versa. “I was going to run the numbers and make my recommendation,” she says. “But I always said to the people I knew, ‘I’m pulling for you!’”

Unfortunately, she had to deliver the news that the Atlanta company had to relocate.

The thrill is when Pauli can save a company from potential disaster. She did just that with a large client that operated all its business functions as a single unit. She convinced the president to structure each function as a unique business. She assured him such a structure would enhance profits, hold the staff accountable and give him a clear view of what was going on.

“That business survived and was later sold at a phenomenal return for the investor,” she says. “I got a lot of referrals from that firm.”

When banks can’t give you the funds you need, look to commercial finance companies for help.
By Crystal Detamore-Rodman | Entrepreneur Magazine – August 2004
URL: http://www.entrepreneur.com/money/financing/selffinancingandbootstrapping/article71778.html
By the mid-1990s, Princeton Laundry had fallen on hard times. Despite a healthy client roster-it catered to New York Cityhotels-the rising costs of operating in Manhattan had taken a toll. A steep mortgage and mounting maintenance expensesfor its commercial co-op space made it exceedingly difficult to sustain the operation. To make matters worse, thecommercial laundry, owned by the Garlasco family for three generations, was behind on its taxes.

“Our accountant kept telling us, ‘Your business is profitable, but where you’re located [is] driving you out of business,’”recalls Kevin Garlasco, 40, the company’s treasurer and managing partner. Heeding the warning, the family moved thecompany in a dramatic new direction-a 20-minute drive north to the Bronx, where community leaders were danglingbusiness incentives for economic growth. There, the Garlascos built a new production facility that opened in 1997.

Leaving Manhattan was only a temporary solution, though. Even after Kevin, his father, Larry, and brothers John andMichael mortgaged their homes for funding, the family still needed a large infusion of working capital to stabilize thecompany. Unfortunately, traditional creditors were wary of recent financial hiccups, though the business had been aroundsince 1918. “We tried going to banks,” says Kevin, “and it was always the same thing: They wouldn’t give us a loan becausewe were in a tight situation and a little behind in paying our taxes. We were falling into a hole.”

The answer to their financial woes was a commercial finance company, Business Alliance Capital, in Princeton, New Jersey.Business Alliance provided a $600,000 revolving line of credit secured by accounts receivable. “We laid everything out onthe table with them, and it wasn’t a pretty situation at that time,” Kevin remembers. “It’s gotten drastically better. We wereable to clear up our taxes, and now we’re running our business much more efficiently.” Indeed, the family firm has grownapproximately 30 percent to annual sales of $7 million since the 1998 funding intervention, which also included about$500,000 in equipment financing.

A Different Breed
While Business Alliance Capital obviously saw growth potential, it didn’t place blind faith in the struggling business. Financecompanies are simply a different breed of lender than more mainstream creditors, such as banks. Nonbank lenders likeBusiness Alliance Capital advance funds based on a percentage of a firm’s assets- usually 25 to 60 percent for inventoryand 75 to 85 percent for accounts receivable-and when that firm’s receivables are paid, the cash is turned over to the lenderto pay down the loan. Because the loans are secured by assets, finance companies can lend to businesses with irregularcash flow, even losses-the very borrowers banks try to avoid. Banks are principally cash-flow lenders, leaving many highlyleveraged companies and those with sporadic growth outside their financing domain.
Although there was a time when only troubled companies resorted to asset-based funding, it’s an increasingly commonfinancing strategy for businesses with fluctuating capital needs. “It’s what we call the David and Goliath effect,” explainsMike Parrish, regional manager for The Commercial Finance Group in Atlanta. “You have a guy who’s a hammermanufacturer providing product to The Home Depot or Lowe’s, but the problem is that neither Lowe’s nor The Home Depotis going to pay them in the 35 days that a traditional company like that would get paid.”

Part of the appeal of asset-based lenders is their willingness to give space to borrowers going through a rough patch. Banksroutinely impose financial covenants on borrowers to monitor operating perform-ance, dictating such things as minimumworking-capital balances and debt-to-equity ratios. Depending on the extent of the covenants, a business may be just onefinancial misstep away from losing critical funding. Finance companies, in contrast, rarely use the kinds of restrictivecovenants that accompany cash-flow loans, instead touting themselves as a stable financing source even if a company’scircumstances take a negative turn. Ted Kompa, president and CEO of Business Alliance Capital, says, “The company, froma standpoint of calling a loan for financial performance, would have to be in pretty dire straits for a properly secured financecompany to want to take action.”

The Cost of Convenience
The simplicity, however, comes at a price. While competition has helped drive down the cost of asset-based credit, smallloans may run 15 to 28 percent. Both risk- and collateral-monitoring requirements figure heavily in the total asset-basedfunding cost. For instance, a business that generates a large volume of small invoices typically pays a monthly collateral monitoringfee ranging from one-quarter to one-half percent. On top of those fees, prepayment penalties are standard todeter borrowers from refinancing with a bank if creditworthiness improves.

It’s quite common for businesses to get a bank loan once their financial situation progresses. Princeton Laundry isn’t one ofthem, however, despite now having more secure financial footing. Kevin Garlasco says the higher costs are a small price topay for peace of mind during periods of market volatility, such as the months following the 9/11 terrorist attacks, which dealta severe blow to the commercial laundry’s core constituency: New York City hotels. “Sales did slow down, but we gotthrough it. If I were with a bank,” he says, “they probably would have been breathing down my neck.”

Along with higher fees, finance companies have more arduous reporting requirements. Lenders may require daily reports onsales and collections to establish how much funding a business can draw against assets; in determining borrowing capacity,lenders subtract ineligible assets, such as past-due receivables. On a positive note, the rigorous reporting forces owners to examine key aspects of their operations. “They may see receivables getting old, but maybe they haven’t looked to see why,”says business advisor Debra Pauli, president of Corporate Financial Solutions in Atlanta. “This lending program forces entrepreneurs to understand intimate details of their businesses. A business is asset management from cash flow, and that’swhat this lending program is all about.”

The lesson isn’t lost on Kevin Garlasco, who knows he has to actively manage receivables to keep the funds flowing.”Anything over 90 days, that money is not available to borrow,” he says. “So I really have to keep control of my customersand keep them paying.”

MEET YOUR MATCH
While asset-based lenders are abundant, loan size ultimately determines an entrepreneur’s range of financing options.

For modest financing deals, borrowers may have to look harder for an asset-based lender that focuses on smallertransactions. “Many specialize in [loans] under $1 million, but they’re not national in scope,” says Ted Kompa, president andCEO of Business Alliance Capital in Princeton, New Jersey. “You have to look at each individual region to see who is activein that area.” He recommends contacting the Commercial Finance Association, a New York City-based trade group forasset-based lenders, for a list of finance companies in your area. You can search for lenders by geographic region and loansize at the association’s Web site, www.cfa.com.

Before signing on with any finance company, though, carefully investigate its track record. “Do some due diligence on thatlender. Ask for references, and talk to current customers to get a feel for what that customer [thought] they were gettingwhen they went in versus what they actually have now,” advises Debra Pauli, president of Corporate Financial Solutions in Atlanta. “You have to remember that this is a competitive marketplace. Interview a lot of lenders in your market.”

Crystal Detamore-Rodman is a Charlottesville, Virginia, writer who covers the small-business finance market.

Atlanta Business Chronicle – January 26, 2004
Debra Pauli of Corporate Financial Solutions LLC has become the first female in Georgia to earn the Certified Turnaround Professional (CTP) designation.

She is also only the 11th woman in the United States to receive the designation. To become a CTP, practitioners must meet stringent standards of education, experience and professional conduct set by the Association of Certified Turnaround Professionals (ACTP). ACTP is the sole international organization that develops, monitors and maintains a certification program for professionals engaged in the turnaround, crisis management, restructuring and renewal of troubled businesses, organizations and associations. Of the more than 2,500 people offering turnaround services, only 253 have earned the CTP designation (including 13 others in Georgia).

Pauli has more than 20 years’ diversified financial experience ranging from the Fortune 500 to entrepreneurial companies in crisis. In 1997, Pauli started Corporate Financial Solutions LLC to consult with company stakeholders in addressing their most pressing business problems. She recently served on the GSU School of Accountancy Advisory Board.

DEBRA PAULI

Debra Pauli, CPA/CFF, CTP, CVA has over twenty years diversified financial experience with companies ranging from the Fortune 500 to entrepreneurial companies in crisis. In 1997, Ms. Pauli started Corporate Financial Solutions, LLC to consult with companies in addressing their most pressing financial problems. Ms. Pauli is a straightforward, self-motivated individual who blends big picture understanding and a result orientation with strong analytical and technical skills.

Ms. Pauli’s consulting projects have included acquisition due diligence; collections management; CFO services; business plans, process improvement, compensation design; and corporate assessments for venture capitalists and financial institutions and turnaround management.

Ms. Pauli has twelve years experience in the apparel industry as both CFO and Controller with both public and non publicly traded companies. In these positions, Ms. Pauli had responsibility for financial planning and financial reporting, accounting, global tax planning and compliance, treasury, due diligence, and cost accounting. International experience includes both outbound U.S. investment as well as inbound foreign investment.

Ms. Pauli received her B.B.A. degree from Georgia State University and is a Certified Public Accountant, Certified in Financial Forensics, Certified Turnaround Professional and Certified Valuation Analyst. Ms. Pauli has served on the board of directors of the Atlanta Chapter of Financial Executives International. Ms. Pauli also served on Georgia State University’s School of Accountancy Advisory Council. Ms. Pauli is past President of Women’s Finance Exchange and was a founding member of the Atlanta Chapter of IWIRC (International Women’s Insolvency and Restructuring Confederation).

CASH MANAGEMENT
Problems with cash can indicate underlying problems within the actual operations and/or reflect a company’s lack of experience in the management of cash. A consultant with cash management experience can help identify these issues and help solve the problems before a crisis situation develops. Related issues to cash management include credit and collection policies and procedures and inventory control.

CREDIT POLICES AND CASH COLLECTION
Until it’s collected, it’s not a sale it’s a gift. Cash and profit management starts with good credit and collections management.

INVENTORY CONTROL
The control of inventory involves the relationship between systems, operations and marketing. A thorough understanding of the activities of each is necessary to improve the processes that support each other. Sometimes insiders are in conflict over these activities or do not understand the implications of activities on the control of inventory. An outsider can help determine what’s best for the company

LITIGATION SUPPORT
Corporate activities challenged by a lawsuit require an individual experienced with corporate activities while also possessing investigative and reporting skills. These skills can be invaluable in efficiently evaluating the financial issues of litigation.

BANKRUPTCY
Companies in bankruptcy or anticipating bankruptcy have special financial requirements where an outside consultant can add value.

BUSINESS ASSESSMENT
Banks and investors can benefit from an objective opinion an outsider’s perspective lends to the evaluation of a company’s operations and its management. Utilizing consultants experienced at the executive management level brings an outsiders perspective to investors, bankers, and management to better understand the current environment and build a bridge for understanding and problem solving.

BUSINESS DECLINE AND CORPORATE RENEWAL
Businesses experience decline due to both external and internal forces. External causes of decline include economic changes, competitive or industry changes, labor changes, and governmental regulation. Internal causes of decline include management related issues, such as lack of management depth, unbalanced top management and dishonesty or fraud. Another internal cause of decline is a weak finance function, which manifests itself in under capitalization and excessive leverage, over-extension of credit, excessive inventories, excessive fixed assets, poor information for management and lack of adequate controls. The first step in solving any problem is clear and concise recognition of the problem. An objective point of view by someone with good investigative skills and broad business understanding can do this quickly and efficiently. Designing the plans for renewal quickly follows identification of the problem.

PURCHASE OR SALE OF A BUSINESS
Companies acquiring or selling a business can utilize experienced assistance in identifying the critical success factors of the business. Proper investigation of the Target Company provides assurance of the representations made during the sale and positions the buyer for a successful transition. Many times findings during due diligence can be successfully used to adjust the purchase price or avoid a costly mistake. Acquisition due diligence can be more effective and efficient performed by someone with experienced with acquisitions. For sellers, having an advisor is critical to ensure the goals of the sale are meet.

NEW BUSINESS
New business ventures require specialized start up experience to address systems designs for adequate internal control, business planning, and management reporting, combined with good organizational skills not always available within a new organization which can easily be addressed by a consultant.

BUSINESS PLANS
All businesses need to assess where they are and where they are going. Having an outsider ask the questions can bring in the fresh perspective necessary to move a company to its next level. Formalizing the plan, and developing benchmarks will ensure the plan becomes a part of the business and not just an exercise for management.

FINANCIAL SYSTEMS DESIGN
Companies’ considering a new system can benefit from a needs assessment directed by an experienced corporate consultant as the first step in the selection and design of their systems. Implementation and systems responsibilities need to be addressed as well.

INTERNATIONAL ACTIVITIES
Inbound and outbound investments involve operating, financial and tax considerations not found in domestic transactions. Bringing in an individual experienced in both inbound and outbound foreign investment can help overcome some of the hazards of these new ventures.

CFO SERVICES AND INTERIM MANAGEMENT
Businesses not requiring a full time CFO can benefit from an experienced executive who can coach and train staff in their development while improving the quality of the financial department of a small organization. Companies sometimes experience unexpected turnover or require a more senior individual to assist with a current problem or challenge. An experienced financial executive can immediately add value. All done on an as needed basis.