60 What Business Owners Should Know About Financial Management

1 00:00:00,239 --> 00:00:02,000 SPEAKER_04: This is the Empowering Healthy Business 2 00:00:02,160 --> 00:00:04,639 Podcast, and I'm your host, Cal Wilder. 3 00:00:04,879 --> 00:00:07,839 Each episode, we'll dive into topics important to folks who 4 00:00:07,839 --> 00:00:10,480 want to run businesses that are both nicely profitable, 5 00:00:10,640 --> 00:00:14,560 sustainable, and scalable, and who want to achieve balance in 6 00:00:14,560 --> 00:00:17,839 their lives and realize their potential inside and outside of 7 00:00:17,839 --> 00:00:18,079 work. 8 00:00:18,320 --> 00:00:20,960 The show is sponsored by SmartBooks, provider of 9 00:00:20,960 --> 00:00:22,960 bookkeeping and accounting for businesses. 10 00:00:23,120 --> 00:00:24,559 Let's get started. 11 00:00:34,240 --> 00:00:37,119 SPEAKER_01: Sometimes it's make it or break it decisions that 12 00:00:37,119 --> 00:00:38,399 have to happen real time. 13 00:00:38,799 --> 00:00:42,399 For example, do you have enough cash to make payroll in a few 14 00:00:42,399 --> 00:00:42,719 months? 15 00:00:42,960 --> 00:00:45,520 Or do you need to take out a loan? 16 00:00:46,320 --> 00:00:48,240 Is one revenue stream tanking? 17 00:00:48,399 --> 00:00:50,079 Are the margins shrinking? 18 00:00:50,960 --> 00:00:52,880 Are you pricing your product properly? 19 00:00:53,359 --> 00:00:55,600 Do you have the right staffing mix? 20 00:00:55,759 --> 00:00:59,600 So, like all of those things you don't want to wait to make 21 00:00:59,600 --> 00:01:01,119 changes as needed as you're running. 22 00:01:01,520 --> 00:01:04,000 I mean the goal is always to minimize the bottleneck. 23 00:01:04,159 --> 00:01:08,000 So many tasks can be completed ahead of time, like you said. 24 00:01:08,159 --> 00:01:13,040 It's it's really trying to remove anything in that short 25 00:01:13,040 --> 00:01:15,519 period of time after month end when you're trying to close the 26 00:01:15,519 --> 00:01:19,920 books and bring it or complete it earlier in the month if 27 00:01:19,920 --> 00:01:20,560 possible. 28 00:01:20,719 --> 00:01:26,319 Um for example, like payroll can be posted every time a payroll 29 00:01:26,319 --> 00:01:26,640 is run. 30 00:01:26,719 --> 00:01:29,359 So on payday, we can post a payroll, and that's not 31 00:01:29,359 --> 00:01:32,000 something that has to be done during during month end. 32 00:01:32,319 --> 00:01:36,400 Um also, you know, just posting the customer and vendor payments 33 00:01:36,640 --> 00:01:40,560 as they're made, um, keeping up with the bank and credit card 34 00:01:40,560 --> 00:01:43,840 registers and updating them weekly with new postings. 35 00:01:44,159 --> 00:01:46,879 Um I mentioned the uncategorized transactions. 36 00:01:46,959 --> 00:01:50,159 So if there's anything unknown, we try to resolve them within 37 00:01:50,159 --> 00:01:53,840 the week that we see them coming through the bank or the credit 38 00:01:53,840 --> 00:01:57,840 card to really minimize that back and forth during the short 39 00:01:57,840 --> 00:01:58,719 close process. 40 00:01:58,879 --> 00:02:02,400 And that really can speed up the close process and resolve some 41 00:02:02,400 --> 00:02:04,400 of those bottlenecks ahead of time. 42 00:02:06,719 --> 00:02:09,759 SPEAKER_04: When we assess your current finances, we look at 43 00:02:09,759 --> 00:02:12,240 three main accounting financial statements. 44 00:02:12,400 --> 00:02:16,319 Uh, CPAs listening to this may point out there are actually 45 00:02:16,319 --> 00:02:19,120 four official financial statements, but uh, we're only 46 00:02:19,120 --> 00:02:20,479 going to worry about three of them. 47 00:02:20,719 --> 00:02:24,879 These are the income statement, also known as the PL, the 48 00:02:24,879 --> 00:02:28,080 balance sheet, and the cash flow statement. 49 00:02:28,639 --> 00:02:33,360 And as business owners, we need to understand all three because 50 00:02:33,439 --> 00:02:35,599 the financial statements tell a story. 51 00:02:35,840 --> 00:02:38,479 It's our job to figure out what that story is. 52 00:02:38,639 --> 00:02:42,479 And so the only way to really do that is to borrow, and 53 00:02:42,479 --> 00:02:43,280 effectively borrow. 54 00:02:43,439 --> 00:02:46,400 This company effectively borrowed to help fund those 55 00:02:46,400 --> 00:02:47,039 distributions. 56 00:02:47,280 --> 00:02:51,039 We look at our notes payable line, it went from 100,000 at 57 00:02:51,039 --> 00:02:53,360 the beginning to 150,000 at the end. 58 00:02:53,520 --> 00:02:58,639 So$50,000 of those distributions were effectively borrowed from 59 00:02:58,639 --> 00:03:00,479 note notes payable. 60 00:03:00,960 --> 00:03:05,439 Um cash has gotten a lot tighter. 61 00:03:05,680 --> 00:03:11,280 Cash is down almost in half from where it was at the beginning. 62 00:03:11,599 --> 00:03:14,560 And if we start to look at some ratios, it gives us a little 63 00:03:14,560 --> 00:03:16,800 more color commentary on that. 64 00:03:17,039 --> 00:03:21,360 Our our cash balance is a multiple of monthly operating 65 00:03:21,360 --> 00:03:26,159 expenses, you know, was a pretty healthy 1.4 times at the 66 00:03:26,159 --> 00:03:30,000 beginning, meaning we had 1.4 times our monthly operating 67 00:03:30,000 --> 00:03:32,960 expenses as cash in the bank and never had to worry about making 68 00:03:32,960 --> 00:03:36,560 payroll or or uh getting on payment plans with vendors. 69 00:03:36,639 --> 00:03:38,639 We can just afford to pay everything when due. 70 00:03:39,039 --> 00:03:42,479 Now, at the end of the period, we're down to 0.5x. 71 00:03:43,120 --> 00:03:48,000 And typically, when we get less than one, um it start to 72 00:03:48,000 --> 00:03:51,120 introduce a lot of stress and wasted energy and money to 73 00:03:51,120 --> 00:03:54,400 figure out how to pay bills and manage cash flow instead of 74 00:03:54,400 --> 00:03:57,360 doing things that are going to drive revenue and quality and 75 00:03:57,360 --> 00:04:00,719 customer satisfaction and retention and profit for the 76 00:04:00,719 --> 00:04:01,520 business. 77 00:04:03,599 --> 00:04:07,599 And our approach is first to focus on the metrics, and then 78 00:04:07,680 --> 00:04:10,479 second, to set goals for each metric. 79 00:04:10,639 --> 00:04:14,400 And so the difference is, for example, if I've got a business 80 00:04:14,400 --> 00:04:18,399 with a cash flow problem and I think collecting from customers 81 00:04:18,399 --> 00:04:22,720 is the primary cause of my cash flow trouble, then um, you know, 82 00:04:22,800 --> 00:04:24,879 I need a metric around collections. 83 00:04:25,040 --> 00:04:29,120 And so on a weekly basis, my metric might be what's the 84 00:04:29,120 --> 00:04:33,439 percent of delinquent customers that we called this week? 85 00:04:33,680 --> 00:04:38,319 Or on a monthly basis, it might be what is the day's sales 86 00:04:38,319 --> 00:04:40,160 outstanding at the end of the month? 87 00:04:40,399 --> 00:04:42,480 One of them is contribution margin. 88 00:04:43,040 --> 00:04:47,120 And so contribution margin is really gross profit minus the 89 00:04:47,120 --> 00:04:50,560 service cost of delivering those services or producing those 90 00:04:50,560 --> 00:04:51,199 products. 91 00:04:51,519 --> 00:04:56,639 And so it's a measure of value on one hand and cost efficiency 92 00:04:56,639 --> 00:04:58,160 on the other hand, right? 93 00:04:58,399 --> 00:05:02,800 Um if we've got a low contribution margin, it might be 94 00:05:02,800 --> 00:05:06,560 because our we're pricing our products too low, because either 95 00:05:06,560 --> 00:05:08,639 we're not appreciating how valuable they are in the 96 00:05:08,639 --> 00:05:12,000 marketplace, or we're competing in a commoditized marketplace 97 00:05:12,000 --> 00:05:15,040 where the customers will only pay so much and we just can't 98 00:05:15,040 --> 00:05:15,759 price high enough. 99 00:05:15,839 --> 00:05:19,360 And so we're stuck with low margins because you know our 100 00:05:19,360 --> 00:05:21,759 product or service just isn't that valuable. 101 00:05:21,920 --> 00:05:24,399 Um and it's a reflection of cost efficiency. 102 00:05:24,480 --> 00:05:27,759 We could be charging a very high price for that product or 103 00:05:27,759 --> 00:05:31,439 service, um, and the market could perceive it to be worth 104 00:05:31,439 --> 00:05:35,519 the high price, but we might have a low contribution margin 105 00:05:35,519 --> 00:05:39,439 if we're very inefficient in how we deliver the product. 106 00:05:40,879 --> 00:05:45,120 As we more rigorously start to measure financial metrics, we 107 00:05:45,120 --> 00:05:48,800 usually find that we have trouble measuring some of those 108 00:05:48,800 --> 00:05:49,759 important metrics. 109 00:05:50,000 --> 00:05:52,560 And this is because our accounting is not at a 110 00:05:52,560 --> 00:05:56,639 sufficient quality to produce the financial reports we need in 111 00:05:56,639 --> 00:05:59,680 order to accurately and consistently measure our 112 00:05:59,680 --> 00:06:00,399 metrics. 113 00:06:00,560 --> 00:06:03,360 Uh simply put, in order to manage the business using 114 00:06:03,360 --> 00:06:06,800 financial metrics, you usually need to upgrade your accounting 115 00:06:06,800 --> 00:06:09,199 operations to get the reports you need. 116 00:06:09,519 --> 00:06:14,079 So let's think of a pyramid, you know, wide base, narrow top, 117 00:06:14,240 --> 00:06:17,040 representing the primary kinds of work that go into the 118 00:06:17,040 --> 00:06:18,160 accounting function. 119 00:06:18,399 --> 00:06:21,199 We can refer to this as the finance stack. 120 00:06:21,600 --> 00:06:25,519 At the base of the stack or the pyramid, there's bookkeeping. 121 00:06:25,759 --> 00:06:29,199 It's the most tactical part of the accounting and finance 122 00:06:29,199 --> 00:06:33,279 function, involving a lot of data entry and very basic 123 00:06:33,279 --> 00:06:34,160 accounting. 124 00:06:34,399 --> 00:06:37,920 Then above that, we have more hardcore real accounting, debits 125 00:06:37,920 --> 00:06:40,000 and credits and accounting management. 126 00:06:40,240 --> 00:06:43,519 Above that, we have financial planning and analysis. 127 00:06:43,680 --> 00:06:47,040 And at the very top, we have C-level executive management, 128 00:06:47,199 --> 00:06:50,399 the CFO role, chief financial officer role, which is the most 129 00:06:50,399 --> 00:06:53,120 strategic part of the finance function. 130 00:06:54,639 --> 00:06:57,439 I'm going to present some of the key concepts from those two 131 00:06:57,439 --> 00:06:58,560 chapters here. 132 00:06:59,519 --> 00:07:03,279 So the first concept is a metrics framework. 133 00:07:03,600 --> 00:07:08,639 And by framework, I mean a system and a format and a common 134 00:07:08,639 --> 00:07:13,040 language that everybody in the company uses to track and 135 00:07:13,040 --> 00:07:16,399 communicate about metrics on a regular basis. 136 00:07:16,639 --> 00:07:19,279 There are a number of different frameworks out there. 137 00:07:19,759 --> 00:07:22,720 Some of the ones you see more commonly are EOS or 138 00:07:22,720 --> 00:07:24,560 entrepreneurial operating system. 139 00:07:25,360 --> 00:07:29,600 It has a document called the Vision Traction Organizer or 140 00:07:29,759 --> 00:07:33,839 VTO, which includes, you know, it's kind of a one-to-two page 141 00:07:33,839 --> 00:07:37,600 business plan that has a 10-year target, a three-year picture, 142 00:07:37,920 --> 00:07:41,920 one-year goals, quarterly rocks, and then outside of that, 143 00:07:42,000 --> 00:07:46,079 there's a weekly scorecard to track weekly results. 144 00:07:46,879 --> 00:07:50,639 I don't believe running a business is a linear path with a 145 00:07:50,639 --> 00:07:53,120 defined start and a defined finish. 146 00:07:53,360 --> 00:07:56,319 It's more of a loop, it's a cycle, right? 147 00:07:56,639 --> 00:08:01,199 Um you set strategy and goals, and you make some decisions that 148 00:08:01,199 --> 00:08:03,920 you think support those strategy and goals. 149 00:08:04,480 --> 00:08:08,079 You then operate the business based on those decisions. 150 00:08:08,800 --> 00:08:12,399 You periodically measure and report back on performance 151 00:08:12,399 --> 00:08:13,839 against those goals. 152 00:08:14,319 --> 00:08:16,800 Um, you know, you're collecting data, you're listening, and 153 00:08:16,959 --> 00:08:19,439 you're observing, you're thinking, you're learning as you 154 00:08:19,439 --> 00:08:19,759 go. 155 00:08:20,160 --> 00:08:23,759 Um you come back to the manage part of you know, reassessing 156 00:08:23,759 --> 00:08:26,800 your strategy and goals, and you may tweak your strategy and 157 00:08:26,800 --> 00:08:29,839 goals and targets and you know, make slightly different 158 00:08:29,839 --> 00:08:31,759 decisions for the next period of time. 159 00:08:31,920 --> 00:08:35,679 And then you repeat that cycle of you know operating based on 160 00:08:35,679 --> 00:08:38,960 those decisions and goals, collecting data and reporting, 161 00:08:39,200 --> 00:08:42,480 and then managing to reassess strategy and goals and targets, 162 00:08:42,639 --> 00:08:43,759 and it's a cycle. 163 00:08:44,000 --> 00:08:48,399 And so, in short, you kind of you manage, you operate, you 164 00:08:48,399 --> 00:08:50,799 report, and repeat in a loop. 165 00:08:52,320 --> 00:08:54,720 SPEAKER_02: And so now we take our profit first. 166 00:08:54,879 --> 00:08:57,360 You were told to take your profit first in business, right? 167 00:08:57,519 --> 00:08:58,799 Pay yourself first. 168 00:08:59,039 --> 00:09:04,320 Now we actually do it and we control our spending, which you 169 00:09:04,320 --> 00:09:06,960 know, people are told you got to spend money to make money. 170 00:09:07,120 --> 00:09:08,559 I don't believe that's true. 171 00:09:08,799 --> 00:09:11,120 I believe there are better ways to do it. 172 00:09:11,360 --> 00:09:15,279 And it's just shifting our perspective on money and how we 173 00:09:15,279 --> 00:09:16,240 look at things. 174 00:09:16,559 --> 00:09:18,480 I think it works in every model. 175 00:09:18,799 --> 00:09:21,679 I I've got a variety of different businesses in a 176 00:09:21,679 --> 00:09:23,440 variety of different places. 177 00:09:24,000 --> 00:09:29,279 What we find though is that you have to adapt the framework to 178 00:09:29,279 --> 00:09:30,399 the business. 179 00:09:31,279 --> 00:09:34,399 And so that I think is where the issues come up. 180 00:09:35,039 --> 00:09:36,799 Their business is a little bit different. 181 00:09:36,879 --> 00:09:42,720 Maybe it's seasonal, maybe it's it's got um large bulk orders 182 00:09:42,720 --> 00:09:45,840 that need to be placed before the the season starts. 183 00:09:46,399 --> 00:09:52,080 There could be a lot of different parameters specific to 184 00:09:52,080 --> 00:09:52,799 that business. 185 00:09:53,200 --> 00:09:58,480 And the question is how do I model profit first and this the 186 00:09:58,879 --> 00:10:01,679 system to that particular business? 187 00:10:02,399 --> 00:10:06,320 And then I think the second thing is start slow, go slow. 188 00:10:06,480 --> 00:10:08,879 Everyone wants to do everything full speed ahead. 189 00:10:09,440 --> 00:10:13,759 And when you do that, I think what happens is if you get 190 00:10:13,759 --> 00:10:18,559 failure in the first two or three months, people give up. 191 00:10:20,000 --> 00:10:23,200 SPEAKER_03: Yeah, so there's a couple of ways to get money out 192 00:10:23,200 --> 00:10:24,639 of your LLC. 193 00:10:24,879 --> 00:10:28,000 Um, and I guess for our conversation purposes, I will 194 00:10:28,000 --> 00:10:32,559 say when I say LLC, I'm referring to um S-corps and uh 195 00:10:32,559 --> 00:10:33,519 partnerships. 196 00:10:33,679 --> 00:10:38,240 Um so the first one uh for specifically S-corps is W2 197 00:10:38,399 --> 00:10:38,879 wages. 198 00:10:39,039 --> 00:10:44,399 Uh the second one is uh distributions, and then you can 199 00:10:44,399 --> 00:10:48,799 use um some discretionary expenses and infringe benefits 200 00:10:48,799 --> 00:10:55,360 to uh effectively uh pull money out of the businesses and treat 201 00:10:55,360 --> 00:10:57,039 them as as expenses. 202 00:10:57,200 --> 00:11:00,639 So uh, for example, like a home office expense, uh the business 203 00:11:00,639 --> 00:11:04,080 will reimburse you for the home office expenses, and it's a 204 00:11:04,080 --> 00:11:08,720 great way to get money out of the business, um, tax-free, um, 205 00:11:08,960 --> 00:11:11,759 and you get the the expense on the the PL. 206 00:11:12,080 --> 00:11:15,759 It it would be very tempting, and uh sometimes it is a little 207 00:11:15,759 --> 00:11:18,399 too tempting for for some business owners. 208 00:11:18,639 --> 00:11:23,200 Um the IDRS doesn't is is on to us. 209 00:11:23,360 --> 00:11:27,600 They they agree that this is a legal way to to pay yourself and 210 00:11:27,600 --> 00:11:33,200 pull money out of the business, um, but you cannot treat 211 00:11:33,200 --> 00:11:37,120 yourself as an S-corp and pay yourself twelve thousand dollars 212 00:11:37,120 --> 00:11:40,799 a year as a you know CEO of a business. 213 00:11:40,960 --> 00:11:48,720 Um you have to pay yourself what the IRS loosely defines as a um 214 00:11:49,120 --> 00:11:50,879 uh a fair salary. 215 00:11:51,519 --> 00:11:59,039 Now, they don't the tax code does not specifically define how 216 00:11:59,039 --> 00:12:03,200 to come up with a fair salary, what a fair salary is, there's 217 00:12:03,200 --> 00:12:04,399 no percentages. 218 00:12:04,799 --> 00:12:12,000 Um there are some industry standards that um that I've 219 00:12:12,000 --> 00:12:15,360 used, and there's there's kind of different levels on how to 220 00:12:15,360 --> 00:12:17,039 come up with that salary. 221 00:12:18,960 --> 00:12:20,240 SPEAKER_05: What is bankruptcy? 222 00:12:20,399 --> 00:12:25,440 And think of that not as a legal uh tool, but as a financial 223 00:12:25,440 --> 00:12:28,720 condition, and that's if you take the enterprise value of 224 00:12:28,720 --> 00:12:31,039 your company, you know, if you could sell it as an ongoing 225 00:12:31,039 --> 00:12:34,320 concern, and if you sold it, you couldn't pay off all your debts. 226 00:12:34,639 --> 00:12:35,519 That's bankruptcy. 227 00:12:35,679 --> 00:12:37,679 That's when that's quote being bankrupt. 228 00:12:37,840 --> 00:12:41,440 Um and you may well be solvent and be able to pay your bills 229 00:12:41,440 --> 00:12:45,200 and keep going on uh until at some point something happens. 230 00:12:45,440 --> 00:12:49,679 Um, you can be not bankrupt but insolvent. 231 00:12:49,759 --> 00:12:52,480 And insolvency is when you can't pay your current bills. 232 00:12:52,799 --> 00:12:55,360 So all of a sudden things, you know, if you can't pay your 233 00:12:55,360 --> 00:12:57,440 vendors, you can't pay payroll. 234 00:12:57,600 --> 00:13:01,279 Um, you know, the end is near, even if there's substantial 235 00:13:01,279 --> 00:13:02,559 value in the company. 236 00:13:02,720 --> 00:13:04,879 Um and that's what insolvency is. 237 00:13:04,960 --> 00:13:09,679 And insolvency is often the condition that drives things in 238 00:13:09,679 --> 00:13:10,960 my world to start happening. 239 00:13:11,279 --> 00:13:14,399 Hopefully, you've made sure that you can uh make payroll and pay 240 00:13:14,399 --> 00:13:15,679 your final payroll. 241 00:13:15,919 --> 00:13:19,279 Um because that you know, there's typically personal 242 00:13:19,279 --> 00:13:20,480 liability for that. 243 00:13:20,720 --> 00:13:24,320 Uh you want to make sure you can always pay your payroll and any 244 00:13:24,320 --> 00:13:28,799 so-called fiduciary tax, which is the withholding portion of 245 00:13:28,799 --> 00:13:32,559 payroll taxes, uh, not the employ uh not you know, not the 246 00:13:32,559 --> 00:13:33,600 employer part. 247 00:13:33,919 --> 00:13:37,440 Uh any sales tax that's been collected, conceivable any sales 248 00:13:37,440 --> 00:13:38,720 tax that's owed. 249 00:13:38,960 --> 00:13:42,399 Um that's generally considered fiduciary, and you want to make 250 00:13:42,399 --> 00:13:44,399 sure that you can you can pay that. 251 00:13:46,000 --> 00:13:47,840 SPEAKER_01: Yeah, so that's one of the things that we look at 252 00:13:47,840 --> 00:13:51,679 when we onboard a marketing agency is how it's set up to 253 00:13:51,679 --> 00:13:55,600 really tell the story and provide data that's going to be 254 00:13:55,600 --> 00:13:57,200 useful in decision making. 255 00:13:57,360 --> 00:14:01,600 So, I mean, we could set up a chart of accounts that's really 256 00:14:01,600 --> 00:14:05,279 simple, has one revenue line, one expense line, with the 257 00:14:05,279 --> 00:14:08,799 difference being the profit on the third line and at the 258 00:14:08,799 --> 00:14:09,360 bottom. 259 00:14:09,440 --> 00:14:13,679 Um it would be very simple, but it wouldn't be helpful in giving 260 00:14:13,679 --> 00:14:16,080 us the information we need to make decisions. 261 00:14:16,399 --> 00:14:20,240 Um so we like to really look into the chart of accounts. 262 00:14:20,320 --> 00:14:22,960 Um, often we start by referencing the financial 263 00:14:22,960 --> 00:14:26,000 operating system, which is a book that Cal himself has 264 00:14:26,000 --> 00:14:26,639 written. 265 00:14:26,720 --> 00:14:29,679 Um, and we use that as a framework and a methodology when 266 00:14:29,679 --> 00:14:34,080 we're setting up the chart of accounts to really understand 267 00:14:34,080 --> 00:14:37,519 what it is that um the business owner wants to do with the 268 00:14:37,519 --> 00:14:37,759 business. 269 00:14:38,639 --> 00:14:41,919 So um a lot of marketing agencies start out on cash 270 00:14:41,919 --> 00:14:47,039 basis, so that just means that um revenue is recognized when 271 00:14:47,039 --> 00:14:48,159 it's invoiced. 272 00:14:48,320 --> 00:14:52,159 Um, often if there's no invoicing, revenue is recognized 273 00:14:52,159 --> 00:14:56,080 when cash comes in the door and expenses are recognized when 274 00:14:56,080 --> 00:14:56,960 they're incurred. 275 00:14:57,120 --> 00:15:01,200 So there's no um putting things on the balance sheet, prepaids, 276 00:15:01,600 --> 00:15:03,039 um, accruals. 277 00:15:03,279 --> 00:15:06,080 Uh it's really very simple accounting. 278 00:15:06,159 --> 00:15:09,759 Um, and that way the business owner can put their effort and 279 00:15:09,759 --> 00:15:12,159 their resources into launching their business. 280 00:15:12,320 --> 00:15:14,879 Um, it's an inexpensive way of doing accounting since it 281 00:15:14,879 --> 00:15:17,440 doesn't take a lot of effort to track things. 282 00:15:17,600 --> 00:15:21,600 Um, they can, you know, win new clients, do a great job of 283 00:15:21,600 --> 00:15:23,120 servicing those clients. 284 00:15:23,279 --> 00:15:26,559 Um, accounting isn't that critical in the early days of an 285 00:15:26,559 --> 00:15:29,679 agency, um, as long as they have a handle on the client media 286 00:15:29,679 --> 00:15:31,440 funds like we were just talking about. 287 00:15:31,840 --> 00:15:34,879 Um and really the finer points of revenue and expense 288 00:15:34,879 --> 00:15:39,039 recognition might not matter as long as the business is um 289 00:15:39,919 --> 00:15:43,120 coming in and the firm is profitable overall um and 290 00:15:43,120 --> 00:15:44,799 there's cash in the bank. 291 00:15:46,480 --> 00:15:50,320 SPEAKER_00: Um so I I think uh this married couple doesn't 292 00:15:50,320 --> 00:15:51,519 always know they're married. 293 00:15:51,600 --> 00:15:54,799 Uh sometimes there are situations where you know the 294 00:15:54,799 --> 00:15:58,559 the functions themselves are connected, and you know, the the 295 00:15:58,559 --> 00:16:02,080 people in charge of these functions uh have sort of a 296 00:16:02,080 --> 00:16:03,440 dysfunctional relationship. 297 00:16:03,519 --> 00:16:06,000 Uh and I've seen plenty of businesses like that where 298 00:16:06,559 --> 00:16:09,279 finance is doing their own thing, operations is doing their 299 00:16:09,279 --> 00:16:13,039 own thing, um, and they're you know, sometimes looking at the 300 00:16:13,039 --> 00:16:16,879 uh the same data, sometimes the different data, uh, but there's 301 00:16:16,879 --> 00:16:18,799 really not a lot of collaboration. 302 00:16:19,039 --> 00:16:24,080 And and there are there's so much opportunity there for 303 00:16:24,080 --> 00:16:26,480 making things work better for the business. 304 00:16:26,720 --> 00:16:27,759 Yeah, exactly. 305 00:16:28,000 --> 00:16:32,480 So in terms of solutions, what I what I found is is that uh 306 00:16:32,720 --> 00:16:37,840 finance and operations need to um uh co-design the business 307 00:16:37,840 --> 00:16:38,960 model uh basically. 308 00:16:39,120 --> 00:16:42,960 They need to work together on building on making a business 309 00:16:42,960 --> 00:16:46,480 model that that um helps them understand the business better 310 00:16:46,639 --> 00:16:50,080 and talk about things in the same language, uh, and also 311 00:16:50,320 --> 00:16:56,320 agree on on things like you know cycles, uh, you know, um uh 312 00:16:56,559 --> 00:17:00,399 terminology and you know how they want to see the data. 313 00:17:00,720 --> 00:17:04,160 So building building those models together, I think, really 314 00:17:04,240 --> 00:17:06,480 uh makes the team work better. 315 00:17:07,440 --> 00:17:08,079 Cool. 316 00:17:08,240 --> 00:17:12,000 Um and and then on an ongoing basis, it's really reviewing the 317 00:17:12,000 --> 00:17:13,119 monthly reports. 318 00:17:13,279 --> 00:17:18,480 Um in some businesses I've worked at, um uh operations 319 00:17:18,640 --> 00:17:21,920 teams want to see data on a weekly basis because they you 320 00:17:21,920 --> 00:17:24,799 know they want to know that they're on track for for their 321 00:17:24,799 --> 00:17:25,440 goals. 322 00:17:25,680 --> 00:17:31,279 Um uh but that data rolls up to monthly goals and quarterly 323 00:17:31,279 --> 00:17:31,680 goals. 324 00:17:31,839 --> 00:17:35,599 And so reviewing those together really uh helps each function 325 00:17:35,680 --> 00:17:36,559 understand the other function. 326 00:17:36,880 --> 00:17:38,319 SPEAKER_04: Another episode in the books. 327 00:17:38,559 --> 00:17:40,240 Thank you so much for tuning in. 328 00:17:40,400 --> 00:17:44,400 For show notes and more, visit empoweringhealthy business.com. 329 00:17:44,640 --> 00:17:47,359 If you would like to have a one on one discussion with me, or 330 00:17:47,359 --> 00:17:50,720 possibly engage smart books to help with your business, you can 331 00:17:50,720 --> 00:17:54,960 reach me at cal C A L at Empowering Healthy Business dot 332 00:17:54,960 --> 00:17:58,400 com or message me on LinkedIn where I am easy to find. 333 00:17:58,640 --> 00:18:01,920 Until next time, this is Empowering Healthy Business, the 334 00:18:01,920 --> 00:18:04,160 podcast for business owners, signing off.