The Importance of Financial Literacy for Small Business Owners - Melissa Leon, Owner of Two Sense Consulting

- > Welcome to the CFO Corner. I'm your host, Nick Ezzo. In the CFO Corner, we sit down with CFOs - > and corporate finance professionals to hear about the innovative approaches and technology they use - > to scale and grow their organizations. They share challenges they're facing with mundane - > repetitive tasks, and they give their takes on what they'd like to see in the corporate - > finance function that can help CFOs achieve a stress-free working life.

With me today is - > Melissa Leon, author and co-owner of Two Sense Consulting. As a business accounting professional, - > Melissa helps businesses achieve maximum productivity with minimum wasted effort or - > expense. She's an author and a public speaker for women aspiring to have a career and a family. - > Welcome, Melissa.

<br> - > Hi, thank you so much. I'm happy to be here. - > So while we get started here, can you tell me a little about Two Sense Consulting and your role - > and what your mission is there? Yeah, I'd love to.

So Two Cents Consulting was formed during the - > pandemic, you know, we filed for an LLC March 23rd, 2020, little did we know what was about to - > happen. But what actually ended up happening was a lot of small business owners who needed to file - > for PPP loans and EDIL loans, and they had no idea what they were doing. They'd never seen a - > financial report. So my partner and I decided to start helping people for free.

We were trying to - > help make good on a bad situation. And it turned out to be a niche that we haven't really expected - > to fall into, that we support small business owners. And what I mean by small business owners is. - > One employee, two employees, 10 employees, usually we don't go larger than 50.

And it's our space - > that has worked beautifully for us. And our main mission is to improve financial literacy for small - > business owners. It's one thing when you're passionate and you have an exciting business - > that you want to bring into the world, but we help teach them how to read their balance sheet, how to - > read their P&L, help them create a cash flow statement. Budgets, forecasts are obviously - > big this time of year.

So it's been really rewarding, really fulfilling and the ride of, - > a lifetime for sure. You told me earlier that instead of just doing the books for these companies, - > your role is to really kind of teach those business owners who are kind of their own - > CEO in a way. How do you use these reports to kind of guide their business? - > That's exactly right.

I mean, we do start with bookkeeping most of the time. Most of the time, - > we find these small business owners who are trying to do it themselves. You know, - > they've been sold some golden ticket from Intuit that QuickBooks is going to save their life, - > and they can do it all by themselves and what we find out is that they end up - > $80,000 debit on their liability section on the balance sheet and they don't know why it says - > negative and they can't figure out how to make the balance sheet look right.

And it's all of that. - > That doesn't make sense if you don't know how to use an accounting software. - > So we end up typically coming into cleanup and then we end up setting things up for. - > Success from a book perspective.

And then we move into the financial literacy piece. It's - > my favorite part. So we teach the small business owner how to read their balance sheet first. - > We always tell them your balance sheet is the most important.

And then we move into the profit and - > loss. And I tell them the story of their business without ever having stepped foot in their business - > most of the time. And we've got restaurants in Texas and Hawaii and website designers in Arizona, - > and IT companies in Florida. I've never been in their office, but I can tell them the story of - > how their operation is running.

And once they start to absorb that and understand how the financial, - > report tells that story, it's been amazing. We've seen a lot of growth from a lot of small companies - > in a very short time. Yeah, it kind of reminds me of that expression and probably butchering it, - > that you know, just because you have a box of watercolors doesn't make you Rembrandt. - > You're teaching them to paint.

So because you're a CFO, you're a fractional CFO for many different - > companies and your experience throughout your career, how have you seen the role of the CFO - > changed in the last five or 10 years and potentially where do you see it going in the future? - > I mean, I spent 20 years in corporate world and moving into the small business space, - > really what I have noticed the most over the last five years is, well, two things. It's cash. - > Cash has been a big issue for a lot of people in a very short time and especially with the interest - > rates changing the way that they have been, but also the real understanding of what the reports - > mean.

Even in my corporate space, there was an accounting team who did all the work, but the - > operators never understood it. - > They might provide some backup or they might provide some data input, - > but they never were the ones analyzing, understanding, writing month-end comments, writing executive summaries. - > And what I've really seen shift, at least what we're trying to really implement, - > is that financial literacy from the actual operators themselves. - > You can't run a business with any type of certainty and any type of longevity without, - > really understanding the data.

And that's where I hope we're headed. <br> - > Yeah. So speaking of the data, - > I mean, how concerned are you about like errors lurking in your financial data? - > Errors?

Errors always exist. But for me, it's always going to be about is it is something - > classified wrong? The balance sheet is the most important thing on my mind for small business - > owners always, I spend 80% of my time teaching them the balance sheet and how it correlates - > to the P&L. Most of the time they want to jump right to the P&L.

They want to see how - > much revenue they brought in. They want to see what their profit is. And I spend a lot - > of my time educating on your P&L only is right if your balance sheet is right. And we can - > only make decisions on your cash if we understand what's in your bank account and what your - > liabilities are.

So really trying to shift the paradigm for them and help them understand. - > The other thing I spend a lot of time on is cost control. - > And so I know with most of my clients, every penny of what's going into their costs, - > whether it's a food cost or an operating cost, a fixed cost, - > some type of variable, so that they can really understand cost control before they start to look at profit. - > Because I'm a big believer, if you don't know what you're spending, you're never going to make any money.

- > Yeah, and that's the one side of the balance sheet you have almost entirely in your control, - > is how much money is going to come out of what you're spending. - > You can't always fill the money coming in. You know, we're gonna pay you when you're gonna pay it. - > You can, you can hound them, you can call them, you can send them envelopes, - > but the one thing you do have under your control is the cash going out.

- > And so, since you work with all these companies and you've got, you've seen a lot of different things, - > if you could magically solve, you know, one problem, wave your magic wand, Melissa, - > what would be the one problem in finance and accounting that you would solve? - > Oh, that's such a good question. The problem that I see in finance and accounting typically relates to somebody not understanding - > how they all tie together. - > I find a lot of interface issues with user interface, really.

- > It's the problem exists between the keyboard and the chair most of the time. - > But I think the one thing I would try to solve for is a little bit more understanding of - > the connection between those things. - > The terminology of debit and credit is very confusing for people, especially when you, - > try to see the negative sign or the brackets around it. Trying to educate people on the terminology and the nomenclature can be challenging.

- > You talk to people all the time and they say, oh, it's a minus. - > We don't have minuses in accounting. But I think if we can fix some of that, I think some of the rest of the information - > would come together quite quickly for them. The other thing that's always top of mind for me is the accessibility to cash for small - > business owners and t - > hem thinking about g - > etting a line of credit before they actually need it.

Because when you need money, it is really, - > hard to find. But when you don't need money, it's a great time to go get a line of credit and figure - > out what your options are so that if something major breaks, so you need to buy new manufacturing - > equipment or something like this, that you'll have the cash flow to do so. <br> - > <br> - > It sounds like - > your magic wand wish, if you can solve one thing, it's just helping people become more educated about - > like other business works from an economic perspective.

<br> - > And I'm trying my hardest and I - > we're making some great progress too. I don't even need a magic wand but it's amazing when people - > really want to learn and I have clients that are like I don't want to learn it you just do it for - > me and that's great I would be happy to but they don't see the same success as when they really - > start to dig into the education of it and it does not happen quickly. I have a degree I've been doing - > this for 20 years. You're not going to be able to learn it in two months or six months, but over - > the course of 18 months, you're going to have a solid foundation of what it all means.

And even - > in the corporate world, I would say if our operators of these large corporations understood - > the financial statements and it didn't just get pushed to the accounting team, I think we'd see. - > Way healthier profit and loss statements across the board. - > Yeah, I couldn't agree with you more. Now, you know, you've been doing this for a long time.

- > When you started out in the accounting world, there was, you know, probably, you know, - > people were doing stuff on spreadsheets and maybe some of your clients were working with spreadsheets, - > that evolved into, you know, accounting software and then cloud-based accounting software. And, - > there's more, there's more automation and more, more things to help people get past the routine - > mundane aspects of accounting and finance. How big of a problem do you think that is?

- > This kind of the repetitive nature of finance and does that lead to burnout among accounting professionals? - > I think it can. I think if you look at a bank reconciliation as a pretty basic function of - > an accounting person, that task in and of itself can be pretty boring and can be a little bit - > mundane and lead some of that burnout. Yes, Green Bar Paper was a thing when I started - > in accounting.

It's true. And prior to my time in accounting, I was in banking. I was a bank teller - > at 16 years old. So I've been in the money space for a very long time.

I'm not super old. Like, - > like, let's be real, but it's been more than 20 years. - > The burnout is certainly impossible. I really lean into a lot of automation.

- > I really like things that can help me work faster and stronger. - > I just wrote a book called Efficiency Bitch, and all I talk about is ways to get it all done - > without doing it all. - > And so finding ways, regardless if it's accounting or your home life, to make some of those redundant pieces, - > a little bit faster and easier is the name of the game for me. - > Well, can you give us an example of one of those tricks or, you know, life hacks?

- > I'm a mom of three. I have a seven, nine and 11 year old. And every morning and every night, - > there's two things that happen and they go to bed and they wake up in the morning. And - > a lot of people just use traditional alarm clocks.

I am a big believer in Amazon Alexa - > and any AI tool for that matter. I mean, it could be Google, but or Siri, but Amazon Alexa - > happens to be the one I like. But I have a routine set in the AI that says at 7.45 kids, - > it's time for bed, go get ready.

And then at eight o'clock it's bedtime. And then at - > 6.30 in the morning, time to get up. And then at seven o'clock time to leave for school.

- > And what that does is they're not robots. My children are not robots. They hear the - > prompt and they may or may not go listen to it. But what it's doing is it's helping me - > not have to be the timekeeper on those things.

And so anytime I can take a task like - > keeping track of what time it is. And some automated system will tell me all the better, right? - > I do the same thing on my Apple watch. - > Using things like that to help take some of the mental burden off of something so simple of what time is it, - > really helps quite a bit.

- > So there's four times a day that I don't have to worry about what time it is because an automated system - > will speak it throughout the house and tell us in four rooms that it's time for bed. - > So that's really helpful. I love that we're in Alexa household myself. - > I said her name, hopefully she'll know.

Mine's going to start talking too. - > I found that it's extremely useful to be able to just say something and something happens. - > We are literally living in the future that I dreamed of when I was a child. - > I can tell the device to turn lights on inside, outside, turn the Christmas tree on, turn the Christmas tree off, - > turn the heat up, turn the heat down, make a phone call to somebody.

- > And we all walk around with these devices in our pockets too, which we can talk to. - > It understands quote unquote. And the cool thing about that is that there's - > a whole new category of automation for finance and accounting where the system understands - > an email that comes in, for example, and says, oh, this. - > Is a vendor looking for a copy of an invoice.

- > And the automation will then reach into the ERP system, find the invoice, attach it to the email, and off it goes. - > That would not be possible without the technology that you just talked about from our home devices, - > whether it's from Google, Amazon, and others. - > Very cool. Yeah, I agree.

And things like optical character recognition - > that have been around for some time, - > most people it's not part of their vocabulary to know what OCR is, - > but we've been dealing with that type of technology for 20 years at least. - > I remember being a bank teller at 18 years old and taking a check and reading it through the feeder. - > It's picking up characters and it's understanding what that means. - > What bank account is that?

What routing number is that? Those types of things. - > And that software is getting stronger and faster and more helpful. - > And for accounting professionals.

- > Yeah, so amazing. Yeah, that's a you know, I come from an IT background many, many years ago. So I - > know OCR. They take OCR and they infuse it with artificial intelligence and it's called computer - > vision.

So it not only can read the characters on a check, but it can even understand the context of - > what the what the check is for and categorize it appropriately. Now that's crazy. You know. - > I just yesterday I scanned a check using my phone here and made a deposit.

I don't think I've - > actually been to a bank teller in five years. So that said, now we've been having this conversation - > about automation accounting. Are robots going to take away accounting jobs? No, I think they're - > just going to improve them.

In fact, my last job, my last corporate job, I was in charge of a large, - > global outsource firm. I was on the client side and I outsourced it and we not only went to outsource. - > The human capital, but to outsource the technology of it as well. And what it ended up doing was not, - > only saving us money and time, but we were able to keep our accounting professionals more engaged - > because they were doing less of the redundant, boring matching and things like this.

We ended - > up losing a lot of the bench, if you will, so we didn't bring in a lot of entry-level positions. - > We ended up hiring at a different level, but we had to, so we had to re-calibrate our training - > programs a little bit. If you're hiring somebody at, you know, a level five where you used to hire - > at a level one, you have to adjust in order to get them from a five to a ten in certain amount of - > time. But that learning curve was incredible and I definitely credit that experience to a lot of - > what I know about AI, about what I know about a lot of outsourcing and automation and I bring a - > lot of that into the small business space.

Excellent. Well, we're almost at time here. Any - > final thoughts you want to share with our audience before we wrap it up? - > Uh, I just launched a new book, so I'd love to plug that, but it's called Efficiency Bitch, - > How Ambitious Women Can Have It All Without Doing It All.

I talk a lot about money and I talk a lot - > about automation. There you have it. There's your endorsement right there. I'd like to thank you, - > Melissa Leone from Two Cents Consulting for spending some time with us today.

With that, - > My name is Nick Ezzo, the host of CFO Corner, and we'll see you next time.