Why You Need to Know Your Numbers ft. Craig Rattray

Speaker A: So welcome to the new F Word podcast. It's great to be joined by Craig Alexander Rattray and really looking forward to getting into this conversation. Craig, it's great to have you. Why don't you give us a bit of a background as to why you're here and what you've been working on over the last number of years.

Speaker B: Thanks Colin. Delighted to be here. Love what, love what you guys at Float are doing. Background. A very quick potted history. I qualified as a chartered accountant 30 years ago this year, which is quite scary on a number of different fronts. I've worked in corporate finance, I've worked in industry, I worked in private equity, venture capital. And 15 years ago I took the plunge and set up myself to provide a range of services to SME businesses. And at that time I wasn't particularly sure what I wanted to do. But over the years I have now focused on working with growing ambitious companies. So I do that on a part time, fractional CFO basis, part time FD basis. And also I run something called Know youw Numbers where I took groups of business owners and teach them sort of high level finance. Because what we find is that, that most business owners know how to do what they do, whether that build houses, fix roofs, but no one's ever taken the time to explain to them PNLs, balance sheets, forecast and cash. So that works pretty well with a lot of these guys. And uh, it's just a combination of lots of related things there.

Speaker A: Yeah, absolutely. And that, that, that resonates. You know, that was my story. I had very little experience in the finances. And how do you, do you have kind of size of business that you typically like to work with? Like do you. You know, I imagine there's a lot of small businesses that really, you know, they don't have a clue but maybe can't afford someone like you or how does that can typically work? When does it start to become what's your sweet spot for, for working with a company?

Speaker B: From my perspective it's less about size, it's more about growth and ambition. So a business could be turning over 250,000, but they're growing quite rapidly, getting to half a million to a million to two and beyond. I compare that with a business that's perhaps either 1 or 5 or 10 or 20. If they're going to be at 1, 5 or 20 in the next year and the following year, that's not a client for me. I just don't want to work with businesses like that. I think what happens typically is That a lot of people set up because they're good at doing something or they see an opportunity or they fall out with a boss. So they're good at fixing roofs or building houses or providing some sort of product or service and they jump into it full of enthusiasm, which is great because they've seen that opportunity. So lots of very entrepreneurial people doing that. The challenge then arises because no one's ever taught them about finance. You've been there yourself. No one explains P&LS and balance sheets or explains cash or how to deal with banks and investors. And as the business grows, what happens is that the guy who's set up or the woman who's set up with these great ideas is working twice as many hours, probably earning half as much as they were before, and constantly stressed about cash. Because as the business grows, the working capital, as you know, the requirement just keeps going up and up and up. And because a lot of these businesses don't have the right financial information then. Well, a combination of that and also not knowing they can get it, they don't know where to go and get the proper funding and they don't have the forecasts as well. So it's a whole combination of different things. And I think for the smaller businesses out there, there's probably a few tips and things that we can discuss as we go along the way. One, like being, uh, getting a good bookkeeper or a good accountant to keep things up to date. It was one of the things I learned almost 30 years ago that uh, if you do everything every day, you're only ever a day behind. So process your sales invoices, your purchase invoices, do your bank reg, have everything up to date, come back in and do it again the next day. Now I appreciate that. If you're the guy who's out on the tools, then that's going to be quite difficult. But you can bring people in on an outsourced basis, whether that's bookkeeping or higher level finance type roles. So I just like to say ignore size and do what you should be doing regardless of the size of the business. You know, whether you're turning over, you know, 10,000, 100,000 or 10 million or 100 million. It's the same things, there's just more of them when you're, when you're a bit bigger.

Speaker A: It's a really interesting point is, you know, I mean, I guess there'll be some businesses that have ambitions to grow and haven't been growing or, but that actually finances one of the things that can unlock that growth. Uh, so it's almost about, we hear that quite a lot. It's like the ambition of the company is what attracts people into working with them. And yeah, that makes a lot of sense. And I think from our perspective, I used to run an agency and really didn't give much emphasis to the numbers at all. I was just thinking about like you say, is there enough cash in the bank? And if there was, I was kind of happy. And you know, actually I think it was really starting to think about, yeah, how do I stop being the bottleneck in all elk aspects of my business so I can actually start thinking like you know, an owner rather than, you know, being an employee of the business and trying to get to that sort of higher level. But yeah, I think it, it's probably been, I think it's, it's interesting because what do you think gets a business owner to, to that point when they start to want to take it seriously? You know, for me it was that realization that if we don't get this under control, we're never going to have the data we need to grow a business.

Speaker B: I think there's even a point before that, Colin, that at the end of the day you don't know what you don't know. Okay? So if you've been taught how to build houses or fix roofs or something like that, from an operational perspective, you, you'll be very good at that and you'll crack on and do that. But no one's ever taken you aside to say like here's how you need to manage the business, here's the numbers you need to know, here's what you need to work out that ah, you've got in terms of pricing and margins and cash flow. And typically people come to me with probably one, one of, one of three or four problems. One where they've got, they're not making enough profit and, or they've got a pent up demand for more opportunities. So they're going to, they're turning over half a million pounds. But there's all these people chopping in their doors saying please come and work for me, please come and work for me. And the business owner saying, well I can't, I can't fund it, you know, I can't bring in new men I can bring in, can get the materials I need. So that's the first one. So typically say sort of profit slash opportunity. The second one's people where uh, they can't get the right people. And the third one is stress where 24, seven, worrying about the business, how do I pay the wages next week, how do I pay the suppliers, how do I even maybe get some money out of this myself? So all of those things happen. And if you draw that triangle with those three sides, profit, opportunity, people and stress, and you're right in the middle of that cash, cash can fix all of that because cash can then, or cash slash working capital facilities. Cash can then allow you to take advantage of the opportunities that you have because the business is now properly funded. Cash can help you get better people because, uh, I keep hearing that businesses can get staffed. Now, whether that's right or wrong, I approach it slightly differently on the basis that, uh, there's 8 billion people in the planet. Have you asked all of them? What tends to happen is that you can't get the staff for the salary or the package you want to pay because you're perhaps a bit constrained in terms of what you can pay them. So again, going back to cash and working capital, if you've got the right funding in place, you can then go for better people or pay a bit more for those people. So you can get the right people because people are paying lots of money, will get the right stuff. Whether they're the right ones or not is probably, uh, out with the scope of this chart. And then the third one is the stress side of things, because if you've got the right financial information and you've got the right funding, you don't need to worry about how you pay the wages next week or how you're paying m the suppliers, because that's all in place. And the way, the way to do all of that is making sure you've got the right financial information in terms of where you are, where you've been and where you're going. And that's the thing I've got above my head as well. It's the, that's the know your numbers framework. And in terms of information from where you are, we talk about management accounts and key performance indicators and they will then assess where you are and you can then compare where you, where you are compared to where you thought you would be against budget you look at, in terms of where you've been. So looking at historic accounts, statute accounts that you fill at the company's house, making sure they're up to date, making sure you've got all your compliance up to date, whether that's HMRC or other related accreditations you've got. But for me, the big bit here is actually the looking forward, right, which is what you guys do in float, it's working at what's going to happen next week, next month, three months, six months. That's the real skill in terms of financial management. Because at the end of the day none of us know what's going to happen. But we can make a series of assumptions based on where we are and where we've been. And that's why you need all of that information up to date as well, because that's what you need to run your business. That's what you need to make the decisions on a daily, a weekly and on a monthly basis. And um, funnily enough, in terms of getting funding, what does a funder need to know? You need to know where you are, where you've been and where you're going. So the information you're using to run your business you can package up slightly differently and you stick it in front of a funder and say, right, I need this, here's what, I'm going to go with it because, you know, we hear regularly all of these comments that the banks aren't lending or I can get funding. Oh, it's perhaps because you've not got the right financial information or because you've not packaged that financial information. Easy. Because if you give the banks that information, they will be eating out of your hand all day long. Assuming, assuming I need to add that you've got a commercial profitable business. Right. If your business is losing a lot of money. Right then, okay, different story. But we're assuming here we've got a commercial viable business that has growth opportunities and a management team to deliver it.

Speaker A: Yeah, it's interesting because obviously, you know, coming from my background in the world of startups is often a lot of people are not in that position. You know, they managed to raise some early funding from, from angels and then they're in that position of trying to, to raise from, you know, follow on funding or vc. And it can be quite challenging if they haven't hit that. And it seems like, I don't know if you're noticing this, but it seems like we're seeing uh, a turn in the tide to businesses deciding to, like they know the funding is, is, is maybe more difficult to access than it was and certainly in the startup world of the vc, but uh, they're looking to try and move to profitable business models and get cash flowing in much faster.

Speaker B: You've got the two sides of that. Again, you've got to understand what are you funding? Are you funding growth because the working capital is going up or Are you funding losses because you're at early stage and you're developing something. So two different forms of funding where you're funding losses, you will need an investor to do that. But if you're funding growth, then there's so many great ways of doing that, particularly through invoice finance, invoice financing, confidential invoice discounting type facilities. So I always like to ask when people are saying I'm looking for money, what do you need it for and where is it going to take you to?

Speaker A: And it does, it does feel like, like coming back to your earlier point of, you know, just getting, you know, getting a bookkeeper who can actually reconcile, you know, obviously the move in the last 10 years, you know, almost whole wholesale to cloud accounting. So tools like Xero and QuickBooks, you've got, you've got all this great information but you have to have it up to date or it's, you know, still, it's still pretty old school.

Speaker B: It's only great if it's been in, if it's been input correctly. Because the number of times I've heard people say I don't need a bookkeeper and accountant, I've got, you know, I've got zero, you know, and somebody will put all the information in. But you know, if it's all nonsense that's going in, then what's coming out is nonsense as well. I think I've, I've said, I've said many times that in, in any company, I would rather have a really good, uh, really good bookkeeper than have a finance director. Because the finance director or fractional cfo, they can only do their job if the day to day stuff's done. And this goes back to the point I made at the start. Do everything every day, you know, do your bank right, do your purchase invoices, do your sales invoices, everything. Just make sure it's completely up to date and then you can do what you need to do with it. You can take that information and use that to make better decisions. But the look ahead for me is key and that's the bit where I'm not the pop accountants yet and we've been going for 15 minutes. But that's the way for most accountants aren't particularly good because they can tell you what happened last week or last month or last year. But the real skill for me in terms of finance and if you're a growing ambitious business, is to get someone who can help you understand where you're going going forward. Now they need to work in conjunction with the operational team to understand that by making a series of assumption based on where you are, where you've been telling you to know where you're going. It's not as, it's not as complicated as people think. And I think that's what I found through the know your numbers group. Start. Most business owners are scared of finance because they perhaps not. They've not done particularly well at maths or they've been made feel stupid at maths and they've gone down more of a vocational route. So they are now operational in terms of building houses, roofs, that type of things, you know, working with their hands as having got a trade. And they run away from the numbers side of the business for that very reason. But I think one of the things I've shown over the last few years is that this is actually quite simple. If you break it down into the constituent parts and explain it without using terminology that, you know, your typical person history doesn't understand, then they can understand it.

Speaker A: Yeah, absolutely. I think, yeah, we had that revelation kind of. I remember one point just when we started using cloud accounting, thinking, you know, this used to be a massive job, you know, you'd have to have somebody coming in and taking all your numbers and invoices and receipts and, you know, physically taking them and putting them into stage or something like that. And I think, you know, just realizing, like, hold on a minute. Once you get, if you start with this as a foundation and you get this, if you get this, this one right, then yeah, everything just becomes easier. Just, you know, like, oh yeah, where's that invoice? Or what's that information? Or who is that supplier? It's just at your fingertips. And uh, you know, I think that's, it's huge. You know, even if like for me not being finance background and to all that, just having that access to be able to, to look and go, what was we invoiced that company last time? Or, you know. Yeah, why is that? How long does it typically take them to pay us? Like, having that information is, you know, it's amazing just to be able to get it at your fingertips.

Speaker B: And um, the thing is there's no excuses anymore because it's there. You know, you've got the online accounting, your bank can feed into it as well if you can connect that, uh, properly so you've got real time, live information. And that's the whole point of doing it every day. If you've done it every day, then you're, you're, you're fully up to date. So as a business owner, you can have a look at the dashboard on 0 or QuickBooks or whatever that may be and see exactly where you are. You can go into your forecast as well, see how that's been updated as well. You know exactly where you are. And that's my whole point about taking the stress out of it. But having that information, having the right funding, then the running the business becomes a lot less stressful.

Speaker A: Yeah, absolutely. I think, you know, I'm not, not the blow around trumpet, but that certainly was one of the things that, you know, again, companies even like you say, if they're using like zero or something like that, where they're using, they've got, you know, they know they're doing things in the cloud. They know they're, they're kind of typically up to date every. Every month or so. Uh, you know, we still find companies that are reconciling their bank account every quarter when they have to do their VAT return. And there's that. And there was only, that was the only reason for them doing the. Was the vat. And, and actually with. When you have something like float or something that gives you a. So what, you know, that actually makes companies, we've heard like say, actually I want to, like, I want to get my expenses in. I want to, you know, do this reconciliation. I want to pay a bookkeeper because if I do that work, then I know my. I can look at and see the future. And that is something that is like you say, most businesses do want to have access to.

Speaker B: And that's where we need the education piece. Because again, I go back to, uh, most business owners don't know what they don't know and their accountant isn't necessarily telling them these things. I've had people apply for know your numbers and they fill out an application form and various things. And typically, what was your turnover last year? What's your ambition over the next few years? Where are you currently those types of things? The number of people say they don't know because their accountant hasn't done it and they're going into the accountant seven and a half, eight months after the end of the year to a meeting to find out how much money they made going back more than a year ago. It's staggering. And I often say, or, uh, ask the question, how do you run a business without a forecast? And the answer to that is badly, because you can't run it without a forecast. In this, again, by float is so important for businesses going forward because if you're not forecasting how do you know how much money you need or what bank facilities you need? You don't because you haven't got a clue. How can you then go to a bank to say I need X because you don't know what X is and the bank isn't going to give you it because you don't know you don't have the forecast. So, so it becomes circular. And that's why you get so many business owners who are uh, in a situation where they've got this pent up demand for business but they can't take advantage of it because they don't have the right financial information, can't get the right funding and they just spend this life in this, in this circle where they're constantly stressed and under pressure from cash. And as you know if you take a step back and do these things it's actually very simple. You know if I, if I look at my own client base over the last three, four, five years I had guys who've come to me who were turning over half a million pounds or less or uh, you know, between half a million and a million and we put in place the right financial information, we develop a forecast, maybe a high level business plan and then we go and get it funded. So these guys are now making 5, 6, 7, 10 times what they were making before and making significantly more money, taking more money out of business and having a lot less stress because of that. My advice to any business owners out there listening to this is you've got to think about it as an investment rather than a cost. Invest in a good bookkeeper, uh, invest in float forecasting, you know, invest in a fractional CFO and you'll then do all these things. Because if you know, if I look at some of my clients where they've gone from making you know, an EBITDA of you know, less than 100 grand to making an EBITDA of 789000 and some of them over a million pounds. My costs and the cost of a bookkeeping, other finance, they become irrelevant at that point.

Speaker A: Yeah, absolutely. Yeah. I mean I suppose there's always a, the stories of people who uh, think that you know, that money is better invested in the early days in sales and marketing, product, whatever it is, you know and there's, there's you know uh, you obviously have to have a business that's doing something to actually warrant spending money on, on the finances. But have you got any stories of businesses you've worked in where there's been you know that kind of turnaround or they, you know, like you're saying some of these companies have come into and they've increased it. Like, what, what are the. Can you give us a bit more insight into what were the revelations that they had or what were the things that kind of got them over the edge to start looking at this more seriously.

Speaker B: It generally is driven from the cash side of things where they're just struggling to pay things. I can think of a couple of opportunities and they're similar stories. Sorry, a couple of stories there. They're broadly similar where introduced to both business owners, businesses are doing okay, turning over. One was seven, eight hundred thousand, one was a million. Ish. Not making huge amounts of money, but telling you maybe all these opportunities, we've got this, we've got that, there's 100 here, there's 250 there. And it's uh, a 35% margin, a 40% margin. So, okay, fine, right, what's your plans for the next five years? And I think both of them said, I want to get to 5 million. I said, well, based on what you've told me, why not do that in two years? And the typical response that comes back as well, people in cash. Uh, so my response to that is we'll see if what you've told me is right. We'll develop a forecast, we'll get in front of a funder, uh, and we'll get the business funded. And both of those businesses hit, they went from where they were to over 5 million in less than two and a half years because they had the right financial information which got them, um, the right funding and they're making a damn site more money now. Business is now running almost itself because we've got the right people in, because we had the right funding in to develop the team. And in one of the cases, One of the MDs is barely in the business. He's hardly there at all. He's got an operational team that runs it. He's got some KPIs that get sent out daily, weekly, and we catch up monthly. And that sounds, you know, there'll be people listening to think, listening to this, thinking that's maybe just a one off. It's not, you know, if you've got that type of business where you are doing something well, people want to work with you. You will get it funded all day long. It's just about packaging the right information and the packaging point is actually relevant as well. I'll give you another story. Someone who joined my Know youw Know one of the Know youw Numbers groups, tail end of last year, was buying his father out and it was family, so it was him and a couple of members of the family and they produced a business plan to, to, to send to the, to the bank for the funding. And it was not a huge amount. It was like half a million pounds of funding. So a bit of a dispute. Couple of family members decided not to be involved. So it was this one person left. So he asked me for a bit of help. So sort of helping out informally sent me the business plan and I, uh, opened this and I phoned him immediately and he said, please tell me you've not sent this to the bank. Right. Because it was like. I compared it to like going to an all inclusive buffet where you've got lots of nice food, right. And all they've done is they just grab food from everywhere and stuck it all in one plate, right. So it's just like it's an information dump. And all I did was I took that information and put it into the right structure, right sort of format. Uh, the accountant actually did the forecasts on this that, you know, there was some in place that was pretty good, tweaked a bit and we got it funded and we got it funded reasonably quickly. And the bank said there is not a chance we were ever going to fund that first business plan. And my point there is it was all the same information. It was just about how you then articulate that properly to the funder and how you set the other information alongside that. Uh, so a lot of people will have information in their business and just not to be sure how. Not sure how to engage properly with the funder. It is reasonably easy if you've got that information.

Speaker A: So, uh, do you, Craig? I mean this is obviously we're calling this the new F Word podcast in terms of fractional CFOs and really kind of exploring the rise of that as a role. Do you go under that moniker or you've been, you know, is that something that, that's changed for you over the. Because. Because this is. Feels like a relatively new sort of, you know, surge that we're seeing since post Pandemic more and more CFOs moving into fractional rules. Do you feel like, you know, you've always been in this game for a long time? Do you call yourself something different? Do you kind of come in as more of like a turnaround person or like, how do you, how do you position your own services?

Speaker B: I stay away from turnaround work. I Used to do a bit of turnover, turnaround work going back 10 years plus. But turnaround work is difficult. It's all encompassing, becomes full time, you can't do a turnaround part time and typically there's no cash to pay you. You might end up with an equity stake in something that's worthless, but it's worthless generally. So over the last five years I've focused on growing ambitious businesses because whilst they may not necessarily have the cash on day one, because we're going to get the funding, we build in the proper funding, whether it's for me, for the CEO, for the rest of the management team and other people we need to bring in, that is part of the funding package because a lot of the business owners aren't paying themselves properly because they only take what's, what's there rather than a proper salary. So we build all of that into the forecasts and do that properly going forward. I find I'm doing, I'm doing less FD CFO work because I've been more focused on the know your number side because FDCFO work is difficult. I've resigned from about six different roles in the last nine months to free up time because I was doing too much. I was working between 70 and 80 hours most weeks, which was a lot. Because if you're working with ambitious companies and they're doing, because they're typically doing things, they're raising money, they might be buying another business or opening something up or doing something, if I've got a portfolio of that dozen people and there are seven or eight of them are doing something, that's quite time consuming. So my focus over the last year or so has been more on the know your numbers side. I'm still doing the CFO FD roles because I really enjoy doing them, but for the right companies, even more selective than I, than I was before.

Speaker A: And when you say you're focusing on the Know youw Numbers, like what is that? That's a course that you've put together that you're, you're putting a cohort through, you know, every couple of months. How does that work?

Speaker B: Yeah, so knowyournumbers Biz, where we take groups of business owners, they apply to join and the main course at the moment is structured over a six month period where we do. It's all done on Zoom. So I've had people from all over the UK doing it. North, South, east, west has been good. We do a two hour session one week which is principally focused on the teaching side of things. So as you see on the website, it covers different things like first session's P&L and balance sheets. Second session is management accounts. Three is forecasting, four is further forecasting, five we go into gross margin pricing, direct costs, indirect costs, and then six is wrapping up cash and then building value in the business. So I do a lot of teaching, although it is inter, although it is interactive and we do breakout sessions and hot seats that allow other people to talk to each other, learn from each other, because they're learning from other business owners. And then the second session we do every month is two weeks. After that it's a one hour session and there's no agenda for that. Session one has a reasonably fixed agenda. Session two, we speak about what the members want to speak about. And that could be. Could you explain EBITDA a bit more or your Tommy Gross margin can go into that or here's the numbers for my business. What does that mean? How am I doing? So it becomes very interactive and we're rolling out over the course of the next few months, we're rolling out a few different versions of that where we've got one focused on construction of an early stage one, we've got growth and succession and we're also going to do one which is just for female entrepreneurs. Whilst I've had some that there's been a number of women in the groups going forward, something I've found is that a lot of them just want to deal with other women as well. So there's a lot of that stuff happening as well. But it's still back to the same principle. It's still pointing people in the right direction in terms of taking information and using it to run the business. This is not about people. You know, let's go and learn what a P and L on a balance sheet is. And I can say how clever I am. You know, it's not about that, it's being aware of it and it's then using that in your business to make sure you've got the right info, but to make better decisions and then focusing on certain, certain key numbers that you can manage, monitor and influence more. And what that does is it drives the profitability and the cash flow as well. So it's reasonably simple.

Speaker A: Yeah, it sounds fantastic. It's really interesting, like take on, you know, moving because I think obviously there may be more people who want to kind of take on that model, but it obviously allows you to just keep producing it and keep teaching it. And is it just you or do you bring on other people?

Speaker B: Or well, what we're doing in the new groups that we've got going forward. In the construction one, we'll have a quantity surveyor, we'll do a small slot in that. In the female entrepreneur, we've got a lady who's been on Know youw Numbers Mastery and her, her female general manager is on a current group as well. So she will be talking about her experience of running a business and in the growth and succession we've got someone with some other relevant experience as well. So, so make just mixing it up a little bit. We still, the focus will still be on the know your numbers Mastery because that's the bit where I think there's a real demand because if, if I take you back to group, second or third group that I did, you've got to apply for it and then I interview you because it's got to be the right mix of people. You've got to share, you've got to be open and just help, help others. So first session, 7am to 9am 10 past 9 I got an email from a gentleman. Thanks very much for letting me into your group. I've Learned more in 2 hours than I have in 35 years of running my own business. 57. He'd been running his own business since he was 21 and it was just mind blowing. So you get a lot of stories like that. Because it goes back to what I said earlier about people being scared of numbers because of maths class at school and just running away from it. You can't as a business owner, it's your business. You might have an FDA or a bookkeeper, an external accountant. It's still your business and they're your numbers. So you can't just devolve yourself of it. You want to have that high level knowledge so you can understand is your bookkeeping accountant and fda, are they doing what they're supposed to be doing? You need to try and hold them accountable. Again some of the feedback from that is that uh, people can now go and have business owners can have a discussion with their accountant and understand it, go and speak to the bank, go and speak to another business perhaps about buying their business or selling their business. So it's giving that awareness and knowledge to allow them basically learn, apply and grow.

Speaker A: Yeah. I was going to ask you, do you feel like, you know, obviously people might discuss. Sometimes people are not, feel like they're not getting the services that they want from their accountant and other times people maybe love what they're getting from their accountants. It's uh, Obviously, like in anything, it's going to be a mixed bag. But do you like. One of the things that I've noticed coming up more is people going, oh, yeah, maybe I shouldn't be expecting everything from my, uh, accountant. Maybe I do need to hire a bookkeeper or maybe I do need a fractional CFO or a virtual FD or something along those lines. Does that, do you cover, like people talking? Uh, like that's my next step now that I've done this course, is to go and get that team together.

Speaker B: I find that it will often happen in the first session where people start saying, my accountant doesn't do that for me. Now, whilst I am, um, as you know, highly critical of accountants in general, the problem again you've got here is that the business owner doesn't know what the business owner doesn't needs to know because it might be his pal in the pub said, go and speak to so and so because he'll do it for 50 quid a month or whatever that may be, right? So he's getting a 50 quid a month service, but it perhaps needs a 250 quid a month or a 500 quid a month service because he would then get much more information and be able to do something with it. And it's, it's about understanding that. And that's where the education comes in, you know, by trying to explain to people, here's what you need. Now some, some accountants are very good at that. They will go and they will, they will interact with the company and say, look, you actually need this or you need that, or let's do a wee bit more or less do monthly accounts. You know, one of the things that I really hate are, uh, people getting, you know, quarterly accounts. I just, I just detest quarterly management accounts. Why not just do it every month? You know, it doesn't, you don't need to wait a quarter, you know, back to. If you're doing everything every day, just do it and use that information. Because one of the things I like to ask a business owner is how do you know if you've had a good day, a good week or a good month? And the typical response will be, well, you know, the phones are ringing or all my men are out on site or all my vehicles are out on site, or we're just really busy. Yeah, but point to me something financially that you actually measure and you manage. That shows that. And in many cases they don't do that, Colin. And again, it's because they don't know, and what I found is that you can put in place, you know, three, four, five KPIs, key performance indicators that are things that you can measure them, you can monitor them, but you can also manage them and influence them and use them to drive the business. So what I found is if you can find something that are relevant for each business, they then go away and start doing it. Right. See, if you do more of this, then you'll make more money and more cash. Right, fine, I'm off. I'll speak to my operational team. It's that type of thing. So this is not about just learning information for the sake of it, this is learning it, applying it in your business to make the business better and, um, to make your life a lot less stressful as well.

Speaker A: Yeah, no, absolutely. 100% agree. What do you, what's your thoughts on the whole direct versus indirect method of cash flow forecasting? Like, you know, I like, I like

Speaker B: to use a combination of both. I think, I think, I think it's important.

Speaker A: I think if you, as in two, to get two different ones.

Speaker B: Generally, generally in the end of the day you can be a profitable business, but you can't pay your suppliers and you can't pay your, um, employees with profit. You can only pay them with cash or working capital facilities. So I like the old, I like the way float works, you know that I've got clients who use float, I've got clients who use of spreadsheets, but for me, you know, receipts and payments type basis, you know, it's easy to see, you know, cash in, cash out, what's happening this week, next week, you know, 13 weeks at least, if not longer. It's really important to do that. And you can then look at the different versions of doing it where typically doing that on more of a monthly basis when you've got an integrated profit and loss account, balance sheet and cash flow. And that cash flow can be done on a number of different bases, but that's typically going out at least to the end of the current financial year, probably to the end of the next financial year on a monthly basis. And just making sure that whilst they don't necessarily need to be exact, but they should be reasonably accurate in terms of what both of them show.

Speaker A: Yeah, yeah, absolutely, yeah. I mean, the number of times I've heard people saying, oh, yeah, we've got a cash flow forecast and what they're actually looking at is, you know, an indirect cash flow that was done at the beginning of the year and it's not really looking at anything, you know, in bills, invoices that are in their system at the moment, things that haven't been paid. It doesn't contain any of that information. And really I agree with you. I think, you know, you need to have both. You need to have both. And a lot of people don't have that direction, direct one, the, you know, the hand. It's, it's just not, not something they

Speaker B: can pull up, but linking that back as well. If you think about floats, right, Because a lot of, a lot of business owners, as I said before, you know how you run a business without forecasting badly, right? I'm not trying to be critical because there'll be people listening to this who have never, you know, never thought about doing a forecast because they've never been taught to do a forecast or told that that's what they need, uh, that's what they need to do. But if you've got, you know, if, if you come in this morning, right, and you've got X in your bank account, right, you may decide, I've got lots of money, right, I'll just pay all these suppliers, right, but you've forgotten that you need to pay your, you know, your VAT next week and you need to pay your salaries next week because you don't have that forecast, you're just running it from where you are. Another story, client, know your numbers group six, eight months ago, family business senior member wanted to shut the business because they were really struggling for cash. What I forgot was that There was about 800 grand of trade debtors. There was only about 70 grand of trade creditors and they'd work in progress that they hadn't recognized as the business of about half a million pounds. So when you add all of that up and then you see how it unwinds, they were in a fantastic position. Okay, things were tough from a day to day basis, but we put in place an invoice finance facility to fix that. Uh, so you know, as an understanding, all of that. And that's where the information has got to be current, it's got to be up to date. Otherwise you start making wrong decisions. You know, you either, you either spend all the money or you think you're going bust when you aren't, you've just got all your, all your um, working capital money tied up in working capital. So you got, you got to have the right information and the right people to manage that information for you. Business owners aren't expected to know all of this stuff. Again, I'll make that point. I would Never ask a business owner to go and prepare a P and L on the balance sheet and actually do the forecast. But they need to be aware of it and use it to help themselves and guarantee that the stress levels will be significantly less and they'll make more money doing this.

Speaker A: Yeah, I mean, Craig, I could talk to you all day about this. It's absolutely spot on. Well, we should probably close up because we've gone over our time. But if I could leave you with one, one question, like, what's next for you? What do you feel? You know, you're going to continue to grow, Know your numbers. That's obviously a passion and it's a great thing that you're doing in terms of educating businesses. Is that. Does that. Are you planning to grow that? Does that. Is that, that the next step?

Speaker B: Yeah, that's the plan. Typically we're running with a couple of groups at, uh, any point in time. The, the plan is it will scale that up and probably run with a lot more than, than two going forward. And whilst we're doing that, there's a lot of free information on the Know youw Numbers website. There's about 70 videos, there's blogs, there's comments, there's all sorts of stuff. So for me it's not just about making money through the groups, it is about helping. You know, I've got the, I've got the two books that I give away typically to help people as well. Masteringcashflowbook.com you can download a copy of that book for nothing and you'll get that and lessons for Rocking Chair on Amazon too. But anyone who can't stretch to 99p on audible or. Sorry, not on Audible, on Kindle or. I can't even remember how much it costs now. 7.50. Please just message me through LinkedIn and I'll send you a copy on behalf of. Courtesy of, um, Gift from Float.

Speaker A: Well, yeah, look, thanks so much. It's been great to chat to you. The website is knowyournumbers Biz, so people can go and find out about that from there. But Craig, really good to chat and look forward to talking more.

Speaker B: Thank you, Colin. I've enjoyed it.