Your First CFO

The Accounting Cure for Small Business Owners

Pam Prior

• Publisher: Morgan James Publishing
• Year: 2020
• Print ISBN: 9781683505556
• eBook ISBN: 9781683505563
• Topic: Betriebswirtschaft
• Subtopic: Buchhaltung & Budgets

"Whether you're looking to add a bookkeeper, part-time CFO, or full-time CFO, Your First CFO is an eye-opening must-read." —Kevin Kruse, New York Times–bestselling author of Unlimited Clients
Are you paying good money for an accountant and bookkeeper, but still lacking enough confidence in your company's financials to answer critical money questions?
Do you sit up at night processing and reprocessing unresolved questions about how to keep your business on a solid financial footing or nurture it to the next level?
Do you feel like you're flying blind with your finances and have no sense of the terrain ahead?
Your First CFO is a step-by-step blueprint for using the tools and people you've already paid for to shine a spotlight on your business finances so they make sense to you and are reliable, timely, and relevant. With this guide, you can transform your current stress and uncertainty about bookkeepers, accounting, and finance into a foundation of steady confidence about the future of your business.

Draw Your Business: Business Mapping

The most important reason for you to read this book is to realize that, to be a successful business leader, you need to come to terms with accounting.

Ouch.

My goal is to make that journey as painless and valuable as possible, and with one clear takeaway in mind:

Your business accounting only has value to you if it is aligned with your business model.

That sounds so simple. And yet, when I met Nathalie, she was caught in a quagmire of reports that didn’t have value for her. She, like so many others, reviewed monthly reports that had been set up using generic templates, and that didn’t reflect the business that she was running, day in and day out.

To turn the corner and step into a better system, one that worked for Nathalie, the accounting team first needed to understand Nathalie’s business. So, together, we walked through a series of questions that translated Nathalie’s business from the crystal-clear vision in her head into the language required by Frank (her bookkeeper) to support that vision. That exercise laid the groundwork for Frank to start creating reports and metrics that made sense to Nathalie and that logically and obviously reflected her own concept of her business model.

Your first step, like Nathalie’s, is to create a clear description, in English, of your business the way you see it. To do this well, you’re going to need some uninterrupted time. And, since this description will become the foundation on which you build your financial confidence, get a babysitter for the kids, close the door (or head to your favorite off-site hideaway), turn off the phones, and promise yourself to spend fifty uninterrupted minutes to answer the questions (coming up soon, in the next section).

Fifty minutes for this is just right. If you finish early, go back over your answers and see if you’ve missed anything. If it takes longer than 50 minutes, you’re getting too detailed (remember the 80/20 rule: 80% of the value is in 20% of the effort; so take the high, 30,000-foot perspective for this exercise as you look at your vision for your business.) You don’t need to be perfect here; you only need to capture the outline of your business essentials, as you see them.

If you have trusted advisors, check in and ask them the same questions, and listen to their answers carefully. Your own filter may be misleading you about your vision. If you have a mastermind or peer group you can brainstorm with, pull them together and run them through this exercise, as well. If you have a trusted leadership team, get those team members’ perspectives.

As you go through this exercise and answer the questions, there is a ground rule (and it may surprise you):

Define your business without looking at your current financial reports or asking your accounting team what is possible.

This blank-page approach will define your business as you see it, not necessarily as your current accounting and reporting reflects it.

Now, don’t panic. I am not proposing the start of a major project to overhaul everything about your accounting and reporting systems. Alignment to create a system that really works for you may only require a few tweaks. That will be more likely if you are completely transparent about how you see your business, and about what information you’d like to have at your fingertips to manage it. For now, don’t worry about how we will accomplish that vision, just grab a notebook, or open a new computer document, and let’s go.

Draw Your Business – Q & A

1. Overview

a. What are the things you purchase and/or pay for to run your business (where does your cash go)?

i. Supplies

ii. Services

iii. Employees

iv. Consultants

v. Materials

vi. Other

b. What are the services or products you create or modify to provide to your clients (what do your clients pay you for)?

c. What do you do to transform and create the services or products that you provide to your clients (or, what is your “special sauce”)?

d. What is your core expertise? In other words, why are you in business, and what are the things that only you can do, that can’t be outsourced? Advice: be very selective with your answer; there should only be one or two things, at most.

e. What makes your business better than anyone else’s?

f. List your competitors. What makes them strong competitors?

g. What environmental and economic factors affect your ability to do business?

2. Categories

a. Do you have different clusters of clients that group together in your mind to form categories that you would like to track?

b. Do you have different clusters of products or services that group together in your mind to form categories that you would like to track?

c. Do you operate in different geographical regions that you would like to track individually?

d. Are there any other characteristics or dimensions of your business model that you would like to differentiate and track?

3. Processes

a. How are the things that you purchase and/or pay for delivered into your possession? Is the delivery process different for any of the categories identified in the previous section?

b. How do you deliver your products or services to your clients? Is that process different for any of the categories identified in the previous section?

c. What is the value you add to your products before you send them to or provide them to your clients? Is the added value different for any of the categories identified in the previous section?

d. What machines, materials, and/or people are involved in creating the products or services for your client? Are they different for any of the categories identified in the previous section?

e. What machines, supplies, people, and expenses are not specifically involved in creating the products or services that you sell?

4. Outside Factors

a. What is the composition of your customer base? Advice: Take an 80/20 look at your customers. Who provides 80% of your customer base?

b. Do you have any suppliers who are at risk, or who are the only suppliers for key products or services you need?

c. Under what regulatory restrictions and requirements do you operate?

d. Who owns you?

i. How much have they invested?

ii. How long have they been invested?

iii. What are their expectations of the business? Short-term? Long-term?

e. Who has lent you money? Advice: This doesn’t include the normal invoicing from your suppliers; only large loans or lines of credit.

i. How much do you owe them?

ii. How are you paying them back?

iii. What’s the timing on paying them back?

iv. What is the cost (interest charge)?

5. Context

a. What are the three biggest questions or challenges you face in your business right now?

b. If you could wave a wand, what information would you want for being able to make good decisions for each of the time periods below?

i. Daily

ii. Weekly

iii. Monthly

iv. Quarterly

v. Annually

* * *

Welcome back. And congratulations! That was a huge first step toward gaining the control you need to make financial decisions that are in line with your vision. In additio...

Table of contents

• Cover
• Title
• Copyright
• Table of Contents
• Introduction
• Chapter 1 Draw Your Business: Business Mapping
• Chapter 2 Notice the Connections: Linking Net Income and Cash
• Chapter 3 Look Ahead: Forecasting
• Chapter 4 Meet Your Cash: Controls Over Cash
• Chapter 5 Gain Insight: More about Key Performance Indicators
• Chapter 6 Build Your Team: Finance and Accounting Roles
• Chapter 7 Pick Your CFO: The Range of CFO Choices
• Further Resources
• Acknowledgments
• About the Author
• Thank You