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Building a Great Cash Flow Strategy

Poor cash flow is one of the top five reasons businesses go under. But it doesn’t have to be that way – a solid cash flow strategy can make all the difference. Watch as Greg speaks with Deborah Harris on how you can use these numbers in a way that can help you drive your business strategy forward.


Greg: Thank you, everybody, for taking a few minutes out of your time to watch us on Momentum Talks. I am Greg Gunther, from YBM. Founder and Director of YBM. Today we have Deborah Harris from GrowCFO. Welcome, Deborah.

Deborah: Well, thank you for having me.

Greg: It's a pleasure. Before we get started, I'll just give a quick intro to Deborah, a bit of her background. She’s a passionate philanthropist, speaker and entrepreneur. She is the founder of GrowCFO, which is a company that specialises in growing the financial capabilities of purpose-driven businesses. She's dedicated number nerd, you're in few, very few of those Deborah, with an enormous capacity to uplift others from her strategic thinking, and her quirky sense of humour, which I can attest to.

Deborah believes that businesses who are spending their efforts trying to make our world a better and fair place for everyone deserve to grow and thrive. To Deborah, this is the easiest way for us to solve the world's biggest problems that we have, and support those who are committed to action.

So welcome. Again, Deborah, thank you for taking the time out, I know the valuable diary you've been travelling. So got a number of questions here that would just like to ask you. But the very first one that we like to kick off with is something just a little different. What's something that's crazy, or maybe an amazing statistic that you feel is relevant to your industry that others might not know?

Deborah: Probably the most challenging statistic and the reason I do what I do is that there's actually 125 million small businesses on the face of the Earth right now. And 75 million of those in the next three years will go out of business forever. There's a number of reasons, but one of the top five is poor cash flow for their business. And it's crazy because it's something we can actually change, we can actually fix that statistic. It's one of the few that's probably simpler than others to fix. And yet we don't invest the time and energy thinking strategically to shift that. And when I know that's someone's family home, it's the stress that you take home like a suitcase full of worry at the end of the day, and it impacts on your family life and I'm so passionate about family that for me is that it's a crazy statistic maybe not crazy in terms of you know, 35% of people prefer white bread. But it's a crazy statistic because it's something we can change.

Greg: Yeah. And that's the key point to it, isn't it? It is something that we can change, I guess, and you probably come across this people, maybe just like an understanding, you know, of exactly, you know what the numbers actually mean? They're probably just looking at their bank balances, I'm guessing as a thing. So different what, like GrowCFO, and that's probably an unknown to a lot of people, what services do you provide there? And what would you be known for?

Deborah: Well, when I'm for actually teaching teams about cash flow, we found that there's a place in the market for virtual chief financial officers solutions. And we know that there's a growing business can't really afford the overhead of having a full-time CFO in their business when they're still small. And yet, they need the help of somebody who's capable of lifting it to that level. So putting someone in there in a part-time capacity, if they've got the right skill set can be an invaluable source of strategic knowledge and understanding for that business. But a lot of play a lot of businesses and not see if I ready, they need training on how to build up their financial capabilities. And we need to do that in a way that's cash flow positive because obviously, if you're going to pay for having a CFO further down the line, going to need to know that you can fund that. And it's not just a CFO, anybody who's in an executive level, if you're trying to employ top talent, you need to have the funds in there to actually afford that overhead for the business. So we found that we spent a lot of time and we've built up a lot of processes over the last, we've had an accounting firm for over 30 years. And we've worked out how to build up that team training to a point where we now have stepped out with grow CFO on its own, and we focus on the team training, rather than focusing on any of the accounting work. So we work alongside businesses, accountants, now whoever they already have. And we just help them with that strategic direction and how to understand the cash flow.

Greg: Cool. Yeah, and you know, the old saying "Cash is King".  I do know, from my experience, just how little understanding people have of managing their cash, they're just not monitoring. And so that probably segues into the next question for me, Deborah, like, you know, you have come across that arise in family businesses?

Deborah: Well, we know that a family business started from the passion of the founder, there's something that they wanted to do for their family that and for themselves, that really struck their vision in the first place. But alongside that comes from all the challenges of investing your whole family wealth, and so forth on that. So it can be a massive challenge there. And I'm not sure if any of your listeners can identify with this, but I suspect they can when you find out that your business is profitable by going into your tax accountant, and they say congratulations, you made a great profit this year. Here's your tax bill and here's our bill and you're going, “Where the hell is the money? I got to pay for this?” And that's what we find is that's like a bomb? There's a disconnect between people don't understand necessarily the difference between revenue, profit and cash flow.

Greg: Yes. So, and again, just probably even following the line there, like, you know, what would be, do you think, an action that a business owner could take to, you know, start to step towards solving some of these issues?

Deborah: Well, I guess the first thing is if you're already paying to get your accounts done for your tax return, and that's probably 98% businesses, get your accountants will give you those numbers in a way that can help you drive your strategy forward. So the numbers are already there, they're already generated, you're already paying for that you're not having to pay any extra for that. So if you can get those numbers and use those numbers, you can ask you, your captain, your accountant, maybe someone who can drive that strategy for you. But you can use those same numbers, to actually work out what to do next, not just have a look at what you've already done, because that's not it. Well, it's great for your ego, or maybe not so great for your ego, it doesn't help you work out what to do next.

Greg: Yeah, good. Okay. And look is there any sort of valuable tools or systems that you know, or even piece of content, or something people should read that, look into some of these?

Deborah: Well, there are a few tools that we use that we find invaluable. And one is, we do a power of one scenario analysis so as soon as someone comes to us, we bring in all their data, and our CFO has a really good look to see if there's anything wrong with it, or any challenges that they have with it to see. Because sometimes when we do things for the reasons of tax, they're not necessarily what you need to know, for the reasons of growth. And we go through those particular pieces of information and, and we put them through our parent, one scenario tool when it tells us the dollar value, there are actually seven cash flow leaders, it tells is the dollar value of each month. And we've then found that profiling, so there are lots of different personality profiling systems out there but we found that there are certain key character at certain of those characteristics, make for a better match for someone who says, if you're trying to get a person to fix your overheads, you can choose someone who's really good at structure and chasing things down and, you know, going and talking to your landlord, and that kind of thing to get you some money back, that might be someone that is completely different from who are driving sales. So we know that having a look at their profile and having helping business owners with it with working out what their profile of their employees is. And I know that you guys do a great profiling tool as part of your toolkit to its quite standard for that to be a part of it. The other thing we use is, it's really simple it's a Google Sheet with all the metrics on it and we use it as flight deck and we just check in every single week, how we doing here, what's going on with us. And we use mutually as one of the tools that we use, that's Futrli, just to confuse everybody with spelling. We use that as a dashboarding tool for a lot of our big CFO engagements because we can bring their data from lots of different sources and report in one common language. Yes, and that's really valuable for us. So we can look at some of their key metrics there. So that's more about outward facing that for our internal team and how we track each week, all about traffic sources for social media, all the bits and pieces that we're trying to pull together, a Google Sheet is just as good as anything else.

Greg: But it's a good point you are raising because I think measuring the right metrics is terribly important. I don't know that a lot of people really take the time to understand what the key drivers are. In their businesses, they're probably more inclined to go reflect backwards just by looking at their financials, rather than understanding what actions really actually drive those results. So I love the concept of a dashboard. I think that's, that's something that's a big thing for everybody, I think, to start to think about, you might have just answered this question. But the one last question that I did have was, you know, what's the best piece of software that you use in your business? And what is it actually doing for you?

Deborah: Yeah, well, that I would say that the key one for us is really the Power of One. We use that to underpin all of our seven levers of cash flow. By reporting back on that, we can show if you had a 1% change, or you know, a one day change in the different set of meters? How much is that actually impacting your business? So we take all of the guesswork out of the strategy that way, we know exactly how much each leaver worth. So we know exactly, okay, we focus on price and will focus on our pricing bundle or nope, we need to focus on our cost of sales, because that's out of control or our accounts receivable days too high. Those particular leaders, we use it for ourselves, and we use it for everybody else that we that comes through our doors, because it's just an amazing tool to drive strategy, but also to drive an understanding of which leaders are making a big impact, but also help a business owner know, but all their team and their team. What can shift it, what makes the difference?

Greg: Yeah, yeah. Look, it's a great point. I think, again, I think when I first talked to you about your Power of One, I have always operated off the five levers and you've introduced another to. But the reality is that you know that it does give you that focus because you can see which of those levers are getting the most influence. And typically, in my experience, I'm seeing a lot of people focusing in on the wrong, there is another low hanging fruit, so to speak, that, you know, that could be actually focusing in on and, and getting a good result.

Deborah: Yeah, you're quite right. Because a lot of people when they're struggling with cash flow doubt, they'll immediately think I have to sell more.

Greg: Yes, exactly.

Deborah: Often, it's the one that makes the least difference, which is quite surprising to many people. But sometimes it actually can send you going backwards. If you've got me to think of it like a leaky bucket, you can put a hole in your bucket and you're pouring more water in. It's just running out that you're just losing more water at the bottom. It's not you're not making any difference.

Greg: Exactly. Right. Thank you, Deborah, that's been really, really insightful. And it's a topic that, you know, frankly, is one of those, I think most important things for people to be thinking about. So, again, that Power of One that Deborah talked about is a great tool. And I encourage you to reach out. And just on that point, I'm sure from this short session that just done with that, you can actually see the passion that she has, particularly around managing cash, and it is one of those things that will trip you up if you're not on top of it.

So if you need Deborah to reach, feel free to reach out to her, you can check out her website. It's www.growcfoco.com. or you can connect directly with her on LinkedIn, just do a search on Deborah, and you'll find her on LinkedIn.

One last point, please take a few short minutes to subscribe now, that'll ensure that you get regular updates from our new Momentum Talks as we do them. Each time we interview somebody, it'll be on different topics from a different time. We want to continue to add value to you as business owners. Thank you again, Deborah. That was amazing. And yeah, really appreciate you taking your time.

Deborah: That's my pleasure. Thank you very much for asking me, Greg. It's a pleasure.

Greg: Thank you, Deborah.

 



  • Deborah Harris

    Deborah Harris

    Passionate philanthropist, speaker and entrepreneur. Founder of the Grow CFO Co. - a company specialising in growing the financial capabilities of purpose-driven businesses.

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