Brendan Mills is a CPA and
the founder of a business based in Perth, Australia, called CFO Dynamics. He describes his role as
“helping business owners to gain greater control over their financial
performance, so they can focus on what they’re good at”.
For over ten years Brendan
has advised small business owners as well as senior executives of large firms,
on how they can best achieve their profit goals – through a balanced approach
to both maximising revenue streams but also containing and controlling costs. I invited Brendan to share some of his
finance experience with us and also asked him about his own
journey in starting up his business …..
1.
Brendan, what motivated you
to start up your own business?
There are a couple of
layers to this question. I always wanted to run my own business so what
influenced my decision to study accounting at university was my belief that accounting
was the best degree for me to do to run my own business one day.
The decision to start my
own business was seeing an opportunity in the market. From experience I believe
a lot of consultants and accountants like to have their clients become reliant
on them. Therefore, when they provide services and advice if they are removed
from the picture the benefits disappear. We work on a principle of
systemising and improving financial processes so the accounts department know
what to provide owners/management and we educate owners and management about
how to interpret the information and improve their business as a result, making
us redundant.
2. What were some of the major challenges you initially encountered?
2. What were some of the major challenges you initially encountered?
Two main challenges, the
first was expected and the second unexpected. The first major challenge was
generating leads because I had no contacts and contractually couldn't approach
any clients from my previous employer. Even though the concept of an Outsourced
CFO is not new but our goal of making ourselves redundant was met with
scepticism to start with.
The unexpected challenge
was the solitude. I like most people enjoy the social interaction of work and
this is lost when working by yourself. I must admit I found this a huge
challenge to overcome because working out of home (when not at a client) made
you feel distant to the outside world.
3. What are the common mistakes you’ve seen small business owners make with their finances?
3. What are the common mistakes you’ve seen small business owners make with their finances?
The most common day-to-day
mistake I see in small businesses with their finances is not understanding
their costs of production. Every business provides an outcome for their clients
whether that is tangible or intangible. I break businesses into three types,
"Buy & Sell" where you buy a product for a dollar and sell it for
two (for example retail and wholesale), service where you provide intellect and
knowledge to provide an outcome (for example a physio or lawyer) and
"Value Add" businesses where you combine intellect and materials to
achieve an outcome (for example manufacturing and construction).
Plus
nobody will ever care as much about your business as you do, so why outsource
the responsibility of knowing your businesses financial status on an ongoing
basis in terms of revenue, costs, profitability, efficiency and cash flow when
you can do it yourself
4. What quick tips would you offer small business on managing their cash flow?
Every single business has a
cost of production to deliver the outcomes they provide clients and it is
really important to know your costs of production and identifying the type of
business you are will help you identify your costs of production. Regardless of
how many or how few outcomes your business provides you must know what it costs
to produce each outcome. The key factors you would need to factor include
materials, freight and direct labour right down to the number of hours taken to
complete the task. So few businesses understand their true costs of production
but if you understand your costs of production you know what you can charge and
determine the best course of action to position yourself regardless of what the
economy/market is doing.
Another mistake I see is
not taking responsibility for understanding their financials in relation to
what they have done and where they are heading on a regular (monthly minimum)
basis. There is a misconception out in the world that understanding financials
is a difficult skill to acquire. The reality is they are learnable skills and
the great thing about understanding financial information is once you
understand them, they don't change. Financial data has not changed for 100
years and won't change for the next 100.
4. What quick tips would you offer small business on managing their cash flow?
Firstly, if your single
cash flow management strategy is to ring people who owe you money it's too
late! I could talk about this topic for a couple of days so I will keep my
advice short and actionable. It is really important to understand when you incur
your costs through the production process and ensure you get paid by the client
prior to incurring the costs.
These are some simple
examples …. If you run a service business you should be paid by the client at
the very latest by the time of completion at each stage of the project. If you
run a retail store you need to make sure you are holding and paying for stock
and wages in a longer time period than what you are selling the stock in. If
you pay your suppliers in 30 days then you must make sure you get paid in less
than 30 days.
5. You’re a CPA – what have you learned about sales and marketing?
5. You’re a CPA – what have you learned about sales and marketing?
Great question,
Accountants can't sell a jumper to a guy in the Arctic. Everything I have
learnt about sales and marketing has been self taught either through personal
experience or through reading sales and marketing books. My CPA training was
invaluable but did nothing from a sales and marketing perspective.
I am a huge believer in
you have to "add value to get value". If you are selling a product
where people can touch and feel it is a lot easier to sell the product because
of that physical aspect. When you are providing outcomes which can't be touched
and felt it is really important to add value and impart knowledge which can
help the prospective client prior to them investing any money. This helps you
provide credibility and confidence in the client so they can "touch and
feel" what they are going to get prior to outlaying a dollar. Therefore, I
treat every sales meeting as an opportunity to answer as many questions as
possible and provide them with actionable items.
6. When selecting an accountant, what do you think small business owners should consider?
6. When selecting an accountant, what do you think small business owners should consider?
You need a proactive
accountant who is willing to "invest" in your story and in your
ambitions and goals. They need to understand where you want to go so they can
best advise how to get there especially from a tax perspective.
I believe they should also subscribe to the "add value to get value" philosophy because to often every single minute is charged to a client by an accountant (and other professionals) and I question the value of a lot of these minutes so look for an accountant who is willing to fix price their services.
I believe they should also subscribe to the "add value to get value" philosophy because to often every single minute is charged to a client by an accountant (and other professionals) and I question the value of a lot of these minutes so look for an accountant who is willing to fix price their services.
Lastly, don't be afraid to
challenge your accountant. The most astute business people I have come across
challenge you and want to understand why and how everything works, so they can
learn and grow.
6. Brendan, are there any other final tips on managing or planning finances you would like to add in closing?
6. Brendan, are there any other final tips on managing or planning finances you would like to add in closing?
Invest in your financial
education. If you can read, count and do basic mathematics then you are capable
of learning all the business financial skills you require to be a successful
business owner and/or higher skilled and valued employee. I'm not saying you
need to turn into an accountant or bookkeeper but you need to understand how
financial information influences where your business has been, where it is
going and what you need to do to improve business performance.
A shameless plug here, but let me add that I
have just launched a website www.financecoach.tv
with this goal in mind.....we do three short videos a week free of charge helping
business people understand financial information and create more profitable businesses.
Thanks Brendan. I think
you’ve offered some nice simple tips on managing finances and I for one will be checking out your video. Whether we like it or not, developing the ability to interpret financial data is central to being able to navigate our business through a changing and sometimes volatile business environment
Here's a short video clip that features Brendan sharing a story about a small business owner who fell into a common trap with the financial management of his business
If you enjoyed this post, then another related post that might interest you is Tips for managing cash flow in your small business
Here's a short video clip that features Brendan sharing a story about a small business owner who fell into a common trap with the financial management of his business
If you enjoyed this post, then another related post that might interest you is Tips for managing cash flow in your small business
About the author 
