How the Four Pillars of Financial Success Bring Peace

Pillars of peace

As a business leader, do you ever get stressed out over money? If so, you are not alone.

In previous posts, I discussed the four pillars of financial success. In this post, I want to make it more personal – to show you how knowing and practicing these pillars can reduce your stress as a leader. Let’s review the pillars and consider how they help you manage stress.

These pillars are:

1. Understanding: Knowing the basics about typical financial inputs and what the data reveals.

What it is: You need to understand basic financial inputs such as revenue (income generated from your sales), expenses (costs to run the business), profit (what is left after expenses), and cash flow (the movement of money in and out of your business.

How it brings peace: many business owners fly by the seat of their pants and don’t really know whether they are making money. Understanding what your expenses truly are will keep you from spending money you don’t have, and could keep you from incurring debt to keep things afloat.

2. Forecasting: predicting expected results and cash flow.

What it is: Forecasting is a core process to predict your company’s results and financial performance. It’s a view based on historical data, current market trends, and expected future events. It provides insights to make informed decisions.

How it brings peace: when you understand your company’s performance trends, you can plan better for slow and bumpy periods. You can help your team work together in the leaner times and celebrate in the more fruitful seasons. You won’t be going into each new week blind.

3 Analyzing: using a weekly dashboard to determine where you stand.

What it is: A weekly report provides a more immediate view of your business’s financial health, enabling quick adjustments, centralizing critical financial data, and offering a snapshot of performance and trends.

How it brings peace: Having access to your up-to-date numbers will help you decide whether you can afford that new piece of equipment right now, or must save up for a while. You’ll see if you can make payroll – a definite source of stress if you cannot.

4. Reporting and Reviewing: producing and reviewing monthly CFO reports to stay aligned with your mission and course correct as necessary.

What it is: Financial reporting is critical for businesses of all sizes, providing key insights into financial performance, health, and the decision-making process. Financial transparency is the key to operating a business with integrity.

How it brings peace: It’s important to know if the business is performing and progressing at the correct pace. Are the main financial numbers on track and pointing in the right direction? Knowing where you stand helps you determine if you are indeed on the mission of the business (or your own personal mission). You can sleep better at night knowing your day-to-day financial decisions coincide with those priorities.

I highly encourage you to have practices that align with these pillars. Your stress level doesn’t have to be high over elements of the business you don’t know or understand. I can help. Contact me for a conversation!

Keep Your Business Healthy: The Four Pillars of Sound Financial Practices

Four Pillars

There are 33.5 million small to mid-sized businesses in America with $12 trillion market value. But the failure rate of all businesses is incredibly high. 22% of business startups fail in the first year, and 50% of new businesses fail within the first five years – and 70% fail within ten years.* 

Operational savvy doesn’t always come easy, and a business owner sometimes, out of necessity, has to put on hats they aren’t equipped.  I often hear “But I’m not an accountant!” and I understand.  Still, if you are going to own a business, you have to take responsibility for the financial aspects of your business as well as other operations and product/service development and sales.  You just have to choose what direction to go to set yourself up for success – whether that means handling the financial practices yourself, hiring a fractional CFO, or hiring a financial specialist as an employee.

Whether you decide to have a separate CFO or decide to wear the hat yourself for a while, the first crucial step is to grasp the foundational principles of financial management.  I break this down into a 4-pillar process to take small businesses to the next level – helping business owners see obstacles coming and develop disciplines.

These pillars are:

1. Understanding: Knowing the basics about typical financial inputs and what the data reveals.

The fundamental inputs for most businesses include:

  • Revenue: The income generated from your products or services
  • Expenses: all costs involved in running your business
  • Profit: what is left after expenses are deducted from revenue – a healthy profit is your ultimate goal
  • Cash flow: the movement of money in and out of your business, determining your operational flexibility and financial stability. 

2. Forecasting and Budgeting: predicting expected results and cash flow and creating a budget.

Forecasting is a core process to predict your company’s results and financial performance. While it’s always inexact, it is a view of your company based on historical data, current market trends, and expected future events. It’s a critical component of strategic planning, providing the insights needed to make informed decisions.

Budgeting is the process of creating a financial plan for your business. It translates the insights gained from forecasting into detailed action plans, allocating resources to achieve strategic goals.

3. Analyzing: using a weekly dashboard to determine where you stand.

Weekly reporting provides an immediate view of your business’s financial health, enabling quick adjustments to operations and strategy. A weekly dashboard centralizes critical financial data, offering a snapshot of performance and trends at a glance.

Components of a Weekly Dashboard:

  • Cash and Inventory Position: This includes the current cash balance and any significant changes from the previous week (i.e. from costs) as well as your current inventory status, including any critical shortages or overstocks
  • Accounts Receivable: Overview of outstanding invoices, highlighting any past-due accounts
  • Accounts Payable: Summary of upcoming and overdue payments
  • Sales Figures: Weekly sales totals compared to projections and historical data.

4. Reporting and Reviewing: producing and going over monthly CFO reports to stay aligned with your mission.

Financial reporting is critical for businesses of all sizes, providing key insights into financial performance, health, and the decision-making process. Financial transparency is the key to operating a business with integrity.  Monthly CFO reports form the basis of communication with stakeholders, including investors, creditors, and regulatory bodies.

The key components of a monthly CFO report circle us back around to item 1.

  • Income Statement: Shows revenue, expenses, and profit over a specific period, highlighting the company’s operational efficiency
  • Balance Sheet: Provides a snapshot of the company’s assets, liabilities, and equity at a specific point in time, indicating financial stability
  • Cash Flow Statement: Details the inflows and outflows of cash, offering insights into the company’s liquidity and ability to generate cash.

Additional Analysis reports such as forecast-to-actual, historical-to-actual, KPI’s, asset and cash flow efficiency, and Continual Improvement reports can be very helpful for wise leadership decision-making.

There’s a lot more to running a business than creating a product or service and selling it. Be sure you handle your business financial operations with integrity, consistency, and open-mindedness.

I’m here to help! Contact me for a conversation about where you currently stand and how, together, we can strengthen your business using the four pillars.

* Statistics per: U.S. Small Business Administration (SBA) and the U.S. Bureau of Labor Statistics

How to Keep the End of a Quarter from Feeling Like the End of Your Business

Many business owners think their business is the only business with unpredictable income and cash flow. This makes me grin. Revenue for most businesses is never steady or easy to plan. If you are one of the fortunate ones with predictable revenue, it certainly makes things easier, but you are in the minority.

At the time of this writing, two of my clients had fallen short of quarterly goals. One missed by quite a bit. Their planned net income was now an actual loss. They missed their revenue target by 40%. Expenses were slightly higher due to some one-time expenditures. They had a hoped-for pipeline client deal that didn’t close (and as of this writing, it still hasn’t.) This happens – you think you have a deal nearly done and at the last minute it doesn’t close. Your whole quarter is now toast and you have brackets on your bottom line. They were facing a quarterly result that was much different than they’d hoped for.

Every 12 weeks or so, your business enters a new quarter. We often call them “Q1” “Q2” etc. and there’s a good chance that when you are reading this, you may be getting close to the end of a quarter, or far enough into a new one that you can take some time to reflect on the one before. While I hope your review is more positive than the scenario above, every business should ask themselves these questions every quarter:

How did our business do? Consider more than just the bottom line with this question. How is your culture? Is your staff productive and happy? Is your business still operating according to your core values? These all contribute to the financial results.

Did we hit our target numbers for the quarter?
Did we meet or exceed our targets? If so, how are we going to celebrate? What helped our success? If we didn’t meet our targets, why not? What hindered us? What can we do better next quarter? Are our targets realistic?

How healthy is our cash flow plan? If we have disappointing sales or news next quarter, do we have a strong foundation in place to make payroll and other expenses?

Is our pipeline strong? Are we relying too much on one promising client to close or for a big sale to happen? Do we have other streams of income, a wide bandwidth of customers, and efficient processes to help us weather disappointments?

Solid business growth is dependent on a firm foundation that doesn’t completely collapse when a promised sale or promising new client falls through. It depends on daily, weekly, and monthly practices and processes that contribute to informed leadership decisions. An honest quarterly review will help you stay on track and course-correct as needed before an unexpected event upends your business. And it will prepare you to be in an even better position to celebrate should sales and client development be in your favor.

I can help you have an efficient and healthy quarterly review. Contact me for more information!

What Does a Fractional CFO Do?

Fractional CFO

I had a conversation the other day with a small group of venture capitalists and seed fund investors. I love talking with these types of people – they are so passionate and have super creative business ideas. When I shared my Fractional CFO services framework and approach to helping smaller growing companies, I also was able to answer the question

What does a fractional CFO do?

We are a guide who provides strategic financial guidance and expertise to businesses on a part-time contractual basis, helping businesses manage cash flow, plan growth strategies, and make informed decisions without the cost of a full-time executive. This role is especially beneficial for startups and SMBs needing flexible, high-level financial advice tailored to their specific challenges and opportunities.

While every business is slightly different from the next and may require a slightly different approach, most businesses need the following data every month in addition to keeping up with the bookkeeping processes that lead to a strong monthly close:

Three basic financial statements: (income statement, balance sheet, statement of cash flow)
Monthly 12-month forecast
Weekly scorecard comparing weekly KPIs to expectations
13-week cash flow forecast
Monthly CFO reports
A regular, intentional meeting to discuss the results.

I generally start conversations with potential clients by ensuring they understand the three basic financial statements and why these are so important. These are:

Income statement.  Also known as the P&L (Profit & Loss) statement, shows revenue, expenses, and net profit over a certain period. Net income is zeroed out annually and moved to what is called “retained earnings” (which is a balance sheet account and means income that has stayed in the business since inception).  At the beginning of the new year, you start pushing the ball up the hill again.

Balance sheet. This shows your assets, liabilities, and net worth at a snapshot in time. It shows what you own and what you owe on a particular date. The assets and liabilities are listed in the ‘ease of liquidity’ order. Liquidity refers to how quickly you can turn those assets into cash.

Cash flow statement. This shows sources and uses of cash categorized by operating activities, investing activities, and financing activities. (In other words, cash flow from operations, from investing, and financing activities.)

Then we look at the other elements:

The monthly forecast/weekly scorecards generally take a few iterations to become useful for a company. We concentrate on the monthly, first. Once it is solid, then we can more easily parse down the numbers to a weekly forecast and develop the weekly scorecard.

Weekly Scorecard comparing KPIs: Every company’s KPIs are slightly different, and we may need to track a variety of specific things depending on quarterly goals. Business owners usually have questions like:
What sort of data should we be tracking? How many KPIs should we track? Generally, you should track revenue, drivers of revenue, gross margin, labor utilization, cost efficiency, asset velocity, and cash and cash flow – actual compared to expected results for the week.

I track all this in Excel. There are some awesome tools out there for dashboards that are fully automated and contain tons of great information and graphics. I love the look but I find the best scorecards are prepared manually and contain surprisingly little data. This allows everyone to focus on the highest-value data points. High-tech is great, but we still need high-touch.

The 13-week cash flow forecast contains cash receipts and cash disbursements by week for three months.   In a turnaround, the 13WCFF is updated daily, but for a typical business, I like to update it weekly so it’s always a rolling 3-month look forward.

CFO Reports (or Monthly Reporting Package, or Monthly Operating Report) are produced monthly. They vary by business but generally contain the three basic financial statements, the 12-month forecasted P&L and Balance Sheet, the current month’s P&L compared to forecast, trend graphs for sales, margin, asset velocity measures, and significant goal tracking, top 5 company goals and status, current 13-WCFF, top customers for the month and year to date.

Regardless of the format, this data should be prepared and discussed regularly. This is where an intentional meeting between CFO and business leaders comes in. Weekly is best but monthly can work. This way you’ll see if you are hitting the numbers or not, and helps you course-correct more easily if you aren’t. It also helps to avoid big surprises later in the year. It allows the CFO to become a vital ally – not just presenting numbers, but helping you understand “why” the numbers are a certain way. A discerning CFO will also have good suggestions for more success in reaching goals.

If your business doesn’t have a CFO, you should seriously consider one. If I can help your company with its fractional CFO needs, contact me!

If It Ain’t Broke …

Break glass

We’ve all heard the old saying, “If it ain’t broke, don’t fix it.”

There’s a lot of wisdom in that. When you’ve implemented an efficient plan (i.e. a quick month-end close, financial processes that keep good data in front of you, etc.) it’s a good idea not to mess with it – to a point. But it’s never good to permanently rest in a routine that isn’t reviewed regularly. It’s then that we fall into a rut, otherwise known as a casket without a top.

And forgive the pun, but if you are not growing, you are dying. Growing requires the willingness to change.

I am working with several new clients who are making changes in their business. Change isn’t easy, but it is necessary to improve. It’s been good to see some of the positive outcomes from this process.

As I mentioned in a previous post, assessing your business regularly and recognizing the need to change is step one. Even if things are going well, the waterline is rising, and things can always be better. We need to continuously deal with any leaks, including new ones that may spring up.

So how do we do this?

I suggest a shift of mindset, based on a fabulous book I read many years ago: If it Ain’t Broke…Break It!: And Other Unconventional Wisdom for a Changing Business World by Robert F. Kriegel and Louis Palter. Their advice shared in the early ’90s is timeless. We must have a mindset toward embracing change, innovation, and continuous improvement as keys to success in both personal and professional life.

Here are some key thoughts from the book, along with a question you can ask yourself in assessing how your business and team are doing when it comes to each theme:

1. Embrace Change: it’s important to be open to change rather than cling to established norms or practices. Change can lead to improvement and growth.

Question: What change in process did we recently implement or consider as a way to improve our productivity?

2. Innovation is Key: Innovation is significant in driving progress and success. When you encourage a culture of innovation, you’ll see breakthroughs and competitive advantages.

Question: Does my team feel comfortable bringing me new ideas?

3. Challenge Conventions: Rather than accept that “This is how it’s always been done,” encourage questioning and challenge conventional wisdom.

Question: What is something we have been doing for years that we should consider changing or eliminating from our processes or policies?

4. Risk-Taking: calculated risks are essential for growth and advancement. Rather than fearing failure, consider it a valuable learning experience.

Question: When did we take a risk in the last 3-12 months? If we haven’t been willing to take a calculated risk, why are we holding back?

5. Continuous Improvement: Individuals and organizations should always seek ways to evolve and enhance their processes and products.

Question: What are three key areas where we are working on improvements in the company? (i.e. personnel, environment, culture)

6. Adaptability: In today’s rapidly changing world, being adaptable is crucial. During the pandemic, we saw a critical need to pivot and adjust to new circumstances and challenges.

Question: While we are not in an active pandemic now, what other concerns threaten our success? How do we need to re-position ourselves to stay relevant?

7. Creativity and Experimentation: encouraging these can lead to new ideas and solutions not considered before.

Question: What is a problem we are experiencing that could use a creative solution? What ideas can we consider for a while without shooting them down immediately?

8. Leadership Role: leaders are the critical component in fostering a culture of innovation and change. They should lead by example, supporting initiatives that promote growth and innovation.

Question: How strong is our leadership team? Do we inspire growth and innovation, or are we stuck in our ways? What would our employees say if guaranteed anonymity?

Some of these questions may be uncomfortable, but I assure you they are important. Culture affects the bottom line. An unhappy, stressed out, unproductive team creates leaks that sink your business success and satisfaction. A team that has the freedom to bring up fresh ideas, evaluate processes objectively, and follow values modeled by their leaders will help create an organization that makes money and contributes positively to society.

Which would you rather have?

How Do You Run a Business Without Good Data? 5 Ways to Change That


As is my custom, I spent New Year’s weekend honing my 2024 plan and updating bookkeeping for my business as well as for several of my clients.

Yes, I was playing the role of bookkeeper for Verbeck Associates. When you have to do the work yourself, you realize again the value of a great bookkeeper. It’s great to have someone whose job it is to get all transactions in on a timely basis and ensure that accounts are all reconciled. I wish I could say I was always THAT someone for my own business! But as they say about the shoemaker’s son …

The further away from the transaction date, the more complicated it is to determine the essence of the transaction. In one case, I had to bring ten (yes 10!) months of a new client’s QuickBooks up to date. Their bookkeeper had completely dropped the ball. It was brutal, but we tenaciously got four bank accounts reconciled to 12/31.

After that, I sat with the business owner, asking “How did you run your business without good data?”

While it may seem surprising for someone to run a business without looking at numbers, it’s not all that unusual. And while some business owners LOOK at the numbers, they don’t study them in a way to benefit from the information.

Here are some reasons why owners don’t look carefully at the numbers.

The books and records are not in good shape.

This tends to happen when a finance team player (i.e. bookkeeper) isn’t kept accountable for entering transactions in a timely way and providing a quick month-end close. They may be overwhelmed with the minutia, or be in over their head. But all financial staff should be accountable to someone, even if the supervisor isn’t finance savvy. They can still ask the right questions to make sure monthly tasks are current.

They assume things.

Business owners have told me, “I’ve been in business for ten years. I know how we are doing.” They assume their books are in good shape. (Most of the time they aren’t.)

They are afraid to look stupid.

Many business owners launched businesses due to their passion and skills in a particular area. They may be great carpenters, restauranteurs, therapists or marketers so they hung a shingle and started a company or practice. That may not mean that they have the financial and administrative skillset to excel in the operational side of running a business. Deep down, they may know that they are not good at math, or an accountant. There’s no shame in that – unless they refuse to acknowledge that they need some help.

They don’t like the “report card” feel.

Many times, when owners finally look at numbers, it’s been prompted by something unpleasant. It could be tax time and they are meeting with their CPA. They may be collaborating with a lender and have to face hard facts. Bookkeeping, when done correctly, doesn’t lie. If the numbers don’t add up, they don’t. I know someone who was gently told that they were making under $5 an hour once their time was accounted for. Facing numbers and facts like this is scary. No one likes to feel like they are failing, especially when they are putting a lot of time and energy (and even their own money) into a venture. 

So what’s the answer? Here are five things you can do right away no matter what time of year it is:

  1. Face facts. The first step to change is knowing. Decide that starting NOW, you are going to make a more intentional effort to keep up with the financial overview of your company.
  2. Hold your financial employees accountable. You can do this in a way that feels collaborative. Set up a monthly or even more frequent meeting. Tell them you need their help in making more informed business decisions and you’ll need transactions entered and month-end figures in a timely way. Set a meeting early in the new month to review last month’s numbers.
  3. Educate yourself. I offer a variety of resources (and am working on more) that can help you “be your own CFO.” You don’t have to become a CPA to learn to understand basic information like financial statements, cash flow, cost of sales elements, and other standard reports.
  4. Think beyond the numbers. Once you know the numbers, figure out why they may feel out of alignment with your goals. I always look at a business’s performance from a numerical point of view, which is objective. But there’s also a good argument for looking more closely at employee satisfaction and customer service. These are harder to tangibly measure, but there are ways to see if your company is hitting the mark more often than not. Remember that dissatisfied employees and/or customers cause profit leaks.
  5. Consider hiring outside help. Whether it’s an additional employee or a contracted company that provides CFO and/or bookkeeping services (like mine) you may find that your numbers improve because you have people with a gift for that side of business playing that role.

    If I can help, contact me. At the very least, start looking at your numbers more closely, more often.

Progress and Growth: Things I Learned in 2023

What I learned

At this time of year, I’m usually pushing to finish strong, both personally and professionally. I’m helping my clients get ready for a quick year-end close and effective kickstart to the new year. I’m finishing my own planning and goal setting as well, because I like to start each year with a clear direction and strategy. I thought it might be helpful to share some of the things I learned and experimented with this year.

12-Week Year Process
For the last two quarters, I’ve been using the 12 Week Year process. I love the idea of shrinking the year into 12-week segments, and then further breaking it down to weekly actions that are measured and tracked weekly. I had a hard time with this in the beginning. I had some bad weeks. But overall, it was a great way for me to see progress on a couple of projects that would not have gotten done if I didn’t have a precise focus. I recommend this book by Brian Moran and Michael Lennington: The 12 Week Year: Get More Done in 12 Weeks than Others Do in 12 Months.

Artificial Intelligence (AI)
I’ve utilized AI for some writing help. It simplified some complicated memos, clarified business process instructions, and enhanced some of my more creative writing efforts. I learned it certainly does not replace the human touch in writing, and you have to customize it for the situation. But it’s a big help in avoiding “Blank Paper Syndrome.”

Microsoft Co-Pilot
I anticipate this tool having a big impact for me next year. I am always looking for new approaches and systems to up my capability. AI add-ins for MS Word, Excel, and PowerPoint will be great additions to their product suite, and will certainly help me produce better presentations.

First Principle Algorithm
Inspired by Elon Musk’s “first principal algorithm,” I scrutinized and optimized business processes, emphasizing the elimination of unnecessary tasks before automation. This philosophy, encompassing questioning, deletion, systematization, acceleration, and automation, has become a guiding principle in enhancing operational efficiency for myself and my clients.

Client Challenges
In general, I have great experiences with my clients. But like anyone in business, there are times when challenges come up. Hindsight is 20/20, and I learned some things to do differently in the future. I learned that being assertive and direct is often necessary for handling difficult conversations. Make sure expectations are clear on all sides. Make mid-course corrections and stay committed to communication to avoid misunderstandings.

Food / Exercise Discipline
I worked on living a low/no-sugar lifestyle this year. I started a no-dessert policy. I find that cutting a food altogether works better for me than moderation – you have to know what works best for you. And, I’ve been logging all my food intake. Writing it down helps me stay on track. I found myself less disciplined about logging my workouts, and guess what – I ended up skipping many days and my intensity plummeted. I got back to my daily log this last quarter and it proved again to me that what gets measured gets done.

Meditation and Journaling
I generally get up at 5:00 am to do a morning ritual that includes a meditation practice. This year, I increased my practice from 10 minutes to 20 minutes every day. I noticed a big difference in the rest of my day. I also have been journaling daily for the last six months. This took me some time, but it has been really helpful to cultivate ideas, and handle issues. I have better focus, mindfulness, and clarity.

We’ve been building a new house over the last two years. It’s amazing to create something new, but the number of decisions involved is incredible. Add the stress of falling behind schedule and going over budget – it can get overwhelming. I am fortunate that my team (i.e. my wife) stepped up to lead the project so I could focus more on business. The process has taught me a great deal – not only about construction and project management but also leadership, negotiation, teamwork (delegation?) – and stress management!

As I look ahead, the lessons learned and practices adopted promise continued personal and professional growth in the coming year. Ask yourself the following questions, and let’s both look forward to more progress and resilience!

What is your next bold move?
Are you committed to certain disciplines for the new year?
Where can you up your skills?

Contact me for help streamlining your financial processes next year!

Unlocking Business Success with Simplified KPIs

In the vast sea of business complexities, the need for a reliable compass cannot be overstated. Enter Key Performance Indicators (KPIs) – the navigational tools that help business owners chart their course and make informed decisions. In this blog post, we’ll explore the art of simplifying KPIs and their pivotal role in guiding your business journey.

Embracing Simplicity in a Complex World

Complexity tends to sneak in as time marches on. And being a business owner is difficult. We often find ourselves facing challenging moments, as a contact of mine did when his sales pitches to a large company ended in rejection. This, however, is normal and part of the journey. Most sales calls receive the dreaded “no,” a harsh reality of the sales world. In the face of adversity, we must not lose heart; instead, we should expect challenges and remain steadfast in our vision.

Our North Star in this tumultuous sea is a clear and unwavering vision. Every business owner must ask themselves: “Where are we heading, and what is our vision?” A clear vision will serve as a guiding light through turbulent waters and should influence the type of information you track and reporting that you do.

Simplicity in Reporting and KPIs

Just as life’s complexities grow with age, so do the complexities in business operations and reporting. If you’ve been in business for a while, you’ve likely seen your processes and reports become increasingly intricate and complicated. It’s just the way it is. With more time, things get more complex.

The key, however, is to keep things simple. The allure of intricate dashboards with tons of data points and graphs is enticing, but often it becomes challenging to see what truly matters. To cut through the noise, it’s essential to maintain a straightforward approach.

Organize and Focus with KPIs

One effective way to streamline your business’s focus is by categorizing KPIs on your weekly Company Scorecard with categories such as marketing, sales, operations, and finance, and assign teams to brainstorm and track three to five key metrics in each category. This approach narrows the focus, ensuring that each KPI contributes to the overall value of your business. And each KPI has a person (or you) accountable for it.

The Power of the Weekly Review

Weekly reviews are the engine that keeps your business on course. This routine check-in allows for the timely identification of issues and the resolution of bottlenecks. It’s the glue that aligns everyone with the same KPIs and growth targets, fostering unity and clarity within the team.

Measuring Progress with KPIs

When it comes to KPIs, consider the following areas: Growth, Fulfillment, and Innovation. To measure your business’s performance, keep an eye on a range of metrics tied to these areas, such as:

  • Growth: Revenue growth, monthly recurring revenue, pipeline, customer acquisition cost, gross margin, net profit margin, monthly active users, activation rate
  • Fulfillment: Order fulfillment time, inventory turnover, on-time delivery rate, total support tickets, average response time, number of clients onboarded, renewal rate, net promoter score
  • Innovation: R&D ratio, new product launches, time to market for new products, milestone achievement, churn.

Additionally, analyze other vital KPIs, including unique visitors, cost per acquisition, return on ad spend, average customer value, new customers, sales, sales leads, qualification calls, close rate, booked revenue, average deal size, and pipeline.

A Deeper Dive into KPIs

If you’re looking to expand your KPI knowledge, consider delving into the following key metrics:

  • Days of inventory on hand is found by dividing the average Inventory by the ratio of cost of goods sold to the number of days in the period. It indicates the average number of days it takes for a company to sell its entire inventory, providing insights into inventory management efficiency.
  • Gross profit margin: Determined by subtracting cost of sales from total sales, then dividing the result by total sales.
  • Working capital ratio: Computed by dividing current assets by current liabilities.
  • Account payable turnover: Found by dividing net credit purchases by the average accounts payable. It measures how many times, on average, a company pays its accounts payable during a specific period, providing insights into the efficiency of the company’s payment process and its relationship with suppliers.
  • Days Sales Outstanding (DSO): found by multiplying the ratio of average accounts receivable to average daily credit sales by the number of days in the period. It represents the average number of days it takes for a company to collect payment after a sale has been made on credit.

KPIs are the lighthouse that guides your business towards success. Keep your compass simple, focus on your vision, and harness the power of weekly reviews to ensure everyone is on the same page. With the right KPIs in your arsenal, you’ll navigate the intricate waters of the business world with confidence and clarity.

Contact me for help establishing your KPIs and creating a helpful dashboard!

Budget Time: Use the 80/20 Framework to Keep Costs in Line

80 20 rule

You’ve probably heard of the 80/20 concept (also known as the Pareto Principle), where 20% of whatever you are considering (i.e. workers, technology, inventory) is responsible for 80% of the results (productivity, sales, and profit.) The fourth quarter of the year is budget season and a great time to take a closer look at your overall cost structure within the 80/20 framework. It’s time to ask yourself what you REALLY need to run and continue to grow your business.

When addressing costs – start with the larger impact and more important things.  Dive into the right problems. 

Don’t start with something that will have a minimal impact.  I like to value stream map key processes with stickies and a whiteboard.  Note people and processes around the sales and delivery experience and the customer/vendor touch points like invoicing and getting paid, improving customer delivery, paying vendors, and maximizing cash outlays.

Here are three areas to take a careful look at, with an 80/20 perspective.


So much of business is based on unknown revenue numbers, and people are your biggest expense. An unfortunate reality is that many times, the people who got you to where you are now are not the same people to get you to where you need to go next. They cannot change and develop as the business does. That’s why budget time is also a good time to review your organization chart. You’ll often see that 80% of your results are coming from 20% of your team. Can you identify the 80% that are less productive and think of ways to scale, or invest in increasing their contribution through training, for example? Are there ways to continue growing your revenue while not growing (and perhaps even reducing) your team as you look into next year?


Another cost that can be significant is Infrastructure investments – money you put into the business for tools, applications, equipment, and more. These generally come in what I call stairsteps, not in a linear path. It’s tempting to be attracted, for example, to the bells and whistles of new technology, but it’s quite possible that only 20% of the features would contribute to 80% of your results. Ask yourself if investment into new tech or equipment would overcomplicate the workplace rather than be the solution you need. Will the learning curve create other problems/costs? It’s essential to ensure that these investments will actually elevate productivity and address challenges.

For example, you may decide that a new ERP (Enterprise Resource Planning) system will streamline tasks and management of employees. This can be true! But if the system is overcomplicated, and you have to retain an on-call consultant for a year, is that an effective use of funds in the long run? It could be, but there may also be simpler solutions available using applications you already have. Perhaps some additional training on current applications so users can move from beginner to intermediate or advanced would cost less and work just as well.

Bonus tip: One way to help separate the problem and solution is to identify and address the pain points in one meeting, give time for the assigned team members to research potential solutions, and then have a separate meeting to consider the options they discovered. This allows your team to determine the core problem without having to provide potential fixes right away. A clear understanding of the problem can be extremely helpful in researching solutions.


Face it – all companies are leaking, some worse than others. Another cost to consider is what your vendors are charging. It’s not unusual for companies to be paying for services and products they aren’t using regularly (or don’t need more of right now.) Again, 20% of the services and products you receive could be covering 80% of your needs.

I recommend that you review each vendor invoice and credit card charge for the next 45 days and determine if each item is necessary. When I’m doing this for a client, I ask the obvious question – “What is this for?” Other questions include, “Are the services billed leading to the expected outcome?” “Are you paying for a subscription for an app you only use twice a year?” “Are automatic deliveries keeping your supplies overstocked?” “Are these conference expenses leading to the collaboration, soft skill enhancement, or team bonding or are you essentially providing your employees a paid-for trip/vacation?” (If that’s something you want to budget for, fine, but be intentional about it.)

If you need a more objective eye, there is a group of consultants like my colleague Steve Thompson at Integrity Cost Consulting. He can analyze your vendor spend to look for historical overpayments. His company earns their fee based on the savings they find. I love that! I like to track savings based on hard savings AND process improvements as a critical success factor.

Cost analysis exercises are generally a helpful practice for most companies, even if they can be somewhat painful. Use this 80/20 framework to budget wisely.

Additional tips:

  • Ask yourself not only about getting the best price – but getting the best value. 
  • When cuts are necessary, be sure you cut deep enough the first time.
  • Do cost analysis on a regular basis.

Need some objective input? I can help. Contact me!

The Rearview Mirror for Looking Ahead: Know Yourself to Grow Yourself

rear view mirror

“Why do you accountants always focus on the rearview mirror?”

This question was posed to me during a small business workshop I was conducting. Read on to see how I answered it. But first some context:

I do workshops for small businesses frequently, to share more deeply about my Fractional CFO framework and approach. I share how business changes with growth that generally comes in 1’s and 3’s. (In other words, growth from $100,000 – 300,000, or $1m to $3m, or $10m to 30m.) In this particular workshop, I had been discussing the weekly scorecard and how to improve the accuracy of the company’s numbers using a solid financial close process. I also encouraged tracking many other data points like new customers, new web sign-ups, sales by segment, gross margin, inventory turnover, production and direct labor efficiency, etc. I was rattling on about how these metrics need to be on your dashboard and the importance of not judging your performance on the metrics of other people. I emphasized that their business is not your business. However, your business can always perform better. If you want to jump in 3’s, you first have to know your business well.

That’s about when I received this great, and understandable question. At first glance, CFOs do appear to look at the past a lot. The rearview mirror is important, and we do have to have accurate data; it’s essential to know where you are and where you’ve been. If you don’t it’s hard to get to where you want to go.

I ride my bicycle for my workout four times per week in the summer logging about 100 miles per week.  My bike is equipped with lights so cars can see me and I have a mirror that attaches to the handlebar.  The other day, when I was riding on some incredible roads we have here in Central NY, I was looking in my mirror, which is small and was so dirty that it wasn’t useful.  Using the mirror is safer than turning my head, but the visibility with the mirror was terrible. Trying to focus on the images in the mirror, I almost rode off the road. (I recently bought a radar tool that beeps when there’s a car behind me. Much safer.)

But ironically, a good CFO uses the rearview mirror but doesn’t focus on it. We shouldn’t look in the rearview mirror too often.  We do need to see what’s behind us if it poses danger – like a car for a bicyclist. But we shouldn’t constantly be looking in the mirror to see where we’ve been. We need to keep our eyes focused on the road ahead. 

The job of a CFO is to help a business look ahead. Yes, we focus on getting the monthly financials closed and the reporting package published, but those are tools for our main priority of helping the business deliver on its mission. Reasons come first, results come second. We try to make things better for the future.

To do this well means that a lot of my time is spent trying to help businesses improve processes. Consistent improvements over time often lead to impressive results. Companies that stay stuck in their ways tend to stagnate. Small businesses that are nimble tend to grow and flourish.

In Robert Greenleaf’s book, The Servant Leader, he shares how the servant leads from the back with empathy and compassion. They see the struggle of others and bring clarity and solutions. I’ve seen the suffering of many small businesses over the last 30+ years – and I have been there myself, so I have a desire to help turn that around. Having solid processes and taking a regular, but not obsessive, look in the rearview mirror helps me do that.

The other service that is very helpful to a CFO is to know the valuation of a business. Click here to learn more about our valuation service.

What is the next thing that you need to do to get ahead? Do you need to shift your perspective from the rearview mirror to the road in front of you? I’d be happy to help. Contact me!

Image by Hebi B. from Pixabay