how financial literacy makes clients better, and makes better clients.
by sandi leyva and michelle long
the ultimate accounting virtual conference
we really need to be compassionate with our clients. if they don’t see our value, we just have to realize they’re afraid of all this.
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i think we need to be gentle as we communicate our value and help them with their fear. if they stay afraid of it, they will stay close-minded and that will keep their business from reaching the potential it could.
we can make such a difference in our clients, especially these micro businesses we work with. these are people who are struggling to put food on the table in some cases and we can really turn their lives around and make a difference.
let’s talk about six literacy topics that clients desperately need.
1. data coding changes
i don’t have too many clients because i’m really focused on learning about marketing. but i like to also stay in touch with what you have to put up with on a daily basis. one of my clients was using quicken and a very outmoded, fancy excel spreadsheet for inventory. this is a chiropractor who is doing six figures and on quicken and their revenue chart of accounts was one line – deposits.
she has been in business for 10 to 15 years and scared to death of accounting, scared to death of any of this stuff and getting by with this and not wanting to deal with it and in denial and so she had no idea how she was doing. she also has nutrition, but no idea how much nutrition consulting revenue vs. chiropractic adjustments she was selling. i bet her inventory was 500 items and she had 30 different services and absolutely no revenue accounts except one and no classes or categories, no nothing.
how many of you have clients like that? i know some of you are transforming those types of clients. so one thing we need to do is tell them, “look at what you can see.” the first time they get that monthly revenue report that breaks it all down they start crying. they’re like, “i did without this for 15 years.” she has a bookkeeper too and it makes me mad. why didn’t the bookkeeper suggest that? in other words, you have to be more proactive, please.eliminating duplicate data entry is another huge opportunity. there are a lot of problems between the point of sale system and the accounting system and how we get the data in. i’ve got a duplicate data entry between my shopping cart and my accounting system, and one of these days i’ m going to write my own program for that.
eliminating duplicate data entry is another huge opportunity. there are a lot of problems between the point of sale system and the accounting system and how we get the data in.
one way you can approach this while still being compassionate around the client’s fears is you can say, “did you know we could do this a different way? did you know that you can see all this detail and it would allow you to make better business decisions? did you know that there are solutions for eliminating duplicate data entry?”
i want you to remember that, remember “did you know?” and start it out with your clients. it keeps them from feeling stupid and we don’t want our clients to feel stupid.
here are some red flags for you to look for, and i mean this is a checklist of more revenue for you. clients collecting detail on expenses but not revenue is one. i know if a client is understaffed that means they may be cutting corners in accounting. clients with lots of manual paper are a huge opportunity to automate and let them know what is available.so are outdated or inappropriate systems; i know if they’re on quicken and running a six-figure business we have a mismatch there. if they haven’t updated quickbooks and are still on desktop, they can change.
2. marketing and revenue
i know you focus a lot on expenses because it is easier, but what i want you to focus on is marketing and revenue. there are studies that show hands down that an entrepreneur who focuses on increasing revenue is going to be several times more successful than one who focuses on cutting costs. but what do we do? we talk about cutting costs.
we need to change that. we need to start talking about helping them increase revenue. we can’t market for them and we may not ever feel good about being experts in marketing, but we can help them answer the question, “what marketing is working?” we can compare those marketing expenses to how much revenue those marketing expenses generated for them. we can slice and dice that data.
we can also tell them what service or product is producing the most revenue. and we can help them with reports that will trigger the question in their mind, “how can i generate more revenue?” when they see which marketing channels are working they can push more money into that marketing and cut costs and cut off the stuff that’s not working. so you really can help them on marketing and revenue.
here are some red flags to look at. clients with low revenues, clients with high marketing costs and clients with risky marketing expenditures. one of my clients buys into those internet marketing programs and one of the ones that she purchased was 6 percent of her revenue for one program. that’s a risky marketing expenditure. now it’s hard to communicate with them because they probably bought with emotion, but what is tricky is you can help them see the risk from a financial standpoint and be very logical about it and help them rein in their emotions. clients with a fear of marketing or lack of understanding marketing, they may be able to be helped by just having you teach them how to evaluate their marketing expenses and roi.
3. systems improvements
many of you are kicking and screaming and getting your clients into the 21st century, cloud, mobile apps, working on transforming their work flow. so when you see work flow improvements, bring them up and remember to include the cost of their time in when you compare what the cash outlay is going to be. that will help the client say yes.
red flags are systems older than three years, proprietary systems with no support, inappropriate systems that don’t fit the business, lots of paper processes and too many spreadsheets. it can also be duplicate data entry or bulky work flows.
4. cash flow
help them with analyzing timing differences between a/p and a/r, which is not the same as revenue. if they’re short on cash that’s a revenue problem and you need to go back to number one and help them with increasing revenue.
cash flow is where they have ups and downs and it happens later in the business life of a client. some of your clients may end up being stuck in their business because maybe they don’t want to hire employees or don’t know how to market. they will continue to have revenue growth problems even though they might have been in business for 10 years. it varies and everybody is different.
when i got a coach in 2010 and went through a very sophisticated coaching program, she said this and i’ll never forget it:
“your business only grows as fast as you personally are willing to grow.”
that’s very true of us and very true of our clients. we are the only ones who get in our own way.
red flags in cash flow are ups and downs in cash balance, insufficient funds and timing issues between buying and selling products. if they have a seasonal business they’re also going to have challenges.
5. internal control and other risks
i’m going to make a new phrase: “risk literacy.” how many of you feel comfortable with how your clients perceive risks in their business?
to me, being an entrepreneur is all about risk management and taking calculated risks. i can’t think of another skill that is more important than understanding when to take a risk and when not to. it is truly the core of being a great business owner and making great business decisions.
how can you help clients with this? this is more than insurance and helping them tighten up the risk of losses. often they don’t know what they don’t know, such as sales tax risk, which is a compliance area and also an advisory area.
if they had prior fraud or suspect fraud, then you can help them with internal control advisory information. if they have loose approvals, bill.com can tighten that up. if they have no separation of duties – which is really a big issue for the smaller firms because a lot of times they don’t have staff – then cash transactions are a whole other ball of wax.
6. key performance indicators
these are the few sets of numbers that the entrepreneur lives and dies by. it could be cash balance for the smaller firms or monthly revenue. it could be the turn rate or cost per client acquisition.
one of the most fun things you can do with a client is to sit down with them and decide what their kpis should be.
each client is going to have a different hot button to be pushed. so what metrics are right for that client? then help them get those numbers.
maybe you can set it up in a report that is emailed to them if you’re using qbo. decide on the metrics the owner is interested in tracking and figure out how to come up with those numbers through your accounting system each month.
it is a really exciting session when you do this because now it’s like a report card for your business and everybody loves getting grades so you can improve them. especially if they’re competitive, they can improve them from month to month. it sets a whole different competition level for the entrepreneur and it’s a fun thing for you to deliver on a monthly basis.
red flags for this area are seat-of-the-pants management, no existing kpis, no idea of cash balance and a lot of nsfs.
i remember being in financial reporting at frito-lay early in my career in the 1980s. i was the very first person in the entire company to know what profit was. that gave me a lot of visibility with the vp right away. it’s a great position to be in and so you can do that for each of your clients, you could know what that profit number is and share it with your client.