Leverage Cash Flow For Business Success and Growth

Cash flow.

A big misunderstanding that people have about cash flow is that they think it's the same thing as profit. Many believe that if their business is making money, they won't have any issues with cash flow at all.

But it's quite common for a business to be profitable on paper but still struggle with cash flow issues.

And that's what we're talking about today on Marc Haine Live. Welcome to this episode! This is where small business owners and entrepreneurs develop new skills to help them create those jaw-dropping, show-stopping experiences that their customers and their employees deserve. I am your host, Customer and Employee Experience Strategist Marc Haine. I am so glad that you are here with me today because my guest for this episode is Cashflow Mentor Kirsha Campbell. And today, we will be taking a deep dive into the critical nature of cash flow issues. And we'll uncover some practical tailored strategies that you can apply today to help you stabilize and enhance your business operations. My one ask as always is that if you do know somebody who could use this information, please share a link to this episode. I know it's going to be chock-full of all sorts of really great information. Now, do you realize how important cash flow is to your business? Cash flow is like your lifeline. It decides if you succeed or struggle under financial pressure, especially during times where there's uncertainty or there's a ton of change. Cash flow is the magic button you should be looking at to help you get through the turbulent times. But managing it is tough. Many leaders focus on profits but forget about the cash flow until— And that brings us to our Question of the Day. When was the last time that you really checked how your business is doing, focusing not just on profits but on the actual movement of money in and out of your business? Have you ever found yourself short on cash even when your business seems profitable? I'd love for you to be part of this conversation. Why don't you go ahead, share this episode on your favorite social media platform, hashtag it #ExperienceLeadership, and be part of this conversation.

As I mentioned, my guest today is a specialist in cash flow management, Kirsha Campbell. Kirsha, also known as the Cash Flow Catalyst, has a knack for turning financial turmoil into triumph.

She's got a rich background spanning multiple industries from bustling food and beverage sector to structured worlds of real estate. She's the expert businesses call on whenever they need their cash flow situation rescued. Kirsha isn't just a master of the numbers. She is a CPA who digs deep into your business's mechanics, ensuring not just survival but growth. And whether it's with her groundbreaking articles in Entrepreneur Magazine or dynamic presentations at QuickBooks Connect, even ATB. We were just talking prior to the beginning of the show how she presented to ATB. Kirsha brings a blend of expertise, energy, and empathy to the table, making her the go-to guru for businesses aiming to build a rock-solid financial foundation.

Kirsha, welcome to the show. It's so great to have you.

Thank you so much, Marc. It's my honor to be here. I'm really feeling pretty privileged to be joining you today.

So, before we go too deep into today's topic, how did you fall into this niche of cash flow management?

Well, I realized early on from my corporate experience and other experiences that It boils down to the cash flow. It's the lifeblood of the business. So, I realized over the years there's that misconception that, oh, you need to focus on sales or it's just a profit. And it boils down to the monies you have, your cash in the bank, and so much more.

Yeah, yeah.

Well, we've done episodes on kind of accounts receivable, managing accounts receivable. But this is the first time that we're actually in 197 episodes talking about cash flow. But before we get too deep into it, could we define cash flow?

What it is?

What is— let's talk about Cash Flow 101. What is cash flow and why is this crucial?

Cash flow is simply money. Those coins, the notes that you spend with, that you buy with, that you have to pay your suppliers, your workers with. So, it's just cash. So, it is really the difference between cash coming into your business and cash leaving your business. That is cash flow. So it's not limited to your bank account balance. No, it's that flow of cash coming in, coming out. And you do want to ensure that at the end of the day, you have, you know, sustainable cash flow. You have more monies coming in than what's leaving your business. So that is cash flow. And why it is so important is That is what you need to spend your money. That is what is going to be one of the key components in valuing your business as well.

So, what are the misconceptions business leaders have about cash flow versus profit?

What's the belief system out there?

So, there are a few. One of the misconceptions is that your profits is your cash flow and it's not. I get the question often. I made $50,000 in profits. Why am I not seeing that in my bank account balance? What went wrong here? So profits are different from your cash flow. Profits is a measure of, you know, your sales less your expenses, what's that more? So if you're selling, let's say bicycles, by the time you've sold your bicycles, sold all your bicycles, and you take out the cost. So make those bicycles, your marketing, all those costs, did you have more monies left back? So that is profit. Think of like an orange and a lemon. I use that often. They're both citrus fruits. Depending on the flavor you want in your juice or your salads, you'll opt for a lemon or an orange. However, they are both citrus fruits, slightly different measurements. So not discounting profit, it is important. However— Cash flow supersedes profit every day. That's the lifeblood of your business— cash flow.

So, like as you were talking about that, I kept thinking about the discussions I've had with businesses where they didn't understand, for instance, when they made a mortgage payment.

They didn't understand that the only thing that you're booking into your paperwork is that the interest you're paying on your mortgage is the expense. But then, the principal that you're putting onto it is actually just switching one asset into another asset. And so, when they look at it, they go, but my paper, how is my P&L saying that I just made $100,000 this year when I have no money? Where's my money going? And they don't understand that some of the money being paid out is not necessarily just covering expenses.

Sometimes, It's a shifting of capital.

Exactly. And that is where the need for that understanding into all these different accounting terms and what it boils down to is important, because that's a key point. So I do know when we went through the whole COVID cycle, and there were some businesses that had to get those COVID loans and stuff, and a lot of the bookkeepers were not recording it properly. And there was a lot of incorrect reports and confusion. So again, it is important that you classify your transactions properly. So again, you know, thinking that, okay, this is what I make, and so there are different measurements and different ways to check on what really is happening. And the more you understand and dive deeper into that, then you can know, okay, this is my profit. It's a different measurement from what my cash flow is.

Right. I can't tell you how many times I've talked. I had a trucking client who was making really good profit. And he looked at that and said, oh, I can afford to buy another truck. And he was basing it on the fact that he had the books were saying how much money he was making.

And he looked at the number and goes, oh, I should be able to afford another truck.

And because he went out and got another loan to buy another truck, which required another employee, he actually flushed his business down the toilet.

Right.

Because he didn't understand that what he made in profit was actually covering the transition from one capital to another piece of capital, which was he was going from his bank account to paying for a truck asset that he was still making payments on. Right?

And so, it's very challenging.

So, when businesses are looking at their financials and stuff, what are some of the indicators that a business is experiencing some cash flow problems even if they do appear to be profitable?

Okay. So, one of the things you look at is, you know, are you having to do constant cash flow injections? So, we're talking about a pattern, not like a one-off thing where constantly you have to find money whether it's your personal money or a loan, line of credit, to cover those expenses, to payroll, to pay your suppliers, you're struggling to pay. That is one example of a red flag. I call them red flags, right? You're constantly having to put money in to really survive in the business. The other thing is where you have persons who owe you, those are your accounts receivable persons, and they are not paying, right? That is, it's one of the things that you know, drops businesses so fast. Outstanding for a long, long time, accounts receivable. So they owe you and you're not getting paid. That is another red flag. That is something you need to look out for. Also, you got to get deep and intimate with your business, the cycles, right? Your environment. If there are changes in consumer demand and they're not purchasing your product or your services as much, there's a shift in the demand, that's a red flag. And that is why you got to be keeping your eyes on all these areas. So those are some examples of red flags where you might see it's not normal. It's not something where you constantly have to be putting money in, persons are just owing you indefinitely. Those things are, they might seem normal. However, they are not normal. And they can sink your business so fast, unfortunately.

So, in your experience, what are the root causes of poor cash flow management in all the various different industries that you've worked with? There must be some commonality.

The root cause is not knowing your numbers, not looking at what's happening in your business, not looking at your reports, not looking at your numbers. Those are the root causes, right? It's like Let's say you're going on a trip, right? And you're there packing and planning, you're not paying attention to the weather. So you're prepared for sunshine when there's so much rain in the forecast. So you don't know what's really happening in your business. You're driving along and you really don't know what's happening. That's the root cause. The more you know your business, the more you understand what's happening, then you're going to find that you you're able to be proactive and innovative with these cash management challenges, cash flow management, and mitigate the risk of not having sustainable cash flow.

Is it fair to say that most business operators, especially the entrepreneurs, owner-operators, and so on, don't understand how to interpret their financial statements?

I would say a lot of them don't understand how to interpret it. And also, there's that overwhelmed when it comes to numbers. I've talked to so many persons, and, you know, recently someone in BC, and she was like, I know I need to look at my numbers, I know I need to pay attention, I'm just overwhelmed. These are real issues, and there's no judgment, no shame. It's just a real issue, and the longer you delay, the longer it gets, you know, just worse and so forth. So I definitely see not looking at your numbers as one of the main reasons. The other one I'll quickly throw in is that persons don't realize every decision impacts your cash flow. Every single decision that you make in your business, the team you have, the marketing, you know, strategy you use, every— your culture in your, in your business, every decision impacts your cash flow. And the more you understand that, the then the more you're going to think twice before you make that decision.

So, when you're thinking about this idea, there's so many different exercises that businesses need to do. For instance, we need to be able to set budgets.

Where does cash flow fit in in the budget-making process?

Okay. So, when you're creating a budget, it's a plan of action. You're planning, I'm going to make this amount of sales. I'm going to need to pay this amount to my team. I'm going to need marketing and so forth. The budgeting process looks at you know, the plans that you have to get monies coming in. When, when I do budgeting, we don't stop at just those types of budget. We also do a cash flow forecast. It's one thing to have the plan that this is the sales that's gonna come in. However, the cash flow forecast, it is more detailed, and you're able to look at not just your plan for profit, for sales, you're looking at the plan for cash coming into your bank account, cash coming into your business. So we dive deeper to say, okay, January might make sales of $5,000. However, let's be realistic. There might be payment plans and so forth, you know, based on your contract. We're not getting that entire $5,000 in January. We might just get $3,000. So the cash flow forecast is a separate process, a separate document, a separate tool that is used with budgeting.

And so the cash flow, um, the cash flow budgeting component is focused on understanding how long your receivables will be held, right? Whether people are typically paying on a 30-day, 45-day, 90-day, whatever that might look like. You're taking that all into account as you do the reporting.

Exactly. So, we actually have 2 documents. Well, they're more than 2. But on one hand, this is our plan for sales. And the other hand is, when are we actually getting the monies coming in? And that's something that's often missed with businesses. You plan, oh, I'm gonna make sales, and then you forget, oh, I might not get all the sales at the same time, especially if you have payment plans. And it does apply to businesses where you're getting, you're being paid right away. Remember now, we have so many different forms of payment, credit, debit card, there might be 2, 3-day delays, sometimes even 4. Depending on the provider you're using to process your payments. So you gotta bear those timings in account. Think of it, if a bill is due on the 1st, if you don't have the money coming from those payment processors, those providers, until the 5th, you have a gap there. So when we dive into cash flow forecasting, that is what we are looking at, the actual movement of cash in and out of the business.

And it's funny because as well, I see a lot of people doing their budgets and they'll put down the sales. But one thing they fail to do is they fail to translate all the third-party processing fees that come into it. And they fail to understand that there's a huge percentage. And they go by so many times, they go by like what the Visa charge rate is.

Oh, Visa is only charging me 2.65%.

But they're not looking at the effective charge rate. of people using their credit cards, which I think is an exercise I encourage everybody to do is to look at those statements, understand exactly what you're paying.

Exactly. And these, depending on the size of your business and the provider you're using, those fees can really be excessive depending on the state. If you're in a case where you have, it's not a big impact on your business. However, think of if you're just starting out or you're going through a crunch and you're saying, oh, I have to pay these fees too. So, you got to look at all those numbers in your business.

Yeah. Yes.

So, cash flow issues within a business, how do they typically manifest in the day-to-day operations when they're having problems?

What other spin-off challenges does having a lack of cash flow have to a business?

Well, definitely you're gonna have situations where you have bills to be paid. You need to pay your suppliers or vendors. You need to pay your team. There might be marketing that you want to incorporate in your business, marketing strategies, and you're struggling to find those monies to pay taxes. I cannot emphasize the importance of tax planning, planning legally to pay less taxes. That is something that is so overlooked. The other— just recently I posted on LinkedIn, have you ever calculated your tax bill? And a lot of— most persons were like, no. You can know before what your tax bill is to the cent, right? This is tax planning. So taxes are the biggest expense in businesses, and yet a lot of persons are still not tax planning. So you'll find that you have these bills to be paid and you can't pay them. You'll also see There might be different reasons why you can't pay them. You're not getting enough sales in your business, and you're like, I need to make another sale, I need to do this, and it's just not happening. And that's when you realize that you're having a cash flow issue. Another thing too is some persons will grab at any sales just to get those monies in. You have— there's a strategy with that, right? Not all sales will be profitable or lead to cash flow.

cash flow.

So, it's diving deeper.

Am I at the right price? Am I discounting too much? So, all these things will indicate if you're having a cash flow problem in your business.

Yeah, it's as you were saying all that, I was going to all the nightmares I've seen my clients going through when it came down to stuff including, hey, I have this money in the bank so I can pay my stuff.

It's like, but what about you set set aside your GST and your HST is all set aside. It's like, but now you don't have the money to pay your tax bill when it comes out, right?

And people struggle, right? They think it's a cash cow. Oh, I'll put it back later.

I'll spend it now.

I'll put it back later, which I just think is such a challenge.

And one of the misconceptions too, I'll quickly add. There are some persons who like, they go with the envelope method. Oh, I'll put this aside for taxes, this aside for payroll. That is such a misleading method. Why? Because you have that security that if I put the monies in those envelopes, then it's okay. It's deeper than that. You need to know your numbers. I'm putting aside this for payroll and so forth, but do I really have the money? Am I really putting aside the right amount? Or, you know, you're putting aside even before you look at the total picture. So again, it can be so misleading, and it all goes back to knowing your numbers in Yeah.

And so, we're going to get into solutions.

But one of those ways that people can learn numbers is to bring people on like yourself to help them translate and be able to learn what it's all about.

And I think Business Link, some of the banks will have advisors that you could sit down with to say, hey, can somebody show me how to read my financial statements? Because the Chartered Accountant gave it to me.

I don't want to have to pay him oodles and oodles of money to show me what it's all about. Could you sit down?

And I'm sure banks would Do it as a service?

I'm not sure, because to be honest, not every banker will understand the reports. Bankers are trained in a different way. Bankers are trained to mitigate risk loans, right? You're coming in for a loan, they have certain things they look at to see, can you manage this loan? How are you going to pay back? So it's a different thing depending on the banker, to be honest.

Yeah, yeah.

Fair enough, fair enough. I just thought being people in financial, I think the lesson I want people to take away is that if you're unsure about something, talk to somebody.

Exactly.

Talk to somebody who will have an idea of the direction to help push you towards. And if it's not somebody like Kursha who is a Chartered Professional Accountant, then it can be somebody at the Chamber of Commerce.

And you can talk to other businesses to find out how they've learned their financial statements and figure out how to do it. Because that to me is no excuse for not being able to manage your cash flow properly is, oh, I don't know how to do paperwork.

Yeah. And I'll quickly add to that. Never forget that your business is ultimately your responsibility. It's not your accountant's responsibility. It's not your marketer's responsibility, your workers. So, you got to look at your business in that holistic frame where this is ultimately my responsibility. I might not understand everything. I need to get support to understand. That's okay. There's no shame with that. That's okay. And those are some of those steps that you need to take to get to that level where you understand. You know your business so intimately.

Yeah, yeah, you really do.

And I've been really blown away by how well some people really do know their business.

And they know every decision that they make is going to leverage some differential within their financial statements. So hey, I'd like to get into your 7 action steps that you advocate for building sustainable cash flow. We'll get to that right after this.

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Welcome back! I am speaking with the Cash Flow Diva herself, Kirsha Campbell.

Okay. I made up the title.

I just think that should be your new branding, Cash Flow Diva.

Kirsha, before we get into these 7 action steps, what are the long-term consequences for a business that continues to ignore their cash flow issues?

Your business is just gonna fail, go out of business, bankrupt. It's just a matter of time, right? Because if you think about it, Can you indefinitely keep pumping money in, you know, whether it's a bank loan, your personal money, line of credit indefinitely? It's not sustainable. So, it just boils down to that.

You mentioned about the financial institutions kind of being like they want to limit liability. Is it fair to say that if you keep pulling loans and pulling the lines of credit and so on, and they don't— They don't see that you're paying it back, that you're going to be getting a request for a meeting pretty darn quick.

Oh yes, soon. And depending on the loan you're requesting, they're going to want to see financials, right? They— I mean, after a while they're going to be like, I need to see your reports, I need to see what is really happening. I mean, it's a business and banks aren't just gonna blindly be lending money and they're not sure if they're gonna get repaid, right? So Depending on the risk, they're going to need to look at those numbers. And there are real cases where they say no. They look at what's happening in the business, your P&L, your balance sheet, and they might say you have too much debt already. No, we can't. We're not going to go there with you. So it's sad. However, this is just a reality, and persons will knock the banks. They won't lend and so forth. However, they need to manage their risk. Right then, they're looking at, can I be repaid? Because they can go out of business as well. So, we have so many stories over the years of banks and other financial institutions that have gone out of business.

Yes. I know a couple of small business operators when they got refused by the banks, they went to those cash checking places. to get because they had to make payroll and they didn't have enough money. And then, they realized that they were being dinged for 28% or 30% of the rate over a very short period of time. And it's like the one thing I will tell people is do not get yourself so desperate that you have to run to one of these legalized loan sharking outfits to help you sustain because you'll never get out of it.

And the other thing too, is it's, you know, you can't inject, keep doing cash injection out of a problem. It's like you can't exercise a bad diet, right? It's not going to happen.

Yeah.

And oftentimes, that additional step to find out what led to this problem is ignored, right? It's so easy to get cash most times, line of credit, credit card, loan. So oftentimes, the first step is to just run for that lifeline, However, we need to take that step back to find out what led us here and how can we mitigate the risk of getting here again. And most times, all the times, the more you dive, dive, dive deeper, you're gonna find the root of that cause.

Right, right. I'd love to jump into the first of your 7 action steps that you advocate for building sustainable cash flow.

Let's go steps 1, 2, and 3. And then, we'll do a quick little check-in.

And see how people— how you're feeling about it.

Okay. No problem. So the first one is know your numbers. Review what's happening in your business. What I like to call it a 360-degree review of what's happening in your business all around. You're looking at comparing your results now to what was it like a year ago. Why is there change? Also, you're looking at— you're comparing your results to the industry, right? You might be like, oh, I'm good. I'm making sales of $5,000. a week. However, a comparable business in the industry is making $10,000, $20,000. So it is important to compare. Comparison is good in this case. Comparing yourself to what's happening in the industry, what's happening to your other competitors, how do things look like for the future. So you're looking at your numbers, you're reviewing at least on a monthly basis. You're not just looking at sales. I never just look at numbers in absolute, right? That's the first step. However, I'm applying key metrics, key indicators, right? You made sales of $10,000. However, what's the profit on that? What's the labor cost that's involved, right? Just looking at the labor cost, you can know quickly if your team is slacking off, if they're not being efficient, if they're, you know, using too many hours to get the job done. So I like to call it looking into the story behind the numbers. That is the first step, diving deep into what's happening in your business, right? Looking at your metrics, looking at, you know, those comparisons, and just understanding what's happening at least on a monthly basis. And why is it important? It's going to help you to shift your strategy quickly, shift decisions quickly as needed, helps you to be proactive and innovative. So that's the first step. The second step is using plans in your business. I can't talk enough about the importance of planning. You need to have a strategic plan in your business. You need to be using budgets, cash flow forecasts, right? Meetings, having conversations. So oftentimes persons create a budget and it's all exciting. That's just the first step of the budgeting process. You need to dive deeper after the actual results are in to do what's That's called a variance analysis. I planned for $10,000. Why did I only make $8,000 in sales? I planned for $10,000. Why did I make $15,000? Diving deep into what led to these results. What do I need to quickly change? What do I need to stop doing? What do I need to do more of? So, using key plans in your business. That's number 2.

Great! So valuable.

And what is number 3?

Number 3 is having processes and systems in your business, right? You just started out and you might say, okay, I'll use a paper to jot things down or Excel. As your business is growing, your processes and systems need to align with the growth of your business. So, you might— it might be time for you to move to an accounting software. Improving automation, right? However, as a careful— as just being careful that automation won't work if your systems and processes aren't flowing properly, right? It's like garbage in, garbage out. So ensure that your systems and processes are effective. For example, accounts receivable. What is your process to ensure that you're getting paid on time or even early by, by your clients, by your customers.

It doesn't— it starts from the invoicing point. So you need to make sure your invoice is clear, it's free of errors, it's clear how they should pay you. You send your invoice out. You also need to be sure that it's going to the right person.

Are you following up? Did they receive it? Do you know when they make payments? So you have a process for accounts receivable. Everything in your business needs to have a process and a standard. So, having effective and efficient processes and systems in your business is the number 3 step.

I love that. So, I'm hoping that people have taken a pencil and a paper or opened up Evernote and started typing out some of these things because these are absolutely crucial to getting started.

Kersha, If this is resonating with people, how can they connect with you?

How can they, if they decide they want you to look over and help them, how can they get in touch with you?

The best way is reaching out to me on LinkedIn. I'm there as Karsha Campbell. And send me a message. Send me a DM. That's the best way, the quickest way.

The quickest way. And that link is in the show notes. There's also a checklist in the show notes as well. Can you talk a little bit about that checklist?

So that checklist is really looking at your business to see, do you, you know, do you have those key processes, those key check, check marks when it comes to cash flow, right? Because oftentimes you might think things are okay. However, as you go through that checklist, you'll be like, oh, I need to think about this, or I need to reconsider this. So it's really a cash flow checklist, the things that you need to have in your business when it comes to cash flow.

Okay.

Step number 4 is what?

Number 4, number 4 is managing risk. We can never eliminate risk. We manage risk. Risk is so often ignored when it comes to a business, and there are so many types of risk, over 100. It's a lot. However, you need to assess risk on a monthly basis. You know, quarterly, depending on what's happening. So, for example, when it comes to your clients, right? If you you need to look at where you're getting monies from. Is it from just you know company ABC? Is it just from the food industry? If it's a case where you find ninety percent or more of your revenues from one single supplier, not supply one single. customer, one single client, or one type of industry, that's a red flag. That's what's called a gorilla account, and that can sink your business fast. So think of it, if I'm just relying on ABC Company for most of my sales, if ABC Company closes down, or they're like, okay, we're not renewing this contract, what— where does that leave your business? So you need to be assessing the different types of risk, the risk of You know, technology is a huge one, right? You know, cybersecurity. You need to look at the risk of your team, right? Your team— you need your team for success, for a successful business. If it's a case where most of your team do not have their experience, or you're having a high turnover, why is that happening? What is leading to that? So manage the risk in your company. If there's risk with Your team, your efficiencies. They name it. Whatever is happening in your business, there's a risk. So, manage those risks well.

And it's including things like understand the community that you're in.

If you're an entrepreneur, if you're at a grassroots level, if you're a shop or a restaurant or a hotel, understand the community you're in.

Understand what the competition is and what they're doing. is really important as well. So, that means things like going to the Chamber of Commerce meeting, going to industry association meetings, and so on. Because a lot of these people bring with them the idea of trends and they are future-focused. And they can let you in on all sorts of information. But we can't get that if we have our heads down just working in the business.

Exactly! Rules and regulations change that do impact your business. You need to be aware of that, right? So, these are all the things you look at just All the different business risks. Manage risk well. Identify the risk. Always have a plan to mitigate or reduce that risk as well.

Yep. And of course, COVID was a one-off, right? Like nobody could be prepared for COVID. We didn't know how big or how bad it was going to get.

So, when you think about that, that's the worst that it can get because that's something we could not protect. There was no foreseeable indicator that we would come to this. But a lot of things in our businesses are foreseeable.

Exactly. And another thing with COVID too. COVID showed up a lot of businesses that they didn't have different streams of revenue, right? So for example, you could be a plumber, right? You have one stream is the services. One stream, you might sell parts. So, it showed up that you need different streams of income. So that your cash flow will be sustainable. You might not have had— some persons didn't have enough savings as a buffer. So, there are a lot of things that come into managing and having sustainable cash flow as well.

Terrific!

So, 4 was managing your risk. Number 5 is what?

Having an exit plan for your business. A lot of times—

Oh my goodness! You're kidding me! You have to have an exit plan?

Yes. And anytime a new business owner comes to me, or even someone already in business, one of the first things I ask, what is your plan for the business? Do you plan to always be in the business? You plan to sell it? You plan to have, you know, someone take over day to day? It is important. You as the owner, right? If you step away, can your business survive without you? So these are things that will impact your cash flow. So you got to be looking at that. What's your succession plan? And also, depending on what you want to have done with your business, it's going to impact your business structure. It's going to impact the decisions you make, the persons you hire. So what is your exit plan? Persons get emotional about an exit plan. They're like, I don't want to leave my business. You're going to take it over. And rightly so. When you think about You know, your sweat equity building your business, you have a culture and so forth.

It's natural to be emotional.

However, you need to look at what is your ultimate plan for your business and work towards that plan. Anything can happen to you as the owner, and you got to be prepared for that too. So what is your exit plan? What's your succession plan as well? And all these plans will help the you to have insurance to cover taxes later on if you decide to sell. And so, so many things are intertwined into the exit plan you have or the succession plan you have for your business.

I love that.

That's number 5.

I just did an episode with how to overcome the emotional connection to the succession planning, which is a really good episode. It talks a little bit about it. And again, one of the things that we've been saying on the show is if you don't have a succession plan, if you don't have a way to move yourself out of the business, you're hurting your business's valuation if you insist on being in it.

It is. It is.

And yeah, and that's— I was just at a seminar the other day on that very issue. And it was so open-minded to realize so many businesses are struggling with this. They don't have a succession plan. They don't have a will. They don't have an exit plan because they don't want to think ahead that far or it scares so many things, right? So however, it's important to have that plan.

And again, I encourage people to really think about this because this is a very important component of the 7 steps. It's a very important component on how your business will succeed. And that sweat equity then becomes a legacy.

It's not just a valuation issue.

It is by putting a succession plan in place, you are able to then say, my business will have a legacy past me and will survive me, which is always great.

So, that was number 5. So, magical number 6.

Having a leadership team in your business that's very, very, you know, a strong leadership team. So a strong leadership, having a team. So on the team, you have a leadership team, and you also have a team of experts. So let's talk about the team of experts, right? You, as your business is growing, I'm not saying get everybody all now. I do recommend having the initial conversations now though, but you need someone versed in insurance. That's an important component of operating your business. Insurance, all those risks are covered and managed. Real estate, a lot of times as businesses grow, you want to invest in real estate. You need an advisor like that. A lawyer, I cannot stress the importance of having a lawyer, and I'm not knocking like legal aids and so forth. However, you need an expert in legal matters for your business. You also need someone who is an expert in tax matters. I'm not talking, you know, those blocks or so places that you just dumped in. A tax expert, someone who can look at your situation, your personal situation, what's happening in your business, and find legal ways for you to pay less taxes. And this is a case where you're not just with year-end you're doing it, you're meeting with them throughout the year. So having a tax expert an accountant. There are lots of different types of accountants. You can have your bookkeeper, you have your CFO. So you got to have your accountant as a key part of your team, an investment advisor, and also your financial analyst. So those— your financial advisor. So those are key persons who will make up your team, your legal team. Under your leadership team, you want to have strong persons who eventually are even stronger than you, right? And so you want to make sure your leaders in your business, they understand the culture, they know the standards, and you can rely on them. They are really innovative, bringing ideas to the table, all those changes. It's so important. And I would suggest as you grow as well, you do have a board of advisors to support you, giving you independent views, bringing, you know, this doesn't make sense. It's You can never operate on your own. So, leadership and team, that's such an important part of building your business, building your cash flow, and so forth.

I love, I love. We've talked about having our board of advisors as well on this show. We've talked about this before. So, it's so nice that this is all so congruent with everything that we've talked about on this show.

When we get back, we are going to expose Tip number 7, and we'll get to that right after this.

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As you can tell, Kersha and I are committed to serving business leaders just like you.

If you would like to explore how we could be of benefit, especially If you're planning something like a leadership retreat or a conference, drop us a line. Our contact information is in the show notes.

We could help you.

We could serve. This is what we do is we serve. So, Kersha, step number 7, the final of the 7 steps.

What you got for us?

The foundation, bookkeeping. All the things we talk about, it's not going to work unless you have solid bookkeeping, reliable numbers, reliable information. Bookkeeping is often seen as a, oh, it's not a big thing. It is a big thing. If you have the wrong number for expenses, you're paying more in taxes. If you don't have all your sales recorded, you're paying the wrong number in taxes. You can overpay in taxes. So the foundation has to be created. Solid, solid, solid bookkeeping. That's where this all starts.

Why?

Because bookkeeping, recording your transaction, that feeds into your report, and you're relying on your reports to make decisions. And you know, tools such as a bank reconciliation. I cannot stress the importance of doing that every month. There are some business owners, they are going along not having a bank reconciliation done. So they don't know if there's fraud in their business. They don't know if they're logging into their real-life bank account or making decisions. Your real-life bank account does not show everything. There are transactions that might not have yet been reflected in the bank account. There can be errors. you should have an internal process where you're checking, like, you know, cross-checking your checkbook, knowing what's happening in your bank account internally, your own records. So that's a part of bookkeeping. So again, having a solid foundation, which is bookkeeping, your transactions are recorded properly. You know, you're not getting a loan and seeing that's income. For example, a lot of persons did that with COVID and that was a big, just a big mess, right? You don't have a case where, oh, you, you did make these payments, however they're not recorded, you forgot about them in your, you know, your folder or something. So you have a process where errors are minimized, missing transactions are minimized. So bookkeeping is a solid, solid, solid foundation. That's where it starts in your business. So All the things we talk about, all these strategies, they're not going to be effective unless you have the foundation right. Solid bookkeeping. That's where it starts.

Now, it's interesting because that's one of the areas I find that a lot of entrepreneurs kind of let slip.

They hire a bookkeeper but they don't know anything about bookkeeping themselves. And so, they don't know how to keep the bookkeeper accountable. Do you have any tips or tricks on how to check in with the bookkeeper to make sure that things are being registered properly?

The first thing is asking your bookkeeper for monthly reports, right? You must look— ask them for monthly reports. And another thing is having someone to check your bookkeeper. There are situations where, you know, husband and wife, they run their business, the wife does the bookkeeping. And I've had situations where I go in now and I'm checking back To see what's happening, right? I'm reviewing the numbers, reviewing the reports. Oh, this wasn't coded properly. You made a mistake here. So one, asking your bookkeeper for reports, and 2, having someone to check back what your bookkeeper does. You need that check back because oftentimes at year-end when taxes are being done, especially if you're not doing an audit— most small businesses don't do an audit.

Most small businesses, they just send their numbers and the accountant prepares the tax That does not catch errors in your business, right? Some accountants, depending on the one that you have, they'll say, oh, this doesn't look right. That most of them are going to say, this is what you gave me. That if you hire them to really review what's happening in your business, that's a different scope of engagement. They will do that. However, a lot of persons will just be relying on, oh, I sent this and they just work the magic. It's not going to happen. So, you need to have that solid foundation.

And these are some steps to really know that your bookkeeper is doing the right thing.

And that leads me into our next part of the discussion, which is cautionaries and pitfalls. I know personally from personal experience, I had a client who relied on the technology. So, they have QuickBooks and QuickBooks pulls the numbers from the bank account. And they figured because of that, they didn't have to do a bank rec.

And so, since 2016, they have not done a single bank reconciliation.

And when I got around to it and actually dug into it, they had over-generated their perceived income by $46,000 over since 2016 because there were hiccups in the software.

Wow! So, let's talk a little bit about as a cautionary.

What do people need to understand about the software that we're using to do bookkeeping?

Well, in that case, what it sounds like to me in that example is QuickBooks does pull— you can connect your bank account and the transactions come in. QuickBooks never automatically does your bank reconciliation for you. There's a separate section in QuickBooks that you have to go in, your bookkeeper, so, and they perform the bank reconciliation. So Again, you can definitely ask your bookkeeper certain key things. And before I go into those key things, I'll elaborate a little bit more. Know that, again, if you don't have a system and process, it doesn't matter how many softwares, how many automation you have, it's not going to be effective, right?

Right.

So you can have QuickBooks, however, if it's not set up properly, if it's not being used properly, it's not helping your business. So again, Ask your bookkeeper, have you done the bank reconciliation? Number 2, are all the transactions in? Can I see the reports, the profit and loss report? Can I see accounts receivable report? Can I look at my balance sheet? This should be a standard part of your business. Accounts receivable, for example, a lot of times a lot of businesses I, I, I connect with, they have never looked at that report. They didn't even know it existed. They don't know who owes them. They don't know how long they've owed them. We need to dive deep into those numbers. So those are some things you go through with your bookkeeper. And as a business owner, you need to be intimate with your business. So I had a client once and there was an issue with the GST and they were looking through the details and they're like, something doesn't look right here. And there was an issue with the GST, right? So again, you know, think of it. Nobody, none of our professionals are an expert. However, nobody's going to know your business better than yourself. So you got to train yourself, take those baby steps, get into the habits of knowing your numbers, understanding really what's happening. There are times when you might have to check and say to the bookkeeper, this wasn't done properly. This number doesn't look right at all. Can I see what makes up that number? Behind every number on your report, there are details you can look at, supporting details.

Yes, and that's what it's there for. And again, this is to our point this morning when we first started. This idea of there's a big difference between working in your business and working on your business. And this process that Kirscha is outlining for us is part of the process of us working on our business.

And so, if you're too busy working in your business that you can't do that, there's something inherently wrong with your systems.

Yes, for sure. And I'll also add quickly, a lot of times, often it's, oh, I don't want to pay this and so forth. So, I'll do it myself or I'll just go with the cheapest route. And you got to know your bookkeeper, right? And My sons, for example, they've done several surgeries and never once have I said to the surgeon, can you give me the steps and I'll do this surgery myself? No, I'll never even venture that way. I'm not an expert and my sons are more valuable to me, are priceless. So I'm going to want the best done. So think of your business like that, right? Are you going to say, I'm not going to pay $1,000 for a bookkeeper, I'm going to go with this just to save? Bookkeeping is not— it's a profit center for your business, right? If you have that foundation set, you're paying less taxes. So many other things flow from having that set up properly in your business.

Love it.

This has been such a wonderful conversation, Kirsha. Do you have any last thoughts about what we've been talking about today?

Yeah, I'll quickly add, remember the importance of your business. The world is never the same if your business shuts down.

Yes.

The impact you're making, your team. So look at your business as that valuable, right? It is so valuable. All the work needs to be done. Realize also the importance of a team. We are nothing we can do. We can't do everything on our own, right? We can't get our own electricity, that we need others. So build that team in your business. build that team inside and outside of your business. It is so, so, so important. And remember, the journey of a million miles begins with just one step. It will look so overwhelming. It will look like, I don't know if I'll ever figure this out. It's not my— I hear this often, numbers is not my favorite thing. That's okay. However, it doesn't have to be your favorite thing, but you got to do it as a business owner.

So Change how you're looking at things gradually, step by step.

I'm not saying it's easy.

I'm just saying it's not impossible. It can be done. So be that committed to your business, the impact it's making, and remember that, you know, it's a journey and it can be such a beautiful journey as a business owner. It's so worth it as an entrepreneur.

Love it!

Could you remind everybody one more time how to get a hold of you?

Definitely hit me up on LinkedIn. I'm there, Kersha Campbell. You can find me and you can just send me a message as well. My website is there. It's under construction. So, it's www.thecashlab.com— .ca, sorry. However, we're revamping our website now. So, the easiest way is definitely on LinkedIn.

Kersha, thank you so much.

You're welcome. It was a pleasure to be here. And I'm just so excited about the impact you are making with your Justice Podcast and your role as a business owner too. It's really commendable.

Thank you so much, Kersha. I appreciate you.

Why don't you let me know if this was of value to you? As always, my offer stands. If you would like 30 minutes of my time to brainstorm your business with you and your team, feel free to book yourself on my online calendar. The link is in the show notes. It's a complimentary clarity call just for you and your team. It would be my honor to serve you. And while you're at it, why don't you go ahead and leave a review or comment about this episode? I'd love to get your feedback. Was this of value to you? And of course, if you haven't done so yet, Please click the subscribe button. That way, you get notified whenever I bring you fresh new content each and every week. Thank you so much for joining me today. My name is Marc Haine. I hope you stay safe, stay healthy, and I hope, and I hope that you dare to be the exception.