161. The One Skill Most CFOs Overlook

Does this speak to you get so frustrated because you tell the clients the things and they don't do the things. I see some head nods with the lights. It's so frustrating. And then we burn out and then we want to fire the clients. Simplicity is the key to everything. Everything starts with simplicity. Because when we explain things simply to our clients, they understand. Think back to my story earlier about the CEO of the IT company cash flow forecast. This is how much is in the bank. This is how much we need. Can you afford to spend money on the 3D printer? No, you can't. Oh, I understand. Gross profit margin markup not the same. Oh, I understand. Now when we overcomplicate things, the clients don't understand. When they don't understand, they don't take action. Make things simple. Clients understand, they take action. Once they take action, then we get to see impact. Impact doesn't work without action. Action doesn't work without clear understanding. Simplicity comes in so important. Without understanding, there will be no action. Without action, there will be no impact. So as you're working with your clients and gosh, how many of you guys does this speak to? You get so frustrated because you tell the clients the things and they don't do the things. Is that I see some head nods with the lights. It's so frustrating. And then we burn out and then we want to fire the clients. So what we're going to talk about today is how can we take something inherently complex and complicated as finances, as FP&A, as CFOE things, and how can we simplify it down for our clients so that they can have understanding, so that they will take action, so that we can impart impact. Usually there's two things that go wrong when our clients aren't taking action. The first one, as you might guess, is what you're telling them is too complicated and they're not following. What are you even talking about? So number one, it's too complicated, they're not following along. Number two, and I think this is one where you start to get into more of the advanced CFOs, the ones that have been around for a minute. So today you're going to get a little shortcut. The second thing is they don't clearly understand how what you're telling them impacts their goals. I think our fundamental job as fractional CFOs then becomes how can we simplify so that our clients can understand. Now, note that I didn't say that our fundamental job as fractional CFOs is to put together the most Accurate set of forecasts and projections. Our job fundamentally isn't to figure out how to save them X percent on their taxes. Our job fundamentally is to drive impact. Because without impact, what are we doing? And it all starts with simplicity. And then once we simplify, then what else do we need to do to get action happening? So we got to think like simplification and driving action. I know a lot of us tend to, we struggle, we complicate things. I would say a lot of us don't even realize that we're doing it. We just know that we get frustrated when our clients don't do the things. I know somebody in the front row that's shaking her head right now. I don't even. There she is right there. You get so frustrated because the clients aren't doing the things you know, we're putting all this effort in. They're not doing it. And I would say, like, look up until today, it's really not your fault. Think back to accounting school or the CPA exam or business school. How many times in any of those educational programs did a professor get up to the front of the room and tell you how to communicate to the people that need to know the things that you were learning? How many times did a professor get up there and say, look, if you ever have a client that's like paying you for this stuff, you need to explain it to them this way so that they can understand it did not happen in my mba. And so all we really learn how to do through our formalized education is learn how to communicate to other CPAs. We learn how to communicate to MBAs, but we're not the people that need to understand this stuff. We're not the ones that are taking action as fractional CFOs, our clients are. And so it's a whole new skill set that we have to learn and embrace and master in order to be able to get that impact that we all are talking about. And I'll tell you, I will be the first to tell you, I screwed this bad up. In the early days when we first started back before I knew that there was a thing called fractional cfr. We would deliver this report to our clients called a Financial health assessment. And it was cool. It had all the charts and the graphs and the. In the KPIs, it was anywhere from 10 to 20 pages long PDF. Bless those clients hearts. Every month they get this 20 page PDF. It was cool because like on sales calls you're showing them these reports, but they're seeing all the charts and the Graphs and the KPIs, and it looks cool. And I'll tell you, the alpha males loved it because it looked cool. They're like, I need this. This is what I need. This is what I need. But then you find out they look at it and they don't know what to do with it. And you get fired a month later. That's the reality of it. So what did it have in this financial health assessment? It had the usual suspects. Revenue, profit margins, cash. But it also had the cool, sexy stuff, too. What's your current ratio, man? Current ratio is too low. What's your quick ratio? Return on equity. We got to be thinking about return on equity, right? What's the debt to equity ratio? If we're not talking about return on assets, what are we even doing? Z score. I talked about the Z score for years. I have no, no idea what it meant. Inventory, Turn right. There's all these different things that we're sharing with the clients. That sounded cool, it looked great in the report, but nobody really understood what the heck it meant. You know? We understood, but the clients certainly didn't know what it was. All right, my friends, I hope you found this episode helpful. If you did, it would mean the world to me if you would leave a five star review on Apple podcasts, Google podcasts, Spotify, wherever you're listening to this episode. In the meantime, I can't wait to see you back right here next week. I'll see you then.