94. How to Handle Bad Books as a Fractional CFO

Foreign.

Of the scariest moments in the life of a fractional CFO comes right after you sign a new client and you open their books for the first time. Are you gonna find a beautiful set of recently reconciled accounting records, or are you gonna find a flaming hot dumpster fire of a file that hasn't been touched by a competent professional in the last three years? Let's be honest, it's probably the latter. So what do you do as a fractional CFO that doesn't wanna do bookkeeping when you find one of these files? How do you set boundaries with your clients and that you're not doing that work while still being somebody that can help them move their books forward? In today's episode of the CFO Report, I'm talking to one of my inner circle members who comes across this all the time. I'm walking him through the process step by step on how to handle this and still look like a cfo. That's helpful, but not crossing boundaries. Let's dive in.

Every single client I get, as they onboard, you realize that their accounting is missing. And then you're trying to stay in the CFO space to say, hey, I'd love to get that from there. And then we could do our CFO report and we can start to do some strategies and tactics. Yep. How are you setting boundaries and how are you finding somebody to do the tactics? Perfect example is I have a client who, when we did the CFO report, you look at it and it's like, here's six months of whatever, and then there's six months of empty columns because they literally are missing huge accounting things and then not ending up in, okay, I'm going to do the accounting for you. Hell, how are you setting the boundaries? How are you getting their needs fulfilled?

All things the alpha and the omega. All things begin on the sales call. All things begin on the sales call. What I'll do is if I'm even a little bit worried towards the end of the call, the sales call, after they've already agreed to everything, like, yeah, let's work together. Let's do it. I'll say, hey, look, I just want to give you a heads up that in order for us to be successful as a fractional cfo, we got to have good books, you know, in order for us to figure out where we're going, we got to know where we're at first. It's just like using a map, you know, maps useless if you don't know where you're at. And so what I've noticed is a lot of times businesses that are like yours, and I don't know if this is true for yours or not, because I haven't looked at your books. A lot of times the accounting isn't up to snuff. As part of the onboarding process, I'm going to help you evaluate that and I'm going to help show you if the books are in a great spot or not. And if they're not, what we might need to do is make some changes to who's doing the books. And I just like to be really upfront about that, that the books might not be good. And I want to be honest with you, because I won't be successful if the books are bad. And then you're spending a bunch of money on a bad bookkeeper and on me, and you're not getting anything useful out of it. Now what I can do is if those books are bad, I can help you find someone to fix them. Okay, there's the see right there, super low key. I'm like, I'm not doing your dirty laundry, but I'll help you find the cleaner, right? I'll help you figure out what kind of bookkeeper you need. And is. Is you're like interviewing them. You know, we can help you select and those kinds of things. So that's what, that's one thing you could do. If you feel like screwing with it, there is some upside in you fixing their books. Get their chart of accounts the way you want. Their chart of accounts, get everything dialed in, and then you just bring in somebody, plug and play to, to maintain. And so you could, you know, charge three, four grand to clean up their books if that's something you feel like fooling with. We actually just did that. Like I, we all hate doing books, but we had this client, the books were really bad, and we're like, ah, we like them. You know, we like the guy. So we did a cleanup. We charged him, I think three or four grand to get his books cleaned up year to date. And it was just easier for us that way. And you know, whatever, if you feel like doing it. But it all starts on the sales call and then during onboarding, like reinforce it. Hey, this is what I'm seeing in your books. This is the problem. This is what I recommend. We need to find somebody in the next 30 to 60 days. But now remember, there's things that you can be doing in parallel with that to add value. As the cfo, your cash flow forecasts in no way, shape or form are contingent on them having accurate and timely books. You don't need good books to do a good cash flow forecast. You don't. You can't convince me otherwise. Right. Bank statements are really all you need to do a cash flow forecast. Is it easier with good books? Absolutely. Can you do it off of bank statements? You betcha. So really, then you can still focus on cash flow forecast and start having conversations with them about how the operations of their business works. You can get into their CRM, you can look at tax returns. There's all kinds of things you can do to add value while they're finding that bookkeeper. But you got to continue to push the ball down the field and make sure that they're taking action to get that piece of it cleaned up.

Perfect. Thank you.

Yeah, absolutely.

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.