Philip Campbell's Blog

Your accounting and financial reporting function meets Steven Pressfield’s Do The Work

Steven Pressfield’s book, Do The Work and his book The War of Art, talk about a fascinating subject – Resistance. Resistance is always working against you. Convincing you to take the lazy way out. Lulling you into a false sense of security.

Resistance is that nasty little creature in your head tempting you to starve the accounting and financial reporting function in your business. It loves the saying “Nothing happens until someone sells something”. And it goes one step further to say “Accounting isn’t selling anything. They don’t create sales or profits. They don’t take care of customers. They just cost money. It’s a pure overhead function.”

“Resistance is a repelling force. It’s negative. Its aim is to shave us away, disturb us, prevent us from doing our work…Resistance is always full of s@#!

Do The Work, Steven Pressfield

Truth and Lies

And there is some truth to what Resistance is saying.

The problem is a half-a$$ accounting and finance function can turn your dream of business ownership into a hellish nightmare. It can ruin you and your family financially.

A poor accounting and finance function will drag you down. It blindfolds you and forces you to make important business decisions in the dark.

It handcuffs your ability to grow and attract capital and talent. It hurts your credibility with your banker, your other lenders, your investors, your partners, and all those in the financial community you need in order to grow your business successfully over time.

It sucks the life out of you.

“Resistance will reason with you like a lawyer or jam a nine-millimeter in your face like a stickup man.”

Do The Work, Steven Pressfield

Are you ready to take on the Resistance?

Is accounting and financial reporting the weak link holding you back?

Picture this. You are sitting on a huge, heavy duty John Deere tractor. On one end of the tractor is a long chain. On the other end of the chain is a large object you have to pull across a field.

No matter how big the tractor is, or how much weight it is capable of pulling, the strength of the chain will determine how much weight you can pull. And the strength of the chain is determined by the strength of its weakest link.

If the chain has fifty links, and forty-nine are strong and one is weak, then the weak link will break when it hits its limit. The chain breaks and your ability to pull the object goes to zero.

If each of the forty-nine links are capable of pulling 1,000 pounds, but one link can only pull 500 pounds, then the entire chain can only pull 500 pounds. The strength of the chain is determined by the strength of its weakest link. (Very important point.) 

Where is Your Weak Link?

Having a sloppy accounting and financial function/department in your company is a weak link. It hurts your ability to make smart business decisions. It hurts your credibility with investors and lenders. It makes it harder to attract capital.

It even hurts your ability to keep customers because they will become irritated by inaccuracy and the overall apathy they experience from your accounting operation.

Making a weak link in your business stronger will lift your company to a whole new level.

Bootstrapping your business, the craziness of student loans debt, and the education of millionaires

The Education of Millionaires is a fantastic book by Michael Ellsberg. He does a wonderful job talking about the virtues of bootstrapping your business. You should run, not walk, to get your copy of this book.

I’m a big fan of the bootstrapping approach because using debt/leverage can be a very dangerous approach, especially in a small to medium size business. It's very important to use debt cautiously.

And the author does a brilliant job of making the case for why we should look at funding our college education, and the college education of our children, using the same bootstrapping principles.

Check this out from The Education of Millionaires. I love it.

 “Bootstrapping is a concept central to the themes in this book. In the world of business, it’s a strategy that involves getting to the point of profitability as quickly as possible—even if the profits are small—and then continually reinvesting profits to fuel growth.

… you can bootstrap your own education (including your continuing and professional education as an adult), and you can bootstrap your personal investments of time and money in your own career, just as you can bootstrap a business.

The essence of bootstrapping is keeping expenses low, generating income right away (even if it’s just a little bit), and continually reinvesting as much of that income as effectively as possible into expanding your future income.

… to get a better sense of what bootstrapping your own continuing education and personal investments might mean for you going forward, let’s look at the opposite of bootstrapping—lots of up-front expenditures and debt, with little up-front income generation. This is how a great deal of Americans “invest” in their human capital, and it’s how I myself lived during my twenties. Rather than bootstrapping, it might be called “charging the boots on credit card.” 

Hey, I’ve got an investment opportunity for you.

It’s going to require an investment of about $45,000 to $200,000 on your part over several years. Given your current finances, you’re going to need to borrow a large part of that amount, that is, invest on margin, but that’s OK, the rates are pretty low. (One thing you should know, though, is that if the investment goes under, you’re personally on the hook for that money, until you pay it down, for the rest of your life. There is no way to discharge the debt in bankruptcy, and your future wages and social security benefits could be garnished if you can’t pay.)

The business I would like you to invest in is, well, sort of in the exploratory/development phase. It doesn’t really know what business it’s in, to be frank, or what product it sells. In fact, it may not even know that for a few years. The chief executive in the business may have to move back in with her parents at some point during this time – before she figures out the business’s mission, revenue model, or core competency. (Oh, and by the way, the CEO is quite immature. She is often irresponsible and from time to time becomes distracted by side projects, like partying.)

The business you’re about to invest in has absolutely no knowledge or experience in sales or marketing. It doesn’t even really know how to keep its own books or balance a budget, and often runs up a lot of credit card debt. It’s not even sure it wants to be a business; the CEO may want to start a nonprofit, pursue a passion in acting, or go help orphans in Botswana. The chief executive has no business network or contacts to speak of, and in fact, has no experience whatsoever running a business.

Wanna invest?

Unfortunately, this is precisely the way many people in America go about investing in themselves today. It’s the opposite of bootstrapping. It’s high-expenditure, high-debt up front now, and revenue (if at all) much later.”

Two important lessons

Lesson one is be smart about how you use debt and leverage in your business. It’s easy to get your head cut off using too much debt.

Lesson two, is give some serious thought to outlawing the use of student loans in your family. The number of student loans that go horribly wrong is breathtaking. Don’t put your kids through that (and definitely don't take out student debt yourself, or guarantee any debt, for your kids college education).

Help them develop a plan that gets them through school without having a ball and chain to drag around their entire life.

They will thank you for it!

Seven more great reasons to get the accounting and financial side of your business under control

Here are seven more really good reasons to make the accounting and financial side of your business strong.

1. You want more accurate and timely financial information so you can hold your executives and managers accountable for improving profitability and cash flow
2. You’re ready to take your company to the next level
3. You know that “adult financial supervision” is needed to get to the next level
4. You're tired of operating on a shaky financial foundation
5. You want to grow your business but you’re scared to do that right now
6. You want to get serious about making your company stronger
7. You need to attract new investors

When you think about how much money you have riding on the success of your business, it only makes sense to hold your accounting and financial function to the same high standards you demand from every other part of your company.

It's smart (and it's the right thing to do).

Here is the list of the first five reasons to get on with the process.

How to survive a cash crisis in your business – FREE Webinar on February 23, 2012

I will be a panelist on a FREE Webinar on February 23, 2012 at 11:00 a.m. EST (10:00 a.m. CST).

The webinar is titled – How to Survive a Cash Crisis in Your Business.

A cash crisis can rear its ugly head when you least expect it: 

• Your bank or lender threatens to call your loans
• The housing collapse wipes out the equity in your home, and the bank pulls your home equity line of credit
• A dishonest employee embezzles
• Poor financial controls lead to overbuying of inventory
• A major customer goes bankrupt
• A new competitor moves into your market

You have your entire business riding on how well you navigate through this crisis.

Do it right and you live to fight another day. Do it wrong and you could lose the company you worked so hard to grow.

The 3-Step Plan of Attack

I’d like to invite you to attend the webinar because I will share with you a 3-Step Plan of Attack for moving from fear to success in your business. I’ll show you the secret to dealing with banks and lenders and how to buy the time you need to put the plan of attack in place.

Rusty Luhring is hosting the webinar. He is a seasoned software entrepreneur and a veteran of the cash flow wars you have to fight running your business.

He will provide a hands-on demonstration of the SurvivalWare Cash Planning tool designed to help you pull yourself up by the bootstraps when a cash crisis strikes.

Join us for a very insightful and practical look at what it takes to survive a cash crisis in your business.

Register now

Registration is limited to the first 100 people, so register now.

Please join us. And share this with your friends in business so they can join us too.

It’s FREE.

Register for the webinar here.

Five great reasons to get the accounting and financial side of your business under control

Every business owner or entrepreneur has a little different reason for getting the accounting and financial side of their business under control.

Usually it’s a cash or debt crisis that forces the issue. Sometimes it’s just getting tired of the problems that a weak financial function will create for you.

Here are five good reasons to get on with it.

1. You're tired of being the Chief Firefighter (rather than the Chief Executive Officer)
2. You’re ready to focus on the parts of the business that highlight your unique ability
3. You want to pull yourself out of the day to day processing work in the financial function
4. You're tired of looking bad to your partners and lenders
5. You want good, solid, accurate, and timely financial information so you can make better, smarter, more profitable business decisions

The Financial Confidence Road Map will show you the way.

The Monthly Confidence Package will help you establish the credibility and trust you need to win financially in business.

The human tendency to hide when you are faced with a cash crisis in your business

Nothing can strike complete fear and terror in your entire being like experiencing a cash crisis in your business.

I’ve been through it. And you would be surprised how many other entrepreneurs just like you have been through it too.

You feel it in your gut. It hurts. It kills your confidence. You feel like a failure.

Money and fear

It’s amazing how our physical and mental reactions to money problems seem to be hardwired in our brain. I’ve felt it when my own money was at stake in a business.

I’ve even felt the same fear-based emotions and reactions in my consulting work with companies even when I don’t have any money at stake in the deal at all.

Don’t hide

One of the natural human tendencies when faced with a cash or debt crisis is to hide. But I have learned over the years that the most useful and positive thing you can do is just the opposite. Communicate, communicate, and then communicate some more.

Generally speaking, a cash crisis is brought on by debt. A bank or a lender isn’t getting paid and they are starting to take action. That’s usually the trigger that sends you into crisis control mode.

Don’t make the mistake of hiding or not returning calls or emails when the lender starts inserting themselves into the process. Create a plan and communicate with them and be available when they call.

Surviving a cash crisis

My next book will be devoted to sharing with you a 3-Step Plan of Attack for surviving a cash or debt crisis in your business. I’ll show you how to move from fear to success during one of the most stressful times you can experience in business.

I will also be writing about this topic frequently in future blog posts.

Be sure to enter your email address in the box at the top left section of this page and you will get each blog post delivered directly to your email.

Are you growing your business with purpose (or just winging it)?

Hmmmmmmm. I wonder which way we should go? When you encounter a sign like this one on a vacation with your family, do you have to sit and think about it for a while?

Of course not, you already know which direction you’re going. You have a plan already set out and the decision is a no-brainer.

Maybe it should be that focused and well planned in your business.

Hmmmmmmm. Which direction are you going with your business?

The fastest way to increase your cash flow is to stop doing things that lose money

Don't be fooled by the common sense, seemingly obvious nature of that statement.

I have seen very intelligent, very experienced business people break this rule over and over again in my career. I can't tell you how much time I spend in my consulting work highlighting the seemingly obvious drains on a company’s profitability and cash flow.

Old habits die hard

I worked with a client who put over $1,000,000 to the bottom line once he finally came to grips with a pet project that was losing money. And the project was clearly on a path to continue to lose money every month.

He was so personally attached to the project he was temporarily blinded by the obvious.

Another client completely changed their marketing strategy when they finally understood that every $1.00 of revenue it was generating with that advertising was costing the business about $1.10. Bad, bad, bad. (Another example of how slow and sloppy financial information turns smart people into poor decision makers.)

One client was so attached to a specific strategy that was losing about $450,000 a year that it took almost six months of me constantly nagging him before he finally did the right thing. He finally said "stop", and instantly, a huge cash flow drain on the company went away.

That's a fast way to increase your profits and improve your cash flow.

Your next step

Take a hard look at some projects and activities in your business that are (or might be) losing money and draining your cash flow. Then make the tough decision to say “stop”!

And watch your profits and cash flow increase instantly.

Inventory can be a big drain on your cash flow if you are not managing it properly

Inventory is one of those assets that’s sometimes your best friend… and sometimes your worst enemy.

You can lose a lot of money really fast if you are sloppy about how you manage inventory in your business.

Inventory is especially dangerous if you like to pay close attention to your income statement but have a tendency to ignore your balance sheet. Inventory only shows up in cost of goods sold (in the income statement) when the products are sold, not when you are buying them.

While you are writing the checks to pay for your inventory purchases, the cash is leaving your bank account but there is no recognition of that item as an expense. It’s going to the inventory account on your balance sheet.

A real word example

I worked with a retail operation that had let their inventory get out of control. The owner did a good job of reviewing the income statement each month. What he had not done quite as well was reviewing the amount of cash his stores were using each month to purchase inventory.

The operation was short on cash and the owner was concerned that he had a problem. He was right!

It turned out the stores had about twice as much inventory on the books as they should have. They had been buying more inventory than they were selling. Some of the inventory had been moved to storage locations because there was not enough room for it in the stores. It had become clear that they had not managed their inventory purchases properly.

Good news… and bad news

The product had to be marked down 60–80% in order to sell it and clear out the excess inventory.

The good news was they were able to generate some cash.

The bad news was they had to do it at a huge loss.

And it was only at this point that the reality of this loss was shown in the income statement. That’s part of inventory’s ability to hurt you really fast and drain your profitability and cash flow.

The best medicine here is prevention (and creating cash flow projections that make it clear how much cash is being devoted to inventory purchases every month).