Creating Financial Clarity for the Business Sale

In this, The Faces of Business, Jason Kruger, President & Founder, Signature Analytics, shares his valuable insights on creating financial clarity to help you make sound business decisions.

In this, The Faces of Business, Jason Kruger, President & Founder, Signature Analytics, shares his valuable insights on creating financial clarity to help you make sound business decisions.

Jason Kruger is a business leader dedicated to helping entrepreneurs, leaders, and executives enhance their performance by creating value-added financial clarity to make more effective decisions.

He is the President & Founder of Signature Analytics. Signature Analytics has been providing expert-level accounting and business advisory solutions to small and middle-market businesses for over 14 years.

Download our free business valuation guide here to understand more about business valuations and view our business valuation FAQs to answer the most common valuation questions.

Through their comprehensive approach, Signature Analytics manages the accounting function and financial reporting, alleviating the burden for their clients. Their focus extends to improving business performance and achieving goals through forward-looking activities, direction, and strategy.

With Jason’s renowned 5-step process for client success, his team instills confidence with timely and accurate financial processes and reporting. His commitment to financial clarity through insightful reporting empowers business leaders to make informed, forward-looking decisions that positively impact their business value, margins, and cash flows.

Damon expresses his enthusiasm for the insightful discussion ahead with his experienced guest, Jason, in this captivating show. The show aims to empower you with the knowledge and strategies to enhance your business value through accurate and timely financial information.

Do you want to know if your business is ready for your exit or what you should do to prepare? Learn this and more with our business exit assessment here.

Damon is interested in exploring how Jason and his team at Signature have been assisting individuals and uncovering valuable insights throughout their extensive years in business. Jason asserts his commitment to dealing with post-fraud situations and educating business owners to achieve their goals.

The host requests Jason to talk about the latter’s background.

Jason reveals that his professional career spans 20 years. He began his career in the late 90s in public accounting, focusing on financial statement audits. With the belief that understanding numbers provides a solid business foundation, he gained experience at Moss Adams and Deloitte, where he realized his preference for working with mid-market companies. Observing that many businesses viewed accounting as a necessary evil, Jason recognized a gap in talent and expertise.

Get the most value for your business by understanding the process and preparing for the sale with information here on our Selling a Business page.

In 2008, Jason founded Signature Analytics to support small and mid-market businesses by providing peace of mind through effective day-to-day financial operations and offering visibility into financials for credibility and informed decision-making.

Damon expresses his excitement to delve deeper into the topic by asking Jason about the surprising aspects he encountered during his time in public accounting.

Jason reflects on his experience in public accounting, discussing the exposure he gained to various companies, industries, and business owners of different sizes. He notes that larger public companies with well-documented policies and procedures tend to be more sophisticated. Contrastingly, small and midsize businesses, often led by first-time entrepreneurs, lack the resources to invest in a robust corporate structure. Initially, it was eye-opening for him to witness the disparity between the two.

He mentions that the entrepreneurial realm can sometimes feel like the “Wild West,” where the focus is on growing the business and making money rather than adhering to strict corporate practices. Additionally, he mentions the ongoing challenge of a talent shortage in the finance industry, with a decreasing number of individuals pursuing accounting careers. Jason personally entered accounting to learn about business and explore where it would lead him rather than solely pursuing a long-term accounting career.

Damon acknowledges Jason’s resolve to serve his clients. He then prompts Jason to share the telltale signs indicating a situation beyond the team’s capabilities or comfort zone.

In Jason’s view, cash is king and must be managed efficiently. He explains that a business owner’s margin can vary significantly, ranging from 50% to 60%. He emphasizes accurately determining the margin percentage and breaking it down by product/service lines. By improving the margin by just 1% or 2%, a $10 million business can achieve additional profits of $100,000 or $200,000, respectively. These figures highlight margin improvement’s big impact on a business’s bottom line.

Agreeing with the guest, Damon notes the importance of taking proactive steps to optimize inventory and improve financial capabilities for further business development. The host seeks to understand the transformative effects of these changes on accounting practices and the efficiency of financial operations.

In response, the guest stresses the need for effective systems in small and mid-sized businesses. He discusses the challenges and expenses of implementing an ERP system. He suggests using affordable solutions like bill.com to automate processes. To Jason, small business owners must assess the accounting and financial environment.

Jason further clarifies that their service involves evaluating the client’s team, incorporating their resources, providing financial leadership, and executing a plan based on the assessment. In his view, there is a need to avoid jumping into accounting tasks without a clear plan to prevent confusion and mounting expenses.

Damon asks Jason about the “aha” moments or insights clients often have after working with him and gaining a deeper understanding of their financial information.

Jason mentions cash flow management and suggests strategies to improve it. He recommends adjusting payment terms, invoicing frequency, and methods to pay and receive cash. Jason highlights the importance of implementing accounts receivable and accounts payable management processes, including regular review and streamlining of payment schedules. He also mentions the unique challenges and opportunities for manufacturing businesses regarding cash flow.

From a financial reporting perspective, Jason believes it is crucial to create and regularly review budgets to set expectations and analyze trends in revenue, cost of goods sold, and other expenses. He encourages businesses to prepare for potential market uncertainties by evaluating their revenue streams, inventory, cash flow, andexpenses, intending to make strategic investments and cut costs where necessary.

Damon raises the topic of “weather-proofing” a business and acknowledges the varying growth rates and struggles experienced by different industries. He then asks Jason about the significance of utilizing periodic financial reports in addition to monthly financials and how beneficial it is for business owners.

Answering Damon’s query, Jason recommends having a solid monthly close process to ensure up-to-date and relevant information. Monthly reporting should include income statements, balance sheets, cash flow visibility, and a deeper analysis of revenue, cost of goods sold, margins, and expenses.

However, Jason also highlights the need for ongoing monthly reporting to manage the business in real time. Flash reports and daily snapshots of revenue trends can provide critical insights and allow for proactive decision-making. With access to timely information, businesses can adjust their strategies, address potential issues, and make informed decisions to meet their goals and manage cash flow effectively.

To increase awareness among the business community, Damon inquires Jason about the common types of fraud prevalent in today’s business environment.

While talking about the most common type of fraud, Jason explains it occurs when one person has excessive control over accounting functions in a company. He stresses the need for a second level of review by involving someone outside of accounting, such as the owner or an executive. The guest shares a case of significant fraud in a manufacturing environment where an individual manipulated inventory and claimed significant expense reimbursements through payroll to herself. The fraud went undetected for years until a bank audit uncovered it.

He emphasizes the importance of proper inventory tracking and accountability to prevent such fraud.

Damon asks Jason about exciting developments in the accounting field, including advancements in systems, technology, and changes in how people approach their work. He expresses enthusiasm for the evolving landscape of accounting.

Jason highlights the importance of embracing technology in accounting to create efficiencies and focus on valuable tasks. He mentions ChatGPT and its potential for leveraging technology in financial statement analysis and process documentation. He also emphasizes their efforts to leverage technology for reporting, using a custom tool that syncs with various accounting systems. Jason aims to drive value and efficiency in accounting, particularly in commoditized areas.

The conversation ends with Damon thanking Jason for sharing his knowledge and insights on building better financial systems and achieving financial clarity.

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44:04
SUMMARY KEYWORDS
accounting, companies, cash, business, inventory, talking, critical, financial, business owners, pay, clients, revenue, signature, big, month, public accounting, payroll, individual, cash flow, leverage
SPEAKERS
Jason Kruger, Damon Pistulka

Damon Pistulka 00:01
All right, everyone, welcome once again to the faces of business. I’m your host, Damon Pistulka. And with me today, I am so excited because we got Jason Krueger from signature analytics, going to be talking about creating financial clarity. Welcome, Jason.

Jason Kruger 00:21
Thank you, Damon, appreciate it.

Damon Pistulka 00:23
I’m really excited to talk today because man, your depth of experience, and the stuff that you guys are doing today, I’m just excited to cover it and go and take a deep dive into how you’re helping people some of the things you see, I mean, you guys have been in business quite a while at Signature. And you had to have uncovered some real gems over the years.

Jason Kruger 00:47
Oh, yeah, we’ve we’ve seen some some good stuff. Many times we come in after the real fun stuff, or the scary stuff has already occurred, right? Yeah, we’ve come into situations where there’s been significant fraud after the fact. And we’ve had to work through those situations. I that’s not ideal. We want to work with business owners, obviously, to make sure that they’re on track. And there’s, so it can help with educating them and becoming more sophisticated. So they have clarity that, you know, ultimately to achieve their goals, same thing you’re doing it’s how, what are their goals? And let’s work with them to figure out how we can help them to achieve those goals. Yeah,

Damon Pistulka 01:33
good stuff. Well, Jason, let’s talk about your background, because you started out in public accounting. And I’d like to just kind of walk us through that. And in some of your experiences there and kind of how you got, yeah, the signature analytics idea came and then and then moved to there.

Jason Kruger 01:50
Yep. Yeah, yeah. So I started my career in the late 90s. And public accounting, as you mentioned, on the financial statement audit side. And so I felt that accounting would allow me to get into business would allow me to see the foundation of what I call what I felt the foundation of business was, if you know the numbers, you know the business pretty well. At the time, I thought I’d get my CPA and two years and go conquer the world. And after two years, I realized I still didn’t know much of anything. And then I just continued to learn. I started my career with a national firm called Moss Adams, or big, firm, and nationally and regionally, especially think in your neighborhood. And then I, after a couple years, I went to Deloitte, Deloitte and Touche, which is one of the big four companies that wanted a bigger SEC experience. I got that. And then I realized I actually enjoyed the mid market better. So I switched over to servicing mid market companies spent almost 10 years in public accounting, and working with a small, mid market, even our clients at Deloitte, I could see that a lot of these companies were looking at accounting and finances as the necessary evil, right? I have to pay my bills, I have to invoice my clients and collect, I have to make sure I have enough payer cash in the bank to pay payroll. And oh, yeah, I got to file my taxes once a year at the end of the year. And outside of that, that was there. That was kind of how they used accounting, right. And so what I realized quickly is that there was a gap. Or that these companies were, they deserved better, they didn’t have the the, they didn’t have the right talent in place. They didn’t they couldn’t afford the top talent. And a lot of cases times they didn’t actually need that top one person and that top talent to be they need that one person that role, they only needed a part of that person or they needed multiple people in different roles. And so, you know, leveraging my background back in 2008, decided to start signature analytics to work with the small and mid market to support their internal accounting arm and finance arm or their business. For a couple of things. One, it’s business owners need peace of mind, right? They need to be able to go to sleep at night, knowing that they have cash, they can meet their obligations of paying their bills, and their invoices are going out. So that’s the peace of mind making sure that the day to day activities is going effectively. The second would be visibility into the financials. As businesses grow, they start to have conversations with third parties like yourself. They’re bankers investors, and the first thing they’re going to ask for is financials. So we want them to our clients to look credible. And we also want to give them the visibility into the business so they can make decisions to achieve their goals. So that is a that’s a 20 year snapshot and about two minutes. Happy to go anywhere you want to go from there. Yeah,

Damon Pistulka 04:57
I’m excited to get into this a little bit more because As you know, what were some of the things that you learned in the public accounting that surprised you that you got into? You went? Wow, I would have thought it was? Or are you going? Wow, this is really cool.

Jason Kruger 05:15
Ya know, it’s interesting because I, I think having been in public accounting gave me exposure to all different types of companies, size industry, different types of business owners, CEO, executive teams, and the much larger companies, larger public companies, they are obviously much more sophisticated. They have all of their policies and procedures documented, they have, they hire individuals with significant experience who have been through the corporate structure, the small and midsize businesses, a lot of these businesses are being run by first time entrepreneurs, first time business owners, they don’t have the resources in place to invest in the corporate structure, like these bigger companies do. And so, you know, from an outsider’s perspective, coming in initially, it was a little bit eye opening to see how, you know, really didn’t realize and see this all the time now. And now it’s just commonplace, it’s, a lot of times, this is the Wild West, right? It’s, hey, we, we have a great idea, we have a great business. And now let’s go figure out how to grow it and make money. And, and so there’s also a lack of and you i, we hear this all the time, in our industry, there’s a lack of talent, in finance, out in the marketplace right now, the volume of individuals that go into accounting is is decreasing every year, for a career. And so there’s a real lack of talent, and the companies in that small and mid market are the ones that are really suffering from that. Accounting, I can see why an 18 year old when think accounting is exciting. I didn’t personally get into accounting to do accounting my entire career, I got into it to learn about business, and to see where it took me.

Damon Pistulka 07:08
Yeah, yeah, and that’s true, because, you know, the, the public companies, obviously, they, you know, they have to meet expectations give good projections, otherwise, that just ruins your credibility. But you’re right, and you think about some of the, over the last time since you started signature, how it’s changed from much longer term established companies to now you think a SaaS company, they could, they could get started, they could get a big round of funding, and, and hit the ground really hard in 24 months, right. And it is literally the Wild West because they’re hiring people so fast, and money’s coming in and going out and multiple, it’s just, it’s just crazy how that’s probably changed for you.

Jason Kruger 07:55
Yeah, where we see to a lot of companies that get that capital infusion, the first thing that depending on who’s who’s bringing in that capital, they’ll want, they may want to bring in, you know, or have a say in the management team. So they’ll build a bring in a very strong management team, but then there’s nothing below them, right, they might have this high powered CFO with a low level bookkeeper below them, right and so those are actually fun individuals to work with because they’re, they’re aligned as a management team as to where they want to go, they see value in our services, and we can come in and really help them to build out that that function built out that portion of their back office to help them you know, really take business to the next level.

Damon Pistulka 08:44
Now that we’re gonna get into that because I think that is one of the things that a lot of smaller business you know, business financial teams, ownership leadership teams, wherever you want to say really miss in in in what they could get from financial information if they used it or had it more available and quicker and all kinds of things we’re gonna get to that in a minute but you you hit a couple things that we are we were talking about now that we were talking about before and you did a couple of points as we come into this in these wild west type situations. What are some of the telltale signs of problems when you go we should we should get this is a this is getting this is getting above our pay grade or whatever you know outside of our comfort or none of our comfort but our abilities?

Jason Kruger 09:41
Yeah, I’d say in the in this environment cat it’s always cash right? Cash is king. Yeah, cash was in flowing like like no other. That Olivia that covers a lot of issues, right? A lot of problems. As soon as there’s some seems to be some level of cash flow. have challenges. And a lot of times they’re, they’re unexpected. I’ve talked to a number of manufacturers and I know you have a lot of experience in manufacturing, talking to a number of manufacturers, they say, Hey, look at my look at my income statement. Look at my p&l, look how much money look how much we’re making. Why do I have no cash? Right? And I say, I’d say, well, there’s, there’s one of two reasons One, your financials aren’t right? Or two, your cash is actually on the shelf over there and your warehouse, it’s in its inventory. Right? So, so your cash is inventory? So so how are you managing your inventory? Processes? How do you know, you know, what’s your overall process on buying inventory? What’s your sales cycle look like? You know, manufacturing companies haven’t had the most difficult as far as man managing cash. And that’s why establishing a banking relationship is so critical in that in that industry as well. And you also have collateral through your inventory to make it easier as well. So I always say cash is by far the most challenging, and then the business owners that start to move beyond their, where they’re currently at and have to start providing their financials to third parties. And we talked about this, I think, before we jumped on to it’s, you know, a company that says, hey, you know, what, I need to I need financing, I need to bring in an investor, I need to, you know, I need to take advantage of this, even if it’s this tax credit that might be out there. And the first first question that I get asked is, send me your financials. And if they send financials that don’t make sense, then they’re not going to get very far. And so that’s the typically those are the initial signs that that you know, that they’re, they’re ready, or that they start to realize the value. Beyond that there’s so much more beyond that, though, too. Because as businesses grow, having the information in front of them is critical, because margin in a business is everything, right? It can be your manufacturer, or even a service provider. And what, you know, if you ask a business owner, hey, you know, what your margin is say? Well, it’s actually pretty good. It’s, you know, 5354 55, you know, between 50 and 60%? Well, that’s a huge spread, right? Yeah. So what we want to do is be able to identify that by the, and nail it down to the percentage point, and then how can we actually break that apart by product line, and by service line, because then you can really focus on which product lines are more profitable. And you could really look at your pricing and your costs. And you know, what we do a lot of times I say, if I can, how do I improve my margin by one or 2%. And that could be through pricing that could be through how I cost my product, or how I purchase my product, or my services, or whatever I’m doing. If you’re a $10 million business 1% is $100,000. For the bottom line, that’s a lot. That’s a lot. That’s a lot of additional profit to a $10 million business. 2% is 200,000, you know, so it’s, it’s significant. And just giving visibility to owners, I think opens up a lot of eyes. And then you have something to work on. Right? You say, Okay, hey, great. Now let’s work on this. And let’s then measure the results and see what’s happening. And you can make very quick impact for these businesses. And I know I’m speaking up your alley. I mean, I know you do.

Damon Pistulka 13:34
Well, this is this is great. I just wanted to let you talk because because it was funny, because I actually had written down that very thing that you said, because I don’t know how many times I have had worked with business owners that, hey, we’re growing really good. But we don’t have any money in the bank ever, that cash is always short. And then you do the exact same thing you said and said, well look at your inventory as a percent of your revenue 12 months ago, and you grew a lot say you grew whatever, 25%. But your inventory grew by 50%. Right. That’s where your money is setting, just like you said, it’s either in materials are on the shelf and finished product. And yeah, and if you’re

Jason Kruger 14:16
leveraging a line of credit, you’re actually paying interest on that inventory that’s sitting on the shelf, right. So that’s why managing inventory to a good level is so critical. Mm hmm.

Damon Pistulka 14:27
We actually had a number of years ago now we had a client that that like to buy inventory. And the business was pretty profitable. And it was it was very hard to slow that that train down. Yeah. And but yeah, it is. It’s,

Jason Kruger 14:47
it’s not because sometimes there’s an opportunity cost, right? They want to have an inventory, just in case XYZ might happen. Or I know a lot of companies have inventory on their shelves right now because of the instability. in the supply chain over the years, and that’s not their fault, either. So now’s the time a lot of companies have excess inventory, what’s the plan to? To bring that down? Yeah. You know, you whether to sell or liquidate or whatever it is to get that to the right level. So there’s opportunity right now for these businesses that have extra inventory to actually generate, and they’ve survived, generate, you know, some good cash because they’ve already paid for the product. And now they’re gonna get some revenue out of it, if they can get that down at a good clip.

Damon Pistulka 15:37
Yeah, I was actually talking to somebody about that a couple of weeks ago, they were there. We’re doing the same thing again, what’s your revenue or your revenue, the percent of inventory that you’re holding compared to your revenue, and it had gone up the revenue, the inventory has gotten too high. And we were talking about like, Hey, you got all these products? And they cost you 20 bucks. Yeah, we normally sell them for $38. I said, why not sell them for 30? Yeah, why not? Why not sell them for 29? Well, that’s lower than we normally sell them. I said, but yeah, you’re telling me you’re short cash. And this is an item that you’ve got plenty of Rush, run a sale, do something like you said, turn that into cash, and then you have cash to do the other things you want to do in the business?

Jason Kruger 16:27
Yeah, exactly. Yeah. So a lot of those decisions, obviously. And so Oh, yeah. Sometimes that’s a and then it takes it was who we saw 30 or 31, or 32. And so a lot of that goes into that. Yeah,

Damon Pistulka 16:39
yeah. So as you over the years now, one of the things that’s really changed the way accounting works, and and cash management is the the amount of electronic transactions that we have anymore. Me because when you started, there, were still a lot of paper checks going back and forth, or a few wire transfers, but a lot. So really, how has both on the orders, the invoicing, the payments? The billing, how has that really changed the way the accounting works? And the speed of accounting?

Jason Kruger 17:19
Yeah. Why is it significant? The biggest challenge, I think, in the, in the small and mid size, the business market that we’re you know, that really we’re talking to is that is, is getting the system set up in order to operate effectively. And so a lot of and it’s so expensive to, they can be so expensive. So to implement an ERP, right, and so yeah, start with QuickBooks, and QuickBooks will do certain things. And then you have to bolt on other systems to be able to do some of the things that you do the systems, you know, then maybe if you’re in manufacturing, and QuickBooks doesn’t work very well at all for that. So you, you bring in an ERP system. And if it’s set up the right way, and you have the right processes in the team knows how to do it, it can be fantastic. If it’s not, then that’s when you the team starts, you know, having the side Excel spreadsheets on the side, reconciling certain things, and you can lose a lot of efficiency that way. At a minimum, in my opinion, nobody should be cutting paper tax anymore. There’s, there’s very cheap, simple solutions, even for the smallest companies like a bill.com, where it just automates the process. If a check needs to be sent, they’ll send it through their process on your behalf. It enables the approval process is very easily easy as well, to make sure it’s everything’s approved effectively. As far as you know, just going back to your original question it the systems are fantastic. But it really has to be set up effectively. One of the first things that we do with all of our clients is we perform a an assessment of their accounting and financial environment. And that includes their systems and the technology. And so we map all of that out. And so when we do the assessment, we look at people, their processes, their technology, and the reporting infrastructure. And we’re talking about the technology piece right now. So we map out everything that they currently have, how it’s being used, what’s working, what’s not what’s interfacing effectively and what’s not. And then we come back with our thoughts on how recommendation and now obviously, if everybody had unlimited funds, what the recommendation may be different than, you know, the rest of us. So we have to work within the parameters of where the company is and what’s in their best interest now, and then what’s you know, something that we can strive for into the future, but at least we can put some quick wins in place too. Rate some of those efficiencies. And so that’s, that’s a critical piece of what we really look at.

Damon Pistulka 20:05
Yeah, yeah. Because you spot those problems right at the beginning or potential areas that you should address right away, that gives you the big bang for the buck or prevent problems, right and move on. And the most cost effective to

Jason Kruger 20:19
write Ah, yeah, I mean, what we’re really trying to do is, we want to make sure we define and develop the right solution for our clients. And that doesn’t mean getting rid of their team. You know, technically, we’re an outsourced accounting and CFO advisory service. It means evaluating their team layering in our resources, where it makes sense, providing financial leadership for their team, and inish. And building that plan through the assessment, and then executing against that plan. What we don’t want to do is just jump in and just start doing what I call in quotes doing accounting, because nobody really knows what that means or is and the bills start racking up and nobody knows what’s happening. So build that plan. Make sure you understand the environment, and then execute.

Damon Pistulka 21:06
Yeah. Great points. Great points.

Jason Kruger 21:09
I think, Tony and it are like the black holes in business, right? Like nobody understands what’s going on.

Damon Pistulka 21:15
Yeah, yeah. Well, I mean, in accounting, you understand what both of them really you, but you understand when they’re not working? Right. And that’s, that’s, that’s the point that, that everybody goes, oh, there’s a problem. It’s not working, when it’s working, no one even thinks about it. Right. And exactly, the thing that I really enjoy as, as I get to work with clients, and we’re working on, you know, improving their businesses and getting them running better and building value up to the up to the, the exit point is some of the clarity, and we’ll talk about that in a moment. Some of the clarity you can get by not just saying, Hey, we’re, we’re, we’re sending out our bills, like we should, but getting to the point to where you’re really going, Okay, what’s her? What, okay, what do we have in the zero to 30? Day bucket? What do we have in 30? To 60? Do we have any over that? And how does that look from it from last year, or last week or last month? And as we grow? How is that as a percentage of our overall sales? So we really can understand the the the kind of knowledge that gives us about, are we really running the, that part of our business better or not? Rather than going? Well, you know, we’ve got a million dollars outstanding. So that’s, that’s pretty good, right? Well, that million dollars can be all over the age, and, and it’s just so much fun, when you can really start to think about, okay, we’re a growing business, and we need cash. And if we can take five days out of our cash cycle, somehow, that would be a tremendous amount of money that we have in the bank now to be able to, to fund the growth or whatever we’re doing, that you talk about financial clarity, what are some of the things that and this is an example that I see all the time, and we love to do is is to around cash, and around just the clarity you get from really understanding your financial information? What are some of the things that you see your clients go on? Aha, moments after working with you a while or things that they say?

Jason Kruger 23:32
Yeah, so there’s, there’s the, the cash flow piece that you talked about? The you mentioned, is critical, right? So with certain professional service firms like ours, for example, it can be even, it can be even easier, right? So it can be as much as, hey, you know, why don’t you take a deposit upfront? Or why don’t you take a bigger deposit upfront? Or why don’t we we invoice twice a month instead of once a month? And why don’t we instead of making terms 30 days, why don’t we accept or process via ACH or credit card was shorter terms, and credit cards and others, you know, there’s a fee associated credit cards, so be careful, whereas prefer Ach, but it’s amazing the impact you can have on cash flow very quickly. And a lot of business owners think well, you know, my, my they feel hamstrung by their customers, right? And my customers will never do that. Well maybe start on new customers and see how they react. Right? And what I found out over time at the beginning 15 years ago when we started I was very scared to you know, we had 30 days 30 day terms everyone paid by cheque collections always collect and everything. And we’ve tidied that up and with how we’ve done that, with what we do now we are cashflow improved significantly and the category of our these services As companies can improve significantly, too, and you’ll realize that business owners, if they, if they value your service, and they have built you build trust with them up front, the terms are not as big of a deal as we may think they are. And they’re willing to do that. Because it may be it may be what’s, what’s the market is, right. So, you know, I think there’s opportunity to be a little bit more aggressive with terms of contract terms with customers for cash flow, that’s a big one. And then the other, the other piece is really having processes in place, so that you have an actual AR process, and you have an AP process. And you know, you know, instead of trying to figure out who’s gonna pay every single day, I always recommend just, first let’s make it once a week, unless we’re in dire cash situation, we’re trying to manage that daily or weekly or daily or hourly, right? Yeah, yeah, make it once a week. And let’s have a process on how we pay and who we pay and what that means. There’s opportunities to extend some vendors and others there’s not. And that creates some some cash flow, as well. On the AR side, there has to be a process on invoicing and then on collections. And that has to be reviewed on a consistent basis. And so when we, when he talked about the assessment, we also flowchart each of those processes out and say, Okay, here’s what you’re doing, here’s a best practice. With manufacturing businesses, it’s a little bit different, they’re typically buying the product, well in advance of when they actually receive the cash from their customer, right? So then it’s how do I tighten that up a little bit, based on the timing of when I buy what the terms are with my vendors, what the terms are, again, with my customers, and then most, what I would encourage if you don’t have a banking relationship, getting a banking relationship, whether you need it or not right now, because there’s a lot of value, even in higher interest rate times the leverage that for growth. So that’s those are critical from a cash perspective. From a financial reporting perspective, I think it comes down to one a budget in my mind is very important. A lot of people do a budget a we did a budget, throw on the floor on the shelf, or in the drawer, and then never look at it again, what budget really sets expectations and comparing against that budget. And you talked about trends, right? Like really understanding the trends of your business over time, based on what you thought it was going to be, is critical. And then you break it down into revenue and cost of goods sold and your margin we talked about before. And then all of your other costs your your SG and a or you’re selling general and administrative. And we’ve, we’ve talked a lot with a lot of clients, we applied this to ourself this year, as it relates to you know, we call it weather proofing your business, because interest rates are going up, there’s a lot of uncertainty in the market, there may be there’s potential for a recession if we’re not already in it. So what are you doing to prepare for that? And what does that mean? And there’s different ways that you can look at your business, from a revenue and cost of goods sold, and inventory perspective, cash flow, and also those other expenses, that can really make a big impact? And the answer isn’t just cut everything by 20%. You may want to you may want to invest in some areas of your business because you can take market share. But other areas, there’s opportunities for real costs.

Damon Pistulka 28:29
Yeah, that’s true. That’s true, because there’s weather proofing your business. I like that term. I like that term. Because it’s, it’s there there. I mean, because you look at across the board, there’s people that are having explosive growth right now. And there’s people that are really struggling, it just depends upon the industry and the kind of work they’re doing. That’s for sure. The The other thing I was wondering, and I’ve seen this, seen this used a fair amount. How much do you think business owners should be using more periodic financial reports than their monthly financials?

Jason Kruger 29:10
Yeah, I’d say it depends. I think it’s actually very important. So Well, I would say most companies should. The best structure and consistent structure I’ve seen is, number one, make sure you have a good monthly close process, you can produce monthly, a monthly financial package on a monthly basis, you know, in the earlier part of the month, right, so that’s another thing you asked about what are companies where do you usually see challenges, talk to companies and when they haven’t closed their books since for three or four months, um, three to four months behind, right? So they have no data, they have no relevant current information. Yeah, so that’s a critical get a we want to make sure we have a consistency and our monthly reporting package. We can then build that out. So it starts with your income state Men are p&l, your balance sheet, want to make sure you have visibility in your cash flows. But then you start digging deeper into other areas of your business. And really focusing on you know, breaking out revenue breaking out revenue by product line and your cost of goods sold on your margins and your other expenses and, and the trends and what’s happening with the trends of your business. Right. So to that has to be done or absolutely want to do that on a monthly basis. Now, throughout the month, as you mentioned, I think it’s critical to get ongoing reporting, so you can manage your business throughout the month, because if today is July one, I mean, I won’t get my July financials, in best case scenario, until August 5, or through 10th. And in most companies, it’s the later part of August. So now you have a 45 to 60 day window where you’re not seeing what’s going on, right. So that’s where flash reports are critical. Depending on your company revenue, you know, your system should be able to understand and, and provide you with daily snapshots or revenue reports. real time reporting can be critical. We use Microsoft Power BI for several of our clients, we set them up on dashboarding that plugs into their existing systems, and is able to get them the right reporting for our business way our people business. So every day, we’re looking at our utilization of our team, where they are against their forecasts and their goal hours. We’re looking at our revenue trend throughout the month, what’s happening, are we trending in the right direction to hit our forecast, because the last thing I want to do on July 30, is say, Oh, crap, you know, we’re not going to hit our forecast. And I can’t do anything about it. But if I know now, then I can move forward, I can say okay, you know, it looks like XYZ is happening. But there’s a big need for some, some additional support maybe on this client over here. Or, you know, so and so is on vacation, so we know that their time is going to pick up. And so we know that we can manage that that will be fine over here. That’s just service base. But in a high volume, retail or online business or manufacturing, I mean that those reports are critical to understand how you’re, you know, how you’re trending that month, so that you’re sure that you can hit the goals you hit. And also an understanding what your breakeven is right? Hey, you know what, we’re worth 30% below what I thought we were going to be we better, you know, really look at how we’re going to conserve cash, because in 30 to 60 days, we’re gonna have a cash crunch. Right? Yeah, let’s start that now. versus, you know, getting the financials 35 days from now and then saying, Oh, crap, we missed our forecast by 30%. Now, what do we do?

Damon Pistulka 33:10
Yeah, that’s a great point. Because if you’ve got one of those businesses where your cash cycle is something like that, we’re just say, I’ve got to pay for my product before I manufacture my product, and I ship my product, and then I have to wait, just say it’s 45 days, you could be 75 days out pretty easy. And that’s where the whole is going to be. And I think that really, that that that correlation between what we did today, and how it’s going to hit me out here, when the cash starts coming in, or that effect up or down is something people miss a lot because they don’t understand the cash

Jason Kruger 33:48
cycle. Exactly. And that’s why the accrual accounting is so critical. And I don’t want to bore the audience by getting too detailed into accounting. But accrual in its simplest form, it matches the revenue you earn that month with the cost of the product or service that you incurred. And that gives you an idea of what your your profitability was for that month, and where you’re trending. And so you say, oh, no, we actually weren’t profitable, or we were, you know, we missed our budget. And so we need now we can visually see this, or we need to make some decisions to right size this. If you’re on a cash basis, where you’re just recording revenue, whenever you book the sale, or whenever you invoice and you’re just paying, recording the cost when you buy the product, you may have recorded the cost over on the three months before. Yep, the current month. You know, maybe you’re not buying a lot and it may look like you’re very profitable. But the reality is, you know, you’re probably going to you know, you’re going to see a decline and a hit in your business in the next couple of months that you may not have seen otherwise.

Damon Pistulka 34:55
Yeah, that’s a great point because you get getting into the accrual based accounting. is a must. It’s it’s it because it gives you so much for like you. Were talking about today clarity in what you’re really doing. Right. So, man, so much good stuff so much good stuff. I’m going through my questions here because you you. You mentioned fraud, and you getting pulled in behind fraud? What are some of the most common types of fraud that you’re seeing today so that we if someone’s listening today they could go? Hmm, maybe I should check?

Jason Kruger 35:36
Yeah, absolutely. I think the most common is if, obviously, if you have one person that has too much control in the accounting department, one person that pays bills, one person that invoices one person that does payroll, and a lot of small businesses, I mean, that’s what they have, right? Because they can’t afford to hire five people in accounting, because there’s no creation of you know, and so they don’t have what you call segregation of duties, you don’t have the right controls in place. So if you have that, it’s, it’s critical to bring in somebody outside of accounting, in some capacity, provide a second level of review on what’s going out. Even even if it’s the owner, or the CEO, or someone from the executive team to be a part of that is critical. One thing you know, where I’ve seen the worst, significant fraud actually is, in a, in a manufacturing environment, where the one individual had significant control over that one individual had significant control over the accounting function, and everything that was entered into it, that person also had control over payroll, and other and other information. The accounting was not, nobody really understood the accounting and accounting was not important to the owner. And so what happens is, a lot of times inventory can become a black hole, right? The inventory balance on the within, within the company, you can massage the inventory balance to create whatever profitability want, if you’re not tracking inventory appropriately, or if you’re not doing account, you’re not trying. And so what ended up happening was this individual who subsequently actually was the was the issue was caught by a third party at a bank audit of all things. The individual actually ended up going to jail. But what she what the individual was doing was that she was taking she was submitting payroll, and she was claiming expense reimbursements through payroll to herself, of significant dollar amounts 2010 dot $10,000 A paper $20,000 a month. And, and the payroll, you know, looked the payroll journal, and she was getting paid her salary, the payroll company never questioned it, which they probably should have. Her salary never really changed. But she was getting these basically was tax free reimbursable expense reimbursements for with no support, no nothing, right. And because she controlled all the financials, she was able to put those costs, you know, in inventory or somewhere else that nobody could find, or nobody could see. And she kept going along. And she did that for a couple of years until ultimately, she got caught. And that is one thing I will say is it’s it’s, in most cases the individual gets caught. But the damage it did to the company before that was substantial.

Damon Pistulka 38:40
Yeah, yeah. And I’ve seen that as well. There’s, there’s, I’ve seen a couple times, you know, obviously, you see where the people get caught, there are very few times when you they do not figure out what happened. Yeah. So that’s, that’s good to know. But that is an interesting, that’s, that is an interesting and innovative way of doing it. But I guess there’s there’s a lot of different ways that people have done it, you know, I’ve seen more people will set up fake suppliers and and, you know, if you’re controlling the buying and the and the paying the supplier, she can do that. And then just if, you know, of course on the businesses that carry cash, that’s a whole different ball ball to deal with. But

Jason Kruger 39:27
I do know, I know some an individual who also went to jail for exactly what you just said, creating fake suppliers and vendors and so on. So yeah, yeah.

Damon Pistulka 39:39
Yeah. So what are some exciting things that you guys see that’s happening in terms of accounting now? What are some new developments in the systems, the technology the way people are doing things? It really is fun.

Jason Kruger 39:52
Yeah, it’s, um, we want to be technology forward. We want to embrace technology. The more efficiencies we can create in the, in the, what I call the commoditized accounting, which is reconciliations and data entry, the better because then we can focus on the good stuff. And so we’re really focused on doing that we have a lot of ways to create significant efficiencies and in that and make it cost effective. The Chad GPT thing that came out, I mean, that’s unbelievable, I think there’s going to, actually there’s going to be a lot of good stuff that can be leveraged, even in accounting, financial statement, trend analysis is one of them financial statement. So, you know, documentation of process documentation is another one. So there’s a lot of efficiencies that can be, can be had. With leveraging technology. We have, we tried to leverage technology, even for the simplest of companies, from our reporting perspective, and we have a, we leverage a custom reporting tool that syncs up with QuickBooks and NetSuite and other systems so that it spits out everything associated with their financial statements on an ongoing, you know, on a monthly basis. And then we will then go in and work through the, what I call the MDNA, or the, the summary, the the trend analysis I talked about, and hopefully and what we’re looking into is hopefully we can even get that, you know, pass that done more efficiently and more effectively as well so that we can continue to create these efficiencies for our clients. Because accounting is looked at as a commodity and a lot of ways. So how do we how do we, how do we continue to drive value? And how do we create continue to create efficiencies in the areas that are the most?

Damon Pistulka 41:51
Yeah, yeah. It’s awesome. It’s awesome talking to the Jason because it’s, it’s, you guys are are doing some cool stuff and, and really helping these businesses within places they don’t realize it yet. A lot a lot of times. So we’re, we’re at time time wrap up here. So if people want to get a hold of you get a hold us people that signature analytics, what’s the what’s the best way to do that?

Jason Kruger 42:20
Yeah, best way is our website signature analytics.com. Okay, real easy to learn a lot of information about us there. I love talking to business owners, I’m happy to talk to anyone, they want to email me. The email is Jay Krueger. At signature analytics.com. That’s KJKRUG are at Signature analytics.com. And anyone can call me 28582285643. I’m happy to talk to anyone. We have about 85 full time employees as part of our team right now. And we’re really looking to continue to add value in that market. In that small midsize business market. We work for companies all over the country. And if we can’t help you, we’re not going to try to fit a round peg in a square hole. And if I can, I can. If I can introduce you to somebody who can that then I want to do that too. But I just love talking to business owners and hearing what they’re going through and sharing any experience I can can provide.

Damon Pistulka 43:20
Awesome, Jason, thank you so much for stopping by. And I want to thank everyone for listening today. I was I was reticent on the comments and stuff. But thanks so much. Thanks for listening. Thanks for being here. And Jason, thanks so much for stopping by and and sharing some of your your knowledge and some of the things you’re seeing helping companies build better financial systems really get that financial clarity that that helps them run a better business today and ultimately to will help them create more valuable business as well into the future.

Jason Kruger 43:52
Yep, absolutely. Yeah. Thank

Damon Pistulka 43:55
you vet well hang out just for a minute. Then Jason, and we’ll talk I want to say we’re going to shut down for now, and we’ll be back

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