The Most Common Pitfall Small Business Owners Make in their Finances w/ Dan DeGolier | Small Business Quick Wins Podcast

In this episode, host Jay Schwedelson interviews Dan DeGolier, CEO and founder of Ascent CFO Solutions, to explore the critical role of having a financial expert in your small business. Dan shares invaluable insights on managing cash flow, securing lines of credit, and the benefits of engaging a fractional CFO.

Transcript

Small Business Quick Wins (00:00)

Welcome to Small Business Quick Wins presented by Thrive. This podcast is exclusively designed for small business leaders like you. Prepare to get invaluable insights from every episode equipped with actionable tips made for immediate implementation in your business. Tune in as we teach our firsthand lessons from fellow small business owners and thought leaders. I’m your host, Jay Schwedelson. Over last 25 years,

I’ve grown multiple small businesses that have generated over $300 million in revenue. Along the way, I’ve learned pitfalls to avoid and quick wins that can transform your business immediately. I’m excited to share it all. So if you’re ready to win on Main Street, let’s dig into this episode. We are back for Small Business Quick Wins presented by Thrive. And I’m excited today because today I’m going to learn stuff because I screw up this topic big time.

And we’re talking about our finances, doing our books, what it means to have a CFO involved in your business. And we got the right guy. We got Dan D. Gallier. I hope I didn’t butcher that because people butcher my name and it is what it is. Dan, I’m so sorry. Out of the gate. But who’s Dan?

Dan DeGolier (02:25)

Degolier is how you pronounce it, but you’re not too far off. It’s not uncommon, so no problem.

Small Business Quick Wins (02:31)

⁓ God. I practiced in my head too. didn’t go. the rest of this is going to go fantastic. So who is Dan? Let me tell you. Dan is the CEO and founder of Ascent CFO Solutions, and he has had every kind of finance role that you can imagine. So this is going to be great for small business owners to really learn the ins and outs of what it means to have somebody helping you with your finances. So Dan, welcome to the show.

Dan DeGolier (02:35)

I’m

Thanks so much for having me, Jay. I’m excited to be here.

Small Business Quick Wins (03:01)

So before we get into CFO stuff, how did Dan become Dan?

Dan DeGolier (03:07)

Yeah, thanks for asking. Started out my career as in a CPA firm doing audit and tax work, which was a good extension of my education. I enjoyed it, but it wasn’t something I wanted to spend my life doing. So I spent four years ⁓ as an auditor primarily, and then really focused on scaling companies, on working with entrepreneurs or working when early on, lot of my career was in technology companies, so software companies and other tech companies.

and was really excited to work with entrepreneurs who were ⁓ disrupting markets and doing interesting things in that regard. So ⁓ that was really my kind of early, early career.

Small Business Quick Wins (03:50)

So let me ask you this, before we get into like CFO stuff, I’m curious about something. You’ve worked with a lot of entrepreneurs, small businesses, all this stuff, so they bring you in. What is the most common pitfall that you see that is like the most easily correctable thing that small business owners are making? Like, well, you gotta do this first.

Dan DeGolier (04:11)

Yeah, I’m not sure it’s easy to correct, but I would say by far the most common thing that we’re seeing is companies, founders, ⁓ executives, ⁓ business owners who don’t really understand their cash flows. They don’t understand the risks to their cash flow. don’t understand that even if they’re growing rapidly, they still could have an issue with cash flow, with running out of cash and getting tight and sweating a payroll. So I think that a really important thing for

founders to pay attention to is their cash. Again, they might be growing, but you can grow too quickly. And if your receivables can’t keep up, then you can be in a tough position.

Small Business Quick Wins (04:52)

So, you I’m gonna go off script here for a little bit, because with your background, I’m just curious about what you think about all this. What is your take for a small business owner who’s like, listen, I wanna grow, I’m gonna go get ⁓ a line of credit, I’m gonna go get a loan because I just feel too tight. Is there a right time or a wrong time to do that? Is there certain businesses that should just never try to take on that type of debt?

Dan DeGolier (05:16)

think having a line of credit, depending upon the business and the situation that you’re in, it’s always easier to raise equity capital and to raise debt when you don’t need it. When you’re desperate for it, it’s going to be difficult. So getting a line of credit, whatever you have is collateral. ⁓ I encourage small business owners to have a line of credit.

at their disposal for that for a rainy day. Even if they never have to touch it, it’s not that expensive to just have it in place.

Small Business Quick Wins (05:47)

So let me just say that back you because I just learned something and something I’m gonna put in my brain. It is a bad idea to get a line of credit to fix problems that you have. You really should be looking at a line of credit when you got things going in the right direction and you wanna use it to kind of put oil on the fire. Is that like fair statement?

Dan DeGolier (06:08)

That’s not exactly the way I described it, but that’s not untrue. I think it definitely can help with growth ⁓ as equity capital can. ⁓ But I think when things are going smoothly and you’re feeling like your cash is going okay, ⁓ I think it’s still not a bad idea. Have that facility in place. You don’t have to draw on it, right? You can have a line of credit. Doesn’t mean you’re necessarily drawing on it and taking money down and paying interest on it.

But just knowing that you have it available can be a really good disciplined way to sleep better at

Small Business Quick Wins (06:42)

Okay, I got you. So, let’s get into this idea of fractional CFO or in general, a lot of small business owners, right, I got my HVAC company, I got seven people that work for me, I don’t even have a finance officer, I have some random person that might do my taxes, I’m kind of back at the napkin doing stuff. Should all small businesses have a human being that is responsible for finances, whether in their company,

or outside of their company? that what we should be doing?

Dan DeGolier (07:16)

I would say the vast majority of people need to have somebody looking at their finances. And for a very small company, maybe it’s just a really qualified bookkeeper who’s handling collections and payables and receivables and payroll. ⁓ But a company that has ⁓ a little more scale, you definitely want to have somebody who’s an experienced person, whether it’s an employee part-time or full-time or whether it’s a fractional resource like the folks that we have at our team who can.

Give them the discipline and again, come back to cash flow, coming back to forecasting, understanding the metrics of your business, understanding what are the drivers for your business, especially if you’re trying to grow.

Small Business Quick Wins (07:57)

So the older that I get and the longer I’ve had my businesses, the more I like contractors. I know this is gonna sound terrible to everybody that works for me, but I like having people that are not like full-time on my payroll, I’m getting part of their brain, they’re doing a great job, and if things go south, I don’t have like an HR thing, I just say goodbye and I move on. So until this dialogue, I never really even thought about, and I should have, a fractional CFO. How?

How common is that and is that like a growing trend?

Dan DeGolier (08:30)

Yeah, we’re seeing not it’s not just CFO. mean, certainly, I think we were looking at some data the other day. And I was on a webinar with some other fractionals. One was HR, one was marketing. And we looked at it. So fractional CFO is a little more mature than than marketing and HR and operations and revenue. But it’s we’re definitely seeing growth. We think we look at it as being we can be extremely cost effective.

A company like ours, we’ve got 40 people on our team, right? So we have CFOs, we have controllers, accounting managers, financial analysts, senior accountants. ⁓ if you hire a firm like ours, if you’ve got a special project, you’re gonna do a system conversion, you’re gonna upgrade your accounting and your ERP system, or you have, ⁓ you wanna look at some R &D tax credits, or there’s different things you might wanna do. We can bring in specialists to help with certain things. And if you’re hiring a fractional CFO, you’re just paying,

for the CFO is only going to be spending their hours at truly strategic financial areas. They’re going to be forecasting, doing financial planning analysis. They’re going to perhaps help with fundraising or helping with the negotiation around debt or leases or customer contracts. are to be areas in that. And then, controller is going to be the ones doing the publishing the financials, reviewing the accounting. So you’ve got a tiered situation.

you know, I’ve heard it referred to as buy by the bite, right? You’re not, you’re not paying for a full-time resource or even a 20 hour a week resource. You’re paying for just for what you need. And I think that is, that has a lot of advantages. And that’s, and again, you know, it’s not just finance, but I’ve seen, the way that I look at it is if you’re, if you’re building a, someone starting a new company, the core founders, the team are oftentimes somebody who builds something or provides something and somebody who sells. And so,

you know, the maker and the seller core team. But around that, can put HR around that. And it’s a fractional basis. You can put marketing around that. You can put some operational efficiency people around that. And then of course, finance, finance and accounting is a very logical area where you can put a really skilled person on your team, but you’re not having to pay their full-time salary. You’re paying for what you need.

Small Business Quick Wins (10:45)

So I think it’s amazing. mean, you really are talking about almost like the business of the business, whatever the need is. And I’m curious when somebody makes the leap and says, okay, I’m going to call a firm like yours, or I’m going to look to bring on some other expertise in all the different areas you described. A lot of small business owners, I know that sounds terrible, can be like bullheaded, right? They know better, they built it, everybody’s wrong but them.

But when they make that phone call to you all, have they crossed that bridge that, okay, I need help? Or is part of your role like psychological where you’re kind of shepherding them along and say, listen, if you want your business to like do anything and grow, you’re going to have to be open minded to this.

Dan DeGolier (11:29)

happens in a couple ways. Sometimes it is when, oh shit, I’m sweating payroll or we made a major error and we didn’t bill our clients enough and now some time has passed. Something has happened where we’re like, man, we’ve kind of messed up and we need things fixed or we’re trying to get a bank loan and our accounting is a mess and our bankers looking at our financials and saying, what is this? This doesn’t make any sense to me.

That’s one area that they can sometimes tire us. Other ones is clients where they’ve realized, okay, now in their trajectory, they’ve really figured out product market fit and they’re starting to see an opportunity just to scale the company. Or they’ve raised some outside capital and they have some new board members who have different reporting requirements. so they’ve identified the way they’ve been doing things no longer scales. And as they’re looking to scale that company, the same old, same old no longer works.

So they need to level up their process, level up their systems, level up their reporting. And again, their forecasting and their visibility into the health of the company and to the metrics of what’s going to drive the growth of the company.

Small Business Quick Wins (12:41)

So when you talk about leveling up, since you have eyeballs into so many different businesses, I’m just curious, I actually want to feel like, is my business doing? How messy is it most often when you’re like, okay, bring us on board, show us what you got, and sometimes like, well, we don’t really keep our books that well, and we got this much money in the bank, we got this many bills, and that’s kind of like what we know? Or do you see companies really, I got this forecasting and this, that way?

Like what do you see when you open up everything?

Dan DeGolier (13:11)

It’s all over the board. I I’ve seen both ends of the spectrum and everything in between. yeah, there’s certainly some companies that are very sophisticated and they’ve got good systems and processes in place. ⁓ But they need to make some incremental improvements. they want to understand better their pipeline and ⁓ what the risks are to that pipeline and hitting their revenue forecasts. And other companies that are ⁓

kind of a complete mess. You may come in there and say, okay, so we’re going to start by ⁓ looking at your historical transactions and we’re probably going to restate several periods of financials because things aren’t really classified well. I mentioned the chart of accounts. That’s an area where like, what are the real, you’ve got your tax return is one thing, right? You’ve got to have certain things classified for the IRS and your tax return. But that’s not how you run your business. You need to, I think you break down the functional areas of your business. break down the

What are the actual discretionary spending items versus those fixed items? So you break it down in a very logical order. So oftentimes when we come in with a new client on board, we have a discrete phase we call the assessment phase. And we’ll oftentimes spend 20 to 40 hours over the course of two or three months where we will take a deep dive into that company. We’re going to understand the capitalization table. We’re going to understand the customer contracts or understand their supplier or vendor contracts.

look at their inventory systems if they’re a product company. We’re going to look at the way that they’re forecasting, the way that all of their processes are done within the accounting and finance department, all their reporting and come up with a really comprehensive view of the company. And then we will take that and make a recommendation as to what improvements we should make and how we should staff that beyond the CFO. Again, we have a full stack of people from CFO down to…

down to accountant level. ⁓ we’ll take a very holistic view at that and try to create an understanding their budgets too, that, you know, depending on what that company can afford to spend in their finance and accounting department, we want to be cost effective and we want to fit within what’s reasonable for them.

Small Business Quick Wins (15:24)

You know, I think that the conversation today is really important for small business owners to hear. It’s not even the particulars. It’s the fact that you should have somebody that’s thinking the way that you’re laying things out on your behalf, thinking that way, because you’re in the business as a business owner of doing what you got to do, and you got to let other people do what they know best or else your business is going to either not grow or could potentially fail.

⁓ I think it’s really important for people to hear about bringing this out of house potentially. All right, before we wrap up, how does everybody get involved in Dan’s world? How do they follow you, consume your content? Where do they find you? Tell us everything.

Dan DeGolier (16:06)

Sure.

⁓ So the best place to ⁓ see what we’re doing and to reach out to us is our website, ascentcfo.com. That’s A-S-C-E-N-T, C-F-O dot com. And we’re very active on LinkedIn ⁓ as well. So you can encourage you to follow us on LinkedIn. Same thing, just search for Ascent CFO Solutions and you’ll find us there. We publish all of our.

interesting content there and we also put the longer form things on our website on our resources tab on our website.

Small Business Quick Wins (16:39)

Amazing. All right, so we’re gonna put all this in the show notes so you can find all of Dan’s stuff, send him all of your accounting materials, just unsolicited, just send him everything. Out of the gate. They’re like, wait a what?

Dan DeGolier (16:51)

Along

with the wire wire transfer. Yeah.

Small Business Quick Wins (16:56)

Exactly, all your passwords. No, this has been great. Everybody follow Dan on LinkedIn for sure and appreciate you being here,

Dan DeGolier (17:04)

Yeah, my pleasure. Really great to meet you, Jay. Thanks for reaching out.

Small Business Quick Wins (17:08)

All right, take it easy. Take care.

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