What are the key components to a good business dashboard?



In this episode we talk to Ryan Roch of Intrepidium consulting who is a partner in a CPA led bookeeping firm helping small businesses get their books in order for accounting and tax preparation. We had viewers ask what are some good key metrics to have on your dashboard so you can identify the health of your business at a glance and get a good pulse on the business.


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Justin Lam 0:05 You want to find your tribe of raving fans. I'm gonna help you do it. This is the digging deep podcast with Three Sixty Media where we help you do better business. Justin Lam 0:16 Hey everybody, this is Justin Lam and you're watching episode. Oh, what are we at now? See I just recorded seven. So this would be eight. This would be episode eight of digging deeper. We help business owners, build better businesses and do better business and today I am joined by a bookkeeper with a team who has been in the business for the last two years helping small businesses, build their financial statements, help them with their bookkeeping, and he's a visual ERP specialist. Their team islocated on the web at www.intrepidium.com Please make sure you check the link if you're on YouTube, so that you can contact with them. And Ryan Roch. Welcome to the podcast. Thank you for coming today. Ryan Roch 1:11 Thank you for having me. Justin Lam 1:13 Amazing. So, visual ERP, what is that? Ryan Roch 1:20 Visual is the name of software. It's owned by infor global solutions. and ERP is enterprise resource planning. So it's a software package designed to help businesses manage their manufacturing activities. Justin Lam 1:37 Hmm, fantastic. Excellent. So that's got to be quite a quite a specialized niche. Ryan Roch 1:45 It is Yeah, my business partner and I are both certified with infor global solutions to provide consulting or general support throughout North America. We're a bit unique in that we're both designated accountants as well as certified visual DRP specialists. So the combination sort of makes our services a little bit unique and different from from the rest. Justin Lam 2:13 Amazing. And I also noticed that you're doing fractional cmo work. And so for those people who don't know what a CMO stands for. **ACTUALLY CFO Ryan Roch 2:22 it's actually fractional CFO Yeah, no problem. Fractional just means sort of part time.And CFO is your chief financial officer. What we do is we support small to midsize businesses, become an extension of their team, provide them with access of senior financial management, leadership, knowledge direction, at a fraction of the cost that it would that it would otherwise be for somebody full time. Justin Lam 2:56 Amazing and booking services pretty straightforward. Ryan Roch 3:00 Yeah, our bookkeeping is pretty straightforward. We're a bit unique in that not all bookkeeping firms are CPA LED. So it doesn't need an accountant is reviewing the work, and also providing fees, feedback and guidance to our bookkeeping team. And as well can, you know, really define and present the information in in a way that's logical to the client, and we can explain where the numbers are coming from. Justin Lam 3:38 I think See, that's a very useful thing. I think a lot of people don't really know the numbers, especially the Small Business route. And actually one of the reasons why you are here today. So I had a direct message from a couple of people who are in small business and they struggle about understanding the metrics of you know how their business is doing and they're using QuickBooks or they're using another CRM software, and they're thinking their invoices, they kind of know their expenses. But one of the things that they're really trying to understand or try to grasp is what makes a good dashboard? Like, how are they really understanding what the health of their business looks like? What kind of key things can they put onto this dashboard that they could look at on a day to day basis? And know that, you know, there's either trouble ahead, or there's trouble in the pipeline, you know, the overall health of the business, and that's why, you know, I've reached out to you to see if you'd be able to shed some light on some of that stuff. Ryan Roch 4:41 Yeah, absolutely. It's a very good question. And it's, it's one that a lot of small business owners you know, they lack the detailed reporting, and more importantly reporting that means something to them that will tell them something useful. So there are have various different KPIs or ways to measure how well your business is doing not only today, but also to help you forecast in the future and prepare for some ups and downs as best you can. One of the main areas that small businesses and midsize businesses or businesses in general for the most part, is cashflow. So it's really important to have a solid understanding and system in place to manage your cash, understand when those shortages are going to come up and be able to plan for them, as well as knowing when you've got excess cash to invest into activities that are going to generate additional revenue. Justin Lam 5:48 Okay, and they and so that's an interesting point that you make there. I think a lot of small business owners, at least in the art community were like photographers or videographers. Maybe I'm not sure if it's rampant in any other industry, but it seems that a lot of small business owners kind of spend the money before they kind of kind of actually have it in the bank. And, and I think my conversations in the last few days with a few different people have led me to this is where, you know, they've gone out to buy equipment, even though they couldn't really quite afford it in the hopes and or in the anticipation that businesses coming in or they're booking and they've got a deposit and they're, they're paying in advance now. In my world, I mean, I built a lot of our business on that where, you know, we did have equipment leases and stuff to build it rapidly. But I mean, for us, for me, personally, I tried to mitigate a lot of that by, you know, try not to overspend and making sure that it was still tangible. Or, or at least manageable in some sense, under under high stress like we are in now. What is your suggestion for somebody to be able to look at that particular metric and cash flow and to determine whether that should be allocated to say like an emergency fund versus investing into their business? Ryan Roch 7:23 Yeah, no, that's a great point. So, a couple of areas that cash flow management requires diligent sort of reporting and making sure that things are accurate. So first, firstly, let's talk about cash inflow. It's really important to understand that the dollar that came into your bank account today might have to last you an extended period of time. So we have the accounting rules and and are based on an accrual system which means for example, If we incur a cost or we invoice a client today, we've accrued and we've recorded the earned revenue and the the amount of money that we're expecting to receive, hence earned from the client or customer. The real issue is, is that just because you earned it today doesn't mean that it's going to hit your bank account today. So we need to plan for the timing difference between when you earn that revenue and when the clients gonna pay. So it might seem very nice if all of a sudden you get quite a few deposits or retainers or all of a sudden you collect a great amount of money from invoices that have been outstanding for the last 30 days. But you've had a quiet period between that 30 days and today so therefore you're probably not going to expect to receive very much in the next 30 days. So it's important not to think we've got a lump sum money today. What are we going to do with that? What's more important is how long does that have to last us before we collect again, and what and then defining what our absolute most critical investments are. So if you're a photographer, most definitely you're going to want to invest in cameras, and what other types of equipment it's going to help you generate revenue. Small business owners to start generally don't have a lot of cash. So every bit that comes in, you pay yourself the very bare minimum and you try to build a business. That's normal. But what we try to help our clients to is forecast out, not saying don't spend it not saying don't grow. super important, and it's the passion. That's the why we do what we do as small business owners, but we help them understand when they can spend, how much they can spend, and what areas they should spend in first. So on the cash side, that's pretty important. When are we going to collect versus when we earned. Also on the expense side, it's the same concept. You know, you can't skip payroll, you have to pay the government, there are certain things that come before all the other expenses that you might start incurring. So knowing how much money you can spend, knowing when you're going to collect it, knowing when you have to pay it out, all comes together as one big picture. So we help identify that now. In addition to collecting cash, we look at our receivables. So another important KPI for small business owners is let's look at the time it takes us to collect the money from the time we invoice the client. So days outstanding AR or AR turnover. We want to keep that as short as we can And on the flip side on your accounts payable, we want to extend our terms as long as we can. Right? So we collect faster and we pay later. We use our money for our own internal growth for as long as we can before we, we pay off our vendors or our team. Sometimes we can work with vendors and and figure out, you know, how we can work together and maximize that time. And with our customers, you kind of make whether or not you offer a discount for quick payment or maybe it's due upon receipt and you don't offer terms. whatever suits your business most. Justin Lam 11:46 Okay. And so, I think and I don't know if it's in your experience, but you know, at least the really young entrepreneurs people are just entering the work into the industry. A lot of times they're just picking off numbers in terms of what they're charging people solely based on their local competition. And, you know, how how dangerous could that be for for an individual who maybe doesn't build the businesses understanding the numbers that really go behind it and you know, just kind of picking a number willy nilly because that's what they feel like you know, the market serve. In your experience as a bookkeeper Do you find people are under pricing and then not being able to save remit their taxes or not being able to, you know, uphold a business or you can draw revenue from it, because they're just too busy, you know, keeping everything afloat, and they can't draw their own salary. Ryan Roch 12:53 Yeah, no, great point. So, when we all first start out, it's a bit of a It's very unknown. So there's a lot of anxiety and perhaps times of discomfort, but it's pushing outside of your, your comfort zone. So it's very easy to, let's say price your service or product at, let's say a very competitive or under undercut your competitive competitors so that you get into the marketplace. And at the very beginning, it seems like it works because you don't have a lot to pay for. You don't have a lot of overhead you. Basically, make sure you can cover the cost of your product or pay yourself a little bit out of the surface and you're good to go. Where the difficulty comes in is as you grow and you have to scale your business to accommodate that growth. And you've underpriced your services or product dramatically compared to the competitor, now you have to get back up to a level where you can afford your overhead and you can afford your your people you can afford those expenses that didn't exist before. So now you're in a battle of volume more than you were before. And the important, the key component here is, is now it's going to be very difficult for you to get your prices up to standard market value quickly. Because you have existing customers, you kind of have sort of a base and an expectation. So you might be able to get your new customers on to a new pricing very quickly. But to bring your existing customers up to that level might take several months, depending on on what the gap is, what the spread is between your price and the market value or the value you need to start charging to cover those overhead costs. So our clients quite Honestly, they often look at us and ask us for guidance, how much does it cost for me to run my business? What is my overhead? What is my cash or burn rate? How much cash Do I need every day to survive? You know, back to somewhat basic stuff. But when you first start out if you can sort of think about those, or think about, you know, in six months or a year, what is the information that will be useful to me? And where do I plan on being to try to put some, some thought into what that might cost? And it'll help you better prepare, you know, for that growth period, right up front, instead of blindly just eagerly getting into the market and not really having a plan to find those types of areas of business. Yeah, that would be my recommendation. Justin Lam 15:57 100% agree. I think a lot of the people that You know, we coach in the marketing space. A lot of them, when they, when they come ask us, you know, there there is that point where, you know, it's born out of passion, then you know, when it's born out of passion, you don't really think about the money up front. And then what happens is, from a marketing perspective, it's similar in a sense where you say, it'll take a few months and sometimes even more than that, because what happens is, is people are working and charging, you know, X amount of dollars, and now having to jump exponentially, to accommodate the growth and to make sure that running a viable business means that the people who expected that rate and refer people at that tier are no longer your referral partners and you drop a huge amount and it's really prevalent in our industry as photographers. There, they price it low to get them started and then they wonder when they do Um, you know, two x three x their pricing, why the referrals aren't coming back in and there's a part of it is the market will will take you at what you say you're worth. But the problem is is if they've expected that you were worth, you know $1,000 in dollars in your $3,000 the people that were referring you at $1,000 might not feel comfortable referring you at $3,000. And now you have the conundrum is Yes. Are you making more and is it worth it? And are you going to lose too much clientele and not be able to keep your hand up water? Ryan Roch 17:37 it It's a challenging balancing act for sure. And every time you get into either significant price increases or or product service changes, you're just in a different market. So everything that you knew and you've learnt to that point is super valuable. But you kind of have to rethink it. And you have to redesign how you approach it because it is, like you said it's a different, it's a different market, same service, same product crafts, but just a different target market. Justin Lam 18:15 So then those take that back to the dashboard. Okay, so yeah, but the revenue is is one thing, and we're watching our expenses. But, you know, from a tax perspective, the the expenses are not exactly, you know, 100% right off. And so I think a lot of people misunderstand the the write off, is there a way that they can kind of get a good ballpark what their real expenses are, so they don't understand what that spread really looks like. Because like, say, for instance, meal and entertainment, that's a 50%. You know, write off, if they're buying capital assets that depreciating depending on on the type of capital assets, whether they're electronic or whether they're hard to have different rates of depreciation. No, all of those things combined. So when a person is bringing this money in and they don't really sure exactly what that cash flow looks like, So, is there a quick and dirty way that they can just kind of get a ballpark? So they're at least in the right right field? Ryan Roch 19:18 Yeah, that's a great point. So our corporate taxes and our personal taxes, I just want to put a disclaimer out there that I'm not a tax specialist. So he's, I speak in broad terms and, and generalize, you know, the concepts. But yeah, your taxes are obviously a cash outflow. And it's important to forecast for those expenses as well. So, you know, PST is a good example you collect PST but you don't get anything bad for, for paying it or dealing With the administrative, and there's a small commission that the provincial government will kick back to you maxes out at $198 per claim. But essentially, you know, you need to understand what revenue revenue streams are PST applicable what aren't, and know that that money that you collect is not available to spend. So you have to forecast out, you have to put that aside. It's an expenditure, it must be paid. The same with GST. The corporate tax is a little bit trickier. Like you had mentioned, thecapital assets, assets that you purchase, they need to meet the definition of an asset. There's some rules around it. But essentially, it's a piece of equipment that you purchase today, but it's going to help you generate revenue over an extended period of time, generally referred to as useful life for accounting, and it's There are different terms for different county tax. But essentially, the CRA tells you what category or what class those assets belong in. And they'll also tell you how you go about calculating the expense portion to match the revenue. So that can be a little bit tricky. A really, for the most part, I'd like to set my clients up so that their accounting, amortization or rates are the same as tax so when it comes to preparing or, or in this case, anticipating your your corporate tax will be it's much easier could because the to match, where in reality you can have a different rate for accounting and different rate for tax, which then you have to figure out the difference. So there are ways there's schedules schedule one of your corporate tax return you can use you can fill out the main categories It'll spit out a value. I've used spreadsheets in the past to help me through that. And I can certainly share that information if anybody's interested. So yeah, there are ways that we can help our clients determine how much they need to save or the expectation of their taxes and prepare for that as part of that part of their cash flow forecast. Justin Lam 22:26 Hmm, let's but, you know, for for other people, if that was way over your head, make sure that you're connecting with Ryan at www.intrepidium.com. You know, for us here at the studio. I know one of the ways that my dashboard works is you know, I track the revenue in minus all the taxes that I've owed or pay. And then, of that, I also take off a certain percentage, in my case, a 20% off The top that gets allocated to, you know, everything that is its core services. And for me, I took that the health of that account as an indicator of what's ahead and what's coming. And if that account is unhealthy, I know that there's something wrong with the pricing and or the expenditures or Cost of Goods being produced if if it's, if it's going down, or it's staying level, it generally means that there's something wrong in the pipeline. It's something that I have to kind of manage. So on my dashboard, that's what it kind of looks like. Um, you know, in terms of forecasting, I mean, nobody could have forecasted Covid19, wiping out entire, you know, revenue streams for four people. In that case, you know, as people are going to come back online, you know, maybe hopefully to Maybe three months from now, you know, what are some things that they're going to have to be understanding of in their business? And then, of course, the economy, economic life cycle, as they sort of tried to lick their wounds and get back into it, you know, what would be some of your recommendations? Ryan Roch 24:19 Well, I think it's particularly important right now when we talk about cash flow, or we talk about the expectations in the future. And you're absolutely right. Nobody could have predicted this, or, I should say, more specifically, totally prepared for something like this. And, and so it's really important, I think, a lesson to take out of this. If you are a small business owner, midsize business owner or business owner period, and you find yourself in a position where you are lost. You don't exactly know where your business is at financially, your cash flow is a bit of a hmm not too sure what's going on there. That's this is the lesson to learn to get your stuff in order and, and pay a professional to help you. I always tell my clients when the goings good that's when you really need to focus on your controls and your reporting ability. Because when things go sideways, you need to be reactive immediately. Right? And certainly in the in the current situation, we find that you know, people just stop paying everybody stop spending money. So guess what, it felt really good yesterday because I've got a good healthy accounts receivable. Guess what, you're not going to see that money? Because Because your customers have no idea what to expect, right? So we're going to have to ride this out. I think Clearly, but I would say don't expect to start collecting your receivables right away. Right? You're gonna have to prepare, in my opinion for some cash reserves to get yourself going again, if you have payroll, it's going to be particularly important that you've got enough money set aside to cover that first payroll, your government, remittances those types of things. Yeah, there's going to be some deferrals. But, you know, be prepared to slug it out and, and be patient with your vendors and be patient with your customers because we're all in this together. And if you're able to build really good relationships through the very hard times and maintain them, you've got a team that's got your back, right. So if you can, if you can just keep that in mind, I think you'll be you'll have a better reputation as a business owner. And he'll come out of it a lot stronger financially. And if you kind of come down hard on everybody, because every you just, there's nothing there. Justin Lam 27:13 Yeah, that's true, I think. I think the hardest part will be, you know, a lot of people are deferring their payments. You know, and I don't know if it really hits them until until the Piper, you know, comes comes knocking at the door to collect because that deferral means that it's not that they don't owe, it's that they're just pushing it aside, and that, you know, Mount some of those payments. And so, from a cash flow perspective, what used to be, you know, let's just say you had an overhead of $10,000 because you deferred it three or six months. Now, your overhead is maybe what $12,000 that's $2,000 more than you had, plus all the The backlog of receivables. If you had any before, you know this, this all went down. Because some people were purely transactional by nature, like, like come in, get done and leave and pay. But when you try to do payroll, that that's a really big challenge. And I don't know what the government is going to put in place in order to help ease that load. But I just I'd imagine that, given the conversations that I've had, in the last little while, I think there's some people who are in for a real doozy. When that comes back online. Ryan Roch 28:37 It's true, we're going to be strapped both in our businesses and personally for cash for the most part, right? Everybody is sort of in the same scenario, we don't know how, how long we have to have a reserve for and all of these deferrals sound really good. But yeah, you're absolutely right. We're going to have to start ditional Pretty big checks here to get caught up and do what we can through this quiet period, whether we have to change our business model or you know, just start offering things differently or in a different format to keep things going. But just be prepared that that's going to hit. And if you're one of the lucky ones, maybe you're going to be able to collect a bit from your customers at the same time to help out. On that note, I would encourage everybody to reach out to their customers and reach out to their vendors. And keep that communication open. put a plan together, for for that, that magical day when things go go back to I think our new normal, I don't think we'll see it the way it ever has been before. But put a plan together. Start building that cash flow forecast and understand what to expect When you do open your doors again, know who you have to pay first know the minimum amount that they are going to be able to accept in order for their their them to keep their doors open and provide you with service going forward. Restaurants are going to be hugely hit food, food providers produce meat, seafood. You know, the restaurant industry has just come out of their slow period. So the restaurants have accumulated, probably some substantial accounts payable balances, they've deferred paying a little bit on their vendors and everyone sort of expects that seasonal, cyclical event to happen. And here we just got hit with a devastating business closure right at the moment where the the restaurants start to pick up and catch up on those things. Accounts payables. And so it's going to be particularly interesting and important to reach out to those vendors that provide you with your food. And if you're a restaurant owner, and let them know that you know that they're there, you know that they you know, you need each other going forward and put a plan together and start building that cash flow forecast. More important now than ever. Justin Lam 31:27 Absolutely. Do you think there any other things that should be on a daily dashboard for a person to look at it all? Ryan Roch 31:35 Yeah, so depending on what industry you're in, I just want to talk a little bit about inventory. Many businesses deal with inventory and inventory management is, well, it's challenge. It's so annoying. It's one of those things where you you do need to get it right. And once you do, and things move smoothly. It's not that big of a deal. So I like to provide my clients with indicators on their dashboards that allow them to understand how long it takes them from the time that they bring a set a toy in as inventory to the time that they sell that toy to the customer. So that's your inventory turnover days outstanding inventory. That's particularly important because for every item that's in inventory, you're holding up your ability to spend that money on other areas of the business. So you don't want a lot of your capital your cash to be sitting on shelves, hoping to sell right hoping to turn into a sale and collection of money, some profit. Justin Lam 32:48 Yeah, especially collecting interest on that. Ryan Roch 32:51 Absolutely. Right. So, so that's important. The other one, you know, how quickly do we to be collect or receive How, how many days does it take us to pay for our pair vendors? So that's a bit of a balancing act. And then we can look at different areas, more sophisticated areas, such as how well you're using your company's capital resources, or, you know, different little specific KPIs for your particular business or scenario. They're all you can custom, custom build those dashboards, but those would be the basics. You know, your accounts receivable payable, your inventory, really all important stuff. Then you can also look at, if you're a little bit of a larger business, and you have a few employees, you could look at your retention. How often How Long Does somebody stay employed with us? How much does it cost to train somebody Right, so you can start looking at daily sort of our weekly, maybe even monthly and and you can match your employee contribution to the amount of revenue that's generated in that same period. So we can start looking at maybe sales dollars per employee per hour for breaking down different divisions of your business so you can see where you're more profitable, where you're not where you might want to continue offering services or doing business and maybe you want to close down or where should you spend your your excess cash or resources for growth purposes to maximize your gross profit. So they all tie in together. And then what we were able to do is not only create them, but we can monitor them for doing the bookkeeping as is, you know, part have our focus or service focus, then we make sure those KPIs are correct. And as CPAs we're able to provide our clients with an in depth understanding and commentary around what those numbers are saying about their business and activities. Justin Lam 35:18 Okay, so what if a person doesn't, you know, have a bookkeeper doesn't think that they're ready for a bookkeeper? You know, when is the time where they're going to go from say an Excel spreadsheet and then maybe starting to look at as a bookkeeping, you know, software, you know, what are good indicators in the in the entrepreneurs lifecycle, you know, do they do they go from the shoebox and spreadsheets and paper to you know, an online or offline accounting software. Ryan Roch 36:02 That's a bit tricky because my my gut reaction is to say, don't start with spreadsheets. But I know that that's not always practical. I would point out that that a lot of the software programs now are very reasonably priced and available on a cloud suite sort of platform, which makes it very reasonable. But I would say, after you're, you're finished your first year of business, you know, and things are are looking good and certainly after your second year of business, I mean, if your sole proprietor right, you're not incorporated in your, you've got a fairly basic business structure. Then I would say, you know, your two or three, you probably want to to get something set up. If you're business owner that invoices quite frequently, then I would say as soon as possible because you want that consistency you want to be able to really track payments, you want to be prepared for CRA audit if it comes. So, there are there are definitely are advantages of starting off proper. And we we sit down with business owners that that might not be sure on what direction to go or when when to kind of start some of those projects. So we complimentary we sit down complimentary hour or so. And we we define what that looks like and help them guide them in the next steps. Sometimes it involves our services and sometimes it doesn't. Justin Lam 37:48 Hmm. Well, I would highly recommend anybody who's listening to this podcast to reach out to the bookkeeper. To get yourself set up initially. I know that when I first started, I didn't Do that. And as Ryan can attest, it's a pretty big mess in the back end, when you're when bookkeeper after bookkeeper after accountant tries to ad hoc and try to fix things, but not necessarily start you off on the right foot. And had that happened two decades ago. For me, that would have been a much easier transition and management of stuff instead of trying to fix it and repair it after the fact. So save yourself the heartache and the money. Do it well, up front. It would be the biggest recommendation I could I could tell you about getting your books in order to yourself. Ryan Roch 38:44 Yeah, I completely agree. You know, there's a cycle with bookkeepers and people's experience. Same with accountants, and a lot of ways. There are many out there and we all seem to be experts. Right and, and what's important is that to get your books in, in working order and cleaned up and to maintain it, it's going to take some investment. If you're not willing to learn, do it yourself, that's okay. But do invest in proper help and make sure that they're the bookkeeper that you, you find is has enough amount of experience exposure to different industries, and preferably is supervised by somebody with the qualifications to do so. And it'll save you in the long run, for sure. Justin Lam 39:45 Perfect. Well, thanks so much for joining me today. Really appreciate it. Before you go, I really like to ask our guests about a resource that you that you would recommend to people. It doesn't have to Be part of your industry, but just something that you find valuable that other people might might like to look into or peruse at their, at their leisure. Ryan Roch 40:12 Yeah, so it's a bit a bit of a nerdy response perhaps. But a lot of the work that I do as a professional requires research and you want to find a reliable source. So, in times like today now, and even when you're considering some of the rules for for how to transact or how to deal with your your numbers, I go to the government of Canada's website, Canada Revenue agency's very helpful. I also will call their help line and I will ask questions, and if you are ever needing on a provincial or federal level, to get something in writing Ask for either a bulletin or for them to issue something formally. And then you have it as support if you're ever audited down the road, or Abby's bdcs, another good good resource if you're looking at financing and how to grow your business at reasonable lending rates. Justin Lam 41:22 Amazing. Well, thank you so much for your time, really appreciate it. And for those watching, if you find any value in this, please subscribe, like our page really helps with the algorithm and helps us you know, attract and bring more professionals to talk about business things that that are behind the curtains so to speak. You really want to try to move the needle for 1000 business owners and if I if I've moved the needle anyway, yeah, please join the community and participate. Thank you again, Ryan, and we will hopefully have you on a podcast another time. Ryan Roch 41:57 Thank you for having me.