What to Know About Cash Flow: Denise Grove

Denise Groves, CPA  is a financial consultant and strategist, and the founder of CFO Support Inc. With a background that includes positions at  KPMG and Fortune 500 companies, Denise is an Advanced Certified Profit First professional. Her engaging style helps clients implement the cash flow philosophy of Mike Michalowicz’ book, Profit First. She is an Auburn College of Business alumnus and a member of Auburn's Women's Philanthropy Board Executive Committee.

Transcript

Narrator:

Welcome to the Harbert College of Business podcast with your hosts Sarah Gascon and Currie Dyess. Denise Groves is a CPA financial consultant professional speaker, and the founder of CFO Support Inc. She helps professionals understand the complex ideas behind the cashflow philosophy of the book Profit First. She's a graduate of the Harbert College of Business School of Accountancy,

Sarah Gascon:

Denise War Eagle and welcome to the show. War Eagle. War Eagle. I'm

Denise Grove:

Delighted to be here.

Sarah:

Yeah, we're so happy to have you. It's great to have you. So how did you start in finance and what drew you to accounting and leadership?

Denise Grove:

Well, I started in accounting because when I decided to come to Auburn, daddy told me I was either majoring in accounting or engineering because those were fields where he knew I could get a job. So derivatives didn't come too easy to me, so accounting was just natural and so that's how I started my accounting and finance career was Daddy told me.

Currie Dyess:

Alright. And you've been in the workforce for a while. What are some of the biggest changes you have seen in the accounting and finance industry and where do you think it's headed?

Denise Grove:

The thing that has been amazing over the course of my career is the way that technologies and automations have made our work go from being very routine and mundane to being automated, which frees up our time to be able to be better business advisors, whether it be for a client or as an internal CFO or controller or finance professional. The fact that the computers and the technology take a lot of the routine out and gives us faster numbers, faster information, we're able to give our clients, be it internal, external, good data and good information to make quick business decisions. A lot of accounting tends to look backwards or as I say in the rear view mirror as we're looking at historical results. But in order for our field to make a difference in not only businesses but nonprofits as well as in individual's futures and financial successes, we've got to be looking in the windshield and the fact that a lot of the historical information can now be captured and calculated for us to base intelligent decisions upon. We're able to spend more time looking into the future, which is where the change happens.

Sarah:

Yeah. So what would you say are the top two financial reasons that may cause businesses to fail?

Denise Grove:

Well, there's about five top ones that statistically have proved out over the course of my career. The sad thing is two out of the five have to do with money, one being poor, management of the cash or the cashflow or the money. And the second one is not having enough money or said in finance terms, not having enough capital to be able to grow the business and support the business, especially until sales are built up.

Currie:

So Denise, you're doing something a little bit different now. It's not quite accounting. Talk to us about where you are now and why it's so important for your clients.

Denise Grove:

I'm delighted to. I'm a degreed accountant from Auburn. Went to work with one of the big four public accounting firms. KPMG spent eight years in auditing, including getting a chance to rotate through the executive office in Manhattan, working on firm-wide accounting policies. What I realized as an auditor was that I was just coming in double checking what another CPA or accounting team had put together. It was great because it was like running a project, but I really wanted to be the one making the decisions and helping to grow the businesses. So when I left public accounting, I became a corporate controller and worked in fp and a as well as in projects and special groups after working in financial reporting and management. And what I realized is that big publicly traded companies like the ones I had the pleasure of working with, we were very driven by generally accepted accounting principles or gap, which is really what the SEC monitors performance against.

I had great opportunities to get involved with some startup companies early in my career and what I realized with them was it's great to have good accrual or gap basis financial statements, which usually came out after the month closed, but the truth was what we really needed to know was what was the cash balance? Cash is king is a saying that we've heard since I guess almost the beginning of time or the beginning of cash, but it's really so true and in a small to medium sized business, having adequate cash flows and well cash flow management is a difference of keeping the doors open or going bankrupt. So the size companies privately held that I work with now cash is something that I focus on many times more so than the traditional accrual gap basis financials. So I have worked on several different techniques to help my small business owner have better clarity around their money, so they always have plenty of cash.

Currie:

Do you just handle all of it for 'em or are you in there just teaching them how to do everything? How does it work?

Denise Grove:

My practice now is one of a coach or a consultant. My ideal clients have bookkeeping teams, someone that takes care of invoicing, the clients or customers collecting the money, making sure that the vendor bills are paid as well as most importantly that the employee's payroll is run. I go in and help really coach the insight, especially to the leadership team on what's going on with the cash and with the money and in particular use certain techniques and to make it quickly visible, I'm a Profit First professional, which is a cashflow management technique based on Mike Mcow, it's bestselling book called Profit First, change Your Business from a Cash Eating Monster into a moneymaking machine. And with that technique as well as on the personal side, some of the techniques I've learned by being a Dave Ramsey master personal financial coach, it's a really simple technique. You use business accounts, multiple business accounts set up for the purpose of the funds and it helps segregate the money so clearly and it works personally as well as in businesses, especially ones that are of a size that they don't have a whole separate treasury management group. A Fortune 500 company has an entire team that spend all day long managing the cash, but on smaller organizations that would be defined as a small to medium sized business by the SBD Cs or the SBA, they don't have teams of treasury management people.

Sarah:

So with the finances and accounting of businesses, it could be obviously very intense and stressful at certain times. How do you manage that?

Denise Grove:

Having a really strong plan, number one, and most people cringe at the word budget, and so I actually call it a spending plan because it feels better than budget. Having good boundaries and knowing what you can afford to spend as well as intentionally saving. A lot of businesses do not save for emergencies or have what sometimes is called a sinking fund. It is critical, especially with the ebbs and flows in the economy, which now the economy is of great concern to people worldwide, not just here in America, but you really do need a plan and your best strategy is having your own funds in any event, a lot of my clients want to grow and growth costs money, and so having separated out funds outside of the normal operating costs to be able to fund the growth is a key way that people can grow.

The big stress that I see in a lot of my clients is if they've got a big customer that they have to wait on their payment and so they're sometimes sweating collecting that receivable from that customer in order to be able to make payroll on Friday, and I can't tell you the amount of financial stress that causes on the business owners and the CFO or the decision makers thinking, are we going to get that money? It works so much nicer and so much less stress when you have six months worth of operating expenses saved, so you're not sweating that one particular payment from a customer because when you look into it, stress is one of the huge causes of health issues. Stress affects your heart, your blood pressure causes migraine headache, and I'm not a medical professional, but I certainly know that stress, especially stressing over money and lack of sleep because of money is not good for your health.

Currie:

I can attest to that, Denise. So whenever you are talking about growth, right? Do you work with a marketing team and sales team to create a strategy and you're like you bring the financial knowledge or do they bring you the plan and you're like, Hey, this is how much you need in reserves in order to execute

Denise Grove:

Most startups or growth situations like wanting to launch say a new product line is an example. It is a collaborative effort. Number one, you need the sales or the marketing team to know who's the customer and do the market research, how many customers do we have and what's the point? The sales price, what price would they pay? You've got to your sales and your marketing team in say you want to create a new AI type program to solve, I don't know, food waste in the world and think that's going to be a big seller to maybe the local restaurant owners that would like to take their food that's not gone bad yet, but they've got more than they need and funnel it out so that it helps to feed the hungry. You are going to need someone that knows how to program and is that something that's going to be programmable?

So you kind of need to bring all the factors together and then work with someone like myself who helps put the money to those needs. Programmers are not inexpensive. Good sales and marketing teams are not inexpensive and by pulling all that information together, there's a lot of different programs today thankfully because when I first started in corporate, we did everything on spreadsheets trying to do these financial projections of how much is this going to cost, how long is it going to be before we break even, what's the potential sales volumes? Now we've got great softwares available on the cloud, which means no matter if you're working with someone in the Philippines in Auburn up here in Newnan, Georgia, you can actually share the same information and make intelligent projections of how much it's going to cost.

Sarah:

What type of businesses do you currently work with?

Denise Grove:

I work with service businesses. I know a lot about inventory and inventory type businesses, but my preference is service businesses because honestly, cost accounting just wasn't my favorite class.

Sarah:

No offense, right?

Denise Grove:

No offense. Cost accounting has a great place in accounting and it's needed especially in heavy inventory as well as very predominant in the e-commerce markets of today. It's just not my favorite thing.

Sarah:

So as a follow-up, what are some of the challenges you're experiencing right now these businesses are experiencing right now?

Denise Grove:

My clients in particular are really experiencing a squeeze and what I'm going to call margin or profit margin. Their costs are increasing faster than their prices or their professional fee rates are growing. Just today I was on a call with one of my coaching clients and the cost of healthcare premiums to cover her employee team, which is not a huge team, but it's enough that she wants to provide great healthcare. The premiums are going up sometimes 10 or 12%. It's a very unpredictable factor and very hard to budget for, and when you look at an overall service business spend, there's usually some spend on rent, but their personnel including the benefits is usually 40 or for 50% of what they spend out of their revenue. So it's very, very difficult when all of the costs inside the business are going up, but you're not able to increase your prices. I know I'm not a specialist in inventory, but I hear and read a lot about what's going on with the tariffs and the concerns over the supplies. So what I see right now and continuing indefinitely is quite a squeeze on what we can sell things for versus how much our overheads or our internal operating expenses are. But of course when you're operating expenses increase, that decreases your profit and the money that's left for the owner.

Currie:

Is that across the board or are you seeing different sectors or industries where that is hitting a little bit harder?

Denise Grove:

Because I work with a lot of companies that are a million dollars and under in revenue. I see them all experiencing it. I don't see it in a particular industry, but I suspect without doing any digging and research, ones that do carry inventory or have to purchase inventory are probably feeling the squeeze more.

Sarah:

I'd like to go back to a comment you made about automation. So there's a rise of automation, AI and it's obviously changing regulations everywhere. How do you advise young financial professionals to remain aware of the changes and stay up to date and relevant with what is happening in the landscape now?

Denise Grove:

That's a really good question. I'm in a mastermind group on how to use AI in our profession. We meet every other week. Last week, that was one of the questions from one of the participants. I think that LinkedIn and the LinkedIn articles on AI are one of the best ways to get resources and just stay on top of what's changing. There's new automations daily. I go to a annual conference called Scaling New Heights that Joe Woodard here in the metro Atlanta area host each year, last June, I cannot tell you how many new accounting solutions there were on his trade floor that didn't even exist the year before. All of them wanting to do better financial reporting, do the accounting faster, use AI to recognize recurring transactions so that a human's not having to code them every transaction. And what happens is that means the information you get from the reports is better and you get to spend your analysis on what's the trend here?

What is costing more money? What do we need to look at our sales off of a target? So we know that if sales hit a certain number, then we've got to start cutting spending so to stay. I think LinkedIn is one of the best sources to see what's new in ai. I believe employers are looking for candidates that are not only technically aware and smart because employers are going to train you on the technology or the AI that you want, they want to use in their entities, but they're also looking for people with good people skills because the one thing that the computer AI a software package cannot do is shake your hand. So having good personal skills, which basically boil down to do the other people you're working with, trust you. So that side, even with all the technology is still critical in business in any organization.

Currie:

What are some financial metrics, tools and books that they really need to have a firm grasp on if they cannot afford to hire somebody like yourself?

Denise Grove:

Yeah, that's a good question. If you're a startup, the first suggestion I have is do look for resources and including their, even in Auburn, we do have the incubator out on Duval Street look for opportunities to partner with more experienced business owners that have already been down that path. I'm a huge fan of all of Mike Michalowicz's books, but of course in particular his book Profit First so that you set yourself up managing the cash right out of the gate in the best way you can. Another tool that I really like that's very low cost of entry is an online product called Live plan. It's great because you can actually play with the what ifs as well as see what type of expenses that you might have in a particular industry. They have example business plans out on their website by about 20 different industries, and a lot of times going into an idea you really don't know what you need and what it's going to cost, and so having some great examples like that.

They're also at Auburn, we have the Small Business development Center, which is part of the small business association that the government supports. Even if you're not in Auburn, they have those small business development centers all across the United States as well as mentors with score who can help mentor you on a particular area. You fill your deficit in your training. Listening to podcast is also a great way. There's several great business podcasts that talk about different industries in different areas, and like I said, if you don't have a LinkedIn profile yet and aren't watching the articles on LinkedIn, I would encourage you to do so. One of the things about social media is employers, and I'm not an HR specialist, but I do know that employers did look at your social media, so starting a LinkedIn profile even in college, including the activities you're in, the classes you're taking and going ahead and getting a presence out there and have a really good headshot on your profile, that would go a long way to get traction getting into the market as well as starting a business. A lot of people who don't have capital to start a business will a lot of times bring in what's called an angel investor to help get them started and having a good business plan with some good projections and a great idea. I'm not saying you have to go on Shark Tank, but there's a lot of good tips there on Shark Tank and there are angel investors that like to help with startups, but they usually have niches and industries they're in

Sarah:

With the angel investors or investors in general, how often are you communicating with them in your field? Right now,

Denise Grove:

Most of the angel investors communicate directly with the business owners, and it is really up to the angel investor how often they want feedback and reports. Some are going to be more involved than others, and that would be an excellent question, Sarah to ask when you are considering bringing in an outside investor,

Currie:

Denise, I think that if everybody was great with money, you probably wouldn't have a job. What are some financial tools or financial guidelines that people should live by? Not just business owners, of course them, but in general,

Denise Grove:

The biggest change that has happened since the end of World War II is America as a population has transitioned from being members who saved to members who spend. You mentioned my speaking career, my keynote speech is encouraging us all to return to a saving habit instead of a spending habit. Some studies report up to two thirds of Americans right now report their living paycheck to paycheck, and it doesn't matter how big or small the check is, there's still fewer and fewer Americans tending to save. Whether you want to start a business or have a great financial life, the key is consistently saving, and by that I mean saving a little bit. Every time you have a cash inflow, start with 5% or 10%, segregate that into a bank that you cannot see on your checking account, banking app,

So it's a little bit out of sight, out of mind, and consistently before you ever see the money in your checking account, moving even say 10% into a savings account, the big key factor is making a consistent habit of making those transfers. Don't wait until you get a big bonus to put the big bonus in the account. It's very similar to the concept called dollar cost averaging and investing where you put the same amount of money every month, every week into a particular stock by doing the dollar cost averaging method over time, you're not trying to beat the market as to when you buy and sell. Savings is a lot the same way, a little bit consistently saved, goes a lot further. It's a financial marathon. The interesting thing I see a lot about is people talk a lot about passive income and passive income streams being such a great financial habit, and I agree that the irony is not very many people say a money market or a savings account paying a strong percent of interest, which you can get on bankrate.com and find out what the average US interest rates are, paying for savings accounts that is passive income saving and letting it grow with interest.

Currie:

I remember reading, I think it's called Let My People Go Surfing by Yvonne Chenard, and he's the founder of Patagonia, right? So it's an apparel company and in the book he says The biggest problem with people is that they are consumers and not owners, and it kind of sounds like the same thing that you're talking about, right?

Denise Grove:

It is exactly the same thing. We have become a society of spenders versus savers, and I've found that trend very interesting because I was raised by parents that were savers saved a little bit every day or every week depending on what the payroll cycles were. I remember when I was 10 years old mother taking me up to the bank and opening my first savings account, and I'll be the first to tell you I wasn't too crazy about that idea. I assure you there was something in the toy store I wanted with my birthday money. Mama started me on this habit, and then once I figured out money grew with that interest, they were actually giving me money on top of my money at age 10. That was a little mind boggling. It feels like a very conservative habit, but having savings is the best way to be your own bank.

Currie:

Just out of curiosity, really quick before we wrap up, do you ever read anything from the Austrian School of Economics like Ludwig von MiSiS or Frederick Baat or Milton Fried Friedman?

Denise Grove:

I have not, but I need to add those to my long reading list. I have to admit I'm reading more American tips and techniques. One of my favorite books again in American is The Psychology of Money, and if you've never listened to that on Audible or read it, it's a great takeaway. And also same thing, I enjoy Mike Mcow, it's books. Profit First is the book about how to manage the business money with multiple bank accounts, but hot off the press. And I happen to have a signed preliminary copy and I've already snuck into it. His new book comes out in January. It's called Money Habits, and it's about how do you manage the personal money, especially if you're a business owner. So he'll be posting a lot more about that. And as it gets closer to coming hot off the press, keeping it simple is the key thing and making a habit.

Sarah:

Denise, it's been so great to chat with you today. Thank you so much for your time. How can our listeners keep up with you and even contact you if they have additional questions?

Denise Grove:

I would love for everyone to follow me and connect with me on LinkedIn. My profile is DW Grove on the LinkedIn app, and I'm listed as Denise w Grove, C-P-A-C-G-M-A. And don't ask me tax questions. I'm a recovering CPA. I do all business coaching now and speaking of money, and I have some fabulous tax friends and I'm glad we have them. And of course you can reach out to me. My website is CFO support.com. And if you would like to have two chapter of profit first, if you're thinking about your entrepreneurial journey, email me@infoatcfo-support.com and in the subject just say First two chapters of Profit First, and I'll be happy to share those.

Currie:

You'll be getting an email from me.

Sarah:

Thank you so much for your time, Denise. War Eagle.

Currie:

It's so great. War Eagle!

Denise Grove:

War Eagle. It's been my pleasure. And save more money. Keep more money.

Narrator:

Harbert. Inspiring business.