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From Data Rails, this is FP &A Today.
Welcome to FP &A Today.
I'm your host, Glenn Hopper.
Today's guest is Luke Mulcahy, founder of Mulcahy Consulting Group and a seasoned finance strategist with over 15 years of experience across Australia and the US.
Luke's career has spanned large enterprises like Sherwin Williams and Coates, but today he focuses on something different, bringing high impact FP &A and CFO strategy to small businesses that need it most. From utilities and manufacturing to McDonald's global tech vendors, Luke has built and led finance teams, implemented systems, and driven real profitability.
Now, through his consulting firm, he blends bookkeeping, controllership, and CFO advisory into a single offering, helping small and mid -sized businesses fix cash flow, streamline operations, and scale smarter.
Today, we'll talk about the lessons he's he's learned, the mistakes he's helped cleaned up, and how FP &A looks different but just as critical at the small business level.
Luke, welcome to the show.
Thanks, Glenn. I appreciate having me on.
Yeah, I gotta tell you, your experience and background are near and dear to my heart because while I didn't go the fractional CFO route early, I started in a larger organization doing finance and was just had a team and had all the great data.
And it was kind of the glory days of my FP &A career.
And then my first CFO role was at a relatively young startup where I came in and it was me and a controller, in air quotes.
It was more of just a glorified bookkeeper at that point.
And having to, it was a small startup business, but they had no FP &A, no...
Really, I mean, the tax accountant was doing their books, and I'm sure you're very familiar with that.
Absolutely. I mean, you see that everywhere.
Yeah. A lot of people are getting getting their CPAs to run their books, they're not really providing the insights they need to run their businesses.
And that's a huge opportunity small business owners miss.
Yeah, it's funny. Like when your tax accountant is doing your books every year, they tell you spend all your cash right now, you know, to maximize your tax position.
And then as an FD &A person, you're like, no, no, we have big bills due in Q1.
What are you doing?
We get the tax advantage.
We've got to pay payroll next week.
So, calm down. out.
So I guess let's start with your journey.
And that is a huge switch. So you actually had a couple of iterations.
So what pulled you away from initially traditional accounting and then toward management accounting and ultimately FP &A?
Yeah. I mean, I started out like probably most people in FP &A, probably a lot of your listeners in taxation and financial accounting.
That's where I started out just doing small business tax returns, individual tax returns and then moving into month end close processes.
It was for a utility company in the town where I grew up in Canberra in Australia.
At that point in time, I was finishing off my university and it was a job, but I found it a very boring job.
It was very repetitive, doing tax returns over and over again for small businesses.
It was rinse and repeat.
That's when I went and shifted out of tax and got to financial accounting and very quickly it dawned on me, this is kind of the same.
It's just month end close, the same journals, the same balance sheet reconciliations every month.
And it just became too repetitive for me.
I wasn't getting a lot of career satisfaction at that point.
And then an opportunity presented itself with Factual AGL, which was the utility company I was working with to move into management accounting.
And what we were doing there was forecasting energy consumption in order to drive the plans for that company.
And that was fascinating to me, looking at air conditioner units driving consumption in certain months and heating in other months and how televisions and computer this is 20 odd years ago where we're increasing the consumption of electricity we're not even talking numbers we're talking kilowatts there but then you're translating that into numbers and you're really seeing the value that you're adding and that was my first taste of management accounting and fpna from there it was you know I relocated to sydney worked my way up through different fpna roles until i was in quite a senior position there
And then one thing led to another until I was able to move over to the United States and continue my career over there.
I'm not going to bore our listeners.
I've told this story a million times, but I love that you immediately went to Electrical because that first CFO gig where I didn't have much of a staff, we eventually got PE investors in there.
And when it started, you know, there was no FP &A.
And before the PE came in, I was trying to leverage the business and bring on debt financing.
And so I had to build out FP &A and building out the model.
So this business was car wash business.
And the biggest expenses were, you know, you had chemicals and then you had utilities.
And with water consumption, it was pretty straight line.
But one of the coolest first models I built was when I took historical electric data.
And because I didn't realize, you know, peak volume, you're at a different rate if you're, you know, if you're kind of existing at a certain level.
So it was, well, I won't say it's first, but it was one of one of the first problems I had to solve on my own when I didn't have a full team around me was figuring out how to model.
Okay, we know on the weekends, we do more business.
We know during these peak hours, we do more business.
So trying to forecast electrical consumption across multiple units based on a bill that wasn't standard. So I feel like that's probably I mean, I'm sure when you're watching kilowatt hours and all that, you were probably doing some similar modeling.
But I feel like it because it wasn't just a straight line that it really like flexed your modeling skills.
Was that kind of your experience as well?
Yeah, absolutely. I mean, fortunately, when I when I moved into that in Actuagel, I had a good mentor that was very experienced and he had done a lot of the building of the models.
And so it was more understanding these models that he had built, which were quite sophisticated in forecasting electricity consumption, but just getting in there and getting into the detail and understanding that I was able to take those skills onto other places because I'd learned how he had done it.
Essentially, that is FP &A.
It's finding out what the drivers are of your business and then how to drive them, how to move them where you want them to be.
Yeah, it was a lot more interesting than processing in a month's journals and balance sheet recommendations.
Yeah. Yeah. So, I think I know your answer already because I'm already, I'm like feeling your journey here because I made a transition, but I think you actually did it even more smartly because if you're looking for variety and something new, going from that big company to a small company where you're wearing a lot of hats and there's not a lot of data and you're kind of reinventing things, it's a pretty fun mental challenge.
And even more so, I mean, when you're doing that for multiple companies, I can imagine.
But the original question is, you know, working at companies like we mentioned, Sherwin -Williams and Coates, and you were doing the, you know, enterprise level business thing.
And now you're running your own firm serving these small businesses.
What was the moment that you kind of, you knew you wanted to make that shift and, you know, hang out a shingle and do it yourself?
Yeah, to go out on my own.
I mean, to me, it was probably more the time in our modern history.
street was during the pandemic when the world completely changed we were all locked at home working from home office up until that point i was opposed to remote work in the finance area and i was vocal about that in the in the workplace as a lot of people wanted to you know we want to do three -day weeks and i was like how can i make sure you're working you know i was managing large teams i thought it wasn't going to work but that that period forced us all to change and the first few months were rocky.
But as time went on, I got really good at it.
And as we drew towards the end of that pandemic era and we started coming back into the office and I was like, all right, we're back in here five days a week.
I just thought, why are we here?
And I was one of the leaders of the organization thinking, why am I here?
And I know that people here don't want to be here.
I don't want to be here.
I was doing a lot better work when I was working remotely.
And I mean, I took it to the extreme.
I didn't just work in my apartment in Chicago.
I went down to Mexico and was working by the beach. And I took absolute, I really took advantage of the situation, but I found my output in that time was better.
And I realized that the model needs to change.
And that's why I set out to do this on my own and create an environment where accounts and FP &A professionals can work on their own terms when they want to work, where they want to work, as long as they're achieving what they need to do and supporting clients, then I don't care when they work.
So that's sort of what drove me to start my own business.
the focus on small business it was probably more organic those are the clients that you typically pick up you're not going to as a new as a new consulting firm sign Microsoft to be your first client you've got to start somewhere and so starting with small businesses got me exposed to a bunch of different types of clients and different problems and I really I really enjoyed it what you were saying there about how you come in and you have to learn new things I love that I love that even though I'm an accountant and I will know books better than any business owner that I go and speak with.
But often when I sit down with them, it's, oh, I actually know marketing better than you know marketing.
I actually know supply chain better than you know marketing.
I know IT better than you know IT.
And it's just a matter of working in all those organizations, having to support all of those different departments that you understand all those aspects of business that a small business owner doesn't.
They know how to run their business.
They know their product or their service that they're delivering, but they don't know all of at these other aspects.
That to me is fascinating because I can come in and really show value to them.
When you come into a really large organization, it does have processes.
It has rigid processes usually set up.
You have to follow, you have to use the systems that they've got in place.
You have to follow the way that they've done things for the last 20 years.
And every time you want to make a change, you've usually got 20 or 30 opponents that are arguing against that change and it's slow.
It's really hard to demonstrate individual value, I find, in a large enterprise but when you're with a small company the praise i get from my clients it's amazing it's life -changing to them when they have somebody in there with that kind of experience looking at their books and giving them insights it's rewarding for me and so so once i started i was like there is no looking back now at this point i can't imagine going back into into that other world yeah and it's i mean to your point what so like 98 of the businesses in the world are small businesses you know it's that's where so your total addressable
market is huge with that But, you know, if you think and I talk to consulting clients about this all the time, they start a business not because they're excited about doing the back office stuff and about, you know, they start a business not because they're good marketers, but they have an idea and something they're passionate about and they're pursuing and everything else just seems like a burden.
Or even if it doesn't seem like a burden, someone who starts a drywall business or a dry cleaner or whatever, a small business, they don't typically have, you're not, you know, churning out MBAs that are going in and starting these kind of businesses.
And, you know, you want them and they need to be focused on the core business itself.
And then, so if you can have someone who has, especially with your large company experience and you bring that to bear and then your education and background and everything else you've done, I could see that being.
so you come in as you know a fractional CFO but you really get a chance to go into so many other areas just to bring your experience to bear and I could see that being a great value.
Yeah definitely I mean you come in more it's call it a fractional CFO but it you you really do become their business coach in all aspects of their business when you're talking these guys like they don't have heads of departments sorting them maybe they have like a sales a sales director or something like that but but that's usually the extent when you're talking you know companies in that five to 10 million range, they don't have directors of marketing and directors of human resources and things like that.
And so I'm able to pull on my own experience because I've worked with all of those areas and you know about all that.
I'm not going to go out and say I'm a HR professional, but I know enough to be dangerous.
Same with marketing, same with all of those areas.
And these guys, they don't have anything.
I mean, you said 98%, I'd say that's probably accurate.
I don't know that stat that they are, but 98 % of businesses are small businesses.
And I take a guess that 90 -95 % of those have zero FP &A.
They have no idea around their strategy.
They are working payroll to payroll, invoicing.
They have no insights and the wins that you can give them really quickly off the bat are phenomenal.
I'm really drawn to small businesses because I don't know about you and maybe some of your listeners, anyone who's FP &A or accountants.
I don't know if this resonates with you, but when I walk around in my day, you interact with maybe two or three businesses during the day making purchases or whatever but you know you see 20 30 40 different businesses and forever i walk around and i walk into businesses and go oh there's a missed opportunity there they should be doing this or whatever i annoy my wife because i always talk about it but i mean i mean it runs through my veins and seeing so many business owners and you see them there and owner operator like little locations you don't see their financials but you go i don't think this place
is making a lot of money but then you go it's in a prime real estate location and why have you got so much inventory sitting on your shelves or or what why is this menu at this little coffee shop got 85 different items i mean you must be wasting so much product like little things like that that would have huge implications for those businesses and they would benefit from but no one's telling them that they're sitting there running their business on their own scratching their head why they're struggling to pay payroll or why they're having issues with their cash flow and so the the big wins you
can get there with the little businesses it's great.
It's rewarding for me.
That's what we're all here to do.
How can you have the biggest impact?
I think that's where I have the biggest impact on those little guys.
Yeah. And you had the experience in being in larger companies.
Like you said, you had mentors in places.
And so you're coming in and you have this big company mindset or understanding.
So you're trying to help professionalize their FP &A and accounting practice and all that.
that. But there is a difference though, because they don't have as much data.
They don't have as many locations and it's just not as complex. Like the number of jail entries in a month are a fraction of what you'd see in a big company.
So I'm wondering with the data you have and the size of the businesses, what are some of the biggest differences in how FP &A operates or should operate for these small businesses versus what you were doing at larger enterprises?
Yeah, look, I think fundamentally, I think FP &A should be the same in both.
You're trying to get to the same outcome if you're working for a large enterprise or you're working for a small small business i mean you want to understand the data get insights from that data and help that to drive strategy and and to drive smart financial decisions so that i don't think is different at all it's all around how you execute as you said the data is going to be more limited in a in a small organization than a large large organization however in large organizations from my experiences experiences the data is often terrible you have so much data that it hasn't been maintained well
and so as an fpna professional and i've stepped into large organizations that didn't really have an fpna structure at all and you're going the first thing you do is show me your data you look at it before i can tell you anything we need to clean all this data and that can take you six months in large organizations more even and so it's slower to get to that point with a small business maybe their data is as a smaller data set maybe it's also very messy i actually find it's usually a bit cleaner because I haven't had as many hands in there but the cleanup efforts are usually faster and you work
with what you have most pointers say like if it's a hospitality and they're using Toast there's enough information in there to run good FP &A out of it they're purely just using a QuickBooks file maybe they've got some some customer segmentation or some product segmentation that's set up there through class codes or whatever and you can start pulling data that way but it's using what you have to draw conclusions around their business and I always So the first place you've always got to start is with their revenue and how do you want to segment their revenue?
And does their data provide that?
And if not, what have we got to change for that business owner in order for it to provide that?
But every business is different.
Maybe it makes sense to see it by customer, maybe by product, maybe by time of day or whatever makes the most sense for that business.
Define that, then figure out how to get the data.
That's step one. Step two is then get the costs associated with that same segmentation.
And that's where it usually gets tricky.
And that's where the data always gets messy and trying to line your cogs up to your product, revenue or your customer to really just see where it is.
And then that drives their strategy is where to invest. It's like these products you're making a lot of money on, these ones you're losing money on.
Well, that shifts your product strategy.
These customers here you're losing money on, these ones you're making a lot of money on.
How about we cut those bottom ones and we focus on these top guys and support them better?
Just those slight little changes, that's huge for a small business owner.
And they often aren't looking at that.
And so that's the start of FP &A.
And as you go from there, you build more things on, you talk to them and go, go look if we can get better insights and get more granular information we can make smarter decisions but you've got to start somewhere they usually haven't started and that's that's a big win that you get straight off the bat with small businesses they're always limited by resources and the systems that they can use and if you compare to enterprise they're not able to have a full -time analyst most small businesses enterprises will have teams of analysts working on things and fixing data and so you are limited by what you
have but you can always draw a conclusion and understand what is driving the profitability of their business.
So yeah, same thing to answer your question.
I think it's the same thing.
It's just how you do it and the level of detail you get to.
You're not going to get down to skew profitability with a small business, but you're probably going to be able to get product category or customer category and then start driving planning off that.
How familiar is this situation?
You come into a business and you open up a chart of accounts and you say, oh, you're using the default chart of accounts that came with QuickBooks and you have one revenue account that's just called income and for whatever reason.
To be honest, I actually find the opposite.
They usually aren't using the standard chart of accounts and they've created their own chart of accounts and created their own lines, whether they've done it or prior accounts and keepers have done it.
You're usually way too granular for their chart of accounts.
Oh, yeah. I know exactly what you're talking about.
Yeah. I've seen IT expenses and they have different GL lines for every single vendor and you've got GL line.
You've got 50 different IT ones for different vendors.
You know the transactions also have a vendor attached to them.
So you can just roll your data up by vendor.
You don't need to be posting them into different GL lines.
It's like, oh, cool.
So let's just get rid of 49 of your expense accounts there.
We'll just have one called IT expenses.
The craziest one I saw, I had a client that they were doing like $30 million in revenue.
And they had, I swear, a different revenue account for every client.
I mean, it was bonkers, but that was how they were reporting on clients.
They were trying to get, you know, per client profitability and all that, but man, that was a mess.
Yeah, yeah, that's how they do it.
I mean, in all fairness, it's the right, they've got the right idea.
They know what they're doing.
Those kind of people, they're thinking FP &A.
They're thinking, I need to be able to see this by customer, but again, it's the execution.
It doesn't usually work if you try to do it through your chart of accounts.
You can get some information out of your chart of accounts, but I don't usually use just the chart for FP &A analysis.
the other one i see all the time is okay so you're doing cash accounting but for some reason you decided to call this a prepay and you did an accrual here but we're doing cash accounting but you didn't accrue this or you know and forget about you know tracking capital that's it halfway the one foot into accrual account yeah yeah yeah yeah the one of the my first clients i had with something like that was we were trying to get them ready for an audit and it was we had to go back and unwind all these.
It just seemed like they would randomly decide what to accrue and what not to and what to call a prepaid and what not to.
Yeah, yeah, that's it.
What gets capitalized, what doesn't.
It's just all, yeah.
Yeah, it's funny. I could tell war stories about this all day, but I guess we should keep the show moving.
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So, you know, when we talked before the show, we were talking about how you help, your goal really is to help transform back -end finance operations and lead the businesses to profit through that.
So what is that, you know, walk me through, what does that actually look like in practice for a small business?
Yeah, I mean, usually, like I say, well, when I first come in and first meet a client, the first thing, I obviously want to look at their financials and see what it looks like off the bat and that usually I'll usually identify that there's significant things that need to be cleaned up often in their actual accounting files just in order to I'll look at it and go I have no idea how your five bakeries are doing because I have no visibility onto each individual five of the five bakeries it's all lumped into one number we need to do some work on your on your data in order to understand how your business
is performing and so there's always a cleanup that we have to do it at the beginning and that often involves involves working with point of sale systems, integrations, things like that, to just get the data flowing so that we're in there.
And so that's the first step of transforming their back -end operations is to try to get, we know where we are today, and then it's about planning for the future.
Small businesses don't have the resources to be putting extra people on to run manual processes.
And so what we do is we identify the best tech stack for them.
I'm not not an advocate for any specific software.
We find what will work for that client based on what kind of a business they're running.
And so we do that. We set it all up.
A lot of those tools out there as well.
They're great, but typically they're not plug and play.
And often I'll see a business and we've got this great new system in place.
I've set it up and I look at it and this is not adding you any value right now.
I mean, it hasn't been set up correctly.
I mean, you've got a supply chain tool there and you're using it for just for sales forecasting.
I think that's probably probably not the right tool that you're using there.
And people do that.
I mean, obviously, sales people come, they may have a problem, and then they're convinced to get on board with a new system.
And so we come in and really help business owners in building out what that solution is for them.
And so that's kind of what we do to begin with.
And then in parallel, I have a team that does that.
But in parallel, I'll be working with the business owner to really understand their goal to then work back from that in terms of a good FP &A strategy for how are they going to get there so we start you know where do you want to be in five years or 10 years or maybe they don't even have a time horizon they have a i have an objective i want 50 locations or i want my business to be turning over 20 million dollars or whatever whatever they've got in their head and and sometimes business owners don't even want to say it out loud so you have to pry it out of them because they're maybe they're not confident
enough to say their real ambitions because their business is still small at that point and so once you find that information out you then work back from there and build their plan back so you want to be at 20 million in five years you're at one million today well what does that mean we've got to do each year in terms of numbers to deliver that first step what do we got to do in terms of actions and investments in order to hit that and then we really build a playbook a strategic playbook for how they're going to get there if they follow that and then everything goes to plant they will get there
or they they're going to improve their chances of getting there and it really it puts reality to a dream that lots of business owners have they may have a dream that i'm going to turn my little takeaway shop into a national franchise but you know they don't really say that out loud once you put a plan there maybe a 10 -year plan and go no it's possible if you do this and you start adding locations and each location you add once you're cash positive you need this much cash to open a new location look at franchising you put out a whole plan for them for how you could get there in 10 years and they
look at it and go huh well I was just dreaming about this but this actually does look achievable let's do it and that's one part but then it's staying with them along the way staying on the journey every month, sitting down with them, going through their financials, revisiting their strategy and their budgets and going, are we on track?
What are we doing? How are we addressing these?
If a small business owner, even without someone like me helping them, I think if a small business owner is actually consciously taking a couple of hours out every single month to review their financials and review their performance and where they're heading, they're doing better than most because very rarely do I meet one that actually does that.
very rarely do i actually meet a business owner that can say their numbers off the top of their head like you know how much money are you making what's your profitability per month i don't really trust my accounts i don't really know well how much revenue are you billing everywhere every month i don't really know it's up and down maybe 20 30 like people just don't know and and without me supporting if any business owner is listening that if you're not doing that today you really need to start doing that you need to look at your numbers every month and that sort of begs the a question of how when a client reaches
out to you, I can picture they typically, maybe they've got their sister -in -law or their nephew doing their books and they've got their tax accounting and all that.
But what's the inflection point that makes them realize, okay, it's time I need to get serious and bring in some fractional help on my accounting and finance?
Yep. So it's often, I think it's driven by what their existing structure does, their accounting team that they have and what they're getting i've had a lot of clients say to me you know i know more about my books than my bookkeeper does or my accountant does and that's is a big sign that they need to go to the next level like a lot of bookkeepers if you're a very small business let's say you're doing a hundred thousand dollars of revenue you know a bookkeeper you don't need you know you should be able to manage that manage that yourself but once you start to get bigger and it's that same bookkeeper
that's trying to trying to handle a million or two million dollar business and all all they really know how to do is a bank reconciliation maybe and then they file your tax returns and that's it.
That's not really giving you any insight.
It's when they really want insights.
It's usually the ambitious business owners that want to get to that next level.
They want to add extra locations to their business or extra offerings or branch into different industries and that's where they really want to grow or they need financing, they need extra capital and that kind of advice you just don't get from a just a everyday bookkeeper or somebody offshore it doesn't work you really need to go to that next level to get somebody with that experience to advise them how to achieve their goals and their ambitions I've dealt with coming into a new client where they haven't had a CFO before they're usually very very loyal to their tax accountants who maybe a lot
of times are doing the books and they don't want to fire their tax accountant from doing the books because they're happy with what their tax account does for their no, they do their personal taxes because they're LLCs, they're pass -through entities.
And so they're very loyal to and close to their tax accountants.
But when we were talking before the show, you said when you come in, you want bookkeeping, controllership, and CFO support, you want to own the full finance stack.
Yes. And I'm wondering, I mean, I think some of what you said, I already know part of the answer to this, but are you pretty steadfast on that and how is that received and why is it important to you that you have the full, full stack?
Absolutely. I mean, that is what we offer.
That's what I try to make sure we've got that with every client.
The only thing that we don't do is taxes just because I'm a global company.
We're across too many jurisdictions.
I don't want to touch taxes.
So the CPA can keep his tax work.
He can keep his annual filing, but everything else I like to have control of.
The reason being is, I mean, to put an analogy to it, you think about a Formula One driver.
They're not a mechanic or they may have mechanic training, but they know that car better than anybody else.
They know it just as well, if not better than their mechanics.
And they're going to hear it.
They're going to know the engine.
They're going to know when something's failing during a race.
A CFO is the same thing.
Now, if you get a fractional CFO and then they come in and advise a business based on some financials that they haven't been intimately involved with, that they're relying on secondhand information.
I mean, it's a little different if you're talking a much larger company that's gone through an audit process and they're going to have higher quality financial.
But when When you're talking to small business, if it hasn't had somebody with that level of expertise involved in it, it's always going to be a disaster.
And so if you're a CFO trying to run a business and trying to advise a business on the secondhand information that you don't even know if it's accurate and you don't really understand the true drivers of the business, you can only do so well.
I mean, you put somebody in there that doesn't drive that Ferrari every time, yeah, okay, they might get it going, but they're not going to finish on the podium.
And that's why we really want to do it all.
We want to own the books.
I mean, if I'm the CFO, we have other CFOs working for us.
But if I'm the CFO on there, I want to know I have a relationship with the accountant.
And before I even talk to the client, I'm reviewing these things and scrutinizing them and making sure it's right and making sure all the balance sheet's perfect, making sure that our cash flow forecasts are all updated so that when I speak to the client, it's not, here's your P &L that somebody else has prepared and this is what it says.
And I'm just telling you what that piece of paper says.
I have 100 % confidence that this is accurate.
accurate and I have all sorts of insights that my team has provided me directly around your business.
And we take it from there.
I don't think, I mean, you can always just have a bookkeeper.
If somebody wants to go one way or the another and doesn't want to have the full package, we'll do that.
But you're going to get so much more value if it all comes together.
I think that's traditionally why larger corporations don't typically outsource is because they do it.
Some do, but a lot of them won't outsource their CFO. They won't outsource they're they're senior accountants and they're senior analysts and things they'll keep it in house it's for good reason because you want your cfo to be accountable for that whole team you want that cfo to understand it all and those people are working for the cfo they're not just working for the company and the cfo is taking the info so that's why i think they just have to go together you know offshoring just your accounts it can do more harm than good and i've seen that happen a lot of times yeah it makes total sense and i
imagine you know when you come in first up up, you know, if you clean up the books and you can give them that level of visibility where the chart of accounts makes sense and they can actually sort of see things in the appropriate categories and groups that that's one unlock.
But I bet the next unlock is, I mean, just basic, basic FBA where you just do a trend analysis and show them, look, your revenue is doing this, but your cogs is all over.
What's going on here with, you know, or you give them some kind of insight that they didn't have before.
And I imagine that's a huge unlock.
Yeah. Oh, it's huge.
It's huge. I love that moment.
And this went back before I got into business.
Like when you're in large enterprises, when you found some data and you walk into the CFO's office and you're like, check this out.
Look at this. Look at these trends.
And they're like, wow.
And they take it straight to the CEO and go, we need to be focusing on this area of our business.
That's phenomenal. And you can have those moments a lot more frequently with small business owners and just tell them what they're missing, what they haven't got eyes on.
the other day, there was one of our clients, they have tennis courts and they're focusing on their overall revenue numbers.
And they're like, look, we're in line with last year.
We're sort of in line with last month.
And I was like, but have a look at underlying what's going down here.
Your sale of food and drinks has increased, right?
It's gone great. But look, your court reservations and how much people are actually playing tennis is going down in your location.
And so what are you going to do about that?
So yeah, right Right now, your revenue's pretty much flat.
You think you've got a healthy business, great.
But the way I see it, how far down are those court reservations going to go down?
Once they go down far enough, there's going to be no one there to buy food or drinks at your bar.
So, you can have great promos at your bar, but if no one's coming in to play tennis, you don't have any customers, okay?
So, great. Your strategy is working on the bar.
You're selling more food over the bar, but you're not bringing people into the location to play tennis.
And so, another aha moment.
moment you know they're just looking at that one line now i really got to change my change my strategy we got to get some more subscriptions out there for tennis players yeah and i if they've just been backward looking and they just kind of pictured all of accounting is just administrative work and not very helpful when you give them that first glimpse into the power of fba it's got to feel like you've just given me a crystal ball and i'm now seeing you know seeing the matrix but i'm i'm wondering that you know you're not going to have the full -blown like you said skew level reports and profitability
and all that. But what is a basic but effective FP &A framework look like for a business that's in this kind of $5 to $10 million range?
Yeah, a basic framework.
So at that stage, I would want a budget, an annual budget in there at least. Depending on the type of business, whether you need to do an ongoing forecast, a rolling forecast, you've got to assess that based on the volatility of the business and whether a budget's good enough to just have that fixed for the year.
But you need something.
You You need something that your business owner said, this is what I'm going to do.
And so that you can every month to speak with them and go, are you doing what you said you were going to do?
And that's the first step of it in an FP &A framework, in my opinion.
It's just understanding that information and sitting down every month.
And then, like I said, the next part is strategy, longer term strategy, longer term thinking beyond next month, thinking beyond this year.
And that's what I really enjoy doing personally.
I love sitting down with business owner for a couple of days.
That's what we usually do, spend a couple of days.
with them and their their senior senior staff their leadership team if they've got one and we really figure out how we are going to get to their objective how are we going to get to their goal what's our strategy to get there that's where we like to spend a lot of time building that out and then work back from that like i said what have you got to do to get there and then how do we track against that and that's where the fpna stuff really comes into play whether that's number of customers or it's new products or if it's or if it's margin improvement or it's eliminating waste or it's opening new
locations or whatever it is, whatever the thing is that's really going to drive that business to help them deliver their strategy.
We need to put in the processes, maybe the systems in order to track that.
And if we can, like I say, it starts out monthly, but if we can get that visibility more frequently, you know, have it hitting the business owner weekly or daily in some instances so that they can really manage that and make sure they're staying on track.
So that I think is broadly the framework that you need to put in place for a small business.
this? When you come in and maybe you help them do a three -year plan or a five -year plan or even a 10 -year plan and you show it like you're saying earlier, where you can show it out and this is what you need to get your goal.
And then you break it down into annual budgets.
A lot of them probably have never had a budget before because their accounting wasn't in place where they could even figure out run rate and all that.
But having that, once you get that budget in place, or even if you're, even if they don't have a budget yet, like in that first year, where you're just Just comparing it to the same time period last year.
I mean, it starts really giving those insights to them and opens their eyes to think about the business in a whole different way.
Absolutely. It's a game changer.
I like really that's up until I started doing this and getting involved in the small businesses.
I'll tell you, in my early 30s, considered I'm done with this.
I'm over it. I mean, and that was in the corporate world.
It's like it was really hard to influence change and to really have those moments.
That moment where you run into the CFO and he takes it to the CEO and look what Luke found for me.
This is amazing. Happens like twice, three times in your career.
Like it's not something that happens.
For me currently, that moment happens nearly every month, talking to different clients.
Like nearly every month I provide them with some gold and they go, and the feedback that you get, it's just, it's incredible.
It's not the kind of feedback that you get in a large organization, which is usually arguments and people trying to climb the ladder and trying to prove you wrong at every step of the way.
This is you show them something and they just gobsmacked by what you've told them.
They look at it, you explain to them, they know you're not full of it.
You show them the data and they go, wow, he is right and we need to act on this.
And they're like, thank you, thank you, thank you, thank you.
Next month, they're like, we've implemented these changes in our business and you're seeing it.
The amount of times in large organizations where you would identify something and go, hey, here's a huge opportunity for us as an organization.
And two years later, the idea is still floating around, but no one's executed on it because someone in marketing said this or some CEO said, oh, it's not the right time or blah, blah, blah, whatever.
whatever, there's a lot of people that will push back on ideas and change in large organizations and nothing happens.
Small businesses, it's not like that.
They'll see the opportunity, they're entrepreneurial, and they'll go for it.
It's a lot more fun, a lot more fun in finance working with those guys than the big guys.
And you can also, I mean, you can do quick impacts.
I always think about bringing technology to these companies.
And I know you said earlier, you're not shilling any particular software product or whatever, but I'm wondering, you know, whether it's AP, AR, expense management or whatever, as you're working with these clients, what role does technology play in your work with them?
And are there, and I'm not asking for a specific, you know, software recommendation, but are there certain types of tools that you consistently recommend or consistently avoid?
You know, maybe these are things that, you know, they're a small business, they don't really need.
Like I say, I'll recommend based on that business, every business is different and there are tools out there.
I've found that the market has become very fragmented in tools.
There's a lot of tools for specific functions.
For example, accounts payable tools or a cash flow tool or an inventory management tool.
There's not a lot of all -encompassing tools for small businesses that do all of that.
And so it's a matter of picking and choosing what they really need.
If it's a business that's only got a couple of accounts payable invoices a month, you don't go for bill .com.
It's expensive and they don't get any value out of it.
It's faster process for bill payments, much faster than paying those subscriptions.
descriptions if they've got inventory and so on you know depending on how complicated what kind of a kind of system they need to get in place and so yeah i i don't have a rigid answer for you there on what kind of systems they that i would recommend but i have a look at what they need and where their pain points are and what what need we need better data on usually you need good data on sales usually changing a point of sale system is a headache so you don't want to you kind of hope that the small business owner has picked one that gives you what you need but if you have to to change your point
of sale system you have to and then from from then on all of the other ones like anything to do like a like a bill .com or cashflow frog or any of those kind of tools they're they're optional largely like you can get by without it if they don't want to sign up to the subscriptions we can download information from from most small businesses from their point of sale and their quick books and we've got developers in house and we can just make a quick interface a reporting dashboard for them and away they go but yeah it's very ad hoc at the moment i don't think it will be for very long i think it's
only a matter of time before somebody somebody cracks it and brings all of those tools together implement it with ai and a lot of us are going to unfortunately lose our jobs i think but um i don't think anyone's done it today yet yeah it's moving very quickly though right now you know of course enterprise companies and well all companies are are trying to figure out what can we do with AI.
And you've got people talking about agents that are going to do everything.
I haven't seen any really that are ready for prime time yet.
But I'm wondering from your perspective, what's your take on automation and AI in small business finance?
Because they're not going to have teams of data scientists, machine learning engineers, building out bespoke solutions.
And I know you're not getting into that.
Right now, are you seeing that there's real opportunity in some places or where it's maybe more overhyped than it needs to be?
Or what's your stance on, I guess, we'll just limit it to generative AI at this point.
I think both finance professionals and people running businesses, if you're not using AI today, you may as well be signing your resignation.
In the future, the people who are going to succeed are the people who know how to use AI well.
The businesses that are going to succeed are the ones that are going to know how to use AI well.
So everybody needs to think about how it's going to work best for their business.
Today, specifically in the finance and FP &A space a lot of tools have ai have intelligence built into them and they're great gives you some great recommendations pulls some cool reports too does some quick analysis but it's not quite perfect i don't think it's perfect i don't think it replaces the human element yet if you would ask me two years ago i would have said oh this is cool like the early versions of chat gpt this is cool but this isn't going to replace us anytime soon but when i've seen how it's progressed over the last two years and it's progressed much faster than i ever thought it
would even me personally how often i use use ai on a daily basis like i use it using it 20 30 times a day i'd say jumping into chat gpt just quickly brainstorming an idea or whatever i mean i use it continuously the fact that you can now build that into applications and i'm no developer i do have some developers working for me but as soon as somebody cracks how you pull that smarts into there you connect that with your with all of your different systems with your cash flow and gets you one complete solution that's going to be a game changer for small business i don't know if you've explore any
of these most small business i think the u .s is 80 or 90 percent are on quickbooks yep if you've got more than one quickbooks entity if you've ever had that it's a pain i want to know how profitable my group is let me log into this one let me download a p l let me put it over into a spreadsheet let me log into this one there is a native option you can go to quickbooks enterprise it's very expensive and i've i've never actually convinced the client to go there because it's so expensive but i've had it demoed to me by quickbooks and i don't think there's a lot of of value in it no more value than something
cheap we can knock up through using apis and build that for a client yeah just building your own consolidation and yeah exactly said that it's so close it's so close if somebody can take the smarts from like all the ocr smarts and the ai from bill .com and the cash flow frog and connect it all together your month -end close systems automate you know reconciliations that's kind of tricky at the moment i think i don't think anyone's automated balance sheet reconciliations because you have to connect to all kinds of third parties, connect to workers comp vendors, connect to various banks.
The bank connections are usually all right in QuickBooks, but vendor statements, have your system automatically reaching out to vendors to verify accounts payable balances, things like that.
Once somebody does that, they're going to be a very wealthy person, but I think it's going to be a game changer for small business.
Today, it's a matter of just choosing the systems that are going to help your business have a competitive advantage.
That might be as simple as not even looking in the finance space, looking at, you know, sales bots for your products, you know, set up an AI bot that's connected into chat GPT that responds immediately when somebody places a sales call on your business.
That's a huge one. You know, sitting there with a lead that takes two days to follow up or you set something up that automatically follows it up.
Consumers are okay with it too, I think.
I mean, maybe there is a generation that are not willing to accept it and maybe can't even identify AI.
For me, if I'm talking to AI, I know I'm talking to AI very very quickly.
However, I'm happy to engage with it, to be honest. I use a lot of different payroll systems with different clients.
And some of them are really good.
Like you talk to their help desk and it's not just, I have a problem with this person's payroll.
Is it this? Is it this?
Or is it this? That old school, it gives you three different options and it's never right.
It's not that anymore.
It's like a person that you're talking to.
It's going, no, no, this is my problem.
Ah, okay. Here's what you need to do.
You need to go up into this setting.
in. You need to change it.
It's brilliant. It's brilliant.
I think consumers are okay with that.
So the more you can put that into your business, the better off you're going to be.
Yeah, absolutely. As we start winding down here, I've talked to so many single shingle fractional CFOs that are out there doing this.
And like we said, so many small businesses in the world, it's a big, totally addressable market.
So splitting market share is not really a problem there.
But I can picture someone just in a massive corporation feeling kind of the same angst that you did.
But for a mid -career finance professional who might be thinking about leaving the corporate world and going into consulting or fractional CFO work, is there any advice that you'd give, anything you learned from your transition?
Look, I think what I did well was make sure that it was feasible.
I can imagine, I wouldn't have been able to do what I did if I was living in Australia.
I would have been too nervous to do it.
Walk away from a salary and go, all right, well, now I'm going to start this business.
I don't have any clients.
I have no no income coming in, what am I going to do?
That is a terrifying thing to do.
So I think if you're going to do it, try to get yourself financially comfortable so that you can do it and know that you've got a runway there.
That's probably the key because otherwise you're going to get desperate and you'll fail.
That's something that I was able to do effectively through my discovery of Mexico on a lower cost of living by moving down here during the pandemic.
So that made it worthwhile.
Just start somewhere small and really try to get your first couple of clients and do a really good good job with them.
Don't focus too much on growth straight away.
Focus on your product and your value that you can add.
That's what we've tried to do and we're still trying to do.
We have so many clients that we want to run their books perfectly.
We want to provide them with good insights, help their businesses succeed.
If their businesses succeed, we succeed.
Small business owners don't worry about their accounting fees or their bookkeeping fees if they're making cash handover fees and especially if it's a result of the insights that we've been and giving them.
And so that's where we try to do it.
All right. So now we're to the wrap up part of the show where we have two questions that we ask all of our guests.
And the first is, what's something that not everyone knows about you?
Something that we couldn't just find out by Googling you?
I wish I had something super cool, like I won a hot dog eating competition or something, but no. I alluded to it previously that i was contemplating getting out of the finance world i had had enough of it and i was very very close to throwing it all away and becoming a scuba diver instructor a bit of a a change in path there but yeah i'm qualified i'm a dive master i'm almost a scuba diving instructor but i didn't quite finish it my career opportunity presented itself and i took it and then i ran away from the scuba diving side of things but but yeah that's something fascinating if you're an accountant
out there and you're stressed out or you're an engineer and you're stressed out or an an actuary or whatever, those kinds of jobs, scuba diving is fantastic.
It's like forced meditation.
When you're 10 meters under the water and you can't see anything and all you can hear is, it's beautiful.
It's beautiful. That's great.
And that would be amazing.
After a particularly difficult financing a few years ago, I thought I'm going to go down to the beach. I'm going to take a vacation and just completely check out.
And I'd almost convinced myself during that vacation, people come up with really weird ideas when they get away from work after a stressful time.
But I didn't even have the skill level and the certifications.
It wasn't even going to be something as complex as being a dive master.
I just wanted to open a business where I rented out the chairs and umbrellas.
I thought, you know what?
This is all I need.
I always think about that.
That similar idea with Party High.
Like I mentioned, I live in Mexico and they have a fiesta for everything.
They have a party for everything.
All I had to do was buy a bunch of chairs and tables.
There's thousands of parties every weekend.
I rent them out. Easy, easy business.
Still might happen.
I'll come back on the podcast and plug that business if that takes over.
Yeah. Okay. So now everybody's favorite question.
What is your favorite Excel function and why?
So is it my favorite native Excel function or my favorite macro shortcut that I've created?
Actually, I want to hear about your macro shortcut.
Okay. The macro shortcut.
So this is anyone who does international accounting and international finance, works with international businesses.
This is a game changer.
And only those people can probably relate to this.
Dates in Excel are a freaking nightmare, especially converting US.
You guys do it the other way around.
You go month, day, year.
Australia does day.
It's so frustrating when you download data from one system and from another system and they're from two different countries.
And then all of a sudden your dates don't match up.
And I know people who are novices on Excel, they always go up and they go, oh, you just changed the formatting.
It still doesn't work the only foolproof way that i've ever found is you do a text to columns you go with text to columns and then you go and change the change the number format in there to month day year or day month year and that works 100 of the time it's a lot of clicks though and so i i create a shortcut for whatever date i want you know control shift u for usa boom and it will convert usa dates into the correct dates australia into australia dates it's it's a game changer for me anyone who's in in that has that pain point you've got to do that but in terms of native index match the index
match i love it it's it's more advanced than the if you look up or your h look up and if you put that in a spreadsheet and send it to someone they think you're a genius like look at this this long formula you got in here it's not actually that complicated but i look really smart when i send it to you i love it love so well luke i uh i really appreciate your time and uh i love kind going through that SMB stuff because it's a space that near and dear to my heart.
So really enjoyed the conversation.
I guess just last question.
How can our users connect with you and learn more about you and your business?
Thanks for having me on.
I really appreciate being here.
If anyone wants to reach out to me, you can find me on LinkedIn, Luke Mulcahy.
That's probably the best way to reach me directly.
You can also go to my website, mulcahyconsulting .com and schedule time there or find out more about our business there.
All right, Luke. Thanks again.
All right. Thanks, Glenn.
We'll be right back.
