EPISODE 60 OF THE MARKETING SOLUTIONS PODCAST: THE FINANCE NUMBERS YOU SHOULD BE LOOKING AT EVERY MONTH
Sonya:
Have you ever found yourself sticking your head in the sand when it comes to your business finances? Maybe you don't know your profit margin or cost of sales? Well, I sat down with Katie from Propel Her to discuss all of this and more. Katie is the founder and motivational force, around which all things Propeller are evolved.
Sonya:
Increasingly frustrated by the accounting world's approach to doing things the way they've always been done, she decided to shake things up. Tax return, BAS help, this is accounting 101 stuff that any accountant can deliver, but what about business development planning, staffing ratio, sales strategy, or even a shoulder to cry upon. With an eye on the future, Katie stepped out on her own and Propeller was born.
Sonya:
Launching a new business is tough, but she kept her momentum, continued to grow her client base and developed a community of supportive business owners around her that now form the heart of Propeller. As a female accountant, Katie understands the unique struggles women have faced and continue to face in the world of business.
Sonya:
Looking to start a business, but need a business partner or friend, she can relate to your challenges and the loneliness at the top, for this reason, it's her passion to propel you forward and see you and your business thrive.
Sonya:
I absolutely adored recording this episode with Katie and we have put together a checklist of the financial figures that you should be looking at every month.
Sonya:
Welcome to the Boom Your Biz Podcast!, a podcast for the movers, the shakers, and even bigger action takers in business. I'm your host, Sonya McIntyre-Reid, and each week I'll be exploring the question of what really makes businesses and organizations thrive. I'm on a mission to educate, empower, and inspire business owners and myself along the way.
Sonya:
Today, I'm joined by Katie from Propeller Advisory, and I'm so excited to be chatting to her because she actually has a sister organization, or a separate branch for female entrepreneurs called Propel Her, so rather than not do it justice, I'm going to let Katie introduce herself. Welcome.
Katie:
Hi, thank you so much, Sonya. As Sonya introduced, I'm Katie from Propeller Advisory. We are, I guess the traditional word for it is an accounting firm, but I hate calling us that because we're so much more than just accountants, but we're probably more like business advisors or strategists, but we definitely help with tax as well. Just recently we've launched a separate branch called Propel Her, as Sonya mentioned, which really, I guess the bread and butter is female entrepreneurs, and females in small business.
Katie:
Working with quite a lot of females throughout my journey with Propeller, one thing that I've noticed is women in general are quite lonely in their business startup and with not knowing the right people to talk to and who to kind of let... I guess express their concerns to, and that sort of thing, and so Propel Her, we're really kind of... The aim of it is to create a community of amazing female entrepreneurs that can leverage off each other for confidence and help where they need it. It might be that you are part of a professional services group in Propel Her, so they might be HR. They might be legal, they might be accountants, they might be bookkeepers and everyone can kind of get together and really leverage off those skills to help each other out, and to build beautiful businesses.
Sonya:
Oh, fantastic. I love that so much. Just out of curiosity, do you find women tend to shy away from money conversations?
Katie:
Yeah, I think that the way that we were bought up, I do think it's changing. I think the way that we were brought up is that we were always... I don't know that we were taught to, or it just came naturally. I'm not sure what happened, but for some reason we tend to shy away from money conversations. Definitely, and I think even when you apply for a job, we don't tend to back ourselves like men do. We don't go in there and we aim for what we deserve. We go in there and we go, "Oh, I really want $65,000, but I'll go in at 60, because then they're more likely to say yes," and I don't know why we do that to ourselves, but for some reason we do.
Katie:
But the other thing as well is that men are so happy to talk to their friends about, "Oh, I did this much profit last month," or "I made this loss," or whatever, but you get a heap of women into a room and no one wants to share their journey. They definitely shy away from, I guess, communicating their hardships or their achievements with each other, even if it means that they're going to be able to help each other out.
Sonya:
Oh my God, I feel that so much. I think, the way I see it is that women, particularly, if they talk about their profit or success in business, I think it comes across or they perceive it comes across as braggy. Right? But I think, it's switching that mindset and going and looking at it, and I see it, if someone's talking about their profit as, "Oh my God, that's amazing. Look at what's possible," and it kind of breaks down that barrier. It's like that whole four minute mile concept, right? you don't feel like you can do it until someone else has done it, so I think those conversations need to be happening more.
Sonya:
I mean, if you have a small network of women, as I know a lot of people listening to this podcast do, that are in business. Is there a sort of way that we can start talking about money more? What do you recommend? How do we start that conversation?
Katie:
I think, even just to find a teammate, for... An example that I have, I've got my best friend I met through my business, actually. She's got a law firm and I've got an accounting firm. We started our business journey together at a similar time, and so we've had quite a similar growth path and have experienced things at similar times. Like hiring our first employee and that sort of thing, which is actually what led me to even launch Propel Her, because I just found that so helpful, and I couldn't imagine doing that on my own without having someone else that I could bounce ideas and questions off. The whole point of Propel Her is to provide that community where you can bounce those ideas and questions, but what we have started doing to get over this barrier of not sharing, and not communicating, and not helping each other, is having monthly board meetings together.
Katie:
We'll actually put together our own numbers, which for me, that's fine, because I'm an accountant, and I know how to read a profit and loss, but that was something where I had to help her, because that's another aspect. It's not that we don't even shy away from talking about numbers, but we shy away from looking at our numbers. So many women come through my front door and they don't know how to produce a profit and loss statement from their Xero file, and they don't know what their sales were last month, because they've got their head in the sand and they'd rather just not know. As long as they've got money in the bank, then that's all.
Katie:
But yeah, I think if you have someone that you can catch up with once a month to review your numbers together and to kind of go over each other's performance, and they can ask you some hard questions and you can explain to them, "This is why your profit dropped off," or "This is how you won all these new customers," and give yourself a little bit of a pat on the back when something does go great. But at least if things are turning a little bit sour, you can pick it up straight away, and you'll have a little bit of support and someone there to help you, I think.
Sonya:
I think as well, women who are avoiding this and sticking their head in the sand, you might be pleasantly surprised if you do pull your numbers, to have an understanding of where you're at. I think you cannot make intelligent business decisions without having the numbers in front of you, and I think drilling down through, say if you do project based work, where are you making the money? Something I ask my clients when we take them on for advertising management is, who are your most profitable clients? It is amazing, how often people can't tell me that. It is amazing how often they can't tell me their margins, and also, how long they retain clients for as well. All of this feeds into... I guess, even being able to scale a business as well, you need to know your numbers.
Katie:
Yeah, absolutely. You're a hundred percent right. You can not make business decisions without knowing your numbers, and knowing your gross profit margin, and which client is your most profitable, and those sorts of things, is so important. It's also really important to understand if you've got five clients, but one of them takes up 75% of your revenue, you need to know that, because that's a huge risk to your business if that client drops off. It's about getting a little bit more granular into that detail and understanding what your numbers mean for your business.
Katie:
I think as well, another thing that I wanted to touch on, in regards to that was... And my mind's gone blank. Oh. Yeah.
Sonya:
That's all right, it'll come to you. Just for context, Katie's about to go on maternity leave. It's so exciting, so we'll put it down to baby brain.
Sonya:
I would love to create an infographic off the back of this podcast episode, just for the checklist for people on what numbers they should be looking at on a monthly basis. Can you rattle off sort of the basics at a minimum that we should be looking at?
Katie:
Absolutely. The first thing that you need in place is a budget and we're at the perfect time of the year to start thinking about next financial year and putting that budget in place. Then once you've got that budget in place, then every month you should be comparing your actual numbers to the numbers that you budgeted. That is exciting because if your budget is realistic, most of the times you'll smash it out of the park, and you'll be so excited, and it will be that little kick that you need to get you even more excited for the coming month. I think that's a huge one.
Katie:
Revenue growth is a big one, because, "If you're not growing, you're dying," as one of my accounting mentors says to me all the time.
Sonya:
I love that, yeah.
Katie:
Yep. Now your cost of sales line is huge, because that's all about your margin, so you really need to think about, and this was what I was going to touch on before, but before baby brain came in, but you've really got to think about what your real cost of sales are. For example, if I have a client that we do a tax return for, then my cost of sales is my staff, but I also might have, if I was a more traditional accounting firm, which I'm not, I might have other costs like the cost of paper, and printing and binding the reports to give to the clients, and those sorts of things. All of those people might normally put into stationary, but that's a cost of my sale that I do need to factor in, so that I've got a real cost of that sale.
Katie:
A huge issue that I see with sole trader businesses is not taking into consideration a proper charge out rate for yourself that allows you to have a decent margin. You can't go, "Oh, well, I'll charge myself out at $20 an hour," because that doesn't work. That doesn't cover your overheads. It doesn't cover all your other costs, so you really need to be thinking, "All right, what salary do I want to pay myself this year?" Then break that down into how many hours you work, and therefore, what does your hourly rate need to be to pay you that salary? That is the best way to think about it, and then those costs, your time that's spent on that client needs to go in your cost of sales line. Then you need to be looking at your margin on your clients because that will give you a real margin.
Sonya:
Oh my gosh, I love that. I think that's a mistake I made when I first started my business. I mean, you think that you're going to have say 40 hours a week to dedicate to client work. You've got to understand as well, there are other things that happen in your business. You've got admin, you've got sales calls that you've got to do. You've got all of this stuff, so really, strictly. I mean, depending on how many hours you're working, you might not be able to bill out 40 hours a week. Then on top of that, looking at things like treating it like a real business where you get sick leave and holiday leave, and things like that as well. You're not going to be working five days a week, 52 weeks a year. Or you shouldn't be. I think when you first start out, you feel like you're working a million more hours and days than that, but I think setting yourself up with the understanding that you're treating yourself almost like an employee within the business, to set boundaries for yourself to avoid burnout as well, is really important.
Katie:
A hundred percent. Even if you are a sole trader, you do need to just put yourself in the box of an employee and think of yourself as an employee, and I mean that, to the sense that even pay yourself a weekly or monthly salary. Have a separate bank account for the business, have your own personal bank account, and figure out how much you're going to pay yourself each month. Don't just drag bits and pieces out of the business when you want it, pay yourself as an employee, and do the things that way. It will just help you, I guess, change the way that you think about your business a little bit.
Sonya:
A hundred-
Katie:
But in terms...
Sonya:
I'm sorry. I'm going to add just quickly as well. That's going to help when you do go from being a sole trader to a company too. I've recently gone through this process, and it was messy, because I hadn't set everything up properly. Making, future you, life easier.
Katie:
Yeah. A hundred percent. Your accountant's life easier too. They'll love you for having a separate bank account.
Sonya:
Absolutely. Sorry. What were you going to say before I interrupted?
Katie:
I was just thinking about a couple more KPIs that need to go on that list to kind of look at each month.
Sonya:
Yeah.
Katie:
If you've got employees, you need to be looking at your employment costs, and you need to be looking at what the industry average is for your industry. If you're in hospitality, it can be anywhere from 25% to 35% of your sales should be employment costs. You need to be looking at what your KPIs are, and are you fitting within that KPI? Then you need to think about what makes up those employment costs. That includes your super, it includes your salaries. It includes your work cover insurance, all of that sort of thing. You've got to think about it as a whole, rather than just the one salary and wages line.
Katie:
The other key thing is obviously your net profit. That's so important. We need to be looking at our net profit and you need to be keeping an eye on your debtors every month, and making it so your debt is being your outstanding invoices that customers owe to you. I think that it's really important to keep track of how many days they're outstanding. Do you have a large amount of customers that haven't paid you for 90 days or 60 days? If so, then, should you be changing your model so that they're on direct debit or you're charging them some interest on unpaid bills and those sorts of things? These are all little things that we should look at on definitely a monthly basis, just to make sure that your business finances are nice and healthy.
Katie:
The other thing that I love looking at each month and sometimes even each week is my bank balance, less all my upcoming bills, plus all my customer invoices that are due to be received, and what's my bank balance looking like at the end of that. Xero now has a little cashflow dashboard within their system that shows you this information, but if it doesn't, an Excel spreadsheet works fine and you can just manually input that, so that you've got a good idea of how long your cash is going to last you.
Sonya:
I love Xero. I want to say I worked out of spreadsheets for the first few months of my business years ago, and then I moved to a free tool, and honestly, I just wish I'd started with Xero to begin with. It's so easy to use. Most accountants now will work with it, which is fantastic, and it just gives you the ability to export so many reports as well, and have all that information at your fingertips on the dashboard, which I absolutely love.
Katie:
Yeah, absolutely. Then it makes it so easy for you to have a look at who your top 10 customers were? Who were your top 10 suppliers? What's your cashflow going to be like? They even have a budget tool in there, so you can create your budget directly within Xero. Xero's the bees knees, we love it over here.
Sonya:
With Propel Her, is this open for people to be able to join? Can you tell me a bit more about how that works?
Katie:
Yeah, absolutely. What we've done at the moment is, we're officially launching our service as of July. At the moment we're taking on clients, and all that sort of thing, but what the bread and butter of Propel Her is going to be, is this service offering called Bitches Who Board. What that is, is based on that board meeting concept that I was talking about earlier, where you'll sit down and you'll have a strategy session with me, and we'll put together a business plan for your business. That session normally takes about four hours. From the back of that, you'll have, I call it a one page business plan, but realistically it's probably four or five pages, but it kind of gets into the nitty gritty of why you're doing what you do.
Katie:
What are your goals for this upcoming year? What KPIs are relevant for your business, and what goals are you putting in place around those KPIs for the year? We'll put together a budget so that you've got a budget for the full 12 months that you can work towards, and then you've got an action list. That action list will span over the next 90 days, and each quarter we'll review that action list and create another 90-day action list basically to get you to those one-year goals that you're planning to achieve.
Katie:
Now, on the back of the business plan, then we'll get all the women in a room once a month or once a quarter. We haven't quite decided yet what women will like, but watch this space for that, to go over their progress, and where have they come across hiccups, and where are they finding that things are working really well, because there'll be so many amazing, beautiful, talented women all around the table, everyone will be able to leverage off each other and help each other with their own experiences that they have, I guess, that they've experienced. To be able to provide their advice and their insight and provide, I guess, that assistance and support that we just desperately need.
Sonya:
Oh my gosh. That sounds amazing, and is that open to people at any stage of business? Are you really sort of narrowing down on a certain stage to begin with?
Katie:
No. It's open to any stage of business, but we'll be teaming you up with other women that are in a similar stage of business to you. So that, I guess it's more beneficial, because we don't want you working alongside someone that's been in business for 10 years, I guess, and going through totally different challenges to what you might be going through.
Sonya:
Fantastic. Look, I will get you to send me through a link to some information on that. We'll include that in the podcast show notes, so anyone that's interested can join.
Katie:
Amazing.
Sonya:
I'm certainly interested. That sounds incredible.
Sonya:
Let's switch it up a bit for a second. Are you a reader? Have you read any fantastic books lately?
Katie:
Oh my God. I'm such a reader. I think I'm on my 12th book for this year.
Sonya:
Wow. Okay. For context, we are recording this on the 4th of March.
Katie:
Which is just mental, I've never read that much this early on, and I think it's got a lot to do with the fact that I'm about to have a baby, and I think, "Oh my gosh, I've got to do all my reading now," and I only read for fun. I have this amazing, beautiful bookshelf in my office of all these beautiful, amazing, inspirational business books that I really want to read, and I probably try to read one every quarter or something, and I just put it down and I pick up a fun book again.
Katie:
I just finished Honeybee, which is fabulous. It's a book based in Perth, in Australia, by an Australian author. About a young 14 year old boy who... It's very, very confronting and very emotional, but also quite funny. He's 14, he's struggling with his identity and who he wants to be, and considering suicide, and meets this older gentleman on a bridge. They're both about to jump off a bridge and kill themselves, and they form this amazing bond, and become these beautiful friends that basically save each other, which is just a really lovely touching story.
Sonya:
Oh, that's sounds beautiful.
Katie:
Yeah.
Sonya:
I get that. I think reading, so often we think that we need to use our downtime to be productive and read business books, but I think reading the fun books as a downtime is a great way to go as well.
Katie:
Yeah. I think it's so important to really have that time to switch off. When we have a business, we tend to go, "Well, all my time needs to be spent on my business, and I need to just be getting smarter and doing more things," but it is so important for you to have that rest and recovery. I think that it's just incredible. Look, I think for me, after baby arrives, I'm actually going to put away, say, my Friday afternoon during work hours, and that will be my time to go on to learn more, and to read more books that relate to my business, and then leave my outside of work time as my fun book time.
Sonya:
Yeah. I think that's a great idea. I've been trying to do the same this year, where I have a few hours on a Friday to take some of the millions of courses I've purchased online over the years, and the books, and the podcasts, and things that I save. I think building that continued learning time consistently into your business is a really good idea. Otherwise, you kind of feel like it seeps into your out of work hours and you're not recharging like you need to.
Katie:
Absolutely. I agree. Yeah.
Sonya:
Well, Katie, thank you so much for your time. Where can we find more about you and your business?
Katie:
I am on LinkedIn, under Katie Brian and my business is on all social media platforms under Propeller Advisory, and we have a wonderful, beautiful website that was just launched late last year @propelleradvisory.com.au.
Sonya:
Incredible. Thank you, Katie.
Katie:
Thanks so much.