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Transcript 

Dominic (host):
Here we go. Welcome to the Cabinet Maker Profit System podcast. You know, this show is just for wood shop owners, cabinet makers, architectural millworkers, closet companies, those of you that are interested in the business of the wood shop business. Now, look, there’s a chance we haven’t met yet, but here’s what I know about you. You are not here by accident. Something in you, you’ve got this internal drive, this fire, that’s looking for something more – more out of the business, more for your life, more for your family. You’re ready to grow. You’re looking for ways to grow. And so you went looking for this podcast, because nobody comes looking for a show called Cabinet Maker Profit System by accident. So welcome home.

Dominic (host):
Today’s episode is pretty juicy and very rare, like unique, and I’ll tell you why. Today’s guest is Kathy Svetina. Now Kathy is a CFO, and I’ll explain that in a second. You can find Kathy and myself on LinkedIn. Kathy’s name is spelled with a K, and her last name is S-V-E-T-I-N-A, and of course, my name Dominic Rubino. You can find me on LinkedIn as well, or you can also join me on the Facebook group called Contractor Strategy Group. At any point in time, shoot me a text and just say, “Dom, let’s talk.” My cell phone number is 315-903-7853.

Dominic (host):
Today, Kathy and I are going to be digging into a topic you may never have considered before: what is a WIP report and how do I use it to get better at managing money and projects in my wood shop? Now here’s why this episode is important, because for some of you today, you’re going to learn some new words which is kind of fun, right? They’re the kind of words you only learn about when you’re in growth mode, words like CFO. A CFO stands for Chief Financial Officer. So today, Kathy and I are going to talk about the differences between a CFO, who’s a very forward-facing type of accountant, and the difference between a forward-facing CFO and a backward-facing accountant or bookkeeper, right? Accountants and bookkeepers look at what happened. A CFO tells you what’s going to happen. Very interesting financial professional.

Dominic (host):
You’re also going to learn about a report. It’s called a WIP report. It’s spelled W-I-P, and that stands for a work in progress report. Now, if you’ve been curious, searching for ways to understand how to better forecast your business while taking into account jobs that are already in process, whether they’re on paper before they hit the CNC all the way up to, you know, assembly, or while it’s during install, then this episode is for you.

Dominic (host):
Now, here’s the other reason this episode is important, because the odds are slim to none that you or any of your biggest competitors in the city, your county, your state, your province that you live in, are using a CFO to generate WIP reports. Now you might go, “Okay, Rubino, the heck do you know that? You’re not where I live, I never see you when I go out for coffee. How would you know that?” Because myself and my team, we talk to hundreds, hundreds of different cabinet shops every single year. You know, if I do 10 new meetings a week, I probably talk to 500 cabinet shops a year, rough, but during that year, I talk to cabinet shops and millwork companies, closet companies that have sales anywhere from $200,000 or $2 million or $20 or $60 million a year in sales.

Dominic (host):
I mean, just last week I was in a business coaching meeting. I work with a retail store fixture workshop. He was approached by a French bank who represents a European millwork shop who’s looking to expand into the United States. I’m in the middle of a bunch of very cool conversations, but at the same time last week, I had a conversation with a great guy that’s doing 200 grand out of his garage, right? So over the course of a year, probably two companies a year use a CFO to track WIP reports. I mean, that sentence alone is weird, but you now know about it. I’ve opened your mind to a new level of business. That’s my job. I always challenge myself and my team: Find us guests. Find us topics that you, my audience, would normally never have access to or even know are important.

Dominic (host):
Now, since this show is all about the business of cabinetry, millwork and closets, we have to look at the business from multiple angles. And so today, Kathy’s going to show you an angle you’ve probably never considered. Now I also want to give a special shout out to Steven and Heidi. They build beautiful kitchen cabinets up in British Columbia, actually, not very far from my favorite moose hunting spot. They just built their strategic plan, and now they have a clear track of getting a hold of their finances, so Stephen can get off the tools. Imagine that, so they could buy their building and have stability and clarity in their company. Great job, guys. If you want to learn about one-on-one business coaching at any time, shoot me a text. Just say, “Dom, let’s talk.” You guys know myself.

Dominic (host):
Another reminder that WIP reporting has a lot to do with getting in control of your scheduling issues. Now you’ve probably already heard the Mark Sanderson episode. I’ve got Brad coming in. Brad is from Quantum Lean. He’s going to be talking about the same thing. Anyways, from the Mark Sanderson episode, I created a brand new tool for us. It’s based on a question from Nick, who happens to be in central Alberta. See, maybe this is the all-Canada shout-out episode. Anyways, this tool I created for Nick is a one-page, simple visual, and you can share it with your foreman, your project manager, estimator. You’ll know who to share it with as soon as you see it. What it does is translate work in progress into a flow chart. That flow chart, it’s a visual. It makes sense for everybody. It’s actually just one page, right? You print it out. Make it a poster. Make it an 8½ by 11, whatever you need. But it makes sense for everybody. But what it shows you is the levers in your business, and what you can do with the levers. You can push them, pull them, but either way, it’s to get ahead of scheduling issues.

Dominic (host):
As a woodshop – hands up if you’ve had scheduling issues in your workshop. It is the perfect dovetail to Kathy’s insight on the financial part of that same conversation. Now Nick and I like to goof around in our coaching meeting, so I named this download the Rodina Scale after Nick. So just say “Rodina Scale” in a text message. We can all have a good laugh. I’ll just give you my cell again, 315-903-7853, just say “Rodina Scale.” Now that one-page visual is just one example of the simple systems my coaches and I are here to show you to help run this business smoother, make the money you deserve and live the life you want. There are simple systems to help you run the business right, and they all come back to mindset.

Dominic (host):
Now I just said mindset, but two things. First, I want you to do this with me. I want you to stand up straight, put your shoulders back a little bit, lift your chin a quarter of an inch and take a deep breath in. That’s the feeling I want you to have in the business, that quiet confidence. Weird, right? Would think that from a business coach talking about the cabinetry trade. Here we are. Anyways, I got a couple of dad jokes for you, which is the second part of mindset. And why dad jokes, why bad jokes, and why dad jokes poorly delivered with poor timing? Because I want to get you laughing. Today is really going to open up your mind. You’ve probably never heard from a professional like Kathy, but I also want to open your mind the way we normally do. Tell you a couple of jokes, get you giggling, and I know you’re going to share these with somebody else.

Dominic (host):
Of course, you want these, right? Hey, why did the banker switch careers? She lost interest. You can tell this one to the kids. Hey, why was the math book unhappy? It had too many financial problems. Now, if you got really little kids, this one’s going to make them giggle for sure. What do you call a dinosaur that’s good with money? An investosaurus! Oh, that goes out to all the grandpas out there. Tell your grandkids that joke, they’ll squeal with laughter.

Dominic (host):
Hey, got a story for you. Once upon a time, there was a wise and clever old farmer. He wanted to have a horse on the farm for the kids to ride and play with. Hey, maybe he’s a listener to this show, and he’s telling dad jokes too. But anyways, he went to one of his neighbors and bought that guy’s only horse, and he paid 100 bucks for the horse, gave his money in advance to the neighbor and said, “Come back and get it the next day.” Anyways, he goes back the next day, and the neighbor tells him, “Hey, the horse died and sorry, but I already spent the 100 bucks.” The old farmer, you know, he takes off his hat, scratches his hair, scratches his chin, rubs his beard, thinks about it for a second and says, “Well, I’m still going to take the horse.”

Dominic (host):
Couple of days later, the neighbor sees the old farmer in town. The neighbor asks him, “Hey, what’d you ever do with that old dead horse?” “Well, I ended up selling that dead horse for 500 bucks.” Of course, the neighbor says, “Well, how the heck did you do that?” The old farmer said, “Well, I went to the county fair a few towns over. I set up a booth, and I offered the horse through lottery tickets for five bucks. I ended up selling 102 tickets, and in the end, I gave the horse to the winner.” Neighbor’s like, rocked back on his heels. Like, “What? Didn’t the guy complain that he’d won a dead horse?” “Well, see, he bought tickets for a horse, and when I told him the horse had died, I apologized, and I gave him double his money back.” Nice. Some of you are doing the math on your fingers. You’re like, what?

Dominic (host):
Hey, I gotta tell you about my buddy George. Before we get to this, George gets a call from his lawyer. Never good, right? Lawyer goes, “I gotta meet you right away. Come down to the office.” The good old Georgie goes down to the lawyer’s office. Comes right in. Lawyer says, “Hey, do you want the bad news first, or you want the terrible news?” Georgie goes, “Well, those are my choices. I guess I’ll take, you know, the bad news first.” The lawyer says, “Well, George, your wife found a picture. It’s worth a half a million dollars.” George goes, “What? That’s the bad news? If you call that bad, I can’t wait to hear the terrible news.” The lawyer looks dead in the eye and says, “Well, the terrible news is that the picture is of you and your secretary.”

Dominic (host):
All right, folks, listen, um, are you missing the end of the show? By the way, are you miss- are you just fast-forwarding to the end of the show? William, I’m talking to you – that fast-forward button. Probably Martin as well. Talking to you guys, you guys are missing out on something very important, because at the end of the show, I do a very specific mini-training segment. My job there is to simplify and solve a common business problem. So make sure you stay to the end.

Dominic (host):
Look, guys, I host this podcast because one day I would be proud to be your business coach. Myself and my team are there and ready to stand beside you as you march forward in the growth of your company. If we can ever help, or if you’re curious or you want to ask questions, shoot me a text and just say, “Dom, let’s talk.” My cell phone number is 315-903-7853. By the way, there are a number of new coaching programs. If you’ve ever been in Construction Millionaire Boot Camp, if you ever took part years ago in 30 Day Construction Business, or years ago in the Find and Fix Your Eight Profit Leaks courses, we now have a boot camp Construction Millionaire Boot Camp alumni program that you qualify for. It’s super affordable, and what it’s made to do is keep you marching down the path in a reasonable way, so you’re always growing and moving forward. Watch for a message from us on that.

Dominic (host):
Of course, I also added three business coaches to the team. It’s, as you’ve heard me say before, it is hard to become a business coach on my team, and I make it that way on purpose. Did you know that all of my coaches have built or sold or turned around a construction or contracting company of their own? How many people do you even know that have done that? And I’ve managed to find three top-notch, high-quality coaches who can do that. So when you meet with me and my coaching team, we can always put together a program that’s right for you and however you want to do it. The key is, what do you want to do in the business? And if you don’t even know that, you just know you want something different, just talk to me anyways. Got always got options, or at least we’ll have a great conversation.

Dominic (host):
Okay, you guys ready? I’m going to go into business coach mode today. You’re going to hear something, learn something from Kathy or me. I want you to take action on that in the next 24 hours, because this is the kind of information that nobody around you in your industry knows about. So you’ve got what’s called first-mover advantage. Take it. All right, let’s get to it.

Dominic (host):
Kathy Svetina, how are you?

Kathy (guest):
I am great. Thanks for having me, Dominic.

Dominic (host):
Yes, I’m pretty sure I mispronounced your name. It’s Svetina, yes?

Kathy (guest):
That’s correct.

Dominic (host):
I knew I was going to get it wrong. I’m sorry, but I corrected it.

Kathy (guest):
You did.

Dominic (host):
Yes, I did. Hey, it’s great to have you here. We’re going to talk about finance today, one of the most exciting topics ever to grace the airwaves.

Kathy (guest):
Of course, finance. What else could be more exciting than that?

Dominic (host):
Well, to this crowd, it’s exciting because we’re going to talk about work-in-progress reports and WIP accounting, which I think a lot of people overlook. And one of the reasons I brought you here is because there’s a lot of opportunity inside those reports, isn’t there?

Kathy (guest):
Yes. So if you know how to read them, and how to do them well, there’s a wealth of information in those reports, and we’re, I’m sure we’re going to get into details on that.

Dominic (host):
Yeah, but before we do, Kathy Svetina, who the heck are you? And how is it you come to be speaking to all these forward-facing cabinet makers and millworkers and closet companies all over the world?

Kathy (guest):
So I am a fractional CFO. And I know this sounds a little bit complicated, but it really isn’t. So when you think about a fractional CFO, we are there for a fraction of the time, because a lot of times in the small business world, you do need someone who’s going to be more strategic about your finances. And you don’t really need a full-time CFO because they’re expensive, and you don’t really need them, to be honest. So we are there for a fraction of the time, for a fraction of the cost than what an actual full-time CFO would be in your business. So I’ve been doing this in my own company, NewCastle Finance, for the last five years. But before that, I’ve been in corporate finance for 15 years. So I’ve been doing this for 20 years so far, and it’s been, it’s been a fun run.

Dominic (host):
I bet, I bet you probably have some great stories. People wouldn’t think it, but we see all sorts of situations and business situations that come up that probably make it, would probably be a great TV show.

Kathy (guest):
I hope it would be, at least for me, it would be interesting. I don’t know again, if for other people, it would be because we can get into a lot of details, but definitely because fractional CFOs look at the business holistically, so you wouldn’t just get the information about the numbers, but also how those numbers affect the business, and how all these dots in the business – sales, marketing, operations – affect the finances. So, yeah, it could be a, you know, now you give me an idea. Maybe I should do a YouTube video show like that.

Dominic (host):
Sidetrack of fractional CFO, yep. What I’ll do, though, is because this just occurred to me, is, why don’t we take a step back? Because people might not understand what a CFO, Chief Financial Officer or fractional CFO is when a lot of times I’m talking to people about making sure they have good bookkeeping or accounting or control or etc, what are the different financial positions that we can expect to evolve through as our business grows.

Kathy (guest):
This is a great question, because when you think about finances in your business, there’s a lot of pieces that need to be done well for you to get the information and the data and actually make decisions based on that information. So the way how to think about it is your bookkeepers are actually the people who are doing transactional type of work. They are making sure that your bills are paid on time, making sure that you are actually billing your customers and clients, and you’re getting money in that all, all your transactions in the business are in the right buckets, in the right order, that everything is categorized in the right way, and that you have actually whatever financially is happening in your business is in your financial statement, so that you’re not missing anything. So that’s the job of a bookkeeper. Then you have essentially the job of an accountant, which most likely are going to focus on the taxes, making sure that you have the right type of tax burden, so that you’re not paying too much in taxes and then. But you will notice here that I’m talking about the past and basically the present here. So that is what the accounting world does. They focus on the past and focus on the present, so that you have the reporting and then they have all your numbers in but you don’t live in the past. And you do, you do live in the present, obviously, but you also need to think about your future. And this is where the finance folks come in, like myself, like a fractional CFO, that help you focus on the future of your business, making sure that the business is going to be financially healthy and sustainable for the long run, so that you’re not running out of cash, that your margins are in the right way, that you’re not overly hiring the people that they help you make decisions of who you’re going to be hiring. All those types of future focused decisions is where a fractional CFO is going to help you with and on top of that, they look at the business holistically. Because again, everything that you do in your business is going to end up in your finances. So they need to know what’s happening in the business, so that they can help you advise on the future of the business.

Dominic (host):
Okay? I mean, that’s why you say the numbers tell a story, right? The finances of a company tell a story. And for many of us, we want to sell the business one day, and people are going to go back and look at the books, and hopefully somebody like you has been there to steer the company through creating the right story by making the right decisions that get notated and marked down.

Kathy (guest):
Yeah, exactly. And if you’re planning to exit the business by selling the business, you need to prep for it at least three years. That’s the minimum in advance. Hopefully you’re doing that five to 10 years in advance.

Dominic (host):
Oh, that’s a good point. So I’m going to take a weird direction of this. Kathy,

Kathy (guest):
Sure.

Dominic (host):
Have you seen bad bookkeeping? And I don’t mean a bad person, I mean somebody doing a, you know, a five out of 10 job on bookkeeping impact a business negatively?

Kathy (guest):
All the time, and that is one of the reasons why, before I go and work for a client, we actually take a look at their accounting and their bookkeeping. Because if the accounting and the bookkeeping isn’t done the right way and it isn’t clean, I cannot do my job like I cannot help them advise, because if the numbers are all jumbled, if the transactions are old, if you’re not reconciling your bank account statements, if you’re not doing all of that, you’re going to have bad data. Bad data makes bad decisions. So you have to make sure that the accounting and the bookkeeping is done in the right way. And I’ve seen so many clients that have come in, they’re completely confused by their books. Have no idea what’s happening, because the bookkeeper not not that they’re bad bookkeeper. It’s just that they might not be the bookkeeper that they need. Sometimes, I will say that they have, like, an office manager doing their books, yeah, or, uh, you know, their neighbor, or maybe even their spouse doing it, but they don’t have the accounting background, and I will tell you this and that just because someone has an expertise in QuickBooks or zero or whatever software you’re using, that doesn’t mean that there will be a good bookkeeper, because whatever accounting tool using, whether QuickBooks, Xero or whatever else you’re using, is just a tool they need to know accounting to be able to categorize these transactions the right way. And if they don’t, I mean, it’s just going to be it’s just going to be garbage. And I’ve seen, for example, just recently, we were looking at the balance sheet of one of the clients and the on the assets. When you have an asset, for example, if you have a like, if you have, let’s say, tools that you have on your account, your asset account, you also have depreciation, meaning that every year you take depreciation, depreciation should never be more than an asset if, if you have a negative asset, that means that your bookkeeper or your accountant are doing a really, really bad job at making sure that your books are done right. So things like that that I see on people’s books, and because business owners don’t really look at these things in that way. They sometimes they don’t understand, like, why does this matter? And also, how does it affect them in in the long term?

Dominic (host):
Yeah, it’s, it’s so it’s, it’s funny that you and I come to the same conclusion, because we come at business from different angles, right? You come from the finance angle, and I come from the operations and management angle. But a lot of times we’ve just evolved, right? These are cabinet makers and mill workers, and they started this business on their own. And I know lots of people, their first job was something really humble. They made a kitchen for somebody in their family, and then somebody else said, Hey, can you help me? And now they’re like, the city’s one of the top three cabinet makers in the city, or one of the top three mill workers in their city, or top three closet companies, they’ve evolved. And one of the things that we forget to do is look back and go, Well, I’ve evolved, and my spouse is helping me with the books, or my father-in-law’s helping me with the books, but they haven’t evolved. And I’m going to urge people again, and I’ve said this before, at risk of offending people who I’ve never even met, it might be time to change your bookkeeper. Look at it and look at it this way. They’ve been doing you a favor up till now. Please go thank them. Kind of a little bonus check. Say thank you for your help. But we’re going to go find another bookkeeper so that you could finally have your time back. I mean, most of our spouses would actually love that. Even though they give you a little bit of a fight, they would love to have that time back, especially if they’re not trained as a bookkeeper, you need a proper bookkeeper to do the books. Yeah, I feel like I’m on a soapbox now, but you opened it up for me. So I thought I’d take but it happens so much. It just does, you know? And of course, we’ve got lots of situations where you’ve got an office manager who’s super nice person, they’re like, Well, I can help on the books. And so you’re like, oh, great, we need that done, but are they doing the best job at our books? And and

Kathy (guest):
Then the other thing that I would also say is, and this is a very uncomfortable subject, but I’m going to bring it up too that, and I have had two potential clients come to me where they had that happen in their business that their bookkeeper was actually stealing from them.

Dominic (host):
I’ve had that conversation. I probably have that conversation about twice a year. It’s horrible,

Kathy (guest):
And it’s absolutely horrible. And the reason why that might happen too is because you’re thinking, Well, I’m just going to give it all to one person. You know, they can do all the stuff, but you don’t have the proper controls in the place. And in the finance world, we call this internal controls. So essentially, one of the basic, basic ones is that you should never have one person. Obviously, if you have your spouse doing this, it’s a whole, whole different story. But if you’re paying someone to do this, even if it’s an office manager, that they should never be cutting a check, meaning writing a check, putting it in your financial system and reconciling it, because someone can fictitiously put that in, put it under their own account, or maybe put a fictional company together and basically funnel their money to their bank account. So you always have to make sure that you have some type of balance, checks and balances in place so that you can see. And it could be simple things like, for example, you ask them once every three months to give you a vendor report out of the out of your QuickBooks or whatever accounting software you’re using, and you go through find home and say, well, these are the vendors that I have. Is there anything unusual in there? Also looking at your bank accounts statements and just kind of glance through it. Is there some things that don’t make sense, so that you have this oversight of someone you know, not just one person looking at the money, but you have two people. And it doesn’t have to be you, it could be someone else that you trust that can do that, but you at least have two people looking at the money versus just one.

Dominic (host):
Yeah. And I can appreciate that. This is an awkward conversation, and yet Kathy and I are still both happy to jump into it. I mean, you’re, you’re on the finance side, so you might see it more often than I do, but I still see it about twice a year, yeah. And it’s, it’s bad, because, you know, even when you go to the police, they’ll tell you right away. Well, good luck trying to recollect that. Good luck. And then the police will also turn to you and say, you should have had better controls in place. You allowed this to happen, and now the owner’s stuck, just like, you know, fish or cut bait. I gotta get out of here. This is just a bad situation. The only thing I would add is this is if your spouse is currently doing your books and they’re worried about having somebody else come and do the books, because we can’t trust the person. The person, then say to your spouse, why don’t you be our soft internal auditor, let the bookkeeper do their thing, and you come in and check on them every month or two, just to keep them, you know, on task and on point. But when we get to this work in progress reporting that I want to talk to you about today, we can’t have good WIP work in progress reporting, unless we’ve got clean numbers anyway, so it all goes hand in hand.

Kathy (guest):
Oh yeah for sure. So and I do love, and I will go back that. I do love that example of, if you don’t feel comfortable someone else doing the books because the spouse wants to do it, it’s so it is. It is going to be so beneficial if your spouse is actually or whoever you trust looking over the books. So you’re not handing the all the keys to the kingdom to someone else, and you never should be. You have someone who’s trust you trust look over but they’re not the one actually doing things. And keep in mind that if they have questions, the good bookkeeper will provide answers. If they’re saying, Well, I have no idea why, or if, if you see that there’s something going on, then just find yourself on your bookkeeper. You can always do that, but it’s good that you have two people doing your books. Always, always good two people doing the books.

Dominic (host):
I actually have a list of red flags for if your bookkeeper is stealing from you. I don’t actually talk about it much because it’s negative, and I try not to focus on negative things. But if anybody wants the anybody wants the red flags report, send it off to me, or you can reach Kathy as well. I’m sure you have your own systems for figuring those things out, but there’s always you just mentioned it. If somebody’s never getting you the reports you ask for, if there’s always an excuse why they can’t get you a report, there’s a reason. Oh, yeah. And it is time to get very curious and very ornery about your curiosity, curiosity, and it

Kathy (guest):
Might not be something sinister that they’re stealing from you. It just might not be that they’re just not good at what they do, or they might not have the capacity, which is not serving you as a business owner either, because now you’re not getting the information that you need.

Dominic (host):
I feel like we now have a two topic interview. Look at us. Look at how efficient we are. Okay, listen, this is people who manufacture and work in progress. Reporting is a big deal, but a lot of people may not have heard of it or understand the benefits of WIP reporting. Can you take a second and just take us back to zero? Why is WIP reporting important for those of us that manufacture?

Kathy (guest):
So WIP is an important part if you’re manufacturing, and also if you are installing these particular cabinets in your customers. Because if you’re just manufacturing, then you’re really only concerned about your inventory, and when you’re actually, you know, building these types of cabinets. But if you’re also installing them in your customers homes, that means that you are getting a lot of money up front and your you know your cost is going to come through later, especially if you’re using a lot of other people that doing labor, for example, that you’re going to be paying them to install these cabinets if you don’t use the Work in Progress Report adjustments in your financial statements, your P&L, your profit and loss statement, is going to look like a roller coaster, because you’re going to be getting a lot of money up front, but the cost, for example, for labor, is going to come later on, like maybe even two months from now or three months from now, who knows, and you’re going to get a lot of money up front, it’s going to look like you have so much profit, and then the cost is going to come later, and again, it’s going to look like you’re losing money.

Dominic (host):
So You know, the I always think about the Knights of the Round Table, and I know it’s a made up story, but it’s a really good visual, right? The Knights of the Round Table, Lancelot and everybody else sitting around the king. But the reason that the Knights are there is to advise the king. They’re the advisors from different parts of the kingdom, and the strongest leaders always seek wise counsel. They just know they can’t do it on their own. And if you ever watch the news and you see the president giving an address to the country, there’s always a bunch of people in the background, right? I’m not talking about the the guys in dark suits with black glasses that have that earphone those. That’s a totally different job, and we don’t talk about that on the show, but the rest of the people around in business suits and stuff, those are the advisors to the President. Did the President doesn’t know how much we just sold in fish to another country, but there’s somebody in that standing behind him or her that does, and so they’ll turn to that person saying, how much did we sell in CoD to this other country? Right? And that person will just have the answer. They have wise counsel who knows their who knows their area of expertise, and that’s where you and I come in. We’re that wise counsel who’s in the background, ready to advise the president. Now we’re talking about a company president, not a country, but that’s that’s where you need these advisors. Because if you’re going to go and redevelop a raw chunk of land, because you want to build a 20,000 square foot facility to manufacture, you can’t just walk into the bank and go, Hey, my name is Charlie. How you feeling today?

Kathy (guest):
We should work that way. Unfortunately, maybe

Dominic (host):
it used to. Maybe in some small towns, it still does. Maybe, maybe, yeah. So the what’s when you’ve done this whip reporting for companies? This might be a bit of a difficult question, but can you tell us a story about somebody, what they were like before they started using the whip report and after the whip report. Yeah.

Kathy (guest):
So recently, I worked with a client, and when I came in they they was the financial just didn’t make sense. As I’ve said a lot of the the number one way for you to realize that you need something like this is if you look at your profit and loss statement and you completely lost and have no idea what’s going. On. So one times you’re making money, then you’re losing money. And it just doesn’t make sense. Like if you are making these cabinets and you’re installing them, you should be making money, especially if you know what your margins are. But if one month you’re making a lot, and then you’re not making any money, or you’re actually in the loss that that’s a clear indication that there’s something going on. So when I every time I go and I work with a client, I do an assessment of their entire bookkeeping and accounting, because I want to know who’s doing it, what they’re doing it, how they’re doing it, and if we need to make adjustments like this. And that was when we started working that there was no whip reporting. And then we gradually started introducing this, and the financials at the end look very different, and we actually realized that we’re making money, but the whip wasn’t there. So but I will also say for work in progress, reporting to work, you really need to have systems and processes in place, because you will need to have information on how much you are actually, for example, if you’re if you’re selling these cabinets and then you’re installing them, you need to know how much the job is actually going to be for and what the cost is going to Be, and then you’re comparing that to your accounting ledger. We call these ledgers. So your accounting information how much you have actually billed and how much cost is still left for these and that is going that is a very important information when you’re comparing whether you have underbilled, meaning that you have actually spent more of your money on there than you have actually received from the customers, or you have overbilled. If you ever want to be in a position, you always want to be an overbilling position, because that means you have gotten more money up front than what the cost has been. So that’s what we’re really trying to figure out, whether you have overbuilded under billed in this whip report. And then we can figure out again, because we know how much we still need to get in the future, because how much we have built, we can figure out what our cash is going to be in the future, that is important, and then how much cost is still going to come in the future. So we know what money is coming, going to come in the future, and what money is going to come out in future. And that is such an important thing, not just because it’s going to tell you where you are right now, but also where you’re going to be in the future. Yeah,

Dominic (host):
so let me, let me go to I know that’s a lot. It is, no, it is a lot. But you know what I was thinking about is just one thing. How does the business owners face look before whip reporting and after whip reporting and the face is just me being sort of really basic, but what? What’s the business owner’s attitude like after whip reporting is in place, accurate whip reporting? Oh,

Kathy (guest):
it’s completely different, because now we know exactly if we are making money on these particular jobs, on these particular projects, because it might be that we our cost estimation was completely off, and now we’re over budget. My goodness. Now you know, as the job is or the as the project is happening, versus later on, three months later, and you’re like, where did all the money go? Now you know exactly what’s happening on that particular project. And as you know it maybe there’s certain things that you can do to mitigate that risk and to actually, you know, hopefully keep the cost lower so, but the the point is that you have the information, and you have it all in one spreadsheet. You can, you can look at it every month, figure out where you are, and you know exactly how much money is still going to come in. And because you know that, then you can figure out, okay, I need to up my sales, because this is not going to be enough.

Dominic (host):
You have the data to make decisions. Yes, exactly data to make decisions. I wonder if other people have the same question as I do, and this is such a junior question, I apologize, but I can only be honest. How accurate is WIP? Is it down to yesterday, or is it within a week, like if we’re looking at work in progress reporting, how specific does it really get?

Kathy (guest):
This is a really great question. WIP is only good at the time that it was run? Meaning so if I run a whip report today, it will only be good today. Tomorrow, I will have to run another whip report to get the information, because you’re gonna get more costs in. You gotta get more billing in. So it’s only, it’s a snapshot. It’s only if you were take a picture of your financial information. It is only as good as that particular hour in that particular minute. So if you need, and generally you don’t need WIP more than once a month, and if you do, there’s tools that you can use that, and you can certainly put that into your processes. If you need it weekly, I wouldn’t go you don’t need a daily but if you were to need it weekly, you can certainly do that in your accounting processes if you wanted to, but that means that you’ll have to constantly. Only be on top of your numbers, and your bookkeeper will constantly have to update your numbers to to get that information. So yeah, to ask you a question,

Dominic (host):
Bill, yeah, like on a six-month build where, let’s say I’m doing the lobby of a beautiful new building, and this is architecture millwork, right? It’s just a long process with multiple elevations. How many whip reports would I run? Or is it as many as I’d like, as long as my team can keep up, you

Kathy (guest):
can run it every hour if you want to.

Dominic (host):
I’m sure they’d be so happy.

Kathy (guest):
Yeah, they’d be ecstatic about that.

Dominic (host):
Yeah. I mean, in truth, millwork isn’t produced that as that fast, so on a regular basis, running it weekly. For instance, if we ran it every Friday and looked at the previous week’s production and then we reviewed it every Tuesday, from that, would that be reasonable to give us an update on how our accounting was going? Or is that a little too much you can

Kathy (guest):
if you want to it. And again, it really depends on if your bookkeeper is keeping up with your numbers and making sure that you know all the bills are entered in, and that you have all the payments from the clients in, because that is the accounting data that you need updated. Because as you’re selling those particular projects, that’s not really going to change that much. Obviously you might have change orders, but that’s not really going to happen that often. So you have the cost and the selling price set already. The thing that’s really changing that much is all the costs that come through and all the Billings that you need to do.

Dominic (host):
So it sounds to correct me again, I don’t know what I’m talking about, right? Let’s establish that first, but it sounds like the pace might be set by how quickly the invoices are coming in from vendors, right? So if I’m getting, if I’m getting invoices monthly or at the end of the month, and then they send it within two weeks after, I might want to align my whip reporting with when those invoices are coming in. So if I don’t have daily invoicing, I don’t need daily whip reports. It’s not gonna, it’s not gonna change.

Kathy (guest):
So, and let’s separate this with reporting for adjustment for the financial statements is only going to be done once a month. If you need whip reporting in a real light, real time with reporting because you want to make management decisions on on this particular on this particular data, then you can have it anytime you want, but it’s not going to end up in your financial statements more than once a month, as you’re running your profit and loss statement, for example, for April it’s going to be done. For April, it’s not, you’re not going to be doing it every week, because it’s just, it’s, it’s going to drive your county people crazy, and you’re going to have a lot of mistakes. So let’s put that aside. So for management decisions, you can run it however much you want. You can run it weekly, daily, if you need to, if you have people to actually do that. But for the financial information, I would run it at least monthly. So you need to have it at least monthly, and that is going to end up in your profit and loss statement adjustment. So I hope that makes it clear. Yeah,

Dominic (host):
it does for me. Thank you. I appreciate it, and I’m glad I asked the question. I’m not too worried about sounding dumb. I just asked the question I want to ask. I’ve given up on that’s the best. Yeah, just, but because I because I’m curious. You know, if you want to use this tool, you can get addicted to using it too much and having the data, having the data, but if it starts to get redundant, or we’re not, you know, we’re producing the report, but nobody’s looking at it, well, that’s a waste of effort as well. It’s exactly, doesn’t make sense, right? But if I’m growing this business, I need to understand this report. You know, imagine two shops across the street from each other. They do the same thing. One has a really good sense of what their work-in-progress accounting is, and the other one doesn’t. It’s only a matter of time before the one that has good data starts to make better decisions. And those better decisions, you just start to, you know, a horse race is only won by a nose, but pretty soon that nose becomes a length, becomes a full wrapper on the track, and then you’re a completely different business than the other guy across the street who’s just really left wondering what happened and how do we lose money on that job. We’ve been on it for six months. I don’t want anybody listening to this show to be in that situation. And

Kathy (guest):
that’s and that’s also a good point too, is because a lot of times, first, I wouldn’t even say a lot of times, people don’t even look back onto job and figure out what happened, what went wrong on this project. So if you’re doing post do here.

Dominic (host):
Just so you know they do here, we call that the end of job report. And everybody’s laughing right now because they they probably already knew I was going to say that, but please, that’s

Kathy (guest):
great. So I call these post mortems. So at the end of a project, at the end of a job, whatever you have, it’s great to take it doesn’t have to be a long, drawn event, but you take a look at the financials, when did where did you think you’re going to be? Where did you end up being, where you overall, under what you thought it would be, in terms of finances, what went wrong, but also what went right in terms of, oh, we actually did this better than we thought we would. Hmm, how can we replicate that in the. Next project, in the next jobs, and also, not just in terms of money post mortem, but also in terms of time post mortem as well, and in terms of quality too. That is super important. So looking looking at it from a holistic perspective, because you could be under budget, under time, but the quality wasn’t good, and your customer is a problem now, because they’re not happy. So that is a problem too. So looking in from all three perspectives, you want to balance those three out.

Dominic (host):
I love it. Thank you. So

Kathy (guest):
if you have a work-in-progress reporting, you you’re actually doing many post mortems every month. Whenever you’re looking at the work in progress report, because you’re you are having those types of conversations. Hey, this particular project is having a little bit of issues. And I will also say too, and we can get more into details, that if you using purchase orders in your finances, that is a great thing too, because now you will know how much you have contractually obligated already in the costs, so you will know how much cost has already come through, even though you haven’t actually paid for it. So that is super important. And all these

Dominic (host):
small systems that come together, people always say, what’s the one thing I can do to change my business? And you know how sometimes you say, it depends. When I ask a question, there is no one answer. There’s, there’s no one thing you can do. It’s everything that you do. It’s, it’s a combination of the little things that all add up, right? If I if, if somebody was to say, what’s the most important brick that you would use to build that wall, I would say, well, all of them. I mean, the foundation bricks are important, but it doesn’t mean they’re more important than all the bricks above it. We have to build the wall no matter what. And so people often get caught up. They’ll say, hey, Dom, or maybe Kathy, what’s the most important book I can read right now? I’m like, I don’t know all of them. Just go read a book, read a book and then read another one, or listen to an audio and listen to this podcast. But don’t stop you know, you have to continue on forward. And what’s the most important report? Well, there are some that are more important than others, but you got to look at them all. Well,

Kathy (guest):
the thing is, what is happening currently in the business? So you want to prioritize it, because if you just do everything, it’s going to be completely overwhelming and but it makes me want to take a nap. You know? It’s you’ve prioritized it, and that’s what I also do when I go into the business, like there’s everything that we need to fix, but we gotta start at the thing that it’s the most important right now, and then we chip away at other things. And you know, before you know it, six months has passed, a year has passed, and you have a completely different business because you have tackled all of these things versus and if you’re trying to do everything at once, you know what’s the best way to not meet a goal? Make 20 of them? Oh, right, yes. Overcomplicate it. Yep. Over complicated. Complicated. So you do small you do these things in priority, in what actually needs to happen the most, and then you tackle everything else.

Dominic (host):
This has been great, really, good, awesome, deep dive into work in progress reporting. Don’t we have exciting lives? Hey, Kathy, honestly, this has been great because I think a lot of people have these questions, and they don’t really know where to get this kind of information. So I’m glad that you agreed to come on the show and share this, and a lot of people have never even heard of a CFO, much less a fractional CFO. So I’m glad you’re here to talk about that as well. But if people want to find out more about you, how do we find you in this big, wide world?

Kathy (guest):
So you can either connect with me on LinkedIn, but also because we talked about the working progress report, and I know this is a we kind of dived a little bit into it. But if you wanted to see a video of how this looks like and how your financials would look like if you don’t have it, and how your financials look like after you have it, and a spreadsheet that you can use to do this, you can go to Newcastle, dot finance, slash cabinet profit, and there is going to be a work in progress video for you. I really encourage you to to go and look at it. And there’s also going to be a work in progress spreadsheet that you can download and you can use for your purposes.

Dominic (host):
Wow, that’s so nice of you. When did you find the time to build that?

Kathy (guest):
You know, it’s here and there.

Dominic (host):
Thank you, Kathy, that’s so nice. So hold on, Newcastle dot finance, forward slash cabinet profit. Yes, exactly. Well, I’m going to go look at that right after the show. Thank you. I didn’t realize you built that. All right, and sorry because I was writing it down. Tell me one more time what I can expect when I go there. Newcastle

Kathy (guest):
finance, Newcastle that finance slash cabinet profit. You’re going to have a work-in-progress video, and there’s going to be a work-in-progress spreadsheet that you can download and use for your purposes as well. Nice spreadsheet.

Dominic (host):
Okay, well, thank you. This has been fantastic. I think you probably earned yourself a spot to come back again one day.

Kathy (guest):
Oh, thank you.

Dominic (host):
I would love it. You. Yeah, that’s great. And folks, if you have other suggestions for finance topics, let us know, and we’ll put them in front of Kathy one day and see if she wants to come back and talk about them again.

Kathy (guest):
Awesome. Thanks so much for having me on Dominic. This has been, this has been really, really fun.

Dominic (host):
Good, good. Thank you. Have a great day. You too. Bye. Bye.

Dominic (host):
You WELL, WELL, WELL, WELL, was that a juicy episode or what I told you, this is crazy stuff, and most people in your city, in your town, in your region, in your state, if you live in the US, in your province, if you live in Canada, I don’t know what they’re called. In other places in the world don’t use tools like this. They would never, ever speak to a chief a fractional CFO. We learned about CFOs. We learned about fractional CFOs. We learned about whip reports. We learned about how to use them. It is a crazy next level report, and it’s one of those things where information is power, that information is out there. It’s in your business, but ignoring the information doesn’t mean it’s not relevant. So how are you going to put this in place? What did you learn from Kathy? I was trying to think about the training that I could do right now to add value to this conversation. That’s already been fantastic. And what I want to talk to you about today is the profit pack and all the tools in there to get you started, because you might not be ready to talk to a fractional CFO like Kathy, right? But first I want to talk to you. Wally from Minnesota, sent me a text message. He goes, Hey there, Dom, just wanted to shoot you a quick thank you for the free download. Finally, help me nail down my estimates and actually see some profit. You’re a lifesaver. Appreciate all the tips. And then this is where his he puts a little dig in the text message, keep them coming. Gotta run time to check the ice fishing holes skull. So and he got the Go Back report, which some of you have talked about. Actually, it’s in the profit pack. And then I want to give you an update on somebody that’s in the construction millionaire boot camp. He actually runs a cabinet shop, a growing cabinet shop, and he decided to take part in the construction millionaire boot camp. It’s a six week course, and it lays out all the foundations for you. Anyways, this is his update. I think this is from the second week. This is what changes he’s made in his business in the second week. Haley and Dom coach. Lee is the one who runs boot camp for us. Hey, Lee and Dom. I just want to give you a quick, maybe not so quick, update for the week first the shop processes. Remember, this is week two. All we’ve covered so far in week one is the mindset of success, much deeper than we can go into here on the show, obviously. But based on what he learned in week one, this is what he already accomplished by week two, right? First, the shop processes got three of the four process stations up and running. With one more to go, our stations are as follows, cutting, processing, sanding and assembly. I really hope these stations, I really hope, with these stations up, we can start refining a process that’ll become what I call our elevated shop process, that will give us the ability to efficiently make cabinets in a predictable way with anyone we have working on the station. Okay, imagine that. That was all he accomplished this week. But no, Jason. His name is Jason. Is kind of a rock star, and this is the rest of the email our homework this week. I spent an afternoon with a nice warm latte. So he went and got a coffee right, detailing who my ideal customer would be to start I have three customer avatars representing each of the primary markets. So he knows he’s got three different markets he can go after consumer, new home builder or remodeler that he wants to dig further into now, because the consumer is really at the top of the pyramid. He says, I’ll go with that one. So I want you to listen really carefully to how he defines or identifies his ideal customer as a homeowner, and there are some definitions in here, even I have never considered and I want to give a big shout out to Jason for making this observation, the better listen. I’ll get back to reading his letter in a sec. The better you and I understand our customer and the better we understand their problems, and we can repeat their problems back to them, the better we can do that, the more they know you and I have the solution. That’s why we spend so much time understanding the perfect customer, because they say their words a little different. They see the world a little different. I need to know, for instance, a residential client, so, like, a homeowner cares about different things than a property manager cares about. And so because they care about maybe the same things, but in different ways, they’re going to use different words to describe those if you describe their problem back to them in a way that uses the same words as them, they know you get it, and then you get the job, and you get to help them, because you’re a solution provider. You’re not selling based on cost. This is about profitability, helping people with their problems and adding value to the process. Anyways, let’s get back to Jason’s email. Here’s his definition. Of the ideal customer he’s probably got, I’m going to say 20, maybe 25 bullet points here. I’ll just read them as bullet point. Let me take a drink of water first. All, right, home value, over 750,000 wife drives an upscale SUV. Husband drives a luxury or sports or EV electric vehicle. Family lives off one income. The spouse is social and frequently has lunches with friends, taking kids to school and school activities. Both the husband and wife are fit and care about their health. Are you starting to get a picture now of Jason’s ideal customer like he’s doing a really good job of this, right? The family rarely eats junk food when they go out for dinner, it’s commonly a mid to upscale restaurant. They care about their appearance. Their social status is important to them. They care what their friends and co workers think of them. That’s important, guys, that’s really important to know continuing on. They associate price with quality. They value the experience and expect a good experience. Family has two kids. They have dogs and cats for pets, right? Kids go to a good public school or a private school, so they invest in good education. The family enjoys travel and go on vacations at least twice a year. They appreciate home value and investing in things that increase home value. They see their home as an investment. They commonly own a second vacation home. Let me break there for a second. I was having a meeting with one of the coaches that works with Lee on our team, and we were talking about a customer, a prospect, you know, somebody who contacted him out of the blue, and he was trying to set an appointment with the person. They’re like, well, I can’t we gotta go to our place up in Arizona. And I said, Well, hang on a second that is a great indicator of a perfect client, because you’re talking about their primary residence, but they’ve got another place in Arizona. So that’s exactly this definition that Jason is giving us here, right? They commonly own a second vacation home, their purchases align with the image they want to portray. Here is the line that I gotta give Jason a massive high five for. They see the things they purchase as trophies, a way to see the money they earn. Think about that line for a second. What are you doing in your cabinet shop, in your mill workshop, in your closet company, in your furniture company, what are you doing in your process to help your perfect customer understand what they’re getting from you? Is a trophy, a way to see the money they earn going on with his definitions. They’re not looking for the lowest price. Discounts do not incentivize this family to purchase. Oh, that’s a great one. They live in a new custom home, rather than a common track home. If they were to update or remodel, they would use an interior designer to help them. They’re college educated. They work in finance, medical or law. They have new wealth, not old money. They give to charities and supporting community. They go to charity events. They appreciate their status and they like helping others. They appreciate success stories. They are connectors. They like connecting people to others who can help them achieve their goals. They pay when expected to pay. They are welcoming and have them let fortune go to their head. Okay, pretty cool, right? All of this came from week two of a six week business coaching program that Jason’s in the world. Is what you make it, folks, and Jason is making the most of this, left, right and center. You might go, Wow. I mean, this guy already did something impressive up top in that, in that email letter, and then Dom Just read the definitions. Well, hang on, Mr. Jason is another breed. He used chat GPT to create a picture, using AI to create a visual picture of the people, which is obviously attached to the email. Can’t share here. Okay. Jason goes on, okay, I’ve determined an exit strategy, and I’m reverse engineering that journey back to where I am today. I’m finding this process to be incredibly difficult. Is I don’t know what a 5 million in revenue shop acts or looks like, so I dream and pretend I do. Let me stop for a second. I’m so glad he said that, myself and my coaches, we do know what a $5 million shop looks like, smells like, feels like, acts like, what kind of challenges, what kind of opportunities, what kind of people are in there, what kind of people challenges they have, kind of customer challenge. That’s our business. So we understand that. So Jason’s done a good job of getting on the fast track by working with us to see that in advance of getting that right smart. I could go on, there’s more, there’s more out here, but anyways, big high five to Jason for his work here. Listen, for those of you who aren’t sure about what business coaching could do for you, we’ve also developed something new. And this came from a family in Florida, Italian family. These guys are like my cousins.

Dominic (host):
They’re so awesome at. They weren’t sure which coaching program was right for them, but they wanted to do something. And so a couple of months ago, we created something called the Business Operations audit. So it’s not full on coaching, but what it is is a massive assessment program that lays out on paper. Here’s the steps you take after we’re done this big assessment. Do this, do this, do that. Here’s the priority. And they went and kind of did it on their own. It’s called the Business Operations audit. It’s pretty cool, if you want to ever know about that, you know, it includes a five year financial forecast, it includes a big written report. It includes a behavioral style assessment so you know how to go out and interact with your people and your customers. Again, it’s always just shoot me a text. I like to keep it simple. My cell is 315-903-7853, just say, Dom, let’s talk. All right. The the download, the professional development tool I want to give you today to support what Kathy was talking about is the profit pack. The profit pack. The profit pack has, I’m just looking here on another screen, five, five different documents in it five. It’s big. It’s a big deal. You’ve got a professional development tool called How to calculate my revenue responsibility per hour. We’ve got another professional development tool, which is the healthy, wealthy, wise planner. We’ve got another professional development tool which is an interactive workbook. It’s the one hour job estimate calculator. Then we’ve got the professional development tool called the ultimate get things under control guide. And then we’ve got the workbook, where are my blind spots? So one, two, just checking in five, in those five documents, if you were to just give yourself a day where you pour yourself a coffee and just sat down and noodled through those documents, where would you be at the end of that half a day versus where you started? Would that put you more on the path to growing your business, or less on the path? And I hope you know that would take you forward the direction you want to go. That’s why I always start these episodes by Hey guest, who the heck are you? And how is it you come to be speaking all these forward facing contractors all over the world. You are that forward facing contractor. Anyways, folks, let’s wrap it up here. I appreciate you checking in again this show. It’s just a hold over until you and I can have a glass of cup of coffee across the table, face to face like live humans one day. If you’re in Denver, I’ll be in Denver later this year. If you’re in San Fran, I’ll be in San Fran later this year. If you’re in Calgary, I’ll be in Calgary speaking for energy, which is a software company in cabinet space, so I may see you there. So anyways, I look forward to that. Until then, folks, we’ll see on the next episode. Have a great day.