On The Gross Profit Podcast, we often focus on explaining and analyzing ideas that can help your business bring in more profit. Today, we’re shifting our focus to talk about what these issues look like on a daily basis.
Garret Carragher will share some of his experiences wrapping up the old year and preparing for the new one, and James Kennedy will reflect on the lessons learned on a trip to a conference. Through it all, they offer their perspective on how issues arise in the real work of procurement and how to respond in the moment.
On this episode you’ll hear:
- The importance of doing random stock takes
- How to deal with retention
- Lessons from attending a business conference
- Profit concerns as you end one year and begin a new one
If you’re interested in how the issues we talk about manifest in day to day life, then this is one episode you won’t want to miss.
- Free Chapter of “Profit Leaks” by James Kennedy and Garret Carragher
- James Kennedy on Twitter: @JamesKennedy
- Procurement Express YouTube Channel
Transcription of this Episode
The Gross Profit Podcast is your one stop shop on the path to profitability. Each week, we share authentic advice on the positive, practical steps you can take to make the company you love more profitable. If you’re looking for a positive plan to help you avoid common spending mistakes, control costs, and increase your profits, then this is the place for you.
I’m Ryan Cowden, and this week we’re joined by James Kennedy and Garret Carragher. In this episode of the Gross Profit Podcast, James and Garret share the details of what a week in procurement looks like. On the Gross Profit Podcast, we often focus on explaining and analyzing ideas that can help your business bring in more profit. Today, we’re shifting our focus to talk about what these issues look like on a daily basis.
Garret Carragher will share some of his experiences, wrapping up the old year, and preparing for the new one. And James Kennedy will reflect on the lessons learned on a trip to a conference. Through it all, they offer their perspective on how issues arise in the real world of procurement, and how to respond in the moment. On this episode, you’ll hear the importance of doing random stock takes. We’ll look at the phenomenon of shrinkage in your stock, and how stock takes can help you catch shrinking inventory before it’s too late.
Then we’ll talk about how to deal with retention. Some clients like to retain a small percentage of their payments for up to 12 months to ensure their product goes well. We’ll talk about how to work with these clients, and get that retention money back in your accounts. After that, we’ll discuss James Kennedy’s lessons from attending a business conference.
He’ll share what it was like presenting and what he learned for next time. And finally, we’ll share some profit concerns to consider as you end one year and begin a new one. We’ll talk about what to do with your extra cash, and how to anticipate clients who may not want to pay you at the end of the year. If you’re interested in how the issues we talk about on this podcast manifest in day to day life, then this is one episode you won’t want to miss.
There is a lot of actionable advice in this episode, so grab something to write with, because you’re going to want to take notes. As always, I’ll be back on the other side to wrap up any loose ends. Without any further ado, here’s our conversation with James and Garret.
Welcome, everyone. It’s James Kennedy here. CEO at ProcurementExpress.com, where we help hundreds of companies safety spend billions of dollars each year. I’m joined by the secret CFO, Garret Carragher. Garret, how are you?
Good, James. It’s all good. Another totally sunny day here in Kildare. You know, they call it the Torah Bright county. Do you know why that is?
No. Tell me.
It’s full of horses. That’s why. They’re full of studs, horses who’ve won a lot of races. They come out here to stud. The national stud is actually down here, and it’s full of horses, which, hundreds of millions, or not hundreds of millions. Millions, anyways, and lest they rocket abroad, which I think was more hundreds of millions, but they have the horses down here stud. You bring down your mare. They charge you 100,000 Euros, and the stallion gets ahold of the mare, and away you go, and you have a foal, and the foal starts winning every race around the world. So, there you go.
Yeah. Beautiful part of the world down there. Is it my imagination, or is it when you go down there and every person you see in the shop has something in the head, or a limp, or something from a horse actually kicking them, or running over them, or whatever? Seems like it.
It could be. It could be. I did see recently that Irish famous rockstar, Ronan Keiting, his ex-wife, I can’t think of her name. Vivian Conley or something. I can’t think of her name. Ivan, I think it’s. Ivan Keiting. She was big into horse riding, and she actually got kicked in the face with a horse, and she actually had to go in for an operation and broke her jaw and everything, so it just shows you it’s no walk in the park, you know?
Yeah. Funny enough, I just had a taxi driver talking about Ronan Keiting. He brings him out to the airport here. He lives in the town I live in, so yeah, he’s in the news a lot. Maybe he’s not your main tour topic of financial austerity. You can go and look at Good Morning on YouTube to go and figure out about that, but here we are.
Listen, it’s a big week. I thought we would delve into a little bit, two topics this week. One is a week in the life of the secret CFO, background into the day to day trials and triumphs of working as a financial controller, and also we did an event called the business show in London. We’re going to go run through that as well, give people some tips on event marketing, having done it for the first time, so now I feel fully qualified to give out quantitative advice on it.
But let’s start with your week, Garret. What were you up to?
This week, you know, in the business I work in we have a lot of stock, and the problem with stock is that it can get misplaced, become obsolete, be damaged, or not even received, and it can also disappear, as stock sometimes does. Now, this can be a big issue in some businesses. You think of, like, hospitality, with alcohol, and bottles of whiskey, and that kind of stuff. They can easily disappear, or get lost, or I think it’s called shrinkage. Have you ever heard of shrinkage?
Actually, you start off, you say, “Okay, we had so many of this bottle of whiskey. It should give us out 20 servings, and the 20 servings we’re going to sell at four Euro each, and they’re five Euro each, and then we’re going to buy the bottle for so much, and that should give us X number of profit margin on this.”
Well, what actually happens is the whiskey can sometimes vanish. It can sometimes shrink, and what really happens is someone is drinking it and not paying, and that can may be measuring it out wrong, maybe a barman is on the tick. You know, there’s so many issues there, and I don’t work in the hospitality industry at all, but that is a common one where you can have a lot of issues.
Now, in the one I’m in, we have stock, and the stock is actually quite specialized and also it wouldn’t be that small. You know, it’s not like a bottle of whiskey, you can put it into the boot of your car, and give it to your mate, then the local boozer, or whatever. These are kind of specialized products and they’re only really used by certain companies, or by certain companies to provide certain services.
So, it is quite difficult. It’s hard to understand where they might go to, but we had a stock check recently, just to keep an eye on it, and it did show up a number of issues which I’m trying to tackle, I’m in the middle of tackling at the moment. Just trying to understand where the items have gone to, do they even receive them? You know, the worst one for me, funny enough, is not actually the cost of it.
That is annoying, but what annoys me more, James, is the thought that we actually missed billing somebody. We actually missed the revenue.
Yeah. That’s something you might think about, but actually if part X is gone, that probably means I don’t really think it’s been nicked, if I’m honest, so I think it’s been used, and what’s happened is it’s been used somewhere, but whoever was doing it forgot to bloody allocate it to a job, and we didn’t bill it, so that’s really very annoying to think about, that we’ve put something out there, spent all the time, spent the money on putting the product out there.
We sent someone out to do it. They cost us a load of money. The people have got the product that want it; they’re willing to pay for it, just in bill. It would drive you bonkers, wouldn’t it?
Yeah. Well, that happens all the time. I mean, I see even in our business where the software runs, and just forgetting the support staff, have the user in for someone, or they do something, and they juts forget, or they’re in a rush, or whatever, and actually keeping, just, it’s very easy to do. Because sometimes, especially if it was a salesperson it would be one thing.
Oftentimes, the ops people don’t really have that sales mentality. They of course generally do, but you don’t really want people who are too focused on that, either. Especially on the ops side. You just want to provide a good service, but you’ve got to be accountable for everything, and they forget sometimes, you know?
But does it not get picked up by your … ? You don’t run a report at the end of the month, how many users per client or whatever, and you see suddenly, “Hold on, this is increased by two,” or whatever?
Well, what happens sometimes is, and this happened to sparkly, is that you have a very well meaning success person who, let’s say there’s a problem with the servers. There might be a bug, there might be a billing issue, whatever, and sometimes it might just out of the goodness of our heart offer more service, or hold off on billing someone until they feel like that bug’s been addressed, which might be a nice idea, but it’s very often or not the bug gets fixed and actually they forget to bill them anyway.
There’s a human element to this, as well. I think, like anything, it’s down to you do set a policy for it, and certainly when that happened in our instance we had to make some changes, but can sometimes come from a good place. You know, people just want to, I think ops people sometimes just want to deliver a good service. They focus on that. Not necessarily the financials, because they get paid the same anyways, so you know, tension’s not there.
Yeah. I understand that, actually. The skillset, the attitude, and the total process of someone who’s dealing in your success team is nothing to do with the billing at all, and nor should it be, I would think, anyway. They should be really focused on, “How do I keep this customer? How do I make them happy? How can I get them to buy more of what we’re selling?” So, that makes sense.
Then it’s probably down to, I would suggest to finance people, or whoever’s doing your revenue, or revenue recognition, and all that kind of stuff, to really track that and be on top, all over that, going, “Yeah, hold on, now, I see there’s an extra two people here. Explain to me in detail why we haven’t billed those.”
And they go, “Okay, well, you know, I promised them this place.” And that’s fine; when are you going to bill it? Three month’s time, or when this bug is fixed? And they go, “Right, I’ll keep an eye on that. I’ve written that down in my notes, in my comments, and I’m going to follow that up.”
Because I noticed the think, as I always say, James, what gets measured gets stolen, and I noticed myself, even this week, even though I had a problem with the stock, I had a massive success with debtors or people who owe us money, as they’re commonly known, and we had a lot of money owed from these different, from a few years back, and you know, no one had really reviewed these debtors.
And I started reviewing them. I was only in the business, now, eight months or so, and I started reviewing them about five months ago, and on top of that, now, we’re able to pull in a huge amount of cash to us, kind of sitting out there, that was never going to be collected, but even this week, on Friday, this week, we actually paid in money that we’d invoiced out in 2013.
And we hadn’t been able to collect it. I just could not believe it. I nearly started dancing around the office, but being an accountant, I just made a cup of tea instead. But it was really a grade A moment. When I seen invoices from 2013 being paid, I just couldn’t believe it, and the MD even said, “I can’t believe you got that money. That is unbelievable.”
But it just shows you, and then another success was in the business we’re in we have a thing called retention. Do you know what retention is? It’s basically if you’re doing a longterm project, the customer would say, “Okay, you’re going to,” it’s basically like a snag list at the end of the day, so they say, you know, “You’re going to do a project for us. The project’s going to be 100 thousand, or 500 thousand, or a million. What we’re going to do is at the end of the project we’re going to hold five percent of that in our back pocket, so if the project’s 100 thousand, we’re going to hold onto 5,000, and we’ll pay you 95.
And we’d actually hold that on for a year, believe it or not, 5,000 in our back pockets, so this is what customers say to us, and if nothing goes wrong within the year, we will give you the 5,000. Right? Now, when you start adding up how much this bloody retention is, it’s a massive amount of money. It is massive. It’s just sitting out there and you’re waiting to get this bloody money. Now, what has happened in our case, actually, they’re very good at tracking, my team are excellent at tracking the money coming in.
And so we get it, but what was annoying me was like, “Why is it there?” I started digging down into different invoices, and it turns out, then, there was a lot of invoices they were doing for one client and it wasn’t a project. Right? So, actually, stuff was done within the month. Within the month, you know? It wasn’t like a year’s time this bloody thing had to be finished and then there might be a problem.
Just think. We were doing work. The work was fully complete in the month, and we’re invoicing them, and instead of keeping 10 percent retention, so I said, “This is absolutely beyond the pail here.” What we did was go through our sales guy, we met up with them, we discussed it with them, and incredibly they’ve agreed to pay us all this retention, and this is a couple of hundred thousand we’re going to get into cash now in the new year, so it’s another massive success for us to get all of this cash in quickly when I know that it’s preached that cash is king. You know what I mean? You really need to be on top of it.
Now that money’s going to land us. That’s really money for nothing. That’s going to sit out for five months. We’re going to get it all back in January, so it was a good week on that side, not so good in the stock part. How’d you get on at your trip over to London? It’s good anyway. How did you handle the lot of books and the lot of leads?
I gave away about 100 Profit Leaks books, which is the book. You can get a copy at book.ProcurementExpress.com, and you know what it was very good for? This show is called the business show. It has been going for more than 10 years, I think. It is in the Excel center, which is a big venue. A lot of people there. I would say, well, there was about 1,000 stands anyway, so there were a lot of people there. It was a free access, which means anyone could go, which means it was very generic and it was sponsored or the headlined sort of personality behind it was one of the Dragon’s Den judges or investors, which is a TV show in the UK and Ireland aimed for people, the equivalent to Shark’s Tank, I think, in the US.
There was a good bit of that vibe. There was a good bit of aspiring entrepreneurs, people wanting to start a business. Students. It was a mix of people, and we put up our stand, my equipment stand. We had a nice video explaining what we do, produced by my wife at piehole.TV, explaining our video company. We had a nice poster of our app and how it shows you how you can manage budgets in real time.
We had testimonials from all of our review websites where we have six or eight different four and a half or five star reviews from different reviews, so forth. We’ve had all that put there, and then I had a panel dedicated to the book Profit Leaks, and the book definitely got interest.
You know, it’s funny, at these shows, people wander by a couple of times and try to guess what you do just by looking what you have up, and we did get interest out of it and the book was interesting to get people started, but probably the best thing I got out of it was that being so broad on the negative side, probably too broad for us.
We should rather go to, for example, we have cohorts. Customers, like marketing companies, or outsourced development companies, or facilities management, or construction. We should probably go to a fair just dedicated for those, but it did give me a chance to quickly pitch different sort of value props to different groups of people pretty quickly, and you got an instant view on what works and what doesn’t, so I would go, for example, if I was talking to an outsourced development company that offered offshore programmers, I would talk to them and I would say, “Hey, do you do fixed price projects?”
And I said, “Yes,” and I said, “oh, are some of them profitable, and some of them not?” And they go, “How did you know? Yeah, some of them are great, and some of them are train wrecks.” And that’s something we see frequently with our customers, in that they feel like they have to do a fixed price contract because that’s how they win the business, but then they have to get it in under that amount, and that’s how I would explain what our software does for that group of people where, if it was someone else, let’s say a group of care homes, I would go in and I would explain that, “Oh, do you have a lot of admin and time going to tracking rubber gloves and detergents and things like that?”
And they said, “Yeah, it’s a nightmare, and we spent a lot of time doing that.” And I said, “Great, I have the solution for that.” It was interesting, sort of quickly pitching what we do in different ways to different people, and seeing their eyes light up, or they go dead into a dead, thousand-yard stare, and then you know your pitch isn’t working, so that’s probably the biggest thing I got out of it.
Sounds very useful. I think the sincere, that all advice, this, with businesses getting out, being close to your customer, understanding their problems, understanding their needs, and then that allows you to think of the solution to fix them, you know, is super important, and I’d say you got a lot from that but it sounds like meeting all these different people in the one area at the one time gives you a really quick hit of, “This is what they’re thinking, and this is what these are thinking, and this is their problem, this is my solution, does it fit this? Does it fit that?” It must’ve been great to get all of that feedback so quickly on the one day.
Can I ask, who was the Dragon that was sponsoring? Were they there, or what was the plan?
It was James Khan, and James Khan was supposed to be talking at the same time I was, actually, so I was competing for him. His had about 500 people waiting for his talk, and consequently when I started my talk I had exactly one person in my audience, which was a bit of a downer, but I said, “It’s a very nice day, dear. Do you mind if I give my talk, anyway? Maybe some other people will come along.”
I gave it well, went through the book, introduced it, made some big promises about what an awesome talk it was going to be, outlined about the five areas in the book we have where there’s opportunities for cost control, or for improving profits. Counting, embezzlement, buyer management, contracts, and negotiation, and I whipped it up to a total of four people in the audience, at one stage.
I was getting quite excited as people came in, but it turns out that one guy just came in because he heard an Irish accent, and then he just wanted to say hi because that’s what Irish people do, and then yeah, so then I was back down to three, and then, yeah, so it was a little bit of a humbling experience, I have to say.
I have to work on how to sell the sizzle when it comes to more margin. I think we have to crack that one neck earth, because there were some other snafus that happened. For example, my talk wasn’t advertised and stuff. But it is interesting about getting people interested in more profit. You would think that would be easy, but not necessarily so.
Like, the talks about CRMs, and sales, and marketing, and Facebook advertising, giving people money. All of the talks where you give people money, they were packed out. My talk was about saving yourself money, and, well, we’ll have to work on that one next time.
Yeah, like I say, I think a lot of people, there’s so much hype in sales, and then on top of that sales itself is an exciting subject. You know, and they’re using their own techniques to make it even more sizzly, in a kind of way, so they’re going along and it has to be exciting, it has to be all this, that and all show girls and everything, and that’s the way they get it going, and people are looking at it and going, “Yeah, wow, sales, sales, sales.”
What they’re missing out on, and really that we’re showing people is that sales are quite hard to come by, and there’s actually a lot easier ways to increase your profit inside your company without having to run out all the time, looking for more new customers, and take your customers you currently have, and really understand your business model, and really drill down through it, reduce your costs, or move costs, or the CM for CM, or CM for less, and really make a lot more money quite easily, and it’s a lot, lot easier than going out, getting new customers all the time.
Yeah. We will work on that. We’ll evangelize this. We’ll make profit sexy. That was our week. I think I would recommend that if you’re going to think about doing events, get the target audience right. Like, a broad audience can be useful for that purpose. You’re either learning or earning. I would say going to that broad event was more in the learning camp than the earning camp for us, but that’s still important, you know?
So, having found that big win for that cash that’s coming in, Garret, do you have to redo all of your budgets straight away for next year with the extra money, or how are you going to manage that?
Well, we’re probably okay, because the cash will just … you know, it just sits in the bank, so it just increases your bank balance, so it’s just exactly what you want. I know I joined the company this year. I know last year they had a massive problem around this year. Not a massive problem, I don’t want to say that, but they had a significant problem this time last year around cash and getting it into year end, and all that crack, and you have a big customer, and a big customer who has a lot of power.
So, with the big customers, on it, is also a PLC, so when your big customers have the powers of PLC, what they always do at the end of the year is they won’t pay you because they need to hit a cash target. Now, I don’t think this company kind of realized that last year. I don’t know that, but I don’t think they quite caught that, and they were being told that there was IT issues and all of this rubbish, but I know for a fact that it was that they wanted to hit a cash target.
That was 100 percent what happened, so anyway, the company I was in didn’t really get paid, and they were in a bit of cash problems last year, so this year in anticipation of that, I already, two months or three months ago, I was emailing all of the managers, telling them to invoice as much as they could, to collect as much cash as they could, and to get all of their invoices out by the end and middle of November, because once we hit December, we’re not going to get paid, because this other large PLC company is just not going to pay.
They’re going to hit this cash balance, and no matter what rubbish they tell us, if they are short on money, they hit their balance for their shareholders, they will just stop paying immediately, and that message has really got across, and in fairness to the whole people in there, they really put the effort in, and they’ve boosted sales, and our cash is flying, so you can never have too much cash jams, as they always say, but at the minute we’re looking good.
This extra cash is going to come in January. We won’t have to redo any budgets or anything like that. We’re just going to tick along and keep the cash high.
Great. Well, listen. This week we did something a bit different. Just a week in the life of the secret CFO, and I think it’s kind of interesting, actually, just to review what happens, because then people can, if you like this episode, send us an email, James.email@example.com, and let us know, and we can do a bit more of it. We’re also open to listeners’ questions, which you can also send in.
If you’ve had trouble collecting legacy death. Maybe if you, maybe it just might inspire you to go back and look at some of your old debtors, and see if some of them … it’s never too late. 2013, which was six years ago now at this stage, I went and got it, so it might inspire someone. If you manage to collect any cash on that basis, let us know.
I should mention that there’s a couple of places you can reach out to us. You can get me on Twitter, which is just @jameskennedy. We also have a YouTube channel with tips and advice on controlling spend, and different ways. You can get that on ProcurementExpress. You can search for that on YouTube.
And I hear the other podcasters asking for reviews. If you feel like reviewing us, we would gratefully appreciate that. Maybe spread the news about the podcast. I think we’re about 20 podcasts in at this stage, and it’s time to take off the training wheels and start promoting the podcast more, and we’re going to be setting targets, Garret.
I’m going to get those targets, and we set targets for number of subscribers that we’re using in our dashboard, and trying to maybe hit that for Q1, Q2 next year. So, with all of that in mind, leave us a review. Send us an email, and hope you all have a great week. What was the sign off line we were going to start using, Garret?
Stay profitable, yeah.
Stay profitable out there, folks.
All right, folks, there you have it. That wraps up our conversation with James Kennedy and Garret Carragher. They shared a ton of valuable insights and advice today on the issues you might face while working in procurement. We also shared some tools and resources which will all be linked up in the show notes. Don’t forget to click on one of those links to get a free chapter from the book Profit Leaks by James Kennedy and Garret Carragher.
I hope you enjoyed our conversation. Please consider subscribing, sharing with a friend, or leaving us a review in your favorite podcast directory. Until next time, best of luck in all that you do, and we look forward to seeing you on the next episode of the Gross Profit Podcast.