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November 23, 2023

The Hidden Insights of Business Accounting

On this episode of the Gross Profit Podcast, James Kennedy sits down with Walter Miller
The Gross Profit Podcast
The Hidden Insights of Business Accounting
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Show Notes

This week on he Gross Profit Podcast – We’re excited to host Walter Miller, the founder and owner of Norman Professional Services, and as an expert in the field of business accounting and financial management.

This episode is a must-listen, especially for QuickBooks users and those interested in leveraging this tool for enhanced business financial management.

Delving into QuickBooks and Beyond: As a seasoned Fractional CFO, Walter unravels the secrets of business accounting with a specific focus on QuickBooks. His insights are invaluable for users looking to maximize the potential of QuickBooks in their businesses.

What You’ll Learn:

  • The Journey of a Fractional CFO: Discover Walter’s path to becoming an expert in financial management, focusing on his proficiency with QuickBooks.
  • Success Through Integration: Learn about real-world examples where businesses have substantially benefited from integrating with software like QuickBooks, particularly its 2-way sync feature.
  • Addressing Hidden Financial Challenges: Insight into the common yet often unnoticed financial challenges in businesses, and how Walter’s expertise provides solutions.
  • Streamlining Key Financial Processes: How the integration of advanced software can improve efficiency in payment confirmation and good receipt confirmation.
  • Trends in Financial Management: An exploration of the evolving landscape of the financial industry, focusing on the latest trends in accounting software and financial tools.
  • Optimizing Business Finance: Practical advice for businesses seeking to enhance their financial operations and fully utilize tools like QuickBooks.
  • Career Path Insights: Valuable tips for those interested in a career in financial management or becoming experts in tools like QuickBooks.
  • Looking Ahead: Walter shares his exciting plans and upcoming projects in his role as a Fractional CFO and in advancing financial management software.

Episode Highlights:

  • “Walter, can you share your journey to becoming a QuickBooks expert and a Fractional CFO?”
  • “What are some standout success stories of QuickBooks integration in businesses you’ve worked with?”
  • “Could you shed light on some hidden financial challenges that businesses often face?”
  • “How do you see financial management tools evolving, and what impact might this have on businesses?”
  • “What advice would you give to businesses looking to optimize their financial operations?”
  • “What insights can you offer to those aspiring to a career in financial management?”

Join us for this enlightening episode, as Walter Miller reveals the hidden intricacies and insights of business accounting. Whether you’re deep in the trenches of business finance or just starting out, this episode is packed with wisdom and practical advice.

Don’t miss more episodes of the Gross Profit Podcast, where we delve deep into the business world, bringing to light transformative stories, strategies, and insights.

Episode Transcription:

James 0:00  

I always tell our clients my job is to get you to a point where the answer to your question of how much money I have, you don’t go to the bank anymore. You go to QuickBooks because QuickBooks is accurate, it’s reliable and it’s timely. Welcome to the gross profit podcast. My name is James Kennedy. I’m the CEO and co-founder at procurement express.com. We take the hassle out of managing your company’s purchasing with magical features. And one of the main ways we do that is working with QuickBooks. So today on the show, I’m very happy to invite Walter Miller from Norman professional services, self-professed QuickBooks guru, and we’re going to talk about some of the search and rescue situations he’s faced with when he transforms the lives of his clients cleaning up their accountancy services for them. So Walter, How are you today, where are you speaking to us from?

Walter Miller 1:04  

I’m doing great, thank you very much. I am speaking to you from Oak Park, Illinois, just outside of Chicago. Right.

James 1:11  

And maybe you can just tell the listeners a little bit about you and your journey and Quick books, guru DOM, if that’s a word, your story so far,

Walter Miller 1:22  

I will say I’m an English major who wandered into accounting and I never found the exit door. When I was a very young man and I still had hair on the top of my head. I was an aspiring actor. And I discovered I hated being an actor and a waiter. So I became an actor and an accountant, went back to school, took some accounting classes and worked in public accounting for about two decades until I got sick and tired of preparing tax returns. And I left that behind and started this company almost 20 years ago. .

James 1:53  

Great And what can you tell us a little bit about, you know, the type of customers that you have, who is an ideal customer for you? And what do you find them?

Walter Miller 2:02  

I often describe us as an outsourced accounting department for small businesses. So we sit in the worker bee bookkeeper seats, we sit in the controller seats, and we sit in the CFO and advisory seats. Sometimes we sit in just one of those seats. And a lot of times we sit in all of those seats. Our clients are typically business owners, entrepreneurs, service professionals, who are really good at what they do. But they don’t have an accounting background. We work with a lot of attorneys. So a great example might be the attorney who’s a great attorney, they answer their phone, they reply to email, they show up to meetings on time. And because they behave like that their clients like them, they send them more clients. And pretty soon these people have built a business, whether they planned for it or not. And we’re encountering them usually at the moment where they’re going Holy smokes, what’s this Frankenstein monster I’ve created? And it’s time to, as one client said, it’s time for me to go from “being a little boy in the sandbox to an adult accounting system”.

James 3:09  

Yeah, I’m consider myself a business nerd. I tried very hard to build a business all my career. So when I hear these people who miss actually stumble into it and make a successful business employing people and growing up, sort of, I can’t help but get a little bit envious of that situation. But I guess it’s not all sunshine and roses. So certainly when I was starting out in business, I found it intimidating. I mean, I the number one thing I wanted to do is make sure the IRS was knocking on my door. And I wasn’t always entirely successful at that I have to admit. So what are the sorts of risks someone can get into or exposed themselves to when they are being successful at getting clients in the door, but they’re not paying attention to how accounting is done?

Walter Miller 3:52  

Well, I would say that I often asked prospects Why does accounting exist in your company? And when they sort of get over? How odd that question is? The answer is almost always because it has to, we have to file a tax return, we have to send invoices or money doesn’t come in, we have to pay people, nobody works for free. And those are all true, and they never go away that exists for every business I’ve ever encountered on the work in the world. I assert that what the big guys have figured out that the entrepreneur hasn’t is that accounting can have a secondary purpose. And that is that it gives us this information. It gives us all this interesting information about the health of our business and we may be selling three products and accounting is going to tell us which one’s not making money in which one is making money. We may sell to 100 clients accounting is going to tell us which 20 of those are the most profitable, and the list of questions that accounting can help a business owner answer just goes on and on and on. But all of those answers depend on the accounting system being good, being reliable, being efficient and being trustworthy,

James 5:07  

Being timely. I mean, that’s a big one, let’s face it, let’s be real here. Most small businesses never get beyond using their accountant, as a pathologist, why? You might have died six months ago. And he’s just going to show up and say, well, actually, I wish we got these wish you’d been a bit more on top of this, I could have told you earlier, but it’s too late for you. And you really have that fear as a small business owner, it’s all a bit overwhelming. And I don’t know exactly how it is in, Illinois, but certainly here in Dublin, Ireland, it’s a relatively business friendly place, but it’s still quite intimidating. Starting off from let’s say, your own practice doing your own thing. And there’s still quite a number of ways you can mess things up and hang yourself. You know, and especially you kind of have to especially first couple of years, like you have to really power through some difficult realizations when it comes to everyone knows vaguely or you got to pay taxes and so on. But if you really can get caught out beyond that. And so, here are the different levels so when you typically go in on a client, like what’s their biggest? Or they say, Walter, I really want to find out which product is going to make the most money or make me a millionaire? Yeah, what do I need to focus my business? Or is there something else that it’s a burning issue for them,

Walter Miller 6:27  

I wish they were coming up to me and saying, I need to fix my accounting system. I need to know how that but that is rarely the case. Usually you know, the kitchen is on fire, the basement is flooded. These businesses, that build organically, they reach what I call a complexity barrier, where the ways that used to work in the old days, were fine when you were small, fine when it was just the business owner. But as you get bigger, and as you scale, those methods start to show their limitations. And so in the accounting world, things start to drop, they can’t get their billing out on time, they’re not able to pay their vendors, a lot of times they don’t even know how much money they have. And those are all functions of an underdeveloped or immature accounting system. Taking just for example, cash, a lot of business owners, we encounter when I asked them, how do you know how much money you have? They say, well, that’s easy, I just go to the bank’s website, and I look and see how much money I have. And that is an act. That’s accurate to a point. But the bank doesn’t know about the checks you put in the mail yesterday, it doesn’t know about the checks you’ve received, that you haven’t deposited. There’s all sorts of it doesn’t know about the payroll that’s about to hit on, you know, in three days. So there’s a lot of information that the bank website can’t tell you. A good accounting system with QuickBooks, I always tell our clients my job is to get you to a point where the answer to your question of how much money I have, you don’t go to the bank anymore. You go to QuickBooks because QuickBooks is accurate, it’s reliable, and it’s timely. And that’s the source of record for whether you how much money you have.

James 8:14  

I mean, that sounds exactly what you need. Like in our world where it’s a purchasing you don’t know who you’ve ordered from what vendors you’ve agreed to, or what  contracts you’ve signed, you know, already things are still outstanding, and you have no clue. So all that has to be taken out of your cash in the bank and then coming up in advance. So tell me in terms of why is QuickBooks still the tool today in 2023? I mean, there’s 1000s, probably of accounting solutions out there. Why do you still, use QuickBooks been around for what 20 years now? 

Walter Miller 8:47  

At least? Well, I would say that QuickBooks got a jump on everybody else, they were the first people to really introduce a piece of software, where you didn’t have to be either a computer programmer, or have an accounting degree, maybe even accounting graduate degree to understand how to use. So they took a lot of the nuts and bolts of accounting and sort of hid it behind a much friendlier user interface. And to their credit, that was received really well, even back in the day when before the internet. And there was all that you could get was a QuickBooks Desktop software that you installed. So they built huge market share. At one point, I did think they had 85 90% market share. I don’t know what it is now. But I just know it’s huge. I think the reason QuickBooks still dominates is they’ve migrated away from the desktop, you can still get the old fashioned software if you really want it. And about 15 years ago, they really invested they saw that the future was going to be in an internet product, because that product when it was introduced was a hail, poor version of the desktop. But they’ve made it more robust and its ability to interface with other pieces of software. So like, many good software developers, they opened up their code to people who like you, people who do inventory management or time or whatever it is, and allowed them to interact with QuickBooks. So now you have QuickBooks often functioning as the center of an information system, but not alone in in an information system. The other thing I think, that keeps QuickBooks as a good choice is because, they’re so present, yet getting people to help you with it, and it’s pretty easy. The first guy you call is a jerk, you can there’s probably 10 other guys you can call. And then Intuit does a fairly good job themselves of training and there’s people outside of intuit that have done phenomenal jobs of training. So I would say, it’s relatively easy to use relatively easy to get trained on. And a lot of that is because of how the large market share they’ve built and been able to maintain. 

James 11:11  

Yeah, I mean, the analogy I’d see in the programming world is you have all these different languages. And you know, it’s as much about you pick the language based on where you can get the programmers not necessarily what it can do for you. They all more or less move bits around CPU somewhere, I guess. But it’s the availability to workforce and are selectively almost no one who shouldn’t consider starting with QuickBooks. So even if you’re listening to this today, I guess on your first day in business, you know, you can’t go wrong. I mean, there’s no real reason to use anything else. 

Walter Miller 11:41  

Yeah the other thing I think about QuickBooks that I give them credit for, so the majority of our clients are in professional services. And I often say our clients are somehow at the end of the day, they’re turning time into money. You can think of QuickBooks as an accounting software like any piece of software, you can also think of it as a database. And Intuit has done a really good job of configuring the database of QuickBooks in ways that make it very easy to capture information around time, and slice and dice it. So if you’re, building websites, I would call that project costing but you’re calling it how much did I make on my last website? And so the infrastructure is built into QuickBooks to capture that kind of information on almost several levels of granularity you can, sort of choose how detailed you want to be in terms of capturing and using that information. And so what our clients find is often, you know, they’ll want, like, they don’t want to jump in the deep end right away, and we’re going to go,  let’s just we want to know the answers to A, B, and C. And then most business owners, once they get accustomed to having the answers to A, B, and C, they come back and they say, well, that’s really cool. Now can is there more you can tell me? And the answer with QuickBooks is usually yeah, we just need to turn on these features you’re not using yet.

James 13:09  

It’s sort of the Goldilocks zone we find for its customizable enough, but it’s not, you know, it’s got, you know, it’s got classes of projects that you can use to add a give a couple of layers without getting into too much complexity, you know, but there’s still a lot of variability without I mean, we get it. You know, we do QuickBooks customers all the time where the top rated spend control platform and the QuickBooks App Store. And the people come to us like, Oh, we’re using QuickBooks you use QuickBooks it’s great. But it’s a bit like, when I hear that I’m like, well, exactly. How are you using QuickBooks? There’s a broad church there, right? So what do you mean by using QuickBooks? And when you get into the onboarding and you see, okay, actually, wow, this, you can get quite creative within them

Walter Miller 13:55  

You can get quite creative, I would also say, can be a little dangerous. I often joke that my clients periodically, I periodically have the experience of saying, Well, I did not know you could make QuickBooks do that. And that’s not always a good thing.

James 14:13  

Yeah. Well, when you get around it, because we integrate with and it’s a good thing. And it’s also, you know, you get to Oh and wow, that’s really exactly what you’re saying. It’s really creative. We haven’t pulled it out. Maybe we should cater for that as well. So let’s imagine, coming into a customer like what are the number one things you want to sort of tap out? What are the number one sort of things you look for to make sure you get the customer up and running? What do you first do? What are the first couple of things you do when you onboard a new customer? 

Walter Miller 14:42  

Well, we’re accounts so that sort of means our brains are wired to be obsessed by cash. So job one is usually making sure that all of the functions around cash and I guess I also mean credit cards because the transaction levels through cash and credit cards are accurate, or reliable, and timely. And so ways that those might not be, we’ve encountered situations where people have never reconciled their bank account. So in reconciliation is really just the act of making sure that QuickBooks agrees with you and the bank agree. And you square up. From an accounting perspective, reconciliation is sort of task one, because it is the process that ensures we’ve captured all the transactions, they may not all be in the right place. But we know that we have all the transactions. And so if we are with a new client who is behind on their bank recs, some people are still manually entering their transactions. QuickBooks has interfaces with almost every bank I’ve ever seen. So transaction data can be pushed to QuickBooks on a nightly basis. And so we’ll set up those bank feeds to automate that process. So that’s probably task one is getting cash straight. And then we begin a conversation about how they make money and what they need to understand about how they make money. A great example is, QuickBooks is very, very easy to set up, and it will create a chart of accounts for you. But if you’re not careful, QuickBooks will create a chart of accounts, especially in the service business, that doesn’t include a cost of goods, it doesn’t include any section for direct costs. So we will often modify a change of accounts, chart of accounts so that the client can begin to allocate, make distinctions between direct and indirect expenses, and really begin to look at what their gross profit margin is. So I guess making sure cash is straight, making sure that the information is configured in such a way that they’re getting the information they want. And then the last thing would be making sure they understand what that information means as it relates to their particular business.

James 14:48  

So that’s a good point about, you know, I can see, like the gross profit, or like manufacturing business makes tons of sense to me. Right. So yeah, but how does it apply in a service business? You know, its overhead, its, cost of goods sold, I mean, isn’t really making that much difference? How do you use that operationally that information?

Walter Miller 17:08  

Well, here’s where I start to take quibble with very fastidious mountains. Because in sort of textbook accounting, if you’re a service business, some people believe you don’t even cost of goods sold is irrelevant. If you have a service based business, because it’s all just labor, I am in the camp. And I’m not the only one. But I’m in the camp that believes we should at least be distinguishing between the labors that people spend directly doing client work. So going back to the, you know, these are the eight people that all they do is build websites. And that’s how we make money. So let’s put them in our cost of goods sold or direct. But we’ve got these three other people who are admin, probably the business owner, maybe a salesperson, and they’re not directly involved in creating revenue in whatever the service is. So they’re going to be in our overhead. So and then sometimes in a service business with a lot of our clients, in especially a small business, people will do both right, they’ll spend half their time doing billable work and half their time doing non billable work. And that becomes a conversation with the client about how we want to allocate that particular person’s wages

James 18:43  

And in the service business you go as far as you know, having people timesheet their time? Or is that just going to be over? 

Walter Miller 18:50  

I’m smiling, because I’ve been working in the accounting industry for decades, and you don’t get a paycheck and accounting if you don’t track time. So it is often a conversation with our clients. And so we’re predisposed to track time. I never think tracking time is hard, right? Because I’ve been doing it for so long. A lot of our clients think it’s onerous. And so we will try and convince them that they should be tracking time. Certainly they should be tracking time if they’re billing direct hours, like tick an attorney who’s tracking time on a case and needs to build by that. But more commonly, going back to the set someone that builds websites, they’re not tracking hours, or they’re not billing by the hour, I guess, to answer your question. Philosophically, I think for a service based business time is your inventory, right? You’re not a retailer that has products on the shelf, your service base that has minutes you sell. And so the timekeeping system becomes your inventory control system that sometimes it’s successful conversation with clients and sometimes not. When it’s not my recommendation is for that client to find small periods where they can track time so that we know we’re reasonableness, like if they think it takes 100 hours to build a website. Well, let’s track time on the next three websites to see whether your estimate is even close to what that is. So either drink the Kool Aid and of timekeeping, I acknowledge that that’s not possible or desirable for everyone. And if it’s not, we defined periods to sort of test what our time assumptions are periodically.

James 20:37  

Right Okay. I like that idea, actually. So you’re assuming its 10 hours for a website? But is it really, I mean, that time allocation is a whole minefield by itself, because this time you think you’re working on something versus what you really are? And yeah, and then you realize, oh, that internal meeting we had, maybe we should stop that one every, every few days, you know, like, there is some work, or I must get you to chat with my wife for some time about that. And be interesting to me. I haven’t had any success. So what’s the most useful piece of software using QuickBooks? What would you recommend people what works really well with QuickBooks?  We’ve talked about this idea that QuickBooks is your basics f? What would you bolt on there? What are common things that are useful to bolt on time shooting, what else?

Walter Miller 21:25  

For our clients in professional services, timekeeping is often one, but I’m going to probably say, we use Zapier more than anything, because a lot of what we’ve been doing the last couple of years, is helping build QuickBooks and connect it to other systems. So there’s QuickBooks and then there’s accounting systems like NetSuite and others that are very, very expensive. The market has not produced sort of a good middle tier accounting or ERP system. And so what we have spent time doing is taking QuickBooks and timekeeping QuickBooks and software like yours QuickBooks and CRM, sometimes it’s just two pieces of software, sometimes it’s two or three. And we’ve gotten pretty adept at connecting them with Zapier so that the information is flowing. And that creates what I call sort of a temporary ERP, a bridge ERP solution. It’s not perfect, it’s not as robust as something like NetSuite, but it’s also not as expensive as NetSuite. And that solution is going to provide a common set of information. So we’re not having to constantly manually enter information. And it allows us to scale to a certain point, and I always tell my clients at the point that this thing breaks, that’s going to be a great problem, because that means there’s enough revenue coming through the system, there’s enough activity that you’ve now got the money to go out and buy NetSuite or whatever your next solution is.

James 22:58  

NetSuite implementation is expensive, but it’s also very costly to a business, because it’s not the sort of thing you can just use or appoint I’m thinking it’s this sort of thing that totally changes your business, you’re going to drink the Kool Aid for NetSuite now. So good luck with your five years getting your QuickBooks to work. Now, it’s a whole new thing, right? You know, we are one of those solutions I sort of catch is a bridge solution. I’m happy to say that, and we describe it as like, a best in class solution. Well, sure. ERPs are great at a broad variety of things. They can’t be as deep as something like Bill.com for doing your payments or procurement Express for managing your approvals or, you know, any of the time shooting solutions that are out there. And you’re definitely not alone. Like that’s probably the number one use case for customers to come to us true to QuickBooks marketplaces. It’s great, it’s doing 90% of what they want to do. They just want to get some approvals around, you know, these cost of goods sold, for example, or, you know, service costs or order cost. So they weren’t built into the business, but they don’t want to go whole hog, or they want to put something and you can do in a couple of weeks, rather than a couple of months. And let’s face it, people do get fired for putting an ERP system and that fails, right? No one wants to be that guy. So

Walter Miller 24:11  

Right. Well, the other thing I like about what your software does, what bill.com does, that I see with my clients a lot of times is, again, keeping in mind that our typical client is very ignorant about good business practices. The concept of having an approval chain is sometimes eye opening to them. Like what do you mean, it’s not good enough for me just to text, you know, Bob and say its okay to order that? Okay, if Bob is ordering once a week, that might be okay. But as your business speeds up, that’s not what you want to be. 

James 24:42  

I mean, it’s amazing. Like if you want to say money on your span, like just having what we call a for a check, like just having two people to say even if it’s 99% of time, it’s going to go through a 1% of the time like Hold on, I almost bought a book for 300 pounds here just before it came out by accident, right? It can happen just like that you use Zig when you should Zag I was like, Hold on, why are we paying this much for that. And that’s where all that’s where roughly 10% of spend every time one in 10 times the company tries to spend money they wasted, right? So add a divider, same thing they didn’t know we already had stock, they buy two sets of flights instead of one when you know all these little paper cuts that sort of any one of them can trip you up. And just having four sets of eyes on every purchased our own will crash 90% of your problems, you actually don’t need anything fancy, just need a convenient way to make sure you, you can easily review those purchases. 

Walter Miller 25:38  

I totally agree with you on sort of getting rid of the inadvertent purchases inadvertent dumb mistakes, but also the financial control part. You know, we’ve had a couple of instances where a business owner is just heartbroken to realize that the person they trusted for 10 years is stealing fat. And the only way they could steal was because there was no approval process. There was no nobody was getting a second set of eyes on what they were doing.

James 26:10  

This comes down to what is internal, or internal any fault is called embezzlement. And, you know, in order for that to happen, people have to have motive, opportunity. And  if you have either of those, then you can if you put a system in place where there’s no opportunity, it just means that good people sometimes good people make bad mistakes, just like they were given the opportunity. And you know what? Sometimes it could be like 100 bucks. But what are you going to do now you have to replace that person trust tissue, it’s a massive cost to your business. And there’s podcasts issue I did a good friend of mine, Robert, he was embezzled for 300,000 by one of those. It was actually outsourced payroll provider that he had, he got the money back. It was great. But it went on for years, you know, and you just need trust and verify. That’s what on a regular you going to say, Right? 

Walter Miller 27:00  

Yep. Yeah, exactly. 

James 27:02  

Yeah. Well, listen, it’s been really good chatting with you. Maybe you can tell us a little bit about how people can reach out to you where they can find more. Maybe they’re having trouble with our QuickBooks and they want to get someone to clean it up for them. Where can they find

Walter Miller 27:15  

They can always find us on the web, or website is Norman Prof Norman professional Norman prof.com. And you can make appointments, meet phone numbers on the website. That’s probably the best way for people to get ahold of us. I’m on LinkedIn, happy to connect with people on LinkedIn. Right, both the company is and I’m in so those are probably the best ways. Right

James 27:39  

Well, thank you very much, Walter for coming along and chatting with me today was pretty enjoyable. 

Walter Miller 27:44  

My delight, James, thank you. Thanks for the invitation. Appreciate it.

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