Robert Bendetti, Jr., CPA is the CFO of Lifecycle Engineering and a long-time volunteer leader at IMA. He joins Adam Larson to discuss a topic near and dear to his heart: Cash Flow Management. Listen in as Robert shares his expert tips and best practices, including making the most of robotic process automation (RPA) and machine learning.
Check out IMA's Statement of Cash Flow Tutorial
Full Episode Transcript:
< Intro >
Creators & Guests
What is Count Me In®?
IMA® (Institute of Management Accountants) brings you the latest perspectives and learnings on all things affecting the accounting and finance world, as told by the experts working in the field and the thought leaders shaping the profession. Listen in to gain valuable insight and be included in the future of accounting and finance!
< Intro >
- Welcome To Count Me In.
The podcast that brings you
an insider's look at accounting
and finance professionals
working in business.
I'm Adam Larson.
My guest today is Robert Bendetti Jr.
Robert is a CPA and the CFO
of Lifecycle Engineering,
and he joins me for
a high-energy discussion
about cash flow management.
He shares timeless wisdom,
he learned from an early boss,
to how he uses the latest technologies
to optimize his entire cash flow process.
This is one of those inspiring podcasts
where you can tell the guest is
not only a true expert in his field,
but passionate about helping others
take their skills to the next level, enjoy.
< Music >
Robert, I want to thank you so much
for coming on the podcast today.
It's really exciting to have you on.
And today we're going to be talking a lot
about cash flow
and cash flow management,
which is near and dear
to the accountant's heart.
But before we get to that,
I just wanted to start with
if you could just tell a little bit
about your story
and how you got to where you are,
and then we'll continue
the conversation from there.
- Adam, pleasure to be here.
Cash flow management
is my favorite topic
and always has been.
I describe myself as a CFO,
husband, father, Ultrarunner,
and when I'm doing all of those things,
I'm thinking about
cash flow management.
I don't know about everybody else,
but it's certainly important
and it seems like everywhere
I work it has been important.
Yes, a little background, I've always
done corporate accounting.
I am a CPA and member
of the IMA, best org ever.
but I never worked in public accounting,
it's always been corporate accounting
and kind of the standard
internal individual contributor
to manager, director, to VP, to CFO.
- So what is it about cash flow
and cash flow management
that excites you so much?
- Really early on, I had a boss tell me,
and he stole this quote,
and I don't know who said it originally,
"Revenue is vanity, profit is sanity,
cash is reality."
And it just really stuck with me
that everything else is just fun and games,
until we actually get paid cash.
I cannot pay payroll with
your hopes and dreams,
your purchase order, your good meeting.
The only thing I can make
payroll with is cash.
- That's very true.
And speaking of cash flow,
IMA has a Cash Flow
that I know you took.
So you can take that course
and you can learn the basis
of cash flow management.
Which most accountants do know,
but they probably forget,
depending on what their job role is.
But then what happens?
- Yes, first I'm going to plug the course,
free CPE for IMA members.
I am, like many CPAs and CMAs,
always delinquent in getting my CPE.
It's two months before the time
to send in the paperwork.
I'm like, "Ha, what?
Do I have to do that again?
Is that every year?"
I don't know how I've
forgotten it for 20 years.
But, yes, I love it when there's free CPE,
as a member of the IMA, and, yes,
statement of Cash Flows tutorial.
Great course, one hour, little hitter,
is a fantastic reminder on the foundation
of the cash flow statement
and how important it's.
But to, "Now what?"
It started to get my
creative juices flowing,
and I started to think about also
the framework of the days of the fast,
cheap, easy money might be over.
That we might look back
at 2010, '18, '19, even '20
as the good times and that
the future '23, '24, '25
might be rising interest rates, recession,
it might be inflation all in the same stew.
So no time better than the present
to get your cash flow in order.
- So how do you do that?
- Number one, I think is, obviously,
the cash conversion cycle, CCC.
That is the foundation
and, yes, check mark.
And I'm not going to cover that
because we're a bunch of accountants.
But next, maybe 102 level
accounting, is going to be;
you need to review your customer
and job selection
for profit and credit worthiness.
A lot has changed in the past two years
and maybe you looked at it pre-pandemic
and you understood your customer profitability, project profitability.
Or you understood your job profitability,
or your customer credit worthiness,
a lot has changed.
Somebody that was credit-worthy
before may not be in the future
And, so, I think right now
is the perfect time
to be checking those things.
Number two is what are your policies
and procedures around job
or milestone, invoice timing,
and, for that matter, what's
your invoice processes like?
Well, did it used to all be physical
and now you're fully remote?
Did it used to be lean
and now it is cumbersome?
That's the number two thing.
And then the third thing is collections,
not everybody likes collections.
Some people find that
it's a little uncomfortable
to, "Am I being annoying?
Am I being rude?
Will the salespeople not like me?"
You need to stop caring,
there is somebody on your team
who is a little rough around the edges,
and that is the perfect person to promote
to leader of collections
and to be right on top.
Because the squeaky wheel
gets the grease
and you want to get the grease,
you want to get the cash.
As maybe we are entering
into Q4 '22, and '23, and '24,
maybe we're entering into
some tough financial times,
if not you, potentially your customers.
- So as the customers enter that
tough financial times.
As we're looking at rising interest rates,
and all the different things
that are affecting us.
What can accountants do
to prepare for that?
You just mentioned some
things that they can do.
But I imagine that there
are other elements
that they would have to do
making sure that all their
systems are in place.
Making sure all the regulations
and all those things are in place.
But what recommendations
can you give them
as we look to that future?
Because it's not going to get better yet.
- Yes, I'll give you level one and level two.
Because sometimes you skip level one
because you assume everybody's doing it.
But maybe there's one person
on the call that isn't.
Level one stuff is just to remind the team
that it's really important,
that maybe you got PPP money,
or customers were paying you early.
You're a government contractor
and the government
was paying you in seven days
instead of 27 days.
That's not going to happen in the future
and I know everyone's overtasked,
and they are super busy with other things.
Level one is just reminding the team,
"Hey, sending those invoices out on time,
collecting on time,
confirming everything on time.
Know our customers are not going to pay
until receipt of a valid invoice."
Just that basic reminder
of the importance.
Number two, is having a conversation
with your key salespeople.
Your sales and growth leaders,
reminding them that;
"Revenue is vanity, profit is sanity,
and cash is reality."
And that means the two best salespeople,
just reminding them, "Hey, I'm your friend.
I'm your biggest cheerleader.
I'll give you anything you need,
but it is important that
these people actually pay us.
Let me know if you hear anything,
any words on the street
about any pending doom
because you'll know before I will."
And then also talk to
your worst, two salespeople,
you know who they are.
The ones who cause all the trouble
and remind them, "Hey, I'm watching you.
You are not my favorite, Julie
and Jessica are my favorite.
You are a troublemaker
and I'm watching you,
please don't ruin this for me,
it is important that we get paid.
It is not important that
you had a good meeting
or that you got a purchase order,
it's important that we got paid.
Do not be promising payment terms
that I'm going to deny."
So those are some basic,
super basic things.
And, then, yes, technology
is super key here.
If you do not have a system
that automates this for you,
they are out there.
You need to talk to the many IT vendors
who are trying to help you.
Or if you have a platform, but you
haven't purchased that module
that automates all this for you,
because you just haven't
gotten around to it,
this is the time to get around to it.
There are some amazing tools
that can do a lot of this for you.
So this is the time to look out for that.
Or maybe you're like, "Hey, Robert, Adam,
I've talked to the accounting team,
I've talked to the salespeople,
I got that on lockdown, I just
integrated and updated IT.
How about training?"
You might have the tool
and you might have the talent.
Do those people have the training?
Did you used to have...?"
Now, that you're like, "Oh, yes,
we trained them last year.
Is there anybody from
last year still around?"
"Hmm, no, oh, they're around
but you promoted them."
"Mm, well, they're not doing
cash flow anymore.
So the new people,
have they been trained?"
So I think training is
really key around here.
And, then, also, in this
area is if you think,
"Oh, man, I am overtasked
I don't have time for any of this."
Think fractionally; where do you
have a little pocket
within the totality of your organization
that can help in this?
Or there are people that have
had 20, 30 years of experience
and they've kind of semi-retired.
They are a fractional, virtual
resources that can help you.
Your system is completely virtual,
people can work from wherever,
and you're like, "I only need somebody
to do this four hours a week."
Oh, my gosh, there are tons
of resources available.
If you don't know them,
your peers know them.
They could be former employees;
they could be people in industry
that you've met at conferences.
You're like, "Oh, I was just talking
to Barbara and Latasha,
they recently retired, they were awesome.
I bet they would work for you
for four hours to do this."
- Hey, Robert, can you
give us some examples
about how technology, and all of these
that you've been discussing,
can help the team?
- Two things come to mind;
one is just integration of systems.
I've worked at a couple of companies
and this one, my present employer,
have had seasons, where things
were not integrated.
And the pieces of the puzzle
that have to talk to each other,
were automated until it needed
to jump to the next system.
Automated till it had to jump
to the next system.
And then there was a physical person
in between those processes,
and that is unbelievably inefficient.
Especially nowadays where people
are remote or fractional.
I've got people who
have flexible schedules.
So some people take
every other Monday off
or every other Friday off.
And it just seemed like they were always
in the middle of an approval process
on the every other Monday.
So instead of processing
an invoice in three days,
it was taking seven days
because people had a flex,
and technology is there
to resolve these issues.
And sometimes the systems
and it's a great benefit of using
an ERP, sometimes they don't.
Maybe you, at your current employer,
you're using the best-of-class
and, so, you need them integrated.
There's external IT
resources that'll do that.
One thing I've found real benefit from
is bringing that talent in-house.
I think the importance
of somebody understanding
how your systems work, and mapping,
and bridging these are so critical.
That it's an absolute requirement
to have that technology,
that skill in-house,
and not necessarily an obvious skill
in your standard IT group.
It's not exactly networking,
it's not helpdesk,
it is that integration and mapping.
But very often I've found people
with the same data analytics skills,
they have a passion around turning data
into the actionable information.
They've got the skills to be able
to integrate these systems
and connect them, so that is really critical.
And then these just some cool bolt-ons
that I think are really helpful.
Cloud-based tools, and you can find
a lot of information around collections
and credit, in particular.
And I'll just give you two examples
that are coming to mind, one is
there are credit watching services.
Back in the day, you had to
physically type in a name
because they were a new customer
and they'd give you your report.
Now it does it automatically
and they will send you
a color-coded report,
on all your existing customers
or any customers that
are in your CRM pipeline
and just let you know red, yellow, green.
So you can manage by exception,
I think that's really great.
And then another tool that
I found that's really helpful,
that my salespeople were using.
I was paying for, and I didn't have
a license, nobody in accounting,
but they were raving about an online tool
they were using
to get contact information.
Cell phone numbers,
business phone numbers,
email, personal email data.
People were posting on the
internet about companies.
We got a couple of people who do
inbound and outbound sales,
and they were talking about,
"Oh, please don't cut this off.
We think it's great,
it gives me all this stuff."
And I was like, "Oh,
that sounds really good.
I could use that for collections."
When somebody's supposed
to approve something
or pay something,
and they're not responding
and I need more contact information
or I want insights into the company
and I want to set up for alerts.
So I was like, "I will pay
for this cloud-based sales
and growth research tool,
if you'll give me a seat.
And now I have a license to the tool
and I'm just typing in there.
I found out, alarmingly, accurate
stuff on Robert Bendetti.
And if you're ever wondering,
"How are these people
finding my email address, my cell phone?"
Email me, call me, I'll tell you
where they're getting,
and I have a license to the site now.
- Hmm, it is just alarming on how much
of our information is out there
and unless you're living under a rock,
somewhere, your data is there.
It's quite alarming.
It seems that collections
seems to be the only thing
that can't be automated, honestly,
when you think about it.
- I think it can.
Actually, I'll challenge that.
- All right.
- And I'll illustrate it by something
we all are burdened by.
Have you noticed, Adam,
that when people
are trying to sell you something.
There is an obvious schedule,
an email schedule,
how they are going through
a process of first contact,
second contact, third, and fourth?
And then the fifth one is always,
"Oh, have I reached
the wrong person, Adam?
If you're not the person
who makes these decisions,
could you recommend who I should?"
And then the sixth,
I mean, really final email
is that "Hey, just pinging
you one more time."
And trying to be funny.
So it's just an email automation tool
for inbound and outbound marketing.
So those email automation,
the same exact tool and principles
can be used for collections.
Everybody, who's listening,
has a process that;
"Here are whatever my standard
payment terms are at..."
Well, I'll just say my company,
there's the reminder,
but just before it's due or when it's due.
Then it's the day after it's due
there's another reminder,
and then escalating over time
with escalating words.
And there's a number of emails
and then there's phone calls.
You don't have to just
remember that process,
you can set up a bot
to automatically do that.
"If this happens, then I want this
cadence to automatically happen."
You don't have to touch any of it
until the phone call.
And it's even possible to
automate the telephone call
and when somebody actually picks up
and Adam says, "Hello."
Then a human would ring their phone
and they'd have to pick up.
That's kind of hard to automate
that step for accountants,
but it is possible, all of that
is absolutely possible.
And you don't have to do it yourself,
you can pay someone.
If you're large enough,
you can just pay a firm
to do all of this for you,
the entire process.
- So I guess I can stand corrected,
because the way you had
originally described it,
it seemed like it was the only
kind of a manual process.
But it sounds like you
can automate things.
And, so, everything that you're describing
is RPA, Robotic Process Automation.
And, so, maybe you can describe
a little bit for our audience
the importance of RPA
and other AI elements within cash flow.
And how important that is
to being part of the future?
- Yes, I think, it's supercritical
and it's important right now
more than before.
There was a big push
towards lean accounting
over the past 10, 20 years.
We've all taken the classes,
I mean, it's lean.
Our principles are not just applicable
to manufacturing and operations,
certainly, applicable to accounting.
But a lot of our lean processes were lean
when we were all physically
next to each other,
and not potentially either
lean for the digital age
or lean for the new process
of being hybrid, remote-flex.
I know my company wasn't,
I can only speak for myself.
We were lean for an old way
of doing business,
not the future way of doing business.
So I think that is a foundational piece.
Drucker famously said,
"The worst thing you can do
is automate a process
that should never be done."
So don't skip that step, re-look
at your processes and procedures.
Do you have procedures?
Are they written?
Are they the best?
Are they being followed?
Then lean them out,
lean those steps out.
There's something between 80
and 95% waste in all processes.
Don't be surprised if you find waste.
Be surprised if you don't
because you did it wrong,
if you don't find any.
So don't skip that step.
We all like to skip step one,
I'm a big proponent of don't skip step one.
And then, secondly, so it's lean, lean-ish.
All right, now, process automation.
Automate those steps within that process
so that humans are not having
to touch every piece,
it's really hard to come by humans.
It's hard to find young people
who want to work in accounting
and be at a desk.
So, I mean, maybe you
have an overabundance
of accountants at your company,
please share because the rest of us don't.
So take those manual steps off of
their fingers, process automation.
The ERP that you bought,
the accounting system,
the contracts, HRIS, ATS,
those tools already have it.
If you're not using it
or if you haven't purchased it,
put that justification for the capital
project and get the boss
and the boss's boss to sign off,
So then that's step 102, 101, 102.
Next step is just because
in its own little pool,
you have process automation
within one step,
that's robotic process automation.
I think of the difference
between you can...
I remember being super impressed
that I created a macro,
that I would when I was 20, 22.
It was the reason I got my first promotion,
is I had to download a bunch of stuff,
and then format it, and then send it out.
And I created a macro to eliminate
all the timing of formatting
and creating the visualization
of the data in Excel, by the way.
This is like one step away
from stone tablets, people.
I'm 47 years old, and it was revolutionary.
And instead of taking
four hours, every Monday,
it took10 minutes, 20 minutes
or something like that.
And then I also came in early,
nobody knew that,
so that all these reports
went out to my division
before the engineers showed up
versus all the other bean counters
they were sending their stuff out at noon.
And, so, I got a reputation as being
this amazing lean accountant
when it was just a macro.
Well, my FP&A and data analytics folks,
it takes like no seconds.
They don't download anything.
They don't have to format anything.
They don't attach anything to an email
and don't decide who it goes to.
RPA, all they have to do is identify
what needs to get done,
under certain parameters,
and the tool downloads
the information formats,
and then attaches to an email
that is pushed out
to a distribution just based on authority.
So if people come and go,
it doesn't matter,
it's just the authority group.
And then they don't have
to touch anything,
it takes, I think, four seconds
might be an overstatement, RPA.
All stuff I thought was cool,
I mean, I liked doing it,
but there's other value added stuff
I could be doing like collections
and, so, that's RPA.
And then IA, machine learning,
that's like the machine suggested
that this is a report that
the executive team needs to see.
And it suggests for you things
that you're not looking at.
Here, I through this dataset,
have identified exceptions
and is pushing that out to you.
You don't have to pull it,
you don't have to request it,
it's pushing and suggesting
because you've given the dataset
some parameters, "Hey,
I like to see exceptions."
Well, then it'll suggest some
exception management to you.
That's exciting and new age,
and where we're moving.
I started and I'll end with all
businesses are digital businesses,
and if you're not, you're
going to get left behind.
If you don't know how to do this,
you're going to get left behind.
But you don't have to do it alone.
Adam, I think we've said,
all along, there's tools
and or there's talent you might
have on your team,
you just need to equip.
They might have a passion around this
and you might just be able
to say, "Hey Latasha, Julie,
you're in charge of this, I'll support you.
Tell me what you need, let's go."
Or fractional, bring in
some fractional resources
that know how to do this if you're
that medium-size company.
- Yes, I think we all felt
that same way
when we made our first macro,
when we were in our
early twenties, honestly.
- Yes, gosh, I literally got
a promotion for that.
And new age, now we live
in a different time.
I have conversations
with my internal team,
to talk about digital
and data management around,
and we're not perfect, I'm not preaching,
we do not have this all together.
On the example of a pain point is
internally we're a Microsoft Office
and we use Microsoft Cloud, Azure
and we're a Power BI shop,
and a passion around that.
External, a different team,
sales and growth,
they like AWS and Amazon
and Onesite, for data analytics.
Yes, those are two different
tool sets, two levels of mastery.
You'd think like, "Don't you use
the same thing inside and outside?"
No, we don't, so we don't
have it all perfect.
I am a work in process
and every company,
we all work out, all the listeners,
I'm sure even Adam and the IMA,
we're a work-in-process,
we don't have it all figured out.
- Oh, yes, we all don't have it figured out.
And I think the goal would be to
how can we have all of our systems
talk to each other in a better way,
so that we can better help our customers.
And, essentially, the topic of this podcast
is so we can have better
cash flow management
because cash, until you get your cash,
you can't do anything,
like you said in the beginning.
- So important now, and to test
the importance of it,
just a closing thought, Adam, I think
is around test your assumptions.
You just completed a budget
or within the next quarter
you will create a budget
and now, more than ever,
stress test your budget,
and then stress test that not only
for profitability but for cash flow.
Because there's a chance
things are much worse
or could be much worse than you think.
Everywhere I've worked,
20% of the products,
or services, or SKUs drive
80% of the profitability,
and it's important to know which one.
Which are those 20% of SKUs
that have that big of an impact?
The clients, the SKUs,
the products and services,
and stress this what if that industry
or that customer was really impacted
by changing interest rates
or by a recession inflation?
And what would that do to your budget
and, in particular, your cash flow.
This is the time, this is a call to action,
as I leave, to stress test the budget
for those key assumptions.
- Well, I think we'll end on that.
Robert, thank you so much
for coming on the podcast today.
Your knowledge and expertise,
I know, will help our members
and all listeners.
Whether they're a member of IMA or not,
as they continue on and
become better accountants.
- Well, they better join the IMA.
They have excellent conferences
and an excellent podcast.
Thanks for having me on, Adam.
< Outro >
- This has been Count Me In,
providing you with the latest perspectives
of thought leaders from the accounting
and finance profession.
If you like what you heard and you'd like
to be counted in,
for more relevant accounting
and finance education,
visit IMA's website at www.imanet.org.