What Would Cam Do?
TIPS ON FINANCIAL & BUSINESS OPERATIONS FROM A SEASONED EXPERT
I’m thrilled to deliver you the bonus content I collected after interviewing Careerprenur Dreamer, Cammillia Campbell, EGAMI’s Chief Financial Officer & Chief Operations Officer. This is all for you, to give you access to some of the financial wisdom that has supported my business financial operations. Consider this a Cam financial cheat sheet to guide your Dream.
Dreamer All-Star – Financial Cheat Sheet with Cammillia Campbell
- Dreamer All-Star: Cammillia Campbell
- Dreamer Type: Careerpreneur Dreamer
- Dreamer Title: CFO | COO, Egami Group
Cammillia D. Campbell has established herself as an executive, transformational leader, and financial problem solver. She thrives on challenges and knows that her purpose is to use her financial and business acumen to help businesses and individuals succeed. Cammillia is currently the Chief Financial Officer & Chief Operations Officer of EGAMI Group. Cammillia oversees all financial and operational aspects of the company. Cammillia was named one of The Network Journal’s “40 Under Forty” for its 2016 class of achievers and was selected as a member of the Forbes Magazine Executive Financial Council.
Separation of Church & State
One of the most important things that business owners should do is ensure what I like to call “separation of church and state.” Keep business expenses separate from personal expenses. Not having a separation of church and state, simply put, is bad bookkeeping. As business owners, your goal is to maximize profit and responsibly grow the company. However, if you are constantly spending company money to finance your personal lifestyle, the business will suffer and not have adequate money to operate. Separation of church and state draws clear lines of what monies belong to the business and what monies belong to the business owners.
Importance of Accurate Bidding
Understanding how to accurately price a proposal is critical. You must ensure that your bid covers the scope of work on the project, uses industry reasonable labor rates, and offers adequate profit. Do not underbid projects for the sake of getting business. Not all business is good business. You don’t want to start bidding on contracts based on price alone; low price bidding with little to no profit margins isn’t a sustainable model if you want your business to grow.
Importance of Checks & Balances
You need systems in place from a process perspective for to ensure checks and balances. Prior to my coming onboard at EGAMI Group, there was one employee who used the business credit card and bought $5,000 worth of clothes with it. How could he get away with this? There weren’t proper checks and balances in place.
Audits Are Key
You should have your financials audited and annually reviewed by a certified CPA. Then, based on the audit findings, adjust and implement accordingly to maximize your business potential. In addition, operational audits are a sound way of testing how your business and the systems and processes and structures that you have in place are performing against industry standards. An operational audit is a future-oriented, systematic, independent evaluation of organizational activities. In an operational audit, financial data may be examined, but the primary focus of the assessment is the operational policies and achievements related to organizational objectives.
Keep Clean Books
Aim to be financially compliant. Always ensure your company is adhering to the Generally Accepted Accounting Principles (GAAP) and Sarbanes-Oxley (SOX) guidelines. The Securities and Exchange Commission (SEC )has provided these accounting and financial standards to prevent inaccurate or overstated financial books that don’t reflect the actual performance of the company. Keeping your financial books clean and accurate is critical to remaining compliant. Having an effective Finance and Accounting team is critical to ensure the accuracy of financial statements.
Understanding of Contracting Terms
Before you sign a contract, be sure you understand the contract’s terms and conditions (T&C’s). Does that sound obvious? It’s not always. Remember Teneshia’s big lesson from Chapter 10. She signed a contract with P&G without understanding what the payment terms would mean to the company. She overlooked that EGAMI’s not being paid at the same time as in previous contracts — going from NET 30 to NET 120 — meant that the company’s cash flow would have to maintain day to day operations for an additional 90 days (3 months) without receiving cash. You have to understand how all contract terms affect your day-to-day business. Business owners should know that longer payment terms will directly affect the ability to run and fund day-to-day financial operations.
Cash is KING
Cash is King. Hands down, whether you’re a small, medium, or large business, cash is still King. Improper cash management, or the lack of cash, can break the best of companies, even if you have a great product or service that you’re bringing to the marketplace. You have to understand the timing of when cash is coming into the business (Account Receivables) and when cash is going out of the business (Expenses). As part of your cash flow management, you have to ensure you have sufficient cash on hand to manage the day to day operations. If your business doesn’t have sufficient cash flow, assess if there are areas where you can cut spending, negotiate better payment terms with clients, or look for financial leverages to infuse cash in your business (lines of credit, credit cards, account receivable factoring, etc.).
Incoming Cash Tips
From a “cash that’s coming into the business” perspective, ensure that your proposals are being submitted accurately with the correct bill rates to yield your company profit. Also make sure that your proposal includes all the hours and dollars needed to complete all the work the statement of work. This will ensure you are paid for the work that you perform for your clients.
If your client uses a Purchase Order (PO) system, ensure that you receive your executed PO as evidence of a contract award and that it authorizes funding to bill the client for the project.
For each project, understand the contract milestones that indicate when you can bill a client. If you have to complete a deliverable/milestone before you can bill your client, make sure you understand all tasks associated with the deliverable/milestone and what actions you need to take to complete the milestone and submit the product/services to your client. This is important, so that you know which steps need to be completed before you can invoice your client to be paid.
I cannot stress enough that you need to understand your client’s payment terms and know when you’re going to be paid! This is critical for cash flow management.
Submit invoices as soon as you complete a milestone, and be sure that your invoices are accurate, so you don’t delay payments. Work with the client and their procurement team to understand the invoice requirements and the invoice backup requirements so that when you submit the invoice the first time, it will be accurate and won’t be rejected. If the invoice does get rejected, immediately resolve the error or issue and re-submit in the procurement system, so you can start the clock on your net payment terms.
Track your invoices through your client’s procurement approval process. If your invoice has to be approved by three team members on your client’s team, do the due diligence to ensure that the invoice is moving through those three clients to be approved and not sitting in someone’s queue for 20 days, thus impacting your ability to be paid.
If your business is a small, disadvantaged business such as minority-owned, women-owned, or veteran-owned, contact your client’s procurement organization to see if there are any special programs for disadvantaged small businesses. Typically, smaller suppliers don’t have the cash flow of larger suppliers to be able to sustain the long payment terms such as NET 75 or NET 120. As a result, some companies will offer special incentive programs to level the playing field.
Request advance payment for third-party, out of pocket/pass-through vendor expenses so your company is not floating loans for your client by having you pay large-dollar, third-party expenses in advance of being paid by your client.
If your client’s payment terms don’t support your business cash flow, seek a solution called “accounts receivable factoring” or “factoring.” In short, factoring is selling your unpaid accounts receivables (outstanding invoices) to a financial institution for payment before your invoice maturity date, less a financing fee. This option will allow you to collect cash earlier than your client’s net payment terms and grant you access to the cash much quicker to meet your business needs.
Outgoing Cash Tips
Cast the vision of the company—its financial goals and objectives—and then develop a budget that positions the company to meet those objectives. Share the budget with the team and onboard everybody. Then, you have to manage to the budget accordingly! Expense overruns are a silent killer, and they blindside you from a cash-flow perspective and give you little time to respond.
Leave room for the unexpected. Unexpected things will happen, (unforeseen maintenance expenses, additional insurance coverage requirements levied by clients, etc.) so make sure you have “management reserve” in your budget for the unexpected. From a cash-out perspective, also be clear about when your expenses are due; that is, know when you’re going to incur an expense on your books, and also know when you have to pay for that expense.
As a small business owner, your greatest resources will also be your largest expense. We can’t run a business without the team. Understand when your payroll and payroll taxes are due, and be aware of how much money you need to consistently meet your payroll each pay cycle. Missing payroll will inevitably result in losing your team.
Vendor Negotiations
Negotiate vendor terms that favor you as much as possible. If you can, push for vendor payment terms that dictate that you’ll pay vendors after your clients pay you. That’s great from a cash spread/cash flow perspective. If that timing isn’t possible, negotiate vendor payment terms that narrow the gap as much as possible.
Negotiate preferred vendor discount rates with vendors that you use consistently. For example, if you use a photographer who will be your preferred supplier, say, “Any photography work that I have over a six to twelve-month period, I’ll give to you, guaranteed.” Then you can negotiate a discounted rate with that vendor because you’re guaranteeing the vendor future work for that six-to-twelve-month period.
Manage Scope Creep on All Accounts
Watch out for scope creep. If your client starts asking you to complete work that’s beyond your agreed upon contract scope, you have to inform the client that you will need additional funding to complete the additional scope. When you allow scope creep, you’re giving your client work for free and you are paying for the additional work on your own dime and out of your bottom line profit. Don’t incur additional expenses and spend unnecessary cash for work that isn’t included in your client contract.
Pay Your Vendors On Time
One thing that’s key to me, because it speaks to the integrity and the ethics of the business, is ensuring that payments are made on time. As business owners, we expect our clients to pay us on time, so in turn pay your vendors on time. Just as EGAMI has business goals, visions, and objectives, so do our third-party vendors. Do unto others as you would have them do unto you.
Make Business Decisions According to the Numbers:
Don’t let people’s feelings interfere with what the numbers tell you. You need to run a business by the numbers. For example, in the early days of The Dream Project, Teneshia was passionate about doing the symposium every year and delivering a high-end experience that provided the greatest value to the audience. When we took a step back and looked at the numbers, we saw that the events weren’t profitable. Passion aside, the numbers told us that we were in the red. Based on this information, we had to tweak the business model to not be a drain on cash but develop a model that was profitable.
Growing and Scaling a Business
It’s okay to get help. Know when you’re growing and scaling at a rate that your current business model, processes, and procedures cannot sustain and seek expert help to grow the business responsibility. Consulting experts will accelerate your business learning. As an entrepreneur, you don’t have to reinvent the wheel. There are industry and functional experts positioned to help a company grow faster than it would if an entrepreneur took the baby steps of trying to learn every step on his or her own.
Safeguarding Your Dream
Create a Living Will. It’s critical for an owner to have a living will so that if something tragic happens, there will be no gray area relative to your desires.
Safeguard Your Business With Key Man Insurance. It’s important to have insurance protection in place to ensure that if something happens that causes one of your company’s key executives, who drive results like the CEO or the President or another executive to be gone for an extended period of time, the business can still thrive. When you put a talented leadership team in place, even if a personal crisis happens, you have equipped and empowered the team to keep the business moving while the key executive is away due to a personal or medical issue and the company can access operational dollars to fund a temporary replacement until the executive can return.
Adequate Insurance. Make sure you have sufficient personal and business insurance. Also make sure that you have insurance specific for your industry. Understand potential areas of lawsuits or negligence in your industry, and make sure you have not just the proper insurance to protect against those kinds of possibilities but the right levels of coverage dollar-value-wise.
Ratio of Debt / Income – Owner
As a business owner, keep your personal debt/income ratio in mind for both business and personal endeavors. Often, an owner will have to sign personally for business lines of credits, building leases, etc., to grow the business. They must always be mindful that there’s not too much debt tied to their names personally so that when the business needs to scale, the business can have access to financial funding such as increased lines of credit, increased credit card balances, etc. This is possible only if the owner’s credit is in good standing and is not maxed out.
Make Sure Business Entity is Set Up Correctly
It’s very important to have a business entity set up correctly. Understanding the difference between a C Corp, a Sole Proprietorship, and an LLC, is critical. Then, understanding where the responsibility lies in each of those business types is essential because the last thing you want is an issue where someone gets sued as the owner, and they’re personally liable. Make sure you have a business solution in place that protects the owner so that if there is a lawsuit, the lawsuit can only be levied against the business and not the owner and their personal assets.
Infrastructure Set Up
Think through infrastructure such as protecting your IT which not only protects your company and sensitive personal proprietary information but also protects the information that you keep about your clients. Make sure you have proper firewalls to prevent hacking into your company.
Strong Financial Teams
You want someone who is sound and ethical from an accounting/bookkeeping perspective and someone who is sound from a financial management perspective.
The financial person must understand the operational arm of the company to understand how to manage the financial aspects of the business. It’s critical to hire the type of financial person who understands the big picture financially and who can help you with cash flow management, price proposals, favorable negotiations with clients, etc.
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Too often, people run blindly into the excitement of launching a business. They get all wrapped up in the romantic thoughts about creating the product/service, becoming experts in their field, making piles of money, even becoming respected and/or famous for their big idea. But at the heart of it all needs to be a very measured plan and responsible decisions. Insurance policies, tax considerations, payroll, invoicing—this isn’t the sexy stuff people daydream about, but if you neglect these elements, you’ll probably end up watching your Dream dissolve like ice chips in a summer lemonade.
