Mini Episode: What an Elite Finance Team Can Do For Your Brand
Episode Summary
In this mini episode of the Free to Grow CFO Podcast, Jon Blair discusses the essential functions of a finance team for DTC brands, emphasizing the importance of providing value in the scaling journey. He outlines the key monthly processes that finance teams should implement, including a 15-day close, monthly financial reviews, and strategic meetings with the CFO to ensure informed decision-making and risk management.
Key Takeaways:
Your finance team should be providing value and helping you make confident, quality decisions.
Scaling is a series of risk-adjusted bets.
You should have a monthly financial strategy meeting with your CFO.
Episode Links
Jon Blair - https://www.linkedin.com/in/jonathon-albert-blair/
Free to Grow CFO - https://freetogrowcfo.com/
Transcript
00:00 The Role of Finance in DTC Brands
01:53 Monthly Financial Processes for Success
05:42 Strategic Financial Meetings and Decision Making
Jon Blair (00:00)
Does it feel like your DTC brand's finance team isn't providing enough value? Or maybe they sit around waiting for you to tell them what to do every month. What should they be doing every month? Well, today you're gonna find out. Hey everyone, welcome to another mini episode of the Free to Grow CFO podcast, where I break down one key concept that will help your DTC brand increase profit and cashflow as you scale. All right, so today I'm gonna be talking about what your finance team should be doing for you every single month.
Before I get into the steps or the outputs that your finance team should be accomplishing every single month, I wanna talk more conceptually about your finance team providing value to your scaling journey. If you have a finance team that doesn't add value to your scaling journey, then you're doing something finance is a critical component of the scaling journey and every elite DTC brand has an elite finance team because team that helps you make confident, quality, risk-adjusted decisions. Scaling your DTC brand is literally just a series of risk-adjusted bets. And the thing is, without a solid finance team, you're not going to be placing quality risk-adjusted bets. You're gonna be placing poor quality decisions and or decisions that carry too much risk. And as you are scaling, we want every decision to be something that you can survive if you're wrong. We gotta live to fight another day. We need to learn, iterate, and improve, and that's how we scale. So, what should your finance team be doing every single month? Step one, 15 day close. They get your books done on an accrual basis with what we call a variable costing P&L at Free to Grow CFO that is reorganizing profit into revenue minus variable cost equals contribution minus fixed overhead equals profit. So a 15 day close with a variable costing P&L which gives you very clear contribution margin visibility and a clean accrual balance sheet. That's output number one.
The next thing is you should have a CFO who takes the completed financials from the accounting team and without you even asking puts together what we call a monthly financial review or an analysis of your financials. This covers things like budget versus actual. How are we tracking against our plan for the current month and year to date. And it includes a detailed analysis of your profit and loss, margins, fixed overhead, profitability, and your balance sheet and cash flow. Things like cash conversion cycle, networking capital, debt to assets, debt to equity ratio, and your major cash flow drivers. If you're not getting those things in a financial review, you need to make some changes so you can get the information you need to make quality decisions. So in addition to those basic financial analyses, your CFO as a part of this review, should be giving you their top three to five takeaways from the financials and recommended actions that you should take. So, step one, 15 day close. Step two, monthly financial review. Step three is roll forward your financial model. Your financial model is a projection model that projects forward a P&L, balance sheet, and cash flow statement.
And it should be rolled forward every month using the latest actuals and the latest most relevant and real-time data that can be used to project forward the next 24 months of P&L, balance sheet, and cashflow performance. So again, if you have an elite finance team, you're getting a 15-day close, a monthly financial review with key insights and recommended actions, a monthly financial model roll forward, and then should sit down and have a monthly Financial Strategy meeting with your CFO. This is where the CFO is going a level deeper from the financial review they already did for you and they are helping you actually strategize on what actions the business should take in the various areas that your CFO has recommended actions. Usually at this time too, your CFO should be gathering from you as the owner and CEO, your what I call CFO wish list. Here's all the things I wish we could do. I wanna buy this much inventory, I wanna hire this person, I wanna scale ad spend on this channel. Your CFO should be gathering all of those inputs from you so that after the meeting, they can take that, CFO wish list, and roll it back through the financial model and any other analytics tools that your CFO is using and give you the answers of whether or not you can or can't place those bets. And if the answer is no, what would have to be true to place those bets in a manner that mitigates potential risks. And so this is what your finance team should be doing every single month. 15 day close, clear contribution margin visibility on your P&L and accrual basis financials, a monthly financial statement review that analyzes key metrics on the financials and gives you three to five takeaways and recommended actions.
Roll forward a 24 month three statement financial model, P&L balance sheet and cash flow statement. Sit down and have a monthly financial strategy meeting. Collect your CFO wish list outside of that meeting. Do homework and work that back into the financial projection model and other tools that CFOs use and then present that back to you with an assessment on whether or not you can take the actions on your CFO wish list. You should be doing this every single month.
It's a closed loop process that we're always iterating on and improving on and getting better on. If you don't have this, this is exactly what Free to Grow CFO does. What I just read to you is a slide from our sales that we review with prospects. The slide is called the Free to Grow process. So I literally just walked you through the Free to Grow process. When you have this in place, you're able to get proactive strategic CFO advice.
Make quick decisions on data that you can trust. Build your personal wealth faster. Achieve your growth goals. Increase your profit and cash flow and save time and effort. So that's it. This is what your finance team should be doing every single month.
