Ep. 213: Robert Bendetti, Jr. - An expert’s guide to cash flow management

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.
Connect with Robert: https://www.linkedin.com/in/robertbendetti/
Check out IMA's Statement of Cash Flow Tutorial

Full Episode Transcript:

 < Intro >

Adam:            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.

Robert:           Adam, pleasure to be here. Cash flow management is my favorite topic and always has been. I describe myself as a CFO, husband, father ultra-runner, 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 the kind of standard internal individual contributor to manager, director, to VP, to CFO.

Adam:            So what is it about cash flow and cash flow management that excites you so much?

Robert:           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.

Adam:            That's very true. And speaking of cash flow, IMA has a Cash Flow Management course, 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?

Robert:           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.

Adam:            So how do you do that?

Robert:           Number one, I think is, obviously, the cash conversion cycle, CCC. That’s 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.

Adam:            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 like technologies, 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.

Robert:           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?"

"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 and under-resourced, 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? Think that. 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."

Adam:            Hey, Robert, can you give us some examples about how technology, and all of these that you've been discussing, can help the team.

Robert:           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 themselves integrate and it's a great benefit of using an ERP, sometimes they don't. Maybe you, at your current employer, you're using just the best-of-class contracts tool, best-of-class accounting, best-of-class tools 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.

Adam:            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.

Robert:           I think it can. Actually, I'll challenge that. 

Adam:            All right.

Robert:           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? 

Adam:            Yes.

Robert:           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.

Adam:            Hmm. 

Robert:           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.

Adam:            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?

Robert:           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, process automation. 

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… 

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 took 10 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.

Adam:            Yes, I think we all felt that same way when we made our first macro, when we were in our early twenties, honestly.

Robert:           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-progress 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.

Adam:            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.

Robert:           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.

Adam:            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.

Robert:           Well, they better join the IMA. They have excellent conferences and an excellent podcast. Thanks for having me on, Adam.

 < Outro >

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