Episode Summary
In this episode of The Flywheel Effect, Brent Sonnek-Schmelz and Matt Bernath tackle the crucial topic of accounting talent for small businesses. Brent and Matt emphasize that strong accounting practices are essential for growth and offer practical advice on how to build a reliable financial team.
Matt explains the common mistakes business owners make when hiring accounting personnel, such as prioritizing trust over capability. He provides insights on establishing systems for oversight, creating clear KPIs, and the importance of hiring a bookkeeper sooner rather than later.
Brent and Matt encourage business owners to develop a basic understanding of financial statements and key metrics. They also recommend seeking guidance from trusted advisors like CPAs or outsourced CFOs when needed. This episode offers essential advice for any entrepreneur looking to build a solid foundation for financial success.
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Key Insights
Capability Is Critical When Hiring Accounting Talent
While trust is important, don’t make the mistake of hiring accounting talent based on trust alone. Capability is equally important to ensure accurate bookkeeping, insightful financial reporting, and the long-term financial health of your business. A capable bookkeeper can help you identify profit opportunities, manage cash flow effectively, and make informed decisions to drive business growth. Don’t let a lack of financial expertise prevent you from making a strategic hire. Seek help from a trusted advisor if needed to assess capability and ensure a good fit for your business.
Investing in Accounting Talent Is Investing in Profitability
Viewing accounting solely as a cost center is a mistake. Investing in skilled accounting talent is an investment in your company’s profitability. Strong financial management leads to better cash flow management, smarter resource allocation, and the ability to identify growth opportunities. Accurate and insightful financial data allows you to make better business decisions and can even improve profitability by 1-3% of revenue, according to Matt.
A Little Financial Literacy Goes a Long Way
You don’t need to be a CPA to run a successful business, but having a basic understanding of finance is crucial. Take the time to learn how to read and understand financial statements such as the profit and loss statement (P&L) and balance sheet. Familiarize yourself with key performance indicators (KPIs) relevant to your industry. This knowledge will enable you to have more productive conversations with your bookkeeper or financial advisor and make informed decisions about your company’s financial future.
Episode Highlights
Outsourced Accounting vs. In-House Hire
Timestamp: [07:52] – [17:00]
Brent and Matt discuss the pros and cons of outsourcing accounting functions versus hiring an in-house bookkeeper or accounting staff. They advise smaller companies with lower revenue to start with outsourced accounting but emphasize the importance of bringing someone in-house as the business grows. Matt explains how the in-house vs. outsourced decision often overlaps with the need for administrative support.
“As the business grows, the admin work is much easier to outsource to other people in the organization or to hire for than the bookkeeping time. So if you initially bring in a great bookkeeper who can help with some of the admin stuff, that great bookkeeper continues in the business to take on more and more bookkeeping responsibility and less and less admin responsibility.”
The Dangers of Hiring “Trusted” Family or Friends
Timestamp: [21:58] – [23:04]
Matt describes the all-too-common scenario of small business owners hiring family members or friends for bookkeeping and accounting roles, prioritizing trust above all else. He cautions against this practice, explaining how difficult it can be to replace someone you have a personal relationship with even when the business has outgrown their capabilities.
“The biggest challenge that we see is when small businesses hire the trusted person first. So you brought up a spouse, but we’ve seen all kinds of family members, right? Like, hey, I trust you. You’re my cousin, you know, you’ve done some bookkeeping in the past, but I think you can figure it out for my business. Getting rid of that person down the road becomes that much harder.”
The Evolving Role of the Bookkeeper as the Business Grows
Timestamp: [17:02] – [21:57]
Matt and Brent explain how the ideal accounting team structure changes as a business grows. They trace the natural progression from a fractional bookkeeper to a full-time bookkeeper, then to a staff accountant and eventually to a full accounting department with a controller. This transition often requires bringing on additional financial expertise in the form of an outsourced CFO.
“At about the 4 million mark, you truly need more of a staff accountant type than just a bookkeeper, and again, that’s the piece where I said if the business is growing faster than the financial talent, you probably have to turn that financial talent over.”
The Value of Test Projects in the Hiring Process
Timestamp: [28:57] – [32:58]
Matt shares how his company uses paid test projects as part of the hiring process, particularly for roles that require a high level of technical competency such as bookkeeping. He emphasizes the importance of structuring these test projects in a way that reveals the candidate’s ability to teach and explain financial concepts.
“We often find that the most effective are teaching and training. In order to be able to teach somebody something, you have to understand whatever that is at a very, very deep level. The deepest level of understanding is when you can actually teach somebody something.”
