Australian-born Luke Mulcahy started in FP&A at larger businesses including Coates Group (internet leader in Sydney) and manufacturing company Sherwin-Williams. But for nearly 4 years he has loved having “wow” moments of finance insights with smaller companies. closer to the $5-10million range, where powerful insights are taken straight from finance to the CFO. In his words: “You can have those moments a lot more frequently with small business owners and just tell them what they’re, what they’re missing, what they haven’t got eyes on.”
In this episode:
- Forecasting energy consumption for a utility company in Australia
- The fear and strategy of becoming a fractional CFO
- The ideal set up for FP&A in small businesses
- Why big companies often have big data problems (and cleaning that data)
- Big FP&A wins in small business
- Solving the date problem in Excel
Follow Luke on LinkedIn
Get in contact at https://mulcahyconsultants.com/
Glenn Hopper:
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Luke Mulcahy:
This is fp NA today.
Glenn Hopper:
Welcome to FP&A Today, I’m your host, Glenn Hopper. Today’s guest is Luke Mulcahy, founder of Mulcahy Consulting Group, and a seasoned finance strategist. With over 15 years of experience across Australia and the us, Luke’s career has spanned large enterprises like Sherwin Williams and Coats. But today he focuses on something different, bringing high impact FPNA and CFO strategy to small businesses that need it most. From utilities and manufacturing to McDonald’s global tech vendors. Luke has built and led finance teams, implemented systems and driven real profitability. Now through his consulting firm, he blends bookkeeping, controllership, and CFO advisory into a single offering, helping small and mid-size businesses fix cash flow, streamline operations, and scale smarter. Today we’ll talk about the lessons he’s learned, the mistakes he’s helped cleaned up, and how fp and a looks different, but just as critical at the small business level. Luke, welcome to the show.
Luke Mulcahy:
Thanks, Glen. Uh, appreciate having me on.
Glenn Hopper:
I gotta tell you, your experience and background are near and dear to my heart because while I didn’t go the fractional CFO route early, I started in a larger organization doing finance, and was just, had a team and had all the great data. And it was kind of the, the glory days of my <laugh> fp and a career. And then my first CFO role was at a relatively young, uh, startup that where I came in and it was me and a controller in air quotes. You know, it was more of just a glorified bookkeeper at that point, and, uh, having to, you know, it was a small startup business and, and, um, but they had no fp and a, the tax accountant was doing their books, you know, and I’m sure you’re very familiar with that
Luke Mulcahy:
<laugh>. Absolutely. I mean, you see that everywhere. Yeah. A lot of people are getting their CPAs to run their books. They’re not really providing the, the, the insights they need to run their businesses, and that it’s a huge opportunity. Small business owners miss.
Glenn Hopper:
Yeah, it’s funny, like when your tax accountant’s doing your books every year, they tell you spend all your cash right now, you know, to, to maximize your tax position. Exactly. And then as an FD a person, you’re like, no, no. <laugh>, we have big bills due in q1. Whatcha doing? Exactly.
Luke Mulcahy:
We get, we get the tax
Glenn Hopper:
Advantage, we gotta pay payroll next week. So calm down buddy. <laugh>. Yeah, <laugh>. So let’s start with your journey. And, you know, that is a, a huge switch. You actually had a couple of iterations, so what pulled you away from initially traditional accounting and then toward management accounting and ultimately fp NA?
Luke Mulcahy:
Yeah, I started out like probably most people in fp NA, probably a lot of your listeners in, in taxation, um, and financial accounting. That’s where I started out just doing small business tax returns, uh, individual tax returns, and then moving into month end close processes. Uh, for, for, it was for a utility company in, in the town where I grew up in Canberra, in Australia. At that point in time, I was finishing off my university and, and, and it was a job, but I found it a very boring job. It was, it was very repetitive doing tax returns over and over again for small businesses. It was, it was, it was rinse and repeat. That’s when I went and, and shifted out of tax and got to financial accounting. And very quickly, it dawned on me, this is kind of the same, it’s just month end close, the same journals, the same balance sheet reconciliations every month.
And it just became too repetitive for me. I wasn’t getting a lot of career satisfaction at that point. And then, uh, an opportunity presented itself with, with actual A GL, which was the utility company I was working with to move into management accounting. And what we were doing there was forecasting, energy consumption in order to drive the plans for that company. And that was fascinating to me, looking at, you know, air conditioner units driving, driving consumption in certain months and heating in other months, and how televisions and, and computer, this is 20 odd years ago, where we’re increasing the consumption of electricity. We’re not even talking numbers. We’re talking kilowatts there. But then you’re translating that into numbers and you’re really seeing the value that you’re adding. And that was my first taste of, of management accounting and fp and a from there, it was, you know, I, I relocated to Sydney, worked my way up through different fp and a roles until I was in, in quite a senior position there. And, and then one thing led to another until I, I, I was able to move over to the United States and, and continue my career over there.
Glenn Hopper:
So I’m not gonna bore our listeners. I’ve told this story a million times, but it’s, I I love that you immediately went to electrical because that first CFO gig where I didn’t have much of a staff, we eventually got, uh, PE investors in there. And when it started, you know, there was no fp and a and I, before the PE came in, I was trying to leverage the business and, and bring on, um, debt financing. And so I had to, had to build out fp and a and building out the model. So this business was carwash business.
Luke Mulcahy:
Mm-hmm <affirmative>.
Glenn Hopper:
And the biggest expenses were, you know, you had chemicals and then you had utilities. And like with water consumption, it was pretty straight line. But one of the coolest first models I built was when I took historical electric data. And because I didn’t realize, you know, peak volume, you’re at a different rate mm-hmm <affirmative>. If you’re, you know, if you’re kind of existing at a certain level. So it was one of the first problems I had to solve on my own when I didn’t have a full team around me was figuring out how to model, okay, we know on the weekends we do more business, we know during these peak hours we do more business. So trying to forecast electrical consumption across multiple units, um, based on a bill that wasn’t standard. So, uh, I feel like, uh, that’s probably, I mean, and I’m sure when you were, uh, watching kilowatt hours and all that, you were probably doing some similar modeling, but I feel like because it wasn’t just a straight line, that it really like flexed your modeling skills. Was that kind of your experience as well?
Luke Mulcahy:
Yeah, absolutely. When I moved into that in actual A GLI had, I had a good mentor there that was very experienced, and he had done a lot of the building of the models. And so it was more understanding these models that he had built, which were quite sophisticated in, in forecasting electricity consumption. And, but just getting in there and getting into the detail and un understanding that I was able to take those skills onto other places later ’cause I’d learned how he had done it. Uh, essentially that, that is fp and a, it’s finding out what the drivers are of your business, and then how to drive them, how to, how to move them, where you want them to be. A lot more interesting than processing ballot balance sheet, uh, in the month journals and balance sheet reconciliations,
Glenn Hopper:
<laugh>. Yep. Yep. I think I know your answer already because I’m already, I’m, I’m like feeling your, your journey here. I made a transition, but I think you actually did it even more smartly, because if you’re looking for variety and something new, going from that big company to a small company where you’re wearing a lot of hats and there’s not a lot of data, and you’re kind of reinventing things, it’s a pretty fun mental challenge. And even more so, I mean, when you’re doing that for multiple companies, I could imagine. But the original question is, you know, at working at companies like we mentioned Sherwin Williams and Coats, and you were doing the, uh, you know, enterprise level business thing, and now you’re running your own firm serving these small businesses. What was the moment that you kind of, you knew you wanted to make that shift and, and hang out a shingle and do it yourself?
Luke Mulcahy:
To me, it was, it was probably more the, the time in our modern history. It was during the pandemic when, when the world completely changed. We were all locked at home, working from home office up until that point. I was opposed to remote work in the finance area. Oh. And I was vocal about that in the, in the workplace as a lot of people wanted to, you know, we wanna do three day weeks. And I was like, how can I make sure you work? And, you know, I was, I was managing large teams. I thought it wasn’t gonna work. But that, that period forced us all to change. And the first few months were, were rocky. But as the time went on, I got really good at it. And as we, as we drew towards the end of that pandemic era, and, and we started coming back into the office and I was like, all right, we’re back in here five days a week.
I just, I thought, why are we here? And I was one of the leaders of the organization thinking, why am I here? And I know that people here don’t wanna be here. I don’t wanna be here. I was doing a lot better work when I was working remotely. And I mean, I took it to the extreme. I didn’t just work in my apartment in Chicago. I went down to to Mexico and was working by the beach. And I, I took absolute <laugh>. I really, uh, I really took advantage of the situation, but I found my output in that time was better. And I, I realized that the model needs to change. And that’s why I set out to, to do this on my own and create an environment where accounts and fp a professionals can work on their own terms when they wanna work where they wanna work, as long as they’re achieving achieving what they need to do and supporting clients, then I don’t care when they work.
That’s sort of what drove me to start my own business. The focus on small business, it was probably more organic. Those are the clients that you typically pick up. You’re not gonna, as a new, as a new consulting firm, sign Microsoft to be your first client. You, you’ve gotta start somewhere. And so starting with small businesses got me exposed to a bunch of different types of clients and different problems. And I really, I really enjoyed it what you were saying there about how, how you come in and you have to learn new things. I love that. Uh, I love that even though I’m an accountant and I, I will know books better than any business owner that, that I go and speak with, but often when I sit down with them, it’s, oh, I actually know marketing better than, you know, marketing. I actually know supply chain better than, you know, marketing.
I know it better than you know it. And it’s just, it’s just a matter of working in all those organizations, having to support all of those different departments that you understand all those aspects of business that a small business owner doesn’t. They know how to run their business. They know their product or their service that they’re delivering, but they dunno all of these other aspects. That to me is fascinating because I can come in and really show value to them. When you come into a really large organization, it’s, it does have processes, it has rigid processes usually set up. You have to follow, you have to use the systems that they’ve got that have been in place. You have to follow the way that they’ve done things for the last 20 years. Um, and every time you want to make a change, you’ve usually got 20 or 30 opponents that are arguing against that change.
And it, and it’s slow. It’s really hard to demonstrate individual value I find in, in a, in a large enterprise. But when you’re with a small company, it’s the praise I get from my clients. It’s amazing. I, I, you know, it’s life changing to them. When they have somebody in there with that kind of experience, looking at their books and, and giving them insights. It’s, it’s rewarding for me. And so, so once I started, I was like, there is no looking back now at this point, I, I can’t imagine going back into, into that other world.
Glenn Hopper:
To your point, what, so like 98% of the businesses in the world are, are small businesses. You know, it’s, uh, that’s what, so your total addressable market is huge <laugh> with that. But yeah, <laugh>, I talk to consulting clients about this all the time. They, they start a business, not because they’re good marketers, but they have an idea and something they’re passionate about and they’re pursuing, and everything else just seems like a burden. Or even if it doesn’t seem like a burden, you know, someone who starts a, a drywall business or a dry cleaner or whatever, a small business, you’re not, you know, churning out MBAs that are going and starting these kind of businesses. And, um, and you know, you want them, and they need to be focused on the core business itself. And then, so if you can have someone who has, especially with your large company experience, and you bring that to bear, and then your education and background and everything else you’ve done, I could see that being, so you come in as, uh, you know, a fractional CFO, but you really get a chance to go into so, so many other areas just to bring your experience to bear.
And I could see that being a great value. Yeah,
Luke Mulcahy:
Definitely. I mean, you come in more, it’s, you call it a fractional CFO, but it, you, you really do become their business coach in all aspects of their business. When you’re talking to these guys. Like they don’t have heads of departments sorting them. Maybe they have like a, a sales, a sales director or something like that. But that’s usually the extent when you’re talking, you know, companies in that five to 10 million range. They don’t have directors of marketing and directors of human resources and things like that. And so I, and I’m able to pull on my own experience ’cause I’ve, I’ve worked with all of those areas and you know about all that. You don’t, you know, you’re not, I’m not gonna go out and say I’m a HR professional, but you know, I know, I know enough to, to be dangerous. And same with marketing, same with all of those areas.
And these guys, they, they don’t have anything. I mean, you said 98%. I, I, I would, I’d say that’s probably accurate. Uh, I don’t know that stat that they are, but 98% of businesses are small businesses. I, I would, I would take a guess that 90 95% of those have zero fp and a, they have no idea. Yeah. Around their strategy. They are working payroll to payroll, um, invoice, invoice. They’re not, they have no insights. And the wins that you can, you can give them really quickly off the bat are phenomenal. I also, I’m really drawn to small businesses because I don’t know about you and, and maybe some of your listeners and anyone who’s fp a or accountants, I don’t know if this resonates with you, but when I walk around in my day, you know, you interact with maybe two or three businesses during the day making purchases or whatever, but you know, you see 20, 30, 40 different businesses.
And forever I walk around and I walk into businesses and go, oh, there’s a missed opportunity there. They should be doing this, or whatever. And I annoy my wife. ’cause I always talk about it, bored at it, <laugh> there a lot, but I mean, I just, I mean, it runs through my, my veins and, and seeing so many business owners and you, you see them there and owner operator, like little locations and they look, you don’t see their financials, but you go, I don’t think this place is making a lot of money. But then you go, it’s in a prime real estate prop, uh, you know, location. And why have you got so much inventory sitting on your shelves? Or, or why, why is this menu at this little coffee shop, but 85 different items? I mean, you must be wasting so much product. Like little things like that, that would have huge implications for those businesses and, and they would benefit from. But no one’s telling them that they’re sitting there running their business on their own, scratching their head why they’re struggling to pay payroll or why they’re having issues with their cash flow. And so the, the big wins you can get there with the little businesses, it’s, it’s great. It’s rewarding for me. That’s what we’re all here to do. It’s like, how can you have the biggest impact? I think that’s where I have the biggest impact on those little guys.
Glenn Hopper:
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You had the experience in, in being a larger companies, and like you said, you had mentors at, at places. And so you’re coming in and you, you have this big company mindset or understanding, so you’re trying to help professionalize their FPA and accounting practice and, and all that. But I’m, there is a, a difference though, because they don’t have as much data. They don’t have as many locations, and they, it’s just not as complex. Like the number of jail entries in a month are, you know, a fraction of what you’d see in, in a big company. So I’m wondering, with the data you have and the size of the businesses, what, what are some of the biggest differences in how fp a operates or, or should operate, you know, for these small businesses versus what you were doing at larger enterprises?
Luke Mulcahy:
Fundamentally, I think fp and a should be the same in both. It’s you’re trying to get to the same outcome. If you’re working for a large enterprise, or you’re working for a small, small business, I mean, you wanna understand the data, get insights from that data and help that to drive strategy and, and to drive smart financial decisions. So that I don’t think is different at all. It’s all around how you execute. As you said, the data is gonna be more limited in a, in a small organization than a large, large organization. However, in large organizations, from my experiences, the, the data is often terrible. You have so much data that it hasn’t been maintained well. And so as an fp a professional, uh, and I, I’ve stepped into large organizations that didn’t really have an fp a structure at all. And you go in, the first thing you do is show me your data.
You look at it before I can tell you anything, we need to clean all this data. And that can take you six months in large organizations, more even. And so it’s slower to get, get to that point with a small business. Maybe their, their data is, is it’s a smaller data set. Maybe it’s also very messy. I actually find it, it’s usually a bit cleaner because I haven’t had as many hands in there, but the, the cleanup efforts are usually faster. And you, you work with what you have most pointers sale, like if it’s a hospitality and they’re using toast, there’s enough information in there to, to run good FPNA outta it. They’re purely just using a QuickBooks file. Maybe they’ve got some, some customer segmentation or some product segmentation that’s set up there through class codes or, or whatever. And, and you can start pulling, pulling data that way.
But it’s using what you have to draw conclusions around their business. And I always say the first place you’ve always gotta start is with their revenue. And how do you wanna segment their revenue? And does well, it does their data, data provide that. And if not, what have we gotta change for that business owner in order for it to provide that? But every business is different. Maybe it makes sense to see it by customer, maybe by product, maybe by time of day or, or whatever makes the most sense for that business to find that, then figure out how to get the data. That’s step one. Step two is then get the cost associated with that, that same segmentation. And that’s where it usually gets tricky. And that’s where the data always gets messy. And trying to line your cogs up to your product, your revenue or your customer to really just see where it is.
And then that, that, that drives, drives their strategy is where to invest. It’s like these products, you’re making a lot of money on these ones you’re losing money on. Well, that shifts your product strategy. These customers here, you’re losing money on these ones. You’re making a lot of on how about we cut, cut those bottom ones and, and we focus on these top guys and support them better. Just those slight little changes that’s huge for a small business owner. Um, and they often aren’t looking at that. And so that’s, that’s the start of FPNA. And as you go from there, you build more things on and you talk to them and go, look, if we can get better insights and get more granular information, you know, we can, we can make smarter decisions, but you’ve gotta start somewhere. They usually haven’t started. And, and that’s, that’s a big win that you get straight off, uh, straight off the bat with small businesses.
They’re always limited by resources and, and the systems that they can use. And if you compare to enterprise, they’re, they’re not able to have a full-time analyst. Most small businesses, enterprises will have teams of analysts working on things and fixing data and, and so you are limited by what you have, but you can always draw a conclusion and understand what is driving the, the profitability of their business. Same thing, to answer your question, I think it’s the same thing. It’s just how you do it and the level of detail you get to. You’re not gonna get down to skew profitability with a, with a small business. But you know, you, you’re probably gonna be able to get product category or, or customer category and then start driving planning off that. How
Glenn Hopper:
Familiar is this situation? You come into a business and, uh, you open up a chart of accounts and you, you say, oh, you’re, you’re using the default chart of accounts that came with, with QuickBooks and <laugh>. You have one, you have one, uh, revenue account that’s just called, uh, income. Yeah. And for whatever reason, <laugh>,
Luke Mulcahy:
To be honest, I actually find the opposite. I I, they, they usually aren’t using the standard chart of accounts and they’ve created their own chart of accounts and created their own lines, whether they’ve done it or prior accounts. And we keepers have done it u usually way too granular for their chart of accounts. Yeah. I mean, oh yeah, I know exactly. I’ve seen it, IT expenses. And they have different GL lines for every single vendor. And you’ve got GL line, you’ve got 50 different it ones for different vendors. Like, you know, the transactions also have a vendor attached to them. So you can just roll your data up by vendor. You don’t need to be posting them into different GL lines, like, oh, cool. So let’s just get rid of 49 of your chart of, of your, of your expense accounts there. We’ll just have one called it expenses. So, um, yeah,
Glenn Hopper:
The craziest one I saw, I had a client that they were doing like 30 million in revenue, and they had, I swear, a different revenue account for every client. I mean, it was bonkers <laugh>, but there was, that was how they were reporting on client. They were trying to get, you know, per, uh, you know, per client profitability and all that. But man, that was a mess.
Luke Mulcahy:
<laugh>. Yeah. Yeah. That’s how they do it. I mean, it’s, in all fairness, it’s, it’s the right, they, they’ve got the right idea. They, they know what they’re doing. Those kind of people, they’re, they’re thinking fp and a, they’re thinking, I need to be able to see this by customer. But again, it’s the execution and it doesn’t, it doesn’t usually work if you try to do it through your chart of accounts, um, you can get some information outta your chart of accounts, but I don’t usually use just the chart for fp a analysis.
Glenn Hopper:
The other one I see all the time is, okay, so you’re doing cash accounting, but for some reason you decided to call this a prepay and you did an accrual here, but we’re doing cash accounting, but you didn’t accrue this. Or, you know, and forget about, you know, tracking capital expenses. That’s
Luke Mulcahy:
It. Halfway the one foot into accrual account. <laugh>, yeah. Yeah.
Glenn Hopper:
That all the time, <laugh>. Yep, yep, yep. Yeah. The, one of the, my first clients I had with something like that was we, we were trying to get ’em ready for an audit, and it was, we had to go back and unwind all these. They just ran, it just seemed like they would randomly decide what to accrue and what not to <laugh>. Yeah. And what to call a prepaid and whatnot too. It just
Luke Mulcahy:
<laugh>. Yeah. Yeah. That’s it. What, what gets capitalized, what doesn’t? It’s just all, yeah,
Glenn Hopper:
I could tell war stories about this all day, but I guess we should keep the, keep the show moving. I guess. W when we talked before the show, we were talking about how your goal really is to help transform backend finance operations and, and lead the businesses to profit through that. So, you know, walk me through, what does that actually look like in practice for a small business?
Luke Mulcahy:
Like I say, well, when I first come in and, and first meet a client, the first thing, I obviously wanna look at their financials and see what it looks like off the bat. I’ll usually identify that there’s significant things that need to be cleaned up often in their actual accounting files, just in order, you know, I’ll look at it and go, I have no idea how your five bakeries are doing, because I have no visibility onto each individual. Five of the five bakeries. It’s all lumped into one number. I mean, we need to do some work on your data in order to understand how your business is performing. And so there’s always a cleanup that we have to do at, at the beginning, and that often involves working with point of sale systems, integrations, things like that, to just get the data flowing so that we’re in there.
And so that’s the first, first step of transforming their, their backend operations is to try to get, this is where we are today. We know where we are today. And then it’s about planning for the future. You know, small businesses don’t have the resources to be putting extra people on to run manual processes. And so what we do is we identify the best tech stack for them. I’m not an advocate for any specific software. We find what work, what will work for that client based on what, what, what kind of a business they’re running. And so we do that. We set it all up. A lot of, a lot of those tools out there as well. They’re, they’re great, but typically they’re not plug and play. And often I’ll, I’ll see a business owner, well, we got this great new system in place. I’ve set it up and I look at it, what if this is not adding you any value right now?
I mean, it hasn’t been set up correctly. I don’t even know. I mean, you’ve got a supply chain tool there and you are using it for, just for sales forecasting. I think that’s probably not the right tool that you’re using there. And people, uh, do that. I mean, obviously salespeople come, they, they, they may have a problem and then they, they get convinced to, to get on board with a new system. And so we come in and really help business owners in, in building out what that solution is for them. Um, and so that’s, that’s kind of what we do to be, to begin with. In parallel. I have a team that does that, but in parallel, I’ll be working with the business owner to really understand their goal to their work back from that in terms of, of a, a good fp a strategy for how they’re gonna get there.
So we start, you know, where do you wanna be in five years or 10 years? Or maybe they don’t even have a time horizon. They have a, have an objective, I want 50 locations, or I want my business to be turning over $20 million, or whatever, whatever they’ve got in their head. And, and sometimes business owners don’t even wanna say it out loud, so you have to pry it outta them because they’re, maybe they’re not confident enough to say, say their real ambitions, um, because their business is still small, small at that point. And so once you find that information out, you then work back from there and build, build their plan back. So you wanna be at 20 million in five years, you’re at 1 million today. Well, what, what does that mean? We’ve gotta do each year in terms of numbers to deliver that first step.
What do we gotta do in terms of actions and investments in order to hit that? Um, and then we really build a playbook, a strategic playbook for how they’re gonna get there. If they follow that, and then everything goes to plan, they, they, they will get there or they, it’s gonna improve their chances of getting there. And it really, it puts a reality to a dream that lots of business owners have. They may have a dream that I’m gonna turn my little takeaway shop into a, into a national franchise, but you know, they don’t really say that out loud. Once you put a plan there, maybe a 10 year plan and go, you know, it’s possible if you do this and you start adding locations and each, each location you add once your cash positive, you need this much cash to open a new location.
Look at franchise, you put out a whole plan for them for how you could get there in 10 years. And they look at it and go, huh, well, I was just dreaming about this, but this actually does look achievable. Let’s do it. And that’s one part. But then it’s staying with them along the way, staying on the journey every month, sitting down with them, going through their financials, revisiting their strategy and their budgets and going, are we on track? What are we doing? How are we, how are we addressing these if a small business owner, even without someone like me helping them, I think if a small business owner is actually consciously taking a couple of hours out every single month to review their financials and review their, their performance and where they’re heading, they’re doing better than most. Because very rarely do I meet one that actually does that.
Very rarely do I actually meet a business owner that can, can say their numbers off the top of their head. Like, you know, how, how much money are you making a month? What’s your profitability per month? I don’t really trust my accounts. I don’t really know how much revenue are you billing every, every month? Oh, I don’t really know. It’s up and down, maybe 20, 34. Like with, without me supporting. If any business owner is listening that if you’re not doing that today, you really need to start doing that. You need to look at your numbers
Glenn Hopper:
When a client reaches out to you. I can picture maybe they’ve got their, uh, sister-in-law or their nephew doing their books and they’ve got their tax accounting and all that. But what’s the inflection point that makes them realize, okay, it’s time I need to get serious and bring in some fractional help on my accounting and finance.
Luke Mulcahy:
I think it’s driven by what their existing structure does their, their accounting team that they have, um, and what they’re getting. I’ve had a lot of clients say to me, I know more about my books than my bookkeeper does, or, or my account does. And that’s, and that, that is a, is a big sign that they need to, to go to the next level. Like a lot of bookkeepers, if you’re a very small business, let’s say you’re doing a hundred thousand dollars of revenue, you know, you know, you should be able to manage that yourself. But once you start to get bigger, and it’s that same bookkeeper that’s trying to, trying to handle a million or $2 million business, and all they really know how to do is, is a bank reconciliation maybe. And then they file your tax returns and that’s it. Um, that’s not really giving you any insight.
It’s when they really want insights, it’s usually the ambitious business owners that, that wanna get to that next level. They wanna add extra locations to their business or extra offerings or branch into different industries. And, and that’s where they really, they really want to grow or they need financing. They need extra capital. And, and, and that kind of advice you just don’t get from a everyday bookkeeper or somebody offshore. It, it doesn’t work. You really need to go to that next level to get somebody with that experience to advise them how to achieve their, their goals and their ambitions.
Glenn Hopper:
I’ve dealt with coming into a new client where if, if they haven’t had A-A-C-F-O before, they’re usually very, very loyal to their tax accountants who, who maybe a lot of times are doing the books. And they don’t wanna fire their tax accountant from doing the books because they’re happy with what, what their tax accountant does for their, you know, they do their personal tax and because their personal taxes mm-hmm. Because they’re LLCs, they’re passed through entities, and so they’re, they’re very loyal to and close to their tax accountants. But when we were talking before the show, you said when you come in, you want bookkeeping, controllership, and CFO support. You want to own the full finance stack. Yes. And I’m wondering, I mean, I think some of what you said, I already know part of the answer to this, but are you pretty steadfast on that? And how is that received and why is it important to you that you have the full, full stack?
Luke Mulcahy:
Absolutely. I mean, I try to make sure we’ve got that with every client. The only thing that we don’t do is taxes, just ’cause I’m a global company, we’re off across too many jurisdictions. I don’t wanna touch cat taxes so the CPA can keep his tax work, can keep his annual annual filing. But everything else I like to have control of, to put an analogy to it, you think about an a Formula one driver, um, they’re not in a mechanic or they may, they may have mechanic training, but they know that car better than anybody else. They know better. They know it just as well, if not better than their mechanics. And they’re gonna hear it. They’re gonna know the engine, they’re gonna know when something’s failing during a race. A CFO is the same thing. Now, if you get a fractional CFO and then they come in and advise a business based on some, some financials that they haven’t been intimately involved with, that they’re relying on secondhand information.
And I mean, it’s a little different if you’re talking a much larger company that’s gone through an audit process and they’re gonna have higher quality financial, but when you’re talking a small business, if it hasn’t had somebody with that level of expertise involved in it, it’s always gonna be a disaster. And so if you’re a CFO and you’re running, trying to run a business and trying to advise a business on the secondhand information that you don’t even know if it’s accurate and you don’t really understand the true drivers of the business, you, you, you can only do so well. I mean, you put somebody in there that doesn’t drive that Ferrari every time. Yeah, okay. They might get it going, but they’re not gonna finish on the podium. And that’s, that’s why we really want to do it all. We wanna own the books. I mean, I, if I’m the CFO, we have other CFOs, uh, working for us, but if I’m the CFO on there, I want to know, I, I have a relationship with the accountant and before I even talk to the client, I’m reviewing these things and scrutinizing them and making sure it’s right and making sure all the balance sheet’s perfect, making sure that, that our cashflow forecasts are all updated so that when I speak to the client, it’s not, uh, here’s your p and l that somebody else has prepared, and this is what it says.
And I’m just telling you what that piece of paper says. I have a hundred percent confidence. This is, this is accurate, and I have all sorts of insights that my team has provided me directly around your business. And we take it from there. You can always just have, just have a bookkeeper. I mean, we’ll, if somebody wants to go one way or the another and it doesn’t wanna have the full package, we we’ll do that. But you’re gonna get so much more value if at all, comes together. I think that’s traditionally why larger corporations don’t typically outsource is because they do it. You know, some do, but, but a lot of them won’t outsource their CFO. They won’t outsource their, their senior accountants and their, their senior analysts and things. They’ll keep it in house. It’s, it’s for good reason. Because you want your CFO to be accountable for that whole team. You want that CFO to understand it all, and, and those people are working for the CFO. They’re not just working for the company and the CFO’s taking the info. So that’s why I think they just have to go together, offshoring just your accounts. It can do more harm than good. And I’ve seen that happen a lot of times. Yeah,
Glenn Hopper:
It makes total sense. You know, when you come in first up, you know, if you clean up the books and you can give them that level of visibility where the chart of accounts make sense and they can actually sort of see things in the appropriate categories in, in groups, that, that’s one unlock. But I bet the next unlock is, I mean, just basic, basic fp a where you just do a trend analysis and show them, look, your revenue is doing this, but your cogs is all over. What’s going on here with, you know, or you give them some kind of insight that they didn’t have before. That’s it. And I imagine that’s a huge unlock. Yeah. Oh,
Luke Mulcahy:
It’s huge. It’s huge. I love that moment when you, and, and this went back before I got into business, like when you were in large enterprises, when you found some data, you walk into the CFOs office and you’re like, check this out. Look at this <laugh>, these look at these trends, and they’re like, wow. And they take it straight to the CEO and go, we need to be focusing on this area of our business. And that’s phenomenal. And you can, you can have those moments a lot more frequently with small business owners and just tell them what they’re, what they’re missing, what they haven’t got eyes on the other day, there was one, one of our clients, they, they have tennis courts and you know, they, they, they’re, they’re focusing on their overall, you know, revenue numbers. And they’re like, look, we’re in line with last year, we’re sort of in line with my last month.
And I was like, ha. But have a look at underlying what’s going down here. Your, your sale of food and drinks has, has, has increased, right? It’s gone great. But look, your court reservations and how much people are actually playing tennis is going down in your location, and so what, what are you gonna do about that? Like, so yeah, right now your revenue’s pretty much flat. You think you’ve got a healthy business, great. But the way I see it, how far down is that? Are those court reservations gonna go down once they go down far enough? There’s gonna be no one there to buy food or drinks at your bar. You can have great promos at your bar, but if no one’s coming in to play tennis, you don’t have any customers. Okay? So, so, so great. Your strategy’s working on the bar, you’re selling more food over the bar, but you’re not bringing people into the, into the location to play tennis. And so another aha moment, you know, they’re just looking at that one line and go, now I got, I really gotta change my strategy. We gotta get some more subscriptions out there for, for tennis players.
Glenn Hopper:
Yeah. Yeah. If they’ve just been backward looking and they just kind of pictured, uh, all of accounting as just administrative work and, and not very helpful. When you give them that first glimpse into the power of FBA, it’s gotta feel like you’ve, you’ve just given me a crystal ball and <laugh>, I’m, I’m now seeing, you know, seeing the matrix, but I’m, I’m wondering that, you know, you’re not gonna have the full blown, like you said, s skew level, uh, uh, reports and, and, and profitability and all that, but what is a basic, you know, a basic but effective fp and a framework look like for a business that’s in this kind of five to $10 million range
Luke Mulcahy:
At that stage, I, I would want a, a budget, an annual budget in there at, at least depending on the type of business, whether you need to do an, uh, you know, an ongoing forecast, a rolling forecast, sort of, you, you’ve gotta assess that, um, based on the volatility of the business and whether a budget’s good enough to just have that fixed, fixed for the year, but you need something, you need something that your business owner said, this is what I’m gonna do. And so that you can every month to speak with them and go, are you doing what you said you were gonna do? And that’s, that’s the, that’s, that’s, that’s the first step of it in an fp a framework in my opinion, is just, it’s just understanding that information and sitting down every month. And then, like I said, the, the, the next part is strategy, longer term strategy, longer term, thinking beyond next month, it can beyond this year.
That’s what I really enjoy doing personally. I love sitting down with, with a, with a business owner for a couple of days, that’s what we usually do, spend a couple of days with them and their, their senior staff, um, their leadership team, if they’ve got one. And we really figure out how we are gonna get to their objective, how are we gonna get to their goal? What’s our strategy to get there? And that’s where we, we like to spend a lot of time building that out and then work back from that. Like I said, what have you gotta do to get there? And then how do we track against that? And that’s where the fp a stuff really comes into play, whether that’s number of customers or it’s new products, or if it’s, or if it’s margin improvement or it’s eliminating waste or it’s opening new locations or whatever it is, whatever the thing is that’s really gonna drive that business to help them deliver their strategy. We need to put in the processes, maybe the systems in order to track that. And if we can, like I say, it starts out monthly, but if we can get that visibility more frequent frequently, you know, have it hitting the business owner weekly or daily in some instances so that they can really manage that and make sure they’re staying on track. So that I think is broadly the framework that you need to put in, in place for a, for a small business
Glenn Hopper:
When you come in and maybe you’d help them do a three-year plan or a five-year plan, or even a, a 10 year plan, and you show it, like you were saying earlier, where you can show it out and this is what you need to get your goal, and then you break it down into annual budgets. A lot of them probably have never had a budget before because their accounting wasn’t in place where they could even figure out run rate and all that. And that’s right. But once you get that budget in place, or even if you’re, even if they don’t have a budget yet, like in that first year where you’re just comparing it to the same time period last year, I mean, it starts really giving those insights to ’em and, and opens their eyes to think about the business in a whole different way.
Luke Mulcahy:
Absolutely. It’s, it’s, it’s a game changer. U up until I started doing this and getting involved in the small businesses, I, I, in my early thirties considered, I’m done with this. I’m over it. I mean, and that was in the corporate world, it’s like, it was really hard to, to, to influence change and, and to really have those moments, that moment where you run into the CFO and you and, and he takes it to the CEO and look what Luke found for him, me, this is amazing. It happens like twice, three times in your career. Like, it’s not something that happens for me currently, that moment happens nearly every month talking to different clients, like nearly every month I provide them with some gold and they go, oh, wow. And the, the feedback that you get, it’s just, it’s, it’s, it’s incredible. It’s not, it’s not the kind of feedback that you get <laugh> get in a large organization, which is usually arguments and people trying to climb the ladder and trying to prove you wrong at every step of the way.
This is, you show them something and they just like gobsmacked by what you’ve told them. They, they, they look at it, you explain to them, they know you’re not, you’re not full of it. <laugh>. You show them the data and they go, wow, he’s right and we need to act on this. And they’re like, thank you, thank you, thank you, thank you. Next month. They’re like, we’ve implemented these changes in our business and you’re seeing it the amount of times in, in large organizations where you would identify something and go, Hey, here’s a huge opportunity for us as an organization. And two years later the idea’s still floating around, but no one’s executed on it because, you know, someone in marketing said this or some, you know, c CEO EO said, oh, it’s not the right time, or blah, blah, blah, whatever. There’s a lot of people that will push back on ideas and change in large organizations and nothing happens. Small, small businesses, it’s not like that. They’ll see the opportunity. They’re entrepreneurial and they’ll go for it. It’s a lot more fun, a lot more fun in finance working with those guys than, than the big guys.
Glenn Hopper:
You can do quick impacts. I always think about bringing technology to these companies, and I know you said earlier you’re not, you’re not shilling any particular software product or whatever, but I’m wondering, you know, whether it’s ap, ar expense management or whatever, w as you’re working with these clients, what role does technology play in your work with them? And I’m not asking for a specific, you know, software recommendation, but are there certain types of tools that you consistently recommend or mm-hmm <affirmative>. Or consistently avoid? You know, maybe these are things that, you know, they’re small business they don’t really need. Yeah, I’ll recommend, based on that
Luke Mulcahy:
Business, every business is different. And there are tools out there. I’ve, I’ve found that the market has become very fragmented in tools. There’s a lot of tools for specific functions. For example, accounts payable tools or, or a cashflow tool or an inventory management tool. There’s not a lot of all encompassing tools for small businesses that, that do all of that. And so it’s a matter of picking and choosing what they really need. And if it’s, if it’s a business, it’s only got a couple of accounts payable invoices a month, you don’t go for bill. It’s, it’s gonna break. It’s expensive and they don’t get any value outta it. It’s, it’s faster to process for Gill payments, um, much faster than paying those subscriptions if they’ve got inventory and so on. You know, depending on how complicated, what kind of a kind of system they need to get in place.
And so, yeah, I I, I don’t have a a, a rigid answer for you there, um, on, on what kind of systems they that I would recommend, but I have a look at what they need and where their pain points are and what, what need we need better data on. Usually you need good data on sales. Usually changing a point of sale system is a headache, so you don’t want to, you kind of hope that the small business owner has picked one that gives you what you need. Um, but if you have to change a point of sale system, you have to, all of the other ones, like anything to do like, uh, like, like a bill com or a Cashflow Frog or any of those kind of tools, they’re, they’re optional, largely, like you can get by without it. If, if they don’t wanna sign up to subscriptions, we can download information from, from most small businesses from their point of sale and their QuickBooks and you know, we’ve got developers in-house and we can just make a quick, a quick interface, a reporting dashboard for them and, and, and away they go. But yeah. Yeah, it’s, it’s very, it’s very ad hoc at the moment. I don’t think it will be for very long. I think it’s only a matter of time before somebody, somebody cracks it and um, and, and brings all of those tools together, implement it with ai and, and a lot of us are gonna, unfortunately lose our jobs, I think. But, um, I don’t think anyone’s done it today yet.
Glenn Hopper:
It’s moving very quickly though, and on AI right now, you know, of course enterprise companies and well, all companies are trying to figure out what can we do with ai? And there’s, you know, you’ve got people talking about agents that are gonna do everything. I haven’t seen any really that are ready for prime time yet. But I’m wondering from your perspective, kinda what’s your take on automation and AI in, in small business finance, because they’re not gonna have teams of data scientists, machine learning engineers mm-hmm <affirmative>. Building out bespoke solutions. And I know you’re not getting into that right now. Are you seeing that there’s real opportunity in some places or that where it’s maybe more overhyped than it needs to be? Or, or where, what’s your stance on, we’ll just limit it to generative AI at this point?
Luke Mulcahy:
I think both finance professionals and business people running businesses, if you’re not using AI today, you, you may as well be signing your resignation, um, in the future. You know, the, the people who are gonna succeed are the people who know how to use ai. Well, the businesses that are gonna see succeed are the ones that are know how to use AI well. So we need to, everybody needs to, to think about how it’s gonna work best for their business Today, specifically in the finance and space, a lot of tools have AI inte have intelligence built into, and they’re great. Um, gives you some great recommendations, pulls some cool reports to, does some quick analysis, but it’s not quite perfect. I don’t think it’s perfect. I don’t think it replaces the human element yet. If you had asked me two years ago, I would’ve said, oh, this is cool, like the early versions chat, GPT, this is cool, but nah, this isn’t gonna replace us anytime soon.
But when I’ve seen how it’s progressed over the last two years and it’s progressed much faster than I ever thought it would, even me personally, how often I use use AI on a daily basis, like I use it just saying to, to a friend of mine using it 2030 times ai, I’d say, um, jumping into chat t just quickly brainstorming an idea or whatever. I mean, I use it continuously. The fact that you can now build that into applications and, and I’m no developer. I do have some developers working for me, but as soon as somebody cracks how you pull that smarts into there, you connect that with your, with, with all of your different systems, with your cashflow and, and gets you one complete solution that’s gonna be a game changer for small business. You know, I’ve, I dunno if you’ve explored any of these.
Most, most small business, I think the US 80 or 90% are on QuickBooks and Yep. If you’ve got more than one QuickBooks entity, if you’ve ever had that, it’s, it’s a pain. You wanna, I, I wanna know how, how, how well, how profitable my group is. Lemme log into this one. Lemme download a p and l, lemme put it over into a spreadsheet, lemme log into this one. There is a, a native option you can go to quick QuickBooks Enterprise. It’s very expensive, right? I’ve never actually convinced a client to go there ’cause it’s so expensive. But I’ve been, had it demoed to me by QuickBooks and I don’t think there’s a lot of value in it. No more value than something cheap we can knock out through using APIs and, and build that for a client. Um, but yeah,
Glenn Hopper:
Just building your own consolidation and exactly
Luke Mulcahy:
Said that it’s so close, it’s so close. If somebody can, can take the smarts from all, like all the ooc smarts and the AI from bill.com and the Cashflow Frog and connect it all together, your month end close systems automate, you know, reconciliations. That, that’s kind of tricky at the moment I think. I don’t think anyone’s automated balance sheet reconciliations ’cause you have to connect to all kinds of third parties, connect to workers’ comp vendors, connect to, to various, various banks and bank connections are usually all right in QuickBooks, but vendor statements have your system automatically reaching out to vendors to verify accounts payable balances, things like that. Once somebody does that, they’re gonna be a very, very wealthy person. But, um, I think it’s gonna be a game changer for, for small business today. It’s a matter of just choosing the systems that are gonna help your business have a competitive advantage.
That might be as simple as not even looking in the finance space, looking at, you know, sales bots for your, for your products. You know, set up an AI bot that’s connected into chat GT that’s responds immediately when somebody places a sales call on your, on your business. Um, that’s a huge one. You know, sitting there with a lead that takes two days to follow up or you set something up that automatically follows it up. Consumers are okay with it too, I think. I mean, maybe there is a generation that are not willing to accept and they maybe can’t even identify ai. For me, if I’m talking to ai, I know I’m talking to AI very quickly, however, I’m happy to engage with it, to be honest. I use a lot of different payroll systems with different clients, and some of them are really good, like you talk to their help desk and it’s not just, you know, I have a problem with this person’s payroll. Is it this, is it this, or is it this? You know, that old school, like, it give you three different options and it’s never right. It’s not that anymore. It’s like, it’s like a person that you’re talking to. It’s going, no, no, this is my problem. Ah, okay, here’s what you need to do. You need to go up into this setting. You need to change this. It’s brilliant. It’s brilliant. And I think consumers are okay with that. So the more you can put that into your business, the better, better off, uh, you’re gonna be.
Glenn Hopper:
Yeah, absolutely. As we start winding down here, you know, I’ve talked to so many single shingle fractional CFOs that are out there doing this. And, uh, like we said, so many, uh, small businesses in the world, it’s a, it’s a big total addressable market. So splitting market share is not really a, a problem, uh, there, but I do think I, I can picture someone just in a, a, you know, massive corporation feeling kind of the same angst that you did, but for a mid-career finance professional who might be thinking about, uh, leaving the corporate world and going into consulting or fractional CFO work, is there any advice that you’d give? Anything you, you learned from your transition?
Luke Mulcahy:
You know, what I did well was, was make sure that it was feasible. Um, I can imagine, I, I wouldn’t have been able to do what I did if I was, you know, living in Australia. I would’ve been too nervous to do it. Um, walk away from a salary and go, all right, well now I’m gonna start this business. I don’t have any clients. I have no income coming in. What am I gonna do? That is a terrifying thing to do. So I think if you’re gonna do in there, get you, try to get yourself financially comfortable so that you can do it and know that you’ve got a runway there, that’s, that’s probably the key, because otherwise you’re gonna get desperate and you’ll fail. Um, that’s something that, that I, I, I was able to do effectively, um, through my discovery of Mexico on a lower cost of living by moving down here during the pandemic.
Um, so that, that made it, that made it worthwhile. Um, but just, just start somewhere, somewhere small and really try to get your first couple of clients and, and do a really good job with them. Don’t, don’t focus too much on growth straight away. Vote. Focus on your product and your value that you can add. That’s what, that’s what we’ve tried to do. And we are still trying to do, you know, we, we have so many, uh, clients that we just, we want to run their books perfectly. We wanna provide them with, with good insights, help their businesses succeed. If their businesses succeed, we succeed. Bi small business owners don’t worry about their accounting fees or their bookkeeping fees if they’re making cash handover fees, and, and especially if it’s a result of the insights that we’ve been giving them. And so that’s what we, we try to do.
Glenn Hopper:
All right, so now we’re to the wrap up part of the show where we have two questions that we ask all of our guests. And the first is, what’s something that not everyone knows about you? Something that we couldn’t just, uh, find out by Googling you?
Luke Mulcahy:
I, I, I kind of alluded to it previously that I was con contemplating getting out of the finance world. I had had enough of it, and I was very, very close to throwing it all away and becoming a scuba diver, instructor, <laugh>, bit of a, a bit of a, a change in part there, but yet I got, I’m, I’m qualified. I’m a dive master. I’m almost a scuba diving instructor, but I didn’t, I didn’t quite finish it. My, my career opportunity presented itself and I took it, and then I, I ran away from the scuba diving side of things. But, but yeah, that’s something fascinating. And if you, if you’re an accountant out there and you’re stressed out or you’re an engineer and you’re stressed out or an actuary or whatever, those kind of jobs, scuba diving is fantastic. It’s like forced meditation when you’re 10 meters under the water and you can’t see anything and all you can hear is
Glenn Hopper:
Beautiful. It’s beautiful <laugh>. That’s great. And that would be amazing. I, uh, after a particularly difficult fi financing, um, a few years ago I thought, I’m gonna go down to the beach. I’m gonna take a, uh, a vacation and just completely check out. And I’d almost convinced myself during that vacation, people come up with really weird ideas when they get away from work after a stressful time. But I didn’t even have like, the skill level and the, and the certifications. It wa wasn’t even gonna be something as, as complex as, as being a dive master. I just wanted to open a business where I rented out the chairs and umbrellas. I thought, you know what? <laugh> this, <laugh> this is brilliant. This is all I need.
Luke Mulcahy:
I was thinking about that. That si similar idea with, with Party Party High, like I mentioned, I live in Mexico and they have a, have a fiesta for everything. They have a party for everything Long was buy a bunch of chairs and tables, this thousands of parties every weekend. I rent them out. Easy, easy business. Yes, I still might, I’ll come back on the, on the podcast and plug that business if it, uh, <laugh>.
Glenn Hopper:
Perfect. Okay, so now everybody’s favorite question. Uh, what is your favorite Excel function and why
Luke Mulcahy:
Is it my favorite Native Excel function or my favorite macro, uh, shortcut that I’ve created?
Glenn Hopper:
I wanna hear about your macro shortcut. Okay,
Luke Mulcahy:
The macro shortcut. So this is anyone who does international accounting and international finance works with international businesses. This is a, this is a game changer. And only those people can probably relate to this. Dates, dates in Excel are a fricking nightmare. Um, especially converting us how you guys do it the other way around. You go month, day, year, Australia does day month. It’s, it’s so frustrating when you download data from one system and from another system and they’re from two different countries and then all of a sudden your dates don’t match up. People who are novices on Excel, they always go up and they go, oh, you just changed the formatting. It still doesn’t work. The only foolproof way that I’ve ever found. You go with texter columns and then you go and change the, uh, number format in there to month, day, year, or day, month, year.
And that works a hundred percent of the time. It’s a lot of clicks though. And so I, I, I create a shortcut for whatever date date I want, you know, control shift U for USA boom and it’ll convert USA dates into the crack dates Australia into Australia dates. It’s, it’s a game changer for me. <laugh>, anyone who’s in that has that pain point. You’ve gotta do that. It’s, it solves it. But in terms of native, um, index match The index match, I love it. It’s, it’s more advanced than the, if you look up or your H lookup and if you put that in a spreadsheet and send it to someone, they think you’re a genius. They look at this. Yeah, exactly. This is a long formula you got in here. It’s not actually that complicated, but I look really smart when I send it to you and it, and it does
Glenn Hopper:
<laugh>. I love it. Love it. Well, Luke, I, uh, I really appreciate your time and, uh, it’s, it’s, I lo I love kind of going through that, uh, SMB stuff ’cause it’s a space that, uh, near and dear to my heart, so really, really enjoyed the conversation. I guess just last question, how can our, uh, users, uh, connect with you and, and learn more about, uh, you and your business?
Luke Mulcahy:
Look, thanks for having me on. Um, again, I, I really appreciate being here. Uh, if anyone wants to reach out to me, you can find me on LinkedIn, Luke Mulkey. Um, that’s probably the best way to reach me directly. You can also go to my website, mulkey you can consulting com and uh, you can schedule time there or find out more about our business there. Alright,
Glenn Hopper:
Luke, thanks again.
Luke Mulcahy:
All right, thanks Glen.
