How To Master The Finances In Your Roofing Business with Lisa Raiche

Dylan McCabe 0:00
limitless roofing Show Episode Number 32 Welcome to limitless roofing show. My name is Dylan McCabe. And in every episode we give you a seat at the table as we talk with owners and CEOs of roofing companies about their challenges and the things they’ve learned, what they’ve done well, how to grow etc. We also talk with industry experts so that you can get the tactics and the tips you need to get a grip on your business and take it to the next level. Now in this episode, I’m going to talk with Lisa ratio with Bodhi advisors. She was a corporate CPA in the past and now she works with small business owners, and really brings a solid level of business acumen to the world of the small business, especially for roofing, and general contractors. Now in this episode, she’s going to talk about the three essential financial tools you need to use. And then she’s going to give a step by step breakdown on how to use these tools. I guarantee some of this is going to be new information to you and very helpful as well. Before we get into that, if you haven’t done so yet, definitely join our roofing our limitless roofing Facebook group, it’s meant for owners and key executives only a place where you can collaborate with other owners without getting covered up in spam and ads and just endless useless posts that are not relevant to your role in your company. We are diligent to weed that stuff out. So if you want a place where you can connect and collaborate with other owners across the US about the most pressing challenges in your business, check out our limitless roofing Facebook group. Alright guys, let’s jump into this conversation with Lisa ratio about how to master the financial aspect of your business. All right, thank you for those of you joining us the live stream and today I have a special guest on the show Lisa Raisa Lisa, thanks for joining the show.

Lisa Raiche 1:48
Thank you for the invite.

Dylan McCabe 1:50
Yeah, I’m looking forward to this because you know, with any business, you’ve got the three major components, the sales and marketing, the operations and the finance. And unfortunately, a lot of entrepreneurs are really driven on the sales and marketing side and leave the finance Last of all, and that’s the thing that you you can not overlook. So you with your background and all that you bring a lot to the table. And I’m really really looking forward to what you have to say today. Before we do that, I want to jump in to just give a shout out to our corporate sponsor Dalian black. We are proud to partner with Dalian black, and they’re one of our sponsors. And when those of you listening or watching this, when you’re in a situation where the insurance companies underpaid, the layer, deny, look, you need to bring an 800 pound gorilla to the fight and you need somebody who’s going to fight to win and Dalian black is that partner, they are attorneys that specialize especially in large loss claims. They’ve won more cases than any of their competitors, they helped draft the Texas code, insurance code, and they are in court regularly. So if you need to schedule a call with him, you can call them you can reach out to them directly. And you can go to their website at daily black.com. And you will be in very good hands. We actually have London crowds on for an interview, you can listen to that, but you will be in very good hands with daily and black. Alright, so having said that, Lisa, we’ve got some really good stuff to cover today. And we’re gonna focus on the three main tools that business owners really need to be well versed with. And but before we get into that, kind of share who you are and your background.

Lisa Raiche 3:35
So I am a CPA by trade, I’ve been doing this for about 20 years, I did the a typical route, I spent a bunch of time working in local public accounting firm, kind of a small tax shop did tax returns 10, you know, 10 months out of the year, spent a longer period working in corporate America, you know, work worked in that that $20 million company that was engulfed by the $6 billion publicly traded company, you know, you get a chance to see what it’s like to work for a small company, and then to see what it is like to work for a mammoth. And after working for two or three different companies, I decided, you know, I wanted to go back into public accounting, because there had been really a greater shift in the last, you know, five, eight years away from just the the tax shops to actually working with clients providing a level of advisory services, right. So one of the challenges that most business owners have is they’re scared to death of their finances like that is the biggest Boogeyman in the closet. And they really need somebody to work with to translate those to them. And so what I do is I work with clients, but I don’t just hand them a p&l at the end of the month that they have no idea what they’re looking at. So we look at it in a much more graphic format, and giving them a way to digest it, you know, their KPIs, things specific to them and their own business that they want to track and just Helping them gauge where they are, but doing it on their own playing field instead of, here’s a set of financials. I know you don’t know what you’re looking at, but Okay, yeah, fun, you know, try and figure it out. So really being a partner. And what’s really nice, it’s interesting that you were talking about the attorneys, it’s so important that a lot of these business owners when they get in, they’re so great at what they do, they don’t realize that they really need to build up all of those partners around them to support them, and all of those different people, those places, so to have the accountant in place to have the attorney in place to have that insurance company in place, so that you can lean on that, because those are not things that you are well versed in, you know, your guys are roofers, they’re plumbers, the electricians, they’re contractors, building houses, that’s what they’re good at. And that’s what they know how to do. But they need partners in their business. And so it’s kind of where I come in, and I bring in many cases, bring in other partners to them to support them.

Dylan McCabe 5:56
It’s so good. I mean, nobody can be good at everything, and you come alongside the business owner, you are you are very well educated and very experienced in this area. So why would somebody try to do a job that you can do, and you can just knock it out of the park? I mean, we are we are really big believers, that you surround yourself. I mean, john Maxwell, I think made this really popular, but you surround yourself with your dream team. And you surround yourself with people that are smarter than you in every aspect of your business. And you focus on what you’re really good at. But this financial area, you know, specifically you said something about it before, but it’s the most intimidating part of business. For most people, unless you are just wired that way to be a numbers person who loves to look at spreadsheets. You know, my wife is a senior financial analyst at a very large health system here in Dallas. She lives in these massive spreadsheets, she probably love to have my new monitor that I’ve got that’s 49 inches wide, because she could just see a whole spreadsheet. But But she is not intimidated at all. We just talked about this last this morning before I left for work, she was doing financial forecasting for millions and millions of dollars. And I’m thinking oh, you couldn’t pay me enough. I’d be so afraid I made a mistake. And I think that’s where a lot of business owners are at. So how do you how do you calm someone’s nerves when you come to work with somebody? How do you let them know that, hey, this isn’t rocket science.

Lisa Raiche 7:23
Um, you know, I come in because I have the experience. So I, I speak the language. And I tell them, Listen, I know it’s not something that you enjoy. I literally, I have a call later on with a client, he This is not his forte. But he realizes that in order to get his business to that next place, he’s got to learn a little bit more about it. So I give it to them in a way that they can digest. I don’t give it to them the way, you know, again, we look at things in graphs and charts and colors. And I know that sounds silly, but it’s far easier to digest that then on a piece of paper, especially when you have a lot of these, these tradesmen who they know their business in and out. They know the numbers, they absolutely know the numbers, but it all lives here. And when it lives here, and it doesn’t live on, you know, on the computer or on paper, it’s really hard for them to translate what it is that they want and need from their team when it lives here. And so when I work with clients, it’s, I’m showing them in many cases, what is in their brain and they’re like, oh, okay, yep, that’s, you know, they know, they know it, sideways ups, well, you know, backwards, forwards, they know, but then I just show it to them in a graphic format. And they’re like, yep, okay, you know, okay, your margins aren’t really here, or, you know, your margins have changed over the last six months, you know, I’ve been reading that the raw material prices are going up 400% Yeah, you know, I’ve been looking at this and this and increase in my costs. And, and so when they start to see things in a way that you can digest and the way that they know that it already lives in their head, and it speaks to each other, they’re happy, and it makes sense. And so I’m not one who likes to talk over the client, like, Whoa, you know, receivables and buveur. Like, they’d have no idea they glaze over, they don’t want to listen to you. I try to come to them from a place of, don’t be scared of it. It’s something that we need to you know, learn together about your business so that you can make decisions so that you can grow your business if you want to. You can add people you can take on more jobs, are you pricing your jobs properly? Right? Are you including all of your expenses when you’re pricing your jobs? You know, do you have inefficiencies in your business that we can look at where you can make improvements and save on some expenses. And it just gets them to be much more proactive in the business instead of you know, here are my receipts at urine, you know, did I make money, you know, and I used to get that all the time with clients that come in to do a tax return and they drop the receipts on the counter. Did I make money last year and you can’t grow a business That way. And so just giving them the opportunity to be proactive in their business and actually start to make decisions before they’re forced into decisions. Because, you know, then analysis paralysis, they don’t make a decision on something and you get stuck with whatever happens, we want to get out in front of it and say, Hey, here’s an opportunity now for you to, to bring on new people, because you have the opportunity with these additional jobs and all of this additional work to grow and increase your revenues by x this year, and so on, instead of it just kind of falling in your lap. Oh, no, I need three guys, because I just took on all of this work. Now we want to get in front of that work, you know those things, and it becomes more of a true business decisions instead of things that get dumped in your lap.

Dylan McCabe 10:40
No, it’s so good. I mean, you know, you’ve got to surround yourself with a players, if you want to if you want to have an A game. And so let’s get into the more of the training aspect of this and the kind of stuff we talked about before we scheduled this, which let’s let’s we’re going to narrow it down to the three critical financial tools. And when you were talking to me about that, you mentioned a ledger, you mentioned multiple bank accounts. And you mentioned cash flow management. And you really shared with me just some very simple ways. Two or three things people could start doing right now, as they listen to this episode. They could take notes, or they could start practicing this week. So let’s get into the first one. You mentioned using a ledger. So let’s assume we are teaching and training. Some people don’t even know what a ledger is. And that’s fine. What is the ledger? And how do we use it? It’s your books,

Lisa Raiche 11:29
let’s just call it that. It’s your books, when people talk about Oh, the books for your business, that’s really what it is. You really want to use, there are multiple electronic tools out there, QuickBooks Online is the most recognizable one. You know, it, it provides you with tools where you can get from point A to point B a little bit quicker, instead of tracking things on a spreadsheet, or putting receipts in an envelope or things like that. So you really need to have that first tool in place. And what happens is a lot of times, they you know, the average business owner, especially when they start doesn’t even have that they’re running their business based on the dollars in their bank account. That’s it. And so you need to run those things together. And so you need that ledger to want to track you know, who you’ve been invoicing? How long has it been since they pay you, you know, are you chasing them to get paid? And it really becomes those things? Who do you owe money to? Right? If you don’t know who you owe money to you think you have money in the bank today? Oh, yes, I can pay my guys tomorrow. But in actuality, you maybe can’t, because you wrote $7,000 worth of checks, because you owe people 20 $30,000. And you’re just trying to keep people at bay. And so what happens with a lot of these guys, it’s just, it’s keeping people at bay. And that’s what they’re constantly doing. And so they don’t have a set of books that they can go back to and look to see what’s going on and kind of get a visual picture of what’s going on. Now in accounting, you’re going to have things like timing differences, and it does it gets a little bit hokey. But at least if you have this basic tool in place, you can start to see dollars in dollars out dollars out track your receivables give people an easy way to pay you don’t make them chase you and find you and mail you a check and find their checkbook in their the back of a closet at home and look for a stamp and an envelope to pay you and make it easy for people to pay you. And if you have that nicely in a neat, you know, kind of all wrapped up in a nice ledger or a set of books, then you can go back and start to use the information that’s in there to start to make decisions about other things that you want to do. And it’s not just again, decisions getting thrown on you, you can be more proactive and actually make decisions in advance in your business.

Dylan McCabe 14:00
So when you say a ledger or your books, are you also talking about your balance sheet, because that’s something we talked about your balance sheet, your assets, your liabilities, just having a really simple way to get a snapshot of that.

Lisa Raiche 14:12
Absolutely. You don’t make it complex. I mean, I have clients, I tell them, please don’t make it too complex doesn’t need to be you want to see cash you have right now, who owes you money? Who do you owe money to? You know, what are your revenues for the year, whatever your expenses for the year, you want to be able to just quickly grab those things. You don’t want to have to think about who owes me money. Let me look back through my emails. Let me look back through my text messages. Who hasn’t paid me? Well, you don’t if you don’t know that if you can’t, like grab that quickly, you know, pop into an app, check to see who owes you and then potentially shoot them an email that says hey, by the way, slumming outstanding invoice and making it easy for them to pay you if you don’t know that it’s hard for you to really make any decision. So Really that books, those set of books are a place for you to grab quickly basic information that you need. Who do I owe? You know, who owes me money? How long have they owed me money? Right? You know, am I waiting? 30 days, 60 days, 90 days, depending on who you’re working with. I know some of your clients, they work, you know, a lot with the insurance companies. So again, there’s a challenge they are, how long are they waiting to get paid from the insurance company. And so you want to know those things, you want to know what’s outstanding, you don’t want to have to dig through a folder and try to figure out who owes you money or who you owe money to write, because they’ll come looking for you. It’s just you know, it’s kind of the same thing. You want to be able to just take a quick grab and say, these are my payables. These are the five people, eight people 12 people I owe, this is the total dollar amount, this is how long I’ve owed them, the grabit quickly. And that’s really what a good set of books looks like, is that you can grab that and say, I have six invoices outstanding right now six customers owe me or two customers that are, you know, three invoices a piece, whatever it is, I need to be able to grab that quickly and say, Okay, this is who owes me This is who I need to chase, and don’t want to have to be going on a fishing expedition every time you’re looking for that information. And so just having a basic set of books, it doesn’t have to be complex, it really doesn’t. And that’s where you bring in somebody to support you. You know, I’ve many cases I find right out of the gate, usually the wife who’s doing the bookkeeping, she doesn’t want to do the bookkeeping, she doesn’t like it doesn’t know how to do it. So you know, this is where you bring in a bookkeeper bring in a bookkeeper to support you to get everything in that ledger in a timely basis, every month. So you get a snapshot of what happened in that prior month. And you can grab information out of that ledger when you need to, to see where you are today.

Dylan McCabe 16:51
Yeah, and then you can go back to doing what you do best, you know, which is working

Lisa Raiche 16:55
on these projects, you know, they don’t want to be chasing receivables either, but you want to be able to go somewhere quickly and say, oh, okay, these are the five people that owe me money. Let me give them a call.

Dylan McCabe 17:06
Yep. Yeah, we use we use job Nimbus. And we’ll make we’ll make an estimate, of course, lie a lot of our work on them, my business partners side with with our general contracting company, a lot of it is storm restoration work. But we make an estimate inside of job Nimbus. It’s linked up to QuickBooks, but the estimate also becomes an invoice. And then if we get paid, like, let’s say they send the bulk of the money first, but the insurance company’s still holding the depreciation, we can split it to where a partial payment has been given in all of its tracks. So it’s really easy to see where it’s at. And we recently made this shift. And it’s brought a lot of peace of mind. And it’s all linked up. So is this something now I’m not putting? I don’t want to give anybody the idea that this? Is this something you do or that you can help somebody with? If they say, hey, Lisa, that sounds great. But how do I get that system? Is this something you can help them do?

Lisa Raiche 18:02
No, I understand. Absolutely. Yeah. So this is definitely something I can help them with. What I typically see is I see someone come to me, they have probably QuickBooks, and like I said, it’s probably their, you know, their wife, their girlfriend, someone who’s maintaining it, I come in, we clean it up. And then we start to actually add tools. So we would add a tool like job Nimbus and say, Listen, this is going to give you the opportunity to create estimates, send them off to your customers, track the cost actually associated with that job, look at it in a quick, again, a quick fashion, let me open an app up, skim through something quickly see where we are on a job and move on. And so we start to create those tools for them for whatever it is that works for them in their business or was going to work for them. So they can grab that information quickly. And they can make decisions. Geez, why is this job over? You know, why are we over on this job? Let’s let me find out what’s going on. Let me talk to my team lead my progress, no, my project manager figure out what’s going on with this and actually start to have those conversations. And then what’s great about that, when you use a lot of these tools, now you can start to have those post mortem conversations too, right? We had estimated, you know, XYZ, this is where we kind of fell out of the limits, what happened, what didn’t happen? Do we need to make adjustments moving forward when we do our estimates. And so we start to come in and bring them the tools and we bring them slowly one at a time. I’m not looking to overload an owner who’s you know, probably never looked at his financials ever before. We come in and we go slowly, and we we give them a ledger and we do bookkeeping on a monthly basis and I go through it with them. And then as time goes on, they’re ready. Then we bring in another tool that can help them that can help their team lead. If you have the type of business where I don’t know your electrician, you’re a plumber, you just did work. You want a tool where your guy can sit in the truck Do an invoice right there and shoot it off to the customer. You know. And so you want to start to integrate those efficiencies so that it’s not, it’s not Mr. business owner who’s at home at night after the kids have gone to bed, they put them to sleep and trying to figure out who’s going to invoice who we invoicing for what it all becomes integrated. So we slowly add the tools that will help them become far more efficient in their business. And again, gives them ways to grab. Now you have the ability, you can see your own jobs and say, oh, gee, this job is not on track with this one’s great. What did we do differently in this one that we didn’t do in all the other ones? can we can we replicate this? And now you have the ability to proactively make decisions, right? We, you know, we tried this on this job, it worked great. We need to do that moving forward on, you know, all of all of the other ones because it’s a win win for us. It’s it’s a margin getter. Yeah, that’s

Dylan McCabe 20:52
good. I mean, you’re that’s why I wanted to invite you on the show, because you’re a strategic thinker. You’re not. I mean, I’m not trying to use an offensive term here. But you’re not just a bookkeeper, right? You have, you have an amazing corporate background. You’re also a CPA, and by trade, and but you’re a strategic thinker. So everything you’re saying is thinking about how to do things, well, how to bring shortcuts, how to streamline. And that’s why I was excited to get you on the show. So I think the call to action here and the challenge to those listening or watching this live is, the question that we need to ask is, are you using a ledger? I mean, do you have a very simple balance sheet that you can pull up and quickly see your assets, your liabilities, what’s outstanding and stuff like that, because, you know, the thing that I that I’m, you know, convicted about is, you need to know this, too, as a business owner, you can’t just hand this off to somebody, you can get somebody like Lisa to help you. But you can’t be so illiterate when it comes to the financials in your business, because then some things can be happening, that, you know, you find out a year later, somebody has been cooking the books or doing who knows what I have a very dear friend, a very, very wealthy business owner in Houston that found this out, you know, two and a half years in, the person doing the books, was writing checks to themselves in small amounts at first. And then after a while, you know, but he was the kind of guy that would look in on this stuff. And started to see that, hey, something doesn’t look right. And so the thing I like about you is, you’re you’re doing the work, but you’re also training that business owner on how to do it well. So for those of you listening, watching, that’s the challenge, I think is, is do you have that ledger in order? Do you have your books in order in a simple, usable way? The next thing you mentioned, Lisa, was having multiple bank accounts. Now, what’s the big deal with that?

Lisa Raiche 22:41
Yeah, so there is something out there called profit first. It’s a very simple, simple system. It’s something I found probably about four years ago, and absolutely fell in love with. And basically, your budget is the money you bring in the door. So if there’s no money coming in the door, then you really shouldn’t be spending. And that’s really the fundamental basic principle of it. And when you really look at it, it, it breaks down to your grandma’s envelope system, your grandfather would bring his check into the house, you know, on Friday, or his money, and she would put, you know, this into the mortgage, and this into the utilities, and then into the grocery envelope, and the concept is similar, you’re putting your money, it all comes into an income account. And then twice a month, the money moves into your payroll account, your owner’s account to pay, you know, to pay profits to your owner, your tax account and your operating account. Because far too many of these owners don’t pay themselves, they pay everybody else. And they don’t realize and really look and dig into their financials to see that. They’re spending inefficiently, they’re buying things, they don’t need tools, so on and so forth, their teams working in efficiently. So you have two or three guys on a job, they run out of x in the middle of the afternoon, and all three guys get in the truck, and they all go to the Home Depot together. Well guess what all of those guys have gone off for 45 minutes, an hour, hour and a half, whatever it is, you just lost all of that time. And so you start to realize how inefficient that you are in what you’re doing. And also that you probably aren’t paying yourself, and you probably don’t have money put to the side to pay your taxes. And so, you know, at this time of the year for a lot of these business owners, the paper tells them that they’re profitable, but there’s no money in the bank account because they mismanaged it basically throughout the year. And the profit and loss statement says well, you were profitable and you know, they’re paying self employment, which is 15.3% tax. You know, they’re paying that right off the top and then there’s income tax on top of it. And then all of a sudden you’re like, Oh my gosh, I owe $25,000 where Where’s that money coming from? They don’t have that money. And so what? profit first, and there’s actually a really good book that came out probably in the last year. And it’s profit first for contractors. And it speaks the language of contractors. And it really gets them to realize where they’re being inefficient, inefficient, and their businesses where they’re overspending where they’re not charging enough, you know, a lot of these guys are literally quoting to the bottom of the barrel. And there is no money to be made at the bottom of the barrel. And there, they’ll always be like, behind the eight ball right out of the gate, because they’re just trying to grab whatever client off the street who might pay them. And so what’s really wonderful about this book in its earnings, like it’s, it’s not, it’s not complex business, right? Some of these business books are dry. They’re terrible. Yeah,

Dylan McCabe 25:53
they’re all they really are insomnia.

Lisa Raiche 25:56
Absolutely. Right. Now, this is this is easy to follow along, he speaks contractor, you know, he was in the business for years. But he utilizes basically the profit for system, which is the five bank accounts, and really just teaches you how to look at your business differently. You can’t look at it as Oh, well, there’s, you know, there’s $25,000, in my bank account, today, it’s Thursday. Yeah, that’s great. And in about, you know, two hours, payroll is gonna sweep out, so you can pay your guys tomorrow, and most of that money is gone. So you really don’t actually have any money. And so it’s a wonderful tool that teaches you, you need to put money into that tax account. Because if you are profitable, which is what you want to be, you’re going to owe uncle sugar money at year end, just need to come to grips with that. The more that you don’t show profits, again, it becomes a challenge because the Hokie game, I can’t get a loan at the bank to buy another truck, well, you want to show a loss every year, no bank is going to give you a loan for that car lift for that truck, especially when you want to buy something, you know, significant, an expensive piece of equipment. And so it just becomes a silly, a silly game. And so what profit first really teaches you is it teaches you to allocate your money around, pay yourself, first, have your operating expenses, put your money to the side for the taxman at year end, and then have a profit for yourself, because a lot of these guys probably have never, ever even seen a profit in their business. But it forces them to really have, you know, like just a reality check that I’m not charging properly. We’re overspending, we’re buying tools, like crazy tools are disappearing, I’m constantly replacing them, blah, blah, like, you know, you’ve got a laundry list there, and suddenly, you’re not profitable. And so you just need to have another, you need to really understand your value and learn how to convey that to your customers, so that you truly are selling to the customer who’s willing to pay you so that you aren’t chasing your revenues to the bottom of the barrel every time because I will tell you, there’s going to be somebody else, who if you’re talking to that price shopper, that price shopper, somebody else comes up and says they can do it for $500 or less, they’re going to go there. And if you’re losing money, he’s losing even more money. And so it just becomes a game. And so you just have to have really more of a conscious look at your business, you know, am I charging people appropriately? Probably not a typically in services? That is one of the worst, worst visit? You know, if they don’t, they don’t charge properly. So are you charging properly? Are you are you in a fit inefficient? And you know, are you working 100 hours a week in order to just keep just barely keep up. And so it really gives you an opportunity to look back at your business in a very different way. So you pair the profit First, the bank accounts, you know allocating your money around with that quick grab from that set of books who owes me Who do I owe money to? You know those things. And now you can get a much more solid picture of what’s going on in your business.

Dylan McCabe 29:08
That’s so good. You know, if it’s not simple, if you don’t have a simple answer for this, then it’s too complex. That’s one of the things that we teach inside of our roofing CEO groups that your job as the leader of your company, and one of the five key things that you need to do is simplify. And if you have to dig and dig and dig for where things stand your your process is too complex. It should be simple. It should be simple enough for you to have a firm grip on it and wonder how things are going. And unfortunately,

Lisa Raiche 29:41
C’s lie is in the chaos of those over complicated processes.

Dylan McCabe 29:46
Well, and you mentioned some people are not paying themselves and I think the opposite in the spectrum is some people are paying themselves too much. Oh, and they find out you know, now you’re going to your guys and telling them hey, we can’t make payroll this week but but the owner of the company Driving a $70,000, you know, four Platinum truck. And so it’s just all over the map. And I really respect the guys in the business that are doing really well but also show by example, financial wisdom, you know, he had he takes on and his his roofing company has done really well, multiple locations just growing and growing and growing steadily that it’s steadily trending up. And it’s not only healthy from a gross revenue standpoint, but from a profit margin standpoint. And they also launched the catch all and the catch all has taken off, and he’s doing really well. But one of the things he said in our interview, as he said, I waited until I think he waited until he was like five years in when the trend kept going up to buy himself a truck or nice truck that he wanted. Whereas most guys, that’s what they do right out of the gate, they just have no long term thinking at all. So I just love the way your your your thinking about this in the profit. First philosophy is smart. But it’s also going to force you to be responsible with the resources that you’re pulling into this business. And that responsibility is critical, because you’re also connected to the livelihood of others. So I really like that. So we’ve talked about a ledger using a balance sheet that’s simple and easy to use. And I think every tool should be simple and easy to use. It’s not a good tool. We’ve talked about multiple bank accounts with a profit, first philosophy. And then another thing or the third thing that you and I discussed it was cash flow management. What do you mean by cash flow management? Well, I

Lisa Raiche 31:35
think a lot of these guys don’t think about that they don’t think about how long is it going to take me to get paid, right there, they don’t have an active way, an active process in place that says this is how I invoice. And this is how, you know, I chase for my payment, you know, a lot of times they throw that invoice over the wall. And when you pay you pay. And you know that doesn’t pay your guys on Friday. And so you’ve got to understand where the cash is ebbing and flowing. And so while you are beginning to implement profit first and understand, you know, where you know, whether you’re under priced or you’re overspending and things like that, you’ve got to be able to see that in three weeks, we actually have an exposure, and I actually may need a little bit of cash, or I may need to hold back on paying people. And if you aren’t really forecasting that out, when do I think I’m going to get paid you some of these guys work with other contractors or work for other contractors religiously, you know, after a period of time when someone’s going to pay you like your terms, maybe 15 days, you know, and it might be your third, they’re going to pay you 35 days. Okay, you know, you’re going to get that invoice probably in 35 days. And so you begin to project out where that cash is coming in. And then in the interim, what’s going out the door, what has to go out the door, right? I’ve got to pay my guys, I’ve got to pay myself, you know all of those things, looking at it. And where’s it ebbing and flowing, because it it ebbs and flows up and down. It’s there, there are going to be flushes of cash. And that’s where you see the you know certain things, oh, well, I’m flush with cash, I need to go out and buy a truck? Well, no, you actually need that cash to last you six weeks, because the reality is you’re not going to get paid again for six weeks. And so really forecasting that out and understanding where it’s coming from and where it’s going and when it’s going out the door. Because if you don’t, that’s when you expose yourself, those are the things that, oh, gosh, you know, it’s Thursday, I really can’t make or I can make payroll, but I won’t be able to pay anybody else on Tuesday. Well, you want to know that in advance. And so I try it’s hard with contractors, I tried to go out 13 weeks, it isn’t always the easiest to do. A lot of times it ends up being six or eight weeks. But if you understand where your blind spot is in that period, then it really does help you because you want to know you want to know three weeks in that you have a problem. You don’t want to find out on Wednesday that you have a problem on Friday morning. That’s not going to help you but if you know that three weeks in advance, you can start to look at things and what can I do? How can I you know, how can I make you get a payment and you know, a lot of these guys don’t have processes around collecting. They just send an invoice over the wall and when the person plays it, they pay it. Well do you have an active collection process? Hey, client, just want to let you know your invoices out there. Here’s an easy way for you to pay us. Here’s a nice electronic link. Okay, great. You know, and just following up with them, you know, there’s a lot of that from a cash flow perspective. You know, a lot of contractors don’t actually follow up with clients. I had, I had worked on here at my home I gave the first third for Other work done, you know being done? Turns out, they started the work and it’s the scope change. So it increased. And I would say probably like, it looks like we were getting close to the project being done. And I was like, You guys want some money? I was never, never given an invoice for the second third. Nothing. I mean, I was the one who approached them and said,

y’all want some money?

I know, they aren’t the only ones that do that. And

Dylan McCabe 35:35
so I’ve heard that so many times.

Lisa Raiche 35:38
So they were here for a week and a half, almost two weeks, and didn’t collect any money from me, except for that first third. So what were you doing in the interim, paying yourself? You probably weren’t. And so you start to compound that if you have a couple of teams working out a couple of different houses. And you know, that’s happening over and over again? Yeah, you suddenly Oh, no, I have a cashflow problem. You know, and in many cases, you know, cashflow problems usually are bad pricing. It’s not necessarily you going to get more jobs, because getting more jobs doesn’t always fix it. And that’s what I find a lot of contractors, you know, tradesmen, do I need more work? Well, no, you actually just need to know how to price your work properly. And, you know, not overspend on every job, you know, really need more work.

Dylan McCabe 36:24
You’re right, your profit margin is just too thin. And, you know, we, so my business partners company that I still do some work in, with roofing, you know, we’ll have somebody if a homeowner files a claim, even if they have the check, we still don’t schedule the job. We make sure they follow the claim, they’ve got the check, and it’s deposited so that they can actually pay us because it’s your mortgage company’s written on there, and it’s going to draw it out another week or two. We’re not scheduling the work yet. We’ve got to get paid. And yeah, we’ll wait all the depreciation but let’s not let’s not get in over our skis. Let’s just wait there’s no rush, the house is not on fire. This is not an emergency. Let’s wait until you’re all ready. And and like you said, with the margin stuff, we we never sell on price. I mean, I think it’s a race to the bottom, everybody loses including the homeowner. But that’s one of the things we do but but that’s easy. I think with roofing jobs, it’s pretty easy to make that a standard system, especially for like in Dallas, and Colorado, so much of it is hail work. So it’s insurance money. But with bigger jobs, like you discussed, I think that that’s something that you can communicate to your client as well that, hey, here’s the scope of work, it’s going to be $1.5 million, we are going to need a draw of this amount on a schedule. If the jaw doesn’t come, we have to stop work. We’re gonna have to pay our team. You know, we’re in this situation right now doing a big multifamily water mitigation project. And they are giving us very large draws over $100,000 each, and they are coming frequently. Well, now they’re waiting on the insurance company to disperse the draw, then the insurance company all of a sudden wants to send it to the mortgage company as well. So we had to have a conversation with him this week. Well, guess what we’re taking a month off, or two weeks or three weeks, or however long it’s going to take we are not going to get in over our skis financially. And flow this massive project. You guys it the pressure is on you. Now you need to if you’re waiting on them, Well, guess what? We’re waiting on you. So you put the pressure on that. It’s not on us?

Lisa Raiche 38:30
Absolutely. Because you’re right, you’re fronting that money to that homeowner until you get paid. How long is that going to be? How many weeks payroll Are you trying to make? How much in material costs have you incurred, that you’re fronting? That you you’re waiting 30 days to get paid on? Your vendor probably has some sort of like maybe 14 day terms with you. So you’ve probably had to pay your vendor. Your vendor doesn’t care that your client the homeowner hasn’t, you know, hasn’t paid you, they care that they haven’t been paid. And every Friday your guys care that they’re not getting paid, they don’t come back. They don’t want to come back if you don’t pay them and so you’re constantly fronting money and that’s just the terrible You know, you’re not making any money off of fronting people money and so it just becomes a high wire act all the time. And so for you, that’s your boundary Sorry, guys. There’s no more money coming until the money starts flowing again. We’re just going to go off and we’re going to work on another job. And what happens are too often is people don’t do that. They just keep going and going and going. And now oh hey homeowner, well, when are we going to get paid and homers? Like I don’t know. I’m waiting for you know everybody else to bless this and you know, who knows how far well now you’ve just fronted 20 days, 30 days 45 days insurance company doesn’t care that you fronted all of that money for all those materials and that you’ve got guys that got paid though Pay in 60 or 65 days, whenever they feel like it, whatever their terms are. And so you have to be really conscious of those things of stopping work. Hey, client, you haven’t paid us you have two outstanding invoices like you shouldn’t have two outstanding invoices, but client, hey, we’re stopping work. But what happens is far too often is they take money from this homeowner. And they’ve spent that money already. So it’s going to pay all this stuff. And then they get rolling on this homeowner, and they can only get so far. And then they got to go over to the other one, because now I’ve got to get this other one to give me money in order to keep going on that one. And it just becomes a juggling gate. Because they’re inefficient with their expenses, they don’t price properly, a whole slew of you know, and you throw all of those into the mix. And it makes a very, very, very ugly picture. But your homeowner doesn’t know that you might, your homeowner only knows that you haven’t been here in a week. You told me I gave you money, he told me that you’re going to do the work. And I haven’t seen you in a week like what’s going on. And it’s a jungle. And so that’s a typically what happens with a lot of these guys right out of the gate is they worked for someone else, they saw, oh, I could do this, they saw the boss roll up in that 95,000 you know, GMC 3500 with all the bells and the whistles, you know, the car talk the truck talks to you and does all of this, like, well, the boss has $100,000 truck, you know, he’s killing it, I can kill it too well, many cases, you know, what sadly happens is the boss is probably like a payment away from the repoed. And that, you know, has all of this fluid problems. But that’s what they see, they run off and they start their own business. And they don’t understand. And then they’re kind of like chasing it to the bottom of the barrel. And it just becomes sadly a vicious vicious cycle, it becomes you know, over and over, it’s the same thing over and over. And then they will pay

Dylan McCabe 41:47
themselves we could do a whole we could do a whole show on spend more than they make or spend exactly what they may, I’ve got a really good friend who lives in Highland Park, and he’s been a CPA for about 20 years. And it’s one of the most affluent neighborhoods in Dallas. And he told me, he said about 70% of my customers, and they’re mostly in Highland Park Park cities, etc, you know, million dollar homes on the low end, you know, and up. And he said 70% of my clients are living paycheck to paycheck. And I thought oh my gosh, that is just terrible. So when you see that brand new McLaren drive by 70% of those guys with cars like that they’re just one month away from being able to keep that car and it’s just nuts. It’s totally, it’s total insanity. Anyway, I’m not gonna set up a soapbox on that. But um, I just love the people that I know, in my network in Dallas, that are multimillionaires in you would never know it. I just love it. I love I love being able to rub shoulders with people like that, who value things other than they value their family, they value the causes that they’re passionate about, or whatever it might be their faith. But they also are very wise with money. And it’s just good to have those examples. So well, how do we sum all this up? I mean, we’ve talked about the three critical tools. We’ve talked about a ledger, multiple bank accounts and cash flow management. I mean, what would be the best parting piece of advice you could give? If you just had 60 seconds with somebody, what would you tell them listening to this,

Lisa Raiche 43:24
this is not something you should be doing. You should be you, honestly, you should be utilizing an outside source to support you with this and help you with this. They’re not this is not your space. If you know, again, if you got into the roofing industry after spending time in finance, and you can find your way around. Great. That’s for you. But the reality is the average owner does not understand the actual financials of it. And so you need to partner with someone who can help you translate that and help you use the information that you have there in a very succinct manner and allow you to make solid business decisions because you have good information at your fingertips right now that you can make a decision, not four months down the road when everything is past and now you know you’re stuck with whatever happened. So I’m a firm believer in having people help you. You know, I am not a marketing person. I have marketing people who helped me, you know, that’s not my shtick finances my stick. You know, I don’t know anything about roofing I wouldn’t take on. I know enough about it as a finance person, but do I really know enough where I could supervise my own job? No. So why would I do that? So honestly, you know owners across the board, they need to be willing and ready and able to bring in professionals that can support them, that can help them with the things that they are not, you know, skilled skilled in were well versed in and that Nothing, there’s no reflection on you, as an owner just oh, well, you know, you’re a bad owner, because you don’t know everything in your business. No, you’re not meant to know everything in your business, you need to have a good general understanding of all the moving pieces and new parts in your business and understand that they all need to live harmoniously under that umbrella. But you need to partner with the right people to help you. With your business. The really amazing, successful business owners have done that they have an entire team surrounding them. They if they aren’t a great salesperson, they have great salespeople. In most cases, a lot of these guys are probably great salespeople, along with being great craftsmen, so they don’t need but get a marketing person to help you with that. Get a finance person to help you with that, you know, if you have a large enough team, have HR people around you so that you’re making good solid team decisions, you know about the culture in your business. And it’s not, again, things that are getting dumped on you, you know, you’re not a bad business owner. If you don’t know every single in and out of your business, you’re not meant to, you know, find out where your sweet spot is where you’re great. If you’re an amazing salesperson, you need to get out there and sell and get more projects in the door that are well priced. If you’re great at it, like as the owner, go, that’s what you do. You don’t answer the phone, you hire somebody to answer the phone, you hire somebody to do your social media, you hire somebody to do your finance, because you’re amazing at sales. And you can like, you know, talk a dog off the meat wagon. Great. That’s what you need to be out there doing. Not mucking around, you know, playing around and doing your own QuickBooks at night.

Dylan McCabe 46:41
Yeah, right. I’m self aware enough to know that compared to you, I’m like a first grade I met it like a first grader level when it comes to you or my wife or anybody who’s in finance all day long. Why? Why would I want to try to knock it out of the park in that area of my business, it just, we need highly skilled people on our team. You know, it’s all about putting the right people in the right seats. That’s another thing we teach inside of our CEO groups. It’s a principle through EOS worldwide called right people right seats. But you as the owner need to be the right person in the right seat. And the rights person means your values and the way you think about things. And the right seat means the specific role you have that it’s something you get, you get it, you want it and you’ve got the capacity to do it, those three things have to line up, you got to get it, you have to want it, it’s something you really enjoy. You’re not just good at it, but you hate it, you’re good at it and you love it, or you really like it a lot. You got the capacity to do it. So, Lisa, how can people get in touch with you if they want to learn more about you and your company.

Lisa Raiche 47:40
So I can be found on LinkedIn, research, CPA, you can find me on my website, it’s Bodhi business advisors.com. You’re welcome to make a discovery call with me. We’ll walk through kind of what’s going on in your business. And then we make a decision as to whether or not working together makes sense. Not all clients are a good fit for me. So if it you know, if clients aren’t a good fit, then I at least try to potentially recommend a colleague that might be a better fit.

Dylan McCabe 48:08
Awesome. Well, thank you for taking time. I know it’s a busy season for you. So thanks for taking time to break down these three financial tools. And thank you for joining the show.

Lisa Raiche 48:16
No problem.

Thank you for having me.

Dylan McCabe 48:18
All right, that it concludes our conversation with Lisa I love the insights she brought to the table everything from multiple bank accounts to reviewing things to planning to making sure you got a grip on your you know everything from AR to what projecting what’s coming in. She’s just solid and that’s why we wanted to have her on the show. So I encourage anybody out there who feels like they have a weak grip on this aspect of their business to reach out to Lisa. And as I mentioned at the beginning, if you haven’t done so yet, join our Facebook group, and you can collaborate with other owners about the most pressing needs in your business. This is Dylan McCabe with the limitless roofing show and I will catch you in the next episode.

Transcribed by https://otter.ai