Copper8 Strategies, LLC is a fractional CFO firm supporting small businesses, start-ups, and non-profits driving results via robust financial strategies and management. We offer packages to get you from business validation to $20M in annual revenue.
I have a passion for supporting founders & business owners on their journey to success. I drive business growth through financial strategy development and execution. My services include fractional CFO support, management consulting, and advisory services.
I started Copper8 Strategies, LLC in 2018 working with tech start-ups doing market research, financial modeling, and venture funding preparation. Now, my offerings include serving small businesses and non-profit organizations. Prior to founding Copper8, I spent five and half years at the Bill & Melinda Gates Foundation in grant-making, focusing on tech investments within K-12 & higher education, then transitioned into the corporate world as a finance manager at Starbucks.
I hold Master of Business Administration from the University of Washington Foster School of Business with a focus on entrepreneurial finance and venture capital.
Outside of the “office”, you’ll find me remodeling my fixer-upper house with my husband, building Legos or looking at bugs with my 5-year-old daughter and 15-month-old son, and planning my post-covid travel adventure.
In this episode
Natalie Cook of Cooper8 Strategies clears up the confusion on the difference between accounting and finance. Finance is really about strategy, deep thinking, and forward thinking. Accounting is a numerical recording of your results and is backward looking. Instead of only reviewing financials sent by your accountant on a monthly basis (which you should do), Natalie recommends taking out a notebook and pen every month and thinking through your revenue, expenses, and major decisions for your business for the next 3 months. She advises asking questions like, Are you at max capacity? How many potential clients do I have in my pipeline? Are any of my clients at risk? What expenses can I cut or change? Review your financial history to see if you’re reaching your goals (KPI's) and then take a step back to see if there's anything that needs to be adjusted.
A glimpse of what you'll hear
03:04 Accounting, bookkeeping, and finance are very different functions.
12:03 Introduce the finance function in the early stage of your business.
15:27 The importance of finance when taking in outside money (debt and/or equity).
20:32 Business benefits from having a finance function in your business.
22:51 5 steps to take to incorporate a finance function into your business.
27:56 Learn about Natalie. Email Natalie at email@example.com.
(Note: this was transcribed using transcription software and may not reflect the exact words used in the podcast.)
00:00:04:13 - 00:00:22:18
Welcome to the best kept secret video cast and podcast from Centricity. If you are a B2B service professional, use our five step process to go from the grind of chasing every sale to keeping your pipeline full with prospects knocking on your door to buy from you. We give you the freedom of time and a life outside of your business.
00:00:23:06 - 00:00:42:05
Each episode features an executive from our B2B services company sharing their provocative perspective on an opportunity that many of their clients are missing out on. It's how we teach our clients to get executive decision makers to buy without being salesy or spammy. Here's our host, the co-founder and CEO of Centricity jokingly.
00:00:43:01 - 00:01:11:17
I'm Jay Kingley, co-founder and CEO of Centricity. Welcome to our show where our guests share their provocative perspective on what their target market is missing out on. I'm happy to welcome to the show Natalie Cook of Corporate Strategies. Corporate Strategies is a fractional CFO firm supporting small businesses, startups and nonprofits. Driving results via robust financial strategies in management.
Natalie is based in Seattle, Washington. Welcome to the show, Natalie.
00:01:16:16 - 00:01:19:09
Thank you so much for having me, Jay I'm really excited to be here.
00:01:19:19 - 00:01:43:01
Natalie I've been a principal in a number of startups and small businesses, even all the way through the enterprise level. I have been blessed to work with so many entrepreneurs that have started their own business, and as one of our clients likes to say, I've never met a person who started a business because they were good in business.
And what this is really trying to say is that you start a business because you are passionate about what you're going to do for your clients and customers. And that's the thing that you focus on. But simply delivering the service does not make what you're doing a business. You've got to do all the other things that are required to turn that passion into a real company.
And of course, one of those things is finance and accounting. But, you know, of all the people that I've met that start businesses, not too many of them were experts in those two areas of finance and accounting. And yet it doesn't take long before people realize that they have got to get on top of their numbers. They have got to understand how their business is performing, and they've got to make sure that they have a secure financial position.
And simply checking your bank balance at the start of every day. Well, I'm not saying that's a bad thing to do. I am saying that surely is not sufficient to run a business. Now, as someone who provides fractional CFO services to start ups through larger companies, I've got to ask you, what do you see that people struggle with when it comes to finance and accounting?
00:03:14:08 - 00:03:38:02
Yeah, it's a great question. So I, I explain this probably every week, which is accounting and finance are different things. They're different functions, they're different thought processes, accounting, bookkeeping and tax accounting are really backward facing parts of your business. You have to have them. They're really important, but they tell you what has already happened. Finance on the other side is deep thinking.
It's strategic thinking, it is forward looking and it is trying to plan what's going to happen. And so if you you need both. I really focus on what is going to happen and what is that deep thought process. I think what is really helpful for young companies and I work a lot with young companies, I also run a very young company is taking the time to think about what's going to happen to your business so that you can begin to predict how your cash is going to come in, how it's going to go out, what you can afford to do, how you can grow your business.
You can't actually grow your customer base or do any marketing unless you know your financial structure. So I've worked with all kinds of businesses. I actually my husband runs a general contracting firm, so I do a lot of free work for them and they're a great example of two guys that went into business. They are terrible at bookkeeping and accounting and finance and they do check their bank balance every week and it drives me nuts actually.
I check their bank balance every week and run their payroll, which I don't do for anyone else. But I've learned a lot from watching them struggle, and so I've been able to take what those they're so hands on. And I've worked with a lot of other business owners that have more of a corporate background and they have a little bit more finance.
And so marry the two and talk to people about what what matters to them and what's important. And one of the tools that I use is a pen and paper, which is, I think a little bit different what people expect of me. I actually don't start in an Excel or a financial tool. I take pen and paper and I write out what does my next three months look like, what is coming in, what's going out?
And I find that to be a really great strategic thinking tool. Even if you're only going to spend 5 minutes a week on it.
00:05:33:06 - 00:05:52:13
We have bookkeeping, we have accounting and we have finance. And you said that those are three different functions that are all important. Can you just take a second and tell us what is the difference between those three functions?
00:05:52:17 - 00:06:16:19
Yeah, so bookkeeping is really the data entry part. So what bills have you paid? What revenue have you received? There's a lot of overlap between bookkeeping and accounting. They get a little fuzzy accounting that can be a lot more strategy involved of how you account for things. What is revenue recognition? How are you meeting your tax requirements? How are you if you are a public company and that becomes a whole other level of accounting.
But essentially both of those functions record what has happened in your business. So it's already done and then you get a report of what has already happened.
00:06:28:01 - 00:06:42:21
And one of the things that every person who runs a business needs to worry about is keeping the government happy. And they think that, you know, we call that following your taxes. Now, that is normally the purview of the accountant, not the bookkeeper.
00:06:43:02 - 00:07:09:07
You can have a bookkeeper and not an accountant and an accountant. There's multiple kinds of accounting. There's tax accounting. And then there's other kinds of there's just accounting, which is making your bank statements and bank statements, financial statements. So your pencil, your balance sheet, cash flow statement, working in QuickBooks, bookkeepers are really just data entry. They're, they're like the beginning part.
And then an accountant, there's different levels of accounting. So they might be strategically helping you figure out your account, your chart of accounts. And then there's tax accounting, which is its own thing, and they very rarely overlap. But where I think people get really confused is they hear the word CPA. Sometimes people are CPAs that only do tax accounting.
Sometimes there are CPAs that don't do any taxes. And I've come across quite a bit and you actually need to accounting firms to run a business, you need a CPA and you need an accounting firm. And if you're a really small company, so if you think of midwifery firm, so kind of a bizarre example, you really only need like a bill pay bookkeeper because their business is pretty steady state.
They're just kind of managing that cash flow in and out. They're not necessarily looking to expand. They may be, but if you are growing business or you any complexity, you need an accounting firm that does bookkeeping and you need a CPA that does tax accounting.
00:08:13:19 - 00:08:38:06
Now, you mentioned that both bookkeeping and accounting are, in effect, recording what's happening and giving you that backwards looking finance is looking forward. So talk a little bit about what a person who is doing the finance part, what they are looking at. That's different from the accountant and the bookkeeper.
00:08:38:11 - 00:09:01:04
Let me give you an example, because I think that's easier or so. Accounting gives you your numbers of what you already had. Finance will often take those numbers and then forecast what's going to happen in the future. So if you have constantly been growing your revenue 3% month over month, a finance person might take that and say, okay, well, we know that just based on current growth, you're going to get here by the end of the year.
And then they'll also work with the leadership team and guide them through, well, what are your goals? So do you want to get ten X your revenue in two years? Do you want to stay steady state? What does that look like? And then they can kind of give that set them targets on whatever cadence they need to get those revenue targets.
So that's one example. Oftentimes it can be taking what's happen and doing a really deep analysis on it. So if you if you think about a physical product business, they have COGS, cost of goods sold and that's one that you need to do constant analysis on to project what it's going to be in the future. So you know where to cut costs.
So if you think of just the cost that it takes to produce a physical product that piece is just a one line item in your COGS line, and it is something that you can constantly go and renegotiate those costs. But if you aren't looking, you need the accounting piece. So what has happened? But then you need someone to take those numbers, tell a story about them, and then guide the team to see what can you cut?
Is that an area where you can cut? Here's all the things that you can lower costs. So if you are a financial leader, so CFO or director in a corporate company, your goal is to maximize revenue, set targets, minimize costs.
00:10:22:06 - 00:10:44:10
Before we move on one one more question. Let's talk about the background in the differences in the background of what you would typically see in a bookkeeper, an accountant and a finance executive. And I know these are very fuzzy, but on balance, what's the difference in training and experience and background between those three functions?
00:10:44:17 - 00:11:07:14
A bookkeeper you've got to train yourself to be a bookkeeper without any real formal background. I know lots of really good bookkeepers in that mindset is just someone who's incredibly organized and loves kind of digging in and making sure everything's correct. And I think that can go you can kind of girl in your career as an accountant, starting as a bookkeeper, when you're talking CPA, that's an owner's own certification.
So sometimes people get like an undergrad degree in accounting and then they get a CPA on top of it. So that's a certified public accountant. It's a different like entity that certifies that it's a test. I don't know much about that, the specifics of it, but that's what that is when you're talking finance again, it can also be just an undergraduate in finance and then you go into corporate finance and kind of work in that field and then you can grow from there.
I, I didn't actually start in finance. My undergrad degree is in humanities, and I then got an MBA with a focus in finance. And I was kind of always finance adjacent prior to actually making the full switch perfect.
00:11:47:00 - 00:12:12:21
I think that gives a lot of clarity in terms of trying to understand who does what and what their backgrounds are and therefore what you can expect them to be really good at in where they're going to start to get out of their comfort zone. We've talked about the difference between finance and accounting and how accounting has also this bookkeeping function.
So you're running a business. How do you do it? You know, how do you take that and figure out what you should be doing in terms of spending your time looking at these functions? And what is it that you should be looking for.
00:12:28:14 - 00:12:59:07
When you're very, very young? Your whole goal is to sell and build, right? So build your products, sell your product, figure out what your product market fit is. And I think a lot of people hear that and then they think, well, I don't need to worry about finance and accounting. That's not true. I think I really value I really, really push people, even if you're so young, if you are not in young meaning in your business, you are you're not going to know where you're successful if you don't actually do bookkeeping.
And it doesn't matter what tool you use if you are not going to pay attention, outsource it immediately. It is worth the like 100 to $300 a month to pay someone else to do it, even if you're like barely making the money, it's totally worth it. So start there, know what has happened in the past so that you can then look forward and see what where you might be successful.
So what's a good example? Say you start your business and you have three product offerings and you track for six months and one of those just never makes any revenue cut. That product offering focus on the two that are making revenue and then go from there. So that's the accounting piece, the finance piece where I think it comes into play is just planning for the future.
So if you are super new to business like super, super now just spend some time. It can be weekly, it can be monthly. This is what I do I take on. I'll work out on a certain point in the month and I look at my calendar, I look at my client list, I look for the next three months.
I think, okay. Am I at max capacity? Is my team at max capacity, can I add someone to a client? Do I need to add a team member? Do I need to restructure a client? What? Where am I? Where are my gaps? And in you don't have to be super sophisticated about it. Honestly, like good leaders, just take the time to think about their business and that is the key to success.
It's not being the smartest. There's a lot of smart people that just ignore details and it's not even really having the right answers. It's building that the cadence to sit and think. And the more you do it, the better you get, the better you're able to do it. And there's there's a lot more detail you can go into it, but that's the bare minimum.
00:14:50:18 - 00:15:24:23
I want to give you three letters 0pm and that, of course, stands for other people's money. So lots of times if you're a start up or you're established in business, you are going to need money that comes from sources other than your business. So of course, one source is the bank or other providers of that capital, depending perhaps on your credit rating.
And the other, of course, are equity investors. And, you know, we commonly understand that as venture capitalist in angels and seed investors. So in my experience, I want to get your reaction to this. The minute you start taking in other people's money, you better be seriously thinking of the finance function in your business. While accounting and bookkeeping is necessary from day one, the world changes when it's not just your money.
And could you talk a little about how you should be thinking about finance, particularly when you're getting outside, outside sources of capital to grow and fund your business?
00:16:04:23 - 00:16:24:07
So it definitely depends on who is funding you. So banks have very different requirements than venture capital, but let's use venture capital is a really good example because that's a lot of my clients are venture backed. They will have requirements, so they will have accounting requirements. Oftentimes they will ask for gap, gap accounting financials. And so that requires a different kind of firm.
That's one piece. So that's the accounting piece. That's not what we're going to focus on or focus on the finance side. But you will usually have a cadence of board meetings, so that often it's quarterly, sometimes monthly. It depends on what stage you're in, but what you want to focus on is telling the story of what's happening in your business during those meetings.
So that way you can tell your investors, Hey, we're being very successful, or these are pain points and get advice, or you simply they just have requirements and they want to know. So what I would focus on is building a really solid set of KPIs that tell your story in the right way. Now, that might be fuzzy to a lot of people.
What is the right way to tell the story? Well, it's to be honest about what has happening in your business so that they can either say, yes, this was a really awesome investment, we're going to come and invest more money or, hey, we have a whole bunch of support available to you. So that you're struggling. We're going to get you to where we want to go because investors want their money back.
They want you to be successful. They want to help you. They do not want you to fail. And I think that when you understand that investors are they have your back, then you're able to kind of tell that story. So let's focus on what does a finance person do for them to share that story. One is we will say, okay, we'll take the accounting, the financial statements from the accountant and write the commentary.
Okay. So this is this is what happened in the past. And this is where the finance and accounting feature overlap a lot, where I think that people get confused, but I will pretty it up not change the numbers but pretty it up. Like I want you to focus on these three things in the financial statements and I want you to understand the commentary.
So yeah, we've been mis we didn't get our revenue this month but look at all other places that we succeeded. Look at the customer growth and how it relates to revenue. So I do a lot of that storytelling. Then there's the KPIs. So how have you set up your KPIs? A lot of young companies haven't set it up.
It's hard when you are young because you don't know what they're going to be. But if you're thinking just financial, very simple revenue customers, your customer acquisition costs your lifetime value, how do those change over time? So you can show the changes? You can show, Hey, we're on track or we're off track. That's really the key that you get with this fractional CFO that you don't really get.
If you aren't a finance expert, you're kind of just making it up as you go and you can get a lot more support by having an outsourced person.
00:18:55:13 - 00:19:24:17
I have taken in other people's money through venture capital into my business. I have at various points in time gone the debt route, both straight that convertible debt. When you're on the other side of the table, it's the money that gives you the leverage. If things aren't going the way you want them to go, it's ultimately that you're control of the money because as a company you are cashflow negative.
You are relying on outside finance to get you to the point where you can go from cash flow negative to cash flow positive at a much bigger scale than if you had to finance that totally internally. So there is an absolute need to be on the same page as the providers of that capital, and that is telling the story.
It's also understanding their concerns positively, addressing those concerns rather than having a big fight. As we experience changes in the economy, which of course happen all the time, that can influence the thinking on that financial capital that can be made available to your business. So when you're in boom times, people want to throw more money at you and of course then expect you to do something constructive and positive, accelerate your growth, become bigger.
But when times look a little bit shaky, then they start to turn off that type of money that your business plan might be relying on. And you better have a good finance person who can figure out the different scenarios so that if you find out that that investment that you are counting on isn't going to come in the door, you have a plan B that you're on right away that secures the viability of your business.
And I have always found that if you don't have a good finance person on your team, you are really going to struggle when it comes to managing these external stakeholders in an environment which almost by definition is never stable. Now talk about when you when you have that function dealt with correctly, you've got your accounting and bookkeeping squared away, but you now have the appropriate finance capability for your business.
What has been your experience for how that business benefits from that capability?
00:21:22:08 - 00:21:43:08
Yeah, I think that you are able to make decisions in your business with a of somebody else. They're kind of having your back. But I often play the bad guy role and I think that that provides a lot of them like distress for my clients of like, oh, okay, yeah, someone else told me I need to make a different decision.
So, hey, I don't want you to hire anybody right now because you're going to run out of cash. Like that's a that's a true scenario that has happened. And when I see my clients face, when I say like, yeah, you don't have the money to do it, you can make me the bad guy. They just like, oh, sense of calm, of like I didn't really want to do this, you know, I didn't know.
So that's kind of one benefit. I think if you have a really good finance person, they should be able to increase your EBITA. So now I can't remember, you know.
00:22:15:10 - 00:22:20:18
Earnings before interest tax depreciation and amortization. Thank you very much.
00:22:21:15 - 00:22:44:17
I know my brain. Sorry, but they should be able to increase it if they're, you know, depending on the type of business, 1 to 15% like you should see that number go up. And that's because they're constantly looking and paying attention to are you meeting your revenue targets? Are you cutting costs where you can? It's it's so easy as a business owner to be so attached to what you've already spent money on.
And so having someone who really it's their job to be like to spend money on that is just a such a huge benefit that you will you will far out way whatever you pay the CFO in your cost savings like it will just happen. It may not happen right away, but it will happen. And so I just I highly encourage it.
And you can get a very minimum amount of CFO services. It can be a quarterly call of just having someone to talk to about these decisions. And that's that's a huge benefit done.
00:23:19:03 - 00:23:45:01
I think a great job at teasing out the differences between thinking in your bookkeeping and accounting are taken care of versus you actually have a true finance function in place to help you move your business forward. So let's say I've got the accounting. I really need to put the finance in place. What are the steps that I can follow that would allow me to do that?
00:23:45:04 - 00:24:07:06
So if you want to self do this, the first thing is to set KPIs. So those are key performance indicators. You can literally just Google search, what are the basic KPIs, keep it simple, keep it trackable, and then set a cadence for how you're going to track those. And so that's really dependent on your business. If you're stuck, you're like, I don't know, do it monthly and then get organized to get an accounting, a bookkeeper.
Again, this is where they those features overlap, right? You have to have