When to Hire a CFO, Controller, and Bookkeeper

Jordan Buckner: [00:00:00] As you're building your CPG brand, oftentimes you're thinking about finance, budgeting, and where the money is going to go and come from. And as a founder, you're often probably doing this yourself, maybe have an accountant that you found through your family or through the internet, but then as your business grows, you're starting to think about how can you control and get a handle on your money and on your finances.

So it doesn't slip out from under you. This often gets down into the roles of when do I need to hire a full time accountant? When do I need to hire a CFO? What's a controller? We're going to be breaking down all these things on today's episode. And for this, I've invited on Brad Ebenhoeh, who's the CEO of Accountfully and frequent podcast guest to break on all things accounting and finance.

Brad, welcome. 

Brad Ebenhoeh: Thanks, Jordan. Looking forward to chatting with you again. Thanks again for the invite, by the way. Thanks. 

Jordan Buckner: Of course. So as brands are growing, usually like having a bookkeeper or accountant Is the first job that they're looking to hire for. What's the difference between the [00:01:00] bookkeeper and an accountant, if there is one, and do you need to find like someone who outsource or do it full time for you, your company?

Brad Ebenhoeh: All great questions. So kind of number one here on the accountant side, or what is really an accountant? Well, there is different levels of what an accountant is, right? At the lowest level from an accountant, you're talking. Like a bookkeeper role, right? Where you have an accountant who's doing basic bookkeeping tasks for businesses, including updating the books and records, typically QuickBooks, supporting and invoicing your customers, reaching out to your customers if they haven't paid it.

Paying bills, processing payroll, filing sales tax returns, those types of things that kind of keep the lights on and keeping everything moving forward from like an operational standpoint, right? So, number one accountant, accounting kind of level person is the bookkeeper who's more of a staff accountant role.

As the spectrum kind of moves up the chain a little bit, really what you're looking at next, Level is kind of like more of a controller level, right? Where controller person, which essentially is a responsible party who oversees and supports [00:02:00] bookkeepers and different accountants in that department and their main responsibility is ensuring the accuracy of the financials on a month over month basis, right?

Controlling the books and records, controlling the cash, those types of things. So from an accountant perspective, you can have more of a bookkeeper Position. You can have more of a controller position where they work in combination, as well as you can have different positions along the way, like it accounts payable clerk and accounts receivable clerk, depending on the size of your company, as well as the accountant can go from bookkeeper to controller levels.

So basically that's the function of a typical kind of accounting department in house, right? And then separately, a lot of people just say. They typically mean tax accountant, right? But hey, I need an accountant. So there's kind of three terms that are typically used. Externally. Number one is accountant.

And a lot of times that means a CPA or a tax person. Number two is bookkeeper, which we just talked about. Number three is CFO. And the CFO is the one that's most confused with just kind of more of a control level function for small business. And that we'll get into kind of in this conversation. And then the last thing is there's really no need to hire in [00:03:00] house for any of these roles.

Until you're, I don't know, 5 million annual revenue or whatever. It's just, it's not functional from a mix of paying somebody full time to do this work, as well as the level of expertise, knowledge, and support you can get from an external party to do that job at a more kind of reduced or fixed, fixed costs with that.

So there may be certain things that come up that you're like, I'm going to have this person do my bookkeeping because they're good at it on top of that. They are going to help with the entering data into my inventory system and doing more administrative or operational stuff. Okay. Well, that's kind of a fractional role.

They'll still need somebody to oversee that whether that's external or internal, et cetera. But you shouldn't be stacking up FTEs or full time equivalents within the accounting and financial function until you're at least 5 million in revenue to kind of start that conversation.

Jordan Buckner: That makes a lot of sense. How important is it to have a. Boat keeper who knows the CPG industry or not?

 I think It's not as important from a bookkeeper perspective, but that kind of controller or overseer of the bookkeeper of whoever that is. Right. [00:04:00] So number one, if you just have a good bookkeeper and you're like, Hey, I'm also listening to somebody that is here local in my market, who's doing good bookkeeping for me as a very reasonable price or hourly rate or a monthly fee.

Brad Ebenhoeh: And there's nobody really overseeing the work and they're just kind of flying blind or doing it themselves. Then it's much, it's very important to have them have maybe that CPG experience, but at least inventory accounting, right. And understanding how to account for inventory and cost of goods sold.

If they have CPG experience specifically within, you know, deductions with, in trade spend with, you know, buying KeHe, that can add complexity to it. But a lot of like small brands are emerging, let's say you're there with 250, 000 in annual revenue and you're just growing. Using a cheap book, your bookkeeper's fine.

Cash basis accounting is fine. It's not the end of the world, especially if you're trying to minimize costs. As you're moving up the chain and you're kind of getting to the next level towards that million dollars in revenue or 500 K to a million in revenue. If you're still using that bookkeeper, you need to have somebody that actually has inventory costs and possibly.

CPG experience to review and oversee their books and records and make sure financials are on a cool [00:05:00] basis. And that you're accounting for trade spend properly, that you're accounting for Shopify, Amazon sales properly, because that's the level you're going to need to get to in order to have good reporting, to make good decisions, but also externally to, raise money or go to banks or anything else so there's kind of, it's a dependence, right? In terms of it, but it is really good as you kind of get to that seven figures, I a million dollars annual run rate to have somebody with that experience who kind of is responsible for your monthly financials. 

Jordan Buckner: Yeah. Those are the kind of couple of biggest mistakes I see any new business owner make the first is like, how do you have a professionally looking set of accounting books so that one, you know, your company , and the financials that you can also share that with an external party, right?

And like a lot of founders make the mistake of doing it themselves with like a base knowledge, but then messing a lot of things up where there's completely missing parts. And the other two I see are e commerce specific interactions, right? Like if you get paid from Shopify or Amazon, usually your bank account [00:06:00] transaction is missing the merchant fees, right?

And so how do you win and how do you separate those out? And other big pieces, obviously like inventory, how it relates to an asset versus a cost of good so win that? When that journal entry happens, and then also how do you deal with like expiring product and like marketing product that you're sending out for samples and like what level of details needed kind of within those.

Brad Ebenhoeh: Yeah. No, I think number one, let's just talk about kind of the cash basis portion of this, right. From a cash accounting, really what that is, is whatever hits your bank account is your revenues. If they're inflows, if they're outflows, they're expenses, right. And so from an aspect of where you're saying you're selling on Shopify, you get, let's say through the credit card payouts, the net amount paid to you.

So you spend a hundred bucks or somebody's charged a hundred dollars. You get paid 96, whatever the credit card fees go away. So there's that Delta of four. And if you're not doing this on a cruel basis and grossing things up on a monthly aspect, you're missing kind of gross revenue, which is a very key to everything kind of going on here.

What is my gross revenue? That [00:07:00] is not as material as like Amazon, if you're using FBA, they're paying you out every two weeks and they're taking much more fees, you know, fulfillment fees, storage fees, yada, yada, yada. So it's not just like a credit card fee structure. So getting to that accrual basis is really key.

Cause then you can see. Your actual top line revenue. And then you can see kind of associated fees that then impact your kind of contribution margins that come into play with the right bet. So that's kind of that aspect. Same thing on the trace fund. If you spend 20 or sell 20 grand, you'll pay 12 grand.

You're going to want that 20 grand as gross. And then deduct eight grand to 12K a net. it's part of the reporting for somebody who doesn't get it. They're like, yeah, it all nets out at the bottom. You're a hundred percent correct. The point of it is though, you need to have it in that accrual basis because that, that really helps people, you internally and externally understand kind of where you're at from the sales perspective.

So that's that. And then on the inventory side of things, this is the most I think not focused on portion of emerging CPG brand business owners, especially those who have never done an inventory based company. Like, Oh, just sell, just sell. It's, you know, it's like, Whoa, you need to understand what is your fully loaded [00:08:00] cost, landed costs.

the cost to get to the customer don't focus so much on revenue. You need to focus on margins pricing properly. And reporting on that while you're selling your product, right? So you can't lose margin just because you're getting higher kind of velocity insurance. You need to be very careful with that.

And we have some. You know, people we've seen come in and not really understood that and don't include various costs in it. They sell their product at a negative margin, especially after you factor in fees and everything else that kind of comes into play. So understanding that is I think the most important aspect of all this, right?

Like. If you're a small CBG brand, the number one, two major focuses from my perspective are cash, cash is king. How much cash do I have? How much cash do I have in hand? Have I gotten paid from my customers? How can I extend my terms of my vendors? How can I reduce the cost of my raw materials? And the number two is margins, inventory management, and understanding that and accounting for it properly.

And if you got those two things down, then you're able to kind of, you know sell and increase your velocity and have your customers reorder and the average order, you know, value increases or the velocity per door increases, [00:09:00] then that's number three, that then allows you to move forward and then really create a great plan and a great 

business.

Jordan Buckner: I love that, you know, that brings up. Then the next level of having the CFO or chief financial officer, which is interesting because one thing I've just even learned in nuance and talking with you, and you know, these terms aren't always strictly defined, but there's usually the accounting part of the business, but then there's also finance and financial strategy, which can be a little bit more encompassing to in terms of like, it's not just based in QuickBooks or your coming software is looking at.

Forecasting, looking at the, you know, investment or fundraising, how much money you need in the future. Talk a little bit about like the role of a CFO, either full time or part time and what they should be looking at. 

Brad Ebenhoeh: Yeah. Number one, a CFO really you shouldn't have a full time CFO unless you're, upwards of 10 million in revenue, because fractionally you should be able to support this role.

A really good in house CFO. It's going to cost you a couple of hundred thousand dollars, but what if you can do it fractionally for [00:10:00] 75 grand and have somebody that helps you 10 hours a week, right. In conjunction with that. So just understanding that number one aspect or difference of controller and accounting versus finances, controller accounting, looking backwards, responsible for ensuring assets are taken care of and controlled.

The books and records are accurate and everything looking backwards is good. Right? So that's kind of that finance comes into play to help looking for cash flow planning. Budgeting, forecasting, modeling, et cetera. And then those are the kind of specific projects you can do, right? Like I call it tactical CFO in terms of putting a budget together, updating cashflow every month in terms of how much cash on hand or different things like that helping with budgeting or whatever, but then there's the second portion of strategic finance that comes more into somebody that's helping you more consistently with more hours that isn't just doing those.

They're also looking at your books, looking at your. Having conversations with your operations team, understanding your terms with your vendors, payment terms, you know, identifying ways to get money, whether it's debt financing, whether it's factoring or different things like that. Right. So they're really integrated in that aspect of your [00:11:00] business.

And then they identify different things that can help out, or even looking at various employees that you have. And then, Hey, is there a way that we can fractionalize some of this to contractors to minimize costs? Right. So it's more creative, more strategic, more consistent support. So that's that strategic finance.

Part, a portion that comes into play that integrates internally with other functions of the business. Now that sounds great. And there you're like, well, I want to have that for my company. Well, that person who's really good costs a lot of money. But on top of that, a lot of these small businesses, you don't need that level of experience.

What you need is. Somebody at that controller bookkeeping level to give you consistent support, visibility, cashflow, financials. And then at some point you need to take ownership on it and grow your business and figure it out. Right. And then there comes a point where you can have external parties helping out.

So on the finance side of things, really, it's two things, right? It's three things. You'd have a good set of books and records to base everything off going forward. Otherwise it's just a crap shoe, right? Rebels on charting. Oh, I'm going to do this. And my forecast says this, it's not based on anything.

And next, you know, it's just a waste of time. So if you're actually going to invest in somebody and pay a finance person to help you, [00:12:00] let's have the baselines and the understanding of the actuals in place, because then we can actually take that off, you know, real data moving forward. Secondly, you can have project based work, but I'm saying putting together a forecast or a model is something that can help you quarterly in that aspect.

It helps you with fundraising, whatever. Cool. That can be more of a project based work, less work kind of consistent over time. And then the next step of it is more of a strategic finance role where you're getting more and more hours and time to help you with the strategic things I mentioned. Then when you get into that 10 maybe you do need an in house CFO and maybe you could have an in house accounting department, or maybe you have a full time CFO and you have a fractional accounting department still that they integrate and work together.

Or with, so that's kind of can be much more creative in that capacity. 

Jordan Buckner: I like that, you know, in thinking about those two differences between thinking about like, what's happening, what's going to happen, I know one area that I. used to and still sometimes get tripped up on is when I'm looking at something like, what's the current margin of my product, right?

If I had my Ingredient costs at my packaging costs. And [00:13:00] then I'm a manufacturing costs. How do I look at that in the past versus right now? How often do I update it? And I used to want to think that my accounting software and like QuickBooks would like, tell me the cost. How my cost of goods sold from like a product margin contribution margin standpoint would work.

But I also found that difficult to kind of force fit within like a QuickBooks because it's not really designed to tell you that. 

Brad Ebenhoeh: Correct. Correct. So basically kind of two aspects of that. Number one is that That's a smaller company. You really need to, where you don't have a ton of resources and time to actually implement more of an inventory management system that can help kind of calculate that real time and update in real time, you need to do it more manually.

It's less precise. But it's more, it's more time efficient, cost efficient, which is what you need. But at a minimum, you need to get a good ballpark and a good process. So we don't do it in QuickBooks online. We do it in spreadsheets because that's just the way that it's the most easiest to do at this point.

Right. Figuring out all your landed costs, all the costs that go into it, calculate it, take actual numbers [00:14:00] from your POs and your bills you pay, you know, what other landed costs come into it, freight, duties, et cetera, estimate those. Calculate your landed costs. So you get like an average cost that basically for every SKU that you're selling, my average cost to get it in a warehouse ready to sell is this.

That's step one. Step two is then each month you're calculating costs based upon sales ship, but you're also doing inventory counts, right? So you understand what's in my inventory and what's going on there and actually counting them. A lot of times they'll have adjustments or things that kind of come into play that then may yield, Oh, that's right.

We should probably update our costs because we now have a new product Raw material or new vendor. That's a different cost where we have a higher price or a more flexible cost. There's times you have to maybe revisit that and then you may have to do inventory adjustments. While you're doing all that big part of this, and you mentioned this before is making sure you're breaking out like spoilage or theft, or a big part of it.

If we always, you know, see misses marketing, promo, et cetera, because you don't want that in your Marvin's, you want that broken out so you can kind of see, Hey, I'm spending this much time on marketing and promo. So that's kind of the manual process. Once you kind of get to a point where you want an inventory system, then basically [00:15:00] the system itself, if you're doing it right, will calculate that specific costs for that specific PO and you, and that batch you made based upon the various facts and circumstances.

So you get real time information there that going forward, that'll help you. So that level of reporting is much better on a consistent basis from a product level, from a customer level, different things like that. So. So as you get to that, you're able to get more scientific and analytical in the past, you kind of got to use ballparks and less precision, but as long as you move forward in that progress, you're going to make, you know, benefits and good decisions as you move forward.

Jordan Buckner: I'm curious, are there any inventory systems that you usually work with or like recommend your clients work with that integrate well kind of for the emerging brand size? 

Brad Ebenhoeh: Yeah, we use Cin7 core, the core version is called the inventory. That's what we recommend. It's like, that's the best one we've seen.

And we have an inventory department where we've consulted with and implemented and supported, consulted with 150 brands the last five, six years with just core specifically just the user experience that the cost, the integration of Shopify, Amazon, QuickBooks, EDI, et cetera. The user experience and the integration with [00:16:00] accounting is really good.

Yeah. And it's like, I don't know, three, 400, 300 bucks, 500 bucks, 600 bucks. So it's really in a good position to when you're ready to do that, to go to that level. It's much more mature than a lot of other ones that exist. That I come up, some of the other ones are more of a, actually more of a warehouse management system, which is more focused on quantities versus costs.

So if you can get a system that you can do assemblies and costs and different things like that, and I agree with accounting, it makes your life a lot easier. And it's really sufficient and it can do a lot of things for you. That bank can take you at like, let's say a million dollar revenue to even 20 million, you can leverage that system.

As long as you have a good ops team, that's managing it, all that stuff there. So it's like part of this whole accounting aspects is a lot of people say, well, you're my accountant, you should calculate this, you should do this. You should do this. On the accounting side, our goal when a client comes to us, just from an accounting standpoint, we Not an inventory system standpoint is to understand their inventory supply chain.

So we can properly cost their landed costs of their products that then help out as well as where they have inventory. So then we can properly account for them on the P and L as well as on [00:17:00] the balance sheet so we can have good and accurate rule based financials. As part of that, we'll be pointing out specific things, but you're the business owner, you're the brand, you have to have good operations, focusing, control on inventory, reordering quantities.

Hey, my 3PL says I have this, my counts are this, what's going on? And there's that kind of nuance and stuff that kind of goes into the process that like, for all the folks that are. experience at CPG, no, it can be a pain in the butt, depending upon who you use and how it all works. So but from an accounting standpoint, that's where you have that.

Then we built out the inventory kind of service system consulting team because our clients wanted these implemented and they need that system, which makes sense. 

Jordan Buckner: You know, I think one of the biggest things that you talk about, I mentioned a couple of times on this podcast and others is around the fact that as a founder, you need to really be the one in charge of your finances and your numbers and take ownership of that.

So that you know how your business is running and can answer all those questions so that you can make better decisions versus outsourcing all of that information to someone else and expecting them to just give you the answers. 

Brad Ebenhoeh: A hundred percent, a hundred percent of it's your [00:18:00] business. You know, like you're, I mean, you're, even if it's an employee or contractor using that right.

If, if you have a social media or marketing for a contractor that you're using, literally they're going to help you and do stuff, but at the same time, they're supporting 10 other clients. Right. Let's just say, so you need to understand what they're doing with the KPIs, but the metrics be consistently involved with them.

That's where having consistency around like weekly basic deliverables. What's my AR, what's my AP, what's my cashflow. Monthly financials, having a conversation with these folks each month. And that's where a lot of people come to us and they're like, I need a CFO. And it's like, no, you don't, you just need consistent support and financial reporting each month.

And then a conversation that's the level, which is basically controller focused, but that gets you to a point of, Oh, I understand this now. I understand this. I understand this. And then engage, ask questions, be engaged from responding and reviewing financials. And that's how you learn.

And then that's going to help you make just kind of better decisions and be more I guess individualized or being able to kind of do things in your own longterm as you go forward.

Jordan Buckner: I love that. Brad, thanks so much for being on today and for having this conversation for [00:19:00] those listeners. Make sure you are hiring for those right roles so that you have a clear understanding of your financials, but ultimately take ownership over that.

Take control. And if you're not as comfortable with the financial language, that's, we're here to do is to teach you about some of those things so that you can feel comfortable and in control of your finances. Brad, thanks so much for being on. If anyone is looking for help with their finances, their accounting, definitely check out Accountfully.

We're going to put the information in the show notes as well. Brad and his team work with inventory based and CPG brands and know this space in and out. So able to really help you navigate and answer all your questions so that you can feel empowered. 

Brad Ebenhoeh: Thanks so much for an enjoy the chat.