Recently, a client came to us because margins were inconsistent. I’m talking months where they made $500K and months where they lost $500K—sometimes one after the other.

But after a few months of working with us, their revenue doubled, and they secured a $2MM loan.

That’s the power of good bookkeeping and CFO work coming together.

Without clean books, even the best CFO can only do so much. But getting the books in order is not enough. The value lies in what you do with that data once you have it in a clear format.

So this week, I’ll be talking all about how we pulled off that kind of revenue growth by doing just that.

Let’s get into it.

At a high level, here’s what we did:

1. Transitioned from cash to accrual accounting

2. Implemented an inventory management process

3. Created more transparency

4. Redeployed capital

Transitioned From Cash to Accrual Accounting

When we came aboard, they were doing cash-based accounting. Their gross margin would be negative one month then 98% the next. These month-to-month fluctuations rendered their financial statements completely useless.

So, we switched to accrual accounting as a first step to smooth out the financials. Doing so allowed us to more accurately diagnose the problem.

Implemented an Inventory Management Process

Once we got the books in order, it became clear that they were massively overspending on inventory while also holding in the low six figures more than they should. That realization allowed for an immediate win as we sold all those excess units down.

Doing so freed up cash that was later redeployed to higher-value areas of the business. More on that later.

Then, to prevent excess inventory from piling up again in the future, we began tracking inventory orders in a way that kept more cash in the business longer. In doing so, our client could see clearly when to buy inventory, when NOT to buy inventory, and exactly where they had excess at any given time. The result was no more guessing games, unnecessary expenditures, or impulse purchases.

Created More Transparency

Once we got the accounting and inventory in order, we pulled the curtains wide by showing the team the full P&L, Balance Sheet, and cash accounts. We also issued credit cards.

Why?

Because I’ve said it before, and I’ll say it again. Transparency is the cornerstone of trust in any organization. It also created far more accountability.

In the end, letting the whole team take ownership of the organization’s finances led to countless ideas for new offerings, additional value drivers being identified, and a sharp decline in unnecessary spending at all levels.

Redeployed Capital

By cleaning up the books we were able to free up the cash from selling down the excess inventory, save future funds with more efficient purchasing, and identify what actually fueled growth for this business.

In their case, we needed to ramp up ad spend and make a few strategic hires. With more efficient use of cash, our client had the funds to do this.

And that’s where the magic really started to happen.

Revenue doubled as costs came down.

The best part? The growth was sustainable rather than a result of one-time windfalls or accounting gimmicks.

From there, our client decided to double down on growth by securing financing while they were already in a strong financial position.

With clean books and a solid P&L, they were granted a $2MM loan without a personal guarantee attached to it. Without clean books and a dramatic improvement in their gross margins, this wouldn’t have been possible.

There you have it. A prime example of how good bookkeeping and CFO work together can transform a business.

To date, I’ve helped over 75 SMBs like this one grow with good finance and accounting practices.

So, if you need help or have any questions, feel free to reply to this message or shoot me a DM.

As always, I’m happy to help.

Putting It All Together

Here are your top takeaways from this week’s post.

1. Getting your books clean on its own won’t transform your business, but it is your first step toward effecting real and lasting change.

2. With clean books, a good CFO can diagnose problems at the root, free up cash, and optimize for sustained growth.

3. As long as your books remain cluttered, you’ll risk stunting growth by keeping cash tied up in the least productive areas of the business. You’ll also miss out on the opportunity to secure financing on ideal terms.

4. For your business to reach its full potential, bookkeeping and good CFO work need to work in tandem.

Hungry for More?

1. Follow me on Twitter and LinkedIn for daily content to take your business to the next level.

2. Shoot me an email with your questions or requests for what you’d like me to write about next.

‘Til Next Time,

Connor