1. 1
Getting Naked
in Numbers
“Simple ways to supercharge profitability and
turn your business into a cash flow powerhouse”
—GREG SMARGIASSI

2. 1
Important Copyright and Legal Information
The book is the work of Greg Smargiassi, Founder and CEO of OurCFO Pty
Ltd.Youdonothavetherighttoreprint,sell,auctionordistributethisebook.You
are not allowed to give away, sell, share or circulate this ebook or its content in
any form.
Books, electronic books, or ‘ebooks’ such as this are protected under interna-
tional copyright and intellectual property law. Copyright infringement and theft
of intellectual property are series crimes.
The information contained within this document is for informational and
educational purposes only. It is not an attempt by the writer to diagnose or pre-
scribe for your business’s financial health, nor should it be construed to be such.
The material in this book represents the views and opinions of the author, based
onhisownpersonalandprofessionalexperiences.Thereforereadersareencour-
aged to seek their own professional advice specific to their own individual and
business circumstances, financial position, and overall position.
Also, readers are encouraged to verify for themselves and to their own satis-
faction the accuracy of all reports, recommendations, conclusions, comments,
opinions, or anything else published herein before making any kind of decisions
based upon what they have read.

3. 2
Contents
Introduction:
Getting naked in numbers
The truth uncovered:
Attitude, Au Naturel
Lesson 1:
Peeking under the Financial Leadership Fig Leaf
Lesson 2:
Bared & Shared: Peak Performance Undressed
Lesson 3:
Strategy Stark Naked
Lesson 4:
Monitoring Made Bare
Lesson 5:
Systems Exposed
Lesson 6:
Process Undressed
Conclusion
About the Author

4. 3
Introduction
Getting naked in numbers

5. 4
Getting Naked in numbers! Bow-chicka-wow-wow… Sounds like something
people used to do at 1960’s swinger’s parties! (The burning sensation between
my toes tells me it’s probably the hybrid child of Twister, craps, and strip poker).
All innuendo and pathetically lame attempts at inventing games for the unscru-
pulous aside, what are we really talking about here?
When you really get down to the business of business, everything boils down
to numbers. Oh, there may be a myriad of different metrics (hours, years, meters,
degrees, litres, knots, kilometres, etc.), but in the long run, we express just about
everything you can think of numerically. Business is no exception; in fact, it’s one
of the most common (and commonly misunderstood) numbers games there is.
Now hold on a minute! Before you close out this eBook and pick up your
tweezers to pluck nose hairs because it sounds like more fun, I urge you put the
tweezing on hold and keep reading. Why? Because the information you find here
could be just what you need to help you take your business to the next level… and
the next… I guarantee the nose hairs will wait!
Despite the fact that our universe and everything in it is represented numer-
ically, owners of the not-so-big business have become more notorious than Ivan
the Terrible for NOT using numbers to their advantage. Ignoring what num-
bers can tell you, means leaving the possibility of success almost entirely up to
chance. It is next to impossible… no, it IS impossible to run a successful business
by “winging it”. You’d probably have better luck making a bank deposit by tying
your checking account information to the leg of a homing pigeon with arthritis
and a bad sense of direction.
Finding the most efficient way to make money is basically the whole idea
when it comes to running a business, but amazingly, you’ll find that the majority
of small business owners possess little (if any) formal education related to the fi-
nancial processes their livelihood depends on. Despite having big dreams, a great
product, enormous potential, and an unstoppable work ethic, a lack of financial
know-howcanstandbetweenthebusinessownerandsuccesslikea20-footbrick
wall topped with broken glass and razor wire. Throw in the added “fun” of cash
flow pressures, overwork, stress, lost sleep, missed family time, and the feeling of
being married to the business into the mix, it can be a recipe for disaster.
Sadly,manypeopleexperiencetheexactoppositeofwhattheyexpectedwhen
they decided to pursue their dreams of owning a business. Like a child with an
outgrown toy, they eventually grow disenchanted, let their dreams fall by the

6. 5
wayside, and sell out to seek greener pastures. To add insult to injury, they may
not even be able to sell the business and recoup some of their losses, because the
average sane person wants nothing to do with someone else’s migraine!
Throughout the course of my career, I’ve had the opportunity to work with
hundreds of small and medium sized businesses. For the purposes of writing this
book, I spoke candidly with a large number of experts including: tax accountants,
lawyers, business coaches, business valuation experts, independent finance bro-
kers,businessinsuranceproviders,andthebranchmanagersofmajorAustralian
banks. I asked them a number of pertinent questions and asked them to express
theiropinionscandidly.Unfortunately,thediscoveriesI’vemadeareconsistent…
and alarming.
I’m here to tell you to not to fear. Turning your business into a cash-making
machine is as easy as getting naked in numbers! By now you’re probably won-
deringaboutalltheunclothednumericalinnuendos.Whenyoureallythinkabout
it, numbers tell the naked truth about the health of your business. They reveal
what is working well… and not so well. Numbers help uncover your key drivers
of success, and expose both positive and negative aspects of your business. The
most successful enterprises in the world rely on numbers to reveal the truth, and
then learn how to use the truth to their advantage. Once you learn to boost your
business by getting naked in numbers, the only thing you’ll be wearing is a smile!

7. 6
The Truth Uncovered
Attitude… Au Naturel

8. 7
‘You are the same today as you’ll be in five years except for two things:
The people you meet and the books you read’
—Charlie ‘Tremendous’ Jones
“Nice quote,” you think… “Now, how does it relate to our purposes?”
Itgoeswithoutsayingthatwedon’talwaysgetwhatwewantoutoflife.When
this is the case, we might make a conscious decision to change. It’s not always
easy, and the process can often be complicated. Sometimes it requires taking a
good, hard look at the man/woman in the mirror. The problem is, we don’t always
like what we see. Often, one of the biggest things in need of an adjustment is our
attitude. Why? Because you can never really change, improve, and grow in life
without the willingness to think about things differently.
If you are not doing so already, it’s time start becoming a student of life. Life
can be a tough schoolmistress, but in the end, she’s an experienced one. Sure, you
may be subjected to a few sessions in the corner sporting a dunce cap, or get your
knuckles rapped with a ruler now and then, but it’s all a part of the learning pro-
cess. When we look back on life, the lessons we remember the best were often the
mostuncomfortable.Learningtosucceedinbusinesscanrequireenduringsome
tough lessons, but once you do learn them, the information will always be there
helping you to do things in bigger and better ways.
Another way to help yourself to be a better you in business is to position your-
self in a way that allows you to spend as much time as possible with people who
can support and inspire you to achieve the results you desire. You can learn a lot
by observing and speaking to people that have “been there” before. Fortunately,
most are more than happy to share their experiences and expertise with you so
that you can avoid the same pitfalls they encountered along the way. A good sup-
port system can be invaluable when it comes to finding a way (whether formal or
informal) to acquire the skills you need to succeed.
One of the most valuable tools in the arsenal of the super-successful business
owner is financial knowledge. Before you get all hot and bothered, I’m not sug-
gesting that you put life on hold and head off to university to pursue a bachelor’s
degree in accounting. (Face it, your tolerance for alcohol and unexpected room-
mate nakedness isn’t what it used to be.) What I am suggesting is that you keep
anopenmindwhenitcomestothedynamicsofowningandoperatingabusiness.
Embracethefactthatyoudon’tknoweverything. Betteryet,embracethefactthat

9. 8
that no one knows everything. What people know (and “people” includes you) are
specific things that they can exchange with others for the things they know. Be
an open, honest, and active learner. Don’t be afraid to admit that you don’t know
something, and take every opportunity to learn new things from new people.
When you learn something that comes to you as an epiphany, don’t be stingy… be
sure to return the favour by sharing what you know with others. Do all of these
things and you open yourself to invite in exactly the change you need to find your
own success.
Just so you don’t doubt my credibility, I’m one of those people who practices
what they preach. Getting to this point required conducting an honest and thor-
ough re-examination of my own life. This deep (and sometimes uncomfortable)
soul searching was really the only way to come to many of the realizations that I
present here. Making the move from tax accountant to business coach was a step
that allowed me to acquire a much deeper knowledge of leadership, marketing,
sales, systems, culture, and other aspects of what makes a business successful. It
changed my thinking, helped to build my confidence, and gave me a positive new
outlook on life. As a result, I began to view the business world through a different
set of glasses which allowed me examine possibilities I’d never noticed before.
One of the most important principles I learnt while retraining as a business
coach is:
‘Your business is a reflection of you. When you look closely at your business, it
can be a lot like looking in a mirror. Everything that’s great about your business
is a reflection of you. Everything that is not so great about your business is also a
reflection of you.’
A mirror never lies… unless you are in a funhouse. It shows us only what is,
whether we like what we see or not. Every blemish, roll, and wrinkle becomes
instantly visible, and sometimes we don’t like what we see. Rather than wallow-
ing in self-pity or drowning your sorrows in bottomless buckets of your favourite
brew,manup,acceptwhatyoufind,andtakeresponsibilityforit.It’sthebestway
possible to give yourself the flexibility to move forward… and avoid becoming an
incurable alcoholic.
Your business is a lot like a mirror. One of the most important things it does is
to show yourself and others what you look like from a financial perspective. This
means considering the current state of your finances (even if you pull up your
credit score and it gives you two middle fingers). You must be willing to rate your

10. 9
financial acumen (or determining whether you even have such a thing), and dig
down deep to discover the extent to which you use numbers (aka get naked) to
drive the performance of your business. You’ve got to be willing to strip down to
the bare essentials, stare at them unclad in the mirror for a good long time, and
decide if they’d look better in a mini skirt or a muumuu. Now that you’ve taken a
serious look at yourself… warts, rolls, double chins and all… you’re ready to dive
into our first lesson–Peeping under the financial leadership fig.

11. 10
Lesson 1:
Peeping under the Financial Leadership Fig Leaf

12. 11
Hah! Caught you looking! Don’t worry. We’re glad you’re still with us, because
it’s time to take a look at how financial leadership makes all the difference when
it comes to helping your business succeed. Imagine that (for some unknown rea-
son) you have just placed a heaping spoonful of wasabi in the mouth of an unsus-
pecting victim. There’s a high likelihood that their reaction will be one of anger
or disgust, and the possibility your nose could end up cushioning the blow from a
fistful of wasabi-fuelled fury. There’s a decent chance that your victim will make
a face that only Forrest Gump’s mother could love, and I’m almost certain that
99.99% of people on the planet are unlikely to smile and ask for a second helping.
It’s not very different from the reaction I get when mentioning numbers to some
business owners.
Everything requires direction; from running the neighbourhood football
teamtobakingthatchocolatecakeyourdadlikessomuch.Thismeans,ofcourse,
that you must have the ability to direct the activities of your business based on
what numbers tell you about it. When I mention numbers to some business own-
ers, they may quickly toss back an “I don’t want to know!” or even an “I’m not a
numbers type!” What may come across as a lack of concern, is more likely a de-
fence mechanism for coping with a lack of understanding (or fear of) numbers
and what they mean to a business.
Ignoring the numbers which are most important to your business is like ig-
noring a spreading infection. Pay it no mind and it may get worse and worse until
it kills you. Numbers are like that in that no matter what you do, they will still be
there; broadcasting your sins and successes for the whole world to see. Ignore
what they tell you, and you may be undermining the potential of your entire busi-
ness. While they may not make your face light up or cause you to do backflips
across the lawn, you have to master the numbers that matter… before they mas-
ter you. When you do, you’ll discover how useful they can be, and how managing
them properly can yield significant improvements in the way you do business.
Goodleadersdon’tsitaroundthinking“Wow,lookatwhatagreatleaderIam.
I’ve got some serious skills!” They simply see where things need to go and set out
in that direction before everyone else does. Their confidence inspires others to
follow. To be successful in business, you must have the confidence to lead your
enterprise in the right direction. This sort of confidence is built on mastering the
numbers that matter.
Sadly, when we take a look the average small and medium business (SME)

13. 12
owner in Australia we discover that “winging it” is alarmingly commonplace.
Most are unprepared to deal with even basic financial principles, and as a result,
they adopt few of the practices that could be most useful to them. Instead, they
mistake bookkeeping for a financial process, when what they should be focus-
ing on is financial management, strategy, and processes.
Trying to run a business without a good working knowledge of basic finan-
cial processes is like driving down the motorway with the windscreen painted
black. You could probably achieve greater success by tacking your options to
a dart board and going with whatever you land on (and you might actually live
through it). If our greatest corporate captains approached things in such a hap-
hazard way, they’d be thrown in the slammer. Instead, they are who they are be-
cause they have learned to read the numbers and use them to their company’s
advantage.
It begins with a willingness to change your thinking and develop an ongoing
commitment to learning. It takes time to develop any new skill, and this includes
cultivating financial prowess. When it comes to your business, leadership means
takingresponsibilityforwhatyouneedtoknowaboutfinances,doingeverythingin
yourpowertolearnmoreaboutthem,andusingthemtoyouradvantage.Through-
out my career, I have seen many SME owners acquire the financial skills it takes
to become financially savvy. They weren’t mathematical geniuses or trained ac-
countants. They were everyday people who cared enough about what they did to
do it as well as possible. Learning to get naked with numbers can be done. And
you can do it. Now that you’re keen to develop your skills, where do you start?
Three of the most important concepts you need to have a thorough under-
standing of are: profitability, cash flow and overall financial position. Stop
snoring… they might seem like big, confusing words, but they need to be a bigger
part of your vocabulary than that naughty word you always say when you drop
somethingheavyonyourfoot.Why?Simplybecausethey arevitalwhenitcomes
to driving the success of your business. They represent the basic financial struc-
ture of any business. It is the starting point to financial acumen.
MostSMEownershaveadifficulttimedistinguishingbetweenprofitability
and cash flow. I have developed a simple visual way of demonstrating the differ-
ence between the two. You should see the look on people’s faces when they get
it. A look of a major epiphany and you can see the stress that is lifted from their
shoulders.

14. 13
Then of course there is overall financial position. In recent years, per-
forming routing checks of one’s financial position has become as commonplace
ascheckingonatoddlertomakesuretheyaren’tdecoratingthelivingroomwalls
withaboxofcrayons.Whileitcanbehandytohaveanaccountantaroundtohan-
dle in-depth money matter, as head honcho, you still must be able to understand
the numbers critical to the healthy operation of your business.
For a business to be sustainable it must be profitable. There is no other way.
And as a business owner, you must have the foresight to determine how your de-
cisions influence profitability. This process can be facilitated by having as much
up-to-the-moment information as possible, so you can make decisions quickly.
For example: if you discover that you are devoting few of your resources to the
production of your most profitable products, while less-profitable products con-
sume greater resources than they should, you can immediately redirect your ef-
forts to where they are most profitable.
Asyourunderstandingoftheseimportantnumbersgrows,youwillbeexcited
to see how your business progresses against your stated goals. You may also be in
awe of your newfound ability to see what adjustments are needed and put them
into play. It can be thrilling to find that you know how to spot ways to maximise
opportunities as well as deal with threatening situations when they arise.
Fromaleadershipperspective,Iurgeyoutotakeresponsibilityforyourfinanc-
es.Makeacommitmenttoeducatingyourself,andstartimplementingtheprocess-
es necessary to drive your business financially.

15. 14
Lesson 2:
Bared & Shared: Peak Performance Undressed

16. 15
Peak financial performance—it’s not so different from inner workings of a
high performance sports car. Picture a Ferrari. Undoubtedly one of the sexiest
vehicles on the planet, quality, craftsmanship, and good looks all come together
to form an amazing machine. Imagine for a moment that you own a Ferrari and
it’s a balmy Sunday afternoon. That oh-so-incredible car sits in the garage glis-
tening under multiple coats of turtle wax, waiting for you to push it to the limit.
You give in to temptation and head for the garage. “Ah, there she is!” You open
the door and lower yourself into the leather-clad driver’s seat designed to fit you
perfectly (essential, of course, to the rigours of proper sports car driving). The
quality is so great that you can smell and feel it even before you strap yourself
tightly into position.
You drive to the city limits and find your favourite road. It’s full of luscious
curvesbutalsohasafewfantasticstraightaways;everythingyouneedtopushyour
Ferrariandyourdrivingskillstothemax.Firstit’satightbend.Youpresshardon
the brakes and pull on the wheel ever-so-slightly. You feel your bodyweight shift,
but in that body-hugging custom seat, you still maintain perfect driving position.
Your super-responsive Ferrari takes the corner with knife’s edge precision. You
look up to see a beckoning straight stretch ahead of you. You push your foot to the
floor, and the incredible machine shoots forward while your body is thrust back
into the driver’s seat. As you gain speed and move through multiple gears, the
edges of the road blur in your peripherals. With your eyes focused over the front
of the car, you can see the road, your speed, your rpm’s... Things couldn’t be more
perfect. You say to yourself, ‘I never get tired of this car. It does what I want, when
I want, all the time… in short, it’s perfect.’
Can you say the same about your business? Is it a finely tuned machine that
performs the way you want it to and gets great results consistently? Here’s the
million-dollar question: do you want it to be? Like a Ferrari, a business consists
of multiple components working together to determine performance. The bet-
ter they work together, the higher the level of performance. Take away any of these
parts and the car would be unable to perform in the way you’ve come to expect.
What then, are the components necessary for a business to function at optimum
levels?
Having observed thousands of businesses over the years, I’ve had the oppor-
tunity to study what highly profitable businesses do to achieve and maintain fi-
nancialsuccess.I’vealsohadtheopportunitytoobservewhatpoorly-performing

17. 16
businesses do, or rather… don’t do. Observation, study, and firsthand experience,
have led me to believe that there are three fundamental elements, which must
work hand in hand to enable financial success: strategy, monitoring, and sys-
tems (pic. 1). Reduce the effectiveness of any one, and you significantly weaken
the others, and reduce the possibility of peak performance. To make your enter-
prise the Ferrari of the business world, you need to engineer and fine-tune them
until they become parts of a well-oiled machine. Now that you’re all excited, let’s
take a closer look at strategy, monitoring, and systems.
Pic. 1. Monitoring, strategy & systems diagram.

18. 17
Lesson 3:
Strategy Stark Naked

19. 18
Key Point:
A process of financial strategy development is vital to achieving peak
financial performance. Without it, your performance will be mediocre
at best.
Case Study
A start up residential construction company approached us to assist them
with the financial side of their business. They had been operating for 18 months
and had established very good fundamentals. Branding was good, there were
plenty of enquiries, and sales were on the rise. The business had also built good
relationships with subcontractors; a critical aspect of the construction business.
Nick (the owner) was very skilled when it came to the construction side of
the business. While he realized that jobs had to be completed quickly in order to
keep costs in check, years of experience in the industry convinced him that the
pressureforfastturnaroundsoftenaffectedthequalityofthebuild.Thedesireto
focus on quality was the main reason that Nick decided to start his own business.
He believed that he could do a better job, and that most people would pay extra
for the added quality.
What Nick hadn’t been exposed to before, was the financial side of business.
In the past, this had always been the concern of his employers. Now, it had fallen
into his lap. In order to learn more about his business, I asked Nick’s a few perti-
nent questions:
Me: If you’re going to allow more time for jobs to be completed for quality pur-
poses, have you determined how this strategy will affect your working capital
and cash flow requirements?
Nick: To be honest, no, I haven’t.
Me: What about pricing? Have you out worked how you may need to adjust
prices to account for longer turnaround times?
Nick: Well, we raised our prices a bit, but we didn’t get too hung up on the actu-
al calculations. We just went with our gut feeling.
Me: How is your cash flow then?
Nick: Very tight. It causes me some stress, but everyone says it’s normal to
have shortages in the early stages of starting a business.
Me: Well, people might like to think that it’s “normal” but that’s not the whole

20. 19
truth. It’s only happens because most business owners do not plan their cash
flows very well. They don’t develop a set strategy, be it financial or non-finan-
cial. Cash flow pressures are usually due to a lack of planning, not the fact that
a business is in the start-up phase.
Nick: Hmm. Well, what exactly is financial strategy?
Me: I’m glad you asked…
Cases like Nick’s are very common. Whether you are in the start-up phase or
atanyotherpointinthelifeofyourbusiness,strategydevelopment,andinpartic-
ular financial strategy development, is often the missing ingredient in the recipe
for success. So, what do you need to know about it anyway?
The Oxford Dictionary defines strategy as ‘a plan of action designed to achieve
a long term or overall aim’. The key words here are plan, action, and aim, be-
cause strategy generally applies to forward-looking plans and goals, although it
may sometimes be applied to shorter time frames. In business, strategy refers
to ‘what’ needs to be done, as opposed to ‘how’ it is done, and in many cases, the
‘what’ proves to be a lot less complex than the ‘how.’
How does this apply to you as a business owner? In short, every decision you
make has a financial impact. Without a plan to guide the decision-making pro-
cess, you might simply turn up each day, blindly fighting fires (or creating new
ones)whichcouldhavebeenavoided.Youdonotwanttobeoneoftheseuninten-
tional, self-sabotaging, arsonists? If you’re feeling guilty right about now, you’re
not alone. The vast majority of small and medium businesses in Australia have
neither a plan nor processes in place to help them to develop the right strategy
for success.
Okay! Hang in there! Even if you feel like your head is swimming, you can
learn how to change things for the better. Fortunately, the best way to increase
your understanding of financial concepts and principles is to approach them
from the strategic level. As a business owner, your three main strategic concerns
should be: profitability, allocation of profit, and your overall financial position.
Why? They are what most simply and accurately represent the essence of the
financial structure of a business.
One way to process this idea more easily is to think of financial structure as
you would the human body. Human beings come in all shapes, sizes, colours. We
possess a multitude of personalities, and (for the most part) we all possess the

21. 20
same basic physical structure- arms, legs, torso, neck, head, etc. Businesses also
comeineveryimaginableshapeandsize.Theyrepresentdifferentindustries,and
may possess a wide variety of cultures. Despite the differences, financial struc-
tureisbasicallythesamewhenitcomestoallbusinesses.Profitability,allocation
of profit, and overall financial position are the “legs”, “arms” and other miscella-
neous parts. For this reason, understanding them is the key to understanding the
basic financial structure of your business. Only when you do, can you begin to
develop the strategies necessary to optimise and enhance them. Once again, the
key to understanding how a successful business works is doing everything you
can to further your understanding of:
1. Profitability.
2. Allocation of profit.
3. Financial position.

22. 21
Lesson 4:
Monitoring Made Bare

23. 22
Key Point:
An effective monitoring and reporting process is needed to enable
your business to develop effective strategy. It reflects the quality of your
business,revealswhatisandisnotworking,highlightsareaswhichneed
attention, and directly affects your ability to set strategy. When either
are lacking, you set yourself up for disappointment and/or failure.
Case Study
Alan and Margaret run a bakery business which includes wholesale and retail
operations. They employ their adult children, Gavin and Melissa. Alan and Gavin
are both qualified bakers, whilst Margaret and her daughter take care of the ad-
ministrative side of things. They all work extremely hard, but feel that they should
see greater rewards for their efforts. They have considered upgrading point of sale
machines in order to make their retail operation more automated. They came to
see me after a recommendation from a friend who also runs a business:
Me: ‘What kind of returns and profits does the retail part of your business pro-
vide to you right now?’
Alan: (Looking at Margaret) ‘I don’t know. Margaret does the numbers. Mar-
garet, do you have those reports?’
Margaret: ‘Yes, I have them here with me.’ (Margaret passes them to me.)
Me: (After taking a look) ‘Margaret, these reports show your revenue and ex-
penses all grouped together. Do you have other records that split them between
your bakery wholesale and retail operations?’
Margaret: ‘Yes. We use separate deposit books and cheque books for the retail
side of the business.’
Me: ‘Great. Can you gather them for me? We need to review how the retail part
of your business is going before you make any decisions around reinvesting.’
Upon conducting a review of their operations, we discovered that the retail side
of the business had been losing an average of $15,000—20,000 per month for over 5
years. This had gone unnoticed, because although the business has been profitable,
other divisions had been covering the losses being made by retail.
When I delivered the news to Alan and Margaret, they were scarcely able to be-
lieve it. I could see the pain in their eyes when they realised that losses ran close to

24. 23
$1 million dollars.
It so happens that their accounting reports had neither been developed on a di-
visional basis, nor monitored effectively. Because little attention had been paid to
developingthemanagementofinformationinlinewiththedynamicsoftheirbusi-
ness, they paid a hefty price.
Alan and Margaret chose to close the retail part of their business. As a result,
they experienced an instant improvement in cash flow, as well as an immediate
reduction in the amount of energy they were expending.
In the numbers world, there is a saying that goes–‘what you measure, you can
manage’.Allthisreallymeansisthatwhenyouarenotmeasuringsomething,you
are not managing it! The problem with Alan and Margaret was that they were
not monitoring their business in a way that allowed their various dynamics to be
considered correctly.
Understanding the profitability of divisions within a business is often ne-
glected. This means that the owner of the business may not always understand
which parts of the business are profitable and which are not. From a monitoring
perspective, divisional reporting is just another part of the big picture.
Let’s look at it like this:
Given the fact that the Apollo 11 mission made it to the moon in July of 1969,
one might expect that the spacecraft was on track the entire way between its de-
parture from Earth and its arrival on the moon. In truth, Apollo 11 was only on
track and astounding 7% of the time! Mission Control spent the other 93% of the
journey performing critical procedures, including constant measurement of the
coordinates necessary to get back on track.
A business is very much the same… either on track or off track. That is why
monitoring is so important. You need to know when you’re off track, so that when
ithappens,youcandevelopstrategiestogetbackontrackagain.Abusinesswith-
out monitoring is a business without strategy. The end result is mediocrity busi-
ness at best… complete failure at worst.
Without effective monitoring, strategy development is virtually useless. In
my view, effective strategy cannot be developed when a business doesn’t realize
what is working and what is not. From a monitoring perspective, here are some
important concepts to keep in mind:

25. 24
• Management reports are the tools most commonly used for monitoring
purposes.
• Management reports must identify and report critical activities which
drive profitability and cash flow.
• The information contained in management reports directly reflects which
systems are and are not in place.
• The timeliness (availability) of management reports directly reflects the
efficiency of your business’ processes, systems, and operations.
• Overall, the quality of management reports and the reporting process is a
direct reflection of the quality of a business.
While we could delve deeply into the intricacies of management reporting,
that lies outside our purposes. Instead, what we wish to do it to present a ‘bird’s
eyeview’ofthekeystrategieswhichneedtobeconsideredwithinafinancialcon-
text.

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Lesson 5:
Systems Exposed

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Key Point:
Effective systems enable you to successfully execute strategy and
they allow the capture of quality data needed for monitoring purposes.
Without them, your strategy is doomed to fail.
Case Study
Mark and his wife Carissa came to me seeking advice when it came to purchas-
ing a 24-hour petrol station/mini-mart. After reviewing the business, we found it
to be in good shape, as well as having the potential for improvement. The deal was
negotiated and settled, and immediately after takeover, the decision was made to
improve internal procedures, systems, and controls in the two areas which repre-
sented the greatest risk to this type of business: inventory and cash.
The forecourt system designed to control the fuel browser was not linked to the
cash register system. This presented a great deal of risk, because fuel transactions
could not be linked or reconciled to payments received.
Further digging turned up other serious problems. After reviewing video foot-
age and transaction records, it was discovered that the night manager was sys-
tematically pilfering cash during his shifts by employing a ‘no tender’ system of
for fuel sales. As a result, he had stolen approximately $9,000 over the course of
three months. The police were called in, and further investigation also uncovered
the theft of $100,000 over a twelve-month period from the previous owner of the
business.
By examining the results of the manager’s activities, not only had the previous
owner lost over $100,000 in stolen cash, but potentially another $300,000 on the
sale value of the business, due to the fact that small and medium businesses in Aus-
tralia are generally valued at three times their profit.
FYI:Afterbeingprocessedthroughthelegalsystem,themanagerreceivedajail
term for his crimes.
The problem is, to most people, systems just aren’t all that sexy (unless you
have a strange fetish for which you should probably seek years of intensive ther-
apy). Most business owners can think of a million other things they’d rather be
doing (like picking belly button lint, or walking barefoot over burning coals)
than thinking about internal controls or accounting. Dealing with this particular
brand of reality reminds them of a mopping chore that they hope will go away on
its own if they ignore it long enough. When it comes to systems and the operation

28. 27
of your business, however, ignoring them means that you’ll eventually trip over
the mess and land flat on your back in a big, fat puddle of avoid-ability.
Systems are so important because they provide a way to capture relevant, re-
liable, and timely information which can be used to execute strategy and deliver
intended results consistently. Today’s multi-billion-dollar fast food empires are
the absolute experts when it comes to this. The processes they use are so fine-
ly-tuned that they can successfully serve mass quantities of fattening fare to an
unbelievable number of people throughout the course of a single day. They are so
good at what they do that they continually rake in incredible profits, and, manage
to keep everyone coming back for more.
A simple computer inquiry can determine such detailed information as the
quantity of a new menu item sold in the past month. If sales of the item are low-
er than expected, the item may be discontinued or the business may decide to
develop a different marketing strategy for the product. The data collected using
these processes is reliable, useful, and up-to-date at any given moment. It is the
quintessential example of how “getting naked in numbers” presents you with the
truthyouneedtodevelopthestrategiesyouneedtokeepmovingforward.It’slike
having access to an incredibly informative scorecard, but it would not be possi-
ble without the proper systems in place.
Neglecting systems leaves you vulnerable to greater risk (remember the pud-
dle)? It’s not that different from getting soaked in a rainstorm because you forget
to buy and set aside an umbrella in case of rain. When it comes to repelling the
elements, an umbrella absolutely reduces your chance of getting wet. Not having
an umbrella, on the other hand, exposes you to the very real possibility of soggy
underpants and pneumonia. The most logical plan of action is to always have ra-
ingear close at hand, acting as an effective system for staying dry. One thing is for
certain; if you don’t put this particular system into play, you will end up all wet.
Now that the storm is over, you are probably wondering how the concept of
“systems” relates to your business. To find the answer, you first need to identify
what it is that you do most often. For example, do you spend the majority of your
time juggling mass quantities of products? (ex: Uncle John’s Toilet Tissue) If the
answer is yes, your most vital systems are those related to stock control. Why?
Because they allow you to manage the mountain of TP constantly entering or
leaving your possession. The most important systems to any business are those
which allow you to manage critical aspects of the operation.

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Simply introducing the correct systems isn’t enough. To maintain effective-
ness, they require continued development and oversight. Giving a three-year-old
a colouring book and crayons may be a good system for keeping them occupied,
but forget to keep a watchful eye on them, and the result could be a life sized
self-portrait on the dining room wall in artful sonic silver and atomic tangerine.
Effective systems must always keep time with the pace of real life, and they must
always be well-monitored. Overlooking them is a mistake that can cost you more
than profits; it can cost you your business.

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Lesson 6:
Process Undressed

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“Dabbling” in systems development, “tinkering” with the idea of monitoring,
and/or “playing around” with the idea of developing a new strategy is not enough
to produce the results you are looking for. Think of it this way: simply thinking
about turning on the TV, will never switch the set on… no matter how much you
try.Ifyoudon’thavearemote,gettingresultsrequiresfollowingthroughwiththe
process of getting off your behind, walking across the room, and physically push-
ing a button. When it comes to your business, determining the best processes de-
pends on making an accurate assessment of your individual needs and goals. The
most successful businesses, whether big or small, know this and use it to their
great advantage. The big questions are, how do they do it, and how can you do it?
Whyisprocesssoimportant?Foronething,itisoneofthebestwaystodevel-
op consistency. Consistency in marketing allows you to build credibility, gener-
ate new leads, and successfully build your brand. Consistency in sales processes
helpsensurethatyouareabletoconverthard-earnedleadsintonewcustomersor
clients. Consistency when it comes to delivery of a product or service is the most
effective way to build trust in your brand. Consistency in delivering after-sales
services leads to higher customer-retention rates and helps you get customers to
returntoyourbusinessagainandagain.Finally,financialmanagementandstrat-
egy build higher levels of profitability and lead to consistent positive cash flow.
Anotherimportantreasonforhavingtherightprocessesinplaceisthepower
that they have to help to reduce risk. What is so important about keeping your
level of risk down? By way of example, when you go to see the doctor, it is unlike-
ly that you will be given a prescription without receiving at least a basic exam-
ination. If you were, and then fell ill or died as a result, it would be considered
malpractice. An exam is a process you must go through to eliminate the risk of
possible side effects.
Processes that relate to monitoring effectiveness and efficiency are very im-
portant. In one instance, we had been working with an electrical construction
and maintenance business employing 150 people when it came time for their
annual review. During the review process, we examined the company’s overall
progress, what new things had been implemented, and what had changed over
thecourseoftheyear.Wealsotooktimetodecidewhatneededtobedonetokeep
the company moving forward.
One of the things that jumped out at us right away was the company’s time-
liness in completing and making available their monthly business management

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information. This included elements as diverse as KPI data collection, data en-
try, invoicing, and reconciliations which are all necessary in generating accurate
managementinformation.Timingisessentialwhenitcomestothistypeofinfor-
mation because when it is completed quickly and accurately, it can be reviewed
promptly and used to direct actions aimed at correcting problems.
To tackle the problem, we decided that it was time to get naked in numbers.
We set the target of having each process completed within 15 days of the end of
themonth.Forthistohappen,anumberofprocesseshadtobetightenedup.This
ultimately uncovered inefficiency in job management processes which resulted
in completed work not being invoiced promptly. This, in turn, led to cash-flow
cycles that did not operate at peak levels. These inefficiencies where uncovered
by simply taking the time to monitor how long it took to complete management
tasks and generate the corresponding reports. Once these problems were reme-
died, monthly cash flow and profitability began to improve.
There are other (perhaps more selfish) reasons for taking the time to put the
right processes in place. One of the most attractive prospects is the way in which
they can be used to increase your overall level of freedom. When you can go home
at the end of the day with the knowledge that if you need to take a day off, things
will still run without you. You eliminate the need to sleep in your office, as well
as the nagging sense of worry that things will probably fall apart if you need to
get away for a while. If you neglect to put the proper processes in place, there is
a good chance that you will eventually find yourself “married” to your business;
unable to get away because things might disintegrate without you. It is an un-
equal and unhappy union, and in the end, it might cause you to “divorce” yourself
from the business you once loved.
Now that you understand the importance of these processes, just exactly how
do you go about developing them or tailoring them to suit your needs?
Michael Gerber, author of the ‘E-Myth’ may have said it best when he stated
that “a big business is just a small business that did the right things.” Success-
ful businesses have gotten where they are due to their ability to achieve results.
But what “things” have they done to get to this point? In short, they have learned
to understand the processes that make success possible: those rooted in finan-
cial education, financial strategy, and financial management. While they are the
lifeblood of a successful enterprise, none of these vital processes should ever be
viewedasone-offactivities.Youmustlearnaboutthem,putthemintoplay,assess

33. 32
the ways in which they increase your level of success, and then go back and start
again…and again…andagain.Manyeducatorsembracetheideaoflifelonglearn-
ing. This is a concept that can serve you well in your journey to build and main-
tain a business you can be proud of.

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Conclusion

35. 34
Numbers are like an amazing multi-tool that allows you to manage, moni-
tor, and master your business. To make them work to your advantage, you must
be willing to expose them for what they are, and use them as a mirror to reflect
the changes you need to embrace in order to succeed. Getting naked in numbers,
means being a willing and active learner with the willingness to understand how
numbers can work for you.
Understanding the numbers that mean the most will help you gain the con-
fidence it takes to lead your company to the level of success you deserve. They
shape the strategy, monitoring, and systems which comprise the fundamentals
of financial success. Numbers allow you to plan effective strategy as well as mon-
itor what is and is not working when it comes to profitability, profit allocation,
and financial position; the three most important strategic concerns of any busi-
ness owner.
After all of this is said and done, numbers allow you implement systems de-
signed to capture the quality data which can be used to quickly assess developing
situations and adapt strategy accordingly. Perhaps most importantly, they pro-
vide the foundation for the processes all businesses use to cultivate consistency
and reduce risk. When it all comes down to it, numbers are the main ingredient
in the recipe for financial success. Learning to understand them is the first step
toward enjoying the freedom you deserve.

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About the Author

37. 36
Greg Smargiassi is a financial expert with a difference.
With 15 years of experience in the accounting profession, in firms large and
small, and as owner and operator of his own tax accounting business, he knows
the industry like the back of his hand. He has worked in fields as varied as trade
services, manufacturing, aviation, transport and logistics, education, informa-
tion technology, and construction. While serving as Chief Financial Officer for
a successful family business (which later sold for a staggering $110 million), he
obtained firsthand exposure to what it takes to transform a business from a start
up to multi-million dollar enterprise.
In Greg’s view, small and medium businesses are the engine that powers our
economy. Unfortunately, he believes that the accounting profession is not doing
all that it can to help them succeed. Growing frustration with the overwhelming
focus on taxation and compliance caused him to decide that enough was enough.
Drawing inspiration from Indian leader Mahatma Ghandi, who said “you
must be the change you wish to see in the world”, Greg began leading the effort
to be the change he felt was so greatly needed in the accounting profession. He
sold his tax accounting business and dedicated his time to providing top-notch
instruction in financial education, processes, and strategy to the less-than-big
business.
Greg’sskillsextendfarbeyondaccounting.Afteracceptingapositionwithan
international business coaching franchise, he soon emerged as one of their high-
est performers, and was appointed a master coach. The position allowed him to
begin sharing his knowledge and skills with emerging business coaches through-
out Australia and New Zealand.
Thrivinginhisnewroleascoach,consultant,writerandspeaker,Gregknows
firsthand what it takes to evolve personally, professionally, and in business. He
is eager to share his experiences in order to help you transform your business as
well.

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Further Information
www.ourcfo.com.au
www.gregsmargiassi.com