lead your day

Can Finances Really Be Inspirational?

Transcript 

Merilyn (host):

Hello, I'm Merilyn and welcome to Lead Your Day - down-to-earth chats with fascinating people dotted with short inspirational episodes from me. All with an inside-out approach, to not just growing in your business, but become conscious leaders our world craving to follow. In a nutshell, I empower women to lead, and that starts with leading your day.

 

Merilyn (host):

Hello! It's Merilyn, and welcome to Lead Your Day. On the show today, I'm talking with Kathy Svetina who says that we shouldn't just be looking at our money mindset, something way more important- our financial mindset. No, don't let your eyes glazed over when you hear talk about finances. You have to listen to this episode. Anyone who is stepping out, leading your world whether that's in an entrepreneurial way, in a creative way - finance is a one thing to get your head around. Today we talk about making finances inspirational. Enjoy the show. 

 

Merilyn (host):

Welcome to the show, Kathy.

 

Kathy (guest): 

Thanks so much for having me, Merilyn. So happy to be here. 

 

Merilyn (host):

You're in which part of the US?

 

Kathy (guest):

I'm in the Chicago area - the windy city.

 

Merilyn (host):  

How beautiful! That is one part I have not been to in the US. I have traveled quite a bit there but I'm still on the bucket list post-COVID, which I believe you have on your list to come to Australia.

 

Kathy (guest):

Yes, Australia and New Zealand. I always wanted to go to New Zealand and Australia. Those are my bucket list for sure.

 

Merilyn (host):  

What is the attraction for coming to Australia?

 

Kathy (guest):  

You know, you're gonna laugh at it but I really like the Sydney Opera House in the Sydney area. And I love The Hobbit when I was growing up so that's why-

 

Merilyn (host):

Oh yeah!

 

Merilyn (host):  

Yeah, my dad's a Kiwi so I have an affinity to cross the water to use New Zealand. As New Zealand hates this, but we sometimes Australians treat New Zealand like another state, not a separate country. But yes, I love The Lord of the Rings and The Hobbit and I went to Hobbiton and it's better than you can imagine. It's like, I went there in winter, I want to go back in summer. It is spectacular. I would definitely put that on your travel list. 

 

Merilyn (host):  

This is not a travel show. But we speak to so many people around the world that it's good to sort of check-in with people's dreams and where they live and all that kind of things. That's fantastic. What is the first thing you're going to do when you can start traveling again?

 

Kathy (guest):

I think I will probably go and see my mom because I grew up in Europe and my mom is still living there. She's in Slovenia. I really, really want to go there and visit her and see her, and go see a couple of castles. I'm a huge castle fan as well. So yeah.

 

Merilyn (host):  

Oh, the castle as we will like to say. Doesn't matter where in the part of the world you're in. You were born overseas, how did you end up in the US doing finances? I mean, how did you take that leap from Europe to the US?

 

Kathy (guest):

Yeah.

 

Merilyn (host):

Because you got a US accent.

 

Kathy (guest):

That's a long story but to make it short, I had an opportunity to study in the US and I took and said "Well, this is a great opportunity." I never plan to actually live here and stay here. The plan was always to get my education and then move back to Europe to be with my family. However, just around the time when I was graduating, the whole financial thing was collapsing. That was in 2007, 2008 and I was lucky enough to actually get a job. I figured "better a bird in one hand and two on the roof" or whatever that's you know saying is. I said, "What I'm gonna be here for the next couple of years and just get some experience." Then long story short I got a job, got another job, then I got married and now it's 20 years and I'm still here and I actually love it. But the hope is that later on my husband and I will retire in Europe somewhere-

 

Merilyn (host):

And live in a castle.

 

Kathy (guest):

I don't know if he could-

 

Merilyn (host):  

Big heating bill.

 

Merilyn (host): 

So Kathy, how did you discovered or you may not have discovered and it might just have been a slow burn. But how did you discover that financially helping people with their finances was your calling, it was your destiny or your path in life? 

 

Kathy (guest):

Originally-

 

Merilyn (host):

And can I ask were you a math nerd at school?

 

Kathy (guest):  

No, I was not. Definitely not. I was good in math, however, but I was definitely not a math nerd. But I was fascinated with stock markets since I was 12.

 

Merilyn (host):  

Wow! No way. 

 

Kathy (guest):  

Yeah. I was this 12 year- old like reading the stock tickers and try to figure out the patterns of it. It was fun for me. I wanted to go into investment banking. I wanted to go into stocks. However, when I got into college, the college that I went to, they actually give us an opportunity to shadow some of these stockbrokers. They were right by the Chicago Board of Trade, which is a huge, huge stock market exchange. I was able to shadow some of the people and realize that this is not what I want to be doing for the rest of my life. It's just not going to happen. What am I going to do now? 

 

Kathy (guest):

And luckily, I found this other field, corporate finance, which actually deals with the financials and deals with the future of the business. There's still a lot of predictions and a lot of analysis, this is something that I really enjoy, and the strategy for the business, and that's how I got into the finance. I got into the corporate finance through that way. Yeah, it's been, and I've stayed with it for a long time. And then afterward, I started my own business. And I really wanted to take all those insights and the knowledge that the big companies have about the finances, the strategy, the future, and translate that into the small businesses. It will really help them figure out what to "I have these numbers, what do I do with them now." Right?

 

Merilyn (host):  

Totally. Look, we know entrepreneurial women, professionals, not probably in the finance area, but professionals, whatever field they're in, and especially creatives. We have a lot of creatives listening to the show. Is that one thing we like to delegate is that financial whole arena, or we just glazed over. And yeah, we might love the numbers in terms of, our list size growing or our audience or the dollars coming in. But we often want to just get rid of that whole side of it and have someone just take over completely. 

 

Merilyn (host):

I'm always in shock because I was raised- We were chatting about this before we sort of pressed play on this recording, is that I was fortunate enough in my first job out of university to be as sort of raised by an entrepreneur guy who believed in women, which was very unusual. He believed in women bosses, over men bosses, and he was from a financial background. He taught us how to read a P&L, which freaked us out but it was so valuable. And at the time, it was scary. And he made a set budget. And I could remember using paper and pencil and a calculator. This was before days of- No, I'm not that old. But we didn't use Excel where he made us use paper and pencil, which was actually a very good skill to I think, to learn. And he taught us about how to read it, and also to inform our results and how to expenses and bring in increase the revenue line, increase the profit line. I'm so grateful now that I had that. But not everyone had that. And so you know how? I'd love your take on that one, why is it that we reject that and what is it costing us?

 

Kathy (guest):  

I think a lot of people get, first of all, I think it's a two-fold reason. One, it involves math. But what people don't understand is that it's not math like we had in college or high school. It's basic math. If you can add, subtract, multiply, divide, that's all you need to know. Really, that is all you need to know in terms of math. 

Kathy (guest):

And the other piece is it is a separate language almost like it's when you reading those financial statements if they're in a different language, but if you can learn the basics of it, just the basics of it, it will really, really help because there are certain patterns and if you can. If you know how to read the balance sheet, if you know how to read the P&L, if you know how to read the cash flow statement is and only those three, if nothing else, if you only understand those three and I call them The Three Musketeers of the financial statements. One for all, all for one for your business. You will be amazed by the amount of information that will give you about this business and not just the about the past, but also about the future of the business to really understand that. 

 

Kathy (guest):

But like I said, it's all about learning how to really interpret that and learning that language. It is a language that you do need to learn. It's not something that just magically appears. And we all started like, when I started this when I was, in my mid-teens, because I actually went to a school that started teaching us that in high school, like, I didn't know any about that, about this. We all start from the beginning. Everyone starts from scratch, it's just how you develop and how would you interest one, right?

 

Merilyn (host):  

Tell us some of those, those three things that you talked about us? What are some of the things that we're missing out on by not having those three tools?

 

Kathy (guest):  

The main thing that you would be missing on is the insights about the business. It gives you a pulse, how the business is doing? What are some of the like, the pattern? The pattern is a big, big, big thing? For example, if you made $50,000 in profit for this month, that's great, right? Thumbs up. But what does that really mean to have in terms of like the overall business? How are you doing like six months ago? A month ago? And more importantly, like how what were you thinking that you should be doing this particular month or the months further out? Because it's all about the contents and the reference. It's all about looking at it from a broader perspective and seeing what is really going on in the business, not just in that particular month. And no, some people get really stuck in all this "Oh, did this, and did this."  

 

Kathy (guest):

But yeah, what happened in the previous month? And are you using certain patterns really like looking at the financial statement in terms of what are some of the things that I'm seeing on a bigger level, like, for example, it might be that your customers are starting to pay late, and you'll be able to see that if you look at your accounts receivable, on the balance sheet, especially the thing they called the 'aging report'. It will tell you exactly what invoices you sent out. And if you have a lot of invoices in like 30 to 60 days that they still haven't been paid, it's really the time to pick up the phone and start talking to the customers like, "Where's the money, and we can expect the payment." Right? Not just letting it go. But looking at it and really understanding that this these are the basic language of business that needs to be brought in into your sphere of how you operate.

 

Merilyn (host):  

Can you give us some other examples of patents that we could discover or that we should be looking for?

 

Kathy (guest):  

Yeah, sure. The one that it's really let's say, prevalent is the cost of goods sold. What are some of the things that you actually spent, the expense of that your spending on that you need to get your revenue in? And so if, and I know you said you have a lot of people there, you know, creatives, so if you're actually like, creating things physically. The materials that you're spending money on to, like, let's say you're doing paintings or whatever, or pottery. Looking at expenses, that that are supporting that particular revenue, that you’re particular your making basis, right? You have to materials for it. Looking at it, how much are you actually spending on it? 

 

Kathy (guest): 

And is there let's say, for example, that there's a shortage of a particular material and has it affecting your price. If you're not like reflecting the increase of materials in your prices, that is going to really affect the bottom line at the end. Thinking about those patterns in terms of cost of goods sold, right? 

 

Kathy (guest):

Then the other pieces of also the operating expenses, how much are you actually spending on your people? What are your people doing? The other piece that I'm seeing is people like to hire other people just to bring to manage and have more work and to have more hands, to help them with more work? But thinking about it in terms of people resources, right? Is there any way that you can use those resources of the people better that you can actually position them in places there are going to be more efficient for your business, and that is going to be giving you savings? So really thinking about that is like how is your business growing and then you actually have enough people to support that growth as well. Really planning into the future, and those are all the trends that you'll be able to see if you look at your P&L, if you look at the balance sheet. I hope that answers your question.

 

Merilyn (host):  

It does. I can see people already glazing over going, "Oh my gosh, but where do I start? I mean, how do I even relate to my accountant? What does the accountant do? What do I do? How do I make this happen? And how do I make it fun?

 

Kathy (guest):  

Yeah, and that's a good question, right? The way how I like to do this with clients is first figure out, how does your balance sheet look like? How does your income state look like just be aware of it? What are some of items on it? What are some of the categories that you have? Just blaze through it before you go into the deep end, like really go into the deep end, and then there's actually software that you can use to actually help you with that. 

 

Kathy (guest):

The two ones that I usually recommend, especially for people who are going to be doing that themselves are two- one is called Fathom. It actually, if you're using QuickBooks, on it integrates with Quickbooks really well. It also integrates with Xero as well. The other one is called spotlight reporting, that one's going to help you with figuring out the patterns and the analysis and your numbers as well. And, it's really nice to have, because people are visual, we're all visual, right? We would like to see things and we're used to like, like the Fitbit - graphical representation of the numbers. That's going to really help. 

 

Kathy (guest):

Looking at it from a visual perspective of just numbers. It doesn't matter whether it's a small business owner or a big corporation, but I've also noticed, like, if you just give us some spreadsheet of numbers, their eyes are just gonna glaze over. Right? Don't feel bad if you rather have a root canal, look at your numbers, but find ways that like through the software that I just recommended or even if you have your accountants do something on an Excel spreadsheet that graphically represents your numbers. To have it in a way that is consumable for you, that it's digestible for you, and whatever that looks like. 

 

Merilyn (host):  

That's a great idea. I mean, I use Xero and sometimes I go in there, and my eyes got like "Oh my Gosh." That's great to know though. Those are app or is it software, the things that can turn into a graphical type? report?

 

Kathy (guest):  

Yeah, it's an app. It integrates with your whatever accounting software you are using. Actually, it's web-based, they go in there and play with it. And the nice thing about it too is that you can do these management reports that's what I like to call them. We talked about those three financial statements in the past, right. But there's also this thing called a management reporting. Management reporting is exactly the numbers sliced and diced in a way that you want to see them. In a way that is useful for you and it's going to give you an insight, right? For example, if you just have revenue on your P&L statement, but you want to go and see it by a revenue stream. You might have a subscription plan. You might have a consulting business. You know the way it's diced, you be able to see that in your management reports because the way how you moving the pieces around it's going to be a lot easier for you to digest that and you're going to be able to see trends easily. So think about what when you're looking at these reports when you're putting together like "What do I really want to see?" Like what is it really important for me to see? Yeah, the revenues fine, but what else do I need to see to make a decision? You're looking at these numbers because you want to make decisions? What are you really decide on? That's a good starting place to look at.

 

Merilyn (host):  

Money mindset is kind-off a phrase that is out there. You can buy courses on it. You can buy books on it. You can give a podcast on it. It's like often I hear this again and again. "I've got to fix my money mindset. I've got to fix my money mindset." But you've got another take on that, haven't you?

 

Kathy (guest):  

Yeah. When it comes to the money mindset, it's I think people get really stuck with "I want to make more money. I want to make money. I want to make more revenue." But it's like, really, what is more, revenue means to you in terms of business, right? Is there a particular goal, like a lifetime goal that you want to achieve? You want to grow the company because you want to sell it? You want to do, even have the initial public offering go have like shareholders. I mean, it depends on where you want to be, or do you just want to enough money so that you know, you can take your kids on vacation and you don't have to worry about it. When you think about your business, it's good to think in terms of gold, where do you want to be, and not just go whatever the outside world tells you, "Oh! You got to grow 10x, 5x." Or whatever it is. It's no, just think about where would this serve me really well in the particular life stage that I am in right now? And where would I be later on? Right?

 

Merilyn (host):  

For you, it's replaced the word "money mindset" with the word "financial mindset".

 

Kathy (guest):

Yes. Yes. 

 

Merilyn (host):

I love that. I love that. Finances and the word inspiration don't often go together for most people, but I imagine it does with you. How can we be inspired, inspired by our finances, or the financial side of our business?

 

Kathy (guest):  

That's a great question. What, I mean, for me it this type is fun because I grew up with it. I love it. I love numbers. I love talking about money. I love talking about the financial strategy. But when it comes to the inspiration, what I really what I really see inspiring is all the potential out there. Business as is really a part of this, like, bigger ecosystem of the world is like you're helping people, you're really doing something good for the world. And it's inspirational to see the business doing well, financially, because that also means that it's supporting the customers, the clients that need it, and it makes the world a better place. Right? It's kind of like it's like a ripple effect. Like when you put stones in, when you throw a pebble in the water, it has a ripple effect. That's how I see it. It's like having a really healthy, sustainable business. It is so inspiring because it makes us ripple effect throughout the world, through your customers, and through your clients.

 

Merilyn (host):  

I love that. I love that. Women and money, particularly women stepping up in leadership. This podcast today, which can mean multiple number of things, but it is in essence and inspiring women to not just lead the day in their own lives, but to see to step more into that leadership space. As a woman, do you think, as woman, I love your take on women and finances and leadership because it's often seen as a male world?

 

Kathy (guest):  

Yeah, and that is exactly why we serve businesses that are led by women. So I only work with women owned-businesses, because my mission part of my mission for my company is to help women be in the leadership roles and to be into these to step into the CEO position of their own company and the way through do that is to be really comfortable and understand the financials because when you're able to do that you're able to have a much better impact on the world and in your organization as well. Because you'll be able to, if you choose, you'll be able to grow a lot healthier, more sustainable. You'll be able to help other women as well because you'll be employing them. And whatever matter it is, so you'll be really able to like step into this leadership position. And the reason why I struggle working with women is because I was in finance for so long, and it's a completely male-dominated world. It's really hard, I think, as women when we come into the room, and there's men around the table, and you just feel like you don't have a voice. If you have another woman, that's there, that's cheering you that's your guide, I think it makes a lot easier when women are in those positions to help each other out. 

 

Merilyn (host):

Absolutely. I'm completely on your side there. All right, practically, can we have some tips where would if someone's sitting there right now and they're thinking, "Oh, my God, I don't where, what would you say, what should we do to start?"

 

 

Kathy (guest):

I think the first thing to start is, first of all, I would ask like, "Where are you in the foundation place." Because if you do not have good in data coming into your business when it comes to your finances if your books are not updated for three months or so, it's really hard to make decisions because like I said, you cannot make good decisions on bad data. Really making sure that you have someone who understands the book that updating your book, so get a bookkeeper and get an accountant. Those are foundational, especially if you've been at businesses really running doing well. It's time to have don't have your admin or yourself doing the books that you really have updated on a monthly cadence. 

 

Kathy (guest):

And then after you have that really looking at the books, having those management reports and looking at the numbers and you can also sit down with a bookkeeper, they'll be able to help you, what you should be looking at. And then once you get into like, really, how am I going to plan for the future should I be hiring people? Should I put, for example, have a new line of business? Should I be acquiring a business or whatever it is. Those are the real the decisions about the strategic planning of your business and the future of your business. That is something you can have like a fractional CFO and bring them into your business to help you with those management decisions. But first, you have to start with that foundation that it's the data is squeaky clean, as I would like to say.

 

Merilyn (host):  

So start with a bookkeeper. Get an accountant. Get an accountant-bookkeeper. What's the difference between an accountant and a bookkeeper? This is for those who like wanting to ask this question, but they're probably going, "I'm not going to ask that question because I shouldn't I know." I mean, you could Google it, but I'd love to hear it from your perspective, what is a bookkeeper? What is an accountant? And what's why do we need both? 

 

Kathy (guest):  

That's a great question. A bookkeeper is a person that's really going to be updating your books. That's very transactional. They'll be making sure that your invoices are paid, that their invoices are sent out to your clients or customers, that everything in reconciles with your bank statements, that everything gets in the right orders and the right categories, and the right chart of accounts. They are very transactional. 

 

Kathy (guest):  

The accountant is going to take that information and figure out the taxes based on that and help you manage your taxes and make you, here in the US, we have IRS, the Internal Revenue Service, I don't know what you guys have in Australia, but they're the ones they're dealing with the taxes. And they're going to be able to help you with that. 

 

Kathy (guest):

And the third part is the fractional CFO, such as myself, and those are the people that are going to be taking all of this information and help you plan for the future. So accountants and bookkeepers are for the past and the fractional CFO is for the future.

 

Merilyn (host):  

Oh, I  that. I love that. And still as a business leader. And I'm calling you that. Even if you sometimes think it's just a hobby. You are a business leader, we want to inspire you. This show is to inspire you to step into that leadership space. There are, we simply don't ask our accountant for what we want. Because I know for my accountant, she does a great job. She just prepares my taxes and just gets that ready to sign off. I have to actually say, "Okay, I need these reports." What you mentioned earlier in the show, what can we go to our accountants or bookkeepers, and say "I need these reports to help manage my finances." What would what would be a basic starting point for people?

 

Kathy (guest):  

It depends on what type of business you have, right? and what industry you're in. It's in those and we talked a lot of what are called the management reports. On a basic level, what should be getting every month and every month. And I mean, really every month, get income statement, the P&L statements, balance sheet, and cash flow. Those are the three ones you should be getting every single month so that you can compare and figure out what's going on. 

 

Kathy (guest):

If you have a budget set up, those would actually there's should be a variance, meaning the difference between what actually came into your business, the actuals, and what was planned, which was the budget, and figure out what the variances. Those are the reports that you should be getting. 

 

Kathy (guest):

And in terms of management reports, that's when you have to sit down and think, "What are some things that I really need to see in my business that is going to help me make decisions so that I can have my bookkeeper prepare those for me?"  And like I said, the software that you use be able to help you with that as well. 

 

Merilyn (host):

Yes. That's true.

 

Kathy (guest):

Yep, you'll be able to just go in without the bookkeeper. The bookkeeper updates the numbers, and you just pull out the report yourself. It is more like a self-serve thing versus trying to pull the information in the bookkeeper.

Merilyn (host):  

Yes. Can we go back further to a basic level because I know there's people listening who are new to the entrepreneurial world and you may have been a high-performing executive, but sometimes you may have been exposed to this? But those four management reports that you talked about, can you give us the dummies' guide to what they are in a sentence.

 

Kathy (guest):  

Yeah! Sure. The better the P&L or the income statement, profit and loss statement, is a report that's going to tell you how much you sold in revenue. So how much when you got in sales and all the expenses that happen in your business. When you take sales minus expenses whether that would be business expenses or tax. Don't forget about taxes. That is going to give you your profit, whatever the profit is. That is different from cash. 

 

Kathy (guest):

Cash is different from profit. I want to make the very different, distinct because a lot of people get too mixed those two up. But the cash is actual physical cash coming in, and you're going to be able to find that on your cash flow statement. What that does, they just tell you the cash that came into your business and cash that went out of your business. 

 

Kathy (guest):

If you, for example, have equipment in your business, and you have to depreciate it, because you use that, that is not a cash expense, and you would not find that on your cash flow statement. Those are the simple term of the difference between a profit and loss statement. 

 

Kathy (guest):

And then the third one is called the balance sheet. The balance sheet is more of how your business is doing in terms of assets. What would you have on your business? For example, inventory if you have any equipment, or whatever cash you have in your business, and the liabilities, how much you actually owe whether to your creditors or to your customers. And then the third piece is, are net worths. The reason why the balance sheet is called the balance sheet is that it has to balance. The assets always have to equal the liabilities and owner's equity. 

 

Kathy (guest):

For example, if you have $1,000 in assets, that means you have to have $1,000 on the other side. Another way, if your equipment that's worth $1,000, and you put $500 yourself and $500 from the bank, that would make $1,000. And that's a balanced balance sheet. Looking at it from a perspective of what you actually have in your business, how much you owe, and what is net worth is. And it's what's your balance sheet going to give you. 

 

Merilyn (host):

Thank you, Kathy. I'm sure there are people who are going, 

"Oh, thank you. Thank you. Thank you." Because does anyone else out there feel a bit dumb because we don't know all of the things? But yes, that's great. Kathy, this has been phenomenal. Like some really sound advice. And I know there's people listening right now thinking, "Oh, I feel a little guilty of these." Don't worry one step at a time. But they like some help what else could they, what else could you tell people? What could they do Kathy?

 

Kathy (guest):  

Yeah. You can go, I  actually have resources on my website that will give you books to read and things you should be looking at. The first two books that are recommended, you would able to find them on my website. I did not write them. But I really recommend them to business owners. Because they're such a great foundation of how and you should be looking on the numbers of what they actually mean, the financial statements. You can find them on my website. You can go there and you can get them from Amazon or whatever you want to get them. And they'll be really able to help you with all this. 

 

Merilyn (host):  

Fantastic. You've got a free ebook on your website too, haven't you.? 

 

Kathy (guest):  

Yes. And the free ebook is called "Five Critical Financial Mistakes Business Owners Make" in terms of finances. You can read them on there as well. It's for you. You don't even have to give me your email address. It's good.  

 

Merilyn (host):

Wow.

 

Kathy (guest):

Yes. Yes. It's completely open. I believe in open resources. It's out there for you to be that hopefully, it helps.

 

Merilyn (host):  

Fantastic. I asked everybody, every guest that comes on the show. What does leading your world mean to you?

 

Kathy (guest):  

I think leading my world what it means to me is, it's about freedom. It's having the freedom to have designed the day in a way that I want to it. It's, you know, I'm a night owl. I like to do things at night. Having that freedom, it's really not, I cannot tell you how, how glad I am to have that. And just to be able to help other people. I think that's the freedom and to be able to help that's leading my world.

 

Merilyn (host):  

Kathy, it's been an absolute pleasure. Thank you so much for being a leader in the world. 

 

Kathy (guest):

Thank you so much, Merilyn. I really appreciate you having me here.