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Hello!
I’m Serhii Soloviov, CEO of Solve Marketing.
Today I’m going to talk to Alexander Benidovskyi, a financier, an expert in building financial accounting and planning systems.
We will discuss the following issues:
- why a business needs a financier and when to contact them;
- common mistakes in independent financial accounting;
- stages of implementation of financial accounting and financial modeling
… and much more. So, read to the end!
— Alexander, tell our readers about yourself.
— My name is Oleksandr Benidovskyi, I live in Odessa and work in finance. I have been involved in finance almost all my life — I have a degree in finance with a specialization in business economics and a master’s degree.
My professional career started as a financial director in a company. I co-founded a digital agency. We opened it with two friends when I was 22, and it was our first experience. Like most startups, it didn’t last even a year, but after that I worked in many companies whose activities were related to marketing.
I spent a lot of time in different positions: I was a project manager who sometimes had to become a copywriter and write the text; make visuals in Photoshop. In general, I was in a classic digital agency in all positions except SEO. This is the only specialization I don’t understand.
In addition, I worked for an agency that specialized in marketing research and strategy development. My financial skills were also useful there: there were a lot of calculations, creating media plans and budgets.
In each of my positions, I tried to use my skills, because I have an analytical mindset and financial planning and calculation skills.
Three years ago, I decided that finance and numbers were my vocation and inspired me. So I dedicated myself to this particular niche.
— No wonder I felt you were a colleague, you have so much experience in marketing! Okay, then the next question is: when you communicate with businesses, how do you explain your main benefit? How are you useful to the business owner?
— In short, I allow entrepreneurs to save time and thus increase their business profits. After all, it is impossible for business owners to build a business model without understanding the basic principles — what is income or profit, etc.
I can give you an example with accounting. It takes about a month to understand basic accounting and service yourself as an individual entrepreneur. Then you understand how to submit reports and work with documentation, and you can do it faster. But the time that was devoted to training and further self-service can be spent on business development. Therefore, when entrepreneurs turn to me, they get these processes automated. Then, in three clicks, you can see reports and analyze the current state of the business.
— Please tell us, are business owners afraid of finance when they need to dive into it? Do they say: “No, I don’t want to do this, it scares me”?
— It usually scares people to do accounting on their own. Especially the fact that you need to take the time to understand how it works. It seems like it will take a lot of time. And in fact, when there is no automation of processes, you can study for several months, build a financial model and strategy. But during this time, other business processes will get out of control, and there will be nothing to use these models on. I think this is the main fear.
— Okay, I see. Tell me, are there many marketing businesses among your clients?
— Marketing companies account for about 30% of all my clients. But there is no area that is in the majority. If we take it separately by industry, other businesses account for about 5-10% of my clients. It’s manufacturing or e-commerce, but marketing accounts for 30%.
— What other niches do you have clients in besides marketing?
— If you combine financial activities and marketing background, you can make the following list:
- marketing — integrated, strategic, digital;
- production — custom-made designer kitchens, cosmetics production;
- political projects — management of the digital team in local elections, full financial management of the department (budgeting, financial planning, financial accounting);
- e-commerce — distribution of solar panels, LED products, soft toys, cosmetics, etc;
- organization of educational events — operational activities and financial management of projects;
- service projects: consulting experts in various niches.
— Are there any specifics in marketing that distinguish financial reporting from other areas?
— It does not differ significantly, because all the same financial approaches are used structurally as in any other model. The only difference is payroll. Usually, the sales bonus is not very large, but in marketing, this figure reaches 70% of the salary. Structurally, the reporting and the model are almost the same.
If we are talking about the technical aspects of creating these reports, what I do in Google Sheets, each company may differ significantly and the file itself may look different.
— What are the most common mistakes made by business owners? What would you advise business owners to pay attention to when conducting independent financial planning and financial accounting?
— The most common mistake is “spending money that has not yet been earned”. Let me tell you more about it.
Many businesses build a scheme where they collect prepayments from customers a month, two or three in advance. In this way, they collect, for example, 100 thousand hryvnias and spend them in the first month. But we remember that these funds were paid three months in advance. And we get a situation where the client has paid money for the future, and we use it to pay salaries or other operating expenses for the past month. That is, if next month most clients stop working with us, we realize that we will have to pay our employees, but we will not have any payments from clients. We have such a significant cash gap.
— That’s interesting. Can you give us a list of the main problems that financial accounting solves?
— It allows you to understand the business profit: what is the real earnings, what are the expenses, and where they can be optimized. It also allows you to see the points of business growth. I would put these points in the first place.
In addition, it saves time. Thanks to this approach, an entrepreneur and a manager can quickly analyze finances. No need to ask a financier to prepare a report, wait a week for it, and analyze the situation that has already changed.
It is also a necessary tool for understanding business efficiency. In this case, I’m talking about profitability. How much of the income I can put in my pocket and spend on my own needs based on the results of the month.
— It’s very simple. In my opinion, working with finances is an integral part of scaling. That is, if a company wants to grow, it needs to understand its revenue targets and forecast expenses. And it is very difficult to do this without financial accounting and modeling. So the question is: when should I come to you? At what stage of the company’s development? Please answer this question.
— It’s never too late to come, that’s for sure. I think that in 98% of cases, you can have a positive impact on the financial situation.
It is more correct to do it in parallel: when we plan to start a company, there are concurrent processes. There is the creation of a mission, the development of company values, a name, a logo. Then a financial plan is drawn up, or it is also called a business plan. All this, of course, is the right thing to do at the beginning.
But in practice, I think it makes no sense to make a deep financial system at the beginning, because there is no history of expenses and receipts.
Especially if it’s the first business, a person’s first business in general. Because this planning primarily comes from the owner and those responsible for finance in the company. So, basically, my main part of the modeling work is to guide the owner and his team to solve the problem on their own: what direction to develop, where to get money, where they can cut costs, where to optimize something. And when you’re just starting a business, you don’t know all this.
So, basically, I think the ideal time to contact me is when a certain period of time has passed, at least a year since the start of the business. The owner and his management team really understand how their business and services work, and they have established operational processes. And then, based on this experience, they can forecast, plan and understand how to move forward in terms of financial strategy. And here my task is to help them, guide them and create a tool from a technical point of view to manage these finances.
— Wow. Thank you very much, such a great, detailed answer. Please tell us about your results of implementing the financial planning system. What was done and what did it lead to for the company?
— I have a project that I have been working on for 8 months. The company is engaged in traffic arbitrage. In the spring, they had 5 specialists on their team. I developed 6 files: 5 files for employees and one general dashboard for management to track financial performance.
As a result of the process optimization, they had free time to implement their new marketing strategy and expand their team. The company now employs 47 specialists. We are also actively working on refining the analysis system and creating new tools. In other words, the system we have created has, firstly, freed up time for team leaders to develop the company; and secondly, it has allowed us to quickly integrate new specialists into the team.
It should be noted that this was not the first business for people. They already had established structures, models, and an understanding of how to move forward. So I can’t say that this rapid growth was due to my work alone. But this system allowed them to adapt and test people very quickly. That is, the 47 people who are working now change from time to time. A person comes in, works, and all his or her performance is displayed on the dashboard. The manager sees how much revenue the person brings to the company. And all this is so automated and detailed that it is still possible to understand in a week whether this employee is effective or not and compare it with other people. And, as a result, if necessary, replace them with another specialist who can be more effective.
— I would also like to add that working with financial reports is not only about accounting for money receipts. It also allows you to measure internal indicators. For example, to compare profit growth with team growth. And if everything rises proportionally, it’s a victory. It’s great that you shared such a cool case. In turn, I understand that all this cannot be realized in one day. Tell us about the stages of implementing financial accounting and financial modeling.
— The first and most important stage is to gather your thoughts and start working on it. The desire to work comes first.
Speaking about the work itself, the first step is to develop a financial accounting system. That is, a file is created where you can see all financial activities as quickly as possible.
When I arrive, the first thing I do is conduct an audit to find out how the financial management is currently performed. Sometimes the system works, but all the accounting is in the director’s notebook. The scheme can work, and then we just digitize it so that a new financial accounting specialist can quickly integrate into the scheme.
The second stage after the audit is when I can offer something to the business. I don’t have any templates, so I structure everything in a file. I need to compile all the information there for myself and convey to the business how we can implement a certain model. The main factor by which I evaluate my work is minimization of actions. That is, the person who will be dealing with finances, and primarily the business owner, should spend a minimum of time and receive a maximum of information.
I call the third stage a briefing, but not in the classic marketing sense. At this stage, I clarify all the issues and make adjustments. Often, it is at this briefing that we create the entire structure, which will then be the basis for reports. We also discuss issues related to the company’s system, structure, and operations. How salaries or bonuses are calculated, some subtleties of sales, if it is important for the financial system.
The fourth stage is the development of this financial system, its integration into the company’s operations, and the delivery of the project.
— Tell me, is it true that most businesses do not keep good financial records?
— This is a difficult question. Let the readers analyze whether they are keeping records correctly. To do this, let’s look at what kind of financial system is correct.
The right system is one that, when an expert in this niche looks at it, he or she understands everything. There may be mistakes, it may not be canonical, but everything is clear. For example, like with you: I have a few questions that I want to clarify for myself, but in general, everything is clear.
But when a business owner writes something down in a notebook, it may be theoretically correct, but it is understandable only to him or her. That is, if he scales up tomorrow, hires a CFO and hands over the business to him, the specialist will spend a lot of time figuring out how it works. This system is not correct.
— Another issue is the question of the CFO. Because not all of our readers’ companies have CFOs. Some know what they do, some don’t, so I have a question for you as an expert. What is the main function of a company’s CFO?
— The CFO deals with everything related to finance and affects profit in the first place.
The main result of his work is to maximize profits and profitability. I would like to share with the readers one case that my mentor told me a year and a half ago. He worked with a marketing agency in Kyiv. Their main activity is SEO promotion. They built a crazy financial department — all gurus. When this strong team set up an internal system, the company introduced a service called an outsourced CFO. That is, they outsourced their CFOs to other companies. And one of their employees, working as an outsourced CFO, achieved good results. Therefore, he had a KPI of “how much the company will earn on the money placed on deposit in the bank”. This means they earned so much that, in addition to money for operations and reinvestment, they had money left over for the deposit.
— It’s a great case, you’ve revealed both the work of a CFO and the specifics of our Ukrainian business at the same time 🙂
Oleksandr, thank you for an interesting and informative conversation!
Did you like the interview? Do you have any questions? Write in the comments to the publication, we will ask Oleksandr to provide answers.
