Stepping Out in Front of the Bus – Cash Flow Concerns

Clinton Larson Hello and welcome to EB & Flow. I'm your host, Clinton Larson. And today with me is my co-host, Jenni Huotari, partner in charge of Business Outsourcing and Strategy at Eide Bailly. Welcome back, Jenni.

Jenni Huotari, CPA Hello, Clinton. Good to be back.

Clinton Larson And we are very excited to have as our guest today, Blaine Bertsch, co-founder and CEO of Dryrun. Welcome, Blaine.

Blaine Bertsch Thank you, guys. I'm really excited to be here.

Clinton Larson And maybe we should start out. Do you want to give a little background on yourself and your company?

Blaine Bertsch Sure, yeah, I'm co-founder and CEO at Dryrun and Dryrun is a software that helps businesses take control of their cash flow. We always call it the three Ms. We help them monitor their cash flow for risk, model their cash flow scenarios and make better decisions and also manage their cash flow, which is taking care of those inflows, outflows of cash, overdue items, that sort of thing.

And one of the best ways we find to do that, especially now during this kind of COVID time, is through CPAs. We know that equipping CPAs to help their clients through this is one of the best one of the best ways we can help businesses.

Jenni Huotari, CPA Blaine, we're so excited to have you here, thanks for joining us. I mentioned to Clinton that you and I have known each other for a while. We first met a couple of years ago when you were selected to be part of one of the cohorts for the AICPA and CPA.com Startup Accelerator, one of handpicked small groups. So and you and I worked together then when as adviser and mentee as part of that, that was a great experience.

And as you mentioned, helped Dryrun working with accounting firms like ourselves. We have that common goal of wanting to assist clients in better understanding their cash flow and making some of that those predictions, those forecasted items for what it looks like in the future. And you led into it a bit, talking about the pandemic, knowing that within the last year how we've approached forecasting or understanding cash flows has perhaps been tossed aside. And we've had to look at it differently this year.

You know, when Clinton and I were talking, we really wanted to get your opinion on what you've seen in the last year, what you and the team have seen at a Dryrun from our small and midsize business clients as they've persevered through this pandemic and the impact that it's had.

Blaine Bertsch Yeah, and the struggles have been, we've never seen anything like it. Like, you know, like, ah, the way Dryrun sort of came to be it was really came from my experience of getting through the 2008, 2009 through that recession. Looking at that now that feels like a little baby recession compared to now. It's the volatility we see now is just we've never seen anything like it. There's of course there's a lot of businesses that are struggling mightily. We hear every day that they're understaffed, they're overworked, they're under massive amounts of pressure, and yet there's lots of relief programs.

So there is money coming in. And so sometimes businesses are like they've got this little breathing room, but they're all looking and going, yeah, but how long does that last? Like, how long till we come out of this? And it always seems to be another month and another month and another month later.

And they're wondering, you know, what sort of resources may come up to help them make it through. Unfortunately, we are seeing businesses that are failing, too. So it's just a really, really strange time. And it changes just daily. It just changes so quick. And so what we've done is, like I mentioned in the intro there, as we work a lot with CPA firms to help their clients because the clients are just they're scattered. They're running in every different direction. And they just need someone to say kind of here's the State of the Union and here's what's going on. And here's, you know, how we can help.

Jenni Huotari, CPA Now, Blaine, you mentioned some of the unusual cash items. I'm just something that I relate to. PPP funds that have come in or EIDL loans or other forms of governmental assistance.

Blaine Bertsch Yeah.

Jenni Huotari, CPA In terms of preserving cash or changing business operations, are there any other real solid trends that you've seen in that small and midsize business that modifications that they're making to help conserve cash or continue to be profitable?

Blaine Bertsch Well, they're of course, they're cutting costs. They're on top of government programs. And, of course, like we're based in Canada, our largest customer base is in the United States. But we have customers all over the world. And so there's different programs from country to country. And some are working OK and some are not, to be honest.

But for businesses, one of the most interesting things that we're seeing. And this happened fairly early in the pandemic. And we're seeing that carrying on and on is how they're adapting to it and not just adapting on how they necessarily serve their clients. But we're seeing service businesses add some sort of little bits of product lines and we're seeing product companies add some kind of services and they're adding delivery. They're adding online courses right.

So there's a lot of innovation we're seeing. And it's not like it's working. We've talked with businesses and they're like, yeah, we there was one that was one of the most interesting one is a laser tag business and has a massive space because they have laser tag and video games and all these things. Of course, they can't have kids come in. They can't they're basically shut down. But what they did is they managed to adapt and offer schooling so they could have a sort of a helper or a proctor. They had very limited number of students, but that's such a big space that they could space them out. And they've got all the screens basically turned it into a little school where, you know, the rules change almost weekly here where we're at. But they managed to actually run, run a business and have some cash coming into their business from something that's completely unrelated to anything they did. But it was taking advantage of the resources and the opportunity they had.

Jenni Huotari, CPA Blaine, I could see several others looking to either slightly pivot or make a really dynamic change in order to continue on going forward and in some uncertain times. How do they do that from a cash flow projection, knowing that the business model is totally different than what they've been used to for their prior existence? Do you, are you and the team needing to be involved with that?

Blaine Bertsch Well, at times and just depends. Sometimes I'm actually called in depending on the business itself, and some of them just have very different ways of managing things. So I may be actually called in personally to say, OK, here's how you may want to approach it, because it is a really unique time. But it is tricky. It's making sure you have enough capital to be able to try some of these things. And it's easy to say that, it's difficult in reality.

And that still comes back to do you have access to loans and PPP and all these different programs when that money comes in is how do you make the most use of it? The one of the, I guess one of the scarier things is when money comes in and a business looks, if they run their cash flow from their bank account, that is one of the scariest things we see.

So they might get a loan, they might have money in there. They really don't know how much they're burning through every month because a lot of them are in a loss position every month. They're not really sure. They look at the bank account. They think, yeah, I think I'm good. I've got money in the bank and it feels like a relief. But that money dries up really fast and then they start looking.

And, like here in Canada, like we know restaurants, they don't have a patio season for probably minimum three months. And at that point, they're going to have heaters really going to try and get people to be able to sit outside. They have to be able to not only say we have to get through that three months, but we have to be able to sort of staff up at that point. We have to be able to have our patio going. We're going to burn through a bunch of propane on heaters. We probably have different personal protective equipment that they have to have. Now it might be two masks by the time we get to them and N95 masks, they all have costs associated with it.

And so we like we're talking with businesses every day. And the one thing we really emphasize though is not to try and boil the ocean. Just what is the one thing that is sort of worrying you right now or keeping you up. Let's do a very simple projection. Let's do a very simple forecast. Let's do a couple of comparisons and let's keep it simple. And we hear that actually more often from businesses now. What would you like to see? I just want it to be text message that says this is where you're at. Like they want it simple, quick, straightforward, because they can't take on all of the high complications. They're just like, give me the most important stuff right now and let's work our way through it. So we're seeing a lot of that where they don't have the time and attention that they normally would.

Jenni Huotari, CPA Yes, I think I've heard that before from our data analytics team and others, when you try to focus on too many things, you lose sight and it becomes overwhelming and then the tools are less effective. So certainly great advice. Don't try to boil the ocean and really focus on what's most important.

Blaine Bertsch We actually, sorry I was just going to share, we actually one of our CPA partners there was our director of client success Barbara was online with them and they were talking and they're talking about what they could deliver to a client about cash flow. And finally, they said, well, let's just give them a call and find out.

Gave them a call and it was a very simple answer, like, man, I need this and this is just, you know, this helps everything. And it was kind of gets off the phone and Barbara's like, like they're amazed that it's kind of easy, but it is exactly what that client needs. And so that is, again, even from the CPA side, is just to talk with the clients and find out what's going to help them make that next decision without, you know, clouding their brain with too much stuff.

Jenni Huotari, CPA Yeah, yeah. We could do a lot of things, but it isn't necessarily effective. Now, Blaine as you're working with them. Obviously, in these discussions. We're making some assumptions that go into our forecast and then we're retrospectively looking back at those. Are our assumptions accurate? What if those conversations look like or that reflection on some of the assumptions in the early conversations gone? Now, as we've said, you've changed your business model. We know a little more now than we knew before. How do those conversations look compared to what they were before?

Blaine Bertsch Well, the big thing is before you had more time and he had more. You kind of knew. You knew it was seasonal. You knew it was coming. And they're going to be a lot more accurate. What's happening now is you have to check in a lot more. You have to update your projections a lot more. You have to stay on top of your receivables a lot more because you have to get that water level really quickly and find out is this actually working?

Aged receivables are honestly what we're hearing. They're through the roof like and they're extended. It's like, yeah, this customer always paid. It was always late, but it was forty five days. Well, now I don't know when it's coming. And so they're staying on top of those receivables. The assumptions are they're more challenging, but it's almost like you're getting information every day.

So make sure you're in there at least once a week and you're updating things because before when you could say we can slide through the fall because it's a good, you know, a good time of the year for us and we kind of know where things are going. You kind of look at it a little bit. Now it's like, yeah, is that working? Because they're cutting close to the edge as it is and things are so fluid, they have to keep updating a lot more often and stay on top of the real operational stuff. Who owes me money and when am I getting paid and who do I have to pay and when can I actually do that?

Jenni Huotari, CPA So, OK, well, not to totally plug what it is that you do necessarily, but one of the challenges why our clients and small and midsize businesses weren't doing that more before is it's a lot to maintain, to build out a forecast and to change it for the assumptions and everything environmentally that's going on. And now we think everything we knew before might not be relevant anymore. So it is a lot of assumptions and I think ties into the importance of using some form of technology in order to help do that so that we're really investing our time in the right place, analyzing the information, not inputting the data, checking our spreadsheet. What did you tell me, Blaine, periodically, how many errors the average spreadsheet contains, right?

Blaine Bertsch Oh, it's mind boggling. And I will show you a story at one point I did have something in the spreadsheet, drove all the way over to my accountant's office and sat down and said, what is this? And he clicked, like he, I'd emailed it to him. And I went there and sat down and I drove all the way over and he said, well, it's a broken equation and it. Me thinking, I'm so smart. I just I stood up and I just I picked up my paper sheet that I printed out and shook my head and walked out. I go and I don't get to bill for that.

It happens, you know, like we've got inaccuracies in spreadsheets. They're out of date. They take much too long to build. They've got like there's a lot of issues with them. And the reasons that we, the clients come to us is because there's, we'll speed up a lot of that, and at times we can dramatically speed up. Like one of our clients, we literally save them three days a week. We do it in the first five minutes Monday morning, most take em until Wednesday afternoon. Multi location, multi-currency, all these things.

But the other issue is the communication side. So you're sitting down with management, you're sitting down with the team and you put a spreadsheet up and you end up explaining how you made the spreadsheet and what the color codes mean and everything. We help just look at it and go, I understand what's happening. And so there's a number of factors that are really impeding businesses and it's, you know, confusion and time and, you know, inaccuracy and all these things.

There are systems out there that can help and they're systems from, you know what I'm talking about the cash flow side. But for you know what it's like if you want cash flows accurate, well, the bookkeeping has to be up to date. But there's all kinds of terrific systems to help manage your receipts and your bookkeeping and engage someone like this is not where you scrimp and save money is on your finances. Make sure your books are up to date and you have the optics you need to make decisions. Otherwise you're just you're blind and you're trying to fly. It's hard enough to fly in the dark as it is, but now it's in a massive storm, too. And it's too much. It's too risky, even though it is a little bit of an expense.

Jenni Huotari, CPA Yeah, Blaine, you've probably seen that where some have connected their accounts to the tool, and when you have the conversation about it, it looks off. And the reason is that the underlying information wasn't updated or isn't accurate.

Blaine Bertsch It does happen. But also one of the stories that I always remember is there was a client that came in and buzzed our support channel through chat. And Barbara got on a call with them and she said, what's the problem? She says, well, I signed up. And this was I think it was like in April or May or something like this, a couple of years ago and said, well, I signed up for a Dryrun and I hooked up my account and I'm out of cash in June.

And she just had no idea that it was just a matter of like five, six weeks or whatever it was, she was out of cash. That was the problem. We were expecting a technical question and it was she was, what do I do? And Barb's like call your accountant, like get some help with this. But it was basically that quick of data comes in and there's, wow, we got a problem here.

And some of the things that we've been working on, at Dryrun, our latest sort of rollout is what's called a Dryrun insights. And it did change our roadmap a little bit away from going into artificial intelligence, things like that, to go how do we help people through the pandemic when data from last year is broken, data from the year before, like it's all broken. There weren't trends to predict this.

And what we looked at is how do we get really important information, top line information really quickly to people so they can just evaluate where am I at and monitor that risk and figure out who am I in trouble and do I need help? Because we saw that. But we want to make it quicker and easier for them to get that information to be able to go on the phone and say call their accountant and say, I need help. I don't really understand what's going on here.

Jenni Huotari, CPA Blaine, previously you've mentioned the three a.m.rs, you've got kind of a designation for the crowd that comes to you and signs up in the middle of the night. Are there any certain characteristics of that three a.m. crowd?

Blaine Bertsch We had a client actually come to us one time, it was actually a CPA came to us and asked our support team to help them set up a forecast for one of their clients. And this is early pandemic. This is I think it was April, May or something like that. And the unfortunate story was they were shutting down the business and so there were building a forecast in Dryrun to figure out how do we shut this down, basically with the least amount of damage, the what if scenarios of what if we do this? What if we do that?

And so they modeled this out and the accountant left to go and talk with their clients. And we got a call a few days later and they said that it's actually flipped around, that when they showed the forecast to their clients and they started looking at the data, they actually found a path through. The clients, looked at it, went, you know, if we reduce this and we add this and we get a little money here, I think we can ride this out.

And so it went from kind of, I guess, the red alert probably in the bank account to something actionable where they could say, I think we can actually save the business going in this direction. So that was just a really interesting story for us. And, of course, a story that warms all our hearts because it's a business in a really difficult time that managed to find a way through.

But I suppose the moral of the story is that having access to that information and a full picture of what is your revenue look like coming in, where can you have money coming in? Where is it going out and when is it going out? Because sometimes you can delay those things and speed other things up and it can actually change the fortunes of your business.

Jenni Huotari, CPA Now, Blaine, maybe tying into the analogy of when's the right time to build a tree like 30 years ago, when you hear that saying, you know, in this situation, that example, there's a client in a really urgent need. But I would guess you're not suggesting everyone waits until that urgent need to look at cash flow into forecast. You know, in your opinion, when is the right time for the company to really invest in that at the right level? Have the tools, pay attention to the analysis?

Blaine Bertsch Yeah, today. Is the short answer. Get started today. And like we mentioned earlier, you don't have to have the ultimate massive forecast. Another thing I say all the time is you're not building this perfect GPS map with all the information. You know, you want the napkin where it's like go up to the tree and turn right and get to where you want to go. Something simple.

We, even our success team, we've had some success with a lot of businesses saying, look, let's start with the one minute forecast. And literally they put in four or five numbers. They hit auto repeat and you can get an idea, OK, here's what's going on. Here's what we're expecting coming in, going out. And just a starting point.

But it's important to start right away so that you're not waiting for that 3:00 a.m. wake up in the middle of night and go, holy smokes. I think we're in real serious trouble here. You're finding a way out. And another example and Jenni you probably heard this example before I probably use it too much, but the best example I give is like stepping off a curb in front of a bus. And when you step off the curb and the bus is five feet away, you're going to get schmucked. If the bus is three blocks down, you kind of step back on the curb, or you cross the road, or you can wave them down. You have all these options and we always say that buying yourself time, buys yourself options.

And so that's why getting started, knowing where you're at, gives you that ability to talk with your bank or talk with your accountant to understand some of your options, talk with your clients, scale back your costs while you can before it's too late and it could save your business. So get started today. It doesn't have to be this massive, overwhelming lift. Start simple with your problem you're facing right now and let it evolve over time.

And going back to when we were talking at the start, this is how we made it through that 2008, 2009. Started with can I pay my payroll on Friday, to within weeks and months of having a really solid understanding of what it costs to stay in business, what our cash flow is like, when cash was coming in, when it was going out, what do we have to follow up on? And a sales pipeline with some discipline. And we knew when cash was coming in from our sales pipeline, what was likely to close and to the point where it actually helped us negotiate contracts and make sure that the payment schedule on the contracts and all the terms made sense to allow us to keep going.

And it completely transformed our business. So it's, you don't do it overnight, but you'll get some value and some benefit right out of the gate. And if you keep it up, it can become an actual like a real advantage for your business and an opportunity to grow and really understand where you're going.

Jenni Huotari, CPA And as you're mentioning here, Blaine, you're not just someone who created a technology company, you were someone who was a small business owner that was just like the other, the clients that you and I and our firms and all of our peers that we're collectively working with, in your point of view, came from those shoes and understanding the cash flow challenges, you created a tool that was valuable to you and you feel like it's valuable to many others in the small and midsize business space.

And if I were to analyze your book title, which you haven't yet mentioned, and I want to take a second to plug that, clearly you sound like a prophet. So maybe just mention how it led into that book. And you know what the basis for the book is about just so the listeners have some idea.

Blaine Bertsch Yeah. So the book title and let me let me stress this is from 2018. So this wasn't opportunist. It's called Pandemic Cash Flow. And the angle was, you know, this is a global issue and it affects businesses everywhere and it's really severe. And so that's why I wrote the book.

And the book really is it's just a basic primer on cash flow. And the reason I wrote it is because I read everywhere, every blog and business article and everything would say, you know, cash flow kills, you know, a third of businesses and the cash flow will kill five, 50 percent by their fifth birthday or whatever it is. And then what basically the advice is just get a spreadsheet. That was it - just get a spreadsheet. And magically everything will take care of itself.

And so I wrote the book, just a really fundamental guide to here are some of the issues with cash flow. Here are the problems that lead to cash flow shortfalls. Here's how you can help diagnose what's happening in your business. And just a really simple way to understand cash flow and start to build some systems to take care of it.

And it does get into a little bit more advanced where you can how you could set up a sales pipeline if you're doing bigger sales and gauge how much is coming in and when it's coming in and things like that. So there just was a I thought, a fundamental gap in financial literacy for business owners that oftentimes don't come from a finance background, in fact, almost never do. And just a way to give them a good primer on how to manage their cash flow.

Jenni Huotari, CPA Yeah, certainly, you know, as they say, cash is king, and I think that's become even more evident in the last year than in my prior two decades working in this industry with a lot of small and mid-sized businesses. It's been the critical components to whether the doors are still open or the lights are still on, in tomorrow and further down the road.

Blaine Bertsch Well, we'd like to say that once we get through the other side of this pandemic and businesses, the ones that are kind of left standing, will be tested heavily. But they're going to be in a good position. They'll, I don't want to say that's whatever doesn't kill you makes you stronger. But in this case, it will, I think, to a large degree.

But understanding your cash flow and being able to build projections and models is what is going to help businesses grow and grow faster and excel. So coming out of here, you know, you're hoping that businesses will come out truly stronger and able to really accelerate that growth.

Jenni Huotari, CPA Yeah, definitely, that's a great positive note, I think, for us to leave our listeners with. So on behalf of Clinton, Blaine, I want to thank you for joining us today and sharing all your knowledge as it relates to being a prior business owner and studying cash flow and working with so many small and mid-sized businesses. Thank you for being here and for being part of our podcast. It's very much appreciated.

Blaine Bertsch Oh, thank you so much. I always love chatting, small business, chatting cash flow and of course, chatting with you, Jenni and Clinton, who I just met. So this was a really terrific time. Thanks so much.

Jenni Huotari, CPA Thank you.

Clinton Larson Jenni and I talked in the last episode about how businesses have been forced to adapt technology because of the pandemic and sort of they have to embrace innovation because they just don't have a choice. Have you seen a lot of that happen with Dryrun? And how do you help businesses make that leap that maybe have never thought about adding a technology component to what they do?

Blaine Bertsch One of the biggest shifts we see and it's not just on our side, but I know it's industry wide is a massive shift to the cloud. And it's because everybody's remote and suddenly they realize I can't have my tower sitting in my office and know what's going on. And so it's not just communication tools like Zoom, Slack and things like that. Financial tools are really, really important. And you have distributive teams. You have, you know, you can't just drop the receipts on your boss's desk or whatever it is.

So all the way back from that receipt management into the accounting tools and out into Dryrun and or other like analytical and data tools, there's just a massive stampede to the cloud where before there's a lot of people that were just I don't see the value or I'll get to it eventually or whatever. I think that's a really big shift. And I think it's going to continue for a long time where the desktop, I don't think, will be much of a player within a couple of years just because of the advantages of the cloud.

Clinton Larson Thank you. That's an important aspect of this, it's just all these businesses who've never had to, like you said, who've been putting it off, who have never really had a reason to think about it. Now they have a reason to think about it. They have a reason to consider it. So it's definitely a major concern.