Kenji Kuramoto, Acuity Founder and CEO
Kenji Kuramoto is the founder and CEO of Acuity, a full service financial firm that builds and maintains financial functions for innovative entrepreneurs.
The following is a transcript from an interview between Square and Kenji Kuramoto. It has been edited for length and clarity.
Tracking the inflows and outflows of cash to your business can be hard to navigate. Better managing this cash flow is the key to informing future business decisions. What are the crucial forms to use and steps to take to set yourself and your business up with a solid foundation?
Kenji: I think "cash flow management" is a really interesting term and it differs from other financial and accounting terms, in one significant way and that is in the fact that the term "management" is an active term. I think business owners should think about them having some control and being active in that. In some other areas of a small business owner's financials, they're just getting reports, reports of things that have already happened. So they're looking at those reports, but they're not very active. The act of managing one's cash flow does take some planning. It takes some decisions in real time, and so it's a much more active term that I think that business owners sometimes may not always think that. I think that's where there's opportunity for small businesses to really have a significant impact in their business for their team members, even with their customers, about making some really key decisions that will help improve that cash flow.
Cash is king. We can just kind of go back to some of the basics. You can have the greatest world-changing idea in your small business, you may have been able to assemble the most impressive team, yet, if you don't have the cash flow, some of that may never see fruition. Your beautiful idea that's developed by your amazing team may never get out there in the world — and so cash is incredibly relevant for small businesses. It's relevant for all businesses, but small businesses in particular. I think all of us who take that risk, I'm a small business owner myself. We take that risk to go do something like this. We're trying to make an impact, and it's heartbreaking when that impact can't be fully realized by a small business owner, just because some of the cash wasn't there to really see those ideas come to fruition.
...That's a worthwhile investment, if you're really going to run a business.
What are some tools you would recommend to business owners looking to better manage their cash flow?
Kenji: The first thing I would say is you do have to track the data, the financials of your business. It really starts there. It's not glamorous. We understand. We know this from working with our clients. The back office accounting is probably the least favorite thing about starting a business but you do need to track how the business is performing and there are some really good tools out there to do it. You can certainly use things like QuickBooks Online or Xero or Fresh Books. There are a lot of tools out there and if you look at them, they're really pretty and cost-effective. You're talking about the range of those being anywhere from on the low end, $10 a month, maybe $40, or $50 bucks a month. That's a worthwhile investment. If you're going to run a business.
So a lot of the things we talked about require there to be some underlying data to work with and learn from. And so you need to, first of all, make sure you're tracking it. There's many accountants and financially minded people out there, maybe even on a business owner's team. If that's not them, get some help if you're already familiar, feeling overwhelmed, get some help on the account, and get things cleaned up. Once things are in good shape, through a good series of tools, and someone's maintaining it, you're really in a much better position, then start managing it.
What are strategies business owners should consider when it comes to scaling their businesses?
Kenji: There are some strategies around different processes you can put in place to both accelerate the collection of cash and to maybe slow down a little bit, the outflow of cash. Requiring things like deposits or maybe retainers if you're a service business. I know that sometimes that puts you into conflict with the customer, but that's a smart business practice is if you can put some things in place to put some cash up upfront. Look at ways to get customers to pay you electronically. If you can get things like checks out of the U.S. mail eliminated, you're going to cut a few days off right there. I know there's some cost to that, but in most cases, we find the costs are typically worth even taking credit card or ACH payments or some other form of electronic payments really helps speed things up. Staying on top of collections is really important, just somebody managing that. There are some tools out there as well, too, that could automatically send reminders to your customers around that. Let's say you do invoice a customer, can you shorten those invoicing cycles? Maybe you invoice customers once a month and it may take a little more work, but what about invoicing them every single week on a regular, more frequent basis? Ways to shorten that cycle.
And then, on the cash outflow side. It's probably not as many levers to pull over there but there still are some things that can be done. Always have to be careful with credit cards, right? We always say this but putting expenses on a credit card may give you an extra 30 days, at least from when you've really got to pay those. Just have to be careful with any form of debt that he's not building up and you're not losing some visibility there. Having a good relationship with your vendors, those people that you need to pay regularly, and see if you can work out some terms with them. Can you work out terms where it's maybe net 30 and you don't have to pay that bill until 30 days out? There are vendors who like things like upfront annual payments. Can you work out some terms with them to make those monthly? Those are all active strategies. I think that can help a business owner just try to shorten that cycle from when you've got to go out and make payments like cash out the door of the business and you're waiting to collect them. If you can do that, it really can relieve a lot of stress on the small business owner.