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  • Seth Block

A career in finance starts with flowers

As a business leader, your role is to guide the company to the best of your ability and a good leader understands that they cannot do it alone. Successful companies are managed by a team of experts in their field. A company’s financial leadership is critical to all aspects of a company's health and longevity, because it touches all aspects of an organization. Operations, sales, physical plant, marketing, and more. It’s all dependent upon the budget and fiscal projections, but those are actually just a portion of responsibilities of financial leadership.


Most companies don’t have a true CFO and many don't have a controller. They have a financial person who is good with spreadsheets and budgets, but they don’t have the business acumen to understand how to leverage debt and equity. They don’t know the ins and outs of lending or how to manage finances beyond cost centers. When it comes time to deal with M&A or anything beyond bank loans, these companies end up bringing in outside help.


Several years ago, I was the CFO for a wholesale floral operation out of Houston. Well, I was a CFO in title, but like most in financial leadership, my experience was in accounting. I could track the books and handle the basic business needs. I took the job because I was young and the owners wanted me to help their company grow, so I joined in a leadership role.


When you’re young, we’re sometimes more excited about a new opportunity and don’t have the life experience to understand what we’re getting in to. This was clearly the case after I started and began going through the books. I realized I should have done some due diligence before taking the job.


In retrospect, I should have asked for an Accounts Payable aging, determined if it was accurate, and then spoken with the Accounts Payable clerk to try and figure out exactly how the books could be such a mess.


The Accounts Payable clerk was way behind keying invoices. The average turn was over 60 days and the former “CFO” spent the majority of their days dealing with vendors and working out payment plans. On top of that the company was paying delinquent fees on most of their accounts. They were losing money faster than they were making money. My new employer had no understanding of their financial trajectory nor did they have a plan in place to save their business from eventual ruin.


I spent the first six months of my job straightening out the books and planning a course of action. The Accounts Payable clerk was not experienced or knowledgeable enough to negotiate payment plans, let alone talk to people when my employer could not live up to their financial commitments. As CFO, those duties fell to me by default even though I did not have training or experience in those areas. Fortunately, I’m a quick study.



I was working 50-55 hours a week negotiating with lenders, managing the finances, and trying to keep the business afloat. I was working hard, but not smart.


As an option, I reached out to our banker and tried to obtain a low interest line of credit or even an SBA loan. The bank was happy to take our deposits, but our credit rating ended the conversation as soon as it began. They wanted our money, but thought we were too great of a credit risk, so I ended up looking for other options.


My employer had plenty of accounts receivables and I just read an article about factoring. I reached out to a few factoring firms and realized quickly that our credit rating didn’t matter to them. These alternative lenders were more interested in was the fact that our customers paid, which they did. We had a rolling accounts receivables that averaged 37 days and it was spread fairly evenly across all of our customers.


This time I did my due diligence. I made a financial case and prepared a model showing the owners how we could leverage our finances to get out of the mess we were in. I proposed a factoring agreement at 2.5% discount rate, which was standard back in the 1980’s. Knowing what I know now, discount rates would be significantly less today.


The owners balked. I showed them we could cover the discount fees by taking discounts for early payment and then negotiating better deals as we went forward. They balked again and very directly told me this was non-negotiable.


I pointed out that the few instances where our customers paid with a credit card, we paid more than that in processing fees, which is still the case today. The average credit card interest rate is 18% and the merchant processing fee is around 3%.


Logic prevailed and we ended up with the factoring agreement. Over the course of the next 3 months the Accounts Payable issues became non-issues. We were able to have rapid access to capital when we needed it, which opened doors for us. Over the course of the next two years, we did 3 acquisitions. The company went from barely breaking even to making $700,000 per year. I had grown from glorified accountant to a full fledged CFO and the company had a financial plan to rely on in good and bad times.



Due diligence and understanding alternative lending options made the difference between success and failure. How well do you understand the finances of your company and are you capitalizing on lending opportunities? As leaders, we make the choice to trust the members of our management team and consider their advice, but do they have the experience to move your company forward? Can they bring alternative solutions to the table when you need them?


I started The Funding University as an educational tool for financial leadership and accountants so they would have access to important resources, the kind which would help them avoid the pitfalls I encountered early in my career.


The information we provide to our subscribers is valuable, useful, and actionable. What started as a podcast has grown into newsletters, articles, and soon a bi-monthly webinar series with The Funding Strategies Conference.


I started my career with a floral wholesaler but it is The Funding University that has really blossomed. Thank you for being a part of the conversation.--Seth


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