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[Podcast] Virtual CFO Best Practices with Hannah Smolinski at Clara CFO Group

Topic: Podcast

In this episode of AI in Accounting, you will meet Hannah Smolinski, Founder and CEO of Clara CFO Group, an outsourced CFO services company based in the Seattle, Washington area. Clara CFO Group prides itself on providing financial clarity to small businesses using financial strategy and best practices to help them realize their mission and accomplish their goals.
As Founder and CEO of her own CFO services company that she branded and built from the ground up, Hannah has a treasure trove of knowledge for those who are eager to enter the burgeoning outsourced accounting field and start a CAS practice of their own. Her first piece of advice? Don’t be intimidated by the competition. In Hannah’s words:

[Podcast] Virtual CFO Best Practices with Hannah Smolinski at Clara CFO Group

“There’s enough business for everybody. I don’t see anybody as a direct competitor in this space because small businesses need a lot of help, and … there is room for lots of different specializations. There’s room for lots of people in this space, and there’s a lot of need in this space for small businesses to have good advisory services.”

Hannah also cautions new advisors not to let themselves get overwhelmed by the many decisions they’ll have to make when deciding the type of practice that they want to build, and where they want to specialize. Hannah says:

“You have to serve people in order to figure out where you need to be. So, it takes time … to … serve clients, figure it out, iterate, make it better, figure out who you want to work with, and who you don’t want to work with, who you specialize in, who you can serve in the best capacity, and sometimes you just have to get out there and start doing the work … and you iterate your process as you continue to do it. … I think some people … get a little scared and … don’t put themselves out there and just do it. … Take the leap and do it, and then iterate and reassess and keep going from there.”

Listen to the episode in full to learn more about the importance of:

  • Remembering your leadership role and differentiating yourself from the often stigmatized “bookkeeper” title, so you remain confident in your interactions with clients,
  • Building a good brand with a clear message,
  • Not seeing other providers as direct competitors because there is enough room in the CAS space for everyone,
  • Not deciding exactly what type of practice you’re going to be right away and giving yourself time and options to figure out what you do best.

All this and more is discussed in detail in this episode of the AI in Accounting podcast. To learn more about Hannah Smolinski and contact her with any questions about outsourced CFO services, you can check out her LinkedIn profile and learn more about Clara CFO Group. Hannah is also an active uploader on YouTube; her channel, Clara CFO Group Channel, has lots of resources for small businesses, particularly centered around PPP.

 

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A lightly-edited transcript follows below:

Hannah Smolinski:

That's kind of one of the things that we do at the very beginning because the customization of the chart of accounts and the P&L really needs to help the management look at the numbers, and if it doesn't really provide that much information, it's limited in its usefulness.

Speaker 2:

Welcome to the AI in Accounting podcast, which helps accounting, bookkeeping, and finance professionals prepare for the future of outsourced accounting and accounting technology. Plus, you'll learn how to use artificial intelligence (AI), automation, and machine learning to scale your accounting practice. Now, here's your host, Joshua Feinberg of Vic.ai.

Joshua Feinberg:

Hi, I'm Joshua Feinberg from the AI in Accounting podcast, and today I'm being joined by a very special guest. I have with me Hannah Smolinski from the Clara CFO Group. Hannah is the Founder and CEO of the outsource CFO services company, based in the Seattle, Washington area. Hannah, welcome to the podcast.

Hannah Smolinski:

Thank you so much for having me. I'm excited to chat today.

Journey to Outsourced CFO

Joshua Feinberg:

Excited, as well. I'm glad to have you here. So, the first place I usually like to start is to understand how you got to where you are in your career. How did you get to starting your own outsourced CFO business? Did you always want to be a CFO? Is this something you were thinking about from the time you were in elementary school, middle school, high school? Or did it just click in college? Can you walk us through your career journey?

Hannah Smolinski:

Sure. I wouldn't say that I always wanted to be in accounting but from what I've listened to, it seems like I'm not the only one who didn't have dreams of being an accountant as a small child. But yeah, so, I've always enjoyed business. I always thought I would do something in business, but I thought I would own a business, like a shop, or something like that. I always wanted to own some kind of brick-and-mortar-type thing.

But when I got into college, I ended up kind of being directed into accounting because it just seemed to work pretty well with the way that my brain worked, and then from there, I kind of got convinced by a number of people that maybe it was a track that I should consider more seriously. But once I really got into it, I really did like it. So, I ended up kind of doing the pretty traditional kind of education route of doing your undergraduate in accounting, going and getting your Master's in Accounting, so that you can get the hours to sit for the CPA exam.

I did an internship with EY, so I started there, my career at EY. So, I did my first five years and kind of put in my dues in public accounting and did the audit track. So, I was always kind of in the financial statement audits, but I really liked that, actually. I was one of those weird people that really enjoyed public accounting, and I loved the people that I worked with, and it was fantastic. I loved the high-quality caliber people and just being able to look inside public companies and see how they're being run and looking at the numbers. I enjoyed all of that, but ultimately kind of made a decision for work-life balance, to make a decision, to step out with public accounting and go and work for a small engineering firm.

So, when I did that, I was kind of the quote-unquote “controller”, but really, I was doing a lot of other things alongside of that because the business wasn't big enough to need a full-time finance role. So, from there, I worked there for a number of years and kind of realized, like, "Hey, I like doing the finance part of this, and I really like the planning. I like the cash forecasting. I like the strategic decision-making. I like really helping the business owner do what needs to happen to set his business up for success," and what I realized at that point was that there was potentially a business idea in doing that portion of the finance function for multiple small businesses at the same time. So, that's kind of where the genesis of my company came from is, I said, "Hey, what if I do this service, this part of my job that I like, and I start doing this for other people?" So, that's kind of where Clara CFO Group was born from.

Joshua Feinberg:

Excellent. Yeah, and it's interesting to see that model evolve. Coming from the, like, IT services, managed services background, the idea of having an outsourced IT team is something that's been around for decades. The marketing side, too, people are very comfortable with outsourcing. Marketing, it only seems to be in the last five, 10 years or so that small businesses have warmed up to the idea that way more than just the services they would have purchased from a traditional CPA firm, that there's a big need for someone that can get way more hands-on in processing, and statements, and providing insight, and analysis, and direction.

Hannah Smolinski:

Yeah, and I do wonder, too, with accounting moving more towards technology and being more cloud-based, being more virtual and digital. Anyways, it used to be that you had to show up and look at bank statements, and paper copies, and get your 10-key out and do a bank reconciliation that way. But now that we have all this technology to help us along, it's kind of definitely changing the landscape.

Joshua Feinberg:

Yeah. If you think about the consumerization of it, and SAS, and cloud, the rapid adoption of mobile technology over the last 10 years or so, it's really all laid the framework, the groundwork, for small businesses to start to be more comfortable with these relationships. I remember some of the research that Microsoft commissioned 15, 20 years ago, there was like a certain proximity of number of miles, or driving distance, and I'm sure it was very similar in traditional CPA firms, where someone was like, in Seattle, would be comfortable maybe working with an accounting firm that was within a half-hour, an hour drive, but not so much on the other side of the country. Those boundaries, if they weren't melting away before COVID, it seems there's been a dramatic acceleration in all of that. Like, what’d they say? “10 years of digital transformation in eight months”?

Hannah Smolinski:

Yeah. I would say, yeah, we've made leaps and bounds. I mean, I was kind of positioned in a pretty good spot before COVID because I was already working with clients across the country. So, I knew clients in New Hampshire and in the South, and Las Vegas, and California. So, when everything hit, I was like, “Well, I guess I just do what I do. I guess I can just continue on from here.” So, it really didn't cause too much disruption—although the potential to actually go and, like, meet people every now and then is currently gone, but we're making do.

Joshua Feinberg:

The concern I usually hear from people is like, "But what about the clients that don't feel comfortable working remote?" Well, there's plenty, and over time, there will be more and more of that, out of competitive necessity.

Hannah Smolinski:

Yeah, and I think when you rely on that, when that's the only way you do business is that one-to-one and in-person, you start to get a lack of timing. I have a number of clients that still have in-person bookkeepers that pick up papers from them, and that means that we review our financials way later because I don't do the bookkeeping. Our firm doesn't do the bookkeeping. So, that means that we don't get our results from the previous month until potentially weeks after the people who are on cloud-based. So, what that does is it gives management a slower time to react to anything that we may find in the financials, and a lag in when they have the information or in order to make future decisions. So, it's definitely a detriment, I think, actually, to totally be on that in-person track.

Joshua Feinberg:

It seems like if you look up “agility” in Wikipedia, it seems like it would be the exact opposite of what a growth-minded CEO would want to be doing because from a competitive standpoint, it's very unlikely that the handful of companies that they see as direct competitors in the bigger space of indirect competitors are all that technology-resistant to the point that they're handicapping their whole operations and finance approach.

Hannah Smolinski:

Yeah. Yeah. I would say so.

Advice for Building an Outsourced CFO Practice

Joshua Feinberg:

So, you're a couple years into getting Clara CFO Group off the ground. With some of the lessons you've learned along the way, if you were to sit down and talk with someone—a colleague you've worked with in the past, or maybe someone you went to school with, who was looking to start a similar business that wasn't competitive; maybe they’re in another part of the country or targeting specific kinds of industries—what advice would you give to someone for what they should be thinking about in the first couple of years of building an outsource CFO practice?

Hannah Smolinski:

Sure. I actually have a call upcoming with someone who's reached out to me for this very question. So, I'll prep here.

Joshua Feinberg:

It may actually happen more frequently when you're answering this question on the podcast end.

Hannah Smolinski:

Yeah, and I think my mindset is more, “There's enough business for everybody.” I don't see anybody as a direct competitor in this space because small businesses need a lot of help, and I think one of the things that I've realized through this process, as I've been growing this business, is there is room for lots of different specializations. There's room for lots of people in this space, and there's a lot of need in this space for small businesses to have good advisory services. I would say that one of the things that I had to do—which I think was a trial-and-error process but really important—is that you have to serve people in order to figure out where you need to be. So, it takes time, and it takes some time to kind of serve clients, figure it out, iterate, make it better, figure out who you want to work with, and who you don't want to work with, who you specialize in, who you can serve in the best capacity, and sometimes you just have to get out there and start doing the work, and I think that comes, and you iterate your process as you continue to do it. So, I think that's the biggest thing is, like, I think some people maybe get a little scared and maybe just don't put themselves out there and just do it. But I think that's the biggest thing is take the leap and do it, and then iterate and reassess and keep going from there.

Joshua Feinberg:

Not one of those things that you can learn about by just reading about it. You got to actually roll up your sleeves and start having clients and see what questions they have and tweak your process over time, and your workflows, and your tech stack.

Hannah Smolinski:

Yeah, and I think that one thing that I've been seeing people do that I would probably recommend not doing is that they provide, like, a very reactionary service, to where it's more like, "Hey, we do bookkeeping—and yes, we do CFO services, but it's only kind of if you could ask us questions," and then the client might get to a place where they're not wanting to ask questions, or they don't even know the questions to ask. So, as you are a CFO, you are in a position of leadership. Now, you're not making the decisions for the CEO, but you are in a place that you should be coming to clients with, like, a program, a plan, a "Hey, here's some things we look at at this point in time of the year, or this point in time of the year," and I think that's the difference between just a really good bookkeeper, and somebody who actually is in leadership, and they're thinking about the company in a way of, “Where can the company go?” and, “How can the company grow?” So, I think there's just an inherent difference between those two things, and if you want to do CFO services, I think it's good to think of yourself differently than just a bookkeeper, or somebody who prepares tax returns. Very different hats.

Joshua Feinberg:

I was moderating a panel webinar about a month or two ago, and someone—I think it was in the rehearsal; I don't think it made it into live events—slipped and referred to their bookkeepers internally and said, "Wait a second,"—and this was really large CPA firm—said, "We're not allowed to call that staff ‘bookkeepers’ ever because it just doesn't do justice for the impact that they have on clients." So, largely a matter of positioning, as well.

Hannah Smolinski:

Absolutely. I think that's one thing I learned pretty early on was that there's a value perception in the term “bookkeeper” and even if you're a CPA, and you're, like, the best accountant anyone could ever ask for, I think there is kind of a limiting factor to the title of a “bookkeeper”, and people will only pay so much for that service. So, it's kind of maybe almost like a glass ceiling that happens with that title. So, it's kind of interesting that they even called that out.

Joshua Feinberg:

One thing that I perceive that you're probably getting really good at figuring out is that so much of this kind of professional services business is based on the personality, and the ability to build trusted relationships with clients, and I know you have a really active YouTube channel, and social media presence that you're building up. Was that something that when you started, you wanted to make a key part of your growth strategy? Was there some interaction that you had with small businesses that spurred you to want to make that such a big priority? Or kind of all of the above?

Hannah Smolinski:

Yeah, so, the YouTube has kind of been an interesting growth situation, but I have always been pretty active on social media, and I feel like it's allowed me to get into communities that maybe I would have never had just being local. So, that's one way that I ended up getting a lot of my clients all over the country was I was involved in certain business Facebook groups and being involved in those Facebook groups offered other opportunities to meet new people, and that kind of expanded my reach. When I was really trying to think about this business, I determined that I wanted to make an impact. I realized that small businesses need help, and so I kind of use the YouTube channel as a way to try to make an impact for free for people who maybe don't have access to their own CFO or their own strategic advisor. So, that's kind of where I decided to kind of step into YouTube, and then I got sort of lucky. Maybe a combination of stepping into it, and then a combination of sort of maybe luck that it did take off pretty well, and a lot of that came around the content that I was putting up around the PPP loan, and some of the IDL stuff, and stuff around the CARES Act, but that was coming out around the time that a lot of people were looking for information on all of that and still are looking for information, so I kind of took it on myself to keep people educated about that and try to explain everything that came out as it came out, and so from there, it's been growing quite a bit. So, it's kind of a fun journey and pretty different. I didn't really expect to be here, but here we are.

Joshua Feinberg:

One of the interesting differences that I've noticed between traditional CPA firms, and outsourced accounting firms, and outsourced virtual CFO firms is that traditional CPA firms, their brand usually is the last names of the original founders, and the initials of the last names, whereas the outsourced accounting or virtual CFO, outsourced CFO firm usually is a lot more creative with their branding. They're usually a lot more likely to be born in the cloud. They were very early on with remote, and, in many cases, their marketing, their position, and the branding looks more like a software or a tech company than a traditional professional services company. Are those decisions that you made deliberately along the way when you were first building out Clara? Or did it just happen for other reasons?

Hannah Smolinski:

I think branding is actually pretty important. When I first started working here, and when I first started my business, I thought, "Oh, I'm never going to spend money on branding. Branding's a waste of money." But as I started working with more companies, and I really started to see the effects of a good brand, and the message you can send with a good brand, I actually rebranded. So, Clara CFO Group is my rebrand. I started under a different name because I just realized that it was pretty important for me to come out and, like, say what I wanted this business to be, and I didn't want it to just be the last name of myself. First of all, people would always have trouble saying it; my last name is Smolinski. But then I wanted it to be something more than just people. I wanted the idea to be bigger, and I think that's what a brand can do, and when you lock yourselves into maybe last names, you lock yourselves into individual people, but I wanted this to be a bigger idea than just that.

Taking Over a Client from Another Outsourced CFO

Joshua Feinberg:

Another area I wanted to ask you about today is when you take over a new client that either was only relying on internal resources, or maybe they were working with another outsource CFO firm, or outsource accounting firm, or traditional CPA firm, have you found that there's any one big area that most clients seem to be getting wrong that then needs to be addressed pretty urgently when you first start working with a new client?

Hannah Smolinski:

One of the first things that we always do with clients is we look over their chart of accounts. I think that's one thing that I don't see a lot of small businesses doing. They don't customize their chart of accounts to make sense for the information they want to see, and I think that's the maybe a little bit of failing of just, "Hey, let's just pop open QuickBooks, and QuickBooks has it all ready to go for us.” You don't have any kind of segmentation. They might have three core business lines, but all of their revenue is showing up in sales, or they're not segmenting out their expenses in any kind of logical format. Maybe they have contractors, and they're lumping it all into one type of contractor. But really, they need to see how much they're spending on videographers, and how much they're spending on blog editors, and how much they're spending on all the different things. So, that's kind of one of the things that we do at the very beginning because the customization of the chart of accounts and the P&L really needs to help the management look at the numbers, and if it doesn't really provide that much information, it's limited in its usefulness.

What it Means to be an Outsourced CFO

Joshua Feinberg:

Yeah. That makes a lot of sense. The final area I wanted to touch on today is to get your thoughts on where the future of this business model is heading. Is there something that you see going on right now, where we're going to look back 12, 18, 24 months from now and be like, "Wow, that was the big inflection point that changed the whole nature of what it means to be an outsourced CFO"?

Hannah Smolinski:

That's a good question. I mean, I do think that the virtual nature of this—the ability to do this job virtually—is starting to allow this role much more than it was even a few years ago. When I first started, it was really hard to explain to people what a virtual CFO could look like, and what it could do for a business. But now it's becoming maybe a little bit more of like common lingo for a lot of small business owners. I think there's more awareness around this role. I think it'll continue to grow from here, but I think that we'll probably also see some type of systemization, as well, with people trying to, like, turn this into something that maybe it could be controlled by a software, or something like that. But I also see kind of just more reliance on technology. I think the virtual CFO needs to be understanding data. So, I think using data visualization tools, and other kinds of data analysis, is going to be more and more important—especially just as we get more and more data. We have more and more data—even the very smallest of businesses have incredible access to some data, kind of depending on what systems that they use. So, I think that is a growth path, as well. But I don't know; I don't know about the groundbreaking changes, besides just that this whole new thing that's allowable now, and this whole new role, which I think is pretty great.

Joshua Feinberg:

It sounds like it's a combination of small business owners being more receptive to having access to a really senior resource but on a fractional basis, as opposed to settling for a very junior resource that they have, that they can walk over and tap on the shoulder for 20 hours a week, or 40 hours a week—which, given the world we're operating in right now, is less of a factor, and less of a reality. The longer this goes on, the more likely it is that people will get used to working remotely as a new normal, and then on top of that, yeah, I constantly see that most people that are in the role of providing outsource accounting and financial advice to small businesses are getting tapped to related technology-implementation projects that would have been a specialized type of IT consultant 20 years ago. I remember when I used to do SMB IT consulting; I partnered with a MAS 90 expert at the time, and now that would be something that would be very normal for the Sage Intacct specialist to just be part of the accounting firm.

Hannah Smolinski:

Yeah. Yeah, absolutely. Definitely.

Joshua Feinberg:

Well, Hannah, where's the best place for someone to learn more about Clara CFO Group, learn more about what you're working on, reach out to you? Is LinkedIn a good channel? Or is there a certain website or social media you'd recommend?

Hannah Smolinski:

Yeah, I mean, definitely find me on LinkedIn. I'm pretty active there. If anybody wants to reach out, you can check out my website at Claracfo.com, and then if anybody's interested in resources for small businesses or just kind of want to see like what it looks like to have a YouTube channel as a CPA, and then in the accounting firm, check out Clara CFO Group Channel, and we're there and posting a lot of stuff right now—especially around PPP resources.

Joshua Feinberg:

Excellent. Well, Hannah, thanks so much today for coming on the AI in Accounting podcast. I really appreciate you sharing all your insight on how you got to where you are in your career, and how it started with getting to be a controller of a small company, where you were wearing so many different hats, and you recognized that there was a big need for a lot of other small businesses in a similar situation to have access to that resource but maybe didn't necessarily need to have access to that resource for 40 hours a week, and what you've learned in building out and growing your firm so far. Wish you all the best in helping to continue to scale up the Clara CFO Group.

Hannah Smolinski:

Thank you so much and thanks for having me today.

Joshua Feinberg:

Oh, you're very welcome. Thank you.

Speaker 2:

Thanks for listening to this episode of the AI in Accounting podcast. To subscribe and leave a review, check us out blog.vic.ai, or wherever you like to consume podcast episodes, including Apple podcasts, Google podcasts, and YouTube.

 

What's your favorite outsourced accounting tip? And what did you find most valuable from Hannah Smolinski's podcast interview? Let us know in the Comments section below.

Learn even more about client accounting services (CAS) when you download the free report: The State of Client Accounting Services and Outsourced Accounting.

 

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