Mike Milan Podcast Transcript
Mike Milan joins host Brian Thomas on The Digital Executive Podcast.
Brian Thomas: Welcome to The Digital Executive. Today’s guest is Mike Milan. ClearPath to Cash is Mike Milan’s financial advisory platform. Its flagship advisor membership gives accountants, bookkeepers, fractional chief financial officers, bankers, and business advisors access to more than 25 financial and advisory tools, education, live coaching, and a structured advisory process.
ClearPath to Cash was founded by Mike, known as Cash Flow Mike, as part of his mission to eliminate cash flow as a reason businesses fail. Well, good afternoon, Mike. Welcome to the show
Mike Milan: Hey, live from San Antonio is Cashflow Mike. I’m, I’m excited
Brian Thomas: And this is exciting, absolutely. I appreciate you, my friend.
I’m in Kansas City. We had some good conversation beforehand, and I know you’re a big Chiefs fan. I won’t tell the world, but- … we’re recording now, so, but thank you. I really do appreciate that. And Mike, let’s jump into your first question here. You’ve built a reputation over more than a decade teaching financial and advisory concepts to bankers, accountants, and business owners nationwide, but it started with your own wake-up call, experiencing a cash flow crisis firsthand.
Take us back to that moment. What happened, and how did that personal struggle turn into a mission to eliminate cash flow as a reason businesses fail?
Mike Milan: We… Y- you know what’s really funny is that eh, my, my first job, believe it or not, was I was a state trooper, right? So, right, right there in Missouri. And my family outgrew my income, so I had to go start a business.
I’ve got an MBA from Baylor and you know, so I started a business. It was a janitorial company that quickly evolved into a hotel staffing company, and there’s kind of a story behind that. But when we evolved to a hotel staffing company, something clicked. And every once in a while, you’re so successful that you can grow broke , believe it or not.
And, and that’s kinda what happened to me. Let, let me kind of explain what that means. So growing broke is when you actually outrun your operation. You know, we became a preferred vendor of Marriott pretty fast and opened about 27 offices in nine states in three years. Well, I always had this cash flow problem.
I’m like, “Going I am profitable on paper. We’re making a ton of money. How come I don’t have any money in the bank?” And that, that’s where this whole thing started is that I was paying taxes, I had profit, I looked successful, but the bank account didn’t show it. And so when we really evaluated it, it was about the timing of money where there’s a big difference between profit and cash flow meaning that when money moves through the company, there is a balancing act between money in versus money out.
And where we found it was in the fact that every time I sold an account, I actually added more debt to the company. And people are like going, “What do you mean you added more debt with more accounts?” Well, I kept thinking I could sell my way out of the problem. But again, I would sell a new account. We would put 10 or 15 employees into a new hotel, and then I would wait 80, 90 days to get paid.
Well, every two weeks, there was a bill that came to my door called payroll. So I was having to cover three months worth of payroll on every new account. The only way to solve it is to stop selling. Isn’t that crazy?
Brian Thomas: That is, that is crazy. Yeah, I, and I hear about this all the time, the cash flow issues that businesses have, and you kind of laid that out there for you.
But your backstory’s amazing. State trooper, obviously, and we all get that. We’ve all started somewhere where, hey, your family outgrows your income. So you left to get an education, then you started this hotel staffing company, and I, I just love this, what you, what you said here. You’re so successful, you grew, you grew, grew broke, basically.
I’ve never heard that before, but very successful in what you were doing. But there is a big difference between profit and cash flow, and sometimes, it looks like you’re doing well on paper, but you look at your bank and you’re like, “Gosh, we’re, we’re struggling here.” So I really appreciate that and the backstory.
I think that’s amazing. And if we could, Mike, you… The next question here I have is, one of the most common things you teach is that profit and cash flow are not the same thing. A business can look profitable on paper and still run out of money, as we talked about. Why do so many business owners confuse the two, and what’s the most dangerous blind spot that confusion creates?
Mike Milan: Yeah, I, I think we all f- kind of tend to lean on one financial statement more than the others, and that’s the income statement, right? That, that’s the validation of your business, business model, meaning if I sell this much and spend this much, I should have X dollars left over. Well, we always look at that as a report card from the business standpoint, right?
I’m good at business because my business makes money. That doesn’t mean you have cash, right? There are so many things that, that trap cash inside a business. And I built a technique called mining your business for hidden cash, which is inside that ClearPath to Cash platform That looks at your business from two different angles, right?
So I take three cash-generating activities, and they’re just ratios. So if you’ve heard of ratio analysis, most people look at those in silos. I look at those as a collective unit because the business is living, right? It’s a dynamic organization. So I look at three cash-generating activities like the sales to asset ratio, how much should you be selling with the, the amount of stuff that you have.
The, the gross profit r-ratio basically, or the margin that you have, the percentage that you make on every sale, and the operating expense ratio. How much of every sale do you actually spend on utilities and rent and salaries and those type of things? So those are the first three that I look at, and that’s how your money generates or your business generates cash, right?
It starts with sales and ends with profit. The other side of that is the cash flow side. It’s, it’s the cash conversion activities, which is inventory if you have it. How long does it sit on the shelf? Because that’s, H-have you ever heard of the elf on a shelf? You ever heard of that?
Brian Thomas: Yeah. Oh, yep.
Mike Milan: Right. Remember, it’s the little elf that, that parents have to move into mischievous positions every single night, and it moves around the house, and kids love it. Well, parents don’t like it ’cause it becomes a job, right? All of a sudden, I have a job to do, moving this elf around. Well, that’s the way I look at inventory.
It’s wealth on the shelf. Just like you don’t want elf on the shelf, you probably don’t want wealth on the shelf either. That’s money that’s trapped sitting inside, you know, your business. The other two is accounts receivable and accounts payable, right? So it’s the balance of balancing of money in versus money out.
And those three, well, variables, inventory, AR, and AP create a, a calculation called the financial gap. Inventory plus AR minus AP, these are the days, how long it happens equals the financial gap. And just like a gap, if you think about it in your mind, the larger the gap, the harder it is to run your business.
The smaller the gap, the easier it is, the less money it takes. So what you wanna do is be able to balance money coming in, how long does it take for you to actually receive the cash? Two, how long does it take you to pay your own bills? So the smaller the gap between those two, the easier it is to run your business.
Brian Thomas: That’s awesome. And I love that gap part you just talked about. The smaller the gap, the easier it is to run your business. And again, that’s that balance of that money coming in, how long do y- how long does it take to come in, and how long does it take you to pay your, your invoices? So appreciate that.
Again, just to highlight a couple things here. I know traditionally a lot of people, just because they don’t know better, they lean on that income statement more than anything. But you talked about that ratio analysis, the things you look at, and then of course the cash, the cash cash generation activities and then the cash conversion activities.
So thank you. Mike, you’ve trained over 25,000 professionals and built certification and coaching programs designed to be implemented in as little as 90 days. For an accountant or a bookkeeper who wants to add advisory services but doesn’t know where to start, what does it actually take to stand up a profitable advisory offer, and where do most of them stumble?
Mike Milan: Yeah. So I mean, w-what I see is that, accountants and, you know, bookkeepers and all that were being pushed into advisory because software companies, like myself included started automating all the routine things, right? I can take a picture of a receipt and put it into the bookkeeping, application, QuickBooks or otherwise.
So while everything was being automated around them, they had to find value. So the natural thing was to go where the client was already asking the question, “All right, I got all these numbers, what do I do next?” So to me, when I’m talking to an advisor, the place you have to start is, first of all, understanding a couple of different things.
One, that numbers do not explain themselves, right? So you have to understand that each number, people could have what looks like on paper the same problem, but they could have different causes, such as gross profit could be low for two companies. Both of them could have the exact same percentage as a, as a gross profit margin, but they have different causes of why it’s low.
One could be too much labor cost, the other one could be mispriced, right? We could just misprice our goods. So understanding that numbers don’t explain themselves, and that you have to be able to explain it. I don’t like to use words that are liquidity, leverage, solvency, words like that, because the average person doesn’t understand what that means.
So not only does a number not explain itself, you have to be the one to be able to explain it to another person, the person that’s not financially sophisticated, that’s really great at their job, but not great at reading the financial statements. So to do that, you need a repeatable, scalable process.
Other than that, you’re gonna get mired in all of the details because there’s too much data anymore, right? Everything is about data, and that’s where AI comes in, is that it takes a human to understand what’s important. AI can sort out the data to find the patterns within it, and then it takes a human to help somebody be committed to take an action to improve it.
So there’s still a human component in advisory, and that’s what I teach, is how to add yourself into the new AI generation to actually be better at your job as an advisor.
Brian Thomas: Thank you. Appreciate that. You talked about that a lot of times businesses do get pushed into that consultancy role because they need to add value to their business, and of course, their customers are saying, “Hey, I need help with this, XYZ issue.”
But the bottom… The, the takeaway here is numbers can’t explain themselves. You talked about that. You need a strong, repeatable, scalable process where you can explain the numbers. You can leverage AI, especially today but definitely need to be, as we talk about this on the podcast, human in the loop with AI.
Definitely a big part of that, having you as in the middle of that to make sure that you can explain really where your business is at. So I appreciate that. And Mike, the last question of the day, you’ve now built an AI-powered version of ClearPath to Cash, and AI is rapidly changing what’s possible in financial analysis and advisory work.
As AI takes over more of the number crunching, where do you see the role of the accountant and advisor heading over the next five, maybe even 10 years? And what will separate the professionals who thrive from those who get automated out?
Mike Milan: Yeah. So old school advisory, even what I did, pre I, I call it BC, before COVID right?
What we did is we thought we owned the data, that we could analyze and dissect it in various different ways, and you could hand me a set of financial statements, and I could prepare a spreadsheet, a report, a slide deck of everything that I saw. Well, what I realized then is that by providing all of my knowledge in a piece of paper or a spreadsheet to a client, it was overwhelming, and it didn’t really address their issue.
So when I really looked at businesses, I, I determined that there were six burning issues, right? It’s, it’s cash flow, it’s profit, it’s the future, it’s operations, it’s education, and it’s debt. And the only way to understand what’s really important to the client is to talk to them. That’s something AI can’t do yet.
It can’t figure out what’s really important, what’s keeping that person up at night. So the conversation I, that I teach within the Clear Path to Cash, and it’s built into the program itself using AI, teaching AI how to have these conversations I’m able to find what the burning issue is because that’s where you need to start.
You could have 15 different problems, but if you’re not addressing the one that I feel right now, then you’re really not being an advisor, right? It’s about the pain that they feel, not the problem that you see. So with that I use AI to actually do the analysis that’s focused on solving that burning issue, right?
That’s where it’s focused. So everything I’ve built within the Clear Path to Cash is designed to solve a specific problem. Is it a cash flow problem or is it a debt problem? Because they have different different approaches to them. And I don’t wanna waste my client’s time or my time, chasing a ghost.
I wanna actually focus on the thing that f- they feel they can move forward with today. And again, I, I, I wanna, I wanna talk about, commitment versus compliance. Your job as the advisor on the backside, right? I love how you said the human loop in AI. On the backside is, A, I find the burning issue up front.
I let AI help me analyze the data, and then my job on the back is to hold the client accountable and for them to take action to improve the, the actual thing that we found. So AI can’t do the two parts that the human has to do, so it’s human, AI, human inside my advisory platform.
Brian Thomas: That’s awesome. Thank you.
I appreciate that. And you learned a lot. I just learned something. Before COVID, BC, I thought that was pretty cool play on words. But true, it is. That’s such a significant worldwide event that yeah, I get it. But no, you talked about the business basics, cash flow, profit, education, debt, and all that stuff.
But at the end of the day, you, you highlighted some things here about AI. Again, you leverage that to do that analysis to solve the client’s problem up front and, as you said, kind of the front end. And on the back end, as a human, you need to make sure that the client is held accountable on these tasks as well so that you can be successful in the outcome.
So I really appreciate that. And Mike, it was such a pleasure having you on today, and I look forward to speaking with you real soon.
Mike Milan: Hey, what a fun way to start today. I appreciate you, and go Chiefs.
Brian Thomas: Bye for now.
Mike Milan Podcast Transcript. Listen to the audio on the guest’s Podcast Page.
