The CFO In the Trenches with the Wrenches: How Accounting Powers a Million-Dollar Shop

0:01What's up, players? It's another episode of Master Tech to Millionaire. I'm Joe Adams with Adams Automotive, the number one shop in America. This is Master Tech to Millionaire, where we take master technicians and transition them to millionaire CEOs. Speaking of millionaires, you know, counting the money, we're here with our in-the-trenches CFO, Chief Financial Officer, Chief Swag Officer, Matt Keys. Matt, boom. How, how are you doing this afternoon?

0:26Dude, I'm great. This is, um, I'm honored to finally, you got through all the, All the hot big-name guests, and you got to move on to the boring old accounting. I guess it's just time, man. Dude, accounting is sexy in the world of the Auto Hospitality Group. We're making it sexy. All right, that's right. Yeah, we got AI bots doing everything. So I want to start with— you were in the trenches, uh, which is sick, uh, you know, a couple weeks ago.

0:48So you, you got a better understanding of the business, uh, you know, you're not some guy in an ivory tower. I love that. You know Todd Hayes loves that, our CEO and chairman. What did you learn from that experience? And what a day. Only regret is I didn't do it sooner. You know, I think I've been to a couple Take Fives, held a couple of my own, but usually I'm still wearing my loafers.

1:08This was the first time I was gloved up. I had the polo on. I, you know, had the pants, the shoes, felt like, you know, it was truly part of a team and did full day all the way, Take Five until 7:30 when you guys are out the building. And, you know, and sometimes that's 7:45, sometimes that's, that's 8, whatever, whatever the customer needs.

1:26But The biggest takeaway, I mean, learned so many things. And even the times where maybe we weren't helping a customer, I was just opening file cabinets, just poking around, annoying Glenn with 50 million, you know, tiny little questions. That was so beneficial. But I think the biggest takeaway for me in there sweating with those guys is I had no clue the amount of strategy, nuance, and I don't want to use the word small because they're not small decisions, but there's, there's 50 decisions that need to be made every single time a customer comes in in terms of who's going to work on the car, who's the best cert, who's the best suited to, to work

2:04on this job, where we can get the parts from, where is there an opportunity to win on the margins, who's going to be the, the first person to take the first swing, who's going to be the second swing, when are we going to come in for the second, third base. Something goes wrong, parts not there. I think even when I was there We ordered a— apologies for everybody if my technical terms are off, but we ordered a programming module.

2:27That sounds like a car repair part. Sure, something like that. We ordered some kind of crazy programming thing from a, like, you know, Hyundai or Acura, something, you know, and we ordered one and somebody else ordered one. They misdelivered them, you know. That was another thing, learning about the vendor side of this was a whole The art, you mean the archaicness of our industry?

2:47Oh boy, I'm sure we'll talk about that. I'm sure I see that. I see that from my side, but kind of looking at that parts cart and watching how those guys pick stuff up is crazy. But all just all those million things and the fact that especially all of our stores at Auto Hospitality Group, but specifically the A-Team, it's a hive mind.

3:04Yeah. All those guys are on the exact same page. You could pull one guy out and stick somebody else in. He'll pick it up. No problem. And they just, there's 50 decisions to make and they make the right one every single time. And that leads to happy customers. And then God forbid we make one small mistake, we take full accountability, we take care of the customer, and then they come back the next time because they know that's how we operate.

3:25And it's, it's a sport. Like, it's a sport, man. It's literally like, like, I know your background. You were a quarterback. I know that. Well, you know, we've known each other a long time. It is a sport, dude. It's like watching people at the highest level in their field. And I'm so glad you spent a day in the trenches because it's like, shout out Cliffhanger, shout out Mike Alf, shout out Kobe, shout out Donovan, shout out Jaybird.

3:46You know, on the team. I'm probably forgetting people. Glenn, Marcus, Chris, Tony's a new guy, freaking beast. Am I forgetting anybody? I can't forget a single person. I think that's the squad. I'm tripping. Met a bunch of techs too. I spent— I think even when I spent 2 and a half hours out with G watching him replace an engine, very fast TNG, but he, he made some good margins on that one.

4:07And I just sat there for 2 and a half hours and watched him pull out an engine and just asked him every single question about his life, work, non-work. We got— we have a stud team, every single one of our stores. But just seeing it first, and you're so right, it's like going to watching the Dallas Cowboys practice. You're like, this is the highest in the '90s.

4:25This is— it's— we're doing it at the highest level anyone's doing it. It's hands down. It was what a great experience. And I just want to— everybody, I just want to publicly shout out like Glenn, Chris, Marcus, Donovan, Mike, Al, Kobe, Jay, Cliff, the team. Like you guys are animals. Like anybody I forgot to mention, anybody on the— like it is literally the Patriots.

4:45It's literally the Cowboys in the '90s, not in the 2000s. Sorry. It is. It is like watching the people that are the best in the world at they do do what they do because it's— that is what it is like. The shop does $1 million a month. I'm not patting myself on the back. Todd is the one who implemented this concept. You said hive mind.

5:03The concept is The people having a hive mind of the concept is a byproduct of Glenn freaking slaying training every single day for 6 years at this point. And like over and over and over again, like every single person knows when the customer does this, do that. When the objection is this, do that. When the customer can't get the money because of this and they need to do this, like do that.

5:26And it's nonstop all day, 12 hours a day, 7 days a week. Like, and then Glenn's training in the morning on top of that. That's crazy. What a beast. Yeah, what a beast. And then we got to go to key to key and it's like the most time, time of our life is exhilarating. I am still— it's Wednesday after Key to Key.

5:41I'm still riding the wave of electricity, but it's freaking hard work. Like, these guys produce the revenue, they score the touchdowns. The customers are, you know, when they get upset, they're getting upset with them. Not you, not me. Honestly, it doesn't come to me. I deal with a lot of heat cases, but I'm not the first line of defense. I'm like third line of defense.

6:00And so, so cool that you got to kind of watch how the business works and you got to see, you got to be in the trenches with the team instead of just being the CFO that freaking looks at numbers on a screen. You're like, hey guys, we're below margin. And like now you get to understand that like the reason we're below margin is because we like try to take care of that customer that maybe couldn't afford it on that repair, or we had to take care of this customer because of, you know, maybe a technician misdiagnosed it or maybe we moved too fast and made a mistake.

6:29You know, it's so complex. And if you're just managing from a spreadsheet, you're not gonna be able to impact the business. And so I'm so glad you had that experience. Totally. One thing I'll add to that, I, you know, we've always coached that, but there's, we make mistakes. I remember my first 3 months, I didn't know anything about the industry. I'm sure we'll talk about that.

6:45So that kind of prevented me from wanting to get too into the trenches 'cause I just didn't know up from down. But I do remember, I think month 2 or 3, we're having a P&L review meeting just in Houston. And I'm, I've lined up all the P&Ls and I think I'm like, Jose, you know, your, uh, your customer refunds was kind of high this month.

7:04Maybe let's try to get that down. And just now in hindsight, I'm like, what the heck were you doing, man? Absolutely no context. Jose knows where exactly that, however much money it went. And it was the right decision to do that. That's just, you know, just a funny, you know, you look back and you're like, man, if you, if you could only know the things you know now.

7:22Yeah. So you had to learn the industry. Extremely fast, but I'll back up before I want to talk about how you learn the industry. And for somebody who's listening and a service advisor, they don't know what CORS credits, returns, invoices, reconciliation, fraud. They don't know anything about the back office, but they're really good at sales. They need to learn about the back office.

7:38I'm going to get into that. But before we do that, we're already 7 minutes into this podcast. We should probably do ourselves a favor, introduce you and your background. You know, just real briefly, like you know, how do we know each other? And then what did you do in your career before and why kind of Adams needed somebody to do the job that you're doing today?

7:58Of course. Yeah. So we met well over a decade ago at UT Austin, which is crazy. Yeah. As 18-year-olds and the stuff we used to talk about then, I even— we were sitting down to do this podcast and it was just like, how? What the hell is life? How does life work like this? We're the luckiest people on earth. But so my background, I think to know me, you need to know my dad is my hero.

8:22His career journey, I'm in awe of it to this day. And I just want to be like my dad. But unlike you and your family, I knew I never was going to have the stones to be an entrepreneur. I just didn't have that level of risk tolerance. And I happened to meet my wife at UT Austin. So I said, there's somebody to take care of for now.

8:41I didn't feel like I was in a position to bet at all. So instead, In school, UT has the number one accounting program on the planet, undergrad, graduate, and PhD level. So I got my undergraduate and master's and my CPA. I studied and passed my CPA test while I was in school. And I said, okay, I know I've got these big ambitious dreams, but I know I don't have the risk tolerance to be the founder.

9:05So instead, I'm going to go out and try to build the most valuable skillset I possibly can in the world of finance and accounting. And then one day when I'm old enough and experienced enough, somebody will tap me on the shoulder and say, hey, we want you to steward what's already been built up to this point and help take it to the next level.

9:22That was my dream. And my dream has come true. It's crazy. And a lot— a little bit sooner than I thought it was going to happen. But so my back— my career background, I started my career with Ernst Young, did a couple busy seasons there, cut my teeth. There's some things you can only learn there. For the maybe one or two accountants who may be listening to this, you know, that's actually our number one demographic.

9:43Yeah, for sure. People at Deloitte. Yeah, exactly. So funny. So I was at Ernst Young, cut my teeth there, got to work with some cool clients. The New York Red Bulls, the MLS team, was my favorite audit that I worked on. It was part of the larger Red Bull audit. Kind of great company, by the way. Yeah, that company's clean. It's clean, right?

10:01Global billions and billions of dollars. That audit was done in 3 weeks. And they do it. They net like— it's this guy from Austria and they net like $1 billion a year and it's privately owned or something. They're machines. Now, I will say that was, that was around COVID. So the MLS Ticket revenue was not good, was zero. But they, they, we gotta talk, we gotta, after the pod, we gotta talk about that.

10:19Yeah. So, so keep it moving. What'd you learn? So anyway, so learned, learned a ton there. Saw, saw kind of accounting done at the highest level. Um, also realized that, hey, I think I've got some other skills here that maybe some of the other folks on my team or in my STAR class maybe don't have. But I, I was not just a pure accounting weapon the way some of those people were.

10:38So I said, okay, I've cut my teeth in audit, but I don't think I'm a professional Big 4 guy, then went and went on the industry side. So for those, industry just means a public or privately held company that's actually making the goods and services versus Big 4 would have been a professional services firm that's supporting companies in industry. Went over the industry side, it was a PE-backed company, so got some cool experience on that side.

11:00But that's where I just cut my teeth in the full accounting cycle of cash, credit cards, inventory, month-end close, the general ledger reporting, things of that nature. Revenue, got a good foundation there. These are sexy terms. Oh yeah, FP&A. Let's, we got acronyms for days over here. Uh, kind of got some great experience there, but then I said, okay, I've, I've done, I've done public accounting.

11:23I've done industry as a pure kind of execution, execution-based role. Those 2 kind of parts of the triangle didn't really feel like a great fit. So I said, I'm gonna go the consulting route. Um, and that's kind of the 3rd angle of the triangle for, for accountants coming up in their career. So made the move, came, moved back to Austin from Los Angeles.

11:41Where we were living at the time. And it's a, it's a cool story how I got there. That's probably— don't have the time for it, but ended up walking in. I was the youngest consultant at the firm at the time, which there was some imposter syndrome, but I was really excited about the opportunity. Did a year in advisory services, was basically like they would pull me in if a company was going through a large transaction or they lost some key employees or they just needed really some extra muscle that they didn't feel like they could find on the open market.

12:08I'd go in there Um, saw a lot of fires, but I'd learned a lot of great things. But then even after that, I said, man, I've tried all 3 parts of the triangle. There's something else that I'm looking at and I'm still young. What's gonna differentiate me, uh, CPA, a couple years out of career from a great school versus somebody else who's got all those same credentials, but an extra decade of experience?

12:28There's no reason a client would pick me up versus them. So I said, I gotta differentiate myself some way, somehow. Smart. So we launched at the time, you know, God thing. Our firm, growing firm, was doubling in revenue every year. Said, hey, we're going to launch an ERP practice. ERP, we're going to try to stay away from the acronyms. Can you define enterprise resource planning?

12:48Think QuickBooks. Think QuickBooks. Everything— everybody on this, a lot of our listeners will be familiar with what QuickBooks is on steroids. Yes. But they said we're going to start building out a practice to help companies that really— a lot of most companies, they start with QuickBooks and then, but what's next? As the company grows, they need a bigger, more powerful system with controls and And automations and things of that nature.

13:09And so I've raised my hand and said, I want to be that guy. Typically those people come from an engineering background, not an accounting background. Interesting. And I raised my hand and said, no, I want to do that. I think that's what can differentiate myself. So I voluntarily sat on the bench for about 4 to 5 months, meaning no billable work, meaning no money coming in.

13:27So that was about, that was my career, my big career bet. Yeah, that's tough. Which was tough. I remember a moment in June of '22 where it was the first time I got a little misty-eyed and was like, I don't know how I'm going to do this. Yeah, God provided. I studied for all my tests, got certified. It was like doing the CPA all over again.

13:44And fast forward 2, 3 years later, I was the number one biller at our firm and had, uh, been able to take a great leadership role in that practice, got experience with, you know, working with other reports, things of that nature. And, and, and at this point, I like— we, you know, we've stayed connected. We're, uh, you're a groomsmen at my wedding, I was a groomsmen at yours.

14:06And I like am 3, 4 years out of college and like, you know, people, you're starting to see people's careers kind of pan out. And I like just kind of had an understanding that you were doing really well in your career. I think we were both jealous of each other. Yeah. Because I was, you know, keeping in track with what Adams was doing and you're just seeing on LinkedIn and yeah.

14:27I think we were both like, you were kind of maybe, I think as time went on, you started to really know that, hey, over here at Adam's and AHG is where we both want to be. Yeah. But so walk me through. So I'll give you some context. You know, we grew it. So you start with QuickBooks and you start with one shop and it's super simple because when there's, you know, gross profits being calculated, you don't really need to identify like variances in how different shops do it because you're only one shop.

14:53Some people don't count general service technicians. Some people don't count Uber. Some people don't count a lot of things in how they calculate gross profit, for example. But when you grow, we have 14 shops and some of them are from different original owners and they have different P&Ls. They, they, they count their money in different ways. And so trying to get a cohesive picture for what the entire business is doing and looks like is extremely complicated.

15:19And so in 2023, 2024, and really beginning of 2025, we were experiencing those growing pains. P&Ls are spreadsheets that are duct taped together, being glued together really by the strength that is Sadie. She is— loves— she is on God mode in the accounting department and that's it. Like we're pretty much just at the mercy of— we've outgrown the systems that we have in our business.

15:45And so we were like, man, We need somebody, we need a CFO to like basically launch an ERP rollout. And we prayed about it. And the story goes, my dad was like, what about your tall friend? Thanks, Perry. Thanks, Perry. He goes, what about your tall friend? I go, what are you talking about? Matt? Like, what do you mean? And I looked you up on LinkedIn and I like didn't really, I knew that you were in accounting.

16:08I didn't know you were a NetSuite ERP consultant integrator. And it's like perfect timing. So You want to tell the people I called you first to ask you to be a groomsman at my wedding, but then, sorry to my wife, the next 95% of the call, what are we talking about? Yeah, about, hey, we want you to be the CFO. So yeah, I think as you put it to me, I think you knew at that point, hey, we've outgrown our back office in terms of just systems and capabilities and just the level that you guys were selling at.

16:38But then you kind of, so it was the first, you know, you'd had Plenty of potential people who were interested in the business or investors or anything would fly down, they'd see these amazing facilities. And at a certain point it's, hey, I'd like to see the numbers now. And of course we could on a per-shot basis provide those numbers, but there was no way to paint one kind of cohesive financial picture around it.

16:56So you called me, I was initially pretty hesitant. Hey, shocker, I've not been a CFO before. This is my first run at it. Things seemed to be going decently so far, but it was kind of, I saw it, there were really 3 main asks that you guys had of me. The first was obviously the ERP. That was first and foremost kind of getting into it.

17:17You realize the second and probably part that goes first was we needed to kind of rip out the way the back office was currently operating and putting in new procedures and, and systems and all that jazz so that it could actually support the level of volume that you guys were selling at. Right. You know, some shops do $50K in a month. We have $50K days.

17:39You can't manually key in $50K worth of invoices every single day. You'd need an army. So that was number 2. And then the 3 is you, you guys needed, like you said, a bunch of different shops that came from different ownership groups that all had their own little flavor of doing things. Everyone's running, Todd, you know, the key-to-key model on the shop floor, but you guys needed a people leader with that emotional horsepower to get everybody in line, get everybody marching in the same direction so that ultimately I could then go be that financial face of the company and help us reach our goals.

18:09So you take the job, uh, you know, uh, the recruiting process was a lot of fun, but let's get into— so you take the job, you're part of the team, and now you have the very difficult task. The hardest part about me and my life in regards to my career was I had to, you know, it took me 2 years of not really paying attention to Todd.

18:29But then once I really started paying attention, I had the task of rapidly downloading or trying to rapidly download his context and his brain for every aspect of the business. So I had to learn marketing, I had to learn phones, I had to learn sales, I had to learn recruiting, I had to learn back office, I had to learn front prod, which we'll talk about today.

18:46I had to learn, you know, real estate and I had to learn legal and I had to learn like when you're trying to be, you know, he's the CEO, Todd is the CEO and he is training me on his skill set. So if you've ever hung out with Todd for a day, it is literally nonstop. Like his phone literally never stops. And it's so much information that it took me a really long time to really, because of my seat on the bus, to really deeply understand how the work flows through the back office, but you were able to pick it up.

19:16I mean, granted, it's like you've had so many other things you've also had to do on the management team, but your main thing is, you know, deeply understanding the, the, the back office and how the money flows through the business and then influencing it. So how did you do that? What were like, what were like some of the 3 or a handful of the lowest-hanging fruit items?

19:36Like if, if a service advisor is listening to this, and they're like, okay, I'm really good at sales, but I did not go to UT Austin. I do not have a CPA. I do not have my NetSuite certification, or I've never even looked at a P&L before. How did you learn what the most important things in the back office were and just in the business in general in that?

19:55Yeah, that's, that's a great question because you just touched on it. There's so many different— you just named like 15 different kind of key departments or parts of the business that as a management team and leaders we have to understand. But obviously I didn't know any of them walking in. The beauty, and part of why I wanted to get into finance and accounting, is because if you got to pick one to start with, if you pick finance and accounting and you understand how the money is coming in and out, you'll start to be able to wrap your, your arms around every single L.

20:24Because the legal side, there's going to be a check that gets written, and you're going to— why is— where is this check? Why was it written? How much? So it's kind of It's a great place to start and help speedrun that, that experience. I will say I was kind of, you know, the expectation— I remember after I took the job, we flew to Boston.

20:42I kind of presented to Todd my like 30, 60, 90-day plan. And the 90 days involved a lot of just sitting and observing and learning. And then if you remember— oh, I remember on my third day on the job, Todd puts me in a meeting with a partner from a potential firm that wanted to invest in us and partner with us, de-risk the portfolio.

21:04And he said, here you go, Matt. Baptism by fire. Yeah, so I had to speedrun the bit— speedrun learn the business in 3 months so that I could then go turn around and teach it to a team of very, very sophisticated investment professionals. Baptism by fire. But I am— I was not super psyched about it. On— it was really cool, but it was also like, wow, there's a lot sitting on my shoulders right now.

21:29It's a lot, dude. But getting through it, it truly is the greatest. That 3 months, the greatest thing that could have happened to me. And shout out Todd for having the wisdom to be like, you know what, I'm just gonna freaking teach him real quick. And if this young kid can't do it, we'll find out real quick. Like, the way my dad taught me how to swim is he was like, all right, just, uh, he threw me in.

21:46Like, he literally threw me in the water and he's like, sink or swim. And it's like, it's— there's no class. You're not gonna go to a class and we're gonna teach you how to swim. It's like, you better figure it out quick. And so You had to do that. Todd put you at the table and you learned really quickly. So give me like, you know, what are the core pillars of the back office in the accounting industry?

22:05Yeah, I think so. First, there's this, there's this concept called the working capital cycle, and I'm going to define it really, really easily for you. It's comprised of 3 things. The first is how long when I buy inventory, how long does it sit on the shelf before it gets off, right? That's cash that's tied up in that inventory on the shelf. Secondly, there is how long does it take me to actually receive the money from customers, right?

22:32And software companies, they could— you could sign a contract, but they don't have to pay for a full year, right? And then the third part of that is how long do I have to pay my vendors? So in a lot of businesses, that working capital cycle could be all across the board. I got it— my inventory sits on the shelf for 90 days, I got to wait 365 days to receive payment from my customers.

22:54And I, my vendor, I got to pay my vendor on after 30 days. I was talking to a guy who is in lending and he was talking about a company like in e-commerce where they generate the product, but it doesn't get delivered for like 9 months. And he's like, yeah, they have $40 million of inventory just tied up. And so he lends against the accounts receivable.

23:13Yes, that's a whole industry for itself. Yeah. For their So that they have cash flow. And it's like, whoa, it never made sense. But that finally made sense to me. So anyway, the beauty about our industry is— Yeah. So ultimately you take those numbers, you take how much time inventory, how long does that sit? That's a positive number. How long do I— does it take for my customers to pay me?

23:33That's a positive number. And then how long do I have to pay my vendors is a negative number. Ultimately, a positive working capital means it's actually a bad thing. It means in order to grow and sell more, we need more cash. We, our industry, and the beauty of Todd's operating model, which I'm going to connect the dots here in a sec, we have a negative working cap— working capital.

23:51And the reason we have that is because we order all of our inventory just in time, outside of a few small, small things that we want to keep in the, you know, on the shop floor. But every time when the car needs a part, we figure out what part it is and we buy it. And Todd, we've all bought every part that we found, the part 100% of the time.

24:06Yeah. So I have zero days that my parts sit on the shelf. Correct. The customer pays us that day when they pick up the car. When they pick up the car. And then I have 30 days to pay the vendor back. Yeah, that makes things pretty simple from a cash management perspective. Sell more, more money in the bank. Great. Obviously there's some nuance there.

24:24You got to stay on top of, on top of the rest of your expenses and big purchases you're making that don't hit the P&L. But what that all turned into, very simple from a cash management perspective. What is the bottleneck? The bottleneck is accounts payable. We buy hundreds of thousands of parts a year and we return 25% of them. And I'm going to define accounts payable for somebody because even me, I didn't like connect the dots.

24:49That's what— oh, it's parts. It's parts. Oh, it's parts. Like if you're— if you're not familiar with these terms, accounts receivable and accounts payable are like 101 accounting terms. Accounts receivable is for the customer that you know, came to pick up their car, but they haven't paid you yet cuz it's on a fleet account and they're gonna pay you at the end of the month.

25:09You guys that are service advisors probably understand what that is. Accounts payable is I bought the part and it's $100, but the way it works is rather than them hitting our credit card every single time, it's gonna go on our statement for all the parts that we order for the whole month from that vendor. And then they're gonna charge us once at the end of the month.

25:27And that is, Matt's gonna tell you a lot of paperwork. So it's accounts payable, it's parts. How'd you learn it, man? I think first learning what's not working currently with our, with the existing system, you know, and that a lot of that goes back to the actual systems we were using at the time. But the other half of it is when you got guys running extremely fast on the shop floor, an extra little keystroke or, you know, putting, creating a new vendor and, and just putting a space because you gotta move fast and you couldn't find the original or you accidentally fat finger the price or there was a credit card surcharge that we forgot

26:02to put inside TechMetric. All it's every— it's simple. But when you move at the speed that we do, correct, it is impossible and unfair to ask our guys to take 100% responsibility for it. Now, do they need to take responsibility for it? Absolutely. But there has to be a safeguard in place to be able to catch those things before it gets to accounting.

26:23Because if you think about it, If an accountant sees a statement come in at the end of the month and it's missing 3 charges in our system that they're saying that we owe, that's— they got to put on their investigate and on their private detective hat or investigator hat, whatever you want to call it, and they've got to start digging for clues and they got to make calls because the accountant doesn't know how to fix cars.

26:46They don't know what parts need to go on the car. They can't look at the invoice and say, oh, it was this car, of course they bought this. Oh, but I can tell that was— they don't know any of that. No. Yeah, they got to make calls left and right and eventually get somebody to tell them the answer versus that one fat finger that turns into a 45-minute project for the accountant upstairs versus if we can build A, by coaching, training our guys, and then B, building in systems that can catch that as a failsafe.

27:11If that can get caught on the shop floor and we take the extra 30 seconds to fix it, that saved the accounting team 45 minutes. Multiply that by the hundreds of thousands of parts. Yeah, that's how you actually gain real efficiency. And I'll go ahead and vouch for all the service advisors that are listening to this. Our record day here is $84,000 and our record day at The Woodlands is like $50,000.

27:33When you are in the hunt and it's 3:30 and you're at $68,000 and you're like, hell yeah, we're going for a record, uh-uh, we're, we're going for it. I'm sorry. I'm sorry to our top of the house. I, I deeply apologize. I am the, I am the culprit. I am not thinking about the inputs on tech metrics as you shouldn't. And I am literally like, it's like there's blood in the water.

27:58I'm like, I have to get $70,000. I have to get $75,000. And that's my personality. And that's why it serves me on the shop floor and all of our people that sell. And this is what I'm getting at. There is a negative correlation between accounting people. Like, you know, accounting people are conservative. It's like the, it's like the most conservative job you can you can kind of do is every company needs accounting, like you said, versus salespeople where it's like, no, I'm going to take the risk and I'm going to like— it's just a completely different personality set.

28:30So the expectation that— so first of all, we're doing a lot of revenue, you know, so let's break that down. So the average day at Blaylock for $1 million, 7 days a week is in a month is $30-something thousand. That is $30,000 worth of invoices that are pieces of paper that parts drivers deliver to our parts shelf and hand the piece of paper to our service advisors and managers.

28:53And then our managers that are so gifted at sales, not accounting, they're gifted at sales. And that's why they can provide customer service and get it done and work long hours like you were able to see earlier this month. Those people are expected to input the right keystrokes and we manually call our vendors and we negotiate price. They're expected to hit the right buttons on the screen Every single time.

29:18I mean, $100 million in revenue, that's $20 million in parts on average. How many freaking invoices is that? It's a lot. And it finally clicked in my head because you said it like 6 months ago. You were like, accounting and the back office is 98% parts. And Sadie told me one time, she's like, 80 or 90% of my job would go like, it'd be so easy if there's 50— she said per unit there's 15 to 30 invoices per month where the service advisor simply made an input error.

29:50And that's going to be on vendor quantity. Like, you know, you order 8 spark plugs, uh-oh, it's a V4 and you have to return 4 of them, but you forget to change the number in TechMetric. You fat thumb the cost or one other thing, something like that. She's like, if that was all inputted perfectly, I— the P&Ls would come out on time every month.

30:08That's 80% of the problem. And I was like, You've gotta be kidding me. That's it? And she's like, yeah. Oh, it's like, so now it's like, okay, let's get, let's train the service advisors, but it's really hard. So I'm gonna hand it back to you. You're building systems, um, you know, and AI's really involved with that. Like, how are you, I mean, that's an uphill battle.

30:27How are you fighting? Totally. I guess that battle. I think you're right. So the, 'cause there's always gonna be edge cases and ones-offs. Sometimes a part shows up, we were like, we never ordered this part. Yeah. We gotta return it. But I never paid cash for the first place, so how— like, there's always— but that's the stuff Sadie needs to think about because only she can solve that problem and figure out how to account for it correctly, right?

30:44But for all those, those keystrokes, those input errors, there's really 2 big things that we've worked on. One which is fully complete, and it— I'm sure we'll get into some of the results of the work we've done— that, that has been a huge value add. And the second I'm even more excited about, we're still kind of trying to get that across the finish line.

31:01The first being previously when orders and returns were entered into TechMetric, back when we were on QuickBooks— we're on NetSuite now— is when, when back when we were on QuickBooks, all of those orders would get, would get put into TechMetric, and then we would— you would go on this archaic third-party software and try to push it all like via an automated integration into QuickBooks.

31:26Now The 2 major problems with that was a lot of stuff didn't sync. And then we're getting a little more technical here. Everything was coded to parts cost, right? So all these invoices, they're part of cost of goods sold, but they're not just parts. There's tires, there's sublet work, there's shop supplies, shop supplies. There's a whole bunch of other things. So the first thing we've done is now in TechMetric, we can code that order, that specific return to the right expense account.

31:53Upfront, right? It's all tied to the original vendor that we're buying from. But then also we have the ability to update that. So now when all those invoices sync over, they're already coded correctly. There's no need to recode them. The second part of that part of the first thing we're working on, excuse me, is now everything syncs. Okay. There's not— there's no— there's no things that fall off like ghosts and you're trying to figure out what didn't sync and you're just dumping stuff into Claude and saying, hey, please try to find something for me.

32:20Please, I'm begging you, Claude. We now— I have on my computer on Codex, I have every single morning at 8 a.m., I get a report. Here's everything that was purchased in TechMetric. Yeah. And here is the 99.9% of things that sync to NetSuite. And Matt, go look into this 0.001 that didn't sync. And it's done daily. It's done daily. That's sick. That's the first part, right?

32:40So that, that, that's the big value add for the accountants is now there's no recoding and now everything is syncing properly. The second and even bigger value unlock, which what we're talking about, the main thing we got to get around is service advisor missing inputs, but we cannot hand— tie a hand behind our service advisor's back. We cannot make them play one-handed.

33:02Like, they need to be able to move fast. So we need a system that can catch that for them in case they make a mistake. It should not be— ultimately, the responsibility can't end with them. There has to be something else because they have a really big job. What's— and shout out Michael Floyd. I know he was on the pod. Goat stud.

33:18What we've been building with Michael Floyd is a new— and it's probably very common, all the— a lot of these shops, when you receive an invoice, you probably put into some kind of scanning tool, right? Put in a shared drive so you've got the record of it. You know, that's kind of best practice. That's Accounting 101 best practices. Now with our scanning tool, what we've been able to do— and now it's just about— it works.

33:38It's just about making sure it's perfect every time before you really let it, let it go wild. And the implementation is the actual hard part, like getting the humans You know, it's very frustrating to do something the one way for a long time and then for change management to be like, hey, we're going to do it this time, this way, this time, and they use it and then it doesn't work because they don't know how to use it or it doesn't work yet or whatever.

34:01Or it's very hard to push through the friction of like, no, we're going to just keep trying it until it works because if it doesn't work, it takes twice as long. Totally. Because you have to like scan the invoice and then audit it. And then it didn't work. So you're just spending double time and it's extremely frustrating and people give up. So we're in that phase of pushing through this.

34:21But you want to walk me through? And I think actually that's a great— I think a pod on change management. I mean, that's been my life the last 12 months. But for all these people that come through Key2Key and then they're like, how the heck do I change the way my shop's operating? That might be a great topic for us to talk about.

34:34But anyway, this— so this new scanning tool, same thing for the service advisors. They're already trained. They know the invoice comes in that needs to go in the scanning tool. Now the scanning tool has AI built into it to where once that piece of paper goes through the scanning tool, AI is double-checking every single thing on that paper invoice. It is looking at the vendor name, the date of the transaction, yeah, the part name, part number, the quantity, the price, and if there's any kind of core, if there's any credit card surcharge, any of the RO number.

35:08Any, any note that a service advisor wrote on there, anything. It is taking all that information and double-checking it against the actual record of that order or return in TechMetric. Yeah. And if any— if it identifies that anything is misaligned between the two, it will not receive the part. At first, we'll— and kind of our end goal here is that we'll Slack the service advisor and tell them, hey, you need to go back into TechMetric and double-check this.

35:33And then maybe one day if that action isn't taken, then it slacks to the next level above. But it's just so fire. That's how you guarantee that. Yeah. Every once it hits the accounting system, it's perfect and no fraud. No fraud. Like, yeah, it's like literally the buttons. I mean, if somebody is going to try and steal from you, they're going to try, try, try.

35:52And we try to weed that out in the interview. And, you know, Todd is like a, you know, he's a policeman. He's, he's always thinking about fraud. That's right. Come to the— shameless plug. Come see Fraud Hayes live in action at the Back Office Blueprint. We're trying to beat beat, uh, Michael Floyd's record of attendance for a Friday class. Um, I said it in August or whenever, June, July, whenever our last class was.

36:13But yeah, I need that record back. And, uh, it's September, it's like third weekend of September or something like that. So shout out, uh, we're gonna, uh, shameless plug that. Go to autohospitalitygroup.com, autoshopanswers.com, uh, to look for availability. Uh, we hope to see you in Houston. But Fraud Hayes, who is he? He's a policeman, he's a cop, and he's always looking for, um, you know He is looking for ways that people can steal money out of the business because he knows in our industry, unfortunately, we have a reputation for a low-integrity, blue-collar industry, and it only takes one person to steal a bunch of money from you.

36:48So do you want to walk me through— maybe this is shifting gears. If you've got anything else on the AI tool, I'd love to unpack that. But how does, for example, the AI tool protect you from getting stolen from. You know, I think people get— yeah, people get stolen from. They have no idea. It's crazy in our industry. Yeah, there's— it's kind of frustrating to say there's, there's no way to with 100% certainty, right, guarantee fraud.

37:12You know, there's, there's things— it's really about if, if cash is not hitting your bank account. If cash hits your bank account or leaves your bank account, your accounting team should be good enough to, to be able to identify and make sense of that. And that's a— we'll talk about Assessing Your Accounting Talent at Back Office Blueprint, Friday, September 25th. Shameless plug.

37:31Yeah, shameless plug. But it really— it comes down to— I think there's— and we're going to talk more way in depth about fraud at the class. But I think there's a couple really kind of key things that if you're like, I have no clue what's happening, I have no clue if anybody's— if people are stealing money from me or not, there's really kind of 3 things that I think you have to get your mind around first.

37:55Uh, the first is, is cash. Cash is king, meaning at the end of the month you're gonna have a balance on your bank statement and you're also going to have a balance in your accounting system. And now those 2 things won't always align perfectly. You may have a check that hasn't cleared yet, it's not going to clear, so there's going to be reconciling items, a reason that we know why it's off by this amount.

38:16We're expecting that, we know why it's there. But if there is a variance that we cannot explain In our minds, that's fraud. We have to— we should know where every single cent came in and came out. And if we don't, we're not doing our jobs. You know what? When I was new to the industry and new to business, I did not know that there was a difference between P&Ls and the actual cash in the bank.

38:36Like, and I don't think service advisors maybe know that. Like, if you owners don't know that— Todd tells a story. He's like, you know, going through the P&L with this owner that he's consulting with years ago. And it says he netted $20,000. And Todd's like, did your bank account go up $20,000? And he's like, no, there's— I don't get it. You know, I can't figure it out.

38:55So he's like, okay, it's in your inventory, probably. Let's go count your inventory. And he goes into the Techmetric equivalent and there's like $80,000 worth of inventory in there. And Todd's like, there it is. And then they did a physical count of the inventory and guess what? It was like $10,000 or $15,000 or $20,000. I think it was $20,000 if I remember correctly.

39:13It's like, dude, I don't know exactly how that inventory is walking out, but people are buying parts on your statements with your company credit card basically and putting it on their freaking friend's card. You literally took the words out of my mouth because the second thing I was going to say after cash is inventory. Because remember the point I made? If cash comes in, out, we can catch it.

39:31But inventory, that cash already went out. We know we bought the inventory. We were supposed to buy the inventory. Yeah, but how do we know if we made it onto a car or not? By what? And that's why you gotta be in the trenches. You gotta count that inventory every month. Like, I will walk into people's shops And I'm like, you're getting stolen from because I'm looking at your parts shelf.

39:47And you know, if I'm talking to you, you know who I'm talking to. I know people are listening to this, that it is an inside joke. Like, your parts shelf is messy. Go count it. Like, it's so annoying. And you're a salesperson, that's why you're good at this. Or you're a technician, that's why you're good at this. I'm telling you, if your parts shelf is messy, a bad egg that's in your shop, they're gonna see that and they're gonna know that it's like basically You know, it's like trust but verify.

40:12You know, we trust everyone, we, we love everyone in our company, but man, we're gonna verify. And so, um, yeah, keep your eyes on the parts. I would say, yeah, with, with inventory, guys, Adam's Automotive at Blaylock, it's the number one store in the country. They never have more than $25,000 to $40,000 in inventory at the end of the month, right? That's the biggest store in the country.

40:31Yeah. So unless you are a tire shop that just has mountains and mountains of tires in the back room, which a lot are, you know, which some are. And so that's a different, that's a different thing. But if you're, if you're not that guy and you've got $75,000, $80,000, $90,000, $100,000 of inventory on your balance sheet and you've just got a rinky-dink parts cart stolen, you're being stolen.

40:51You are literally being stolen from. It's like cash is king. Where is the cash? So most of it is walking out in the form of parts. What's some other low-hanging fruit like in Techmetric? Again, Techmetric, it's save for laters and deleted tickets. Which they did change the settings a little bit. They have. You can. But if you're not aware of them, you can still get ripped off.

41:07You can. Yeah, you can still get ripped off. It is where you can pay money for a part, stash it away in a save for later or deleted, and it's never actually going to hit as an order. And but the cash wouldn't sync. And so if you're semi on top of it, you would theoretically catch it, right? Or no, you could. But then it's also about, you know, what labor are you putting on those tickets?

41:28Correct. Right. So it's not like cash tickets. 100%. Right. And that's in cash transactions too. Who's to say it was $500 bucks, but you change the price to $400, you put $100 in your pocket. Here's my anecdote for that is I was in accounting training like a year ago. We were teaching this guy at 13 stores about save for laters and I'm like, all right, let's check your save for laters.

41:45Boom. There's like 700 tickets in one of the stores. I'm like, okay, you have 700 tickets that are saved for later. And we click on the first one and it says alignment and it's grayed out, $79.99. I was like, how much do you charge for an alignment? And he was like, $130. And I'm like, man, this kind of looks like a manager took a cash deal and gave the guy a discount for $80.

42:04In cash and then he just put the money in his pocket and it didn't post to your system and you're probably not checking your books, probably not having your P&Ls come out on time. This guy stole money from you. All we know is the cash hit the bank. It's crazy. Yeah. So for us, I think, yeah, there's settings now in TechMetric, but even if they weren't there, Todd has been crystal clear.

42:22Save for laters, deleted tickets. That's a fireable offense in our company. That's crazy. Okay, so, you know, missing receipts, incorrect invoices that causes accounting to pull their hair out. And that affects everyone. Do you wanna talk about like kind of the positive and negative feedback loop of, you know, accounting is a support infrastructure and support system. You do a great job understanding this, that at the end of the day, I mean, you're in the trenches, you saw it.

42:48At the end of the day, the managers, service advisors, the technicians, they make the money and it's your job to count the money. But if they're not doing their job, your job's gonna suck and gonna be way harder and it's gonna be harder for them to do their job. So do you wanna talk about the both? 100%. So yeah, we, the back office, the finance and accounting side, we are not the stars of the show.

43:06We've been— we hit pause on some growth to build some financial infrastructure for sure, but any company worth its salt, they build and cater to the revenue generators. Yeah, that is, that is how great companies work. Players on the field. We understand that. But the thing that people need to understand, especially the guy, the, those service advisors listening, is that it starts with you and it's Up to you to determine, is this going to be a positive feedback loop or a negative feedback loop?

43:32And I'll just talk about what that looks like. A negative feedback loop looks like receipts are not being submitted on time. We are fat fingering parts purchases all the time. We are putting the wrong vendor name. We, we know we, there's a parent dealership and we ordered the part and put one child dealer on there, and then the return had another child dealer on there.

43:53There's a million things that could go wrong, but if it's really about receipts and not being intentional about keeping up with paperwork, making sure there's documentation and then putting things correctly. Now, what does that turn into now at month end, especially, you know, accounting teams that maybe might not have the level of resources or talent to where it's a multiple-person operation, they can start doing some work in the middle of the month.

44:15It's the end of the month. They go to look at everything and they're like, all right, well, I'm missing receipts for 150 transactions. And I've got 20 invoices at every location that I have no idea what's happening here. And then I've got another 5 weird things that I need to go deal with and figure out on top of all the normal month-end journal entries and payroll and accruals and paying rent and doing all the other stuff they need to do at the end of the month.

44:40Now they can't, they can't do their job if they don't have the information or there's not a clean paper trail. They cannot do their job. So they are now sitting on their hands. They are getting nervous and anxious because an accountant's job is to get the P&Ls out. Last. Pretty much. Yeah, that's it. And so now it's the first of the month.

44:56I don't have the information I need. I'm nervous. I'm getting stressed. I'm making calls down to the shop floor, and maybe there's no action off my first call. And then I make a second call, and then maybe I got some attitude because I interrupted somebody who was working really hard on something. Very fair, right? And then the third time, I'm either— either I have to be rude to force the issue.

45:18Yeah. Or I have to just give up and guess. Yeah. Either way, it's not a good outcome because now all of a sudden P&Ls are late, which means potential— there's commissions and bonuses tied to those numbers and they need to be accurate. So now commissions and bonuses are delayed. Now the shop floor is unhappy because we do— we love what we do, but also we like— we enjoy getting paid to do it, right?

45:41Yeah. And so it's just this negative feedback loop of the shop floor didn't provide the information that they needed to. Accounting couldn't do the work they needed to do. Accounting got nervous, stressed, frustrated. Management couldn't actually operate the business accurately. And that's how it ends is now the P&L came out on the 30th and now management got the P&L and now this is stale information.

46:00A whole nother month has passed and now we gotta wait the next month. That's the negative feedback loop versus what about the positive feedback loop of you have the right training and systems on the shop floor to be able to catch all those things that an accountant should not waste their time trying to figure out. The information is all there for them.

46:17The credit card receipts are submitted on time. Now they can get to work on the 1st, and all of a sudden that P&L comes out on the 10th. Service advisors are happy. They know they were paid every single dollar they were owed because they got to see that P&L before their bonus payment even came. And they can do the math and say, yep, that lines up perfectly.

46:35Management, our team now has those P&Ls after 10 days. Now we can make much better decisions because we have real live data and not a month-old stale data. It just— you start, you either go right or left throughout the month. You either are being intentional about trying to understand that this is a crucial part of the business and we're taking the right steps to make sure that that part of the business is supported.

46:57It's a positive feedback loop. It only helps out and the downstream effects come back to the service advisors in form of complete and total transparency of my pay and where it came from and how that was calculated. Right. And then B, a management team that can make smart, fast decisions. And then an accounting team that feels appreciated because they know everybody else is cognizant of what they need to do their job.

47:21It then allows them to go do their job. Accountants love— if they have all the information, they want to flex. My team wants to show me how fast they can do this stuff. They want to win. They want to win. We want to win too. Everybody wants to win. We're all competitive. You guys are the NFL of accounting. 100%. And then it's— the rising tide, it lifts all boats.

47:42And if we choose— and I think we've done a really good job of educating our guys on the importance, but then also building the systems to make sure that it's not all on them. And we've experienced, I think, A, for us as a management team, we've been able to make some great decisions. But even more so, I'm proud of the way it's done for our culture in terms of both sides really kind of getting— office or all of it?

48:03I think between the back office and operations. I think— I don't think there was by no means a rift or anything like that, but just a communication gap. Yeah, right. Of accounting clearly understood, hey, our system is probably too old and we can't handle this volume. And getting to a point where accounting was maybe a little frustrated and was like, well, we're just— we got to figure this out ourselves.

48:24Yeah. And then the guys on the shop floor are like, I haven't heard from them, but stuff's late. But versus now, I think we're in such a greater better place where the guys know, understand what the accounting's job is. The accountants know how important that is to the guys on the shop floor, and both teams just want to do a good job for each other.

48:39Dude, it's just winning, man. It's winning. It's just winning. Like, when you're losing, you don't want to go to work. You don't want to freaking show your face. And my family experienced that when the shop sucks and people are freaking brawling in the back, you know, of the shop, and, you know, nobody's making money. It's like you don't even want to go.

48:54It's not fun. You're losing. You don't want to go. And I think you maybe you told me off the record, you're like, dude, when the P&Ls are coming out late, like it's harder for me to like say hi to the guys at the shop and like be in the trenches. And so, you know, when you went down to the trenches was actually the same day that the P&Ls came out like the fastest they had ever come out.

49:12And you guys are kind of cranking now. So seeing, seeing all that happen, it's like it makes me so happy because like the people in the accounting office are normally like, from my perspective as a service advisor, they're like designed to find the problems and like it's always like, oh, like, you know, excuse my language. This is a Christian-based podcast, but CPA stands for, in the industry, stands for constant pain in the ass.

49:36And it's like they're always finding problems and trying to, we're trying to make our books better. But now, dude, the P&Ls are flying out. It's freaking integrated in Houston. And so I'm here to, one, that's winning, that's sick. But two, it was really hard. So I was going to ask you if you had to do it all again, you really started integrating Houston kind of at the beginning of the year, but really go-live was in May.

49:59And it's been like so much work. And I, if anything, I just want service advisors that work for our company listening to this to understand how much freaking work goes into it and just, you know, acknowledge y'all's work. But 2, if you had to do it all over again, like what lessons did you learn? Man, that is a good question. Deep, deep breath.

50:18Yeah. Such a great, great question. I think Probably. I think if I had to do it all over again, I probably would have maybe taken an extra 3 to 6 months before we actually really launched. But we had deadlines and, and the greater timeline of our company. But an extra 6 months probably of really learning the industry and maybe doing a lot more days on the shop floor, because we got— we jumped right into it.

50:45Then all of a sudden there's an understandable— like, there's going to be delay when you transition systems. But once we got into it, I was like, I got to fix this before I could show my face on the shop floor again, right? So I think taking a little bit more time to truly understand the, the ins and outs of, of the business.

51:01And I, I would, I would say like, I probably wish doing this all over again, I would have spent 3 days staring at the parts cart and like really, yeah, the parts cart and learning that, you know, like some vendors, we have to create an RMA, return material authorization. It's crazy. And then some, they do it for like It's just different across the board, dude.

51:19It's so crazy. If you're listening, like you literally order the part, a parts driver shows up, they wave a freaking invoice at you and like force you to sign it. They're not incentivized to pick up the returns. You have to wave them down. Give me the freaking RMA. It's a piece of paper. And then we rely on humans to put those numbers on that piece of paper into the computer.

51:36That's a joke. Like, if I agree, if I was trying to learn the accounting office, I would just stare as a service provider. I would just stare at the parts cart for 3 days and be like, oh, this is how it works. Like I got a text message today from one of our stores yesterday or one, it's all a blur. And the parts cart is like just full of returns and it's like, oh, okay, we're missing it.

51:55Like it's a very crucial part of the business. And so if you wanna become a general manager or an owner, you know, if you wanna move up in our company, at least you have to understand how the entire business works and how your daily operational habits ultimately affect the P&L. Because we, you know, we talk about this in the Back Office Blueprint.

52:12Like Todd is gonna show you how to make the money in key to key. And he's gonna show you how to keep the money in, uh, in, in Back Office Blueprint, cuz it's, it's walking out, it's walking out the front door. So we are close to the finish line here. Um, we've talked a lot about a lot of great things, but I think let's just take some time to plug the Back Office Blueprint.

52:31But ultimately the idea of keeping the money, okay? Enterprise value. Todd talks about this all the time. Quality of earnings, enterprise value multiples. You know, what is the business actually worth? Yes, we got great revenue. You know, you've talked to a lot of investors. We got great revenue, we got clean shops, happy technicians, they make a lot of money. Show me the numbers.

52:53And if you can't show— that's all they want— somebody the numbers, it's all made up. So, uh, just give me your thoughts on just how in that way accounting adds value to the business. Totally. I, um, I will never make a dollar for this company I will never— maybe I would love to get on the shop floor, get a couple booms, so maybe I'll make a couple bucks.

53:11Yeah, there you go. But without a doubt, I can say the work we've done, my entire team has done this last year, we have created immense value for this company. Yeah, right. But you know, and I do want to say, you know, this— I would love to talk more with those who can make it to the Back Office Blueprint about the process of changing systems.

53:30There's, there's a reason we chose to do it, to meet our future goals and, and the level at which we want to grow to. It's a very difficult thing. You need professional help. You also need to understand that it's— you cannot just pay a bunch of consultants and they'll take care of this for you. The responsibility is equally shared with you. You have to understand and be able to articulate your business back to them to be able to find the right kind of setup that works for your business and industry.

53:56But just kind of circling back to at a higher level, like the role and, and the value creation. You're absolutely right. You, you can wow people all day long with the dog and pony show, and a lot of people can. There's, there's a lot of shops that, like, they are clean, they are nice, and you can put the best person in front, have them go shake the hand, and it's like, oh, this must be a great experience here.

54:21But they want to see the numbers. Yeah, that's all they care about, especially on the investor side. The investors, they're not running your company. They're— they can, they can manage their investment from a spreadsheet. Yeah, they can't run your company from a spreadsheet, and that's not their intention, but they will absolutely evaluate your company off of a spreadsheet. It does not matter.

54:42They will forget about the handshakes. They will forget about the painted walls. They need to understand that if I want to invest in this company, how quickly can I get my money back? Yeah, and you made a good point— quality, consistency of earnings. Todd is very big on— Todd does not want to see us do $2 million of profit in one month and then $750K the next month.

55:02Yeah, he would rather see $1.8 million month over month over month over month over month, because that is what guarantees to an investor we do the same thing that we claim we do. We do it every single day. We execute it without fail. And if you want to invest in this company, I can guarantee you, based on our financial track record, That when it's time for you to recall that money in whatever form or fashion, it's going to be there waiting for you.

55:25They have to know that, and they have to be able to take all of your stores. And like the state we were in, you know, 12 months ago, we had a P&L for every store. Yeah, it looked very different. The calculation for cost of goods sold was different across the board. How can I compare gross profit margin if everybody's using a different formula to get there?

55:44Maybe on the, on the SG&A lines We call the account one thing at this shop. We call the account this thing at that shop. Now, with time and somebody like myself, you can put that all in a spreadsheet and figure it out. But how great is it now to be able to click a button? It's crazy. And we see all of that and we can compare true apples to apples.

56:01Guys, they care about quality of earnings. Yeah, they care about how much you put in bottom line every month and they care about same-store sales. Yeah. Are you growing sales year over year? I think that And this is just me processing out loud. I think that— and I'm going to botch this story. I need to look it up after the pod. It's basically like I heard some story that Warren Buffett bought some railroad company or insurance company for like $1 billion without ever meeting the CEO or like even seeing their operation one time.

56:30And it was because something like this— I'm botching the story, but it was like basically their, their, their numbers were so good and they were so fast and they were so buttoned up. And this is back in the '80s or something. That he was like, yeah, these people know what they're doing. And he bought the company. And the story is basically— and the way I think about it is I think it's kind of like a leading indicator.

56:51It's part of the natural lifecycle of a growing business is a lot of people think about the back office as like an expense. But the reality is like it's an investment in being able to run the business better. Bad accounting is expensive. Yeah, it's like hire— you think an expensive mechanic is expensive? Hire a cheap one. And you're going to find out it's the same thing in accounting.

57:12And so I think Warren Buffett understood that concept that like, like if a company gets to the stage in their lifecycle where they're counting their money extremely fast and it's like Todd is not afraid to raise the corporate, the corporate amount on the P&L, like we pay $15,000 a month per store in Houston corporate for the accounting department. And in his mind, and I'm just even now realizing this even more so than I already did, there's almost no amount of money that you can pour into in the form of resources, whether it be by technology to augment your accounting department or just by accounting talent, which we didn't even really get to get to AI

57:51in the accounting department too much. We're running out of time here, but the quality of and speed of which you produce your numbers, produce month-end close, produce your P&L, is pretty much the quality of the business. It's like, oh, you guys at Auto Hospitality Group, you grew up enough and your business exploded fast enough to where you were like, whoa, we grew too fast.

58:15We have to integrate the whole thing. And I can't even run the business if I'm not getting P&Ls for 30 days. Yeah. And so it's an indication of sophistication. Yes. And if you're sophisticated enough to do that, then you must be a really damn good operator because you realize how important it is to see your numbers every single day. So All that to say, I think I wanna close with this concept.

58:34We'll go a little over. That's fine, man. There's no rules, Todd. There's no rules in business. What? There's no hour time limit on Spotify. This is hilarious. There's this concept of a zero-day close. Mm-hmm. Okay. And for those of you that don't unders— uh, maybe aren't accounting accounts, a, a month-end close is basically how many days does it take me to get the P&Ls?

58:53And a P&L is just a snapshot of how much money we made or lost in the month. On an accrual basis. And so what that means is if I sell a $20,000 engine on the last day of July and I, and I bought the $10,000 engine and sold it for $20,000 retail, but the customer does not pick up their vehicle until, until the next month, until August, the expense for that engine goes on the August P&L because that's when the revenue was realized on a cash basis.

59:26It would all balance out eventually, but you don't really have a good moving picture. That's the whole point of the P&L is it's a moving scorecard of the cash inflows and outflows of the business. And a P&L is really just a collection of data from a bunch of different sources. And we believe that with AI that we can get a P&L produced potentially in zero— in real time, live zero-day close.

59:49So, Matt, I'm— no, I want to riff on this. I want to riff on this. I'm optimistic More so, I think, than the average person. I think we can do it. What do you think? I, I do too. So to give people context, so in the system that I walked into, we, and by the pure willpower of Sadie Nguyen and just what a beast she is and how hard she works, she kind of single-handedly was able to, for multiple locations, our whole Auto Shop Answers family of businesses.

1:00:15Yeah. I've, I've hired 4 people to take things off her plate and I still haven't been able to take everything off her plate. Yeah. It's crazy. She's literally worth 5 people. Multiple companies, like everything. Everything. Um, we— so at that time, P&Ls probably took about 20 to 25 days per store to come out. Yeah. Now we did our transition. Month 1 took 45 days.

1:00:34The biggest— there were some integration issues with outside systems talking to each other that we— one-time stuff that we cleaned up, fixed. We're good to go. Second month took 21 days. Let's go! Dramatic improvement, which— and almost caught up to what it was taking anyway. Yeah. July took 9. That's sick. Fastest we've ever done it. I was shocked. I was shocked. I got 2 P&Ls back to back in a week.

1:00:55Yeah. And I— those P&Ls came out the day before my shift day. Yeah. So that was perfect. Trenches, baby. Oh yeah, man. I'm the CFO. So, so what do we need to do to get to the zero-day close? And another quick plug for Back Office Blueprint. But guys, when you show up, I'm, I'm going to teach you how we're doing this. And ultimately part of the larger vision of Auto Hospitality Group and Auto Shop Answers and Key2Key is We have visions for in the near future.

1:01:20You guys who are coming through Key2Key and you are already operating how we operate on the shop floor. Yeah, there's opportunity to partner where I can just hand— I can hand you the keys. It's crazy. And we just plug it into ours and we turn this thing on. The API keys. Yeah. Like you're not going to suffer the way we have suffered this last year.

1:01:35But what do we need to do to get to zero? Obviously, AI plays a whole, plays a whole part in that. And I think, you know, there's the idea of a zero-day close and then a zero-day reforecast. I'd argue we're pretty dang close to a pretty real time. So a, a refresh of the forecast, meaning, okay, how are we projecting the shops to perform if it's September 10th?

1:01:56Oh, the scorecard. Yeah, yeah, yeah, we call it the— in our words, scorecard. How are we predicting the stores to finish at the end of the month and then even beyond? What do we expect the stores to do for the rest of the year? Yeah, we're like there now. We're pretty much there, which is great. And it's part of our parts and labor.

1:02:09It's pretty simple business to wrap your mind around in that frame of mind, but Back to a zero-day close. So the biggest, and I'm sure for any, for the 2 or 3 accounts who are listening to this in auto repair, you, you well know the vendor statements. Yeah, that's the big thing, right? A lot of times the vendor statements don't, don't show up till the 3rd, the 4th, the 5th, and you gotta reconcile the vendor statements, especially if you're kind of, you're a little more old school, you don't have the talent resources.

1:02:35If you just blindly paying that bill, that number that they say you owe, You're— you, you might be, you know— wait, you're saying that vendors will take advantage of shop owners? Dude, I didn't believe it at first. I was like, I came from, you know, software or, or consumer packaged goods or a couple of like retail manufacturing, and I was floored. It's crazy, right?

1:02:57That with just the, the level of integrity, like Advance Auto Parts versus Advanced with a D, and like somebody will literally send you a fake invoice and an unsuspecting shop owner will get scammed. Yeah. Or the actual vendor will accidentally double charge you for a part and notice that you didn't realize. Yeah, there's accidents and they'll just start doing it again. Yeah.

1:03:16But you know, you give it— you give a— you give them an inch, they'll take a mile. So you got to reconcile. So you do. But my vision is what if we got— like I said, we've talked— we built this system to where everything is keyed into TechMetric. It syncs properly, it's coded properly, and we have a failsafe that if something was miskeyed, we can catch it before it syncs.

1:03:35If we can perfect that, I don't need the vendor statement. Yeah, it's crazy because it's perfect input because I already know that my vendor statement, what I have, my record is going to match that record that we get on the 5th. And guess what? If it doesn't, let's say I missed one part for $25. We sold $1 million last year. Like variances.

1:03:55Yeah, that's so— that's okay. We'll put that $25 in the next month and we'll keep moving now. $5,000 part, that's a big difference. Yeah, we're gonna, we're gonna correct that. But that, that's how we get there, is if we can perfect our parts purchasing and guarantee that the inputs in TechMetric are always correct before they sync. I always put everything on a 72-hour delay to give our team 3 days to catch a mistake, fix the RO before it syncs over.

1:04:21If we can get perfect on it, it'll probably take about another 6 months of training, at least in Houston, to get to a place where we maybe have that level of confidence. That is the only limiting factor, dude. It's crazy. The rest of the data can be pulled from APIs, can be pulled from other systems. And then you— the accountants know they book the same month-end journal entries every month.

1:04:39They have all the data they need by the end of the month. It's crazy. It's part statements, dude. If you don't have to rely on that statement, and that's future state for a lot of people, I would recommend absolutely— there's no shame in waiting till the 5th to pay that and get the P&Ls out on the 10th or 12th. Yeah. But we, we have a, we have a very high bar for ourselves.

1:04:56And if there's companies that are doing a zero-day close, I don't care if that's chat, that OpenAI, and we're auto repair. I don't care. I want to do that too. You, you told me auto repair accounting wasn't sexy, dude. You're— this is crazy. Like, this is crazy. I'm fired up. Like, we're talking about accounting. Look, a P&L is just data that's all over the place in your business.

1:05:22All over the place. It's in the form of payroll through ADP. It's in the form of your credit card statement. It's in the form of your vendor statements to avoid those credit card fees. It's in the form of I got to pay rent either to myself in the form of a real estate company or to my landlord. It's in the form of I got to pay my credit card bill to my utilities and the trash removal and the uniforms and every little thing.

1:05:45But I'm pretty sure Like, well, hold on, there's actually more. There's revenue. I got to get that revenue data from, you know, my point-of-sale software. I got to get it from the cash deposit. I got to get it from everything. And it is Sadie and the team's job to basically compile all of that data into a spreadsheet and to put it in front of Todd Hayes's face and to put it in front of my face and be like, yep, we made money, or yep, we lost money.

1:06:10And for that to validate or verify your operations in the business. And I am speaking to the multi-unit operators or the single-unit operators when, you know, I was doing Mike Quinn's job a year ago and he's much better at my job. He's— or that job. He's a stud. He's a beast. And, and Glenn Piccolo and the whole Houston market. And, you know, it was very hard for me at 5 stores to have a continuous mental model of what the overhead was each location because you just hired a guy here and you just fired a guy there.

1:06:42And this store just had AC fixed in the front office and it was $3,700. And this store is doing slightly less revenue than it was last month. And they actually even calculated their gross profit slightly differently because they didn't count Ubers and they didn't turn in those receipts on time. Where were they putting the general service labor? Yes. And that is all freaking data that exists in the Techmetric API, in the Ramp credit card API, in the payroll data.

1:07:09Like, who did we hire? Who did we fire? Are they in Slack? Are they in Techmetric? Are they in our payroll process? Processing system. And if there's no bottleneck for the part statements, we have to wait for a few days. I'm pretty sure that I can get data— like, because that's what we're doing with our scorecard. When somebody gets terminated, it just— the API checks every single morning.

1:07:28It's like, oh, this person that was making XYZ dollars is no longer working for us. And we were paying— because I'm connected to the NetSuite API— we were paying for their lunches, their uniforms, their payroll, They had 1 year of PTO. They were, you know, yada, yada, yada benefits. They had this insurance policy. Let's just go ahead and divide that by 12 and remove it from the scorecards overhead.

1:07:50And now we have our projected and only for the next 20 days, not for all 30 days of the month. And now we have the estimated net number. And that, that math was what I was trying to do constantly to have a good idea of like, and I was always so stressed because I was like, dude, I don't know, like I'm pretty sure we're going to make money, but like I need to see it show up in the P&L.

1:08:09And sometimes the P&L wouldn't show up for 25 days after the month ended, which was 20 days after I made the move. Imagine you make the move and the, the P&L, the zero-day P&L updates automatically and you're like, okay, like here is— it is literally like trying to play the game with a blindfold on and you don't get to see. It's like playing in the NFL and you don't get to see game film till 6 weeks after you freaking play the game.

1:08:29Excuse my language. If you guys have a— I've always said when I first came in, if operations has a question, finance should be able to answer it. Instantly. And if it's taking 25 days, then that's not happening. So can you imagine the value that would be created to an investor? And if you're not trying to sell your business, that's totally okay. But I believe you should build your business to sell because the business that's more valuable takes care of people.

1:08:50And the reason it's more valuable is because the people in your business are making more money because there's more revenue and you're charging the right prices, so on and so forth. You should build your business to sell even if you don't want to. And I am here to tell you, and Matt is here to tell you that If you can provide a P&L instantly to somebody who wanted to buy your business, it immediately communicates that you are an ace as an operator.

1:09:12Like when I get requests for P&Ls, I know they're timing me. Yeah, they're literally trying to see, okay, if we asked him for the last 3 years of financial records for every single business that makes up our hospitality group, they are measuring if it takes me 2 weeks or 2 minutes, 2 minutes. And it's going to respond to that email. It's going to get to a point where you're going to get the email And you're going to look, open your ChatGPT work and you're going to be like, hey, respond to that email, pull all the data from all the systems.

1:09:37And your agents are literally going to just do all the work that you set up and send it to them. And they're going to be like, what? No, no, I'm talking about this month's, not last year's. And you're going to be like, yeah, that's immediate. That's live. Like, here's a live dashboard. That's sophistication. Even if you're not selling, that attracts better talent.

1:09:52Yeah, you'll have better, more resources to be able to provide and take care of your employees. You can provide better customer service. You'll make better decisions. You won't, you won't stay up at night wondering, did I lose? I just spent money on this. I had to buy this piece of equipment. I don't know if I made or lost money last month. Yeah.

1:10:07It's crazy. It's a hard way to live. So anyway, Todd had the vision to pause aggressive growth for a year, you know, so Adam, so smart, and the team could build people, controls, technology, um, that are required for this next growth phase. But I feel like you guys have done it. It's crazy. Like, I, you know, we're not there yet. We got a lot of work to do.

1:10:22Yeah. I gotta get, you know, you know, some other, we got, hey, Boston store, shout out you guys. You guys go live. Um, we're recording this right now on a, Wednesday. You guys go live next Tuesday. Let's go. We're fired up for you. Hopefully you've listened to this by the time, you know, you know we're doing that. Look, nobody is hiding in this company from the fact on what type of missions we're trying to accomplish.

1:10:43We're trying to de-risk the portfolio. But at the end of the day, Todd has a mission of becoming a billion-dollar-plus automotive organization. And we are building the blueprint. Like, Matt, you are the architect for the blueprint for how the back office is going to support that. So do you have any Um, any final thoughts for the people on why they should come see you and learn kind of how you're running the back office?

1:11:05Yeah, I think, listen, we're going to start the morning with 101 for those folks that, that maybe feel— we're going to start with the P&L. We're going to teach you guys how we structure our P&Ls, and we're going to run through many examples. And Joe and I are going to teach you really here that if we had a bad P&L, there's 2 places we're looking.

1:11:21We're looking at gross profit, we're specifically on parts margin. And we're looking at loaded payroll for the front of the house. Yeah, we're going to go much more in-depth on that. We're going to spend a good chunk of the morning walking through that. But not just that, we're going to talk about assessing the level of talent in your back office and recruiting.

1:11:36We're going to talk about the non-negotiable controls you need to have in place to, A, know where the money went and, B, make sure you've got your, your antennas up for potential fraud. We're going to talk about what it looks like to go from multi— single location to multi to potentially preparing for a sale. We're going to talk about systems, technology, AI in accounting, how it's augmenting employees.

1:11:59It is not replacing human beings in the accounting office because we cannot take a single risk, but it is making our employees 50 times more valuable. Actually, I'll pause with this last thing and just to talk about, you know, you were mentioning where, where we want to head for Auto Hospitality Group. Remember when we started rolling out, you know, really heavy on, hey, trying to push people to leverage AI more and more and connect all of our systems.

1:12:21Had feedback from one of our team members. It was like, hey, you know, I— this is really cool, but I actually feel some concern that, you know, I'm— I feel like I'm watching myself be replaced in front of my eyes. Yeah, it's kind of scary. And, you know, we're— we have multiple people on the accounting team, so, you know, there's a ton— there's larger headcount than maybe some of the other stores listening.

1:12:41And I— what I was able to tell her was like, here's, here's the beautiful part of this. If you— this team of 5 that's running these 5 stores If we were just going to be these 5 stores forever, maybe we wouldn't need 5 people to keep doing this. Right. But the beauty of this thing is in 2, 3 years from now, that team of 5 is going to be running 15 stores.

1:13:01They're going to be 3 times as productive. Yeah. And I will pay them double what they make right now. Right. Because they are going to be way more valuable because they have mastery over these tools. Yeah. Accountants will not lose their jobs to AI, but accountants who don't know how to use job— who don't know how to use AI will lose their job.

1:13:17Todd says that all the time. Yeah, it's crazy. So anyway, That's it. Uh, I think that's the pod. We learned a lot today. I learned a lot today. I'm excited. Zero-day close. I'm gonna hold you to that. No, I'm just kidding. Um, hey, give me a year. Let's see, let's see what we can do. Anyway, Matt, you're the man. This has been, uh, Master Tech to Millionaire presented by Adams Automotive, Auto Shop Answers, and the whole Auto Hospitality Group.

1:13:37That's the pod. We'll see you next time. Boom. For more information, reach out to Todd Westerland at 925-980-8012 or visit autoshopanswers.com. You can get more information about Key to Key to Callbacks, uh, Courtside. We have a VIP Rack Attack Day where you spend an entire day in the trenches with our team learning this perfected business model. Uh, we offer leadership classes, we have an AI Academy, and also get more information about Auto Shop Callbacks.

1:14:05Uh, we have auto tech training. We are literally your one-stop shop. Once again, that number for Todd Westerland is 925-980-8012.