We conducted our interview with Wayne Burgan and Bud Chapplain in classic networking fashion: a three-way call that spanned three countries and two continents. With Bud in Toronto and Wayne in Australia, it took us a little doing to set up the call. By the time our interview was over, we’d gathered that the minimal effort it took to press “Flash” and hook our three phones together posed more complexity that we would encounter using their online accounting system.

Wayne is the founder of CashFlow Manager, Australia’s leading small business bookkeeping solution. With his partner Bud, he has now designed One-Minute Books, a web-based version of his original system tailored specifically for home-based businesspeople. — J.D.M.

How did the two of you begin working together?

BC: I’d been in the direct selling industry for years, working with Encyclopedia Britannica in an executive role. In the late eighties, I took a position running part of Australia for Britannica.

Wayne and I attended the same church and both loved golf, so we decided to play a round together. When we met at the golf course parking lot, we got talking.

In his accounting practice, his small business clients didn’t really understand where their money was coming from or where it was going. They had enough trouble reconciling their checkbooks, let alone their accounting books. To help them, he had created a little book, written so a twelve-year-old could understand it, containing a full set of simple ledgers with practical, understandable headings, so that anyone could easily understand what columns to use for what.

He had also included a section on how to reconcile the data you collected, how to understand it and how to run your business better.

I thought it was brilliant—and that’s how we started working together

This being the late eighties, people weren’t using QuickBooks.

BC: Hardly anyone was doing small-business accounting on home computers. And in the small business arena, what Wayne had put together was quite unique. Within three years, his business was generating about a million dollars a year, just marketing this book to accountants, who then sold it to their own small business clientele.

WB: There were quite a few manual record-keeping systems around, but they all made the assumption that people knew what they were doing.

Bad assumption!

WB: Yes. What made my product unique was that it said, “Step one, do this. Step two, do that. Now, here’s an example, and here are forms you can complete yourself.”

That simple, step-by-step approach made it work. Soon, instead of telling me, “None of my small business clients can reconcile their records,” accountants were getting 96 percent reconciled records.

Since that time, have we grown any more sophisticated about knowing what the heck we’re doing? Or are we in the same state we were then?

WB: We’re pretty much in the same state we were then! It has changed a little, with technology. But with your mom-and-dad-type businesses, across the board, they get trained in how to run their businesses, but have very little understanding or training about the record-keeping side of the business.

Where did things go from there?

BC: Once the market started being flooded with accounting software, Wayne’s customers started saying, “Look, we really like the book, but we need to give our clients something that keeps the integrity and simplicity of the book and delivers it through technology.”

Wayne was faced with a decision: do you go head to head with Intuit and Great Plains, and try to create the same type of product they market? Or do you take a different tack?

Most of those products are very good, but they start with the philosophy that they’re going to turn the end user into a mini-accountant, using double-entry accounting and other things most small businesspeople don’t understand. They put in a Pandora’s box of bells and whistles and market it as extremely simple and easy to use, and the accountant is often left to serve as technical advisor to fix all the problems that come up.

Wayne decided not to go that route. He said, “Let’s leave the accounting to the accountant. Let’s give the small business owner a tool that is easy to use, that focuses on simple record-keeping and lets you run the reports you need to provide to your accountant, but stays away from calculating depreciation and that sort of thing.”

We ended up with a piece of simple, single-entry software that has since withstood the test of time. In Australia, CashFlow Manager rates as one of the country’s top three business software products—and that is without ever having sold a single piece of software in a retail environment.

How did you market the product?

BC: We market directly to specific groups, such as accountants and banks, who have client bases that use the products.

Eventually Wayne wanted to bring the product to North America. By this time, Britannica had closed its traditional doors and people like me had become redundant, so I partnered with him to open up this market.

When we started exploring what market development strategies we might use, we realized that going directly to accountants, as he had done successfully in Australia, was not the route to go here. Instead, we decided to market directly to large groups of end users and large organizations of these people.

There are a few things we do that distinguish us from off-the-shelf software. We have the ability to customize our product and give it specific brand recognition, not only from a specific company or association point of view, but also from an industry point of view.

For example, one direct selling company we work with has 600,000 ladies out in the field marketing their products. Each one of those people is herself a small business; every one of them gets a 1099 and has to file. We worked out a partnership agreement with that company and branded our product to their brand.

And each one of those people is a business that typically is skipped over by most other B2B services, because they’re too small.

WB: Exactly.

BC: You hit the nail on the head. People in network marketing and direct selling, independent insurance agents, home-based businesspeople, all these people get overlooked, because the accountant really doesn’t want to spend an awful lot of time with them. That’s the group we focused on.

Now we’ve also taken it one step further and bridged the technology gap again—and this time, we’re probably one of the leaders in this latest frontier: we’ve just brought to market a full web-based version of the product called One-Minute Books.

What’s the advantage of a web-based application? How is that different from the software we’ve run on our own personal computers?

WB: One advantage is that you can access your records from any computer, anywhere in the world. As long as you’ve got Internet access, you can log on and work on your records.

This means you don’t have to worry about your computer crashing, or not backing up diligently, because your information is stored for you securely online. For anyone who’s ever lost crucial data because they hadn’t backed up—and who hasn’t had that happen?—this alone is a huge advantage.

In Australia, we’ve got about 120,000 pieces of software out in the marketplace, which means we have quite a large customer support center. You’d be amazed at how many people call us, desperate over lost records because they didn’t back up properly.

BC: Here’s another big advantage: you don’t have to buy a new edition of the software every time Microsoft decides to change or upgrade its system.

I suppose this is taking us towards the point where we can do these things on our cell phones.

BC: That’s the next step. No matter where you are, as long as you have Internet access and can view the screens, you can use a system like this.

What are the biggest challenges you face in educating us about financial literacy?

WB: The biggest challenge is moving people away from what they’re good at, which is the business itself, into an area that causes them stress and frustration, because it’s an area they haven’t been trained in and don’t have expertise in.

And it’s intimidating.

WB: Yes.

BC: This is an interesting time of year for us, as people start preparing to do their tax returns. We get calls from people who are tearing their hair out because they just don’t know where to begin. They know they’ve got to do something.

We take it back to the basics: understanding what a record is and what can you do with it. If we can get people to devote ten minutes a week to putting in their data, then at the end of the year, preparing your information for your taxes takes a click of the mouse.

But record-keeping is not a sexy topic, and that makes it a challenge. That’s why we maintain as much simplicity as possible in what we do.

If I’m doing my network marketing business every day just not keeping good track of what I’m doing, what are the problems that might come my way?

WB: One of the biggest problems is that you run the risk of losing credibility as a genuine business with the tax authorities.

Before I developed this product, I worked in the Australian tax office, back in the seventies. One of my first jobs there was to go check through all the returns of network marketers who were claiming they were in business, because many of them were essentially getting tax deductions for “business expenses” but not actually earning any income.

This is why tax authorities around the world look closely at network marketers. They want to know, “Are you in business or not?” And one thing that demonstrates the answer to that question is how you treat your business. If you don’t keep good records, from the tax authority’s point of view, that’s a sign that you’re not really in business.

BC: I recently attended a tax seminar sponsored by the Direct Selling Association in Washington, and the chairwoman of the IRS was there, along with some tax authorities who specialize in direct selling. They realize that the number of professional networkers has exploded into the millions. And of course, they want their piece of the pie.

They understand that a lot of people are marketing the concept that being in this business is a great way to be able to write things off as business expenses. Their point of view is, it’s okay to lose money, but you have to be approaching your business as a business, not as a hobby. And it’s up to you to prove that this is the case.

Beyond the issue of taxes, what’s the disadvantage to me of not really knowing the financial facts about my business? I mean, I just tell people about my product, and the company sends me a check. So why would I need to keep careful track?

BC: A recent article from Business Concepts magazine reported that 80 percent of new businesses fail to succeed, and the top two reasons for their failure were “inadequate accounting records” and “misinterpreting financial records.”

If you don’t understand your basic financial facts, then there are probably other parts of your business you don’t understand, too! And if you do take the time to organize yourself and your records, you’ll probably do better in your business all around.

Behaviors measured, improve.

BC: Whether you’re Enron or Rhonda, Inc., your business is best served by you understanding the true facts of where you are, and not misinterpreting your financial reality because you have some vague idea of where things stand.

WB: In any small business—in fact, in any business, period—the number one issue is cash flow. People talk about profit, but “profit” is really an accounting term. Profit’s important, but cash flow is king, because if you don’t have cash, you can’t pay your bills, and that’s when businesses get into trouble.

It’s remarkable to see the number of businesses that fly by the seat of their pants, when it comes to cash flow, and get themselves in trouble. That’s less the case in network marketing, because you don’t really have people who owe you money, and a lot of other small business owners get into trouble because they’re not diligent in following through with their receivables. But even in a network marketing business, having a clear picture of your cash in and cash out will help you enormously.

In fact, often you’ll find the business won’t grow until you get a grip on where your expenses really are and where you need to focus. One thing we absolutely suggest is keeping two separate bank accounts, one for your personal life and one for your business. Without that, it’s very, very difficult to keep track of what your business is actually doing.

As you said, “what you measure, improves.”

A lot of network marketers come from the background of being an employee, not a business owner, and enter this business without really defining their numeric objectives.

WB: When I started my accounting practice, I always knew how much I had to earn every day to be able to eat at the end of the week. Sometimes, as your business grows larger, you lose that focus, but if you do it’s very hard to actually achieve a goal. You need that focus to be there so you can see it and move towards it. And you need to monitor it to make sure you’re actually heading in that direction.

BC: People who are financially successful typically know exactly where their first dollar came from and exactly when. That’s not because they stingy or penny-pinching, it’s because they understand the true value of the work they’re doing, the time they spend doing it, and the return they get on that investment of time.

I hear people in the networking profession say, “You can work at this for two hours a week,” or, “six hours,” or some tiny number like that. But you and I both know that if you’re going to make anything in this profession, your business will at some point become your primary focus, at least for a certain period of time, until you have built up that residual.

Tell us a little more about this web-based application you’ve just unveiled. Is it tailored for network marketers, or home-based businesspeople, or … ?

BC: When you log on, create your profile and set up your accounts, you can choose from a number of different templates to describe the particular business you’re in. There is a template for network marketing, a template for party plan and direct selling, and a template for your home and personal activity, so you can track your personal financial information as well as your business information.

Let’s say you also run a little flower shop on the side: you could set up the general sales template, too. Or let’s say your spouse happens to be an electrician or a plumber—there’s also a template for trade. Or, if you happen to have a medical practice as a dentist, doctor or chiropractor, there’s a professional section there, too.

You’re not limited to one or two templates; you can set up as many different templates as you need to describe everything you do.

So this is a place where you record your cash flow, and as well as helping you manage your cash flow, it will also provide you with the records you need to give your accountant, come tax time?

BC: You got it.

I would imagine the need for the kind of product you just described has got to be increasing dramatically.

BC: The demographic of the small business, at-home businessperson and network marketer has changed markedly from twenty or even ten years ago. And the spread and accessibility of the Internet is now changing things even more.

I just came back from a few weeks in China. Everybody there, even the ninety-nine-year-old grandmother, knows how to text message on their cell phone or PDA—because they never had any land-line infrastructure for wired telephones. People never had telephones at home, so they’ve skipped that step.

It’s somewhat similar over here, for the generation now entering the business landscape: most people under the age of twenty-five will never have a land line at home. They have no need for it: they operate from a wireless computer and a cell phone, and that’s all they’ll ever use.

The application we’ve just launched is aimed at people who are technologically comfortable tapping into resources on the Internet, as opposed to buying a piece of software and putting it on your computer. That’s what we see as the new horizon.

Any closing thoughts or words of advice?

BC: There are two things you can depend on, death and taxes. If you’re reading this article, you’re not dead yet—but you have to file! This is going to keep happening every year. You might as well get a handle on doing it the right way.

WB: My comment goes back to Leonardo De Vinci, who said, “Simplicity is the ultimate sophistication.”

For a five-minute overview of Bud and Wayne’s product,
go to www.networkingtimes.com/omb
and click on “Overview.”