Mungia CFO Services

05/15/2025

Your strong working capital might be your cash flow weakness.

I’ve often observed that most small business owners, bankers, bonding agents and financial analysts love to see a business with “strong working capital”.

Yet when I see strong working capital, I wonder how cash flow could be affected. Sometimes it’s not an issue. Other times, it’s the cash flow crunch nightmare that keeps business owners up at night.

Here are a few things I do and look at, to better understand how cash flow may be affected by that strong working capital position.

• Define working capital as either gross, net or modified.
• Understand composition.
• Review the conversion cycle.
• Identify external funding sources.
• Determine the priority/allocation of internal funding sources.
• Anticipate capex & funding sources.

If you want this type of analysis to better understand your finances and projected cash flow, contact me. I specialize in providing factional CFO services to small businesses.

04/09/2025

The biggest and most common financial mistake I see business owners make is improperly funding their business with debt and equity. 🤦‍♂️ The use and mix of debt and equity is also referred to as the capital structure.



Having the right capital structure can make the difference between your business dying, surviving or thriving.

We all know the consequences if businesses use or have too much debt. That includes money borrowed from friends and family. The estimated pre-tax cost for debt generally starts at 7% and goes up from there.

Yet few understand the consequence of using too much equity. This consequence is not generally defined as a percentage, like debt. (Although I do know how to estimate the percentage but that’s a post for another time.) Rather, the consequence is felt more operationally.

For example, sometimes a business is faced with a problem. Let’s say its… tariffs. 😉 Sometimes the best way to get around a problem is to increase revenue growth. Yet growing from profit (a form of equity via retained earnings) and management of clients and vendors can limit your growth. Especially on shrinking margins. So, you may not be able to grow fast enough to remedy the problem.

Of course, another equity funding strategy is to sell ownership in exchange for cash. Yet not all owners are ready for that step. Even if they are, it can get complicated quickly regarding terms, control and even buy backs, assuming that is even an option. Note: It’s not uncommon for a buyback to exceed 20% of the original sales price.

Knowing what, when, where and how to use equity and debt can be a huge help in operating your business.

P.s. I’m Steve Mungia, an outsourced or fractional CFO for small and mid-sized businesses. I specialize in helping your business answer these questions to increase your chances of success. Contact me if you’re ready for this kind of business financial leadership and guidance.

04/02/2025

How much of your growth do you plan to fund with internal versus external financing?

This was a question I asked my client that was projecting to quadruple their revenue from the previous year. Having the right mix of internal and external financing can reduce growth costs and lower the risk of going out of business. However, using the wrong mix can be expensive (relatively speaking) and become a high risk for going out of business.

Here are a few examples of financing for each financing type.

Internal Financing Examples:
✅ Management of receivables, inventory and payables
✅ Management of profit margins (product, gross, net, etc.)
✅ Negotiations with vendors/suppliers on terms and conditions
✅ Negotiations with customers on terms and conditions

External Financing Examples:
✅ Sell Purchase Orders
✅ Sell Receivables (factoring)
✅ Credit cards / bank line of credit
✅ Bank loans
✅ Sell partial ownership / private equity

Sometimes external financing can be internal financing and vice versa. So, it’s not always clear. What is clear is that knowing the right mix can help you identify, manage and optimize lowering your costs and risks.

If you’re curious what the right mix is, it’s different for every business. So, if you want to know your optimal mix, contact me. I specialize in working with business owners and improving their business financial awareness and decision making.

04/01/2025

We’re thrilled to unveil Mungia CFO Services’ new website! Discover expert fractional CFO solutions, strategic financial guidance, and more—tailored to help small and mid-sized businesses thrive.

Visit our new website and learn how we can support your journey to sustainable growth! 👉 mungiacfo.com

03/28/2025

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03/26/2025

When should you hire an outsourced Chief Financial Officer (CFO) for your business?

Regardless of what your revenue is or how many employees you have, every business is unique. So, the answer to this question should not be based solely on revenue or employee size.

Here are a few signs that you are ready to hire an outsourced (Fractional) CFO for your business.

• You work with a bookkeeper or accountant but are NOT receiving financial guidance.

• You are not receiving CONSISTENT access to financial guidance from your bookkeeper or accountant, generally because of their “tax season”.

• You want to focus on other tasks but want a financial expert to look at the finances.

• You can afford to hire an internal part-time or full-time bookkeeper.

• You want proactive financial and strategic advice and decision-making assistance.

If most of these signs resonate with you, contact me. I specialize in providing expert financial guidance (Fractional CFO) services to small and medium sized businesses.

03/19/2025

What are your revenue (aka sales) boundaries for your business?

Specifically, what is the minimum revenue you need to stay open and what is the maximum revenue you can achieve before you experience cash flow issues?

Most businesses owners know they need a minimum amount of revenue to stay open. If you know this number, great! Yet I often find that when I calculate the minimum, it is different due to my perspective and unbiased analysis.

How about your maximum revenue? This one is harder to figure out. Sure, there might be some formulas that can help. However, I find that to get a more accurate number, it requires a discussion regarding estimates, forecasts and financial analysis.

Knowing your revenue boundaries can be critical to your success, planning and scaling your business growth and cash flow. Contact me if you don’t know your revenue boundaries or want assistance in determining them.

03/13/2025

One of the more fun activities I like to do with business owners is to help them explore if they should lease or buy a building. Here’s a sample list of the things I analyze before making a recommendation.

• Business rate of return.

• Rates of return for leasing versus buying.

• Cash flow effects of leasing versus buying.

• Income tax effects on business and/or personal taxes.

• Owner/management succession plans & estate planning considerations.

• Strategic vs financial benefit.

If you or someone you know are contemplating this decision and want an expert recommendation, contact me. I can provide you with unbiased information to assist in your decision making.

03/05/2025

“You’re going to have major issues if you grow your revenue over 15% or $225,000 based on your current financials.”

This is a common sentence I say to small business owners when they want to grow but don’t fully understand that there is a cost to grow and that there are limitations.

Common rebuttals are “Well, we did it last year.” or “I have the right people or systems in place.” or my favorite “Why? We’re making money and we need to grow to make more money”.

This could all be true and it doesn’t mean that they can’t achieve their desired growth. However, if businesses grow without proper awareness and preparation, they could literally grow themselves out of business.

Working with a Fractional CFO can help you identify “healthy” growth and how to properly manage and fund this growth so that you are not jeopardizing the health of your business.

If you’ve been experiencing operational stress from growth or want a better grasp of your business finances. Contact me. I’d love to work with you and assist in your continued success.

02/28/2025

The average base salary for a Chief Financial Officer (CFO) is $150,000 but it can be nearly $300,000 at the top end and when including total compensation! That’s according to Payscale.

Most small and medium-sized business owners want the financial leadership, knowledge and experience that comes with hiring a CFO but don’t have the budget for one.

However, if you can afford the salary equivalent of a full – time bookkeeper AND already have a bookkeeper, you can afford to hire your very own CFO! Seriously.

It’s called a Fractional CFO (aka Outsourced CFO or Part-Time CFO) and it’s what I specialize in. From expert financial strategy, modeling and forecasting, assistance with investor/bank relations and negotiations, buying/selling a business and business valuations. If you’re ready to elevate your business, contact me. I’d love to work with you.

02/25/2025

Client: Steve, my business finances are causing frustrations in my marriage and further stress on our personal finances and decisions. Can we book an appointment with you to discuss this further?

Me: Of course! Sounds like we need to set up a financial therapy session. 😉

This is a summary of a recent phone call I received from my client. What is financial therapy? According to the Financial Therapy Association, it’s “A process informed by both therapeutic and financial competencies that helps people think, feel, communicate, and behave differently with money to improve overall well-being through evidence-based practices and interventions”.

Now first off, I am NOT a licensed therapist, nor do I claim to be one. However, I AM a good business financial communicator. You see, I view finance as a language. How you learn to communicate in this language depends on various factors such as your primary language, culture, family influence, geography, exposure, trauma, etc. As a result, people can have different dialects and accents, and this can make communication difficult.

Such was the case for my client and his spouse. They were fluent in personal finance. Yet recently, my client hired me as a Fractional CFO to learn business finance (second language). So, when the couple were trying to make personal financial decisions, there were financial communication issues. This was the source of frustration and stress.

During the session, we addressed the biggest concerns and broke them down so that everyone could understand the issues, regardless of dialects or accents. I can’t wait to have them back for a follow up session.

Hiring a Fractional CFO should be more than just going over your numbers. There’s usually a story behind the numbers. The narration and communication of your numbers can be critical to your relationships with bankers, investors, vendors, employees, friends and family. Contact me if you’re ready for this type of assistance or in need of a little financial therapy.

02/18/2025

Most small business owners make financial decisions and estimates (forecasts) based on simple math and “gut feelings”? This may work for a while but it’s not sustainable or even healthy to only operate this way. Even if a formal forecast is created, few forecasts provide granular data for sensitivity analysis and assist with making proactive decisions.

Working with a fractional CFO can provide unique tools and perspectives to assist you. One such tool is a Price – Volume - Mix (PVM) Analysis. To see the value of this, I’ll set the stage with the following assumptions for an imaginary Coffee Shop:

· Revenue is expected to grow 10% organically by $50k from $500k to $550k.

· The owner is considering increasing average coffee prices by $0.09 from $5.50 to $5.59.

· Sandwiches and miscellaneous prices will remain the same but still increase by organic growth of 10%.

· To encourage customers to buy more pastries with coffee, the average price for pastries will go down by $0.76 from $5.75% to $4.99.

So, what happens to your forecast with these assumptions? Look at the image below, specifically the two waterfall charts. It shows you how products, price and volume will affect your revenue.

In this case, revenue will grow by 16% (instead of 10%) by selling more pastries even though the average price was lowered. With this information, you can decide if this type of change is worth doing before actually doing it!

Even better, this type of tool and perspective isn’t limited to revenue. It could be used for gross profits or even headcounts and labor expenses.

Now obviously there’s a lot more “math behind the scenes” that goes into this type of analysis. For my clients, I’m happy to fully explain it. Or simply do the analysis to give them the information to make more precise and proactive decisions. If you’re ready to operate your business like this, contact me. I’d love to help you.