11 Ways business owners could get better financial advice
Sue Hirst, Director – CFO On-Call
The accounting profession has traditionally focused attention on the tax and compliance side of business. Some accountants are offering day to day financial management advice, but they are few and far between. Most practising accountants have never worked in a commercial situation i.e. been responsible for the profitability and cash flow management for a business (apart from their own), so how well does that equip them to give advice (in ‘plain English’) to SMEs?
What SMEs need is someone who can really roll their sleeves up and get into the nitty gritty with them. When I say nitty gritty I mean:
- Working out the true cost of a product/service, so the business owner knows what price to charge to ensure a profit, how much room for manoeuvre on discounting and competitive pricing.
- Understanding all the overheads of a business and including them in a budget, so they can be monitored monthly to ensure they don’t get out of hand and eat up all the profits.
- Working out the best finance options for a business. Every business is different and therefore has different finance needs. Some have equipment that can be leased or hired, some have high profit margins and therefore can absorb high finance costs, whereas some have low margins and need to be very careful that finance costs don’t eat up all their profit.
- Driving management of the internal factors affecting cash flow management e.g. Accounts Receivables, Accounts Payables, Stock/WIP, Taxes, Loans etc.
- Setting KPIs (both leading and lagging) to ensure targets are met. For example if a business owner knows their sales conversion rate is say 50%, they need to ensure they are generating twice the number of sales leads to achieve their sales target.
- Ensuring SME owners can read and understand the financial reports and what story they are telling about the performance of their business. For example looking at just dollar results is not as useful as looking at reports containing percentages. Percentages make it easier to see how things are going relative to the sales figure, which may be going up and down each month.
- Helping SMEs to analyse feasibility of new ideas. What may sound like a fantastic opportunity, may not create much extra profit on the bottom line if not structured and priced right.
- Helping SMEs to systemise their business, so they can occasionally take leave from it and create more business value by making it more easily transferrable to new owners.
- Helping SME owners to pay themselves properly and structuring pay/dividends, so they are sustainable for the business and tax effective.
- Acting as a ‘sounding board’ and trusted CFO advisor to listen and answer any questions a business owner has about the financial impact of decisions.
- Providing all of the above in a cost effective way and ensuring a high ‘value proposition’ to SMEs so the benefit they gain far outweighs the cost of the service provided.
If the above sounds like you or you’d like someone like this and want to learn more about high quality financial advice contact us