A cheat-sheet written for street-smart business owners… who are ready to grow!
Top 6 Tips For Success in the ‘New Normal’ Business Landscape
- Complimentary E-BooksDespite the fact that you have achieved great revenues and are typically meeting your monthly sales targets, you are not always seeing the profit and cash flow reflected in your bank account.
Top 7 Levers for Manufacturers Competing in a Price Sensitive Market
- Complimentary E-BooksDespite the fact that you have achieved great sales and are typically meeting your monthly targets, you are not always seeing the profit and cash flow reflected in your bank account.
Profit & Cash Flow Planning For The New Financial Year
- Business GrowthWhile the financial year in Australia is about to end on 30th June, the ramifications of COVID-19 are still being experienced by many businesses. Now is a good time to think strategically about plans for both emerging from the crisis, and strengthen business to withstand any future crises.
Here’s a checklist of what to focus on to ensure sustained and improved profit and cash flow in the new financial year:
1. Sales/Gross Profit
- Review sales and gross profit by product, service, customer, region, division etc. to determine which ones you should be focusing on this year. Perhaps there are some you should ditch that are dragging things down.
- Consider new opportunities available due to changing business conditions. Be a survivor of ‘COVID19’ not a victim. If you aren’t comfortable with online/digital marketing get some help in this area.
- Unless your business appeals to those only over say 75, you must get it together online. Run a Strategic Planning session with your team or find someone to facilitate it for you. Brainstorm ways you can achieve sustainable sales improvements.
2. Costs
- Closely review your business costs e.g. are there ways you could achieve supplies more cost effectively and efficiently?
- Labour hours is a massive opportunity to achieve better productivity in a service business. Look very closely at everyone’s productivity level i.e. how many hours their working are you able to bill to customers?
- Small changes in work practices can have a massive impact on profitability. Ask yourself Am I selling all the hours I’m paying for?
- Spend time researching your industry association and industry publications to learn of new efficient ways of doing things to save time and money.
3. Pricing
- Answer these questions honestly
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- How long since you increased your prices?
- Have you been too worried you will lose customers if you do this?
- Can you continue to suck up the margin squeeze created by increased costs, without increasing your prices?
- How much more is your overhead this year compared to the previous two years?
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- If you’re being squeezed by competitors, you must fight back by lowering your costs to compete, or by explaining to the market why they should pay more for your ‘better’ product/service.
- You need to make the ‘invisible visible’ by describing what you do that makes your offering so much better, longer lasting or whatever is your ‘point of difference’.
4. Overheads/Net Profit
- Closely review all your overheads and ask yourself these questions – Why are we spending this money? How does it contribute to the business and our profitability?
- Should we stop spending on this item? Is there a more cost effective alternative or better way of achieving this? Should we seek an alternative supplier – if only to get current suppliers to ‘sharpen their pencil’ on costs?
- What have we learnt through coping with the COVID19 situation? Are there changes that were cost effective we could continue or absorb into future business operations. For example staff working from home can create big savings on premises and power costs.
- It really pays sometimes to create an environment of competition amongst suppliers. Don’t underestimate your value as a customer to them.
5. Customer Payments
- How does the average number of days it takes you to get paid by your customers compare to the terms you offer? Not many business owners really understand and/or appreciate the massive difference between these two numbers and the horrendous impact it can have on cash flow if the difference is large.
- Work it out and set yourself a goal to reduce this number.
6. Supplier Payments
- How does the average number of days it takes you to pay suppliers compare to the terms they offer you?
- If you’re not taking advantage of every day of the terms offered you could be creating unnecessary cash flow squeeze.
- It really pays to seek better terms from suppliers – particularly if you’re a big customer and they have plenty of competition for your custom.
7. Stock Management
- How much stock do you really need to keep on hand at any given point? Think of stock sitting in your stockroom as dollars piled up on the floor that could be used for other things e.g. marketing to get the stuff out of the door quicker.
- It’s so easy to get sucked into buying things in bulk to get discounts, but if the stuff is going to sit around sucking up precious cash, you might be better to buy in smaller quantities. Consider ways to minimise the amount of stock.
- In view of the COVID19 situation, ‘just in time stock management’, may need a rethink, to ensure enough stock is available should there be future supply chain interruptions.
8. Job Management
- How much money do you have tied up at any one time in jobs in progress? Try to find ways to speed up the time it takes to get payment on jobs e.g. through a deposit, progressive invoicing etc. A good job management system can really help you to keep track of jobs, create efficiencies and get jobs finished quicker.
What are the next steps?
Set a plan next financial year to focus on these key aspects of your financial control to achieve better profit and cash flow.
If you would like to learn more about this subject, plus other useful business financial management tips, check out ‘Business Financial Toolkit’
CFOs share their ‘tips from the trenches’ – real-life examples of COVID-19 success stories
- Media ReleasesIt’s one of the biggest buzzwords of the moment – unprecedented. We’re living in unprecedented times, whereby a pandemic is causing an unprecedented impact on the economy. As a result, businesses are facing unprecedented and unpredictable changes to their operations.
At times like these, you turn to those you can rely on. Those who can help you see the light at the end of the tunnel and can guide you in making positive, sustainable choices to mould your future.
As Australia and New Zealand’s leading CFO advisory network, CFO On-Call boasts a stable of experienced financial advisors equipped with all the tools to do just this. So, while some business owners are still acting like a ‘deer in the headlights’, others are using this unique opportunity to be both creative and strategic.
Sue Hirst, Co-Founder of CFO On-Call, says that savvy businesses are treating the crisis as a catalyst to not just survive, but come out the other side in even better shape than before.
“With our CFOs based throughout Australia and New Zealand, we are currently working with a myriad of businesses from a diverse range of sectors – from wholesale, pharmaceuticals and consultancy to fitness, retail and trades,” said Sue.
“This has given us a first-hand glance into how certain sectors have been dealing with the impact of COVID-19, as well as how certain businesses have chosen to make the best out of a bad situation.
“We’ve compiled our ‘tips from the trenches’ – real-life examples of businesses who we have worked with through the COVID-19 pandemic – in the hope that it can help others to push through the tough times,” added Sue.
For wholesalers, COVID-19 has prompted them to embrace ecommerce and online shopping, moving their operations onto the likes of Amazon and eBay. Many have been encouraged to take advantage of this time to do more menial tasks like stocktake and setting up new warehousing where appropriate.
Monthly forecasts combined with training and strategy sessions have proven a great help for those in the pharmaceutical industry, while gyms had much success employing a loan system for their equipment during their closure periods.
In consultancy, the best results have been observed by those who are building positive relationships for the future by offering a reduced fee for a similar or the same amount of work.
Overall, businesses are achieving success by using the downturn to tweak their business model and plan for the future.
“We’ve found that for many business owners, this period has offered them the opportunity to take a step back and properly evaluate their business – something that, under basically any other circumstance, they may not have had the chance to do,” added Sue.
“Immediate priorities have included ensuring they can access the right amount of government stimulus, planning ahead for the ‘best’ and ‘worst’ case scenarios and doing weekly cash flow forecasts to keep on top of finances.
“The best prepared business owners have also taken the opportunity to put their information in black and white and focus on developing accurate forecasts – something which our CFOs have been working on.
“Whatever the industry, the lessen that we’ve learned from the COVID-19 crisis is clear – now is the time for businesses to adapt quickly, plan ahead and get creative,” added Sue.
To help guide businesses through the COVID-19 crisis, CFO On-Call is offering business owners a free 30-minute coaching session with an experienced CFO On-Call Partner. For more information visit https://cfooncall.lpages.co/covid-19-session-edm/
-ENDS-
For more information, interviews and images:
Alison Orren | aorren@brilliantlogic.com.au | 02 4324 6962
Four Top Tips to Secure Your Business Loan
- Complimentary E-BooksMany businesses are looking for loans to either cope with the crisis and/or to capitalise on some of the opportunities arising from it.
Lenders are being just as cautious, if not more than in the past, about who they lend funds to.
Any business wanting to secure a loan needs to impress the lender with their proposition and present their operation in the best possible light.
There are four things banks look for. If these aren’t available or are poor quality a loan will be hard to get approved.
What happens when the music stops? How will your funding needs be met once the subsidies end?
- Covid 19Many businesses have been heavily impacted by the coronavirus pandemic and are surviving through the receipt of various government subsidies. These subsidies have been a welcome lifeline, but they will be of limited duration. Now is the time to start asking yourself: What happens to your cash flow when the subsidies end?
Banks are being supported and encouraged to lend by the government, but it doesn’t mean that they will relax their lending criteria. We all know that they like ‘bricks and mortar’ security. Many small businesses cannot offer ‘bricks and mortar’, so what can they do to gain the funding support that they need?
The next biggest factor in getting a loan is the bank having confidence in you, the business owner, as someone who really knows what’s going on in their business and, importantly knows what’s going on with the finances and cash flows of the business.
A properly prepared funding submission will go a long way to creating confidence.
The Ingredients of a Successful Funding Submission
So, what should this funding submission contain? These are the key elements:
- A detailed forecast of future revenues and expenses
- A detailed forecast of future cash flows, operating, investing, and financing. This demonstrates to the bank your capacity to service and repay debt
- A projected balance sheet
These three elements of the forecast are, in bank language, a three-way forecast. Properly prepared, this document makes it much easier for the banks to consider and meet your funding request.
All the above forecast numbers need to commence with current financial data that shows exactly where the business stands at the commencement of the forecast period – statutory accounts from two years ago won’t cut it.
And there needs to be a detailed written commentary that discusses your business plan and sets out the basis for the various assumptions that underlie the forecast numbers.
Put yourself in the best position to get the funding you need by being able to submit a professionally prepared funding application. These documents will not only tell you and your banker exactly what your funding needs will be but, as a bonus, will also point to ways that you can improve business outcomes.
Four Top Tips to Secure Your Business Loan
Discover how to secure your business loan by downloading our free eBook ‘Four Top Tips to Secure Your Business Loan’. We share what lenders look for when approving business loans and what you can do to best prepare your business case.
Contact CFO On-Call to arrange a free chat about how we can help you to get this information together for your loan application.
The Best Cash Flow Stress Busters for Business Owners
- Complimentary E-BooksThere’s an old saying: “Sales are Vanity, Profit is Sanity, Cash is King!”
Good Cash Flow is what’s going to keep businesses alive and able to continue beyond the current crisis.
The real test for many businesses is going to come later in the year, when government assistance ends. We need to consider now how we are going to handle that point.
To help you understand how to effectively manage cash flow and safeguard your business for the future, we’ve created a free resource ‘The Best Cash Flow Stress Busters for Business Owners’. Download it now for our best Cash Flow Stress Buster tips, as well as actions you can take to help your business now.
Our Top 6 Tips for Success in the ‘New Normal’ Business Landscape
- Covid 19
COVID19 has been a ‘game changer’ for most businesses…some for better and some for worse. For those that survive to fight on, it will be a case of a ‘New Normal’ business landscape.
Those businesses that emerge as winners and survivors of COVID19 will need to recognise that the landscape has changed forever and some key issues will need to be addressed.
To help navigate this new territory, we’ve compiled our Top 6 Tips For Success in the ‘New Normal’ Business Landscape.
Download our free cheatsheet now to find out what your business should be doing differently (and tips on how to do it!).
Free COVID19 Coaching Session
If you would like guidance on how to effectively manage these factors, and what you can be doing to help your business not just survive, but thrive when the crisis recedes, take advantage of a FREE 30 minute Coaching Session with a CFO On-Call. Click here to book yours.
The value of a ‘second opinion’ for your business
- Latest NewsMost business owners have likely sought advice from their accountant or bookkeeper about how to navigate this difficult time. This is understandable. During times of economic uncertainty, it’s important to seek out professional financial advice and guidance for your business.
Even more important, however, is ensuring that the choices you are making are not just short-term solutions, but strategies that will result in the best possible outcome for your business well into the future.
While an accountant may be able to provide necessary guidance on how to navigate things like legislation and payroll, what they lack – and what is arguably the most important asset for any business right now – is strong commercial acumen.
A CFO or Financial Controller guides multi-million dollar companies through any number of financial challenges. They look beyond the numbers and take into account the bigger picture of how a business is pieced together, and whether it is running at optimal pace. It is this more experienced and strategic perspective that will prove invaluable to businesses during this time.
Want a trusted sounding board for your business? We are offering free 30 minute coaching sessions with our CFOs, so that you can get a second opinion about how your business is operating.
Four reasons banks aren’t lending immediately to some businesses
- Cash Flow Management and Forecasting
You’ve probably heard our Prime Minister admonishing banks for not lending quickly enough to some businesses. You’ve probably also heard banks saying they are putting on extra staff and doing their best to manage the situation.
There’s an old saying…
“There’s always two sides to every story…In fact, there’s three sides…there’s each side’s view and there’s the truth.”
In our free eBook, we share the four main reasons why banks may not be immediately lending to some businesses, based upon decades of experience dealing with thousands of small businesses.
We also share tips on how you can improve your business’s success rate for loan approvals.
CLICK HERE TO DOWNLOAD OUR FREE EBOOK
If you would like guidance on how to effectively manage these factors, and what you can be doing to help your business not just survive, but thrive when the crisis recedes, take advantage of a FREE 30 minutes Coaching Session with a CFO On-Call. Click here to book yours.
Top 5 COVID-19 Business Survival Tactics
- Covid 19
You need a ‘clear headed’ plan to cope with this situation and come out the other side intact. Obviously there will be many businesses that won’t make it, however many will come through this if they employ a sensible survival strategy and maintain a high level of determination.
Download our free checklist ‘Top 5 COVID-19 Business Survival Tactics’ to review our top strategies for navigating this challenging time.
If you’d like to talk about how to implement these strategies for your business, please feel free to call us on 1300 362 436 (Australia) or 0800 180 400 (New Zealand) and one of our CFOs will be happy to discuss it with you – no charge, no obligation.
Your Top Two Business ‘Plan of Attack’ Tools for COVID-19
- Covid 19
As the initial shock impact of restrictions on your business operations sink in…
After you’ve dealt with staff, customers, suppliers, landlords, bankers/lenders etc., now is a good time to take stock of the situation and plot out in black and white the potential impact on profit and cash flow going forward.
Now, more than ever, ‘number crunching’ is a vital tool in the armoury of savvy business owners to plan their way out of a downturn to achieve a profitable future.
Usually the first tool utilised in ‘number crunching’ is a budget to determine profitability. Perhaps in this situation it’s best to start with a Cash Flow Forecast.
As the old saying goes: ‘Sales are Vanity, Profit is Sanity, But Cash is King!’
1. Cash Flow Forecast
You’ve probably seen lots of promotion of various Cash Flow Forecasting tools and templates around COVID19. This is a great starting point, however the real skill is in using these tools and performing ‘What If’ scenarios. Because the situation is changing and various opportunities are available, it’s extremely valuable to really ‘work’ the Cash Flow Forecast, rather than seeing it as your future without options for change.
You need to consider various angles when ‘working’ a Cash Flow Forecast. For example:
- If revenue drops by say 30%, how long can we sustain our current overheads level?
- How quickly do we need to make changes to avoid losses and negative cash flow?
- How much leeway do we have with suppliers to renegotiate payment terms?
- What impact would it have on cash flow if we could extend terms by 10 or 20 days?
- What incentives could we offer customers to pay more quickly and what impact would that have on profitability?
- What would it cost us to ‘hibernate’ a project for a while to comply with restrictions?
- How can we otherwise utilise those resources or ask staff to take leave?
- How much can we expect to receive from government assistance and how can we manage cash flow until that arrives?
- What level of cash injection might we need from other sources e.g. lenders, shareholders etc?
The key to getting maximum value from a Cash Flow Forecast is in how you use it to improve and change your situation. Working with someone who really understands the impact of changes on cash flow is vital to ensure you’re making decisions based on good quality information. Someone who has been through ‘change’ situations before is extremely valuable. They know how to, not just change the numbers in the spreadsheet, but how to implement the changes required to achieve the desired outcome. More importantly they’re able to make creative suggestions for change and help to implement them.
A bookkeeper is quite capable of putting the initial data into a spreadsheet, however they aren’t always adept at thinking outside the box when it comes to planning actions to create a better outcome.
One more point regarding spreadsheets is the capacity for mistakes in them. A recent article by Oracle comments that as many as 90% of spreadsheets contain mistakes. If you’re basing decisions on spreadsheets you need to be very sure they are accurate. It may be better to use a dedicated budget and cash flow forecasting tool that eliminates capacity for mistakes.
2. Budget
A budget as a financial management tool, is proving to be more valuable now than at any other time. It’s surprising how many business owners operate without one and wonder why they feel unconfident about their financial situation. A budget is like a ‘financial roadmap’ to plot out your expected sales, costs and overheads and how much profit/loss you plan to make.
Now, more than ever, it’s vital to plot it out in black and white…what your situation is likely to be for the next 12 months. A budget will help you to determine what your future sales will be and therefore what level of costs and overheads the business can sustain in order to avoid losses. At the moment a break-even situation might be a good outcome, compared to the alternative. It’s helpful to do various scenarios e.g. best, worst and most probable, so that you can plan around them.
A budget should be a ‘stretch goal’ that challenges the status quo and moves you to a better business position. It is then very important to know what levers to pull to manage and even beat your budget.
Having access to someone with a logical and pragmatic approach to the situation is worth its weight in gold. Emotions are running high and fear can cause us to make rash decisions we might regret down the track.
Taking a deep breath, taking stock calmly and perhaps even using the situation to reengineer things to be a more agile and cost effective business in the future, is an opportunity at the moment.
Commercially experienced CFOs have had dealings with vendors, customers, banks, landlords etc. and know what’s possible and how far to push and leverage. They have ‘best practice’ toolkits for Accounts Receivable, Inventory and Accounts Payable management.
Our CFOs have moved businesses to great success and our recent experience showed a 51% profit improvement.
The Upside of A Dowturn
- Cash Flow Management and ForecastingBy Sue Hirst, Co-Founder CFO On-Call
If you can ‘keep your cool’ when all around is panic and mayhem you could set up your business for not just survival, but greater profit and cash flow when things improve.
It’s all over the news that business and consumer confidence is low and that Australia and other western economies are experiencing tough times. Money is tight and many business sales are falling. This is not good news for many small to medium enterprises, but it can present a chance to take stock and even get the ‘edge’ over competitors who don’t treat the situation as an opportunity.
Business owners need to show leadership and retain the confidence of staff and other stakeholders. Staff morale can be extremely sensitive in tough times, so it’s important to focus on managing the business as well as possible and be honest with staff. In my experience good staff members can be your best ally in troubled times, if you trust them and get their help in decision making.
SMEs often have an advantage over larger businesses, in that they are able to act more quickly and decisively. Larger businesses often have office politics and various departments trying to protect their own ‘turf’, whereas SMEs are more ‘down to earth’. Having said this though, it can be detrimental to employ ‘slash and burn’ tactics to survive a downturn. By ‘slash and burn’ tactics I mean indiscriminately cutting costs without really thinking about it strategically and how this might impact on the future of the business.
The best place to begin handling a downturn is to work towards where you want to be when things pick up again.
Ask yourself these questions:
- How do you want to be running your business? e.g. in the traditional way you have in the past, or in some other way, perhaps taking advantage of technology or the changing market.
- Is it the right ‘business model’ i.e. are there better ways to structure the business?
- What type of customers do you want to work with?
- How will you market your product or service?
- How will you sell your product or service?
- What resources will you need to deliver products and services and how will you deliver them? Resources includes human as well as equipment.
- Where will you operate your business from?
- What price and cost structure will exist?
- How will your business be funded? Will external funding be required or will it be self funding?
Once you have a picture of your ideal business you can begin to look at the cost of running such a business. A great place to start is with a serious review of your Profit and Loss Statement.
When times are good most business owners spend little time worrying about every cent that gets spent. When sales start to fall though, this is the very best place to start.
Begin by looking at direct costs e.g. cost of products for sale and labour costs. Are their alternatives or better methods of delivering your product or service? How are other businesses doing it. Perhaps do some research on the internet to see how overseas businesses are doing things.
How we saved $250,000 per annum
Next, work your way through every line item on the Profit and Loss Statement. Some time put aside to focus on this issue, can be some of the most profitable time you will spend in your business. It may seem tedious, but when every cent is coming out of your pocket as a business owner, believe me, it’s worthwhile. I went through this exercise myself a couple of years ago and came up with approximately $250,000 per annum worth of savings. I looked at every single item and thought “How can we do this better, more efficiently and more cost effectively?”. Lots of self discipline is necessary and a little sensible ruthlessness as well.
One terrific example is telephone and communication costs. I discovered we were paying eight different service providers. During analysis I discovered there was a lot of wastage and unnecessary phone lines being paid for. I did some investigation and found a better and cheaper method of communication through an ‘IP’ phone system. We needed only a small amount of new equipment costing approximately $700 and the savings have been approximately $1,000 per month!
We did have to shed some staff and this caused a little rockiness for a short while amongst the remaining staff. The staff soon realised though, we were serious about the future survival and profitability of the business. I know they prefer to work for a profitable business rather than one that is struggling to pay it’s way with unmotivated management.
The important point to realise in relation to cost savings is that every dollar saved is a dollar straight onto the bottom line. Whereas every dollar of extra sales may only be a matter of cents onto the bottom line, because a sale carries with it direct costs and overheads.
Cash flow also needs serious attention during a downturn. When sales fall it can take a little while for the effects to be felt i.e. if a business is slow to collect payment from customers normally, the effect of reduced sales may not be felt until actual payment is received. Stock needs to be more closely managed to ensure only the stock that is required is purchased. If you are purchasing stock on credit terms you could get a double whammy of reduced sales and collections at the same time as paying for stock that is taking longer to sell.
All of the above may sound like doomsday stuff, but if you can be realistic and take the tough decisions now, your business will be in a much better position when the downturn ends. Your business will also be in a much better position than competitors who haven’t properly managed the downturn or indeed survived it. When the upturn arrives your business could be even more profitable and valuable.
