The 6 tools businesses need to get their finances in shape

- Business Growth

Good financial management doesn’t happen by accident, it requires organization and systemization, but it doesn’t need to be too complicated. 

Here are some simple tools to help you get organized:

 

  1.   Accounting software

With the accessibility of cloud-based systems that are linked to bank accounts, it’s easier than ever to keep track of all your financial transactions.

You need to keep track of transactions for the tax office, lenders, but most importantly for yourself, as a business owner.  A reliable and well set up system will provide you with information to ensure:

    • You pay everyone the right amounts, including staff, suppliers, business owners, lenders, tax office etc.
    • You know where you are making and losing money e.g. which products/services are most/least profitable, where you are going over/under budget on expenses, when costs are rising and margins being squeezed and it’s time to review pricing.
    • You get paid by your customers on time, by reporting who owes what and for how long.  You can also send out statements/reminders easily to slow payers.

 

  1.   A Budget

This is without doubt the most important tool in any business.  If you go ahead and get on with business without a budget you are flying blind!

A budget is your financial roadmap that keeps you on track every month.  It sets out how much you plan to sell, what your sales will cost and what will be your expenses and profit at the end.

Once you’ve developed a budget it needs to be entered into your accounting system, so that you can report monthly on actual versus budget.   By doing this monthly you can see where things are on/off track and fix them quickly to avoid further unnecessary losses.

 

  1.   A Cashflow Forecast

If a budget is the most important tool, a cash flow forecast is definitely the next.

Achieving your sales and profit target is great, however if you don’t handle the cash side properly your business is at risk of failure due to lack of cash.

A cashflow forecast sets out in black and white when you expect the cash to come in and go out of your business.  By forecasting, you are pre-armed with knowledge that you can act upon. 

For example if things don’t go exactly according to plan and cash looks tight for the future you can ramp up your sales efforts, inject cash into the business from loans, shareholders, sale of assets, speed up payments from customers, speed up finishing jobs so they can be invoiced, sell off slow moving or obsolete stock to free up cash. 

On the outgoings side you can reduce expenses, slow up payment to suppliers, arrange to pay off tax debts, delay payments to shareholders etc.

 

  1.   Monthly Financial Management Checklist

The easiest way to ensure your financial management stays on track is to follow a simple checklist. 

This would include e.g. Monthly reports such as Profit and Loss Report, Balance Sheet, Cashflow Forecast, Outstanding Customer Amounts, Outstanding Supplier Amounts, Job Management, Stock Management, Detailed Sales Report by customer, product, division etc. 

Also include:

    • Reconciliation and payment of suppliers, taxes, superannuation etc.
    • Reconciliation and follow up of customer amounts owed
    • Reconciliation of bank accounts, credit cards etc
    • Monthly accounting entries for non cash transactions such as depreciation of assets and amortization of large amounts due such as yearly insurance (break it down into monthly amounts)
    • Tax returns such as GST/VAT and staff payroll taxes due
    • Reconciliation of Work in Progress and Stock on hand
    • Reconciliation of intercompany loans/accounts and suspense accounts
    • Foreign Exchange transactions – accounting for losses/gains

 

  1.   A Spreadsheet System

A spreadsheet is a great tool for calculating things like:

    • Pricing – you can gather up all your direct costs then add on a margin to work out price.  Conversely if you need to adhere to a price you can deduct a margin and work out how much you have available for cost of the item.
    • Markup – once you know your cost you can add on a markup to achieve your desired margin.
    • Breakeven – this is a very important number to understand.  It’s the sales you need to make to cover your running expenses after direct costs of the product/service.
    • Anything really that you want to work out to ensure you’re on the right track.

 

  1.   A Logical Brain!

Businesses run on ‘gut feel’ can sometimes succeed, however those run with good logical thought processes are much more likely to prosper.  Selling things you love is great, but if you’re not charging the right price and running things efficiently and cost effectively you will really struggle to make a good enough profit for all your efforts. 

It’s so easy to use a ‘thumb suck’ to decide on a price or try to match competitors.  If you aren’t absolutely sure of your true cost you could be not charging enough and eventually go out of business due to lack of profit. 

Taking some time to do some proper analysis before you get started can save you lots of headaches and agony down the track.  It may seem like a boring and unnecessary step when you just want to get on with the exciting stuff of selling and making things, but it will save you lots of money if you pause to ensure you’re on the right track at the beginning.

If you’re not a natural left brain logical thinker (many entrepreneurs are right brain creative) do yourself a favour and find someone who can guide you and keep you on the right track.  They could be a great resource and ‘sounding board’ for your fantastic ideas to ensure they are profitable!

 

For more information on financial management for your business download our FREE eBook ’11 Steps to Business Numbers Made Easy’

Mapping Out a Better Financial Future For Your Business

- Webinars

Would you like clarity over your business numbers?

Watch this video for useful insights:

  • Into mapping out a better financial future for your business
  • If you’d like to predict profitability and cash flow accurately
  • Learn how to set up your business for financial success using a ‘Financial Roadmap’
  • You want better clarity over your profitability and cash flow
  • You want to sleep better at night!
  • You want to grow your business with confidence that the numbers ‘stack up’
  • You want to provide confidence to lenders/investors for your business

How to Be a ‘Lean Mean Fighting Machine’ and Survive Uncertain Times

- Business Growth

Whether you’re a new business looking to secure sustainability, profitability, and longevity, or a seasoned player navigating the ever-changing landscape of digital disruption, one thing is clear: change is your ally.

In this blog, we’ll delve into strategies to help you not only embrace change but thrive in the face of lower-cost competitors.

 

  1. Five Key Areas of Business Begin by assessing your business in five key areas:
      • Your offering to the market
      • Your marketing and sales strategies
      • Operational and financial processes
      • Staff management
      • Customer service

Your offering, whether a product or service, is the core of your business. Understand how it’s evolving and how changes may impact your business.

 

2. Embrace Efficient Systems Investing in systems may seem daunting, but it’s a vital step towards efficiency. Consider the return on investment for each system you implement. For instance, saving a few hours of service staff admin time can significantly boost revenue. Streamline tasks and consider using online systems for various aspects of your business, from manuals to project management.

 

3. Key Performance Indicators (KPIs) Systems make it easier to capture and report on KPIs, which are essential for tracking your business’s health. Identify leading KPIs that measure activities contributing to results. Break down KPIs for each key area of your business, such as product/service, marketing, sales, operations, staff, and customer service.

 

4. Cost Management Digital disruption has empowered smaller competitors with lower cost bases. To stay competitive, you may need to reduce costs. Consider changing your business model, optimizing expenses, and embracing flexibility. Transitioning to virtual assistants, part-time staff, and flexible work arrangements can cut fixed costs.

 

5. Achieving Longevity – monitor activities and trends constantly. When you see a downward trend, address it promptly. Encourage team discussions for constant improvement. Advocate group discussions, utilise tools like Slack, and stay informed about industry changes through magazines, blogs, events, associations, and networking.

 

6. SWOT Analysis and Action Plans.  Regular SWOT (Strengths, Weaknesses, Opportunities, Threats) analysis can guide your business. Create action plans to capitalise on strengths, address weaknesses, seize opportunities, and mitigate threats. Include your team in brainstorming sessions; they often offer valuable insights.

 

Embrace Change and Leadership.  Be ready to make tough decisions and lead your business through change. Downsizing, upsizing, and automation are part of a business’s lifecycle. Combining your experience with modern approaches ensures you can compete effectively against newcomers.

 

In today’s rapidly evolving business landscape, the willingness to adapt and innovate is your greatest asset. So, don’t just survive; thrive, be that ‘Lean Mean Fighting Machine,’ and outshine your low-cost competitors.

 

For more ways to improve your business cash flow download our eBook ‘How to be a lean mean fighting machine and survive uncertain times’

 

Find the hidden profits and cash in your business

- Cash Flow Management and Forecasting

Do you ever look at the reports from your Accounting software and get over-faced by all the numbers?  Do you not bother printing out the reports at all, because you aren’t sure which numbers to look at and you don’t have the time anyway? You would not be alone if you answered yes to any of these questions.

A typical set of financial reports i.e. Profit and Loss Statement and Balance Sheet contains a lot of numbers and it can be a daunting task to make sense of it all and know which numbers are the important ones.  Of course they are all important, but some are absolutely critical to financial success in business.  

Most of the ‘Seven Key Numbers’ are not contained in a typical set of financials, which is a frightening thought, considering they are absolutely vital to profit and cash-flow.  This is because these numbers are ‘Financial Drivers’ rather than ‘Results’.  The typical financials provided to most business owners are for tax purposes, rather than management use.

The Seven Numbers for Profit are:

  • Revenue Growth %
  • Price Change %
  • COGS% (Cost of Goods Sold)
  • Operating Expenses%
  • Days Receivable
  • Days Payable
  • Days Inventory/Work in Progress

Let me explain why these seven numbers are so critical.

1. Revenue Growth

Business owners focus a lot of attention on Revenue and making sales and this is obviously critical.  What is even more critical though is what those sales cost you to make and also cost you to fund.  As soon as you sell something, and often well beforehand, there are costs involved e.g. goods for sale, freight, labour, overheads etc.  It’s critical to know these costs, because if they exceed your revenue then you are making a loss and heading for cash-flow problems.  The reason Revenue Growth % is important is because business growth is often the killer of small businesses.  How is this so?  Because so many numbers besides Revenue are important to profitability.  If the other numbers aren’t being managed right, revenue growth will just exacerbate the situation.  If it’s not a good situation… it won’t get better but could get much worse. Revenue Growth is cause for celebration, but it’s also cause for caution and planning.

 

2. Price Change

Means the percentage increase or decrease, at which you sell your products or services.  In a highly competitive marketplace it’s tempting to sell for the cheapest price possible.  This is fine, but if you’re not covering costs at the price you are on a hiding to nothing.  You may discount some products or services in order to gain business for other more profitable ones and that’s fine.  A trap many businesses fall into, is failing to increase prices regularly by small amounts e.g. by the Consumer Price Index (CPI).  Failing to do this can cause margin squeeze. This means, your gross profit suffers, due to reduced revenue, compared to the costs of delivering the goods or services.  Customers can get a shock if you’ve never increased prices and suddenly make a large increase, whereas regular small increases are much easier to achieve.  Example, I occasionally visit McDonalds for breakfast.  I noticed just today that the cost of my breakfast had gone up 40c.  That was a 4.7% price increase on the price last visit.  It was barely noticeable and I, as a customer, won’t take my business elsewhere for the sake of an extra 40 cents.  This increase is probably quite justified with increased petrol and costs to deliver the product. Love them or hate them, that’s part of McDonald’s success! Many business owners fear losing customers by putting up prices.  The reality is that you may not lose as many as you think.  If you do lose a small number of extremely cost conscious customers it may not be such a bad thing.  Modelling can show that increased price and reduced overall revenue could, in some circumstances, actually have a positive impact on your bottom line.

 

3. COGS

Cost of Goods Sold’ means the costs incurred to get the product or service to the customer, before taking into account Overheads.  This is often referred to as ‘Direct Costs’ or ‘Variable Costs’.  This is a really important number, as it has a huge impact on your Gross Profit.  Many business owners focus a lot of attention on Revenue and this is important, but a small reduction in COGS% can have as much impact on Gross Profit as a large increase in Revenue. Often a little attention to what makes up COGS and some negotiation or investigation with suppliers for better prices, can pay huge dividends on the Gross Profit.  If you are a service based business, attention to work practices can have the same effect on the Gross Profit.  E.g. knowing how many labour hours you are selling compared to those you are paying for, provides opportunity to investigate differences and tighten up processes.

 

4. Overheads

Many business owners focus attention on the Overheads in the Profit and Loss Statement without comparing them relatively, (by percentage) to the Revenue.  It’s important to compare them by percentage, as this has an impact on the profit. If you just look at the Overheads $ figure you could be making more Revenue without increasing your Net Profit.  It’s much easier to focus on one number being the Overheads%, rather than getting too bogged down in all of the numbers listed.  If you don’t have a budget it can be very difficult to know if overheads are reasonable anyway.   Very few businesses have a budget, which makes it difficult to know how you are going during the year.  If you are trying to reach a goal in business then you need a budget.  

Not having a budget in business is like trying to find a new destination without a roadmap or GPS.

 

5. Days Receivable

 is the number of days, on average, your customers are taking to pay invoices.  Managing this number can have a huge impact on cash-flow.  If for example your Accounts Receivable Days is current seventy and you can get it down to say fifty, you could be putting tens of thousands of dollars back into your bank account.  The way to improve this number is to focus attention on your Accounts Receivable procedures.  It’s fine to look at the report out of your accounting system which lists all the customers and how much they owe you.  If your business is growing rapidly you need to know how much Accounts Receivable Days are changing compared to Revenue growth.  This is because if it’s not comparable you will experience cash-flow squeeze and could run out of cash.

 

6. Days Payable

is the number of days, on average, you are taking to pay your suppliers.  This number is just as important as Accounts Receivable Days, in that it can have a big impact on your working capital situation.  It is so easy in business to ‘oil the squeaky wheel’ and pay suppliers who hassle you for money (sometimes before it’s due).  It’s also easy to ignore potential better terms to be had from suppliers, because you get so focused on Revenue.  Some small changes to procedures relating to Accounts Payables can pay big dividends in your bank account.  If your business is growing, this could be critical cash for funding growth.  I’m not suggesting stringing out suppliers beyond the agreed terms, but negotiating better ‘agreed’ terms for your business.

 

7. Days Inventory

is the number of days, on average, that goods for sale are sitting in your store-room, from when they are delivered by suppliers, to when they are shipped out to customers.  These goods often have to be paid for before they have been sold.  This means you have had to spend valuable cash to have the stock sitting there waiting to be sold.  If you can manage this situation better, and reduce the number of Inventory Days, this can have a big impact on your bank account and cash situation.  It’s very tempting when a salesperson calls and offers you a discount to buy more stock.  It’s useful to consider the amount of cash that will be tied up in that stock, compared to the discount being offered.  If you are borrowing funds, it’s also important to consider the amount of interest payable on those funds tied up in slow moving stock.  If you are in a service based business Work in Progress (WIP) Days is very similar to Inventory Days, in that your ‘stock in trade’, is the labour and materials you have to sell.  Slow WIP days can be just as dangerous to cash-flow as Inventory Days.  Anything you can do to tighten up processes and speed up the time work is ready to be invoiced will pay dividends in your bank account and interest expense.

 

One more thought about the Seven Key Numbers…..  Of the seven, four are calculated from the Profit and Loss Statement and three from the Balance Sheet.  How many business owners look very closely at the Balance Sheet?  Scary thought!

For more details about these factors and tips for improving them download our eBook ‘The 7 Key Numbers that Drive Profit and Cash Flow’.

How to be a ‘Lean Mean Fighting Machine’… and Survive Uncertain Times

- Complimentary E-Books

How to Be a ‘Lean Mean Fighting Machine’ and Survive Uncertain Times

Whether you’re a new business looking to secure sustainability, profitability, and longevity, or a seasoned player navigating the ever-changing landscape of digital disruption, one thing is clear: change is your ally. In this blog, we’ll delve into strategies to help you not only embrace change but thrive in the face of lower-cost competitors.

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14 Ways to Cut ‘Fat’ Not ‘Muscle’ From Your Business…

- Business Growth
  1. When times are tough, the knee jerk reaction of many business owners is to slash costs. What’s wrong with such a strategy?
    • Future business growth can be compromised

○ Marketing and Sales can suffer

○ Good staff can be lost and new ones are costly to find and train.

    • Customer and staff morale/satisfaction declines

 

  1. On the flip side, when business is good, owners tend to ignore costs and focus on Sales and business growth and figure that the costs will take care of themselves with a good margin. What can happen with that kind of approach?
    • Net profit squeeze

○ Cash flies out the window

○ Overheads creep up

○ Benefit of growth gets wasted

 

  1. Clearly, when sales are down, there is a much greater motivation to control costs even though good businesses never take their eye off them. So how should you identify the areas that should receive attention first? What tools should you use?
    • Organisation Chart – sets out what gets done and who does it
    • Job descriptions – in line with Organisation Chart
    • Budget
    • Profit and Loss Report – review all direct costs and running expenses and ask yourself

○ How can it be done more efficiently

○ How can it be done more cost effectively

○ Should we stop doing it

    • Cash Flow Forecast to plot future cash position
    • Supplier Purchases reports
    • Use technology – website – CRM

 

  1. Over time, particularly in boom times, businesses get flabby. Where are we most likely to find inefficiency and waste?
    • Staff overlaps and gaps due to lack of job descriptions.
    • Premises – too large or in the wrong (expensive) location.
    • Communications – old fashioned/defunct phone lines etc.
    • Banking – not regularly reviewing and better deals/methods sourced.
    • Use of Technology – not keeping abreast of efficiency gains available.
    • Operations – not regularly analysing more efficient processes.
    • Freight – shop around/reconsider regularity of deliveries.
    • Business Model – check out modern methods and use technology to update.
    • Accounts Receivables – no process and ad hoc follow ups if any.
    • Stock Management – over purchasing and not shopping around for best deals (constantly!)
    • Job management – no management or system in place to ensure quality, efficiency and ability to finish jobs and invoice quickly.

 

  1. You often hear about savings being achieved by re-engineering workflow. How can you do that?
    • Map it out
    • Brainstorm with key staff
    • Do customer surveys
    • Investigate/observe others in industry
    • Seek industry innovation ideas via associations, events, training etc.
    • ‘Change Management’ Plan/Business Improvement – ‘Lean’ method – consultants can help
    • Work On your business
    • Use checklists/templates to standardise operations and constantly improve (creates mechanism for absorption of improvements).

 

  1. How can savings be made to a business’ products and services without impacting customer satisfaction?
    • Look for efficiencies not just savings
    • Client and staff surveys (find out what they do/don’t value)
    • Some savings could improve customer satisfaction
    • Contact via electronic newsletters/blogs/social media
    • Review marketing methods – check out digital marketing and social media etc.  (outsource if you aren’t up to speed with it)

 

  1. Having identified where you are going to make your savings, how should you go about achieving them?
    • Put the customer first – savings should not adversely affect them
    • Look for efficiencies not just savings
    • Leadership – walk the talk – get your team involved
    • Start with the end in mind – how do you want the business to look in future
    • Budget
    • Culture and communication/team involvement
    • Project – put someone in charge of it and document it
    • Implementation – delegate to those involved/affected
    • Reporting – look at percentages compared to budget
    • Constant review/work
    • Celebrate!  When savings achieved take time to celebrate and appreciate efforts with a modest staff lunch or morning tea – keep the team motivated.

 

  1. What are the biggest mistakes you see business’ make in trying to achieve cost savings?
    • Approaching it in an ‘ad hoc’ way
    • Not treating it as an ongoing job
    • Cutting the wrong costs such as marketing, advertising, good staff
    • Not negotiating properly – it’s an art
    • Creating bad will with suppliers

 

  1. What are your thoughts on downsizing and outsourcing?
    • Downsizing has to be approached on a case by case basis

○ Businesses can become obsolete due to technology and need to be pragmatic about their future and how they will compete /survive/thrive

○ Some grow too fast initially without planning and get beyond help.

    • Outsourcing is a terrific way of keeping costs down

○ ‘Variable costs’ can be only incurred when a sale is made e.g. subcontractors, however there can be an issue with quality/availability of supply.

○ Non core activities can be a good thing to outsource e.g. bookkeeping & financial management, virtual assistance, virtual office space, marketing, human resources management, debt collection etc.

 

  1. When do you know you have cut too far?
    • When customer satisfaction slips
    • When staff satisfaction slips
    • When WHS is compromised
    • When operational issues are caused

 

  1. Can you give us some examples of how you have helped some of your small business clients to find cost savings and the results they achieved?
    • Client in Brisbane was using debt factoring – analysed situation and discovered an overdraft reduced interest by circa $30,000.

○ Helped them put a good case to bank for overdraft – budgets, cash flow forecasts, tidy financials

    • Travel Agency client – retail and corporate travel – moved from retail shop front to cheaper location after determining most business was from ‘corporates’ rather than ‘walk-ins’
    • Wholesale Baker – packaging supplier – got them to investigate and negotiate – saved around $20,000 per annum

 

  1. Is there one thing a business owner could do straight away to reduce their costs?
    • Diarise time to look at the P&L and ask

○ How can we do this more efficiently

○ How can we do this more cost effectively

○ Should we stop doing this

    • Investigate and embrace technology
    • Be ‘open-minded’ about doing things differently

 

  1. Now there are a lot of people who say they provide advice on how to manage their costs. How can you tell the difference between the good & bad ones?
    • Cost savings should be a ‘whole of company’ effort and not just be outsourced
    • The overall business needs to be supported by a Virtual CFO
    • The business vision and mission needs to be considered
    • Ad hoc occasional savings can be detrimental to stakeholder experience
    • It needs to be a constant exercise done in an organised way

 

  1. Are there other resources you would recommend for those seeking to manage their costs?
    • Just google ‘cost savings business’ there are millions of them!
    • Web sites have good advice for small business
    • Find someone to act as a ‘sounding board’ like a Virtual CFO with solid commercial experience, who can help you work through the process without compromising your business

 

For more ways to improve your business cash flow download our eBook ‘7 Ways to Stop Cash Flow Chaos Forever’

Four Cash Flow Management Tips For Seasonal Businesses

- Cash Flow Management and Forecasting

While every business owner feels under the pump every now and then, seasonal business owners face a unique set of challenges. While the peaks in sales during their high seasons bring substantial revenue, the nature of the off-seasons can present financial hardships — making effective cash flow management a lifeline for these businesses. 

So, how can seasonal businesses stay on top during these revenue fluctuations? In this blog, we’ll share four cash flow tips for seasonal businesses to ensure year-round prosperity.

1. Use your off-seasons to grow 

Instead of viewing the off-season as a period of financial strain, consider it an opportunity for strategic growth. Research and invest in diversification — explore new product lines, expand your market reach or use the time to enhance your services. 

You can also utilise this time to strengthen your online presence, optimise your website and invest in marketing campaigns. By the time your peak season arrives, you’ll be better positioned for increased sales and profitability.

2. Tweak your invoicing process to encourage on-time payments 

Late payments can disrupt cash flow significantly, with more than 50% of SMEs in Australia experiencing an average 6-day delay. To boost payment frequency, simplify your invoicing process using digital invoicing software. Clearly outline payment terms and offer incentives for early payments. 

It’s also important to stay proactive and follow up promptly on overdue invoices, maintaining a professional but firm approach. By ensuring timely payments, you maintain a steady cash flow, even during the off-season.

3. Financially plan for the future 

One of the easiest cash flow tips for seasonal businesses is to gain a bird’s eye view of your business’s financial condition. You can do this by developing a meticulous budget that accounts for both high and low seasons. Identify essential expenses and allocate funds accordingly while factoring in variable costs, such as seasonal staff hiring and inventory procurement. 

It may also be worth establishing an emergency fund to cushion your business during lean periods. A well-planned budget provides a financial roadmap, ensuring your business stays afloat regardless of the season.

4. Build strong, positive relationships with your suppliers and big clients

No matter your industry, it never hurts to be on good terms with people that keep you in business. Make an effort to cultivate strong relationships with your suppliers and clients through transparent communication, which can lead to more competitive credit terms with clients and suppliers, allowing you to manage your cash flow more effectively.

Loyal clients are more likely to support your business year-round. Consider offering incentives and discounts to encourage repeat business and create a stable revenue stream.

Make strategic decisions for your seasonal business by partnering with CFO On Call

Navigating the financial hurdles of a seasonal business can be challenging, even for the most experienced business owners. That’s where CFO On Call comes in. As experts in cash flow management and growth planning, we offer tailored solutions to ensure your business not only survives, but thrives. 

Our dedicated team assists you in implementing effective cash flow strategies, allowing you to focus on what you do best: running your business. Whether you’re planning an exit strategy or want to gain more control over your existing processes, CFO On Call is here to help.

By incorporating these cash flow tips for seasonal business and partnering with CFO On Call, you can transform the financial landscape of your operations. Discover how CFO On Call can give your seasonal business the upper hand by contacting us today.

Mapping Out A Better Financial Future For Your Business

- Business Growth

CFO On Call is proud to participate in the NSW Small Business Month initiative with NSW Small Business Commission from 1st October to 31st October 2023.

 

One of the key areas of Business Resilience is Cash Flow Management and Profitability.

 

Lack of cashflow and profit can have a negative impact on business growth capability. Learning how to overcome the constraints and achieve ‘sustainable’ growth puts business owners in a much better position.

 

Many business owners spend time focused on their bank balance without understanding what actually impacts it. They also spend a lot of time focused on Sales, with no idea how much of those sales will end up on the bottom line and in the bank account. 

 

There are a couple of tools that help to manage your Sales, Profit and Cash Flow. When you know what they are and some techniques to make them work for you, your bottom line and your bank balance will be the winners. 

 

 

Learn from one of Australia’s top Virtual CFOs how you can drive more profit and cash in your business in simple plain English… no jargon

 

Join our ‘Learning Lunch’ webinar on Friday 6th October 2023 at 1.00pm

 

https://www.eventbrite.com.au/e/mapping-out-a-better-financial-future-for-your-business-registration-723756885327?aff=oddtdtcreator

 

Role of Business Ethics in Maximising Firm Value

- Business Exit Planning

When it comes to improving a company’s bottom line, people usually think it’s all about cutting costs, acquiring new customers, boosting efficiency and increasing revenue.

Of course, while all of these do play a big role in accomplishing this goal, there is another equally important factor that could make or break your business — business ethics.

What are business ethics?

Simply put, business ethics are guiding principles that direct the actions and decisions of an entire organisation. Some are decided by the members of the organisation; others are mandated by law.

They can also either be good or bad, and, as we’ve mentioned in the previous section, have a massive impact on how well — or poorly — your business performs.

What is the role of ethics in business?

The role of ethics in business is simple — they serve as the scale by which all the values, beliefs, behaviours, decisions and actions of all the members of an organisation are measured.

They encompass everything a business does and stands for, including:

Without them, it would be challenging for companies, especially those with larger operations or multiple subsidiaries, to function as a single unit. This, in turn, results in them handling the different aspects of their business differently — creating varied or disconnected experiences for their customers, employees, suppliers, investors and partners.

Is there a connection between business ethics and maximising firm value?

While it might not be immediately apparent, there is a strong connection between business ethics and maximising firm value.

A company known for having good business ethics is simply more attractive to investors or potential buyers than one without. This is primarily because an ethical business is generally more profitable and easier to grow, thanks to its freedom from issues like:

  • Legal or regulatory trouble
  • Unhappy customers
  • Disgruntled, underperforming employees
  • Angry suppliers
  • Inefficient systems and processes

What are the downsides to having bad business ethics?

The primary downside to having bad business ethics is it makes your company less attractive not only to investors and potential buyers of your business, but also to customers and everyone else you do business with. This, in turn, severely limits your ability to make money and grow, which ultimately cuts your chances of seeing long-term success.

In addition, bad business ethics also exposes you to the risk of having to deal with all sorts of legal trouble and the fines and costs that typically come with it.

But the problems don’t stop there. Since the primary role of ethics in business is guiding everything everyone in the organisation does, having unethical employees on your team, regardless of their role, exposes you to issues such as:

  • Theft
  • Inefficiency
  • Poor customer service
  • Low-quality output
  • High employee turnover

How can I ensure my firm has good business ethics?

To ensure your firm has good business ethics and is in the perfect position to maximise its value, you need to:

  • Have a clear code of ethics in place
  • Provide business ethics training to your employees
  • Make sure your organisation’s leadership always sets a good example
  • Develop a way to keep track of and measure your organisation’s ethical performance

Maximise your firm’s value today through good business ethics

You’ve seen how big the role of ethics in business truly is and how strong the connection is between business ethics and maximising firm value. The only thing left to do now is take action.

Let one of our expert virtual CFOs help you get started so you can start improving the value of your firm today. From strategic planning to business exit strategy preparation, we’ll not only make sure your finances and financial systems and processes are all in order, but also help you drive growth, profit and cash flow for your business. Contact us today!

5 Ways to Maximise Cash Flow in Your Business

- Cash Flow Management and Forecasting

Managing cash flow in your business is one of the most vital aspects of business financial control.  If your business regularly runs out of cash, it can be very stressful and make it very difficult to sustainably grow a business.

How can a business improve cash flow?

Here are some tips to help you with how to maximise cash flow and overcome and preferably avoid cash flow problems:

1. Understand your current cash flow position

The best way to understand your current cash flow position is to plot it out in black and white in the form of a Cash Flow Forecast. 

It can be a very simple spreadsheet that records your opening bank balance, the money coming in and going out each day, week or month… with a closing balance at the end of each period. 

You may need a little more sophistication if you’ve got customers that take time to pay and suppliers that give you terms. 

The important point is that you’re able to see very clearly what will be your position going forward.  You can see where the ‘peaks and troughs’ will be and when you need to work on the ‘troughs’. 

For example you may need to ramp up customer payment collections, reduce some spending or inject some funds yourself, borrow or seek longer terms from suppliers.

 

2. Understand the difference between profit and cash flow

One of the biggest myths about how to improve cash flow is that all you need to do is sell more stuff.  What people tend to forget is that for every sale, there are costs associated and customers take time to pay.  So in between you selling something and getting paid… you’ve got to pay suppliers or staff/labour for the costs associated with the sale.

Selling more can sometimes actually make cash flow problems worse, if you don’t consider this situation.  The timing of calculating profit is quite different from the timing associated with cash flow.  Profit is measured when the sale is made and the costs are matched against it. 

Cash flow moves quite differently, because customers don’t always pay immediately when the sale is made and suppliers need to be paid often before you’re paid by customers… Hence cash flow squeeze is often caused by sales growth.  Understanding your business numbers helps to avoid cash flow squeeze.

 

3. Figure out what impacts cash flow the most

Some of the biggest impactors of cash flow are costs, overheads and timing of income and payments.  Costs and overheads can quickly eat up all the cash made from sales, so anything you can do to reduce them or find more efficient ways to get things done has a positive impact on cash flow. 

I see it so often, that businesses get all ‘gung ho’ at the start and load themselves up with way too many overheads, then sales don’t quite match up to expectations and they end up struggling to pay bills.  

The timing of income is important.  The faster you can get paid i.e. invoicing and collecting payment ASAP, getting deposits or progress payments the better your cash flow will be.  Conversely the better terms you can get from suppliers, the tax office, lenders and investors the better your cash flow will fare.

4. Work out a plan to measure and manage your cash flow

As mentioned in point 1, once you’ve got a cash flow forecast in place, it will serve you well to monitor what actually happens compared to what you envisaged.  If you forecasted for a certain level of sales and collections, but that didn’t occur as planned, you should get plenty of notice that you need to change things to suit. 

If you can minimise fixed overheads as much as possible and give yourself the ability to ramp costs up and down in line with income, this will help greatly.  If you can organise a source of funds before you need it, this will give peace of mind when the time comes to call upon it.  If you can avoid running to the bank ‘cap in hand’ at the last minute, that will greatly enhance your chances of getting the funds you require.

 

5. Determine ways to make cash flow a ‘non-issue’ for the future

Once you’ve worked out how to proactively manage your cash flow, it becomes a non issue.  

The keys to achieving this are:

    • Constantly run a Cash Flow Forecast (even when times are good).  Things can turn around very quickly and you don’t want to be caught short.
    • Proactively manage the factors impacting cash flow i.e. funds coming in and going out.  Constantly speeding up customers payments and analysing spending and supplier terms is key to avoiding wastage.
    • Put in place sources of funds when you don’t need them… not when a crisis hits.  It’s much easier to present an attractive proposition to a lender/investor when times are good.

 

For more information about maximising cash flow and cash flow projection visit:

https://cfooncall.com.au/cashflow-forecasting/

Or download our eBook ‘Seven Steps to Stop Cash Flow Chaos Forever’

 

Xero Beautiful Business Fund applications are open

- Covid 19

Xero recently announced the launch of the Xero Beautiful Business Fund.

 

It’s their new initiative, backing small businesses for the future.

 

What does this mean?

Xero is offering more than NZ$750,000 in funding to Xero small business customers across Australia, Canada (excluding Quebec), New Zealand, Singapore, South Africa, the UK and the US.

 

Applications for the fund are now open and we encourage you to apply.

 

About the fund:
There are four funding categories, with no cap on how many you can enter.

    • Innovating for sustainability
      How are you taking the next step on your sustainability journey?
    • Strengthening community connection
      How are you striving to give back to your community?
    • Trailblazing with technology
      How are you seeking to innovate and set pace with technological advancements?
    • Upskilling for the future
      How are you thinking ahead and preparing for the future?

 

For each category you’d like to enter, create a 90 second pitch video and complete the short online application form here.

 

 

Referrals
If you choose to enter, you’ll be asked if you’ve been referred by your accountant or bookkeeper. Please select yes and add the name of our firm and your primary contact.

 

Share the love
Spread the word with other Xero customers you know, so together, we can make the future brighter for small businesses.

Good luck!

How To Maximise The Value Of Your Business

- Business Exit Planning

Whether you want to sell your business or simply stay ahead of the curve, business owners and leaders should always be looking for strategies to enhance their organisation’s value. However, given the fast-paced nature of any business, finding the right tactics that align with your business’s needs can be challenging. 

This blog will explain how to maximise the value of your business by prioritising effective financial management, developing customer relationships and leaning on innovation to ensure long-term success and profitability.

  • Focus on tactical financial management 

Effective financial management keeps the blood pumping in any successful business. In this case, having a well-defined financial strategy is essential for maximising the value of your business. This can involve careful budgeting, minimising expenses and healthy cash flow management. With a solid financial foundation in play, business owners can enhance operational efficiency and, better yet, boost investor confidence.

One key element of strategic financial management is prioritising your investments. Don’t forget to allocate resources to projects that align with your long-term goals and have the potential to generate returns. 

  • Invest in your customer relationships

It’s no secret that customers keep your business alive and well, which means maintaining strong customer relationships can impact your business’s value. Happy customers are more likely to be loyal to your brand, resulting in increased customer retention, more positive feedback and a larger customer base.

To build strong customer relationships, focus on delivering exceptional products or services and prioritising customer feedback. You can do this by implementing a practical customer feedback system to gather insights to identify areas for improvement. By consistently exceeding customer expectations, it won’t be long before you establish your brand as one for quality and reliability.

  • Welcome innovation and adaptation 

No matter your industry, the ability to seamlessly innovate is crucial, as businesses that remain still risk losing market relevance over time. Embrace innovation within your organisation by encouraging employees to share creative ideas that can lead to new products and services, operational improvements or future opportunities for expansion. 

It’s also worth keeping an eye on industry trends and technological advancements that could influence your market. Rather than resist change, explore ways to use these trends to your advantage. By being an early adopter of innovative technologies, you can give your company a competitive edge, positioning yourself as an industry leader.

Learn how to maximise the value of your business with CFO On Call

With so much to consider and plan, it’s no wonder savvy business leaders are opting to outsource this planning to ensure their organisation’s growth and prosperity. CFO On Call offers tailored financial strategies that align with your business objectives. We can help you identify growth opportunities, assess potential investments and make informed decisions that maximise the value of your business. 

The CFO On Call team also specialises in cash flow management, ensuring your business has the funds to manage operations, current investments and future growth. But we’re also capable of going beyond the numbers. 

CFO On Call is your trusted strategic partner, helping you evaluate the feasibility of future expansions while developing other strategies that maximise returns. 

Book a consultation with CFO On Call today to discuss your upcoming business ventures

Navigate the complexities of financial management and drive growth with CFO On Call. Schedule an appointment with us today to get started.

The Top Driver For Profit… It’s Not The One You Think!

- Webinars

There are a number of drivers of profit in a business.  The one that pops up mostly as the top driver is ‘Price’.  If you don’t get the price right for what you’re selling, you’ve got ‘buckleys’ of making profit, after taking into consideration the costs and expenses in your business.

So what can you do to ensure your price is right for what you sell?

Watch this video for useful insights into pricing:

  1. The fundamentals of pricing to ensure profitability
  2. Pricing a product versus a service
  3. The key elements of pricing for services
  4. A pricing model that reflects business operations
  5. A feedback loop to maintain and improve pricing accuracy and profitability
  6. A case study in complex pricing for a service that delivered consistent profit

CFO On Call welcomes Neha Malhotra to the team in Melbourne

- Cash Flow Management and Forecasting

We’re delighted to welcome Neha to the team of Virtual CFOs in Melbourne.

 

Neha works with companies to create value.  Including (for example):

    • Overcoming growth challenges
    • Strategic growth planning and forecasting
    • Managing Cash Flow to achieve sustainable growth
    • Finance acquisition to fund growth
    • Systemisation to handle growth
    • Management reporting to ensure growth plans are on track
    • Project and product costing to ensure profitability
    • Feasibility studies to support investment 
    • Establish cash flow focussed contracts
    • Mitigating and minimizing growth risk

 

Neha loves nothing better than helping an owner with a growing business take it to the next level.

 

There can be all kinds of issues surrounding business growth such as:

    • Cash flow problems (quite common and normal in a rapidly growing business)
    • Bookkeeper and staff not coping with business growth and how to manage them
    • Getting customers to pay on time
    • Owner getting the right business reports to guide decision making
    • Setting up the business systems to handle growth
    • Due diligence on business mergers, acquisitions and expansion plans to ensure it’s a viable and sustainable proposition

 

Neha has helped many businesses to grow, without compromising their existing business.  She has provided:

    • A ‘sounding board’ to discuss clients’ ideas, plans and goals
    • Numbers and costings to ensure viability of initiatives
    • Planning to implement growth and ‘change’ activities
    • Setting targets and reporting to ensure plans are on track and desired outcomes achieved
    • Help employing, guiding and managing the right bookkeeper to handle growth, ensuring profit and cash flow runs properly
    • Investigating, identifying and fixing issues that affect growth

 

In short Neha takes responsibility for your business numbers and financial challenges, so you can DRIVE your business and make money!

 

Discover the Power of an Hour with Neha Malhotra

BOOK A FREE CHAT WITH NEHA

 

To learn more about how Neha is helping businesses download our eBook ‘‘Managing Your Business Through Rapid Growth’