cfo on call Archives - The CFO Centre Australia

How to Scale Your Business for Growth

Published: December 28, 2022 by charlottenoble

Scaling your business depends on two factors: your company’s capability and its capacity to deal with growth.

To scale up your business, your company must be capable of dealing with a growing amount of work or sales and of doing it cost-effectively.

You need to know that your company can achieve exponential growth without costs rising as a result. It’s vital too, that performance doesn’t suffer as your company scales up.

You also need to be sure that your business systems, employees, and infrastructure can accommodate growth. For instance, if you get a sudden surge in orders, will your company be able to cope? Will you be still able to manufacture and deliver products or services on time? Do you have enough employees to deal with a surge in work or sales?

Scaling a business requires careful planning and some funding. To be successful, you’ll need to have the right systems, processes, technology, staff, finance, and even partners in place.

Identify process gaps

Audit your business processes (core processes, support processes, and management processes) to find their strengths and weaknesses. Find the process gaps and address them before you start to scale up.

Keep the processes simple and straightforward. Complex processes slow things down and hinder progress.

Boost sales

Decide what your company needs to do to increase sales. How many new customers will you need to meet your scaled-up goals?

Create a sales growth forecast that details the number of new clients you need, the orders, and the revenue you want to generate.

Examine your existing sales structure and decide if it can generate more sales. Can you increase your flow of leads? Do you need to offer different products or services? Is there an untapped market? Do you have a marketing system to track and manage leads? Is your sales team capable of following up and closing more leads?

Make sure you have enough staff to cope with an increase in sales. If you don’t have enough staff, consider hiring new employees, outsourcing tasks, or finding partners that may be able to handle functions more efficiently than your company.

Forecast costs

Once you’ve done the sales growth forecast, create an expense forecast that includes the new technology, employees, infrastructure and systems you’ll need to be able to handle the new sales orders. The more detailed your cost estimates, the more realistic your plan will be.

Get funding

If you need to hire more staff, install new technology, add facilities or equipment, and create new reporting systems, you’ll need funds. Consider how you will fund the company’s growth.

Make delighting customers a priority

To reach your sales forecasts, your company will need loyal customers. You’ll win their loyalty by delivering outstanding products or services and customer service every time you interact with them.

Invest in technology

Invest in technology that will automate tasks. Automation will bring costs down and make production more efficient.

Ensure that your systems are integrated and work smoothly together.

Ask for help

Don’t be afraid to ask for help from experts who have experience in scaling up companies. In an interview, Apple’s co-founder, Steve Jobs, said, “I’ve never found anybody who didn’t want to help me when I’ve asked them for help.

“I’ve never found anyone who’s said no or hung up the phone when I called – I just asked.

“Most people never pick up the phone and call; most people never ask. And that’s what separates, sometimes, the people that do things from the people that just dream about them. You gotta act. And you’ve gotta be willing to fail; you gotta be ready to crash and burn, with people on the phone, with starting a company, with whatever. If you’re afraid of failing, you won’t get very far.”

What Is a CFO…And Why Do You Need One?

Published: August 1, 2022 by lauramills

Many of my SME and NFP clients ask me “What is a CFO? …. And why do I need one?”

What they are really asking is, “what value can a CFO bring, and what can a CFO do that my finance/accounting/book-keeping team cannot do?”.

BREADTH & COMMERCIALITY

A CFO (Chief Financial Officer) has responsibility for ALL the financial affairs of an organisation. It normally takes around 10+ years of diverse finance experience before they get their FIRST CFO role. Being the top finance person in these sizeable organisations means that they normally acquire commercial, operational and strategic experience.

The finance/accounting team or accountant/book-keeper has responsibility for the accounting system. In this context this typically involves processing invoices and transactions, making payments to suppliers and staff, compiling budgets, facilitating any audits, preparing P&Ls and balance sheets, and compliance work such as filing tax returns. It is an important and critical part of the overall financial system. It is the engine room, or the lifeblood of the financial ship, giving the ship energy, information and the ability to move. But it is not the entire financial operation. There are other parts of the metaphorical ship,e.g. navigation, steering and radar rooms.

CFO’s financial role. In addition to the accounting system, CFO may focus on:

Need forward looking reporting. Accounting system is generally historic (past transactions). We don’t drive our cars with eyes fixed on rear view mirror!
Tax planning (not filing)
Increased focus on cashflows rather than P&Ls (profitable businesses can go bankrupt)
Reporting that gives information on how different parts of the business are performing (rather than the information that ATO or auditors require)
Medium term business plans with milestones and KPIs (not annual budgets)

CFO’s commercially and strategic role:

Partnering with, and advising, the CEO/owner to drive business performance
Manage and mitigate risks
Linking financial and operational strategies
Evaluating and advising on projects, products, customers, pricing strategies

In a nutshell, a good CFO will have breadth at all areas of finance and accounting, but in addition have commercial and strategic acumen.

DO YOU REALLY KNOW WHAT YOUR BUSINESS IS DOING?

As businesses grow and become more complex it is more difficult for owner/managers to have comfort that everything is under control. No longer can they do it all, and see it all, but they don’t know how to setup systems and structures to delegate.

This is currently made more difficult by pandemics, geopolitical tensions, supply chain disruption etc.

Many good businesses fail at this early growth stage. We often call it “the first brick wall”!

It’s a vicious downward spiral. The business suffers, or worse case, runs out of cash.

SO, DO YOU NEED A CFO?

An experienced CFO knows how to setup these systems, to better enable profitable, crisis free growth. They can act as advisors, partners and mentors.

So YES, you may very well need a CFO.

Your finance team can also benefit. By working with the CFO they can up-skill and broaden their experience.

Win, win!!

“But I don’t need and can’t afford a full-time CFO”.

ABSOLUTELY CORRECT, but you do need help, just not full-time help.

SOLUTION….a Part Time CFO model. You pay for the CFO only when you need them!! On demand CFOs.

Written by Gary Campbell. Gary is an experienced CFO, based in Victoria, working for the CFO Centre Australia. He is particularly successful at profit improvement, financial turnarounds, risk management and corporate governance for SMEs and NFP.

4 Signs That My Business Might Need CFO Services

Published: June 28, 2022 by lauramills

I have recently been talking to business owners and executives who want to build more resilience into their business. They are considering adding a part-time Chief Financial Officer (CFO) to their team. During these discussions, two questions usually come up. “How do I know if my business needs a CFO?” and “what does a CFO do that my Accountant can’t?”. I would like to share some thoughts on these questions.

The primary responsibility of a CFO is to optimize the financial performance of a company. This includes its reporting and accountability, liquidity, return on investment and long-term value creation.

A CFO has a forward-looking perspective. They look at interactions of the business with outsiders, acting as a diplomat and negotiator with third parties. Often the strategies put in place by a CFO are not short-term fixes. Some may take months or years to be fully realised.

How do I know when my business needs a CFO?

As to the question of when a business needs a CFO, the following indicators may be helpful.

Internal – When information that helps in making important decisions is not timely or reliable.
External – When improved respect must be gained outside the business. eg from investors, customers, suppliers, labour markets, regulators etc.
Rapid Growth – Growth requires an expansion of systems, and usually additional capital to finance the growth.
Exit – When a business is preparing for a merger, acquisition, or business sale.

So, when the business is at the stage of increased external engagement and growth, a CFO can add significant value.

What does a CFO do that my Accountant can’t?

A CFO always works closely with the external Accountant. Having an accounting background, the CFO is well placed to understand the role of the external Accountant. The external Accountant’s role is mostly concerned with compliance and transactional advice. They work from their own offices and will normally attend the client’s business premises periodically. External Accountants often have the skill sets to provide additional services. However, they are usually not involved closely enough in the running of the business to make this a sensible use of their time.

Functions such as the below will either fall to the CFO or some other suitably qualified resource will need to be allocated:

Budgeting and forecasting
Cash flow management
Financial reporting
Scenario planning
Internal controls
Insurance
Bench-marking and key performance indicators
Incentive schemes
Management of key suppliers
Accounting policies

If the business doesn’t have a CFO, the CEO or one of the Directors have to take ownership of these functions. This means they are taken away from other important leadership and governance roles. They also may not have the depth of experience in the technicalities of financial transactions to handle these things well.

Some of the common misconceptions about a CFO

There are some common misconceptions about a CFO that are worth discussing.

The first misconception is that a CFO may have an excessive focus on short-term financial results ie this year’s profit. Financial success of the business is undoubtedly the objective of any CFO. This, however, does not mean sacrificing long-term value creation for short-term results. A CFO is interested in the success of all business stakeholders. This includes owners, employees, customers, suppliers, financiers etc. All stakeholders must be rewarded to ensure the long-term health of the business.

CFOs are therefore, likely to be just as interested in the business strategy as they are in the profit and loss statement. In addition, culture, reputation, governance, and risk management will be on their radar. A good CFO recognises that sustainable financial success is only achieved when all aspects of a business are working well.

Another commonly held misconception is that CFOs think in “black and white”. That therefore, they may not be comfortable with the various shades of grey that business and life deal up. Whilst that may be true for some aspects of a CFO’s decision-making, good CFOs will look closely at the underlying issue. For example, CFOs are often involved in analysing the performance of a business or even individuals. In understanding performance, a CFO will often consider a range of underlying factors. This can include; roles and responsibilities, resources, delegated authorities, remuneration and incentive systems, behavioural assessments, management approach, and organisational structure and culture. CFOs are first and foremost experienced corporate managers. They understand that people are usually the most critical resource in businesses. From experience, most CFOs are skilled at dealing with people issues sensitively.

If you’d like a confidential discussion about whether a part-time CFO could be right for your business, please contact us.

Allan Robb, CFO at the CFO Centre

Freedom – The Main Reason I got into my Business

Published: August 12, 2021 by lauramills

“Freedom” is the most common reason small business owners started their businesses.

41% of respondents to a recent poll conducted by The CFO Centre Australia identified this as their primary reason.

When I started my business in 2003 I had this desire to be master of my own destiny.

And family was always the primary motivation for this freedom. A desire to be with my young family in their formative years. To share those sporting and other important moments as my children grew up.

But in my work as a CFO working with small business owners, the dream of being independent can often be just that – a dream.

The reality for many owners is they spend most of their time fighting fires. And working longer and longer hours as the business grows. Instead of getting more time with their loved ones, the demands on their time increases and they are at home less.

Business owners are often very good at working on the tools but lack the expertise in other critical skills. Without the business acumen or financial background to know what’s best for the business, they work longer hours trying to do it all.

What do you really want your business to do for you?

Does your business provide the freedom that you expected when you first set it up?

Are you stuck in the operational space with little time left over for what you really want to be doing, both in the business and personally?

I’ve seen this time and time again with business owners that we have worked with. At The CFO Centre we help business owners see the big picture.

This 2 minute video (click the big pink play button) shows some of our clients’ stories – from where they were to where they are now.

Written by Peter Crewe-Brown – CFO at The CFO Centre – Sydney Team.

Growing a Business

Published: April 6, 2021 by lauramills

A client recently said to me: “I want to grow our business and stop the cash burn – how do we do this? When is it the right time to invest and grow?”

What a tough question to answer. Each business is at a different stage.

We spent a day examining his business and determining what the growing pains were. He had started the business a few years ago and it grew from scratch to $750k turnover last financial year. This year they may potentially reach a turnover of $1.2m.

It was generating a great turnover and growing but they never had any cash.

“Why?” he asked.

After reviewing the business financials it was quite clear that the internal systems were not in place. He could not possibly understand the profitability of the products they were selling due to these inadequate systems.

Therefore they could not take the next step.

The first question I asked was: “Where do you want to take this business – what’s your goal? To build up the business and exit down the line, or are you looking to exit now? Or is this business a keeper if we can generate a great RoI?”

The response was: “We don’t know the numbers or where this business could get too as we have no clarity on the numbers”.

Something I see very commonly here in the SME businesses I work with – no clarity around the financials.

Next Steps

Step one for this particular client was to build a reporting framework around their products to determine what was profitable and what as not. If there were non profitable products (or those that deliver little profitability), should we dump them or only include them bundles in the online offering?

Step two: Build a fully flexible 3-way financial model (P&L, Cash Flow and Balance Sheet) for the next 3 years. Play around with the assumptions, i.e what other products can we put into the offering to customers?

Step three: Monthly reviews against the plan – what worked, what didn’t work and the whys around both.

The right time for a business to grow is when they can balance new customer demand with their internal systems and processes. Moreover, in the instance of this client, increasing recurring revenue streams. Growing faster generally costs more per customer as they need to engage more expensive channels within the business model.

Scalability is about continuing to engage customers with new offerings, and to engage new customers with your offering to the market.

To scale a business one must consider how the business model will affect the bottom line when you expand operations. If you have low capital expenditure and can grow your business with the same revenue / expense % it is much easier to deliver greater numbers in the long term and provide greater options to your customers.

It is early days working with this client but the potential is endless.