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Tag: part time cfo

How to Develop a Good Banking Relationship (and Why You Should)

Published: by lauramills
How to Develop a Good Banking Relationship (and Why You Should)

While it may not always appear to be the case, banks are generally very keen to lend money to businesses. However, due to stringent guidelines and red tape, it can seem quite difficult to actually get credit approval. Maintaining a good banking relationship can be the key to this. Here are some simple tips to help your business (particularly your finance department) improve this relationship.

Change Your Mind-set

Dealing with the banks is a state of mind. If you consider the relationship to be ‘master and slave’, that is exactly the kind of relationship that will develop. Instead, think of it as a relationship of equals. Bank relationship managers are just like any other supplier, so negotiating with banks is really no different from negotiating with other suppliers. The product being negotiated just happens to be money.

Understand Your Bank’s Requirements

As with any negotiation situation, both parties have a list of requirements. You will already be intimately familiar with your own needs and goals. By taking the time to understand your bank’s list of requirements as well, you can help the relationships develop much more smoothly.

A bank requires 5 key things:

   1. High-quality management – your leadership team should consist of people who have a reliable track record and a proven ability to overcome obstacles.

   2. Thorough financial information – this should include comprehensive reviews of past performance and insightful analysis into where the business is heading. The maintaining of these records isn’t just important for the information itself; it is also a reflection of the personnel in charge of maintaining it.

   3. Income – a relationship manager’s top priority will always be securing the best price. Once the credit has been approved, it’s up to the relationship manager and his or her director to decide on the actual price.

   4. Loan repayment – the credit team will assess the forecasts while also taking into consideration the bank manager’s recommendations and observations. You need to clearly demonstrate how money will be repaid and openly discuss the factors that these repayments will hinge upon. Credit teams are often cautious in regards to repayment proposals (e.g. if sales end up amounting to only half of what is expected, they want to see that the debt can still be repaid). If you have already scaled back your numbers to allow for this, you need to make sure this is apparent in your presentation and discussions – otherwise your figures will be halved a second time!

   5. Security – when you think of business finance, recognise that this field is actually divided into two specific types of finance: equity and debt. Equity funders understand that returns may be unpredictable, and they charge a higher rate to facilitate this risk. Debt providers expect to be paid back regardless of what happens, and the price of their finance reflects the inherent risk of this not happening. At the end of the day, any bank simply needs to ensure that their deal has a safety net and won’t backfire on them if things go poorly.

Make Sure You Have the Right Banking Relationship Manager

The quality of relationship managers can vary significantly, and this will have a substantial impact on the quality of your relationship with your bank. The best relationship managers can demonstrate very quickly that they both understand your business and you personally.

The best test is to ask yourself if you trust your relationship manager sufficiently to tell them openly when something goes wrong. If you cannot answer this positively, you should have a look at the relationship and determine what steps need to be taken to fix this – whether that means having a comprehensive catch-up meeting to discuss your concerns or requesting a new relationship manager.

The Benefits of a Good Banking Relationship

Aside from having greater opportunities to secure essential finance for your business, having a strong relationship with your banking relationship manager can have a multitude of other advantages. For example, you can:

  • Rely on your bank for general advice and guidance on a range of financial matters
  • Expect to hear about new products, services and deals as they become available
  • Access other relevant financial products for your business, perhaps at a reduced rate
  • Trust your relationship manager to work towards your goals and evaluate your business’s circumstances transparently
  • Genuinely enjoy dealing with your bank, rather than dreading it!

As you can see, a good relationship with your bank – as with almost any good relationship – is well worth a little bit of work. In some cases, having the right part time CFO can make the crucial difference; please don’t hesitate to contact us if this is something you are currently lacking. In the meantime, we hope these tips will help you strengthen your rapport with your bank.

How do I manage my business in an inflationary environment?

Published: by lauramills
How do I manage my business in an inflationary environment?

The last time inflation was over 5% was early 2000’s. For the last 20 years the only business consequence of inflation was annual small CPI adjustments.

Now, the #1 business risk may be our new inflationary world. The most learned bankers and economists admit they don’t know how high or for how long inflation will be around for. Following could be useful guidance.

BUSINESS IMPERATIVES

  • Forecasting and scenario planning
  • Cashflows and working capital become even more important
  • Margin protection
  • Prioritise high profit customers and products

AREAS TO PAY ATTENTION TO

Loans/financing

Assess the potential impact of rising interest rates and business uncertainty. This includes loan headroom, ability to service the loan, and potential covenant breaches. Use stress tests and sensitivity analysis. Have an open line of communication with your banker and don’t hide any bad news from them. Make sure the amount and duration of financing is sufficient to weather the crisis and rollout any business plans. Ensure facilities can’t be called in. Consider replacing some overdraft with fixed term financing if things look tight.

Credit Control

Your customers may struggle. Ensure you have an  on-going open collaborative dialogue with key customers. Review and assess credit limits, payment terms, and credit policies. Ensure you have timely reporting on receivables ageing and potential bad debts. Weekly reporting would be desirable. And ensure someone is reviewing these reports and taking action promptly.

Cash Forecasts

Implement monthly cash forecasting process if you don’t have one in place now. Review forecasts closely. Understand why variances occur, i.e., was it a business issue or inappropriate assumptions, and take appropriate action accordingly. Run regular scenario planning to understand potential problems.

Working capital

Don’t neglect this area. It can be quietly sucking up cash largely un-noticed. Setup processes to ensure invoices are sent out promptly, and customers pay on a timely basis. Review inventory turnover and under-utilised inventory, and setup action plans to improve this. If possible, negotiate better terms with suppliers. Ensure your regular reporting gives visibility of the $ value of receivables, payables and inventory, and also ageing and turnover.

Pricing and margins

THIS IS KEY. Protecting margins is paramount, and a key driver of overall business profitability.

  • Pricing is a quick and powerful lever to do this. It will need to become more dynamic. Price increases will likely be essential, but they need to be targeted and precise. Understand your customers and where you fit in their value chain. For example, how important and how expensive is your product in their overall costs. This will enable more appropriate and ultimately successful price increases to be made.
  • Make sure reporting systems give you margin by customers and products. Prioritise high margin products and customers. This is particularly important if the availability of resources, such as labour, is constrained.
  • Consider hedging mechanisms and contractual T&C allowing you to pass on input prices to customers.

Mix

Understanding, monitoring, and improving, the margin impact of changing customer and product mix is critical. The key is having the mix that maximises margin $.  This process needs to be dynamic and correlated to changes in input prices, and internal resource availability.

Input prices

Monitor input prices closely. Understand impact on product margins. As relative prices change, consider input substitution or replacement. Renegotiate major input prices if possible, e.g., using volume discounts.

Overheads. Review, consider what is business critical and what is not. Try to have costs on a variable basis if possible.

Assets. Review all assets. If they don’t generate profit sell them off.

Business model. Run scenarios around inflation rate, interest rates, wage and input increases etc regularly. Is your business model appropriate?, should it be changed?, do you need to have new delivery models?

Risk management. Make sure you regularly monitor risks and take appropriate mitigation. Check insurance coverage is adequate. Don’t forget that uncertainty can create opportunities.

Improve profitability through innovation and efficiency enhancers such as IT. Can business processes be streamlined, removed or changed?

 

Gary Campbell is an experienced CFO, based in Victoria,  working with the CFO Centre Australia. He is particularly successful at profit improvement, financial turnarounds, risk management and corporate governance for SMEs and NFP. If you would like to talk to a CFO like Gary, please contact us.

The Strategic Planning Checklist

Published: by lauramills
The Strategic Planning Checklist

Our Ultimate Guide to Strategic Planning

Part A: Business Strategy Check List

1. Analysis of Existing Situation – Organisational Philosophy & Mission & Value

  • Does it reflect what you stand for?
  • Do your people understand its true meaning?
  • Does it make it clear as to how you have to compete and against whom?
  • Is it simply written? Is it clear and unambiguous?  Is it believable and realistic?
  • Does it motivate people? Does it attract pride or cynicism?
  • Does it give us some indication of what we should be doing and how we should be doing it?
  • Do all the constituent parts fit and hang together?
  • “Identity Pyramid” – do you have clarity around all the issues?

The Identity pyramid

2. Internal Appraisal of Company

  • SWOT analysis – revisit previous analysis & ensure it is complete & current
  • Distinguish between endowments and core competencies
  • Assess and audit core capabilities.
  • Gauge fit between external environment and core capabilities
  • Identify fit between customer requirements and core capabilities

Having identified what you perceive to be your competences ask yourself the following questions:

  • Will this give us any source of long term sustainable competitive advantage? Clarify the how? (ie. how relevant is it to the needs of our customers (actual and potential)).
  • Do customers (broadly) agree with our findings (ie. the market place)?
  • Can competitors (present/future) emulate or do better? Do they share our perception?
  • How was this list of core competences arrived at (eg. Training, innovation etc)?
  • Any weaknesses/shortfall still? If so, what further investments will be required?
  • Is there any impact on the strategic balance sheet (ie. Intangible and human assets)?
  • Can it be levered, onto other applications and/or markets?
  • What happens next?

3. Competitive Analysis

  • What is the current process for this task?
  • The Positioning Statement (competitive positioning) – refer below
  • Scan present competitive position but focus also on future competition.
  • Do you really know your competitors strategy?
  • Understand changing face of competition
  • Who could be a future competitor?
  • Is your strategy and your competitors becoming more alike or more divergent?
  • What is the most radical thing that your competitor(s) could do?

The Positioning Statement (competitive positioning)

4.Value Proposition

  • Consider or revisit the current Unique Sales Proposition within your Marketing plan & ensure it is complete and up-to-date.
  • Do you know why your customers buy from you and not you competitor(s)?
  • Have you asked them?
  • How can you improve customer experience?

5. Environmental & Industry Analysis

  • Consider legal, social, political, economic, technological, markets, labour position, society, pressure groups, and any other environmental issue.
  • Assess potential impact of any change(s) and consider timing implications.
  • Conduct intensive industry analysis.
  • What is the long-term viability of the industry as a whole?
  • What could change the industry dynamics?
  • What is the nature of current industry changes i.e. radical, creative, intermediate or progressive?
  • What could be the impact on your strategy and source of competitive advantage of such changes?
  • Five years or so from now how will the industry leaders look and act?

Part B: Strategy Selection

 

1. Identify Strategic Alternatives

  • All options to be examined – growth, acquisitions, alliances, JV’s, innovation.
  • Upside and downside risks identified

2. Strategy Evaluation & Selection

  • Clear choice to be made
  • How will we compete?
  • Evaluate impact of each option
  • Will it give unique competitive advantage?
  • Can it last? Can it be sustained?
  • Will it differentiate us from our competitors?
  • Can it be converted easily into a set of business objectives / KPI’s?
  • How will competitors react?
  • Easy to implement?
  • Contingencies in place?
  • What about the next wave?
  • Is it consistent with customer requirements and industry changes?
  • Will it create shareholder value?
  • Is it financially viable?

Part C: Strategy Implementation

 

1. Matching Strategy & Organisational Structure 

  • Do we have the necessary resources?
  • Is there a logical fit?
  • Is current structure adequate? Assess extent of change. Do not ignore culture effect.
  • What about the organisation’s values?
  • Is strategy personalised enough? Assess flexibility and robustness.

2. Allocation of Resources & Responsibilities

  • Planning, Plans, budgets, controls, appraisals etc….. all to be consistent with strategy
  • Strategy well translated into clear objectives
  • Priorities and constraints identified
  • Time horizons clearly laid out
  • Management information systems to dovetail strategic choice

Without a comprehensive, up-to-date business plan and an implementation timetable, companies may be missing out on opportunities for growth and not realising their full potential. A formal plan can be an extremely valuable tool for managing and growing a business, as it allows a company to recognise its strengths and weaknesses. Furthermore, research has shown that SMEs that have a business plan in place are consistently more profitable than those who do not have a business plan.

Photo by Andrew Neel on Unsplash

Tell Me Why I Need A Part Time CFO

Published: by lauramills
Tell Me Why I Need A Part Time CFO

You are the owner or CEO of a medium size business. You already have an in-house accountant and an external public accountant. Why might you need another finance person?

Here are 8 reasons why a part-time CFO will be beneficial to your business:

  1. DIFFERENT (BUT COMPLEMENTARY) AREAS OF EXPERTISE

CFOs will normally have substantial hands-on commercial business experience (see point 3 below). Accountants are more skilled in their areas of expertise, but typically don’t have that depth of hands-on operational commercial experience. The skill sets are different, but complementary. The three finance professionals, working together as a team, can produce substantial benefits.

 

  1. BETTER INFORMATION

You need good information to make good business decisions. For example:

  • FORWARD LOOKING reports, such as cash flows and order/sales forecasts
  • NON FINANCIAL information such as key operational KPIs
  • Customer, territory, sales channel, service and product profitability
  • More frequent high-level timely reporting on key business indicators i.e. the weekly dashboard

CFOs can provide business intelligence reporting, specific to that unique business’s characteristics and challenges. They are generally more experienced at   “management accounting” i.e. providing the right information which management need to run the business. Management accounting is very different from what the tax accountant uses, or what generic software P&L reports provide.

 

  1. COMMERCIAL SKILLSET

Most CFOs are professionally trained accountants, who then move to commercial roles. Normally it would take at least another 10 years of commercial experience to become a CFO. In these corporate roles, CFOs often partner with the CEO as their right-hand person, thus acquiring extensive commercial and operational experience. They often have project management, IT, risk management, internal controls/processes and administration experience.

 

  1. BENEFITS FOR THE OWNER or CEO:

 The part-time CFOs:

  • Can focus on finance, admin, and IT thus freeing up the CEO to focus on the business
  • Pass on best practices and techniques learnt in corporates
  • Be a sounding board, mentor and advisor
  • Be a long-term relationship-based partner who takes the time to really know the business
  • WORK WITH OWNER/CEO TO ACHIEVE THEIR GOALS AND AMBITIONS

 

  1. FLEXIBLE CUSTOMISED ENGAGEMENT

  • You pay for the level of engagement that you need, in contrast to the fixed high costs of a full-time CFO
  • Both retainer and time spent fee structures are available

 

  1. HIRE ONE, ……TAP INTO THE NETWORK

The CFO Centre has over 750 CFOs. When you engage with a CFO from The CFO Centre, you can effectively tap into this global network which has in excess of 10,000 years of experience and knowledge.

 

  1. IMPROVED STAKEHOLDER CONFIDENCE

The CFO Centre are the global number 1 provider of part-time CFOs, Hiring a part-time CFO from The CFO Centre will give banks, suppliers and other partners added confidence to deal with the company.

 

  1. VALUE FOR MONEY

Take advantage of experienced commercial professional, on a flexible structure determined by the client, at a fraction of the cost of a full time CFO.

 

SUMMARY

For SMEs who have grown in size and complexity, but not yet reached a size where a full-time CFO is required, the “part-time”, or  “on-demand” CFO could be the solution.

Written by Gary Campbell. Gary is a CFO with The CFO Centre in Victoria, Australia. He is particularly successful at profit improvement, financial turnarounds, reporting and risk management within manufacturing and distribution sectors. He can be contacted at [email protected], or you can contact us here

Under the Spotlight – The CFO a A Guardian

Published: by lauramills
Under the Spotlight – The CFO a A Guardian

A CFO can act as a guardian for your business, by forecasting your cashflow and profitability, setting meaningful targets and helping you monitor your progress against them so you achieve your goals.

Looking Ahead – Forecasts

While most accountants are very good at telling you what has happened, not everyone is good at looking ahead. Historical accounting records are vital to any business, but so is a forecast. A forecast acts as a red flag, highlighting where profitability or cashflows are under threat. Forecasts need to be informed by well- thought out assumptions, and be capable of being updated quickly. These days numerous cloud-based forecasting tools are available, that are updated continuously from accounting systems.

ZZZZZ and Improving Your Business – KPIs

We all know the cliché that to improve something you have to measure it. To improve a business, you need clear targets or measure – key performance indicators (KPIs).

But how do you go about setting KPIs?

Here are some tips on setting KPIs. I call them the 5 Zs (I’m using American spelling – apologies to all of us using British spelling).

CustomiZe – KPIs must be relevant to your company. If you trade in inventory in different product categories, you need margin and turnover KPIs for your inventory categories. If you are a professional services company, inventory is irrelevant – you need labour utilization and efficiency measurements.

PrioritiZe – it is tempting to want to choose 100 goals, but don’t. If you or your staff are faced with 100 KPIs, you very quickly become overwhelmed and lose focus. Select 5-10 KPIs. Each manager or department will have their own KPIs.

VisualiZe – KPIs need to be visible and visually appealing. People need to see how they are progressing on a regular basis – every day or every week. Only by monitoring their progress constantly can they make changes to their behaviour to improve their performance. It is no use waiting until budget time at the end of the year to review how well you and your team have done.

OrganiZe – people need to be held accountable for achieving the targets. Each KPI needs a manager who is accountable for achieving that particular goal.

OptimiZe – constantly monitor and improve your performance. This means regular reviews and making the changes needed to stay competitive in your environment. This is particularly important in our current environment, where COVID19 has disrupted many industries and changed the operating environment.

Systems

A key element in monitoring your performance against KPIs is a system that gives accurate and reliable data, quickly. There is no one-size-fits-all system; you need to select a system that relates to your business needs. It’s critical that the setup and implementation of the system takes into account your business needs and your goals.

The Role of a CFO

Of course, you can try and do all of this yourself, but it is much easier to have an experienced person do it for you. A part-time CFO will be able to assess your business and set meaningful KPIs. Your CFO can take thorough look at how you are using your system, and whether changes need to be made. Regular meetings to review your forecasts and how you are performing against your KPIs will ensure you achieve your goals.

 

Written by Andrew de Bruyn, Principal (WA) – The CFO Centre

The Role of a CFO

Published: by lauramills
The Role of a CFO

What does a CFO do?

A CFO’s (Chief Finance Officer’s) role is to get fully engaged in your business. They regularly drill down into your financials to help you plan, forecast and monitor financial performance. A CFO can provide valuable help to you in the follow areas:

  • Help you strategize, plan and operate your business to your maximum financial advantage.
  • Analyse results in the context of the company’s objectives and strategies.
  • Plan and consider how financial transactions will be booked, consistent with the objectives and strategies of the business.
  • Work with your internal Finance function (bookkeeper or Financial Controller) and/or external Accountant.
  • Focus on a clean, quick, and solid closing of the books within days of the end of the period.
  • Establish key indicators that provide early warning for management.
  • Work to maximize the value of the business to the owners.
  • Ensure you (the owner or CEO) understand the financials, the trends and the issues they identify.

Our CFOs are qualified accountants with decades of commercial experience in high level finance roles. They have controlled the finances of companies across a huge variety of industries and sectors – plus with a team of over 750 CFOs globally, you can be sure to get the answers from someone who has been there and done it.

What’s more, you can have a high calibre part-time CFO at a fraction of the cost of a full-time resource. Outsourcing a CFO is tremendously cost effective and most CFOs pay for their own time with the cost savings they identify in your business.

The CFO Centre is offering a 1:1 emergency scenario planning video call with one of our experienced CFOs to review the 7 critical areas in your business. You will come away feeling clearer about your options for increasing cash and mitigating risk.

If you believe our expertise could benefit your business, please click here to get in touch.

Or for more information about the CFO Centre please call us on 1300 447 740.

How to Scale Your Business for Growth

Published: by charlottenoble
How to Scale Your Business for Growth

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.”