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Hire a CFO Call us 1300 447 740

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End of Financial Year is the Best Time to Build Business Resilience

Published: by lauramills
End of Financial Year is the Best Time to Build Business Resilience

The Titanic was one of the best ships ever developed in the world.

There were no problems with that ship. It had the latest technology and was deemed “unsinkable”.  The problem with the Titanic was that the captain ignored all the warnings, made hasty decisions, and hit an iceberg. A cautionary tale for all of us, especially when it comes to managing our businesses and finances.

Just like the Titanic’s captain, ignoring crucial data and making rash decisions can lead to disaster.

Entrepreneurs are inherently innovative and driven, but they often fall short in process and strategic planning.

As we have come to the end of another financial year, now is the time to plan ahead if you want to thrive this financial year and make next year’s financial reporting a breeze. Next June is simply too late—you can’t just copy and paste last year’s financial data and hope for the best.

 

Moving forward stronger through detailed planning

At The CFO Centre, and we see clients across all industries. We’re witnessing national growth as businesses emerge stronger with our help.

Many business owners can feel overwhelmed at this time of year, but now is the time to move forward with stronger processes and strategic planning, all with the help of a fractional CFO who understands your business and industry.

 

Process and Strategy: The Key to Success at EOFY

Small and medium-sized enterprises (SMEs) are the lifeblood of our economy. While the news may paint a bleak picture, it’s not all doom and gloom. Proactive CFOs can capitalise on their experience and innovation in financial reporting to give you the edge.

Why is this so important?

· Detailed budgeting and reporting are crucial for a clear snapshot of your business

Funders have noted that poor presentation of financial information can hinder a business’s ability to secure loans or favourable terms.

· Banks and other funders alike want detailed, accurate reports—information out of your head and onto paper. That’s where we come in. At The CFO Centre, we excel in creating P&L budgets, cash flow forecasts, and monthly reports, regardless of your business size. Data drives decisions, and accurate reporting is essential for shareholders, boards, and funders.

· Correct risk analysis helps to protect your business

Evaluating all obvious risks in your business ensures you have contingency plans for those with the highest likelihood and impact.

 

Business Planning Checklist

Because the end of financial year is the best time to build business resilience, here is a summary of our business planning checklist which our CFO’s will help you to work through:

1. Know Where You Stand

Ensure your financial reporting provides an accurate, timely view of your business performance, including:

·         Historic balance sheet, profit and loss, and cash flow

·         Key performance indicators (KPIs)

·         Rolling forecast balance sheet, profit and loss, and cash flow

2. Analyse

Evaluate your products or services to identify which to invest in and which to scale back to enhance business performance.

3. Review Costs

Review all costs, identify alternative suppliers, and renegotiate deals to minimize your cost base. Look for savings through system or process streamlining.

4. Review Customers

Identify and focus on your valuable customers. Consider letting go of customers who delay payments or consistently negotiate prices down.

5. Assess Risk

Have contingency plans in place to manage the impact of accepted risks.

6. Get Clear on Your Personal Goals

Reflect on why you started the business, determine if those goals remain the same, and assess your progress towards achieving them.

Tailored Financial Solutions

Our CFOs provide a fresh perspective that can make a world of difference.

As former U.S. President Dwight D. Eisenhower once said, “It’s very easy to be a farmer when the plough is a pencil, and a field is a thousand miles away.” Business owners need to deeply understand their operations. Engaging a professional part-time CFO can help you understand market forces and growth options.

There is some more useful advice in some of our blogs on the topics of Strategic Planning and Planning Checklist

Don’t wait until end of the financial year to start planning and achieving your business dreams. The time to act is now. Contact us and let us help you navigate the financial seas and avoid the growth icebergs ahead.

The Role of a Fractional CFO in Navigating Economic Uncertainty for SMEs

Published: by lauramills
The Role of a Fractional CFO in Navigating Economic Uncertainty for SMEs

In times of rising costs, uncertain market conditions, and labour constraints, the role of a Fractional CFO (Chief Financial Officer) in SMEs has never been more critical. CFOs are instrumental in guiding businesses.  They work alongside the internal finance teams and external accountants to shield risks, while identifying growth opportunities. Here’s how a CFO’s expertise can be a game-changer for your business.

  1. Strategic Planning

Strategic planning provides clarity and confidence in navigating economic volatility. CFOs, with their in-depth understanding of the financial landscape, steer this process, aligning financial goals with broader business strategies. This involves:

  • Scenario Planning: The challenges presented by the COVID pandemic is a great example of the need for effective planning. At The CFO Centre our fractional CFOs successfully prepared best and worst-case scenarios which helped our clients navigate the uncertainty created around customers, supply chain, labour, and cashflow issues. Economic uncertainty continues, as does the need for scenario planning.
  • Cash Flow Management: CFOs ensure that businesses maintain adequate liquidity, implementing strategies like optimising working capital and exploring flexible financing options. Refer to our blog “Successful Cash Flow Management: A Comprehensive Guide”
  • Cost Management: Fresh eyes combined with year of experience, allows CFOs to identify areas where efficiencies can be improved, ensuring resources are allocated to high-return initiatives. Quite often it is the sum of small improvements that add up to make a material impact on the business’ bottom line.

  1. Financial Oversight & Risk Management

The CFO’s role is vital in ensuring that the business’s financials are continuously monitored and managed. This encompasses:

  • Budgeting and Forecasting: Regularly updated and accurate budgets and forecasts provide a roadmap for financial decision-making. Refer to our blog “The Power of Budgeting”
  • Reporting and Performance Analysis: CFOs have the expertise to analyse financial data to uncover insights into the company’s performance, identifying trends that may impact future growth or stability. At The CFO Centre we have unlocked the power of financial analysis for countless clients, including the insights that come from gross margin analysis by product / service stream.
  • Risk Management and Compliance: CFOs oversee compliance, mitigating financial and reputational risks.  This often involves working alongside other professionals such as tax accountants, lawyers, insurance brokers, and financiers to ensure a co-ordinated and comprehensive approach for the client.

  1. Opportunity Identification

Economic and/or market uncertainty often brings not just challenges but opportunities. A strategic CFO can guide SMEs to:

  • Invest in Growth Areas: By identifying emerging trends, backed by data.
  • Innovate and Diversify: Encouraging innovation and exploring new markets or products, backed by market research.
  • Strategic Acquisitions: CFOs play a key role in identifying and evaluating strategic acquisition opportunities, including financial due diligence.

Conclusion

The role of a fractional CFO in navigating economic uncertainty is multifaceted, combining strategic foresight with practical, hands-on financial management. CFOs can guide SMEs through the differing stages of their journey, ensuring not just survival but a thriving business.

 

At The CFO Centre, we provide highly experienced, commercial CFOs on a part-time or “fractional” basis for SMEs looking for expert guidance with respect to strategic financial management. If you’re seeking help to steer your business, whether that be to improve its financial performance, to grow, or to ready itself for investment or an exit , then reach out to us – 1300 447 740 or [email protected]

Improving Cash Flow Management With Innovative Strategies

Published: by lauramills
Improving Cash Flow Management With Innovative Strategies

Small and medium-sized enterprises (SMEs) operate in a competitive ever-changing market where maintaining a healthy cash flow is both a priority and a challenge. As most SMEs are constantly expanding their business, cash flow management is a constant challenge to the long-term success of their business.

However, with the right strategies, businesses can significantly enhance their cash flow management, ensuring stability and paving the way for smooth funding of their future growth. This blog explores practical advice on optimizing inventory, improving payment terms, and leveraging technology to bolster cash flow.

Optimising Inventory for Better Cash Flow

Inventory management plays a crucial role in cash flow optimization. Excess inventory ties up capital that could otherwise be used for growth initiatives, while too little inventory can lead to lost sales and unhappy customers. Here are innovative strategies to optimise inventory:

  • Just-in-Time (JIT) Inventory: If possible, adopt the JIT approach to reduce inventory costs by receiving goods only as they are needed in the production process, thus minimising inventory levels. Drop shipping: Consider drop shipping for certain products to eliminate the need to keep them in stock, as the supplier directly ships orders to customers.
  • Inventory Analysis: Optimise your inventory to prioritise items that are high volume, high-margin items for better cash flow and higher profitability. Ensure seasonal inventory items are carefully ordered and sold before the end of their season. This will minimise inventory holding costs and while ensuring you have the inventory your customers require.

Enhancing Payment Terms with Customers and Suppliers

Negotiating favourable payment terms with both customers and suppliers can significantly impact your cash flow. Here’s how:

  • Faster Customer Payments: Encourage quicker payments by setting up automated payment reminders, or using digital payment solutions that simplify the process for customers. Ensure a dedicated staff member is responsible for managing Customer Payments and follow up. Having consistent clear communication with Customers will minimise disputes and reduce delays in receiving payments.
  • Extended Supplier Terms: Negotiate longer payment terms with suppliers to keep cash in your business longer. This might include 30 or 60 day terms, giving you more time to sell inventory and collect receivables before payment is due.
  • Electronic Invoices and Payments: Transition to electronic invoicing and payment systems to reduce the time between billing and payment collection, speeding up cash inflows.

Leveraging Technology for Enhanced Cash Flow Management

Technology offers powerful tools for improving cash flow management, providing real-time insights and automating financial processes:

  • Cloud-Based Accounting Software: Implement cloud-based accounting solutions that offer up-to-date financial information, helping you make informed decisions quickly.
  • Automated Receivables and Payables: Use software that automates invoicing and bill payments, ensuring you manage receivables and payables efficiently, improving cash flow predictability.
  • Cash Flow Forecasting Tools: Utilise cash flow forecasting tools that integrate with your accounting software to predict future cash flow based on historical data and current trends.

Additional Strategies for Cash Flow Enhancement

  • Lease, Don’t Buy: Leasing equipment rather than purchasing it can free up cash for other uses, though it’s important to weigh the long-term cost implications.
  • Re-evaluate Operating Expenses: Regularly review and cut unnecessary operating expenses. Even small reductions can free up significant cash over time.
  • Increase Sales with Marketing: Invest in targeted marketing efforts to increase sales volume, focusing on high-margin products or services that contribute positively to cash flow.

Conclusion

Improving cash flow management is an ongoing process that requires attention to detail, strategic planning, and a willingness to adapt to new methods. By optimizing inventory management, enhancing payment terms, and leveraging technology, SMEs can create a robust framework for managing cash flow effectively. Implementing these strategies can not only stabilise cash flow but also fund your businesses ongoing growth and ensuring success in the competitive business environment.

 

Planning, forecasting and optimising cash flow is the lifeline of any thriving business. At The CFO Centre, our strategies and seasoned CFOs help SMEs improve their cash flow management, ensuring a healthier, more sustainable financial future. Whether it’s preparing a multi-year 3-way forecast (Cash Flow, Income Statement and Balance Sheet) for your Bank, refining payment terms, inventory management, or leveraging technology, we’re ready to assist. Connect with us to explore how our tailored cash flow solutions can benefit your business.

The Power of Budgeting: Building a Financial Roadmap for Success

Published: by lauramills
The Power of Budgeting: Building a Financial Roadmap for Success

Budgeting, often seen as a mere accounting exercise, is in fact one of the most powerful strategic tools at a business’s disposal. For SMEs, creating a comprehensive budget provides your business with visibility to achieve your goals and is not just about tracking expenses and revenues. This blog will dig into the essentials of effective budgeting, offering insights into cost management, revenue forecasting, and the critical aspect of risk planning.

Crafting a Comprehensive Budget

An effective budget is a reflection of your annual Strategic Plan and should outline your desired outcomes and key deliverables to achieve that Plan. A well-crafted budget should show the allocation of resources consistent with your plan and serve as a blueprint for business operations. The process begins with understanding your business’s financial status and objectives, then translating this knowledge into actionable financial strategies.

Before leaping straight into the budgeting exercise, at The CFO Centre we first take our clients through a review of the last twelve months in terms of what worked, what didn’t, any key learnings and any new opportunities. We get our clients to re-consider their Why? or in other words, their purpose for being in business and their personal goals, and how that translates into what the business needs to look like. With that clarity and a clear Plan, a meaningful budget can then be prepared.

Aligning with Business Goals

Start with your strategic goals, ideally, they should include a revenue target and a profit target to help shape your budget.

Expense Management

Prioritise Spending: Not all expenses offer the same return on investment. Prioritise spending on areas that directly contribute to growth or efficiency.

Review Regularly: Regular review of your expenses to reveal opportunities for cost savings or reallocation of funds to higher priority areas.

Revenue Forecasting

Analyse Historical Data: Data from your underlying systems such as inventory and sales can help set the expectations going forward. However, be sure not to simply “add x%” to last year’s sales result as the process requires more thought and analysis. Reviewing historical margins by product or service stream will assist with the strategic direction you wish to take. Promotions and New Product Development (NPD) may also impact your budgets.

Consider Market Conditions: Stay informed about market trends and economic conditions that could impact your business, adjusting your forecasts to reflect these realities. HOW?

Set Realistic Expectations: Budgets should be achievable. Prepare a realistic budget that your team believes can be achieved and you can hold them accountable to. Goals are set to be met.

Contingency Planning

Identify Risks: Spend time considering the risks your business may face, from market downturns to operational challenges, and consider these in your budgeting process.

Allocate Reserves: Set aside a portion of your budget as a contingency fund to cover unexpected expenses.

Flexible Planning: Ensure your budget allows for flexibility, adapting to changes in the business environment with minimal disruption to your operations. The impact of risks and opportunities can be shown separately as increases or decreases to the profit in your core budget. Often these are referred to as upside or downside risks or sensitivities that inform the business of the potential impact of say a higher sales volume or an increase in costs. Flexible planning is a useful risk management tool to help plan for risks so you can embrace them.

Engaging the Team

Involve key team members in the budgeting process. This not only provides insights from different areas of the business but also ensures commitment to achieving budget targets. Departmental budgets will be appropriate for certain businesses and ensure any KPI’s for staff are linked to areas they can directly influence.

Monitoring and Adjusting

A budget is not set in stone; it should be a living document that evolves. Your budget can provide you with insights into which levers to pull to achieve the outcomes you want. It’s an opportunity to look at pricing, volumes and your costs. Regular analysis and adjustment is necessary.

The Benefits of Well-Planned Budgeting

  • Clarity: A budget provides a clear picture of the expected financial position of the business and guides decision-making processes. It allows a business owner to work on the business as well as in the business.
  • Control: It puts you in control, allowing for proactive management of resources and expenses.
  • Confidence: With a solid budget in place, you can have confidence that your desired business outcomes are more likely to be realised.
  • Communication: A budget facilitates communication with stakeholders, from employees to investors, providing a transparent overview.

Conclusion

The power of budgeting lies in its ability to transform financial decision-making from a reactive to a proactive process. It helps you focus on the future by building a financial roadmap that aligns with your business goals, so you can navigate the complexities of the business landscape with confidence and agility. A sound budget will also inform you of your cash flow outlook and help with funding decisions essential for facilitating working capital and supporting business growth. Effective budgeting is not just about numbers; it’s about setting a vision for the future and laying down the financial foundations to turn that vision into reality.

 

The CFO Centre guides its clients all over the world with respect to strategic financial management, including the development of comprehensive budgets that align with their business goals. From expense management to revenue forecasting, our expertise ensures your financial planning is on track. Ready to build a financial roadmap for success? Reach out to discover how we can help.

Navigating Your Business Growth Journey: Where Does Your Company Stand?

Published: by lauramills
Navigating Your Business Growth Journey: Where Does Your Company Stand?

As the business landscape constantly evolves, understanding where your company stands on its business growth journey is crucial for shaping future strategies. In a recent business survey, we asked 264 participants to assess their business’s growth stage. The results provide valuable insights into the diverse stages businesses find themselves in. Let’s delve into these findings and explore the implications for businesses at various growth stages.

  1. Scaling: The Power of Momentum (54%)

With over half of the respondents indicating their businesses are currently scaling, it’s evident that many companies are experiencing significant growth and expansion. Scaling is an exciting phase that requires careful planning, resource allocation, and strategic decision-making. It’s essential for businesses in this stage to maintain their momentum while effectively managing risks and seizing new opportunities.

Insight: Scaling businesses should focus on streamlining operations, investing in scalable technologies, nurturing their workforce, and building strong customer relationships to sustain their growth trajectory. The CFO Centre can help by adding an experienced part-time CFO (Chief Financial Officer) resource to your team to help you plan and implement the right strategy for your growth goals.

  1. Market Leaders: Maintaining the Edge (18%)

Being a market leader is an accomplishment that comes with its own set of challenges. These businesses have successfully carved out a substantial share in their respective industries. However, complacency can be detrimental. Market leaders must continuously innovate, adapt to changing market dynamics, and stay ahead of the competition while nurturing their existing customer base.

Insight: Market leaders should embrace a culture of innovation, invest in research and development, explore new markets, and consistently deliver exceptional customer experiences to maintain their edge in an ever-evolving business environment. Our part-time CFOs could be the edge you need to set you apart from your competitors – find out how.

  1. Early Stage: Nurturing Potential (15%)

A significant number of respondents identified their businesses as being in the early stage. This stage is characterised by laying the groundwork for future growth. Early-stage businesses need to focus on refining their business models, building a strong foundation, attracting talent, securing funding, and establishing a solid customer base.

Insight: Early-stage businesses should prioritise market research, develop a compelling value proposition, build strategic partnerships, and leverage digital marketing tools to establish a strong foothold in their target markets.

  1. Preparing for Exit: Strategic Transitions (9%)

Some businesses indicated that they were preparing for an exit. This stage involves strategic decision-making regarding potential mergers, acquisitions, or divestments. It requires careful planning, financial analysis, and alignment with long-term objectives to ensure a smooth transition.

Insight: Businesses preparing for exit should seek expert advice, conduct comprehensive due diligence, optimise their financials to ensure the best possible price, and identify potential buyers or investors who align with their strategic vision.  The CFO Centre has helped countless businesses plan and execute profitable and smooth exits for our clients.  Hear from one of them here.

Conclusion:

Understanding where your business sits on its growth journey is crucial for making informed decisions and charting a path towards success. Whether you are scaling, a market leader, in the early stage, or preparing for exit, each growth stage presents unique opportunities and challenges. To gain deeper insights into your business’s growth journey, consider taking the Scale-up & Exit Business Assessment™ by The CFO Centre. Or contact us on 1300 447 740 to find out how we could add significant value to your business.

Critical Factors for Improving Profitability

Published: by lauramills
Critical Factors for Improving Profitability

In a recent survey of our clients, improving profitability emerged as one of the top three priorities on their business agenda. Profitability is the lifeblood of any successful enterprise, and understanding its intricacies is crucial for business owners and managers alike. In this blog, we’ll dive into the two primary drivers of profit and explore the indispensable link between profitability and cash flow.

Profitability factors are affected by sales and reducing costs. Within the realms of sales there are 3 critical areas: price, volume and customers. These elements are not isolated but intricately interconnected, each influencing sales in unique ways.

  1. Price

When focusing on improving profitability and performance, price sets the scene. It will determine the volume of sales and ultimately attract different types of customers.

The most obvious part of profitability is the selling price. It is essential when determining the price to ensure that the price and sales volume allow the business to be profitable. It is therefore, good practice to also review these prices regularly.

Setting prices involves a careful balance across your product range. It’s common to have “loss-leader” products, which may not yield substantial profits but can be offset by other lucrative offerings. Competitive pricing and your desired market positioning should also guide your pricing strategy. Discounts can boost sales volume but may impact profitability, so diligent record-keeping and regular review are key.

When offering a discount to a customer, always remember that the discount will increase sales volume, but it will also eat into the profitability of the products. You should record all discounts and review them regularly.

Two valuable metrics for monitoring pricing effectiveness are profit margin and mark-up. Both metrics should be in sync with your pricing strategy, allowing you to make necessary adjustments.

  • Always review your gross and net margins against previous periods
  • Understand customer profitability and their behaviours
  • Minimise discounting if possible
  • Implement and review a mark-up policy
  • Analyse sales on a regular basis.
  • Use key financial indicators to identify any anomalies that may impact the sales price:
    • Cost of goods sold margin
    • Gross margin
    • Average stock turnover
    • Mark-up

  1. Volume

There are two ways in which volume can be increase. The first is through increasing your current level of sales with your existing customers, and the other is sourcing new clients.

To boost sales with existing customers, implement a comprehensive marketing strategy and capitalise on the often-overlooked opportunity of up-selling. Effective sales targets and an understanding of your break-even point are essential to drive performance.

Selling targets are a way to monitor overall performance and enhance profitability. Therefore, I advise you to look at this carefully as it can have an impact on other areas of the business. Understanding your break-even point will allow for realistic targets to be set and ensure profit is maximised.

To help increase the volume:

  • Understand your customers’ buying patterns
  • Implement a marketing strategy to increase sales volumes
  • Introduce loyalty programs that encourage referrals
  • Train staff to excel in upselling high-profit products.
  • Use break-even calculations to set achievable sales targets
  • Explore opportunities to expand into new markets

  1. Customers

Exceptional customer service is the cornerstone of customer retention and acquisition. Understanding your customers’ needs and preferences is a simple yet powerful step towards business improvement. Utilising a Customer Relationship Management (CRM) system can provide invaluable insights into customer behaviour.

  • Understand the needs of the business customer and use this information to improve the customer service experience.
  • Utilise tools like Survey Monkey to measure customer service levels.
  • Reward current customer for their loyal support
  • Consider using mystery shoppers to monitor customer service
  • Maintain regular contact with customers to stay top of mind

Improving Profitability In Your Business

In conclusion, the pursuit of improving profitability is a nuanced journey, and this blog only scratches the surface of what’s achievable.

At The CFO Centre, we boast a team of over 60 experienced CFOs across Australia and New Zealand, and over 750 globally. Our track record speaks volumes about our ability to help clients boost their profits. If you’re interested in learning more, feel free to contacting us at 1300 447 740. Your success is our priority, and we’re here to help you on your journey to improving profitability.

You can also get in contact with us here.

Harness Your Profits With 7 Business Levers

Published: by lauramills
Harness Your Profits With 7 Business Levers

Have you ever wondered why your cash-flow fluctuates even when sales are strong? Or how your business is valued in the eyes of an external party? Then you need to know the seven (7) levers in your business to increase profits.

With just a little additional focus on one or more of these 7 levers, you can directly improve the cash-flow, profitability and/or value of your business. There’s no smoke and mirrors, nor anything particularly difficult to undertake. However, many business owners do not take the time to appreciate how the financial performance of their business really works.  So, let’s break it down.

Often business owners will primarily focus on sales volume, in other words trying to sell more. However, whilst sales volume is important, it’s only one of the 7 levers available to you.

What are the 7 levers in a business that control your cash, profit and business valuation?

The first four levers are focused on your Profit and Loss and therefore directly impact the profitability (and cash-flow) of your business. As most, businesses are valued at a multiple of cash earnings. These levers also have a huge impact on the value of your business (along with other aspects such as Brand, customer base / income streams, and internal expertise / “keyman” dependence).

     1.Volume

Selling more – although increasing sales can grow your business, don’t forget to focus on the other levers below! How much of every extra $1 in revenue turns into profit and into cash in your bank account, and when?

Tip – formulate a sales & marketing plan, with a budget, which is aligned back to your  overall Strategy. Review and tweak the plan regularly.  This will help keep you focused on the right way to grow your top line.  Any growth needs to be sustainable!

      2. Pricing

Can you increase your prices? Even a 1% increase can have a big impact. There can be a fear of losing customers by putting up your prices, which can often be unfounded.

Tip – review your margins by product / service stream / customer to ascertain which sales are making you money and which are not.  You need to know your break-even points!  Your part- time CFO can help – they love this stuff!

Tip – the results of your pricing analysis need to dovetail into the sales & marketing plan. It’s possible to make more profit from less turn-over!

      3. Cost of Goods Sold – reduction in % terms

This lever is most relevant to those businesses with direct costs such as manufacturers, construction, etc and places the focus on your gross margin.

Tip – revisit your direct purchasing arrangements and negotiate better terms and pricing. For example, bulk purchase discounts, early payment discounts, reduced freight.  Maintaining strong supply chain relationships is important but that doesn’t mean you can’t ask the question (or find potential alternatives).

Tip – review your direct labour-force using metrics such as labour utilisation, overtime levels, re-work, customer complaints, and down-time.  You may be able to re-deploy staff or reduce casual labour / overtime once you have this data.  Again, your part-time CFO can make this happen for you.

     4. Reducing Overheads

This may sound like an obvious one, but we always find at least some unnecessary “fat” in our client’s overhead expenditure.

Tip – someone needs to review the overheads line by line. Indirect / office wages, communications, insurance, utilities, freight, and advertising are the common ones where savings can be achieved. Even small reductions in certain areas can all add up over time!

These last three levers are focused on your Balance Sheet and are collectively called Working Capital. They have a significant impact on your cash-flow and therefore also on your funding requirements. Many businesses can avoid additional debt borrowings, or pay their existing debt faster by shortening their cash-conversion cycle.

     5. Reducing debtor days

This means improving the ageing profile of your Accounts Receivable function (i.e. getting your customers to pay you faster).

Tip – review your credit control policy and your payment terms as customers with poor payment histories should be carefully managed.  Review your collections process in terms of who chases the debt and when.  The introduction of direct debit may be an excellent solution for some businesses.

     6. Reducing stock days

This means a faster conversion of your inventory (if you carry it) into sold product, thereby reducing the amount of stock you hold.

Tip – introduce a stock-take process if you don’t have one. This can ensure that your financial records mirror what you actually have on the shop-floor. Then review the results of the stock-take for slow-moving or obsolete stock items which may need to be discounted in order to convert them into cash.  Your purchasing policies may also need review if you are over-stocked with certain inventory lines.

     7. Increasing creditor days

This means taking longer to pay suppliers (without hurting the relationship or cutting off supply).

Tip – contact your suppliers to re-negotiate your settlement terms. It’s just a matter of asking the question – they may say “no” but then again, they may really value your business.

Now you know the what the 7 levers are, it’s time to do something tangible with them in order to make a real impact on your business. If you don’t have the internal expertise or time to make it happen, we would be happy to talk to you about how a part-time CFO can bring this to life. After all, as CFOs it’s what we do!

Call us on 1300 447 740 to find out more, or you can contact us here.

Photo by Artem Podrez from Pexels

Our 6 Top Tips For Business Planning In 2024

Published: by lauramills
Our 6 Top Tips For Business Planning In 2024

When it comes to business planning, now is the perfect time to reflect on the year just gone and strategise for the year ahead.  The last few years have thrown many of us challenges and/or opportunities never seen before.  So how can your business go further or do better in 2024?

Below is a business planning checklist to help you when planning for the future:

  1. Know Where you Stand

Does your financial reporting provide you with an accurate and timely view of the financial performance of your business? These could contain:

  • Historic balance sheet, profit and loss and cash-flow together with a set of key performance indicators (KPIs) that the management team use to run the business on a day to day basis.
  • Rolling forecast balance sheet, profit and loss and cash-flow driven by the same KPIs. Even a static annual budget is better than no target at all.

  1. Analyse

Have you analysed all of your products or service offerings and identified those that should be invested in and those which should be scaled back to improve the performance of the business?

  1. Review Costs

Have you reviewed all of your costs and identified all of those costs where alternative suppliers can be identified and current deals can be renegotiated? This helps to minimise your cost base and refine your negotiation skills.  Are there possible savings from systems and/or process streamlining?

  1. Review Customers

Have you reviewed all your customers and identified the good ones form the bad ones i.e. those that take ages to pay and/or beat you down on price etc.? It may be time to let the bad ones go and focus on the ones you want.

  1. Assess Risk

Have you assessed all of the obvious risks in your business and made sure that you have a contingency plan in place to avoid those with the highest likelihood and most significant impact?

  1. Your Personal Goals

Take the time to really reflect on why you started the business, are those goals still the same today and are you getting closer to achieving them?

 

Plan:

Once you have considered the above, you are ready to start planning.  A clear operational plan for the future of the business, which shows you the steps required to implement that plan is the best road to success.  If you do not have this it will be impossible to identify opportunities that arise next year that fit your plan for the business.

Most of our clients have been through this process with our guidance and as a result many are now looking to exploit the opportunities, to expand their markets and recruit key staff to help drive their businesses forward in 2023.

To get your business in the best shape for 2024, contact The CFO Centre on 1300 447 740.

The CFO Centre is dedicated to helping businesses meet their strategic objectives. Find out how it works by watching this short video on our website –  https://www.cfocentre.com/au/how-it-works/