cfo on call Archives - The CFO Centre Australia

How to Scale Your Business for Growth

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?

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. He can be contacted here

4 Signs That My Business Might Need CFO Services

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

Insights for the Australian Construction Industry

August 20, 2021 by lauramills

WATCH THE WEBINAR ABOVE

As part of our joint webinar series with Nexus Law Group, their Construction National Practice Leader, Ben Robertson, our CEO David King and Regional Director, Elechia Jones discuss the important lessons learnt from the recent lockdown situations, and some of our client experiences.

Transcript

CFO Centre’s CEO David King: Welcome everyone to a joint webinar hosted between the CFO Centre and the Nexus Law Group.

Today we’re having a discussion around the construction industry and specifically around the state of that industry given the pandemic that’s been ongoing now for some 18 plus months.

I’m David King the CEO for the CFO group across eastern Australian and New Zealand and today I’m joined by two panellists.

We’ve got Elechia Jones:, my regional director based near me in Newcastle New South Wales. Elechia is the regional director for the greater northern New South Wales area encompassing Newcastle and the Hunter and also has a number of construction clients within her portfolio.

And also today we’ve got Ben Robertson from the Nexus Law Group. Ben is their National Practice Director for construction and infrastructure and has got much experience in that industry, from having acted for developers, builders, subcontractors and property owners in relation to Construction Law matters.

So welcome Elechia and Ben.

CFO Centre North NSW Regional Director, Elechia Jones: Thanks David.

Nexus Construction National Practice Leader Ben Robertson: Thanks David, good to join you.

David: Great well we’ll get started. There are a couple of questions I wanted to run through today. Now obviously COVID’s had a global impact on all areas of business and domestically here around Australia we haven’t escaped that economic impact.

So, the first question I wanted to ask you both is, with respect to the construction industry, can you share with us some of your clients’ experiences since March 2020? I might get Elechia to kick start that one for us.

Elechia: Yeah sure David, thank you.

So, the industry’s actually been a little bit bittersweet. So, I’ll start with the sweet impact. We’re had a lot of the residential construction owners have an influx of people coming and getting quotes for their homes. Whether it be for private use and or some investment properties and that’s mainly driven by the grant that was given out by the government last year being the home builders grant.

And then also they’ve got a little bit of excess cash in their wallet because they can’t do any international travel and sometimes no domestic travel, so they’re wanting to put it into an investment that will give them a return down the track.

So there the sweet things. So then we start with the bitterness of the bittersweet.

So unfortunately, 2020 didn’t start off as a very good year for the industry at all, we had the fires down in New South Wales and Victoria we’re it wiped out 30% of the timber supply for the industry And unfortunately straight after that they had the floods in Queensland where they weren’t actually able to get into the forest to get the timber out, or the trees out and then to mill the timber that was required for the industry.

So that’s just actually one part of the impact that they’ve seen.

So that’s actually caused a disruption in the supply chain. So material shortage is becoming a daily occurrence in all of the construction industry and this has led to slower build times and also reduced margins as the prices are increasing month on month because of the supply shortage. And because of the slower builds it’s also leading to longer cash cycles and this is putting a strain on company’s free cash and impact their ability for them to pay their supplies.

One of the other issues that are actually coming up is the limit that the HIA are actually giving for their home warranty insurance as well. So their having to go and actually ask the home warranty insurance for an increased limit but they aren’t actually able to back that up with the supporting documentation because they are not getting the builds through as quickly as they would hope.

The last thing that I’m going to bring up is that the bank are actually impacting on the cash flow as well. So what they’re actually doing is they’re dictating to the builders what the payment terms are for the progress payments so what I mean by that is they would usually do payments at frame stage and then roof stage but the bank is saying to them no we’re going to pay both frame and roof at roof stage. So therefore they are having to outlay all this cash and then not get paid for it until roof stage.

So that’s some of the things that my clients are actually facing.

David: Great, some interesting stuff there, thanks Elechia. What about you Ben, since March last year what have your clients been experiencing?

Ben: Look, my clients have been experiencing a lot of those issues that Elechia was talking about David. I mean the Construction sector is a really important driver for the Australian economy and the New South Wales economy.

And as a consequence, we saw in 2020 some of those incentives and support schemes put in place to mitigate some of the effects of covid that we that we saw since it first came on our shores around about March 2020 was that was the first lockdown. So, construction in New South Wales was able to trade through, albeit with those restrictions on the industry that Elechia discussed. What we saw then was some of the larger builders with a pipeline of work were able to weather that storm in 2020 a bit better than some of the smaller operators and the subcontractors which were initially hit the hardest in the industry.

The Job Keeper Scheme in 2020 really helped to support those businesses that were struggling and we also saw some changes to the thresholds for creditors statutory demands, that was in place from March 2020 until 31 December 2020, where we saw an increase the statutory minimum that you needed to reach before you could serve a creditors statutory demand increased from 2K up to 20k and time for companies to respond to it, a creditors statutory demand, increased form from 21 days to six months so that really assisted those companies with debts to trade through what they were experiencing in 2020.

David: Fantastic, and I guess moving on from that, you know, what have been their experiences in 2021 thus far Ben,
has anything differed from last year?

Ben: Well, 2021 were really seeing that impact on the supply chain increasing more and more. So timber prices are escalating for those reasons that Elechia outlined initially. The timber has to be imported from North America and from New Zealand so unless you are a large player with a fair bit of purchasing power it can be difficult to get the things that you need, such as timber when you want to get it.

That’s seen some of the builders even some of the larger volume builders shift from just purely timber frame constructions to more of a hybrid between timber and steel. That has also seen some of the builders with relationships with suppliers looking to improve on those relationships so that when they want to get supply of a material it’s there on hand. So it’s really around planning out the jobs and planning when you need the materials and in some cases probably taking a little bit of a punt.

We’ve seen steel rise as well, we’ve also seen interesting things, like the Australian Financial Review reported that waffle pods are becoming difficult to get, now you wouldn’t have thought that in 2020 because waffle pods are manufactured in Australia but the polystyrene that they use comes from overseas. and I understand that Polystyrene is being diverted into other things, like packaging for your flat screen television and what have you, because I think fast moving retail was one of the beneficiaries in 2020. So, there is shortage of things that are probably difficult to plan for that wouldn’t have been on the radar.

Of course, we had lockdowns last year in Victoria and people still managed to trade, the construction industry still continued to trade, albeit with restriction and we had some restrictions in New South Wales as well in terms of the guys on the job site and planning etc, but we’ve really seen this year that lockdown towards the last half of July ,that was a massive impact on the construction industry and albeit that that lockdown has been lifted we still see the flow on from that because there is 9LGA’s now that are locked down and there is a restriction on the trades coming out of those LGA’s to work in other parts of greater Sydney.

So, the trades that can come out, are trades that have been vaccinated or if they’re in the process of getting vaccinated and they’ve had their first shot but not their second shot then there’s an allowance for them to leave if they return a negative test. So that’s had a knock-on effect in terms of, while the restrictions are lifted a great bulk of the work force does come from those LGA’s which are in Western Sydney.

I’ve even had clients in Newcastle impacted by that lockdown and restrictions on Greater Sydney because they had trades coming up from the Central Coast to work in Newcastle and the regulations are just so confusing that a lot of the trades did not want to get the covid tests to work in Newcastle. So that really restricted labour in Newcastle. So, look those are the kind of things, the flow on obviously that that has is impact on site times, liquidated damages for the builders moving forward.

David: Absolutely, a lot of knock-on effects there. Thanks Ben. Elechia, anything from you further in terms of what you’ve seen differently this year or currently with your clients.

Elechia: Yeah sure, I can definitely echo what Ben has said, because it’s been felt across the whole industry. But their ability to adapt to ever changing norms has actually become something that they’re getting used to, so managing their builds a lot closer than they ever had before, so creating new relationships with those supply chains as well as Ben did say, strengthening those so that we can actually get the supply that they need to continue with the build.

Making sure that they’re not using the same suppliers that they have just because they have always used them, making sure they are getting out in the industry and getting different quotes for different parts of the build and then starting that relationship from there.

I’ve seen that they’re actually starting to work closer with their CFO or their finance team to manage their cash flow. Due to the slower builds their available funds to cover the ever-increasing costs incurred including the overheads is quite important for them to continue trading.

And then also I’ve implemented into my own clients’ organisations is a monthly meeting so go through their P&L, their balance sheet and their cash flow and we actually have a look at each job one at a time just to make sure that those increased material cost are not eating away at their margins too much.

So making them aware of what they need to be looking at. And one of the things that my client has actually done is instead of doing their scheduling manually they’ve now brought it into like, I’m going to say ERP system but it’s not quite, but they’ve brought it into an online system where now everybody can see the scheduling so that they don’t have to rely on that one person.

David: Right, some of that stuff you’ve just mentioned is a nice segue into my next question to both of you and that is, are you able to share any examples of the best practice that you’re seeing with your clients in terms of how to best whether the COVID-19 storm. Anything there for you Elechia beyond what you were just saying?

Elechia: Yes absolutely. So as I said just now utilising their current software. So not just for scheduling, making sure that they’re doing job costing, but when they are using the scheduling tool if we were to have an episode where they were being told that they can’t have, let’s just say, the plumber and the electrician on site one time it allows them to then forecast how their actually going to build the home without having that impact, but then also knowing what it’s going to do to your cash flow.

Having your cash flow forecasted, I keep saying cash flow because cash flow is King, it is something that people think is just a saying but it is actually true. They need to be managing their cash flow. So having that cash flow mapped out and making sure that if there is any economic impact they can put it into the forecast and see what actually happens at the end. Also having the ability to do some sensitivity analysis so if they were to have a job that was impacted what does that specific job due to their cash flow, if they have five that are impacted what does that do to your cash flow.

And last but not least definitely job costing, make sure that you’re doing costings per job because otherwise you’re not going to know where your margins are and then you’re going to end up in trouble at the end of the day.

David: Yeah, great advise there, thanks for that. What about for you Ben any sort of examples of best practice leaping out for you?

Ben: I think some of the guys that hopped on very early in the piece David to plan during the contract negotiations of new jobs for some clauses that would deal with Covid if it indeed got worse, which regrettably it has, so mitigating the impact Covid has on things like materials and labour and time that was really important and principals are quite open to those discussion in my experience. Some of them is a little push back but, but eventually the reasonable party will see that it’s a risk that is in everyone’s interest to be managed because a lot of the contracts from 2019, 2018, 2017 may not have had clauses that responded to what we’re experiencing at the moment and it’s a little bit like sticking a round peg in a square hole to torture an analogy. But that was really important.

Some of the contactors are looking to incentivise their trades that they work with moving forward. So, looking at rewarding trades that are sticking with them and have worked with them over a number of projects. Those kinds of incentives sometimes work with some trades. And where contracts don’t respond well to covid or indeed even sometimes when you do have a contract that has a covid clause, sometimes it’s worthwhile having a chat to the principal and a negotiation with the principal off contract to have a crisis negotiation, to work out a way forward, sometimes renegotiate the existing relationship to deal with the impact that it’s having on your materials and your labour and your project delivery. Because some things a very difficult to anticipate, like the waffle pods for example. So, some things just pop out which are difficult to risk manage, albeit that if you really turned your mind to it early in the piece you probably could craft a decent covid-19 clause that could respond to shortages in supply.

By and large I find with my clients and generally the construction industry players that their solution and goal-oriented pragmatic people that want to solve issues. So the construction industry players are usually quite adaptable when they get these difficult circumstances and they can be quite open to negotiate, because no one wants a job where the contractor is pushed into insolvency and the job doesn’t get delivered. So by and large people are willing to work together to find a solution that helps everyone.

David: Absolutely, I wanted to ask Ben further to what you were just saying are there things that construction companies should be seriously considering moving forward?

Ben: Look, I think moving forward definitely reviewing the contract suite that they use and turning their minds very carefully to contract negotiations where contracts are proposed by someone else.

Aligning the contracts as well so that the head contract is aligned with the subcontract and with the supply contracts. That should in the ordinary course happen in any event but these kind of things like Covid should focus everyone’s minds on that.

Recently I’ve seen businesses consider whether or not employees can be incentivised to go out and get vaccinated as well. So, the Therapeutic Goods Association has some guild lines for employers to follow in that regard and it’s probably a good idea before you roll out an incentive scheme to have a chat to your employment lawyer or whoever does your legal work, because there are some things that people need to consider when they are rolling out those kind of incentive schemes.

And Companies that are struggling financially through these times should take the opportunity to consult their financial advisers and their legal advisers at the earliest possible opportunity to manage a way though that financial difficulty rather than the ostrich syndrome of burying your head in the sand which often will only make the problem worse.

So those are some of the things to look for.

David: Great, certainly agree with the ostrich analogy there and Elechia anything you’d like to add to that in terms of going forward, what construction businesses should be doing or considering.

Elechia: Yeah, definitely David.

I think they should be looking at the Federal and State assistance that they can bring on board whether that be the Job Saver Payment, COVID-19 business support grants, payroll tax wavers, the micro business grants.

They should also be contacting their bank in relation to any support that they can offer whether it be a deferral of loan repayments, a temporary overdraft. That would definitely help them if they are in any kind of cash flow trouble.

Lastly, speaking with your Finance team, whether it be a CFO or finance manager as Ben was saying, I think the earlier you do that the better outcome you’re going to have at the end of the day.

David: Great, no, absolutely. And I guess as we start to wrap up, Elechia any sort of final thoughts for today that stand out for you?

Elechia: Yeah, having a look at your current systems and see if you can utilise them any further to you assist with budgeting or Job profitability.

I can’t stress it enough, cash flow, cash flow is king, I’ve said it before, and I’ll say it again. Making sure you’re doing the forecast for those and plan, plan, plan, make sure you’ve always got a plan in place.

David: Yeah, great advice. And Ben, anything further for you.

Ben: Look, just to emphasise, I think contracts need to be looked at to really examine where the risks sits, who wears the risk if there’s a COVID event that affects the job.

Covid is likely to be around with a us for some time, we’re seeing more and more people vaccinated which is a good thing but who knows how long Covid’s going to hang around for or what new variants will emerge, so I think that needs to be considered in terms of risk managing jobs.

There’s likely to be an uptick in the kind of disputes that that we have, which will just ordinarily come to pass because people are having to stick round pegs in square holes. So, it’s likely that there will be some disputes, so consult your legal advisors at the earliest opportunity before you pull the trigger on a on a strategy.

And in addition, businesses should look at the insurance policies they they’ve got, if they’ve got a business interruption policy there is a possibility that could respond to a Covid type shut down. A lot of these business Interruption policies try to exclude pandemics and there is a huge amount of policies on the market that were written with the old legislation in mind not the current legislation that we’re operating under.

There was a test case run in the court of appeal and the insurers lost that test case and it was found that they couldn’t rely on that exclusion clause. They took it to the High Court and weren’t granted special leave to appeal to the high court. So, currently were seeing in the federal court system some more test cases play out in relation to those insurance policies but there may well be timing provision, time bar provisions that apply under the insurance policies generally so it’s important to just review that.

So speak to your insurance broker or your lawyer in relation to coverage under the insurance policies that you’ve got and just generally just be mindful of any time bars that you’ve got under the existing contracts you have, so that any notification in relation to extensions of time or if you’re lucky enough to have a contract where you can claim costs as a result of a Covid delay then putting in a claim for compensable damages under your contract as well. Because a lot of the contracts in New South Wales are negotiated with time bars in place, so it’s important that you don’t miss a time bar and get locked out of an extension of time claim or a compensative damages claim.

David: Absolutely, great stuff.

Look there’s a lot in there and a lot going on for a business owner and its management team in the construction industry, a lot to grapple with on top of all the day to day stuff that they need to do just to get things done. So, I think one of the underlying things from today is get the right advice from the right people at the right time, have a plan and make sure contractually, legally, from an insurance and risk perspective as well as from a financial and cash flow one that you’ve got the right support because you can’t do it for yourself.

I wanted to share just quickly some recommendations that Elechia and Ben were kind enough to put together for us.

I’ll leave it up for just a second, we won’t go through all of that because we have talked to it today but in this pre-recorded webinar feel free to read that your leisure.

Click to download a copy of
the CFO Centre and Nexus’ top COVID recommendations
for construction companies

And finally in terms of reaching out to us, if you’ve got issues or things on your mind, whether it’s from a legal perspective you’ve got Bens details there, if it’s from a planning and financial management perspective you definitely got Elechia and myself at your disposal very happy to take a phone call just talk things through.

And if between the three of us we haven’t got the answer or we’re not the right solution for that particular issue or opportunity then there’s a good chance we probably know someone that we can point you in the direction of.

So thank you Ben, thank you Elechia for you invaluable insights today. I appreciate your time and I hope everyone in the construction industry that sees this got some good value out of it.

Click here for more information about how the CFO Centre can assist with your business and financial strategy

Click here for more information about how Nexus can assist with your construction legal needs.

Freedom – The Main Reason I got into my Business

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.

Need Help with Your Cash Flow?

June 7, 2021 by charlottenoble

Cash flow problems put your company at risk.

Unless your company manages cash flow effectively and uses regular cash flow forecasts, your company is in jeopardy. Cash flow shortfalls mean:

You can’t pay suppliers on time
You can’t make debt repayments on time or at all
You can’t buy new inventory to meet customer demand
You can’t pay staff wages
You can’t compete for new contracts
You can’t advertise to attract new clients
You can’t hire new staff.

This will have a knock-on effect on your company’s profits, market share, and brand reputation. It could even result in your company going into liquidation.

One US bank study found that 82% of business failures are due to poor cash management.

How to Fix Your Cash Flow Shortfalls

Fortunately, most cash flow problems can be resolved with help from the right people. They will help you to identify the causes of cash flow problems in your business and advise the best way to fix them.

To find out how to fix your cash flow problems and prevent them from recurring, grab your free copy of the “Cash Flow” report NOW!

Causes of Cash Flow Problems

Conditions that can impact your cash flow include:

A fall in sales or a decline in gross profit margins. This could be a result of changing economic conditions (such as the most recent global financial crisis), increased competition, or a drop in demand for your product or service.
An unprofitable business model
Using a negative cash flow business model. You offer customers or clients credit terms of anywhere from 30 days to 90 days (or longer).
Having excessive debt
Having inadequate stock or credit and debtor management.

Your cash flow problems can be due to any of the following:

Late paying customers When a customer doesn’t pay on time, your business can experience cash shortfalls.

Poor debt collection processes Not issuing or chasing up invoices in a timely fashion can result in reduced cash flow.

Low prices If your prices are too low, but your expenses are rising, your company is almost certain to experience cash flow problems.

Low sales Too often business owners try to resolve poor sales by looking for new clients. But this incurs more costs in areas like advertising and marketing to attract those new clients.

Too generous payment terms Allowing customers to pay in arrears for goods or services received is a bit like giving those companies short-term, interest-free unsecured loans.

Overtrading Rapid growth means your company will have to invest in more stock, equipment, or hiring staff to meet demand. If you don’t have sufficient working capital, the company will experience cash flow problems.

Too much stock Every dollar or pound you have in inventory is a dollar or pound you don’t have in cash.

Too much debt If you’re overleveraged (when you’ve borrowed too much and can’t pay interest payments or principal repayments or meet operating expenses), you’re likely to experience cash flow problems.

Cash Management

Cash is vital to your business. Without it, your business won’t be able to pay suppliers and creditors and to meet its payroll obligations.

Finding and fixing the cause of your cash flow problems in your business and putting systems in place to manage cash effectively is vital for your company’s survival.

Checklist: How to Sell Your Business Fast

June 7, 2021 by charlottenoble

Plan Your Perfect Exit Strategy

Selling your business to the right buyer for the right price at the right time depends on the health of your business, having the right advisors, and your timing.

Get these factors right, and you can sell your business quickly.

Before putting your business up for sale, you’ll need to clarify:

Why you want to sell the company and what you hope to achieve.
Your ideal buyers and what their plans for the business would be.
Your goals for the sale. Do you want an earn-out clause or a cash sale?
How you’ll improve the current value of your business to get the best price.
How to market your business to sellers. You need to decide whether to use business brokers to do this or do it yourself.
The timing of the sale. You need to sell before patents, licenses, leases, etc. expire.
Due diligence. You’ll need accountants, legal advisors, along with specialists in tax, sales, and IT to perform vendor due diligence and make that information available in a virtual or real data room for potential buyers.
Who will negotiate the deal?

The following checklist will help you to achieve the best deal for your company.

Your Exit Plan Checklist

Clarify why you want to sell your business

You need to decide why you want to sell the business. It’s something prospective buyers will ask you, and it will have an impact on the business sale.

For instance, do you want to retire because you’re fed up with the stress of running a business or suffering from ill-health? Or is it because you want to start a new business, or allow someone with more expertise to take it to the next level?

Your reasons for selling the business could have an impact on the timing and outcome of the sale. For instance, if you decide you must find a buyer as soon as possible, you might have to accept a lower price or less attractive deal.

Decide what you’re selling

You need to decide if you’ll going to sell some or all of your company’s assets or the legal entity of your business as a share sale.

Focus on areas of improvement

Identify the issues and areas of improvement in your business and develop a plan for dealing with them.

For example, how can your company become less reliant on one or two major customers or suppliers? Are there areas that will benefit from cost-cutting? Is there a potential for rapid growth in the business? Can you improve productivity?

Prepare your accounts

You need to show how well the company has performed in the past few years.

Prospective buyers will expect to see at least three years of trading accounts. Buyers will be put off if they discover reports are missing or inaccurate. It will make them doubt your claims about the company’s health.

Get your paperwork in order

Your paperwork needs to be up to date and available to prospective buyers.

They’ll want to see supplier/buyer arrangements, licenses, maintenance agreements, lease or hire purchase agreements, business rates, insurance policies, list of employees, and their contracts, along with your company incorporation documents.

Resolve disputes

If you have problems with suppliers, customers, other companies, or employees, you need to document them and, if possible, resolve them before you put the business on the market.

Decide who will sell your business

Business brokers (or business transfer agents) can market your business for you, or you could do it on your own.

Brokers will demand a percentage of the sale if they sell on your behalf.

You also need to clarify what brokers will do to sell your business and whether you will be involved in picking and interviewing candidates.

Check for details such as extra fees or costs, termination rights, and cooling-off periods.

Look for business brokers that have experience in selling companies in your industry, in your markets, and similar size businesses.

Get a business valuation

Prospective buyers will want to know the true worth of your company. Hire a business valuation expert to do this for you.

Get expert advice

Put together a team of trusted legal and financial advisors who have expertise in selling companies. Get their help to identify areas of the business that need attention and on how best to proceed with a sale.

Create a confidentiality agreement

You won’t want sensitive details about your company or its sale leaked to employees, competitors, suppliers, creditors, and customers, so make sure prospective buyers sign a confidentiality agreement.

Perform Due Diligence

You need a team of specialists to produce a documented business strategy, healthy financials, along with information about your employees, and plant and IT systems.

That information must be made available in a real or virtual data room for prospective buyers to view and check.

Growing a Business

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.