cfo Archives - Page 2 of 8 - The CFO Centre Australia

How To Achieve Revenue Growth x 10 – And Survive Scale Up

September 11, 2023 by lauramills

Revenue Growth

When it comes to revenue growth, our Chairman Colin Mills says the best advice he ever received for doubling the size of a business starts with making a list.

List the top 20 actions that could increase your revenue x 10

Identify the top 3 options

Concentrate on those 3 for the next year

So let’s say you’re a $4million business. Spend a few hours listing out the 20 things you could do to turn this into a $40million business over the next 12 months. This will force you to think outside the box and away from small incremental changes you can make.

I suggest you then spend another hour or so considering the Top 3 activities. These will be the activities that are most likely to get you towards your goal of $40m.

You then have the top 3 activities to focus on over the next 12 months that may well enable you to double your turnover.

For each of those top 3 activities, develop clear action plans on how you are going to achieve results.

That, he says, is how you achieve significant growth – if you set out clear, realistic plans for each of your top three, working with your management team. And make sure you identify and mitigate any risks.

But scaling up brings its own challenges

It’s great seeing your revenue rise but fast growth sometimes gives you growing pains. We wrote a blog about the 6 basics you need to have sorted to grow a company successfully, which are:

A clear, well-thought-out vision shared with everyone
Goals that translate into growth strategies
Top-performing talent, either employees or outsourced
Systems for attracting and retaining good clients
An understanding of the hazards when you scale too fast
A strong focus! Backed by objective advice from an expert

A part-time CFO might well be that expert for you. We helped Bellrock Broking identify their key success factors and get everyone on the same page, feeling motivated to achieve those objectives.

As Managing Director Mark Chiarella told us in his video testimonial “I feel organised and [confident] that the priorities of the business are in order.”

Not to forget, the 2 Cs!

On top of those 6 basics, there are two more we need to mention.

Your company’s capability and capacity to deal with revenue growth.

If workloads go up, orders go up and costs go up, will your business systems, technology, infrastructure and people cope? Can you still deliver on time? Will performance suffer? This blog goes into more detail.

It’s likely you’ll need to do some planning and organise some funding to get your ducks in a row. Our client, music reporting specialists Soundmouse, had a serious growth spurt over one year. One of our CFOs helped them raise money so they could be more comfortable in that rapid growth.

“Knowing the numbers helps everything. It builds confidence, happiness – and as a result, more money,” says Soundmouse founder Kirk Zavieh.

That’s a lot to take in.

You’re right, it is a lot. And it requires some objective thinking.

One of the toughest challenges for owners of SMEs especially is to be able to stand back, look at your business through a wide-angle lens and identify what it is you really have. Especially when you’re being distracted by the day-to-day of your business.

That’s why there’s real benefit in using a qualified CFO as a sounding board, whether they’re an internal hire or a part-time resource from CFO Centre. They can help you make better decisions, take advantage of golden opportunities – and turn revenue growth dreams into plans.

Contact The CFO Centre about a free 60-minute discovery session. Or head to the website for more tips.

Image from Venteezy.com <a href=”https://www.vecteezy.com/free-photos”>Free Stock photos by Vecteezy</a>

External Funding Options for Your Growing Business

August 11, 2023 by lauramills

Your Guide to Business Financing and External Funding

Getting external financing to fund your company’s growth will depend on your plans, how willing you are to give away a stake, and, therefore, control in the business, your eligibility, and the short-term or long-term funding you need.

How to finance your business growth

Bank finance

Banks can offer you:

Unsecured business loans. These will have fixed repayments (including interest) over a set time frame. The amount and the interest rates will depend on the bank and your circumstances.
Secured business loans. To obtain a business equity loan, you’ll need to offer your company collateral or assets as security (for example, property, inventory, or equipment). The amount you can borrow will depend on the value of the assets.
Buy-to-let loans and commercial mortgages. These are suitable if you’re looking to buy or remortgage business premises.
These are more suitable for short-term financial support when your company has a cash shortfall.
Business credit cards. Again, these are probably best for short-term support.
Invoice finance. It will mean you can access cash that is otherwise tied up in outstanding invoices. It’s ideal if your company offers long payment terms to customers or if you need to grab growth opportunities.
Asset finance. This allows you to make small regular payments for an asset rather than a large, one-off payment. It is ideal If you want to preserve your working capital and generate income from an asset as you pay for it.

Angel investors and venture capitalists

If you’re willing to offer a share of your company or equity, you could approach third party investors such as angel investors or venture capitalists (VCs).

You might not have to repay their investment, but the share they will want in return is likely to be high.

Alternative investment markets

You could also consider alternative finance options. These include crowdfunding and peer-to-peer funding.

Crowdfunding. In return for early access to your products/services, discounts, or an equity stake in your company, you can raise the money you need from a crowd of small investors.
Peer-to-peer lending. You can borrow from individual small investors. If your application is successful, you’ll probably be able to borrow more than you would through a bank and access the funds quicker.

The criteria for the loan might not be as stringent as a bank, but the costs might be similar.

Is your company eligible for funding?

Banks and investors often use what’s known as the CAMPARI method to decide if your company is eligible for funding. That is:

C This incorporates everything from your professionalism and brand reputation to your company’s record in repaying loans.
A This is about you and your team’s knowledge and expertise and how successful you’re likely to be to generate growth from the financing that investors are being asked to provide.
M This is about how well your business is equipped to meet your growth plans. Investors will want to see your Return on Equity (ROE), growth projections, your competitive advantage, detailed financial reports, performance record, and a comprehensive expenditure report.
P Investors will want to know how you will use the funds and how they will help to boost the company’s financial situation or generate a profit.

For example, if you have no liquidity in the business but need it to fulfil an order or if you need a type of machinery to be able to increase your product or service range.

A This is about showing investors how you came to decide on the level of funding you’re applying for.
R Investors need to be convinced you can afford any repayments. They’ll look in particular at your cash flow and profit margins.
I This is all about showing investors you have a fallback position if things go wrong. They’ll need to be convinced you have another source of repayment should you need it.

Get expert help

To make it more likely your company is considered eligible for funding, it is advisable to get expert help.

For example, The CFO Centre has part-time CFOs who have trusted partners within banks and major financial institutions. In addition, they can look at angel investors, VCs, and alternative lending markets for funding on behalf of their clients.

We can help and guide you through every step of the funding preparation and application process.

Unveiling the Cash Flow Conundrum: Insights from our Business Survey

August 7, 2023 by lauramills

Cash flow, the lifeblood of any business, often serves as a barometer for its financial health and stability. In a recent business survey, we asked participants to assess the state of their cash flow, and the results shed light on the diverse experiences and concerns faced by entrepreneurs. Let’s delve into the data and explore the implications it holds for businesses of all sizes.

Analysis of the Results

The majority of respondents (56%) reported having mostly healthy cash flow. This is undoubtedly encouraging, suggesting a level of stability and financial robustness within these businesses. However, it is crucial not to become complacent, as maintaining healthy cash flow requires ongoing attention and proactive management.

Interestingly, the responses were equally divided between those who considered their cash flow a concern and those who perceived it as healthy (both at 19%). This result reveals the challenges faced by businesses, where even seemingly successful ventures can experience occasional cash flow hurdles. It highlights the importance of adopting effective strategies to safeguard against potential disruptions and maintain financial resilience.

Furthermore, 6% reported that cash flow was always a concern. Although this percentage may seem relatively small, it represents a significant portion of entrepreneurs whose businesses are perpetually grappling with cash flow issues. Understanding the underlying causes behind this persistent concern will enable us to address them more effectively and provide valuable guidance to those in need.

Cash Flow Insights and Recommendations

Cash Flow Management – Regardless of the current state of your cash flow, it is essential to adopt robust financial management practices. Regularly reviewing your cash flow statement, forecasting potential gaps, and implementing strategies to improve collections and manage expenses can help you navigate through turbulent times.
Diversify Revenue Streams – Relying heavily on a single source of income can leave your cash flow vulnerable. Explore opportunities to diversify your revenue streams, expanding your client base or offering complementary products or services. This will help mitigate the impact of any fluctuations in demand or payment delays.
Seek Expert Advice – Engaging with financial professionals or consulting firms, such as The CFO Centre, can provide you with the expertise required to optimise your cash flow management. Their insights and experience can help identify areas for improvement and tailor strategies to suit your specific business needs. Find out How it Works.

Cash flow is a critical aspect of any business, and the responses from our business survey highlights the diverse experiences and concerns faced by entrepreneurs. Whether your cash flow is mostly healthy, sometimes a concern, or always a concern, it is crucial to proactively manage and optimise your financial position. We encourage you to take our Scale-up & Exit Business Assessment to gain personalised insights into your business’s financial health and uncover tailored strategies to enhance your cash flow management.

Take the survey now and unlock a wealth of knowledge to propel your business towards financial prosperity.

[Disclaimer: The results mentioned in this blog post are based on a specific business survey conducted by our organisation and may not represent the overall business landscape. The recommendations provided are general in nature and should be adapted to suit individual business circumstances.]

How To Resolve Your Cash Flow Problems

June 29, 2023 by lauramills

Managing cash flow is critical to the success of any business. Get it right, and shareholders, creditors, and employees are happy. Get it wrong, and the company could end up on the ropes.

Cash flow problems can beset even profitable companies, particularly those experiencing rapid growth.

So, how do you protect your company from future cash flow issues?

Cut Costs

Cost-cutting will have a more immediate impact on your bottom line than revenue-raising efforts. You could for instance place a freeze on bonuses and overtime payments, reduce the number of employees through attrition or redundancy. You could also approach creditors to ask for better terms.

Carry out credit checks

Before taking on new clients, carry out credit checks. Companies that regularly make late payments or default on payments should be red-flagged. You should also get new clients to sign contracts that include your payment terms.

Offer early payment discounts

Encourage your clients to pay earlier than normal by offering early payment discounts. The early payment discount should only be used when the company is in urgent need of cash. Do it too often, and you will make a serious dent in your profit margins.

Reduce your payment terms

Cut your payment terms from 60 or 90 days down to 30. Think of it this way: when you allow customers to pay in arrears for your products or services, you’re essentially giving them short-term unsecured loans.

Lease rather than buy

Consider leasing rather than purchasing cars, property, office furniture, machinery, and IT and telecommunications equipment. The benefit of renting rather than buying is that you will only have to make small monthly payments. This should help your cash flow.

Raise your prices

Companies are often reluctant to raise their prices for fear they’ll lose valued customers to competitors. But even a small rise in costs can chip away at your profit margins. You can overcome customers’ resistance to a price rise by offering bundled products or services.

Issue invoices promptly

Many companies don’t issue invoices quickly enough or chase late payments. Consider this: every sale has already cost the company in some way, whether that’s the purchase of raw materials, warehousing, labour, sales and marketing, and distribution. If you don’t collect what you’re owed, you’ll be worse off than if you never made the sale.

Use invoice financing

Hire a company that provides invoice financing (either invoice discounting or factoring) to receive an immediate cash injection. Such companies provide funding against your unpaid invoices for a fee.

Usually, you will receive up to 85% of the value of the outstanding invoice within 24 hours. You’ll then receive the remaining 15% minus the broker’s fee once your customer has paid the outstanding invoice.

Get external funding

You could approach banks or lending institutions for a short-term loan or use other funding sources such as self-finance, partners, investors and alternative finance like peer– to–peer lending.

Hire a part-time Chief Financial Officer

A part-time CFO from the CFO Centre will look for all the things that pose a threat to the company and work with you to resolve them. Your CFO will look for ways you can meet your most pressing financial requirements and review all incomings and outgoings to find where improvements and savings can be made.

You’ll be encouraged to use regular cash flow forecasts. Such forecasts will alert you to possible cash shortfalls in the near future. You can then make arrangements for additional borrowing, for example. It will also help decision-making around whether to hire new staff, raise your prices, move premises, find new suppliers or tender for a large contract.

We love numbers, we understand how to interpret them and use them to help get your business where you want it to be.

For more information, you can visit How It Works or get in Contact with us to speak with one of our dedicated team.

Understanding Cash Flow Problems

June 28, 2023 by lauramills

Cash flow problems put your company at risk.

Unless your company manages cash flow effectively and uses regular cash flow forecasts, it 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.

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 pandemic), 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 you have in inventory is a dollar 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. 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.

Understanding Your Cash Flow Position

June 17, 2023 by lauramills

If you are having cash flow issues, it is essential that you know the current position of your business finances. Be honest with yourself and make sure you know if or when your business needs help.

To do this you need to create your cash flow forecast, you need to make sure you know what cash is coming in and what payments need to be processed, this can be constructed in a simple excel spreadsheet.

Tips that can assist in preparing an accurate cash flow forecast:

Call all your current clients/customers and speak about their current situation and find out when the funds will be received. Don’t hold back from entering into a payment plan with them; this will give you a clearer picture of your cash flow.
Hold off on larger payments that are not yet due.
Assume a reduction in your revenue; you must be realistic. If you know that your business will be impacted over time, adjust your revenue to reflect this in the cash flow.
Eliminate discretionary spending. What can wait!!
Employee bonuses, if there are bonuses due and the employees are depending on them, you should pay them if possible. If you can hold off on paying them for 60 days, then do so.
If there are any tax bills requiring to be paid, speak with the tax office or your Accountant about a payment plan.
Be transparent with your employees.

Having a rolling cash flow forecast and updating it weekly, will help you make sure that you are staying on top of any issues that may come to a head.

Once you have listed all known transactions, you will then need to stress-test the scenarios, for example what will happen if your top customer can no longer pay their account?

Questions you should ask yourself – be truthful

Do I know where my business is at financially?
Are we insolvent already?
Have I spoken to my suppliers and customers and do I have a clear understanding of where they currently stand?
Have I spoken to the ATO?
Do I need help? If so, make sure they are qualified.

Many cash flow problems are related to “working capital cycles” and the timing of cash inflows vs outflows. For example, the business pays its staff weekly and suppliers on 14-day terms, but offer its customers 30 day terms. Therefore, the business needs to fund the gap. A part-time CFO will explain your own working capital cycles and present a solution to improve your cash position.

The CFO Centre has been assisting SME’s over 20 years, offering highly experienced Chief Financial Officers on a flexible, part-time basis. As CFO’s we are qualified Accountant’s with the added benefit of extensive commercial experience across multiple sectors, so we know what to look for and how to respond.

You can learn more about How It Works here, or give us a call on 1300 447 740.

Photo by Towfiqu barbhuiya on Unsplash

What does a CFO Actually Do?

June 2, 2023 by lauramills

Often, we get asked by friends, family and peers: What does a Chief Financial Officer (CFO) actually do? These are frequently people that have known us for years, that we dine with regularly, share holidays with, stand at the side of the footy pitch with! Yet, they don’t fully understand exactly how we have helped business owners to transform and scale their businesses. So, if the term “part-time CFO” is as alien to you as “UFO”, here’s what we do, in a nutshell:

Whilst a CFO is a qualified accountant, they also have decades of high-level commercial experience, quite often across many industries.

A CFO works alongside you as the business owner/CEO – giving you more time to work on the business instead of in it. The part-time CFO concept is tremendously cost effective as most CFOs pay for themselves with the cost savings they identify in your business.

In a nutshell, a CFO will typically:

Help you strategize, plan and operate your business to maximise on cash, profitability and company value
Gain access to funding
Ensure you have a solid banking relationship
Become the custodian of your internal Finance function.
Work with your bookkeeper or Finance Officer and/or external Accountant.
Analyse results in the context of the company’s objectives and strategies.
Establish clear KPIs (measures that really matter)
Ensure you (the owner or CEO) understand the financials, the trends and the issues they identify
Assist in growth, expansion (including overseas) and exit strategies
Become a trusted sounding board and devil’s advocate

The need for a part-time CFO may appear earlier on your journey than you may expect. For instance, you may have turnover of over $1million and are experiencing growing pains. Perhaps you would like to grow in a sustainable way, or improve the financial performance of your business. Either way, I would say it’s worth exploring how a CFO can help you in your business.

Our unique 12 box model gives a deep dive into each of the areas that a CFO will assist you with.

The CFO Centre

The CFO Centre provides part-time CFOs to SMEs, so you get the experience of a high calibre CFO for a fraction of the cost of a full-time resource. We have years of experience as a Senior Finance Executive or CFO for large corporations. They have extensive knowledge and experience to bring to your business. In addition, with no lock in contracts, we can work with the needs of your business, providing our services 1-2 days a week to as little as one day a month.

As a global company, we have over 850 CFOs in 18 countries, so we really have seen it all! Therefore, the benefit for you is that no matter what your needs, however complicated, you can tap into that global wealth of knowledge at no extra cost. It’s pretty powerful stuff.

Our video on How it Works sums all of this up, or if you’d like more info you can get in touch with us here.

The Value of Understanding Your Numbers Through Reporting

May 23, 2023 by lauramills

The benefits of having regular access to high-quality financial management reporting is far-reaching. Good reports reveal the efficiency (or otherwise) of the constituent parts of the business. They enable you to deal with potential threats and take advantage of opportunities to grow your business. The compound effect of making regular, quick and high-quality decisions based on a strong set of data and reports cannot be overestimated.

Most businesses have some level of reporting in place but in most cases existing procedures are insufficient to allow for rapid growth.

The Importance of Reporting is Twofold

To have retrospective visibility over past performance (that is, to analyse performance data and use it as a tool to course correct for the future).

To have visibility into the future (knowing what is likely to happen around the corner)

What are Management Reports

Management reports are tools for the management team to make decisions from. Having your bookkeeper run a monthly P&L and Balance Sheet is fine, however to run a business efficiently you need to understand those reports and dig deeper to really see what’s going on.

Base Level Reporting

At the very least you need to have regular access to three key financial statements. They are:

The Balance Sheet

The Cash Flow Statement

The Profit and Loss

4 Steps to Take Your Reporting to the Next Level

Step one:  build a reporting framework around your products to determine what is profitable and what is not. If there are non-profitable products (or those that deliver little profitability), should you consider dumping them or only include them in bundles with other products?

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: Build a 3-year plan based on your findings from Step one and two.

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

Need Help?

Most SME’s don’t have the internal experience to action these four steps, nor does the owner have the time. That’s where a part-time CFO comes in. At The CFO Centre, we don’t just focus on the business numbers – profit and loss, balance sheet, ratio’s, forecasts, but also the less visible “numbers” – what you want from your business – your financial goal for the business, the number of days a month you’d like to work, the number of holidays you want to take, the value you want for the business when you sell, the number of years you want the business to continue (legacy), the number of years until your retirement.

Both sets of numbers play an important part in your overall success.

The CFO Centre will provide you with a highly experienced senior CFO with ‘big business experience’ for a fraction of the cost of a full-time CFO.

With their support and expertise at your fingertips, you will achieve better results, faster. It means you’ll have more confidence and clarity when it comes to decision-making. After all, you’ll have access to expert help and advice whenever you need it.

Understanding Your Numbers Through Ratios