cfo Archives - Page 6 of 7 - The CFO Centre Australia

Where Will Your Business Be in 1 Year From Now?

Published: May 17, 2022 by lauramills

If you want your business to achieve high ambitious turnover growth of at least 20% year on year, you need a business strategy for scaling that incorporates a strong vision and a solid business plan.

Helping your small business to grow, to achieve a sustained growth, will involve careful planning and most likely involve taking calculated risks.

You need to think about what you want to achieve. Where do you want to be 1 year from now? You won’t find that easy unless you know your target market and your customers thoroughly, have products and services they’re keen to buy and be aware of the expenses you’re likely to face.

Managing Growth

To manage your company’s growth, it’s critical that you refer often to your business plan and keep an eye on the business’ key metrics, benchmarks and timelines.

You need to make sure that people have actionable activities; things that they can do and which can be measured.

As well as having repeatable processes and measuring your progress on a day-to-day basis, it’s crucial to be able and willing to adapt and be flexible if things change.

Knowing all your Numbers

Besides monitoring KPIs for turnover, gross profit percentage and salaries, it’s also important to establish KPIs for your profit per product and customer profitability.

You need to know whether you’re doing more business with each of your customers than you were doing the previous year, for example. That’s more important than focusing on going out and winning new customers.

Equally important is being aware of your balance sheet.

Other important KPIs are those that relate to your customer conversion rates, your sales profitability, and your working capital

Funding Growth

You also need to have a clear understanding of what’s achievable both in the short and long-term.

At some point, you’re likely to need to invest in the company to achieve the revenue growth and scale your business the way you want.

That might be to cover the cost of hiring of more team members, the training of your existing employees and their retention, or the development of new product lines or services to boost sales.

Like some companies, you might need additional funding to be able to hire in external experts such as the CFO Centre’s part-time CFOs to fill the personnel gaps within the company as it scales up.

You will also have to decide how you will fund the additional resources you need to sustain your growth.

Companies that enjoy strong growth are prepared to employ the right people and to raise the money they need. Sometimes they have even personally guaranteed the loans they’ve taken out on the company’s behalf.

They’re taking well planned, well considered risks.

The more risk-averse often shy away from offering personal guarantees on loans or embarking on mergers and acquisitions that would help to fuel their rapid growth.

Invariably however you do need to borrow money to achieve growth.

Merger/Acquisition Growth

One of the fastest ways to scale your business is to merge with or acquire another business in your market. Or, in the case of retail or hotel/restaurant companies, open new branches in different locations. It could also involve forming a joint venture partnership.

You need to ensure there are alignment and support for the from all the company’s stakeholders. Including customers, senior management, non-executive directors, potential joint venture or merger partners. And your banks and other finance institutions, your accountants, and your immediate team.

The benefits of choosing the right target company for your merger or acquisition can mean your market share and assets increase.

Your new staff may have more expertise and skills than your existing employees.

The merger or acquisition may make it easier to obtain capital if or when you need it.

But this kind of inorganic growth can be problematic. The purchase price for the acquisition can be prohibitive while restructuring charges can increase expenses. It takes time to benefit from the knowledge or technology your company has acquired through the merger or acquisition.

You may find you need to recruit more managers to cope with the increased workforce.

The business may move in a direction you never anticipated. Or the new company may grow too quickly which puts it at greater risk.

Often, the combination of organic and inorganic growth gives you the best outcome. Your company can diversify its revenue base without having to rely purely on current operations to grow your market share.

Three tips to scale your business

Be open minded about taking on investment. Scaling your business will be hard work and you need to find a way to do it without running out of cash.
Conduct market research to ensure people want to buy what you’re offering. It’s got to interest and excite them so much they’re willing to hand over cash for it.
Reward your employees and make sure they understand and are engaged with your vision for the business. You’ve got to bring them on the journey.

Contact us now if you want to learn how a part-time CFO (Chief Financial Officer) can help you to implement the best business growth strategy.

Hazards To Growth

Published: April 28, 2022 by lauramills

There can be a low-level panic that suffuses an organisation. A constant pressure to keep moving faster and faster and faster. It’s no secret that companies can grow too fast, stretching both culture and controls.

Imagine this: a multi-million-dollar company with almost 200 employees. The founder likes to micromanage to the point he (not the HR department) has sole approval over employee benefits such as requests for time off for holidays.

The company doesn’t have a dedicated IT employee or team. That’s because that same founder believes its gifted employees should be able to resolve any IT problems that occur! No matter if doing so pulls them away from developing products or resolving customer problems.

It might sound far-fetched, but these are just a few of the problems companies can face during an accelerated growth or scale-up stage.

Challenges of Scaling Up

While your scaling up might not experience the internal and external challenges above, you are likely to face at least one or two challenges. It might be:

People challenges
Sales and marketing challenges
Operational challenges
Administrative challenges
Financial challenges.

As the CFO Centre’s founder Colin Mills said in his book, ‘Scale Up: How to Take Your Business To The Next Level Without Losing Control and Running out of Cash’, the scale-up stage is when businesses really struggle because they’re growing but don’t have the infrastructure to support their expanded operations.

They might have the necessary revenue, manufacturing base, or customer reach of a substantial business. However, their controls, processes, personnel, leadership and culture are often still that of the much smaller business they were a short time before, he said.

Worse, they often don’t have the resources to create and maintain such an infrastructure.

During the scale-up stage, they face running out of cash or simply getting stuck, he said.

Revising your business model

It’s only possible to avoid such problems by revising your entire business model. If you don’t, then all the small problems that niggle at you now are likely to become major issues once you begin scaling up.

Even if your business is already going through the scaling up stage, it’s still possible to retrofit, design, and redesign it, he said.

Don’t get lost in the complexity

“In many ways, like most things in life, scaling up is not rocket science. No genius is required, said Mills. It can often be about common sense. “But common sense isn’t always common practice, and being able to focus on the most important things as you scale up is a skill that can get lost in the complexity of the whole process.”

One solution

The easiest way to focus on what’s important during the scaling up stage is to have expert help with big business experience.

For a fraction of the cost of a full-time CFO, the CFO Centre will provide you with a highly experienced senior CFO. They will work with you on a part-time basis to help you with scaling up your business. To discover how the CFO Centre will help your company to scale up, please contact us here.

Step Back and Allow Yourself to Dream

Published: April 7, 2022 by lauramills

The Challenge

One of the toughest challenges for owners of SMEs is to be able to stand back. To look at their business through a wide-angle lens and identify what it is they really have.

When you started your company, you almost certainly allowed yourself to dream. Every successful business operator needs ambition. But as we’ve seen, all too often those aspirations become bogged down in the everyday grind of keeping a business afloat.

Because quite often, the day-to-day distractions and diversions that inevitably surround the running of a successful business get in the way. This affects sensible, objective evaluation and strategic decision-making. Crucially, important opportunities can go at best un-exploited and at worst, un-noticed.

If this resonates with you, what can you do to change the status quo? Ultimately you need an extra pair of hands at a senior level to free up your time and allow you the time to dream.

The Solution

The key could be a CFO (Chief Financial Officer). Whether that is promoting from within, hiring a full timer for a large business, or using a part-time CFO making it affordable for SMEs.

A CFO can be that extra pair of hands to free up your time by ensuring the smooth running of the finance function. They will also being a senior sounding board, taking on some of your worries as well as:

help decode your dream
turn your dream into a plan
be the one to hold you to account to make it happen.

Great CFOs are catalysts. They can help you break the pattern of linear growth and get you what you really want on an expedited timetable.

Your dream is achieved by developing a concise roadmap based on what you want to achieve. The role of the CFO is to help you identify and unlock that potential. Thus, freeing the dream and making it a reality.

Of course this is not to suggest that success comes easily. Business challenges are usually complicated and risky. That’s another reason why potential isn’t always realised.

If you’d like to learn more about how our part-time/as needed CFOs can help you unlock and realise the true potential in your business, please contact us

Photo by carolyn christine on Unsplash

6 Keys to Successful Company Growth

Published: April 7, 2022 by lauramills

If you want to grow your business successfully, then you need to get the basics right. In this article, we’ll delve into our top six tips on how to grow a company successfully.

1. Clear Vision and effective communication

The most important thing that determines business success is the business owner’s thinking. Allowing yourself time to think, dream and get a clear vision is essential to business growth. Without a clear vision and effectively communicating it, how will you and your employees know where they are going? If the business owner has a clear vision, and shares it with all stakeholders, it’s highly likely that the business will also go in the same direction.

2. Set your goals and develop growth strategies

Your goals for your business will provide an overall framework for everyone to follow. The strategies you’ll use to achieve those goals should serve as a roadmap. It will help you to build a structure and bring a focus to decision making.

Once you’ve translated your goals into strategies, you can develop systems and processes that will help with the smooth running of the business.

Many businesses fail in the execution of their strategy. Don’t be afraid. It’s better to execute a mediocre plan correctly than it is to execute a perfect plan poorly.

3. Employ or outsource top-performing talent

A successful business depends on its people. That is hard-working, determined people whose goals are aligned with the organisation’s goals.

The more your organisation is seen to trust employees with responsibility and to invest in their career development, the more likely it is to attract and retain top performers.

But rather than rush to hire people as you scale up, consider outsourcing tasks and using freelancers or temps. This could save you from hiring the wrong people and facing costly turnover.

Sir Richard Branson, Founder of the Virgin Group, says, “There is little point recruiting great people if you don’t then give them the autonomy to take their role and run with it. It also frees you up as the founder to focus less on the day-to-day activities and more on the over-arching objectives laid out in your roadmap.”

4. Attracting and retaining customers

To build your business, you also need to develop a system to attract and retain high-quality customers. For that to happen, you must understand your customers’ needs and pain points. What burning needs do they have? What keeps them from falling asleep at night?

Your customers must believe that your products or services will meet their needs or overcome their challenges.

Many business owners make the mistake of focusing their entire sales and marketing efforts and budget on attracting new customers. They often overlook the needs of their existing customers.

Ignoring your existing customers is a huge mistake. People don’t like to feel as if businesses take them for granted once they’ve placed an order. If they feel neglected, they’re likely to move to another company.

It doesn’t matter if you run a small business or a large corporation. Your company must deliver an exceptional customer service experience.

5. Know the Hazards

Rapid growth might be desirable, but your company must be able to cope with its effects. For instance, can your company meet a sudden influx of orders? What impact would that have on your cash flow? There are dangers of scaling up too fast. They include:

Hiring the wrong people
Losing track of your finances
Management mistakes
Not maintaining customer service
Ineffective business operations
Technology problems
Cash flow mistakes

6. Stay Focussed

The easiest way to stay focused on what’s important during the scaling up stage is to have expert help from a part-time CFO who has big business experience.

For a fraction of the cost of a full-time CFO, the CFO Centre can provide you with a highly experienced CFO who will work with you on a part-time basis to help you with scaling up your business.

Get in contact with us today so we can book in a consultation meeting with one of our dedicated Regional Directors.

“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.” – Steve Jobs, Apple’s Co-founder.

Photo by Basil James on Unsplash

Why Every Business Benefits From a Fractional CFO

Published: March 17, 2022 by lauramills

A typical company finance function can be divided up into 3 areas. However, many businesses believe the finance role is principally to produce accurate accounts.

Ask any bank manager and they will tell you that the bank’s most problematic customers are those who don’t truly understand what is going on in their business. Some customers ask for finance or expect to maintain an overdraft, yet cannot even produce up to date accounts.

Most SME business owners want to focus on the business and not the numbers. The business is their baby and they want it to be their sole focus – not the financials!

The areas which the business owner will seek help in first will be determined by the focus and needs of the business whether in sales, operations, admin or finance. If we look at the finance function, it is traditional to break it down into 3 roles:

3 roles of the finance function

1. Financial direction – the CFO

2. Financial control – the Accountant

3. Book-keeping/basic accounting/ AP & AR – the Finance Department Staff

Many business owners think the finance role is transactional in nature, and so concentrate just on producing accurate accounting records. This is essential in itself, but not enough to manage and develop a growing business. When focusing on the CFO role specifically then, what are the key tasks of this role and what does the fractional CFO bring that the other finance roles do not? Why would you need a part-time or fractional CFO?

I suggest the following four main areas of expertise and input:

1.Strategic

Co-ordinating and developing long term business plans
Defining the implementation timetables
Assessing the risks involved
Seeking the funding required to deliver the proposed plans.

2.Operational

Developing internal controls; managing and developing the reports needed to run the business; improving profit levels; managing cash flows. Does the business owner fully understand the profitability of each product / service they offer? Often the answer is no.

3.Leadership

Instilling a financial approach and mind-set throughout the organisation to help other parts of the business perform better

4.Support

Tax planning and legal issues; compliance issues; managing external relationships; outsourcing relationships.

The modern CFO needs to be able to develop all this and more. There are many other considerations that go beyond the pure “job description” above.

What’s the difference between an accountant and a CFO?

A CFO looks forward and financial accounting looks backwards. Your accountant plays a vital part in tax, compliance and other essential tasks such as auditing. A fractional CFO will essentially oversee your overall finance function; providing high-level strategic advice and planning, preparing the business for growth or sale, sourcing funding, managing banking relationships and improving the business’ cash flow and profit.

Experience: it is important that a CFO has a wide range of commercial experience, not just financial. Good CFOs do not learn their skills from textbooks alone, in fact they learn very little from textbooks – they learn by doing. Commercial experience means leaving their offices and talking to customers and engaging with the production and operations teams.

Personality: a CFO must be able to communicate at all levels be it the production teams, sales teams, marketing teams to board level. The CFO must be able to relate to people on all levels of a business. We always strive to match the best CFO not just commercially, but culturally for your organisation.

The CFO Centre provides high calibre fractional CFOs to SME businesses who don’t need, don’t want or can’t afford a full time CFO. This allows organisations to benefit from the expertise of a highly experienced Chief Financial Officer without incurring the expense of hiring someone full-time. There’s no recruitment fees and no tie-in contracts.

Whether the business is in fast growth mode and needs more control, or has hit a brick wall and needs survival solutions to get through a tough patch, our CFOs can navigate both ends of the spectrum.

For more information about The CFO Centre’s fractional CFO services see How it Works or call us on 1300 447 740

Article written by Peter O’Sullivan – Regional Director – CFO Centre, Victoria

Protect Your Company from Late Payments

Published: March 8, 2022 by lauramills

When your company is facing yet another cash flow crisis caused by late-paying customers, it can be hard to believe there might be a solution. But there are steps you can take to overcome the problems delinquent payments cause and to avoid them happening again.

Late payments are something that hundreds of thousands of SMEs experience. They can threaten SMEs ability to trade, and stifle appetite for growth and recruitment. In worst cases, it can lead to insolvency.

The amount of time SMEs are kept waiting beyond their previously agreed payment terms can be a big issue. Almost a third of companies face delays of at least a month beyond their terms. Additionally, nearly 20% are having to wait more than 60 days before being paid.

Fortunately, there are measures you can take to protect your company from the worst effects of late payments. Furthermore, ensure that you are paid promptly in the future.

Some of these measures include:

Research prospective clients – Before accepting a new client, carry out a credit check and find out if the company has a reputation for paying on time.
Agree on prompt payment terms – Create contracts and terms & conditions that specify when they must pay your invoice and any overdue fees. Include your payment terms on every invoice.
Send invoices promptly – Don’t delay in sending out invoices. Check that the details are correct to avoid delays.
Offer a range of payment options – Make it easy for customers to pay you. Offer them a variety of payment options such as Direct Debit, PayPal, and credit card. If your clients are based in a different country, accept payment in their currency.
Use invoice finance – Invoice finance will give you essential working capital (up to 90% of the approved total invoice) while you wait for the outstanding invoice to be paid. You’ll receive the remaining 10% when your client pays your invoice.
Use an invoice tracker system – You’ll receive an alert when invoices are overdue.
Keep to a schedule – Invoice on the same date every month so that your clients know when to expect your invoices.
Set up internal invoice reviews – Hold regular weekly or monthly internal finance meetings to review your invoices.
Don’t back down – If you have late fees for overdue invoices then make sure you follow through and charge them. By law, you can claim interest and debt recovery costs if another business is late paying for goods or services.
Hire a part-time CFO – For a fraction of the cost of a full-time CFO, the CFO Centre provides highly experienced senior CFOs. Your part-time CFO will assess your company’s cash flow position and take the following steps:

Identify and address all the immediate threats to your business
Determine where improvements and savings can be made.
Instigate the use of regular cash flow forecasts. This way you’ll know in advance of a cash shortfall, and can therefore, make arrangements for extra borrowing, or take other action.

Why Weathering The Storm Might Not Be The Best Strategy

Published: February 28, 2022 by lauramills

Business Strategy in a downturn

Why reducing costs and “weathering the storm” may not always be the best business strategy.

Businesses are facing a perfect storm. High and persistent inflation. Input costs are rising twice as fast as selling prices are rising. Margins are being squeezed. Human talent is scarce, expensive and increasingly demanding. Consumer demand is falling from cost-of-living pressures and slowing economic growth. Lastly, global supply chain challenges.

Defensively cutting back on discretionary spend may not always the best solution. The actions taken at start of contractionary periods are critical to how the business will exit these periods. Gartner research show that the companies that made the correct decisions in the 2007-2009 downturn outperformed their peers for the next decade.

FOUR KEY AREAS TO FOCUS ON

COSTS

Meaningful costs reductions will generally have an adverse operational effect. Impact on the long term business plans must be considered. If costs must be cut, understand the trade-offs involved, and prioritise the cost reductions to minimise the long term impact within your strategy.
Challenge workflows and processes, not only to reduce costs, but make the business more nimble.
Accelerate movement to cloud to reduce IT asset spend and improve cashflows.

TALENT

Ensure your organisation is one that talented staff would like to work for, e.g., work practices, culture, challenges and opportunities. Ensure your Employee Value Proposition is attractive and clearly communicated. Make sure that key digital talent is secured. See below.

DIGITAL

A clear digital strategy is essential. Ensure you attract and retain staff who can analyse, decide, enable and execute these strategies. Digital transformation can improve resource management, lower costs, enhance supply chain, improve customer experience, and gain insight into customer trends.

EXPANSION

A slowdown may well be the best time to secure that scarce digital talent, when other companies are reducing costs and laying off staff.
It may also be an opportune time to buy businesses and assets at attractive prices
It may present opportunities to gain customers and sales when your competitors are bunkering down

SUMMARY

The current business environment is challenging and uncertain, and likely to stay that way for quite a period. Weathering the storm may well be the best strategy for some businesses.

But for well-resourced companies, with good products/services and growth aspirations, risk also represents opportunities. The winners emerging from these times will be better positioned to capitalise on the growth that invariably follows.

Gary Campbell is an experienced “on demand” CFO consultant, based in Victoria, working for The CFO Centre Australia. He is particularly successful at profit improvement, financial turnarounds, risk management within manufacturing and distribution sectors. He can be contacted here or call us on 1300 447 740

Profit Improvement through Expenses and Supply Chain Management

Published: February 21, 2022 by lauramills

There are two types of expenses, fixed and variable. Careful and regular monitoring should be in place for all businesses.

Fixed Expenses

Fixed expenses remain relatively constant regardless of the volume of sales. These are usually salaries, insurance and rent.

If your organisation has a significant decrease in sales, profit is impacted as fixed costs remain constant. Additionally, although termed “fixed”, those costs can increase alongside changing economic and other trading conditions.

The following tips can help a business improve the management of fixed expenses.

Regularly review all these costs and compare them against other suppliers’ pricing to ensure the business pays competitive rates.
Salaries are classified as a fixed cost. You should review your staffing levels and make sure they align with your business activity
Compare your expenses to the industry standard. This will also help you know if the costs you are incurring are in line.

Variable

On the other hand, variable costs are directly impacted by changes in the activity levels or the volume of products or services that your company produces.

It is crucial to differentiate variable costs from fixed costs as variable costs are critical when it comes to profitability. If your organisation is not performing as expected, sales can remain flat or are decreasing. It is essential to manage these costs in line with the sales to reduce the risk of profit erosion.

The following tips can help a business improve the management of variable costs.

Analysing profit margins, not just on a company level but on all product lines. You may find that one product has a high margin and another a negative margin. This will not be evident unless you report on each product line.
Make sure you are aware of which costs are attributed to sales. If you see that the profitability is reducing, you may need to reduce those not attributed to sales, for example marketing costs.
Staffing can be a high cost for any organisation. Consider hiring staff on a casual or part-time basis so that you can scale your staffing levels up and down based on sales demand. There are also recruitment agencies that will handle this aspect for you.

Supplier / Supply Chain

When thinking of supply chain, you usually think about the delivery of goods, are they on time or are they correct, and when will you pay for them. If you think about your supply chain as another way to maximise your profitability, you will be on the right track.

The following tips can help a business improve the use of its supply chain:

Implementing the proper inventory method, finding the balance between too much and insufficient material.
Technology that suggests minimum material quantities, and when more stock needs to be ordered. As a result, this can reduce reliance on human interaction and ensure the stock is on hand when required.
Review your supply chain arrangements regularly, look to see if you can get a better price or negotiate the current arrangement. Having your suppliers hold the stock could reduce your cost of storage.
Always have two suppliers. If something were to happen to one supplier, this would not impact your organisation as much if you only had one supplier.

Each business has its own challenges when it comes to profitability. This blog only touches the surface around what can be achieved. The CFO Centre has been assisting SME’s for 20 years, offering highly experienced Chief Financial Officers on a flexible, part-time basis. As CFOs, we are qualified CPAs or CAs with extensive commercial experience across multiple sectors, so we know what to look for and how to respond.

Written by Elechia Jones, Regional Director, The CFO Centre