growth Archives - CFO Centre Australia

How to Scale Your Business for Growth

How to Scale Your Business for Growth

Scaling your business depends on two factors: your company’s capability and its capacity to deal with growth.

To scale up your business, your company must be capable of dealing with a growing amount of work or sales and of doing it cost-effectively.

You need to know that your company can achieve exponential growth without costs rising as a result. It’s vital too, that performance doesn’t suffer as your company scales up.

You also need to be sure that your business systems, employees, and infrastructure can accommodate growth. For instance, if you get a sudden surge in orders, will your company be able to cope? Will you be still able to manufacture and deliver products or services on time? Do you have enough employees to deal with a surge in work or sales?

Scaling a business requires careful planning and some funding. To be successful, you’ll need to have the right systems, processes, technology, staff, finance, and even partners in place.

Identify process gaps

Audit your business processes (core processes, support processes, and management processes) to find their strengths and weaknesses. Find the process gaps and address them before you start to scale up.

Keep the processes simple and straightforward. Complex processes slow things down and hinder progress.

Boost sales

Decide what your company needs to do to increase sales. How many new customers will you need to meet your scaled-up goals?

Create a sales growth forecast that details the number of new clients you need, the orders, and the revenue you want to generate.

Examine your existing sales structure and decide if it can generate more sales. Can you increase your flow of leads? Do you need to offer different products or services? Is there an untapped market? Do you have a marketing system to track and manage leads? Is your sales team capable of following up and closing more leads?

Make sure you have enough staff to cope with an increase in sales. If you don’t have enough staff, consider hiring new employees, outsourcing tasks, or finding partners that may be able to handle functions more efficiently than your company.

Forecast costs

Once you’ve done the sales growth forecast, create an expense forecast that includes the new technology, employees, infrastructure and systems you’ll need to be able to handle the new sales orders. The more detailed your cost estimates, the more realistic your plan will be.

Get funding

If you need to hire more staff, install new technology, add facilities or equipment, and create new reporting systems, you’ll need funds. Consider how you will fund the company’s growth.

Make delighting customers a priority

To reach your sales forecasts, your company will need loyal customers. You’ll win their loyalty by delivering outstanding products or services and customer service every time you interact with them.

Invest in technology

Invest in technology that will automate tasks. Automation will bring costs down and make production more efficient.

Ensure that your systems are integrated and work smoothly together.

Ask for help

Don’t be afraid to ask for help from experts who have experience in scaling up companies. In an interview, Apple’s co-founder, Steve Jobs, said, “I’ve never found anybody who didn’t want to help me when I’ve asked them for help.

“I’ve never found anyone who’s said no or hung up the phone when I called – I just asked.

“Most people never pick up the phone and call; most people never ask. And that’s what separates, sometimes, the people that do things from the people that just dream about them. You gotta act. And you’ve gotta be willing to fail; you gotta be ready to crash and burn, with people on the phone, with starting a company, with whatever. If you’re afraid of failing, you won’t get very far.”

Plan For Profitable Growth in 7 Easy Steps

Plan For Profitable Growth in 7 Easy Steps

Planning for growth is something every business owner will say they do. However, not all business owners will do this effectively and with a focus that will generate profitable growth.

Many businesses plan for growth, but not profitable growth.  Some businesses focus on growing sales without a focus on margins while others build infrastructures to support sales and growth that never materialize.

Michael Porter said, “If your goal is anything but profitability – if it’s to be big, or to grow fast, or to become a technology leader – you’ll hit problems.

A business must focus on profitable, scalable and sustainable activities if it is to grow. Profit and the generation of cash to re-invest in your business must be made a priority. It’s an essential part of the financial strategy and structure of a successful business.  Profit and a clear business plan will create a focus and the alignment of the organization. Additionally, it’ll attract investors and other sources of funds to fuel growth – all of which impacts the underlying business value of the business.

CFO Centre has identified:

7 Keys to Profitable Growth:

  1. Define your business goals & objectives
    Produce a formal plan from which you can articulate a vision
  2. Critically review your business
    Identify competitive advantage, scalability & sustainability
  3. Establish a financial plan
    Identify milestones, KPIs & dashboards
  4. Create organisational alignment
    Nurture your culture, hire the right people and communicate the vision
  5. Identify the financial resources required
  6. Support the business with systems & processes to optimize performance
  7. Measure, review, evaluate & course correct
    Be proactive & prepared to be reactive

If you follow these 7 Keys and plan for profitable growth, you will ultimately:

  1. Improve and grow profits
  2. Maximise the scalability of your business
  3. Enhance management team and organizational structure
  4. Attract investors and other sources of funds
  5. Increase business value

To enhance the value of your business and grow successfully, follow the 7 Keys and Plan for Profitable Growth.

How to be More Strategic and Successful in 2023

How to be More Strategic and Successful in 2023

The impacts of covid-19 will stay with us for the rest of our lives.

We’ve seen new businesses birthed with success and others thriving amid chaos. We’ve seen neighbourhood classics tragically lost, and others that struggle to survive day-to-day.

Critical points like these thrust every business owner from acting with strategic intention to reacting to curveballs. As we are coming to the end of 2022, most businesses are settling into one of three camps:

  1. Thriving, but not trusting the success
  2. Reviving but hesitant to make bold moves
  3. Surviving and feeling battered, bruised and disillusioned

No matter which category you fall into, you likely are eyeing the rest of 2022 with caution. You’re optimistic but timid in your approach to making those big visionary goals you’ve made in the past. You may even find it hard to dream of a better future because it feels so out of touch with what is happening globally. You are not alone in those feelings.

Now is the opportunity to rewrite the rules and stop settling for less in your business. It is the opportunity to cast a strategic vision that is different from the past and to create more success and growth in your business and your life. Here are some ways you can make it happen.

1. Accept that change is necessary

Change is difficult, but it is for-ever ongoing for small-business owners. And change is happening at a frightening pace.

You’ve likely noticed that the old reliable ways of getting clients and serving them are faltering. The to-do list of things that need your attention is never ending. It’s time to put them to bed.

If change is already happening in your business, why not get ahead of it? When you are reacting to these changes, you treat the symptoms. The better approach is to embrace change to treat the problem.

By treating the problem, you employ change to work with you, not against you. People are likely to welcome strategic change now—especially if the change makes their lives better too.

One way to bring agility and innovation into your business is to implement a quarterly strategic planning and review process into your business. This planning keeps your efforts focused, actionable and accountable while remaining agile and able to shift as new learnings come to the table.

As part of the process, ask yourself these questions.

  • What would disrupt your business enough to change everything?
  • How can you be on the leading edge of that change?
  • How can the business be relevant and profitable five or even 10 years from now?

 2. What does the customer really want / need?

The old rules of supply and demand have gone. Through issues with manufacturing and distribution, product-based businesses feel the pinch. Changing client needs and social distancing have left recession-proof businesses struggling. Service-based businesses are finding that their services are no longer crucial or needed. No business or business model has been unaffected.

The reason is simple: The customers’ needs and their problems are in a constant state of change.

Engaging in a conversation with your clients to identify opportunities is a perfect strategy moving forward. The strategy could be as simple as asking a probing question at the end of every client interaction. It could also be more involved such as surveys or quarterly client advisory groups, to follow a more formal process.

More than ever, staying in tune with the customers’ needs and the problems you can solve is imperative. It is the gateway for future growth and innovation.

3. Work smarter, not harder

Australian culture is all about hard work. If you have struggled to achieve your goals, you’ve likely heard someone telling you to work harder.

Since the rise of intellectual capital as a commodity in the 1980s, the ability to be successful is less about our ability to work hard. Many business owners have told me how hard they work only to find success seemingly out of their reach. Evidence that success is not about hard work.

Sure, success demands focus, determination and resilience. But I challenge the notion that hard work is one of the requirements. If it were, we would have more success stories to celebrate.

Working smarter is about leveraging the talents of people and collaboration. When you remove hurdles and bottlenecks in your processes, you promote ease. It’s the processes that are often the problem. That which is easy gets accomplished. That means being able to produce more revenue with the resources you have. You likely will see a boost to team morale and stop spending time putting out fires.

It leverages technology and systems to streamline the business, allowing it to run smoothly. According to Gartner Research, by 2024, organizations will lower operational costs by 30% by combining hyper automation technologies with redesigned operational processes.

Consider which elements of your client experience and service could be delivered through automation, saving critical points for human interaction and forward looking strategies for your business. The organisational efficiencies gained can offset growth investments and produce a more efficient team.

4. Profit is the aim, not a reward

One of the most misleading entrepreneurial and inspirational quotes is: “Follow your passion and the money will follow.” If only things were that simple.

If success is a reward of hard work, this quote puts profit on the same unattainable pedestal. Passion for what you do gives you fire in your belly and can bring a sense of contribution. At the end of the day, though, passion doesn’t pay the bills; prolific profit does.

By shifting your mindset around profit and other metrics in your business, a magical change in how you spend your day occurs. You start focusing on initiatives that produce results and impact your bottom line.

A 2018 Cone/Porter Novelli Purpose study found that “78% of Americans believe companies must do more than just make money; they must positively impact society as well.” This marriage of purpose and profit is an instance where everyone wins. Clients love supporting social impact; businesses can be profitable and improve their community and world in the process.

For many of my clients, bringing profit up on the priority list, even with reduced revenue, is the defining element of rebuilding business stability.

5. Be a confident leader who empowers others

The entrepreneurial trials of the economic crisis have shaken the confidence of even the most experienced entrepreneurs. We are questioning everything in our professional and personal lives. Whispered conversations with other entrepreneurs over the year let us know that we are not alone in that journey.

With this period of reassessment, the future feels less certain. That uncertainty erodes our confidence to take risks and make bold moves. Past success, “knowing” and being right are pillars in the old definition of confidence.

Be careful—that shaken faith also seeps into our teams’ bones. They want something to champion.

There is good news that can breathe new life into your confidence. You do not need all the answers. You do not even need to know the “how” beyond “what is the best next step?” And, you don’t even need to be right.

Empowering others is what defines the success of top leaders. What got you here has centered around who you are and what you can accomplish. Those accomplishments won’t fuel the future. Relying on your efforts alone is a limiter when scaling your business — even in strong economic times. The old definition of confidence was about what you could do. Your future confidence needs to be about your team and the belief in what the team can do.

For 2023 to be the beginning of your comeback story, you need to take action differently enough to move the needle in your business. Make bold moves that advance and protect your business. Marry your vision to these tips, and you could be looking at a successful year.

Peter O’Sullivan, The CFO Centre

External Funding Options for Your Growing Business

External Funding Options for Your Growing Business

Your Guide to Business Financing

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 with experience in approaching banks and major financial institutions, 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.

3 Steps to Scaling Your Business Through Reporting

3 Steps to Scaling Your Business Through Reporting

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.

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.

Why Every Business Benefits From a Part-Time CFO

Why Every Business Benefits From a Part-Time CFO

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 he or she will tell you 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 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 CFO bring that the other finance roles do not?  Why would you need a CFO?

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


Co-ordinating and developing long term business plans; defining the implementation timetables; assessing the risks involved and seeking the funding required to deliver the proposed plans.


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.


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


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; it’s where your business is going that matters as the past cannot be changed – but learnings can be made and changes made so that past mistakes not repeated.

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.

The CFO Centre provides high calibre CFOs to SMEs on a part time basis, allowing organisations to benefit from the expertise of a highly experienced Chief Financial Officer without incurring the expense of hiring someone full-time. We don’t tie you in with a long term contract.

Whether the business in in fast growth mode and needs control or has hit a brick wall and needs survival solutions to get through a tough patch, our CFO’s can cope with both ends of the spectrum.

For more information about the CFO Centre’s service see How it Works  or call us on 1300 447 740


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

What is the North Star?

What is the North Star?

In the 1950s, strategic planning was around budgetary planning and control, then we jumped to 1970s which focused on corporate planning; 1980s focussed on strategic positioning, 1990s strategic competitive advantage; 2000s strategic and organisational innovation; 2010 complexity and rapid change.

Now, we are talking about North Star Metrics (NSM). The term has been in around since the 2000s and was used primarily in Silicon Valley. It has taken a while to reach Perth.

Here is our view of what the North Star means for SMEs.

If you are not familiar with North Star, it is another form of goal setting. Remember SMART goals (specific; measurable; achievable; realistic; and time-based)? And what about vision boards, or stepping stone goals or even a more recent fad of bullet journaling?

A North Star goal, in its basic form, has also been referred to as the Big Hairy Audacious Goal. It is a goal so big, so far out there and it is not about the destination but more about the journey.

One article recommends to think of them “the way sailors view the North Star: A way to stay on course, no matter where you are. And if you don’t know where to go or what to do, all it takes is a quick glance to get back on track”.

If that is the basic form, let’s have a look at the metric in more detail.

Key steps for creating a North Star Metric

1. Start by Understanding How Customers Get Value

And not just any customers, but instead the “must have” customers who say they would be “very disappointed” if they could no longer use the product. Your goal is to expand this “must have value” across your existing and new customers. Your North Star Metric is how you quantify expansion of this value.

2. Should be Possible to Grow NSM “Up and to the Right” Over Time

A good rule of thumb is to choose a metric that can be “up and to the right” over a long period of time. This is why “Daily Active Users” is an example of a good NSM for consumer products like Facebook or online games.

3. Consider the Downsides of a Metric

Think through some scenarios where growing the metric could lead the team to behave in ways that are against the long-term interest of the business. For example, if you made your NSM “average monthly revenue per customer,” then the fastest way to grow this number would be to eliminate all customers that have a relatively low value — even if they are profitable customers. This would likely reduce your overall customer and revenue growth rate.

4. Keep it Simple

Remember that the point of the NSM is to align everyone on your team to work together to grow it. So, it’s important that it is simple enough for everyone to understand it and recall it.

5. Why Not Just Focus on Revenue Growth?

Revenue growth is very important, so this is a natural question that many people, especially business owners, ask. The challenge is that if revenue growth outpaces growth in the aggregate value that your product delivers to customers, it will not be sustainable. Revenue growth will eventually stall and start to decline. But if we can continue to grow aggregate value delivered to customers over time, then it becomes possible to sustainably grow revenue.

For example, let’s take the CFO Centre (CFOC).

How customers get value: CFOC provides highly experienced CFOs to SMEs on a part-time basis.

Grow NSM: the number of active clients

Downsides: CFOC needs to be able to service active clients and this is directly related to number of CFOs

Keep it simple: CFOC wants every SME to have access to a part-time CFO.

This is a big hairy audacious goal. We understand that the number of clients is limited by the number of CFOs but a North Star Metric isn’t necessarily pragmatic or utilitarian. It does, however, provide a direction for the SME and the business owner.

What is the North Star Framework?

In addition to the metric, the North Star Framework includes a set of key inputs that collectively act as factors that produce the metric. Product teams can directly influence these inputs with their day-to-day work.

This combination of metric and inputs serves three critical purposes in any company:

  1. It helps prioritise and accelerate informed, but decentralised, decision-making.
  2. It helps teams align and communicate.
  3. It enables teams to focus on impact and sustainable, product-led growth.

Personally, I would add to this:

Imagine you have your North Star Metric, next you define sub-metrics (break down big goal to smaller goals), define the outputs (key elements of success) of those goals, define how you will achieve those outputs (needs to be measurable) and finally, what are the inputs to reach the outputs.

The CFOC question

At the CFO Centre, we ask our clients: what do you want your business to do for you?

This is an important question as our goal is to build a relationship with a business owner and the questions starts our journey to better understand what is important to them.

The answer to this question can also be the basis of your North Star.

Is the North Star relevant to SMEs?

Overall, I like the concept of setting a North Star for a business but I much prefer the more basic approach: Big Hairy Audacious Goal.

I was in conversation with one business owner who had his North Star, or rather his Big Hairy Audacious Goal. He wants his business to be valued at $1bn by 2029. I thought this was brilliant and I think this is what North Stars are about.

Set your big goal but remember, it is more about the journey than the destination!

Final words

To qualify as a “North Star,” a metric must do three things: lead to revenue, reflect customer value, and measure progress.

Make it bold, tap into your dream and start the journey.



Types of Goal Setting – From North Star Goals to SMART to Bullet Journals – Leanne Calderwood; The North Star Approach to Goal Setting | by Patrick Ewers | Better Humans; What is a North Star metric? | Mixpanel; About the North Star Framework – Amplitude; North Star Metric: What Is It and How To Find It For Your Company – Kissmetrics; How To Find Your Company’s North Star Metric (; Finding the Right North Star Metric | by Sean Ellis | Growth Hackers; What is the North Star Metric? Theory, benefits and examples | toolshero; What is the North Star for your Strategic Planning? | Insigniam Quarterly; Strategic guardrails for digital transformation | Deloitte Insights



Insights for the Australian Construction Industry

Insights for the Australian Construction Industry


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.


CFO Centre’s CEO David KingWelcome 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
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.


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