kpis Archives - The CFO Centre Australia

A CFO can act as a guardian for your business, by forecasting your cashflow and profitability, setting meaningful targets and helping you monitor your progress against them so you achieve your goals.

Looking Ahead – Forecasts

While most accountants are very good at telling you what has happened, not everyone is good at looking ahead. Historical accounting records are vital to any business, but so is a forecast. A forecast acts as a red flag, highlighting where profitability or cashflows are under threat. Forecasts need to be informed by well- thought out assumptions, and be capable of being updated quickly. These days numerous cloud-based forecasting tools are available, that are updated continuously from accounting systems.

ZZZZZ and Improving Your Business – KPIs

We all know the cliché that to improve something you have to measure it. To improve a business, you need clear targets or measure – key performance indicators (KPIs).

But how do you go about setting KPIs?

Here are some tips on setting KPIs. I call them the 5 Zs (I’m using American spelling – apologies to all of us using British spelling).

CustomiZe – KPIs must be relevant to your company. If you trade in inventory in different product categories, you need margin and turnover KPIs for your inventory categories. If you are a professional services company, inventory is irrelevant – you need labour utilization and efficiency measurements.

PrioritiZe – it is tempting to want to choose 100 goals, but don’t. If you or your staff are faced with 100 KPIs, you very quickly become overwhelmed and lose focus. Select 5-10 KPIs. Each manager or department will have their own KPIs.

VisualiZe – KPIs need to be visible and visually appealing. People need to see how they are progressing on a regular basis – every day or every week. Only by monitoring their progress constantly can they make changes to their behaviour to improve their performance. It is no use waiting until budget time at the end of the year to review how well you and your team have done.

OrganiZe – people need to be held accountable for achieving the targets. Each KPI needs a manager who is accountable for achieving that particular goal.

OptimiZe – constantly monitor and improve your performance. This means regular reviews and making the changes needed to stay competitive in your environment. This is particularly important in our current environment, where COVID19 has disrupted many industries and changed the operating environment.

Systems

A key element in monitoring your performance against KPIs is a system that gives accurate and reliable data, quickly. There is no one-size-fits-all system; you need to select a system that relates to your business needs. It’s critical that the setup and implementation of the system takes into account your business needs and your goals.

The Role of a CFO

Of course, you can try and do all of this yourself, but it is much easier to have an experienced person do it for you. A part-time CFO will be able to assess your business and set meaningful KPIs. Your CFO can take thorough look at how you are using your system, and whether changes need to be made. Regular meetings to review your forecasts and how you are performing against your KPIs will ensure you achieve your goals.

Written by Andrew de Bruyn, Principal (WA) – The CFO Centre

Creating a well thought-through, comprehensive strategic plan is an arduous task. However, it is fundamental to businesses of any size. It can increase your profits, increase your chance of success, help tackle challenges that arise and assist in securing funding as and when required.

Thinking through objectives and likely outcomes which may occur many years down the line is, by nature, challenging. But it is the hard work up front which makes for lighter work down the road as well as a better chance of profits and reaching your goals.

Creating a solid plan

An experienced CFO (Chief Financial Officer), in particular, our part-time/as needed CFOs, can make a significant contribution.

Our CFOs often find their clients have done some good planning and strategic thinking but need a devil’s advocate to ask the right questions and help to steer the ship in the right direction. Being a CEO without a high level ‘finance person’ to bounce ideas off can be tough. CFOs often possess a different albeit complementary set of skills to CEOs.

We highly recommend you take the time out to work through the detail of your business plan. It is rare to see a company succeed if it doesn’t have a robust plan.

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. Your CFO will work closely with you to develop your strategic plan and your timetable for implementation to:

Gain a full understanding of the business and its operating procedures.
Work through the existing strategic plan with you and make necessary changes to build a plan which clarifies how the company’s objectives can be realistically achieved.
Agree on milestones and break down the plan into annual and quarterly targets.
Conduct a fresh SWOT (Strengths, Opportunities, Weaknesses, Threats) analysis bringing the plan up-to-date.
Conduct a new PEST (Political, Economic, Social and Technological) analysis bringing the plan up to date.
Carry out a full competitor analysis to understand in detail what is and isn’t working in the market.
Explore opportunities for effective market research to enable innovation and development of new products/channels to market/operating procedures.
Identify key players in the business.
Identify skill gaps in the business.
Agree financial incentive structures to retain and motivate key members of the team.
Identify five key metrics for determining what the future course of the business should look like.
Agree on the exit or succession strategy.
Develop a clear, coherent message (vision/mission/purpose) to staff and to customers.
Work with the senior team to ensure individual department goals are aligned with the big picture strategy.
Agree on a who/what/when set of objectives for all department heads.
Implement accountability protocol for every member of staff.
Determine methodology which allows the senior team to course correct periodically when a change in strategy is required.
Agree on delegation of authority to department heads to spread responsibility across the business and to free up the CEO’s time.
Create a feedback route so that strategic goals are regularly shared with staff
Develop a set of relevant KPIs (Key Performance Indicators) and a system which allows for regular (daily/weekly/monthly/annual) monitoring and reporting.
Develop a long-term efficient tax structure for the business and for key employees.
Identify key outsource suppliers/advisors and, in particular, corporate finance contacts

This process will instil a deep feeling of confidence both within the senior team and throughout the rest of the business.

You will move out of the chaos and into a more serene working environment where each of the cogs, which make up the bigger system, is able to move in harmony.

Don’t leave success to chance.

If you’d like to find out more about how we can help your business with a strategic plan, phone Venu on 1300 447 740 or watch this quick video on How It Works.

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Under the Spotlight – The CFO a A Guardian