Hire a CFO Call us 1300 447 740
Hire a CFO Call us 1300 447 740

Tag: part time cfo

Navigating Your Business Growth Journey: Where Does Your Company Stand?

by lauramills
Navigating Your Business Growth Journey: Where Does Your Company Stand?

As the business landscape constantly evolves, understanding where your company stands on its business growth journey is crucial for shaping future strategies. In a recent business survey, we asked 264 participants to assess their business’s growth stage. The results provide valuable insights into the diverse stages businesses find themselves in. Let’s delve into these findings and explore the implications for businesses at various growth stages.

  1. Scaling: The Power of Momentum (54%)

With over half of the respondents indicating their businesses are currently scaling, it’s evident that many companies are experiencing significant growth and expansion. Scaling is an exciting phase that requires careful planning, resource allocation, and strategic decision-making. It’s essential for businesses in this stage to maintain their momentum while effectively managing risks and seizing new opportunities.

Insight: Scaling businesses should focus on streamlining operations, investing in scalable technologies, nurturing their workforce, and building strong customer relationships to sustain their growth trajectory. The CFO Centre can help by adding an experienced part-time CFO (Chief Financial Officer) resource to your team to help you plan and implement the right strategy for your growth goals.

  1. Market Leaders: Maintaining the Edge (18%)

Being a market leader is an accomplishment that comes with its own set of challenges. These businesses have successfully carved out a substantial share in their respective industries. However, complacency can be detrimental. Market leaders must continuously innovate, adapt to changing market dynamics, and stay ahead of the competition while nurturing their existing customer base.

Insight: Market leaders should embrace a culture of innovation, invest in research and development, explore new markets, and consistently deliver exceptional customer experiences to maintain their edge in an ever-evolving business environment. Our part-time CFOs could be the edge you need to set you apart from your competitors – find out how.

  1. Early Stage: Nurturing Potential (15%)

A significant number of respondents identified their businesses as being in the early stage. This stage is characterised by laying the groundwork for future growth. Early-stage businesses need to focus on refining their business models, building a strong foundation, attracting talent, securing funding, and establishing a solid customer base.

Insight: Early-stage businesses should prioritise market research, develop a compelling value proposition, build strategic partnerships, and leverage digital marketing tools to establish a strong foothold in their target markets.

  1. Preparing for Exit: Strategic Transitions (9%)

Some businesses indicated that they were preparing for an exit. This stage involves strategic decision-making regarding potential mergers, acquisitions, or divestments. It requires careful planning, financial analysis, and alignment with long-term objectives to ensure a smooth transition.

Insight: Businesses preparing for exit should seek expert advice, conduct comprehensive due diligence, optimise their financials to ensure the best possible price, and identify potential buyers or investors who align with their strategic vision.  The CFO Centre has helped countless businesses plan and execute profitable and smooth exits for our clients.  Hear from one of them here.

Conclusion:

Understanding where your business sits on its growth journey is crucial for making informed decisions and charting a path towards success. Whether you are scaling, a market leader, in the early stage, or preparing for exit, each growth stage presents unique opportunities and challenges. To gain deeper insights into your business’s growth journey, consider taking the Scale-up & Exit Business Assessment™ by The CFO Centre. Or contact us on 1300 447 740 to find out how we could add significant value to your business.

Top 7 Advantages of a Part Time CFO

by lauramills
Top 7 Advantages of a Part Time CFO

A part time CFO is the ideal solution for SME businesses looking to scale, who can’t afford or don’t need a full time resource. One of our clients recently said “it’s the best money I’ve ever spent”.

That’s because a part-time CFO will provide your company with the high-level financial expertise necessary to increase profit, improve cash flow and scale up, for a fraction of the cost of a full-time CFO.

Here are the top seven advantages you can expect when you hire a part-time CFO.

1.   Increased Profit

The number one thing most business owners want!  Having a part time CFO on your team, with their years of commercial experience across many industries, they can increase profits of most businesses by tweaking the levers every business has to increase profit.  For this reason alone, it’s worth considering a part time CFO.

2.    Strategic advice

Your part-time CFO will provide you with strategic analysis and support on every financial aspect of your business. A report from the Financial Executives Research Foundation (FERF) found CFOs play key roles in not only managing a company’s finances but also in setting broader strategic goals and establishing and achieving financial and non-financial milestones.  What’s more, part time CFOs can highlight potential threats or risks of which you and your team may be unaware or perhaps don’t know how to deal with.

3.    Flexibility

You can use the services of your part time CFO for what you need, when you need it. That could be for a variety of different financial functions or a specific project. This means you and your CFO can tailor the role to suit your company’s needs at any time.

4.    Multiple industry experience

Although you can choose to work with part time CFOs who have direct experience in your given industry, you can also opt to work with those that have experience across multiple industries. The advantage will be that your CFO will provide you with access to networks and multi-layered insights that you might not otherwise have.

5.    Sounding board

Running a company can often be a lonely and stressful experience for CEOs, according to The CFO Centre’s Chairman Colin Mills in his book ‘Scaling Up How to Take Your Business to the Next Level Without Losing Control and Running Out of Cash’.  He’s seen first-hand what pressure does to business owners.

“I’ve sat in sales meetings with entrepreneurs who had literally been brought to tears by stress and frustration and the feeling that it’s all too much.”

That’s where a part-time CFO can help. He or she can act as an independent sounding board for the over-burdened, stressed-out business owner. With their ‘big business’ experience, it’s more than likely CFOs can provide solutions to what can seem like overwhelming problems to the CEOs of growing businesses.

6.    Access to a national and international network

If you choose a part-time CFO from an organisation like The CFO Centre, you’ll benefit from the expertise from all the CFOs in its worldwide network. That’s hundreds of years of experience in every aspect of finance—all for a fraction of the cost of employing a single full-time CFO.

7.    Enjoy life through your business, sooner

With the help of a part time CFO, your business will start delivering on what’s really important to you so you get to live the life you choose (eg. more time with family, more time on rather than in your business).

To discover how the CFO Centre will help your company, please call us on 1300 447 740, contact us or watch our short video How it Works.

Photo by Headway on Unsplash

The Ultimate Guide To Strategic Planning

by lauramills
The Ultimate Guide To Strategic Planning

The Importance of Strategic Planning

Strategic Planning is the key to the success of any business, no matter its size or age. The strategic plan sets out:

  • the company’s direction and priorities;
  • its main operating and financial targets,
  • the actions it will take to achieve those objectives,
  • the new initiatives and investments planned, and
  • their impact on performance.

As we swiftly approach the end of 2023, now is a great time for reflection. What were your objectives for this year? Are you on the way to achieving them, or have other things got in the way?

Some SME owners keep plans in their head, but a formal plan is an extremely valuable tool for managing and growing a business, as it: 

  • clearly communicates the company’s priorities
  • ensures all key staff are working towards common goals
  • sets the focus on key objectives
  • delegates actions and accountabilities amongst employees
  • ensures that decisions made will benefit the long-term company goals
  • highlights strengths and weaknesses.
Failing to plan is like planning to fail

Not spending quality time on strategic planning usually leads to a chaotic working environment. Our clients often talk about ‘not feeling in control’ and ‘not really knowing what is coming around the next corner’. When the plan is weak, business owners tend to operate without the same sense of conviction as those who allocate time and expertise to the planning process. Our CFOs often find that 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.

4 Mistakes Business Owners Can Make

  1. They don’t have a plan at all
  2. They don’t have a formal plan, it’s in their head which is difficult to share with others
  3. They don’t have an implementation timetable attached to their plan
  4. They don’t have a mechanism in place to conduct regular reviews

Without a comprehensive, up-to-date strategic plan and an implementation timetable, companies may be missing out on opportunities for growth and not realising their full potential. A formal plan can be an extremely valuable tool for managing and growing a business, as it allows a company to recognise its strengths and weaknesses. 

The Importance of Reviewing Your Plan 

Strategic Planning is integral to business success, however a plan is only useful if it is reviewed regularly to ensure it meets the current and future needs of the business.  It’s vital business owners regularly review their financial strategy to ensure they have the right funding in place to meet the needs of their business, at its current stage of the business lifecycle. 

Most CEOs simply don’t have the time to spend on quality strategic thinking and to document and communicate that thinking in a way which allows the whole business to buy into the vision. Harder still is managing and implementing the business plan. Significant strategic course corrections are commonplace in fast-growing companies. These should therefore, be embraced. The tricky part though is in managing regular change. That requires a combination of time and specialist knowledge. 

There is an art and science to effective strategic planning. Getting it right brings a real sense of clarity and direction to a business – this is where an experienced part-time CFO can make a significant contribution. 

Creating Your Plan

Step 1: Analysis

1.  Analysis of Existing Situation – Organisational Philosophy & Mission & Value

  • Does it reflect what you stand for?
  • Do your people understand its true meaning?
  • Does it make it clear as to how you have to compete and against whom?
  • Is it simply written? Is it clear and unambiguous?  Is it believable and realistic?
  • Does it motivate people? Does it attract pride or cynicism?
  • Does it give us some indication of what we should be doing and how we should be doing it?
  • Do all the constituent parts fit and hang together?
  • “Identity Pyramid” – do you have clarity around all the issues?

2. Internal Appraisal of Company
  • SWOT analysis – revisit previous analysis & ensure it is complete & current
  • Distinguish between endowments and core competencies
  • Assess and audit core capabilities.
  • Gauge fit between external environment and core capabilities
  • Identify fit between customer requirements and core capabilities

Having identified what you perceive to be your competences ask yourself the following questions:

  • Will this give us any source of long term sustainable competitive advantage? Clarify the how? (ie. how relevant is it to the needs of our customers (actual and potential)).
  • Do customers (broadly) agree with our findings (ie. the market place)?
  • Can competitors (present/future) emulate or do better? Do they share our perception?
  • How was this list of core competences arrived at (eg. Training, innovation etc)?
  • Any weaknesses/shortfall still? If so, what further investments will be required?
  • Is there any impact on the strategic balance sheet (ie. Intangible and human assets)?
  • Can it be levered, onto other applications and/or markets?
  • What happens next?
3. Competitive Analysis
  • What is the current process for this task?
  • The Positioning Statement (competitive positioning) – refer below
  • Scan present competitive position but focus also on future competition.
  • Do you really know your competitors strategy?
  • Understand changing face of competition
  • Who could be a future competitor?
  • Is your strategy and your competitors becoming more alike or more divergent?
  • What is the most radical thing that your competitor(s) could do?

4.Value Proposition
  • Consider or revisit the current Unique Sales Proposition within your Marketing plan & ensure it is complete and up-to-date.
  • Do you know why your customers buy from you and not you competitor(s)?
  • Have you asked them?
  • How can you improve customer experience?
5. Environmental & Industry Analysis
  • Consider legal, social, political, economic, technological, markets, labour position, society, pressure groups, and any other environmental issue.
  • Assess potential impact of any change(s) and consider timing implications.
  • Conduct intensive industry analysis.
  • What is the long-term viability of the industry as a whole?
  • What could change the industry dynamics?
  • What is the nature of current industry changes i.e. radical, creative, intermediate or progressive?
  • What could be the impact on your strategy and source of competitive advantage of such changes?
  • Five years or so from now how will the industry leaders look and act?

Step 2: Strategic Thinking

1. Identify Strategic Alternatives

  • All options to be examined – growth, acquisitions, alliances, JV’s, innovation.
  • Upside and downside risks identified

2. Strategy Evaluation & Selection

  • Clear choice to be made
  • How will we compete?
  • Evaluate impact of each option
  • Will it give unique competitive advantage?
  • Can it last? Can it be sustained?
  • Will it differentiate us from our competitors?
  • Can it be converted easily into a set of business objectives / KPI’s?
  • How will competitors react?
  • Easy to implement?
  • Contingencies in place?
  • What about the next wave?
  • Is it consistent with customer requirements and industry changes?
  • Will it create shareholder value?
  • Is it financially viable?

Step 3: Implementation

1. Matching Strategy & Organisational Structure 

  • Do we have the necessary resources?
  • Is there a logical fit?
  • Is current structure adequate? Assess extent of change. Do not ignore culture effect.
  • What about the organisation’s values?
  • Is strategy personalised enough? Assess flexibility and robustness.

2. Allocation of Resources & Responsibilities

  • Planning, Plans, budgets, controls, appraisals etc….. all to be consistent with strategy
  • Strategy well translated into clear objectives
  • Priorities and constraints identified
  • Time horizons clearly laid out
  • Management information systems to dovetail strategic choice

3. Regular Reviews & Adjustments

  • Planning, plans, budgets, controls, appraisals etc…all to be consistent with strategy

Strategic Planning – How a CFO Will Guide You

Under The Spotlight – The CFO as a Strategist

Photo by Rohan Makhecha on Unsplash

Do You Have The Capabilities And Capacity For Scaling Your Business?

by lauramills
Do You Have The Capabilities And Capacity For Scaling Your Business?

Scaling your business

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 uncontrollably 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.

1. 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.

2. 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.

3. 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 for scaling your business.

4. 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.

5. 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.

6. 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.

7. Risk management

Every growth opportunity comes with inherent risks. You should identify potential financial pitfalls, ensuring that the company takes calculated risks. Evaluating contracts, overseeing compliance, managing debts, and setting up internal controls help to safeguard assets.

8. 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 just asked.”

A solid strategic plan is also essential when scaling your business to align your financial goals with the operational objectives. Failing to plan is planning to fail.

In today’s dynamic business environment, scaling a business requires more than just a great idea or product; it demands strategic financial oversight. For many small and medium-sized enterprises (SMEs), the expense of a full-time Chief Financial Officer (CFO) can be prohibitive. Enter the part-time CFO, an innovative solution to meet this challenge.

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

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

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. 

  1. List the top 20 actions that could increase your revenue x 10 
  1. Identify the top 3 options  
  1. 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: 

  1. A clear, well-thought-out vision shared with everyone  
  2. Goals that translate into growth strategies 
  3. Top-performing talent, either employees or outsourced 
  4. Systems for attracting and retaining good clients 
  5. An understanding of the hazards when you scale too fast 
  6. 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>

What does a CFO Actually Do?

by lauramills
What does a CFO Actually Do?

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

by lauramills
The Value of Understanding Your Numbers Through Reporting

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 

  1. 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). 
  1. 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: 

  1. The Balance Sheet 
  1. The Cash Flow Statement 
  1. 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

How to Develop a Good Banking Relationship (and Why You Should)

by lauramills
How to Develop a Good Banking Relationship (and Why You Should)

While it may not always appear to be the case, banks are generally very keen to lend money to businesses. However, due to stringent guidelines and red tape, it can seem quite difficult to actually get credit approval. Maintaining a good banking relationship can be the key to this. Here are some simple tips to help your business (particularly your finance department) improve this relationship.

Change Your Mind-set

Dealing with the banks is a state of mind. If you consider the relationship to be ‘master and slave’, that is exactly the kind of relationship that will develop. Instead, think of it as a relationship of equals. Bank relationship managers are just like any other supplier, so negotiating with banks is really no different from negotiating with other suppliers. The product being negotiated just happens to be money.

Understand Your Bank’s Requirements

As with any negotiation situation, both parties have a list of requirements. You will already be intimately familiar with your own needs and goals. By taking the time to understand your bank’s list of requirements as well, you can help the relationships develop much more smoothly.

A bank requires 5 key things:

   1. High-quality management – your leadership team should consist of people who have a reliable track record and a proven ability to overcome obstacles.

   2. Thorough financial information – this should include comprehensive reviews of past performance and insightful analysis into where the business is heading. The maintaining of these records isn’t just important for the information itself; it is also a reflection of the personnel in charge of maintaining it.

   3. Income – a relationship manager’s top priority will always be securing the best price. Once the credit has been approved, it’s up to the relationship manager and his or her director to decide on the actual price.

   4. Loan repayment – the credit team will assess the forecasts while also taking into consideration the bank manager’s recommendations and observations. You need to clearly demonstrate how money will be repaid and openly discuss the factors that these repayments will hinge upon. Credit teams are often cautious in regards to repayment proposals (e.g. if sales end up amounting to only half of what is expected, they want to see that the debt can still be repaid). If you have already scaled back your numbers to allow for this, you need to make sure this is apparent in your presentation and discussions – otherwise your figures will be halved a second time!

   5. Security – when you think of business finance, recognise that this field is actually divided into two specific types of finance: equity and debt. Equity funders understand that returns may be unpredictable, and they charge a higher rate to facilitate this risk. Debt providers expect to be paid back regardless of what happens, and the price of their finance reflects the inherent risk of this not happening. At the end of the day, any bank simply needs to ensure that their deal has a safety net and won’t backfire on them if things go poorly.

Make Sure You Have the Right Banking Relationship Manager

The quality of relationship managers can vary significantly, and this will have a substantial impact on the quality of your relationship with your bank. The best relationship managers can demonstrate very quickly that they both understand your business and you personally.

The best test is to ask yourself if you trust your relationship manager sufficiently to tell them openly when something goes wrong. If you cannot answer this positively, you should have a look at the relationship and determine what steps need to be taken to fix this – whether that means having a comprehensive catch-up meeting to discuss your concerns or requesting a new relationship manager.

The Benefits of a Good Relationship with Your Bank

Aside from having greater opportunities to secure essential finance for your business, having a strong relationship with your bank and relationship manager can have a multitude of other advantages. For example, you can:

  • Rely on your bank for general advice and guidance on a range of financial matters
  • Expect to hear about new products, services and deals as they become available
  • Access other relevant financial products for your business, perhaps at a reduced rate
  • Trust your relationship manager to work towards your goals and evaluate your business’s circumstances transparently
  • Genuinely enjoy dealing with your bank, rather than dreading it!

As you can see, a good relationship with your bank – as with almost any good relationship – is well worth a little bit of work. In some cases, having the right part time CFO can make the crucial difference; please don’t hesitate to contact us if this is something you are currently lacking. In the meantime, we hope these tips will help you strengthen your rapport with your bank.