What A Finance Director Can Do for Your Company

What A Finance Director Can Do for Your Company

You might think a Finance Director’s role is confined to traditional finance activities, but today’s FD (or CFO) can do so much more than count beans.

In the past, an FD’s responsibilities might have been confined to high-level accounting such as providing timely financial statements and monthly management reports, managing investments and expenses, monitoring cash flow, and managing risk. But as the business landscape has become more complex over the past decade, the role of an FD has changed.

That change is due to factors such as the global financial crisis—the biggest since the Great Depression of the 1930s, disrupted and volatile markets, the rise of big data, and the impact of digital and social media.

As a result, CEOs and their Boards expect so much more from CFOs, according to a KPMG report.[1]

“CEOs are increasingly looking to their finance leaders to help drive wider business strategies,” says Simon Dergel, author of ‘Guide to CFO Success’. [2]

They expect FDs to make decisions and shape their plans based on the company’s ambitions, he says. As the keeper of the company’s data with an understanding of every department’s objectives and performance, they can play an active role in refining and aligning business strategies.

“Perhaps the biggest change in terms of the CFO’s role in business today is that their advice is not only valued—it is necessary,” says Dergel.

“Businesses are currently dealing with a wave of disruptive competitors and fast-changing customer expectations, while also managing a global talent shortage and volatile financial conditions. The wisdom and experience of finance leaders make them indispensable in the boardroom as companies look to tackle one of the most uncertain economic periods in decades.”

Most importantly, CFOs are delivering on these expectations. The new breed of FDs is now much more forward-looking. They wear three ‘hats’ at any given time: financial expert, active management team member, and leader of the finance function.

Given the opportunity, they can perform multiple roles within a company, working both on and in the business. Not only can they direct financial performance and protect the financial integrity of the company but they can also drive strategy.

This is borne out by James Riley, the Group Finance Director and Executive Director of Jardine Matheson Holdings Ltd., who says, “A good CFO should be at the elbow of the CEO, ready to support and challenge him/her in leading the business.

“The CFO should, above all, be a good communicator—to the board on the performance of the business and the issues it is facing; to his/her peers in getting across key information and concepts to facilitate discussion and decision making; and to subordinates so that they are both efficient and motivated.

“Other priorities for a CFO are to have the strength of character, personality, and intellect. I take it as a given in reaching such a position that an individual would have the requisite technical knowledge and financial skills.” [3]

How Start-Ups and Scale-Ups Benefit

Most start-ups and early-stage growth companies don’t need and can’t afford the services of a full-time FD. But that doesn’t mean they can’t benefit from all that FDs offer. They can access the skills of highly qualified FDs by engaging them on a part-time basis.

Part-time FDs can provide enormous value in terms of strategy and planning for early-stage or scale-up companies. A report from the Financial Executives Research Foundation (FERF) went further: it described their role as “critical to the success of start-up and early-stage growth companies” since they provide key insights. [4]

It found FDs play key roles in not only managing a young and fast-growing company’s finances but also in setting broader strategic goals and establishing and achieving financial and non-financial milestones.

When the company is at a stage when it needs external investment, the part-time FD can manage the process to ensure it raises the right type of funding from the right sources. The part-time FD can also provide more comprehensive reporting as well as manage the relationship with the external investors, whether they are venture capitalists, private investors, or banks.

Part-time FDs also help to establish sound reporting systems and tools that help improve reporting metrics and communications to investors.
They also play a key part in setting and monitoring company strategy and maintaining a balance between investing in growth, building market share and preserving capital for future opportunities.

As they grow, the need for a part-time FD’s financial and strategic acumen becomes more acute, FERF found.

The FD Centre’s part-time FDs bring these skills to every client at a fraction of the cost of their full-time counterparts. For instance, its part-time FDs can:

• Provide you with an overview of your company so that you can make sound decisions about its future.
• Help you to understand your company’s finances.
• Eliminate cash flow problems.
• Identify cost savings within your company.
• Improve your profits.
• Create a realistic business plan and so make better financial decisions.
• Help you and your management team to manage your finances with ease.
• Develop clear strategic objectives.
• Identify your Critical Success Factors and Key Performance Indicators (KPIs).
• Find and arrange to fund.
• Understand your main profit drivers.
• Identify your best customers.
• Sort out your tax position.
• Introduce timely, easy-to-follow management reports.
• Facilitate expansion in your country and into other countries
• Build value to make your company more attractive to investors or buyers

To discover how an FD Centre part-time FD or CFO will help your business, contact us now on 0808 164 8902. To book your free one-to-one call with one of our part-time FDs, click here.

[1] ‘The Changing Role of the Chief Financial Officer’, Mbatha, David, KPMG

[2] What Makes a Great Modern CFO?’, Dergel, Simon, Oracle, https://blogs.oracle.com, June 7, 2017

[3] ‘THE ROLE AND EXPECTATIONS OF A CFO A Global Debate on Preparing Accountants for Finance Leadership’, International Federation of Accountants, www.ifac.org, 2013

[4] ‘Center Of The Storm: The CFO’s Role In Start-ups And Rapidly Growing Companies’, Financial Executives Research Foundation, www.financialexecutives.org, March 28, 2017

Strategically Outsource to Maximise Efficiency and Productivity

Strategically Outsource to Maximise Efficiency and Productivity

If you’re looking for a quick way to cut costs, boost efficiency and improve productivity then consider outsourcing one or more of your business’ support processes.

Outsourcing has many benefits and can give you a greater competitive edge in your market. It allows you to tap into a large international talent pool and benefit from external expertise. Your outsourced providers can provide services, innovative approaches, and the latest technology along with cutting-edge solutions that your in-house team might be unable to provide.

It also allows full-time employees to focus on your company’s core competencies. And it means you have lower operational and recruitment costs. The cost savings you achieve with outsourcing can help you to release capital for investment in other areas of your business.

But outsourcing does have its downsides. For example, there’s a risk in allowing outsourced providers to handle confidential company data, whether that’s the details of employees or customers or competitive information. Under the GDPR, companies will be held responsible for any third-party data breaches. The penalties for such breaches will be stiff. What’s more, any data breaches will dent your company’s reputation and damage your brand.

Then there’s the risk that the output will be sub-standard or that delivery time frames will be stretched. Both would damage your company’s reputation and possibly result in lost sales. And there’s a danger that unless the outsourcing is carefully managed, the expected cost savings won’t materialise. This was the case for the UK government. Its programme to outsource back-office functions ended up costing taxpayers £4 million. Officials had predicted the programme would save up to £400 million a year, but after two and a half years, it had saved just £90 million but cost £94 million.

It’s for these reasons many companies are still reluctant to consider outsourcing.

That’s a shame because if the outsourcing is well-managed, the benefits will far outweigh the risks. Take the Alibaba.com e-commerce website, for example. Today, it’s known as the world’s biggest global marketplace but in its early days, its founder Jack Ma had to outsource the website development to a US company. At the time, he couldn’t find development talent in China whereas developers in America had the skills he needed. It also allowed him to overcome the Chinese government’s tight internet restrictions.

Google is another giant that also outsources work to IT specialists, developers and virtual assistants. At one point, Google outsourced phone and email support for AdWords, one of its top-grossing products, to about 1,000 external representatives.

The founders of the hugely popular WhatsApp Brian Acton and Jan Koum also hired the services of external providers. In their case, they used the services of an iPhone developer Igor Solomennikov for the core development work on the app.

What can you outsource?

You can outsource any or all of the following:

  • Administrative tasks such as data entry, typing, travel arrangements and scheduling.
  • Lead generation and customer service including cold calling
  • Marketing including content writing, direct marketing, website design, brand development, press releases, social media, blogging and search engine optimisation
  • IT Directors
  • Sales Directors
  • Legal Directors
  • Human Resources including recruitment and the management of employee benefits
  •  Accounting and financial duties including bookkeeping, invoicing, accounts payable and receivable, payroll processing and financial reporting. You can, for example, hire a part-time Finance Director who knows how to finance a business, deal with growth, present meaningful monthly numbers and get the best deals from banks.

It means you get a highly experienced senior FD with the experience and knowledge to help you plan, manage and control business growth. The FD Centre will provide you with an FD with ‘big business experience’ for a fraction of the cost of a full-time FD.

To discover how an FD Centre part-time FD or CFO will help your business, contact us now on 0808 164 8902. To book your free one-to-one call with one of our part-time FDs, just click here.

10 Ways To Resolve Your Cash Flow Problems

10 Ways To Resolve Your Cash Flow Problems

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

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

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

 

1. Cut Costs 

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

 

2. Carry out credit checks

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

 

3. Offer early payment discounts

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

 

4. Reduce your payment terms

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

 

5. Lease rather than buy

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

 

6. Raise your prices

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

 

7. Issue invoices promptly

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

American entrepreneur Nolan Bushnell says a sale is a gift to the customer until the money is in the bank.[1]

 

8. Use invoice financing

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

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

 

9. Get external funding

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

 

10. Hire a part-time Finance Director

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

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

 

Put an end to your cash flow problems now by calling the FD Centre today on 0800 169 1499. To book your free one-to-one call with one of our part-time FDs, just click here.

[1]Finance for the Non-Finance Manager’, Siciliano, Gene, McGraw-Hill Companies, Inc., 2003

GDPR Regulations and Compliance Tips UK

GDPR Regulations and Compliance Tips UK

Could your company afford to pay a 20 million Euro fine or to lose 4% of your annual global turnover?

It’s a question you should be asking because it’s the penalty that your company will face if you fail to gain your customers’ consent to process their data or deliberately breach their privacy under the EU’s General Data Protection Regulation (GDPR) which comes into effect within weeks. All companies in the EU regardless of size or sector and all those that deal with data from EU citizens wherever those companies are in the world must be compliant with GDPR by May 25 this year.

Less serious violations of the GDPR such as not having records in order or failing to notify supervisory authorities of a data breach within 72 hours of the incident, will incur fines of 2% of the offending company’s global turnover.

Even if your company could shrug off the impact of such fines, the news that it didn’t protect customers’ data could still cause irreparable damage to your reputation and affect your future business.

Then there’s the chance your company may have to compensate your customers. That’s because the purpose of the GDPR is to put individuals in control of their personal data and to empower them to choose how (and if) businesses use their data, so they will have increased rights to legal recourse and even claim compensation.

For these reasons, it’s critical to do everything possible to prepare for the GDPR and to ensure your company is fully compliant by May 25.

Worryingly, many companies are unprepared for the deadline. For example, security chiefs at FTSE 350 and Fortune 500 companies revealed that over half are not ready for the new regulations, according to a survey conducted by international law firm Paul Hastings.[1] Likewise, more than 90% of the UK’s small businesses won’t be compliant come May 25, according to a study carried out by the National Federation of Self Employed & Small Businesses (FSB).[2]

It seems GDPR unpreparedness is a worldwide condition, according to an article entitled ‘GDPR: the numbers don’t lie – the world isn’t ready’.[3] In a round-up of global markets, it revealed Computerwoche, a German IT publication, found only 2% of German companies are prepared; The Independent reported that Irish firms said meeting GDPR compliance would be ‘challenging’ or ‘extremely challenging’ and Le Monde Informatique reported less than 10% of French companies were GDPR-compliant.

Unfortunately, ignorance is no defence in law. If your company is not yet compliant and you know it can’t afford to pay the massive fines for data breaches and their fallout, it’s time to put your skates on—time is running out.

The Steps You Must Take

Analyse the data your company holds and determine where it is, whether you need it, and who in the company has access to it. Find out your core sources of data. You need to know how your company manages the risk of duplicating data, inaccuracies with data, and the failure to delete data that is outdated.

Look at the data you share with third parties—clients, suppliers, partners, and regulators. With GDPR, you must understand and manage the risk of transferring that data. More importantly, you are responsible for ensuring that data is protected by any third party.

Let your customers or clients know the lengths to which your company goes to ensure their personal data is protected. It could be the thing that sets your company apart from your competitors and the reason customers or clients choose you so is well worth doing.

Ensure that your company is not using clients’ personal data for anything more than what they agreed to. If they agreed to sign up for your newsletter, that’s not permission to sell their details to a third party, for example.

Let clients or customers know the ways you use their data. Explain why you need it and with whom you intend to share it. Be aware that your customers or clients may withdraw their consent whenever they like. Make sure you acknowledge their requests for removal from your data bank with an email.

Make every effort possible to protect the data you hold about your clients or customers from organisational and technical risks. You need to ensure everyone within your company is aware of the external forces that could disrupt your business and that you have a strategy to deal with it.

If your organisation deals with large amounts of client data, consider appointing a Data Protection Officer. This person will liaise with regulators, maintain the right level of privacy awareness within your organisation and monitor your company’s GDPR-compliance.

[1] Fortune and FTSE Companies Underestimate GDPR Compliance by May 2018, New Research Shows, Paul Hastings LLP [US], https://www.paulhastings.com, December 15, 2017

[2]Ninety per cent of small firms still not prepared for new data regulation, new research shows, National Federation of Self Employed & Small Businesses Limited, https://www.fsb.org.uk, February 26, 2018

[3]GDPR: the numbers don’t lie – the world isn’t ready’, https://gdpr.report, January 30, 2018

 

Stretch Goals for business elite success

Stretch Goals for business elite success

A funny thing happens on January 4th. It’s the day traditionally when people decide the mammoth New Year goals they set with such high hopes well and truly stuck.

They look in the mirror and see that despite FOUR DAYS of exercising and dieting they are still not marathon or beach-ready.

By January 5th, the new running shoes will have been pushed to the back of the wardrobe and the bathroom scales will have been shoved out of sight. A new bottle of Prosecco will have been put in the fridge alongside a monster bar of chocolate. And the New Year’s New You’ goals will be quietly shelved for another year.

In business, goals tend to be longer-term and even more audacious, designed to really stretch and motivate employees. So it usually takes months rather than days for the insanity of the ‘stretch goals’ to become apparent to everyone except the person who set them.

Stretch goals are an ineffective management practice, says renowned behavioural psychologist Aubrey Daniels in his book, ‘Oops! 13 Management Practices That Waste Time and Money. Stretch goals are met only 10% of the time, he says.

Failing to reach stretch goals can have a detrimental effect on employee morale, says Daniels. Performance declines when people repeatedly fail to reach stretch goals.

The consequences of setting and then missing stretch goals can be profound, agree to management professors Sim B. Sitkin, C. Chet Miller, and Kelly E. See, who have carried out extensive research on stretch goals.

“Our research suggests that through the use of stretch goals is quite common, successful use is not,” they write in the Harvard Business Review.[1] “Failures can foster employee fear and helplessness, kill motivation, and ultimately damage performance.”

They say only successful companies should tackle stretch goals. If a company has just surpassed an important benchmark in the industry or in its own recent history, for example, it’s well-positioned to tackle a stretch goal.

“Winning affects attitudes and behaviours positively. When confronting an extremely challenging task, the employees of recent winners are more likely to see an opportunity, systematically search for and process information, exhibit optimism, and demonstrate strategic flexibility.”

Companies that are experiencing weak results should steer clear of stretch goals, they say. “Their employees are more likely to see a stretch goal as a threat, grasp for externally sourced quick fixes, exhibit fear or defensiveness, and launch new initiatives in a chaotic and ultimately self-defeating fashion.

Daniels says despite his findings, it’s difficult to convince executives about the danger of using stretch goals.

“I get more push-back from executives about stretch goals being a waste of time and money than any other thing I’ve written. Executives believe stretch goals will motivate people to do more than they would have if they didn’t set goals. It’s not true.”

So, if stretch goals rarely work, what can you use in their place?

How to Set Productive Business Goals

Setting realistic goals that motivate employees to do more is more successful than stretch goals, says Daniels.

The key to setting such goals is to:

  • Keep it simple. Focus on one or two things at a time. “Trying to accomplish too many things at once prevents you from being able to do any one of them well,” says Daniels.
  • Define clear actionable behaviours. Decide what needs to be done to accomplish the goal. Break down the steps into concise actions that need to be taken.
  • Set many mini-goals. To boost the likelihood of success, break the big goals into smaller, more achievable ones. “Positive reinforcement accelerates performance and therefore, the more reinforcement opportunities available, the faster and greater the improvement.”
  • Forget stretch goals. If the goal is too high or too difficult to achieve, people will get discouraged and give up.
  • Celebrate! Every time that a milestone or goal is reached, reward and recognise your employees. “Recognising even incremental progress towards a goal provides more frequent opportunities for reinforcement,” says Daniels. “The more reinforcement, the greater the likelihood the desired behaviour will be repeated, and the more likely achievement of long-term goals will be made.

“Making accomplishments visible and sharing them publicly—when appropriate–creates more reinforcement from peers, groups, and management teams who recognise and acknowledge your success.”

Set SMART goalssmart goals infographic

Make sure the goals are small, measurable, achievable, relevant, and timely.

How to set goals for your business

Before embarking on any goal-setting activity for your business, you need to know the current state of your business. Fortunately, the FD Centre offers free financial health checks. You can find out more here or call us at 0800 169499.

[1] ‘The Stretch Goal Paradox’, Sitkin, Sim B., Miller, C. Chet, See, Kelly E, Harvard Business Review, January-February 2017, www.hbr.org