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Tag: Finance

Is This Essential Element Missing From Your Business Plan?

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Is This Essential Element Missing From Your Business Plan?

In building your business, do you ever:

  • Feel out of control – you’re getting by, dealing with one crisis after another, but just barely hanging on?
  • Find that your longstanding products and services just aren’t selling like they used to, but you can’t find time to develop new offerings?
  • Think about retiring after selling out to a group of your employees, but you know that they (and you) are nowhere near to making that possible? (see our post on exiting your business for more on that)

A big step towards resolving these issues, and many others, is to have a business plan – an effective business plan.

Many businesses get by without one. “It’s in my head,” you might say. Or, it could be a document you put together years ago, maybe because your bank required it to extend financing, and you haven’t looked at it since.

According to a survey by business and finance software provider Exact, companies that have a business plan in place were more than twice as successful at achieving their goals than those that did not (a 69% success rate versus 31%).

What’s wrong with many business plans?

If having a business plan is so important, how can your company get the best possible benefit out of the work that goes into preparing one?

Our work here at the CFO Centre has found that while having a business plan helps, there are some important elements to success (many of these are presented in more detail in the e-book).

One is that the plan must be a living document – it needs to be something that you review frequently, updating it as circumstances change, and using it to provide guidance on what your daily, monthly and yearly priorities should be.

Another aspect of success, believe it or not, involves packaging. You may be aware that a business plan that is used as a finance-obtaining tool will succeed more if it features attractive layout and design. But having a document that’s pleasant to look at – not just text on a page – will work better even if it’s just used internally. That’s because the people who read it, including you, will have a greater sense of confidence that the ideas in it can be made to happen.

How a timeline helps make it all happen

But the one important aspect, that many business plans miss, is the element of time. Without a clear picture of what is to happen by what time, a business plan is just a wish-list.

The best way to help make sure that the business plan stays alive – and more importantly so that what’s in it comes to pass – is through including a timeline.

A timeline (or timetable, if you prefer) sets out the milestones of your business plan – the number of employees, number of locations, sales targets, net revenue expected and other targets – and indicates what date they are expected to be reached.

For example, let’s say you have a winning retail concept that you want to turn into a franchise. Maybe even a national franchise.

To do that, you need to determine what processes need to be implemented in order to manage a store like yours effectively. That, in turn, leads to a set of written procedures –  such as the steps to be taken upon opening the store or on closing, how to make each of the products that are sold, and other aspects of success. Maybe then you need to establish a time by which you expect to have that first satellite operation running, maybe as a corporate-owned location, just to see what happens when you’re not on site to trouble-shoot all the time.

It could be that this sounds so complicated and intimidating that you never actually get your franchising idea off the ground.

Here’s how a timeline helps make your business plan happen:

  • It breaks down big, scary projects into smaller, bite-sized chunks you can actually do
  • It reassures you by pointing out that you don’t need to do everything right now
  • It moves you along because you see a deadline for one of those “chunks” coming up, so you can get working on it

Start with the end in mind, then work backward

This involves a  5  step process.

  1. Get a firm image of your goal. Established business wisdom says to consider first where you want to be (say, 20 franchise outlets across the country, ten years from now) and then spell out in detail what that will look like. Going into detail gives you a more clear idea of what needs to be in place for that to happen. Set a date for that to happen.

 

  1. Determine the big milestones along the way. This might include writing out the elements of success in your current business, creating written procedures, testing those procedures to see if they cover all reasonable contingencies, opening a second outlet to further test those procedures, selling your first franchise to someone you know already, and onwards.

 

  1. Think of the resources you’ll need. For example, at some point, you’ll need to engage a franchise lawyer to consult and help in the preparation of a franchise agreement. Think of the finance you’ll need to have in place, maybe from a bank or friend-or-family source, to make the rest happen (to learn more about how to avoid cash-flow problems that might drag you down, see our post here).

 

  1. Write out your timeline. It might be on paper, on a computerized document, on a calendar program that will remind you about deadlines, or whatever works for you. Maybe multiple formats will be a good way to keep you on track.

 

  1. Implement. The rest is up to you and your team. Delegate tasks, outsource, do it yourself – but be sure to stay with your timeline.

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5 key factors to help you sell your business

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5 key factors to help you sell your business

Any business owner will eventually be faced with the need to sell their business.

It could happen when a medical change or injury makes it impossible to continue, and you need to sell to secure your family’s future. Or maybe an offer comes along that’s just too good to refuse.

Regardless of the reason, it’s always a good idea to take steps to make your business ready for sale at any time. And as Chapter Seven of the CFO Centre’s book “Scale Up” points out, many of those steps will help make your business life easier, less complicated and with fewer unpleasant surprises, right now and ongoing.

To get the best possible offer for your business when the time comes – and make your life easier now as well, here are five key points on help you sell your business:

  1. Ownership

A potential purchaser will want clarity around the question of who currently owns the business. If you’re the sole decision-maker in the company, it may be best to have all the shares in your name.

But if you want to reward long-time employees, and support their continued loyalty, you may want to grant or sell some shares to them. If that’s the case, a potential buyer will want to see that there is an effective shareholder’s agreement in place. This reduces uncertainty for the buyer.

  1. Real property

If your business owns real estate, you need to understand that a buyer may view this as a problem – particularly if owning the land is not essential to the success of the business. Consider separating the property from the business, so that a potential owner has the option of avoiding a commitment to an asset that they may not want. One way to deal with this is to put the land into a holding company controlled by you, and then set up a lease agreement for the business to use the property.

  1. Intellectual property

Over the years your company has likely developed trademarks, patents, brands, and industrial processes that are important to the success of the business. You may not think of them as something that has value, however, anyone considering buying the company will want to be sure about the ownership of this intellectual property and its value. So, it may be good to have your company’s IP valued professionally – you may be able to increase the purchase price based on that valuation.

  1. Customer contracts

Many potential buyers will base their purchase decision on the expected ongoing cashflow of the business. So, they’ll want to know about how much of that cashflow comes through dependable contracts. But they’ll also need to know if those contracts will transfer to the new owner – and if a high proportion of the company’s income is due to the customer’s personal loyalty to the owner. Accordingly, it’s good to carry out an analysis of the company’s major customer contracts to see if the future business is sound. Because cashflow is so important in putting a value on a business, consider some of the points raised in our blog post “How your business can fly away from cash problems.”

  1. Financial records

Many owner-operated businesses are operated in a fairly ad-hoc way. If an idea sounds good, the owner relies on their intuition and experience to decide on the next steps.

Potential buyers need to know that there is a plan in place – including a budget each year that they can see closely matches what was actually spent. They need to know that there are not a lot of unnecessary expenses, such as a local softball team sponsorship that is due largely to the owner’s personal interest, rather than its marketing value.

This is one of the areas where an experienced financial professional from the CFO Centre can help. This person can work with you well ahead of time to build a business that is financially successful and therefore attractive to a potential buyer. You’ll also get help with finding out what potential problem areas might cause a potential buyer to lower their offer or just walk away, so you gain the most benefit from the hard work of building your company.

The difference between a CFO and a Controller

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The difference between a CFO and a Controller

If you’ve ever looked through a storage box holding clothes you wore as a child, you may have wondered, “How did I ever fit into something that small?”

Your company may be in the same situation. The equipment, personnel, and premises that fitted well when the company was starting out, may be constraining its growth as it matures.

One of the most pressing areas for change may not be your production system, office space or loading dock. If you find that cash shortages are constraining your business, if you don’t know if you can afford to expand your product offering, or you have no real idea which of your products are the most profitable, you may have outgrown your finance function.

Child-sized clothing might have fitted you well when you were small, and it could be that the financial system you had when your company was young, did what you needed it to do.  Most companies start out with the founder keeping track of everything, maybe with the help of a bookkeeper or accountant, later growing into a department with a controller at the head.

But there is a world of difference between the “controller” mindset and the benefits available through someone who is able to help you take your company to a higher level – a Chief Financial Officer, or CFO.

Having access to those skills is important. A CFO brings enormous practical financial and strategic skills and knowledge to your company.

A report by the International Federation of Accountants[1]  quotes James Riley, Group Finance Director and Executive Director, Jardine Matheson Holdings Ltd.:

A good CFO should be at the elbow of the CEO, ready to support and challenge them 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.

In this post, you’ll learn about the difference between a controller and a CFO, and why it may be time you made the change – and how you can do that without putting an undue cost burden on your company.

The controller mindset: accuracy, compliance, tactics

All companies need someone with a controller mindset, even if they don’t have that specific title on their business card. The controller watches the details, so you don’t have to. The controller focuses on making sure that financial records are accurate, prepares monthly financial reports, ensures payroll is made on time, invoices are issued and collected and ensures compliance with regulations.

Essentially, the controller manages the company’s books and records and is responsible for the transaction processing in a company and reporting on those transactions.  With the focus on recording and reporting on past events, the controller’s role is mainly backward-looking.

And just to repeat – you need someone who makes sure all of these issues are covered.

But your company, even if it’s small, also needs someone able to watch the big picture. And as it grows, that need becomes more acute.

By comparison, the role of the CFO is to provide forward-looking financial management.  It’s a proactive role since it is concerned with the company’s future financial success.

What are the signs that you may need more than what a controller mindset can provide? Maybe — if you need to understand the risks your company is facing, or you need to know which of several possible ways forward is best to improve performance or help you grow profitability, or it could be that you need to someone to help align the organization by establishing performance metrics and mindset throughout the organization, or perhaps you need to know how to finance your growth.

In short, you don’t just need someone to provide a utility function – you need a combination of coach/advisor regarding the resources you need to make your intended future happen.

The CFO mindset: big-picture, advisor, strategy

The role and responsibilities of a CFO have expanded in the past two decades, according to the International Federation of Accountants.  That expansion it says has been driven by complexity as a result of globalized capital and markets, regulatory and business drivers, a growth in information and communications, and changing expectations of the CFO’s role. Whereas the CFO was once seen as a company’s ‘gatekeeper’, he or she is now expected to participate in driving an organization towards its goals.

The CFO still has the responsibilities for overseeing the Controllers role in record keeping to safeguard the company’s assets and reporting on financial performance

By contrast with a controller, the CFO  expands that role to focus on improving the operating performance of a company, analyzing the numbers and presenting solutions on how to make those numbers better. This can include higher sales, lower costs or greater margins.

A CFO will focus on strategy, helping to shape the company’s overall strategy and direction, as well as a catalyst, instilling a financial approach and mindset throughout the organization to help other parts of the business perform better[2].

The controller looks to the short term, the CFO is long-term. The controller helps make sure your company is compliant with issues such as environmental reporting and taxes; the CFO helps you design and implement a strategy. The controller seeks to maintain what you have; the CFO helps you expand.

If your company is in a growth phase – or you want it to be in a growth phase, the controller has your back – and the CFO helps you move forward. It means together you can achieve better results, faster.

Feel free to reach out to us here at the CFO Centre. We’ll sit down and have a talk, even if it’s phone or video call, to get an idea of where you want to take your company, and what your options might be to support the growth you want.

Many of the issues in this post are covered in the CFO Centre’s e-book “Financial Reporting,” which goes into detail about the insights that you can gain from a CFO’s strategic view of your company’s financials.

[1] THE ROLE AND EXPECTATIONS OF A FD: A Global Debate on Preparing Accountants for Finance Leadership, the International Federation of Accountants (IFAC), October 2013, www.ifac.org

[2] ‘Four Faces of the FD’, Perspectives, Deloitte, http://www2.deloitte.com

Do These 6 Things Before You Plan For The Year Ahead

by charlottenoble
Do These 6 Things Before You Plan For The Year Ahead

Now is the perfect time to reflect on the year just gone and plan for the year ahead.  The last two years have thrown many of us challenges and/or opportunities never seen before.  So how can your business go further or do better in 2022?

Below is a checklist for businesses to help you when planning for the future:

  1. Know Where you Stand

Does your financial reporting provide you with an accurate and timely view of the financial performance of your business? These could contain:

  • Historic balance sheet, profit and loss and cash-flow together with a set of key performance indicators (KPIs) that the management team use to run the business on a day to day basis.
  • Rolling forecast balance sheet, profit and loss and cash-flow driven by the same KPIs. Even a static annual budget is better than no target at all.

  1. Analyse

Have you analysed all of your products or service offerings and identified those that should be invested in and those which should be scaled back to improve the performance of the business?

  1. Review Costs

Have you reviewed all of your costs and identified all of those costs where alternative suppliers can be identified and current deals can be renegotiated? This helps to minimise your cost base and refine your negotiation skills.  Are there possible savings from systems and/or process streamlining?

  1. Review Customers

Have you reviewed all your customers and identified the good ones form the bad ones i.e. those that take ages to pay and/or beat you down on price etc.? It may be time to let the bad ones go and focus on the ones you want.

  1. Assess Risk

Have you assessed all of the obvious risks in your business and made sure that you have a contingency plan in place to avoid those with the highest likelihood and most significant impact?

  1. Your Personal Goals

Take the time to really reflect on why you started the business, are those goals still the same today and are you getting closer to achieving them?

Plan:

Once you have considered the above, you are ready to start planning.  A clear operational plan for the future of the business, which shows you the steps required to implement that plan is the best road to success.  If you do not have this it will be impossible to identify opportunities that arise next year that fit your plan for the business.

Most of our clients have been through this process with our guidance and as a result many are now looking to exploit the opportunities, to expand their markets and recruit key staff to help drive their businesses forward in 2022.

To get your business in the best shape for 2022, contact the CFO Centre on 1- 800 – 918 – 1906.

The CFO Centre is dedicated to helping businesses meet their strategic objectives. Find out how it works by watching this short video on our website –  https://www.cfocentre.com/en-ca/how-it-works/

 

What Is The Most Important Number In The Universe?

by charlottenoble
What Is The Most Important Number In The Universe?

Numbers matter.

Our mathematical universe is constructed of numbers.

Some we can see. Most we can’t.

From the speed of light to the parabolic curve of a free-kick in soccer, maths underpins the laws of the universe.

We can also deconstruct our entire lives in numbers.

The average human lives for around 80 years – or 28,385 days.

Most of us will spend 33 years in bed. That’s 12,045 days. For those who hit snooze when the alarm goes off in the morning, it might be closer to 34 years…

You’ll likely spend around 13 years and 2 months (4,821 days) at work. Hopefully, doing something you love.

And 11 years and 4 months (4,731 days) staring at a screen.

That doesn’t leave a huge amount of time for the things that really matter in life…

Spending quality time with family is remarkably, although perhaps unsurprisingly, a very small part of our modern day lives. We’re down to just 38 minutes a week or 104 days in our life time.

That one makes you think.

When it comes to socialising, there’s a little improvement – we’re up to 1 year and 3 days. Again, it’s not a lot, is it?

In business, it seems like we focus constantly on the numbers…
…Leads, opportunities, wins.

Year on year growth.

Cash flow, profit, valuation.

But how often do we put these numbers into context?

How often do we ask ourselves ‘what is the number that really matters to me?’

When we ask entrepreneurs this question, they often find it hard to answer.

It’s an unusual question and causes an interruption in our conditioned daily thought pattern.

One entrepreneur said the number that really mattered to them was ‘6’ as it represented the number of weeks they spent each year skiing, because they had designed their business to support their lifestyle.

Another said ‘13’ to denote the $13m asking price for their business which meant they could retire early and never worry about money again.
The numbers that appear on your P&L and balance sheet matter, but when was the last time you stopped and asked yourself ‘what is the number that really matters to me?’

It’s a powerful question and invariably creates an energetic shift which can fuel a new trajectory for your business and indeed your life.

If you’re struggling to answer that question, we’d love to help: www.cfocentre.com 

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Don’t Call it Your Dream, Call it Your Plan

by bethfarnham
Don’t Call it Your Dream, Call it Your Plan

Life through a lens

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

Because quite often, the day-to-day distractions and diversions that inevitably surround the running of a successful business – particularly when there’s a global pandemic pulling the rug from under everyone’s feet – get in the way of sensible, objective evaluation and strategic decision-making. Crucially, that can mean that really important opportunities to grow and develop go at best un-exploited and at worst, un-noticed.

This is where the role of Chief Financial Officer becomes so vital. And where the specific advantages of joining forces with a part time (and often virtual) CFO are brought sharply into focus.

Allow yourself to dream…

What does your CFO do for you as the owner of an SME? Hopefully, they’ll make sure that everyone gets paid the right amount at the right time; sort out your internal reporting, compliance and tax planning, and probably run your relationship with your bank.

While that (along with a few other bits and pieces) is probably enough to keep a business ticking over, it’s not a reasonable platform on which to base a sound growth strategy.

Of course, things look even worse if you don’t have a CFO on your team. Whatever your business and whatever your own specific talent, it’s almost certain that you didn’t get into business to spend your life doing cashflow projections or dealing with taxes! No dreaming for you – you’re more likely to be waking up at 3 am in cold sweats.

A CFO Centre CFO can help make your dreams come true

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

The CFO Centre team provides CFO expertise of a very high caliber – the top 1% of talent in the marketplace. These are people who know their stuff – the operational finance stuff, which keeps the wheels in motion and the strategic finance stuff, which brings the dream to life.

In many cases they’re able to draw on their own business success to guide others.

A CFO Centre CFO will help decode the dream and turn it into a plan and be the one to hold you to account to make it happen. He or she will bring forward the target by showing you how to come at it from a different angle. Great CFOs are catalysts and can help you break the pattern of linear growth and get you what you really want on an expedited timetable. And that’s essential if the dream is still to come true.

The CFO Centre ‘Entrepreneur Journey’: our ‘secret sauce’

All CFO Centre CFOs operate within an environment that provides comprehensive support and expertise. The CFO Centre has a global network – a Collective Intelligence Engine – of more than 700 individuals, each of whom has achieved success as a CFO and often as an MD or CEO, themselves. What’s more, they are uniquely able to access and deploy the limitless potential locked up in your business model. And they talk to each other, share expertise, experiences, and contacts.

In brief, a CFO Centre CFO will guide the entrepreneur on a three-stage journey to achieve clarity about what it is they really want from their business. To take them from where they are now, to where they want to be.

And to be clear: ‘where they want to be’ is an individual choice for the business owner. It might involve scaling up significantly; it could mean launching new products in new markets around the world; perhaps it means ratcheting up your multiple as you prepare for exit. Whatever form it takes, it’s invariably about making that dream a reality by refashioning the plan and making sure it actually happens.

Stage One on the journey covers the process of achieving operational excellence. In other words enabling an organisation to do what it does best, to the best extent possible.

Stage Two, strategic opportunity, involves preparing the springboard. This is where the strategy to achieve those dreams is forged. Perhaps it’s a question of entering new markets; evaluating risk, raising new funds. Whatever the strategy, it’s based on sound experience and, yes, that ‘secret sauce’ that blends the logic with a little magic and know how.

Stage Three, game-changing performance is, simply, what happens when stages one and two are complete.

The dream is achieved by developing a concise roadmap based on what the business owner wants to achieve. The role of the CFO Centre CFO  is to identify and unlock that potential – thus freeing the dream and making it a reality.

Fly like a bird

Of course, this is not to suggest that success comes easily. Business challenges are usually complicated and risky. That’s another reason why potential isn’t always realised; why many business owners end up working late nights on mundane tasks.

So, one of the first conversations a CFO Centre CFO will have with a client is to understand what it is that motivates them to be in business, and what they want to achieve from it. What really matters to them. There are numbers, many numbers, in the life of a CFO, but it’s identifying and understanding the numbers that really matter in the client’s life that is crucial.

A CFO Centre CFO aims to unlock that potential and give wings to the dream.

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How a part-time CFO can help you to resolve your cash flow problems

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How a part-time CFO can help you to resolve your cash flow problems

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. This means you will have:

  • One of Canada’s leading CFOs, working with you on a part-time basis
  • A local support team of the highest calibre CFOs
  • A national and international collaborative team of the top CFOs sharing best practice (the power of hundreds)
  • Access to our national and international network of clients and partners

With all that 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.

In particular, your part-time CFO will assess your company’s cash flow position and take the following steps:

Identify all the immediate threats to your business

A part-time CFO will look for all those things that could plunge your company into serious financial trouble if they’re not addressed immediately.

These could be factors such as the payment of wages or salaries, the payment of taxes or the payment on a due date for vital goods, etc.

Address those imminent threats

Your CFO will look for ways you can meet your most pressing financial requirements and buy the company more time. This might involve:

  • Chasing late-paying customers. To encourage those customers to pay, consider offering a discount for immediate payment or asking them to pay immediately by credit card.
  • With invoice discounting and factoring, you’ll receive up to 85% of the value of the outstanding invoice, sometimes within 24 hours. You’ll receive the remaining 15% minus a fee once your customer has paid the outstanding invoice.  An invoice discounting service can be confidential so that your customer will be unaware of the financier’s involvement. Factoring companies, however, undertake a full collection service (including sending out statements, making reminder calls and collecting payment), so your customers will be aware that you’re using their services.
  • Arranging short-term loans or operating line of credit with your bank.
  • Considering other funding sources besides banks and other lending institutions such as self-finance, or loans from family and friends, partners, investors and alternative finance like peer–to–peer lending.
  • Asking for better terms from creditors. You may find they’re open to extending your repayment schedule.
  • Identifying and addressing the underlying problem.
  • Assess the business to identify the cause of the cash flow problems. Address those issues to avoid a similar situation occurring again.

Prevent cash flow problems from recurring

As well as identifying and resolving the imminent threats to your business, your CFO will review all inflows and outflows of cash to determine where improvements and savings can be made. This is likely to involve:

  • Working out your break-even sales figure (the number of sales required to cover total expenses without making a net profit).
  • This will mean reviewing your sales figures for the past six months to check that you exceeded that breakeven point. It’s then possible to calculate how much you’re likely to make in sales for the next two months. If you’re unlikely to break even, you’ll need to plan how to increase sales and reduce costs.
  • Looking for ways to increase your profit margins such as raising prices. You can do this without losing valuable customers by offering packages or bundles of goods or services.
  • Reducing your salary or personal draws from the business until your revenue improves.
  • Cutting costs. The beauty of cost-cutting is that it can be done in hours or days, unlike revenue-boosting measures which take longer to implement and to take effect. Such cost-cutting measures might include doing any of the following:
    • Stopping work on non-critical capital projects.
    • Reviewing your inventory and selling off obsolete, damaged, or discontinued products.
    • Eliminating slow-moving products or less popular services from your line since selling unprofitable goods or services is likely to send you out of business faster.
    • Negotiating price discounts for volume purchases from your suppliers.
    • Consider downsizing. Bigger is not better if your company is always struggling to stay afloat. If your profit margins are consistently small, reassess your business goals. Rather than expansion, focus instead on profit.
    • Ditching products or services with the lowest profit margins. This change of focus may mean you can also reduce the size of your borrowings, staff, advertising, and marketing campaigns, premises, etc.
    • Reducing labor costs (without triggering a drop in productivity). Any cost-cutting measure that triggers a drop in staff morale will have negative consequences for productivity. Your CFO may advise you to defer salary increases and bonuses or to cut salaries from the top-down. You might also consider introducing a temporary freeze on overtime. Other measures might include lowering the number of employees through attrition or redundancies.
  • Speeding up the sales process. Your CFO will encourage you to accelerate the speed with which your customers’ purchase orders are converted into cash. In particular, you’ll be asked to consider what steps in the sales process can be combined or eliminated. For example, asking for payment at the time of the order, accepting credit card payments, or offering automatic account debiting.
  • Lowering miscellaneous expenses. You’ll be encouraged to find ways to make small savings on things like insurance policies, office rent, bank service charges, utilities, etc. Lots of small savings across the board can have a significant impact.
  • Refinancing your debt obligations. Your CFO might suggest approaching your lenders to see if you can lower your monthly payments on your term debt obligations by taking the remaining principal amount and spreading it out over a longer period.
  • Analyzing if you can outsource jobs or services. You’ll be asked to look at your operations to determine if any of your activities, services, or functions could be provided at less cost by an outside company or contractor.
  • Holding a sale of surplus or slow-moving inventory.
  • Approaching suppliers to negotiate better deals.
  • Asking your suppliers to take back excess inventory.
  • Selling off your underused assets and renting the equipment instead.¹

With all that 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.

Improving credit control.

Your CFO will help you to get tighter controls over your credit. That will mean:

  • Getting written agreement to your credit terms before taking on new clients.
  • Many businesses are not clear about credit terms with their clients and often simply set out conditions on the face of the invoice, but that’s too late in the process. Instead, you should always ensure that an authorized representative of your customer has agreed to your credit terms in writing before you agree to supply products or services.
  • Carrying out credit checks on all new customers, no matter how large or influential they may appear.
  • Invoicing at the time of a sale or close to it. Instead of waiting for the month’s end to issue invoices do it daily or weekly.
  • Making sure your sales invoices are accurate. Unfortunately, some customers will use any excuse for not paying invoices on time and any inaccuracies (such as an incorrect address or date or no purchase order number) could be enough for them to justify delaying payment.
  • Treating the collection of monies owed as a high priority. If you haven’t already done so, set up a computerized system to provide notification of late payments.
  • Setting up an invoice dispute resolution process. It’s important that your company records any documentation related to invoice-related disputes. You should also keep a record of those customers who challenge their invoices or raise questions so it’s possible to see if any do this regularly as a way of avoiding settling their accounts.²

Investigate the use of regular cash flow forecasts

Your CFO will encourage you to use regular cash flow forecasts so you know how much cash is going to be needed in the coming months. It means you’ll know in advance if you’re likely to face a cash shortfall and can make arrangements for extra borrowing, or take other appropriate action.

It will also make it easier for you and your senior team to make decisions such as whether or not to:

  • Hire more staff
  • Change your prices
  • Move premises
  • Tender for a large contract
  • Find new suppliers.

You’ll be able to see at a glance the impact such decisions might have on your cash flow.

Cash flow forecasts can also highlight potential problems so that you have time to take action to avoid them.

Conclusion

Your cash flow keeps your business alive. Having control of your company’s cash flow which allows you to operate within your means, and move away from a ‘feast and famine’ situation is usually a huge relief to everyone within the business.

It means that decisions can be made and checked against the cash flow forecast to determine whether they are viable. This increased visibility can be introduced quickly and can have a hugely positive impact on the whole business.

It also means that reserves can be built up gradually to give the business a cushion and alleviate the stress of not knowing what lies around the next corner.

Having the right cash flow management processes in place and being able to spot peaks and troughs in trading to improve cash flow is one of the most critical components of any finance function.

Put an end to your cash flow problems now by calling The CFO Centre today.

tel: 1-800-918-1906
email: [email protected]
www.thecfocentre.ca

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1 ‘How to manage a cash crisis’, NAB (National Australia Bank) Ltd., 2011

2 ‘Top Tips for Enhancing Your Invoicing Process – and Avoiding Problems with Your Business Cashflow’, Finlay, Mitch, Talk Business magazine, www.talkbusiness.co.uk, Jan 2015

Is your business idea disruptive enough?

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Is your business idea disruptive enough?

Maybe you see ride-hailing services like Uber and Lyft as arrogant bullies. Or, to you, they’re a breath of fresh air in a world held victim by over-regulated dinosaurs.

But whatever your view, you can’t deny that ride-hailing upended an entire industry. Some taxi companies have tried to compete with the upstarts through rideshare-like mobile apps allowing customers to choose vehicle options, pre-book rides, and pay by smartphone.

Why have ride-sharing services succeeded against well-entrenched opposition? They’re a new idea – but more importantly, they offer real benefits over the traditional taxicab. In short, they’re disruptive.

As we’ll see later, just being disruptive isn’t enough on its own, but it’s an essential part of success.

Disrupt your way to a better customer experience

To see how being “disruptive” works, consider one of the world’s oldest skills – what some parts of the world call “joinery” and others “cabinetry.” It’s about making furniture, cabinets for kitchens and bathrooms, and other fine woodwork. It’s a slow, meticulous process in which skilled people use tools that have changed little in centuries.

That is until someone crashed into this tradition-bound environment with a radical new approach to the business. As entrepreneur Alex Craster recounts in The CFO Centre’s book “Scale Up”, he’d already helped disrupt one industry – travel agencies, with the then-new idea of people booking their own travel online.

Craster talks of how he’d been pulled into managing his father’s failing joinery business. But he came to see opportunities for the firm to provide better services and meet new needs. He started using suppliers in Eastern Europe who were able to do highly skilled work at a fraction of the cost of UK suppliers. He also switched the focus of the firm, from making products into providing solutions to customer problems.

The result has been spectacular growth and even an invitation to supply services to Buckingham Palace.

Why is disruption like this such an important part of business success today? It has to do with two concepts – something that’s new, and something that’s better.

Grab the attention of people you want to attract

Let’s start with “new.”

One well-made kitchen cabinet is pretty much like any other well-made kitchen cabinet. In some ways, cabinetry is a commodity – it’s hard for a customer to tell one company’s offering from another’s. So it becomes a race to the bottom regarding prices.

To catch the attention of potential customers, Alex Craster’s company had to offer something that was new to the market – providing a service in which company representatives sat down with potential customers to get an idea of their problems. That might involve a hotel that wanted to attract a higher level of clientele. This approach made the company newsworthy, so it gained more word-of-mouth publicity.

The company’s approach made it more attractive to the traditional media. But it also had the potential to attract what is becoming a more important kind of attention, from social media including bloggers and Instagrammers.

This meant that just having a new approach put the company’s name in front of potential customers.

Holding the attention of prospective customers

Once you have the attention of the people you want to attract, how do you hold them? By offering something they will value – something that’s not just new, but demonstrably better than what they have now.

Alex Craster’s approach, which included a consultation and understanding customers’ business objectives, was a big step towards helping a hotel meet its goals. Those may have included being able to charge a higher room rate and improving the hotel’s all-important RevPAR (Revenue Per Available Room) metric.

So too, you need to be sure that your business idea offers real benefit to the people you want to serve.

Start by understanding their situation – some of the most pressing problems they are facing. That matters, because unless you can present them with a solution to one of their most pressing problems, or a step towards a solution, they’re not going to pay attention.

Then, instead of choosing a service or product to offer, you choose a problem to work on – such as increasing a hotel’s RevPAR.

Your approach must then revolve around solving that problem, with your product or service being part of that solution. If you’re offering something that is distinctly better than the solutions your prospective customers have on hand, you’ll have a much greater chance of success.

Planning is essential

All of this – finding something new and better – doesn’t just happen. You need to think it through. It takes time to match the assets you have – your skills, the skills of the people you work with, experience, and other factors – to the needs of potential customers.

A big part of that is the financial resources you have access to. With a good understanding of your financial picture, you can understand your financial strengths and limitations, so you know how much you can spend and still pay your rent and your staff.

Many growing companies find that the best way to make sure they have the financial resources they need is through a skilled finance professional – a Chief Financial Officer – who can help them understand their financial picture, and if necessary, get access to other financing that can help to seize on the opportunities to grow in a “disruptive” way.

For many companies, their best option is to have an experienced CFO available to them, on a long-term basis, but without the need to pay the compensation that a full-time professional would expect.  By utilizing a part-time CFO, they have the skill set they need available to them, but in a much more cost-effective manner.

To make sure you’re being disruptive within your market, planning is key. Failing to plan is like planning to fail. To learn more about how you can take your business to the next level, please download our e-book, “Business planning & strategy implementation,” which will walk you through the steps involved in business planning.