Our CEO for Eastern Australia, David King, gives a quick summary on the vital roles that CFOs play within a business.
To future proof your business, click here: https://www.cfocentre.com.au/future-proof-your-business/
Our CEO for Eastern Australia, David King, gives a quick summary on the vital roles that CFOs play within a business.
To future proof your business, click here: https://www.cfocentre.com.au/future-proof-your-business/
SME’s planning to survive
As you emerge from the ‘government life support’ phase and look to plan your future in an uncertain world, preparation is essential.
As we attempt to return to business as usual during what some commentators are forecasting to be the worst economic collapse since federation, businesses will need a clear strategy to help them emerge into what will, for many, be a very different landscape.
It is Australia’s SME’s – those with a turnover between $2m-$50m – that will be crucial in driving that economic renaissance and helping Australia move forward with renewed focus and resilience. SME’s are a key section of our economy, often overlooked in the wider economy and don’t get represented in the way the bigger players do. According to the Australian Government, 44% of employees in Australia work in small businesses and they are critical to the success of those businesses.
Despite the various levels of government support available such as JobKeeper, Cash Flow Boost, deferred payroll tax and the guaranteed loan facilities, irrespective of how quickly the COVID-19 situation improves, plenty of financial damage has already been inflicted on SMEs.
It’s not just your balance sheets and cash, but to the stakeholders with whom you must interact to make a profit: your employees, customers, supply chains and competitors.
Help, in the form of expert financial assistance, over and above financial support, will be key.
Such help can be split into three core stages; react, plan, and rebound.
Typically, SMEs are not strong at strategic planning, but this is something you cannot ignore. You will find that the world will have changed considerably, and your business needs to adjust accordingly. We are now almost at the end of the initial reaction phase, which has revolved around preserving cash and using the various government schemes to the maximum to secure as much of your business as possible, but it has also been about negotiating with creditors for as much relief as can be obtained and using the ATO as a lender of last resort.
Seeking professional advice at this stage is critical, particularly regarding short-term cash management, making the best use of government schemes and negotiating working capital facilities if required.
The current coronavirus crisis is often dubbed as “unprecedented” with little or no data to predict future outcomes. Whilst the economy as a whole has entered into a recession, there are likely to be certain sectors who suffer the most, such as hospitality and tourism. Whilst some sectors will actually thrive, Economists are envisaging a lengthy recession and persistent high levels of unemployment and a lot of businesses not surviving.
To help guard against the worst of such outcomes, SMEs should prepare to move into the restructure phase, which is why it is so critical to involves scenario planning in your recovery plan.
Traditionally employed by large corporates, the disciplines and benefits of scenario planning are equally applicable (and beneficial) to small businesses. Simply by imagining different futures and outline planning for those outcomes – good, bad and somewhere in between – will help create tangible action plans for each possibility, which can then be rolled out when it becomes clearer just what that future pathway is shaping up to be.
We believe that SME’s need to ask themselves a few key questions. Amongst them should be:
A new segmentation of markets will be critical – seeing customers not categorised by industry, geography or what they buy, but by whether they emerge as strugglers, survivors, or “escapers”
But it will also be vital to ask:
Rebound: Critical success factors
Well prepared, SMEs will be able to recover faster, particularly when a clearer economic picture emerges towards the end of 2020 and into 2021.
In the meantime, small businesses should identify from their chosen strategy the set of critical success factors (CSFs) that will impact their ability to recover and prosper, before translating them into a core set of dynamic KPIs that tell it how well the business is doing in achieving them. And keep all of your employees updated with your decisions, and the progress being made to maintain their engagement.
By getting to grips with KPIs such as forward cash, customer retention, working capital management and supply chain resilience, there is nothing to stop a well-prepared SME from not just surviving the current economic and societal afflictions, but thriving.
If, after reading this you’re feeling uncertain about the business plans you have in place, and would like to get a better grip on what the future might look like, The CFO Centre are offering complimentary 90 minute Planning Sessions with a high calibre CFO. In this session they will help you to build a bullet proof plan to come out of 2020 leaner, sharper and stronger than before.
The CFO Centre have helped over 500 businesses through the pandemic, with 91% of clients rating our service as “exceptional”.
Please click here for more info, or to book your Planning Session: https://www.cfocentre.com.au/future-proof-your-business/
Written by Nick Crawford and John Paterson
Businesses in the Professional Services sector (along with many others) have had it tough this year. With the road to recovery in sight and a new financial year, now is the time to make sure your business is in the right shape to navigate through the rest of 2020 and beyond.
Nick Crawford, one of our CFOs in Sydney, partnered up with James Freeman at Capital Architects, Alistair Marshall from Professional Services Business Development and David Smith, Founder of Smithink to discuss ways in which businesses can create a sturdy plan for the rest of 2020.
The impact of COVID 19 coupled with the imminent new financial year is inevitably resulting in a lot of people reviewing their businesses and wondering where to next? Like many, the recruitment sector has been hard hit, but in these times of uncertainty businesses need to be thinking about their business strategically. They need to be planning and being prepared for the recovery. How do you capitalise, pivot and survive to then revive and then THRIVE post COVID 19?
Deborah Power (one of our CFOs in Sydney) has been operating at senior leadership levels in recruitment agencies for many years including the Manpower Group and with smaller agencies as an advisor for the past 10 years. Deb had a chat with our good friends over at APositive, and here’s what Deb has to say about how she is helping recruitment businesses with the rapidly evolving market, the government stimulus packages, obtaining finance and preparing recruitment businesses to thrive in the new financial year.
We are working with businesses in survival mode to understand and obtain the government stimulus packages like Jobkeeper, cash flow boost, the various grants available and the government backed loans.
As we start to open up and come out of the current market we are now working with businesses in the revive mode ie they are optimistic about the future and looking to restart their business as quickly as possible. We are developing a number of scenario plans to determine what the business might look like in the future plus robust cashflow forecasts to determine cashflow and strategic funding needs. Scenario plans are essential to have visibility of the numbers to ensure the best business decisions are made.
Like most businesses, some of our recruitment clients are uncertain about the future and what their business will look like.
The challenges in the industry right now are:
The stage of their business is important. Is it a startup or a more mature business with a trading history? What is the current business mix temp vs perm and what will it need to look like in the future?
At different stages of the business, financing options may vary. A startup might use capital from the founders but do you want to risk personal cash reserves and assets to fund the business? Seed capital from private investors will be difficult to come by right now.
Our recommendation at each stage of growth for a recruitment business is Invoice Financing through the financing of invoices. Leverage the business assets to fund the business. Don’t restrict your opportunities by relying on finite cash reserves or personal assets..
When should businesses review their funding requirements and providers?
It is VERY important to be reviewing funding requirements and providers right now. Agencies need to be thinking what their needs will be in the next month, next 3 months and into the next 12 months. To do this we suggest a 12 month rolling cashflow be prepared.
A thorough review of Funding Providers needs to happen by considering the following:
With COVID-19 relief packages from the government ( JobKeeper, tax deferrals ) and banking sector ( repayment deferrals ) all coming to an end later this year, the major banks are provisioning for a record amount of bad debts. This is likely to have a direct impact on their credit policies for small to medium sized businesses in hard hit industries such as recruitment & labour hire.
Funding from non bank sectors such as invoice finance providers will not change as much as the facility is based on a service that has already been completed, verified through timesheet approvals and invoiced. Financial performance volatility can be more acceptable.
In economic downturns it is also wise to separate personal assets from business risk as much as is possible, which an invoice finance / payroll funding solution will achieve for you.
Firstly it is important to understand the stimulus packages available to the agency in the short term. Then to have the right funding provider in place and to build a strong long term relationship with them. We have worked with and continue to work with APositive for clients invoice financing requirements. They understand the industry, are flexible and have impeccable customer support.
It is imperative to know your numbers, understand the KPIs that drive your business and build various scenario plans around what could or will happen as we come out of the current situation.
Review your credit control processes to ensure invoices are collected faster and risk is reduced. Diversify the temp book across different industries with different risk profiles.
Consider packaging your service offering differently. Continue talking to your clients and candidates, understand their needs now and in the short term and keep up to date with what is happening in your market.
If you ‘d like to know how your recruitment business’ finance function is tracking click here to take our F Score. This is an extremely popular tool that we have developed and used countless times over the years to help businesses thrive during challenging times.
From this you will receive a bespoke 8 page report which details the 3 main areas of strain within your finance function.
APOSITIVE are workforce finance experts, specialising in cashflow funding for recruitment, labour hire and professional services.
If you’d like to discuss how cash flow funding can help your agency, please contact Darren Cottrell on 0458 021 981 or [email protected]
Reflections in Isolation
The COVID-19 lockdown may have afforded many business owners the opportunity to reflect on how they may have been better prepared to manage the crisis. It is likely that there will be a number of common threads evident, however it is certain that they will all be focused on the same goal of making the business more resilient and able to survive, revive or indeed thrive in the event of a major business disruption.
There has been significant disruption to businesses normal supply chains caused by the Covid-19 crisis. Some suppliers have not been able to supply goods or provide services to their customers due to restrictions, a shortage of labour or other issues within their supply chain.
Many businesses have been impacted by excess demand for specific items during the crisis including medical consumables (masks, gloves, hand sanitiser), electrical goods (laptops, monitors) and grocery items (toilet paper, flour, pasta).
Businesses will be forced to reconsider their supply chains with the objective of removing risk. For example, revisiting decisions such as ‘Make versus Buy’, planned inventory levels, the number of contracted suppliers (consolidated or dispersed) and the location of suppliers (onshore versus offshore).
Businesses will review their commercial agreements to ensure that they have been appropriately drafted to deal with Force Majeure events (unforeseeable circumstances that prevent fulfillment of a contract). This may be either the business supplying goods or services to customers or receiving goods or services from suppliers. It is not only important that there is a Force Majeure clause in the contract, but that the business owner understands their rights and obligations under the clause and the events that could trigger a Force Majeure.
Business Continuity Planning
Some business were very ill-equipped for a business disruption the magnitude of the COVID-19 crisis. Businesses should consider putting a business continuity plan in place to enable it to be enacted in the event of a future disaster. A business continuity plan will ensure the business will be able to continue to function with minimal disruption.
Also, businesses should review whether their key suppliers have business contingency plans in place. This will be a more critical factor in future sourcing decisions as a number of businesses previously had outsourced key functions to third party suppliers who did not have business continuity plans in place and have been forced to take back these functions at short notice due to disruption within the suppliers’ business.
A substantial number of small businesses have suffered a shortfall of cash during the COVID-19 crisis, often requiring injections of capital from owners. Businesses will consider implementing a minimum liquidity target (i.e. the minimum amount of cash to be available at any one time) with liquidity available from either cash accounts or lending facilities that are in place i.e. overdraft or line of credit facilities. The amount of cash held would be based upon the expected duration of a crisis and the anticipated net cash commitments over this period (although not many people could have predicted the extent of disruption caused by COVID-19).
Also, the adequacy of cashflow forecasting will be critically reviewed by businesses. The crisis has shown that businesses need to have a rigorous cashflow forecast in place to assist business owners to navigate any disruption to normal cashflow.
Many businesses discovered through the crisis that they had overly restrictive employment arrangements (e.g. leave arrangements, work from home policies, etc.). Post-crisis employers are likely to review these arrangements to ensure that they have the requisite flexibility within the workforce to be able to swiftly act in response to an adverse event. This may include implementing Work-From-Home (WFH) arrangements for staff. Many employers were caught short without a policy in place that would deal with employer health & safety obligations (not to mention adequate technology for staff to work remotely). Some employers may even reconsider their office rental after they find that workforce productivity did not materially decline with employees working from home.
It takes commitment to make relationships work. Therefore, businesses need to ensure that they focus on building and maintaining relationships with key business stakeholders (e.g. customers, suppliers, financiers) to ensure that they stand by your side in times of crisis. The CFO Centre has extensive relationships through a network of preferred business suppliers including lawyers, bankers, financiers, specialists, consultants, and advisors that are working with us and support businesses in challenging times.
A CFO’s knowledge and experience is invaluable. Now more than ever, the right advice and planning is paramount in navigating from Survive to Thrive.
To this end, I have held team meetings with our 40 part-time CFO’s over the last week and wanted to share my learnings in order to help more businesses during these challenging times. It was pleasing to hear how many of our clients are moving from ‘survive’ mode to ‘revive’ or indeed ‘thrive’ mode. Our team have ensured that our clients have executed plans to minimise the impact of COVID-19, found cost savings, reviewed key contracts, have secured or are securing government and bank funding initiatives, and are now planning for growth.
It was also very interesting to hear about the number of acquisition opportunities and new market opportunities that have appeared for clients too. For instance, a local manufacturing client has just merged with another business to gain vertical integration and cost efficiencies, re-launching under a new Brand.
The main theme I got from our meetings is the amount of business planning the team is undertaking to prepare our clients for growth. This really is an excellent opportunity to re-evaluate business models.
We have been recommending our clients stop, take some time to reflect on the past, the current situation and the likely “new normal”. This includes asking key questions of oneself:
Priorities such as cash maximisation, scenario modelling and action planning remain central to our focus with clients under financial pressure. However, for those clients who can “ride out this storm”, they need to minimise the immediate downside and maximise the potential upside in the coming months and years by thinking and responding to the above sorts of questions. This involves seeking good advice and planning!
Whether the business be in Survive, Revive or Thrive mode, there are commonalities across all three categories as related to how the business owner / manager should be responding.
I am very proud of my team who have given many hours of time at no extra cost to our clients and other businesses in need, who span many sectors, as this is about supporting business owners during these very challenging times.
After meeting with my team, I walked away with one key learning: that every business with a turnover greater than $1-2m needs a good CFO right now.
If you would like to speak with one of our highly experienced CFO’s to understand how they are preparing their clients for growth, please let me know.
David King, CEO
1300 447 740
What does a CFO do?
A CFO’s (Chief Finance Officer’s) role is to get fully engaged in your business, regularly drill down into your financials and use their perspective by which to help you plan, forecast and monitor financial performance. A CFO can provide valuable help to you in the follow areas:
Our CFOs are qualified accountants with decades of commercial experience in high level finance roles. They have controlled the finances of companies across a huge variety of industries and sectors – plus with a team of over 700 CFOs globally, you can be sure to get the answers from someone who has been there and done it.
What’s more, you can have a high calibre part-time CFO at a fraction of the cost of a full-time resource. Outsourcing a CFO is tremendously cost effective and most CFOs pay for their own time with the cost savings they identify in your business.
The CFO Centre is offering a 1:1 emergency scenario planning video call with one of our experienced CFOs to review the 7 critical areas in your business. You will come away feeling clearer about your options for increasing cash and mitigating risk.
If you believe our expertise could benefit your business, please click here to register
Or for more information about the CFO Centre please call us on 1300 447 740.
The spread of COVID-19 has had a dramatic impact on lives, livelihoods and businesses worldwide.
Now more than ever, businesses are banding together to find innovative ways to minimise the impact on their business. Some are even retooling their current operation to assist with the shortfall of products.
As the country slowly goes into lockdown, more and more businesses are either closing their doors due to safety reasons or have closed due to a mandatory shut down. As a result of this and the travel restrictions currently in place, retailers are bracing for testing times.
What is it that you are doing in your business to make sure that you make it to the other side?
Steps that you should be taking to make sure you know where you stand.
Cashflow is king
It is essential that you know the current position of your business finances. Be honest with yourself and make sure you know if or when your business needs help.
The Federal and State governments have introduced several different packages that are available to assist businesses to get through the COVID-19 pandemic. However, there are some qualifying criteria and conditions within the fine print that need to be understood.
Create your cashflow forecast, you may not have had to do this in the past, but you need to make sure you know what cash is coming in and what payments need to be processed, this can be constructed in a simple excel spreadsheet.
Once you have listed all known transactions, you will then need to stress-test the scenarios, for example what will happen if your top customer can no longer pay their account? Here are some tips that can assist in preparing an accurate cashflow forecast:
Having a rolling cashflow and updating it at a minimum weekly will help you make sure that you are staying on top of any issues that may come to ahead.
Questions you should ask yourself – be truthful
The CFO Centre has been assisting SME’s for 20 years, offering highly experienced Chief Financial Officers on a flexible, part-time basis. As CFO’s we are qualified CPA’s or CA’s with extensive commercial experience across multiple sectors, so we know what to look for and how to respond.
In these unprecedented times we are offering a complimentary, obligation-free 1:1 scenario planning video call to take you through the first steps of navigating your way through these challenging times. Please follow this link to book your call, or call us on 1300 447 740.
“This too shall pass”
If history has taught us anything, it’s that the only constant in life is change.
Over the course of the last century alone there have been a litany of challenges and numerous disasters, all of which have one thing in common – they’ve all passed.
Some months from now – it’s impossible to predict the true timeline – the current situation we face with Covid-19 will too have passed. As with the bush fires, it will have left in its wake a trail of debris and destruction which we ought not take lightly, but it will pass.
As the great German writer Goethe once said: “Fresh activity is the only means of overcoming adversity.” It’s a wonderful way to focus the mind on proactive, practical activity and look forward. To deal with things that you can influence and change rather than those you can’t.
As CFO’s part of our role is to use our knowledge of the past and translate it into actions that bring about a better future. With 750 of us globally, many of us spanning decades of service to SMEs, we have weathered many storms. We’ve also come out the other side.
And we have learned from those experiences that there are certain actions we must take quickly if we want to overcome adversity and put ourselves in a stronger position for when the storm abates. In the midst of the storm it can be difficult to make sense of what is happening. This is precisely the time to slow down for a moment, as hard as it may seem, and make some proactive decisions.
To address the negative, we can take it as read that the speed at which many industries will contract over the coming weeks will increase. Primary industries such as aviation, travel and tourism, events and conferencing, restaurants and pubs, will suffer devastating blows as will the supply chains they support. The ripple effect will affect everyone, in some way or other. These events are already in train.
While all that happens, as SME owners, we have to do whatever we need to do in order to weather the storm and come out stronger the other side.
And you don’t have to face that challenge alone. There’s a lot that the government, the ATO, and banks are doing to help small to medium sized businesses get through the challenges of the coming weeks. The CFO Centre is also here to help you navigate the options and put you in the strongest possible position when some sense of normality is restored.
Below are some key considerations, risks, opportunities and resources. If you would like us to help you navigate the options, we are offering a courtesy 1:1 Scenario Planning Call to help you get clarity around what you should be doing now to put you in the strongest possible position. Please contact us via email at [email protected] or call us on 1300 447 740.
Protect the downside
Cash is king. What cash buffer do you have in place, what funds can be drawn down from available credit facilities if required? Some relief may be found within the Federal Government’s stimulus package: https://www.pm.gov.au/media/economic-stimulus-package
Cashflow forecasting is essential – but is only as good as the assumptions used (see Scenario Planning below).
2. Scenario Planning
3. Supply side:
4. Demand side:
Can you post messages on your website remotely if required as a means of keeping customers, suppliers notified?
Prepare for the upside
All of the suggestions mentioned above constitute the day to day role of a CFO. These are things that companies ought to be doing as a matter of course, but of course, many do not.
The advantage of going through this process now is that it will enable you to build a better, stronger, more resilient business for the future. Whether Covid-19 or the next major recession, or some other unforeseen event, knowing that you have done all that you can to prepare your business will give you greater confidence in the future.
The future of work is all about remote working, flexibility, greater specialisation and outsourcing. The Coronavirus will increase the pace with which we transition to a new global model. We encourage you to be cautious and use this time to spark ‘fresh activity’ and build a stronger, leaner business for the future.
We are here to help and are offering complimentary 1:1 Scenario Planning Consultations (which can be conducted remotely via video call) to help you make the right decisions to get you through the coming weeks and prepare you better for when the current madness subsides.
Please contact us via email at [email protected] or call us on 1300 447 740.