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What to Expect from a Part-Time CFO

What to Expect from a Part-Time CFO

The idea of hiring even a part-time CFO may seem to some SMEs a bit OTT—like paying Quentin Tarantino to make a 90-second home page video or booking Wembley Stadium for the company’s five-a-side friendly football match.

But for companies whose ambition is to get into and survive the coveted scale-up phase, hiring a part-time CFO makes perfect sense. They know that they’re getting a finance veteran, someone with big business experience, who can provide the guidance they need to grow rapidly and help them to avoid the costly mistakes that so many ambitious SMEs make as they attempt to move into the Big League.

As Colin Mills, the Chairman of the CFO Centre, said in his book about scale-ups, “The reality is that there is great value in having someone from the next level if you’re aspiring to get there.”

Companies who hire part-time CFOs understand that today’s CFOs are capable of delivering far more than bookkeeping or accounting services. They provide the kind of strategic business that fundamentally alters the performance/profitability and long term potential for a business. They can work with your board of directors and external stakeholders such as your bank or investors. They can also advise you on mergers and acquisitions. Besides strategic analysis, they can provide operational support on everything finance-related in your business.

Their responsibilities might cover business planning, capital structure, risk management, auditing and reporting, tax planning, capital expenditure, investor communication, R&D investment, working capital management and company budgeting.

Companies that don’t hire CFOs are often unaware of the opportunities and profits they’re missing out on. When asked why so many SMEs don’t hire CFOs, Matthew Bud, Chairman of the international Financial Executives Networking Group, said business owners are either unaware of their need for a CFO or reluctant to spend the money.

What many entrepreneurs don’t realise is that they’re already spending that money in lost profits and misspending,” he told Inc.

“They’re not seeing the dynamics of the business from an educated financial perspective. You can’t always go with your gut in making financial decisions, which is what a lot of entrepreneurs try to do.”

So, what can you expect from a part-time CFO?

Well, the role a part-time CFO will play in your company will depend on factors such as the size of your business, your expectations, your industry, and your corporate strategy and business goals. But a good CFO will work on your company’s finance strategy and finance operations and manage areas such as compliance, tax planning and legals, outsourcing and banking relationships.

To achieve success in these different roles, a CFO will need outstanding hard and soft skills.

If you’re a CEO, the CFO will be your strategic partner, providing financial insight and strategy and helping you to improve profitability and cash flow.

A good CFO won’t, however, be a ‘Yes’ person, someone who rubber-stamps every initiative without due diligence. On the contrary, they will challenge you and your vision for your business asking the kinds of questions which leads to transformation as opposed to incremental improvement.

Charles Holley, CFO-in-residence at Deloitte and former Walmart CFO, says good CFOs are independent-minded yet supportive of their CEO.

My CEOs counted on me to be the truth teller, to form my own opinions on important company decisions and to speak up. At the same time, they expected my support for execution.”

Great CFOs challenge the business, he says. They point out problems and propose possible solutions to “spark the debate”.

CFOs are in the best position to call attention when the numbers aren’t supporting the strategy. For example, CFOs can push the business to change capex priorities when the underlying ROI assumptions are no longer supported by the numbers.”

Besides being a trusted advisor and sounding board, a good CFO will help to raise efficiencies, identify opportunities, manage risk management, and manage capital structure.

Since they speak the language of financiers and understand what they are really interested in, CFOs can also liaise with financial institutions, investors, and auditors on your behalf.

In other words, a part-time CFO can help you to manage the transition into the scale-up phase more smoothly and ensure you reach your growth targets sooner.

How it works in practice

The FD Centre’s part-time CFOs use a proven framework known as the ’12 Boxes’ to identify where the problems are within any business. They use it to review every aspect of your company finance function and identify every problem area.

They will help you to understand your company’s finances; eliminate cash flow problems; identify cost-savings, and improve profits.

They can also help you and your team to understand your main profit drivers; find and arrange funding; identify your Critical Success Factors and Key Performance Indicators (KPIs), help you to expand nationally and internationally; and build value to make your business more attractive to investors or buyers.

To discover more about the 12 Boxes, click here.

 Need help?

To discover how an CFO Centre part-time 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 CFOs, click  here.   You can see how they add rocket fuel to any business here.

To hear what people really think about the FD Centre’s part-time CFOs, watch these short videos here.

Uncover strengths and weaknesses

Identify the strengths and gaps in your business in just nine minutes with the F-Score.

Just answer a brief series of questions, and you’ll receive an 8-page report that will reveal potential current or future pain points for your business. It will also help you to rate the performance of your finance function and uncover untapped opportunities for growth. Click here now to take the F-Score.

Got a Big Question?

If you have a burning question for one of our team of  CFOs, ask it here, and you’ll get an answer within 24 hours. Please note the question must be finance-related (sadly they can’t give horse-racing or fashion tips or relationship advice).

 

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 CFO can do so much more than count beans.

In the past, an CFO’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 CFO 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.

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

They expect CFOs 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 CFOs are 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 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.”

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 CFO. But that doesn’t mean they can’t benefit from all that CFOs offer. They can access the skills of highly qualified CFOs by engaging them on a part-time basis.

Part-time CFOs 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.

It found CFOs 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 CFO 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 CFOs 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 CFO’s financial and strategic acumen becomes more acute, FERF found.

The CFO Centre’s part-time CFOs bring these skills to every client at a fraction of the cost of their full-time counterparts. For instance, its part-time CFOs 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 funding.
  • 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 CFO Centre part-time FD or CFO will help your business, contact us now on 1300 447 740. To book your free one-to-one call with one of our part-time CFOs, click here.

Why Hollywood Actors Should Get Training from FDs

Why Hollywood Actors Should Get Training from FDs

You shouldn’t be surprised to discover that Meryl Streep, Robert De Niro, Hugh Jackman, Gary Oldman among many other Oscar-winning actors and actresses bear a grudge against Finance Directors.

It’s easy to understand why. For although the likes of Streep and Oldman have achieved fame, fortune and critical acclaim, they can usually only inhabit one role at a time. They take it on for a few months and then move on to the next.

A great CFO, by comparison, is the master or mistress of multiple roles and can switch between them easily and effortlessly. What’s more, they perform those multiple roles day in, day out for weeks, months and even years.

That’s because an CFO is there to help the business owner achieve the company’s objectives by providing financial and strategic guidance to ensure it meets its financial commitments and to develop policies and procedures to ensure its financial management is sound. The Institute of Directors says the CFO is “often viewed as the member of the board who creates a solid foundation upon which a business can grow”.

It’s why a typical CFO job advertisement features a huge list of responsibilities. These will often include the following and more:

  • Providing strategic financial leadership to optimise the organisation’s medium to long-term financial performance and strategic position
  • Contributing fully to the implementation of organisation strategy across all areas of the business, challenging assumptions and decision-making as appropriate and providing financial analysis and guidance on all activities, plans, and targets
  • Providing robust financial reporting and analysis to the Board of Directors, Finance, Risk and Governance Board and Corporate Management Team including the provision of financial support to strategic decision-making and transactions
  • Working with senior management to steer the business towards the goal of greater financial independence and sustainability
  • Providing cash management – monthly cash flow reporting and long-term strategic cash management
  • Overseeing the preparation of VAT and other statutory submissions
  • Developing and ensuring compliance with financial policies and controls
  • Presenting annual accounts to the General Meeting.
  • Risk management and reporting – maintenance of the organisation’s risk register ensuring control processes are fit for purpose
  • Developing an IT strategy which supports the organisational strategy.

Although CFOs aren’t expected to be able to speak in an accent, swordfight or ride a horse as actors are, they are expected to have accountancy qualifications, excellent communication and interpersonal skills, the ability to manage complex stakeholder relationships and to provide strong attention to detail with commercial and strategic acumen.

So, as you can see, at any time during a CFO’s day, the CFO will be a sounding board/mentor for the CEO (and sometimes the only one to point out the flaws in a ‘blue sky’ idea), strategic advisor, bookkeeper, financial controller, risk management advisor, finance team leader, recruitment advisor and much more.

Being able to adapt to any one of the roles comes from experience. The CFO Centre’s part-time FDs, for instance, have all had years of experience working in large corporations. They’re used to working in complex, demanding environments and switching roles as the need arises.

Unlike actors, FDs don’t perform as they do for applause or for a gold-plated statuette (although many would be very, very happy if you offered to pay them in real gold bullion). They do it to help business owners like you take your fledgling business to new heights of success.

What’s more, you can be sure that the FD you hire won’t ever pull you aside before or during a meeting to ask, “What’s my motivation?”

To discover how an FD Centre part-time FD or CFO will help your business, contact us now on 1300 447 740. To book your free one-to-one call with one of our part-time FDs, just click here.

The Rising Power of AI in Financial Services

The Rising Power of AI in Financial Services

Artificial Intelligence (AI) is already transforming the way in which financial service companies are doing business.

More and more of them are using AI to process information on their customers, cut costs, save time, monitor behaviour patterns, assess credit quality, automate client interactions, analyse markets, assess data quality and detect fraud.

A pwc Digital IQ 2017 survey found that 72% of business decision makers believe AI will be the business advantage of the future. About 52% said they’re currently making “substantial investments” in AI, and 66% said they expect to be making substantial investments in three years.

Franck Coison, Industry Solution Director, at international IT services company Atos says the four main types of AI are facial and voice recognition, natural language processing, machine learning, and deep learning. They can be used in chatbots, document analysis, process automation or predictive analysis, he says.

Although robotic process automation (RPA) is increasingly common in financial services, it is usually used for quite simple, repetitive tasks, says Coison. “In contrast, AI can be used to automate more complex tasks that require cognitive, or ‘intelligent’, processes.

“While RPA is appropriate for back-office and accounting processes, when it is combined with AI, any process including customer-facing activities can be automated.”

That means it has great potential in areas such as customer service, sales and customer intelligence, IT services, fraud prevention, and cyber security, he says.

The pwc survey found that adoption of practical machines that think is widespread in the financial services sector. Some banks use AI surveillance tools to prevent financial crime, and others use machine learning for tax planning. Many insurers use automated underwriting tools in their daily decision making and wealth managers offer automated investing advice across multiple channels.

A provider of next-generation investment analytics Kensho Technologies has for example developed a system that allows investment managers to ask investment-related questions in plain English, such as, “What sectors and industries perform best three months before and after a rate hike?”. They receive answers within minutes.

AI is proving popular among banks too. Lloyds Bank, for example, has invested $5.3billion on its digital transformation initiative, which includes using AI to “simplify and progress modernisation of its IT and data infrastructure, as well as other technology-enabled productivity improvements across the business”.

Terry Cordeiro, Head of Product Management at Lloyds Banking Group says AI has “completely transformed how the finance industry works, with the vision at Lloyds being to use smart machines for extending human capabilities while using data to respond.

“Automating processes means better opportunities to reduce costs for better decision making, and intelligent products mean that our customers are able to do much more,” Corderio says.

Earlier this year, NatWest Bank introduced ‘Cora’, an AI-powered ‘digital human’, which converses with customers in its branches. Cora can answer more than 200 queries, covering everything from mortgage applications to lost bank cards.

The plan is to develop Cora so it can answer hundreds of different questions, as well as detect human emotions and react verbally and physically with facial expressions. As well as being put in branches, Cora could be used by customers at home on their laptop or PC and, in the long run, on smartphones.

Finance departments are also benefiting from AI. The insight into data that it can provide will be a competitive advantage, according to Matthias Thurner of the Corporate Performance Management and Business Intelligence solutions provider, Unit4 Prevero.“For this reason, AI will become integral to finance functions in every industry,” he says.

As technology improves, AI will become faster and smarter at providing analysis, he says. Companies that don’t use it will be at a competitive disadvantage.

“Businesses don’t want to replace their employees, but they do want to make better financial decisions, and AI will allow them to do that faster and cheaper than a whole team of humans.”

It will enable skilled office workers to spend more time on their core competencies rather than maintaining data, he says. This will help organisations to reduce costs and the time spent on manual tasks or the classifying of data.

Likewise, FDs will benefit from AI data analysis, says Thurner. That’s important since there’s an increasing expectation for FDs to be a source of business insight. Boards want more frequent reports that contain more context and detail. Fortunately, they will be able to deliver more detailed and more frequent reports thanks to AI, he says.

But it’s unlikely an FDbot will appear in finance departments any time soon. “We can expect machine l   earning to powerfully augment human expertise and experience in the near future even if that’s not a reality today,” says Thurner. “AI can provide data back-up and make suggestions to help the human decision-maker, but it’s the CFO who ultimately has to decide what to recommend,” says Thurner.

With so much potential in key areas of business, it’s no wonder that AI is being hailed as the Fourth Industrial Revolution.

“AI will have an impact as big as electricity and will transform every single industry,” predicts Cordeiro of Lloyds Banking Group.

To discover how a part-time CFO will help your company, please call the CFO Centre on 1300 447 740 or visit our website now.

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 $7 million. Officials had predicted the programme would save up to $700 million a year, but after two and a half years, it had saved just $158 million but cost $165 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 operations
  • 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 Chief Financial Officer 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 CFO with the experience and knowledge to help you plan, manage and control business growth. The CFO Centre will provide you with a CFO with ‘big business experience’ for a fraction of the cost of a full-time CFO.

To discover how a CFO Centre part-time FD or CFO will help your business, contact us now on 1300 447 740. To book your free one-to-one call with one of our part-time CFOs, just click here

 

Why are scale-ups more valuable than start-ups?

What if Bill Hewlett and David Packard had never got out of that famous Palo Alto garage? If they’d stayed a two-person company, we’d likely never have heard of them – and the history of Silicon Valley would have been very different. Instead, at its peak in 2011, Hewlett Packard had nearly 350,000 employees around the world.

There are many small startups of the size Hewlett Packard was back in that garage, and it’s important for governments to encourage entrepreneurs to found companies. But the economic value of entrepreneurship isn’t in two-person startups. It’s in “scale ups” – companies that have hit a growth curve. Scale-up companies have particular value because:

Skilled workers have a chance to shine: Successful scale-ups are able to offer secure, well-paid jobs to highly skilled professionals, giving them a chance to build their skills even more.

Reliable jobs: Scale-up companies also need workers for a wide range of roles – ranging from payroll managers to marketing, sales and other support functions – and this provides work for people who work in the background to keep the company functioning.

Spinoff economic activity: Successfully scaled-up companies provide more than direct employment. They create spinoff activity, requiring support from their own supplier base while supporting their customers’ growth. They also become reliable tenants for property owners, and through their payrolls, they boost the tax base in their community.

Technological advancement: They can gather the financial resources and skills to invest in developing and commercializing new technologies.

Building other companies: Scale-ups also become reliable customers for companies that supply them with parts, components, and other inputs. This allows these vendors to provide reliable jobs, and they too create their own spinoff activity.

Our book “Scale Up” quotes business guru and venture capitalist Daniel Isenberg, “One venture that grows to 100 people in 5 years is probably more beneficial to entrepreneurs, shareholders, employees and governments alike, than 50 which stagnate at two years.”

This book points out that in many parts of the world, the focus for business growth is on helping start-ups succeed. People wanting to found companies find financial help, coaching, and other support through incubators and other institutions. “Scale Up” points out that startups are fun, exciting and sexy.

By contrast, the growth process is more of a hard slog. It’s not that common for a company to have a winning combination of a good idea or technology, along with the vision and determination, to grow past the “garage” stage into mid-size, scale-up stage. But when they do, there has not been the support network to help them successfully grow.  Governments and organizations are now recognizing the need to create an eco-system for start-ups to help enable them to Scale-Up.

The CFO Centre has worked with thousands of companies over the past 17 years. Using this experience and the experience of our clients in Scaling Up, we have identified the key attributes and requirements for a company to successfully Scale.  Over the coming weeks we will explore and explain our Scale-Up Framework.

Because so many companies either fail or have trouble scaling, you need to have every possible advantage on your side.

So maybe you’re not working out of a garage, as Hewlett and Packard were when they started. But to follow their success path, you need to change your thinking from a startup mentality to a scale-up. Success isn’t a matter of predestination – HP’s founders hit many failures before they found what worked for them – but it does help to have a roadmap –to help you on your journey.

The result is a company that is much more valuable when it comes time to move on to the next stage of your life and career.

Is your company ready for rapid growth and positioned to Scale-Up?

First mover advantage doesn’t go to the first company that launches, it goes to the first company that scales.”   – Reid Hoffman, co-founder of LinkedIn

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 on 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 Chief Finance Director

A part-time CFO from the CFO Centre will look for all the things that pose a threat to the company and work with you to resolve them. Your CFO 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 CFO Centre today on 1300 447 740. To book your free one-to-one call with one of our part-time CFOs, just click here

Pink Alarm Clock

Why The Gig Economy Is A Huge Opportunity

Author: Steve Settle MA (Cantab) MBA FCA, Managing Director—Asia, CFO Centre

Despite what you may have heard, working on a contingent or freelance basis has many advantages that are just not available to full-time employees.

It’s easy to get despondent about your future job security and finances these days with doomsday predictions of the impact artificial intelligence (AI), Big Data, machine-learning, robotics and nanotechnology will have on the world of work.

Back in 2013, two Oxford University researchers sounded the alarm for the future of work by predicting that 47% of US employment was in the high-risk category for being automated within two decades. That included jobs in transportation, logistics, office and administrative support, and the service sector.

Since then, barely a month goes by without an expert issuing a dire forecast about how the work we do now will soon be carried out by machines or robots, making us redundant long before we reach the statutory retirement age.

This fear of automation is nothing new of course. In the 17th century, for example, England’s Queen Elizabeth I refused to grant Reverend William Lee a patent for his revolutionary knitting machine for fear it would destroy the traditional hand-knitting industry. (Despite this, Lee’s machine would go on to improve rather than decimate the knitting industry. Parts of his design are still used in machines today.)

People also feared the worst when the first railways opened, believing they posed a threat to the social order of the day (poor people would be able to travel—nothing good would surely come of that!). They even suspected train travel was a danger to human life (people might die of asphyxiation or melt travelling at 20 miles an hour).

Likewise, the invention of the telephone terrified some people. In Sweden, for instance, preachers were convinced it was the instrument of the Devil and others feared telephone lines were conduits for evil spirits.

These stories just illustrate the point that our fears of innovation and change have always been with us.

It’s up to us whether we see them as a threat or an opportunity.

And let’s face it—it’s easier to accept innovation and change as opportunities than try to resist them. Trying to fight them is like standing on a beach and attempting to stop the waves coming in.

Unless we want to give up work altogether and live ‘off-grid’ in grim survival-mode, the best thing we can do is prepare for and take advantage of whatever innovation and change comes along.

Take, for instance, the ‘on-demand workforce’ or ‘gig economy’, in which the labour market is characterised by a plethora of short-term contracts or freelance projects rather than permanent jobs. It’s already a reality for many: a McKinsey Global Institute 2016 study found that 20-30% of the labour force in both the US and the EU are independent workers who are self-employed or do temporary work.

It will become a reality for so many more in the next few years, according to a 2015 study by the financial management software company Intuit.

To some, the prospect of leaving employment and working on one freelance project after another for a stream of different employers is terrifying. Where’s the financial security, they ask.

But to others like our team at The CFO Centre, working in a gig economy is the closest we will come to total freedom. We contingent workers see ourselves as being liberated from the constraints of paid employment. We are free to pick and choose our ‘gigs’ or assignments.

As with most things, of course, there are benefits, and there are drawbacks. Fortunately, the benefits of working on a contingent basis tend to outweigh the drawbacks.

Granted, we can no longer depend on the security of a monthly salary and the usual benefits of employment—the paid annual leave and sickness pay, the bonuses, and medical insurance, and other perks like company cars—are a thing of the past. So too is the protection of our workers’ rights by unions.

The career training we undertake to keep up with developments in our fields we now pay for rather having it come out of an HR budget.

And to some extent, we don’t have the pleasure of working with the same team of colleagues for prolonged periods like we once did.

But on the plus side, we enjoy a sense of autonomy that full-time employees will never have. We decide when we work, how long we work and for whom.

Our lifestyles are more flexible than they ever were as full-time employees. Suddenly, there’s more time to spend with family and even to follow a great passion, like travel, golf or photography.

We don’t have to commute to the same office day in, day out. We can hold meetings in a Starbucks if we want. Or sit on our couches at home and speak with clients wherever they are located in the world.

The financial rewards we receive are dictated by the amount of effort we put into securing and retaining contracts with individuals and companies and the value we subsequently provide, not by a job position or title.

You might think there’s no financial security working in this way but having five or six clients means that if for any reason we lose one, we still have the remainder – and, importantly, the skills with which to find new ones. There’s no doubt that this way of working takes some getting used to. It can be challenging in the beginning, especially when it comes to attracting and retaining clients. It’s not something we historically have experience of.

One of my overseas colleagues at The CFO Centre, for example, said his biggest challenge early on as a part-time CFO was learning to adapt from working as a Finance Director in a multi-national to working in a consultative, strategic role for SME clients. He realised after losing one or two contracts that his ‘full-on’ big corporate style was perceived as being too dictatorial by the owners of the medium-sized family-owned businesses.

Like so many of us working on a contingent basis, he had to adapt very quickly to survive. He learnt to offer advice rather than issue directives and work in a more relaxed style. Since accepting that things move slower in small organisations, he’s built up a portfolio of loyal clients.

And like so many of us working in this new way, he gets huge job satisfaction and fulfilment. Like us, he’s confident that in his role as a part-time CFO he’s helping many more companies to succeed than he would have done had he still been working for one multinational company.

 

Hardhat for safety

Carillion Collapse Shows the Danger for One-Client SMEs

Carillion Collapse Shows the Danger for One-Client SMEs

The collapse of Carillion, the UK’s second largest construction company, has exposed the enormous risk SMEs take by placing too much reliance on one major customer.

The construction company, which employed 43,000 people worldwide and had 450 key public-sector infrastructure projects on its books, went into compulsory liquidation on January 15th with £1.5b debts. That followed the failure of last-minute rescue talks between the company, lenders, and the government. It is believed to have used 30,000 sub-contractors to carry out work on those projects.

Being reliant on one major customer (or having a ‘short client list’) is a trap that many fast-growing companies fall into. It is easy to see why it happens—it is a relatively quick and straightforward way for SMEs to expand. It provides your firm with much-needed revenue and boosts your reputation, which can persuade prospective clients to take the plunge.

The trouble comes when the SMEs get to the point where more than half their revenue stems from that one source.

It means their future cash flow and profit is dependent upon the one client’s financial position, management, and market. That makes them extremely vulnerable to any changes in the fortune of the ‘whale’.

When something goes wrong—as it did so spectacularly with Carillion in mid-January—it is those SMEs with an over-reliance on the big player that are in real danger of collapsing too.

A Daily Telegraph/Reuters report says that Carillion creditors are only expected to recover between less than one penny and 6.6 pence of every pound they are owed in insolvency proceedings, according to court papers.[1]

How to Avoid Being Dragged Under by a Major Defaulting Client

  • If your business has one client that accounts for more than 15% to 20% of turnover, look for ways now to move away from this dangerous dependency.

Having a long client list will also make your company more attractive to investors long-term.

If possible, look for clients in different markets or industries. This way, if one industry or market slows, your business will not suffer as much as it will if you are entirely dependent on just one market or industry.

  • Limit the credit terms you offer to large customers. Try not to settle for 120-day payment terms such as Carillion offered (which was double the construction industry-average, according to Accountancy Age[2]). The more clients you have the less likely you are to be forced into accepting these payment terms.

Run regular credit checks and tighten up your collection services to avoid falling into the late-payment trap, which can threaten your company’s ability to trade and in worst cases, lead to insolvency. It has been estimated by Bacs Payment Scheme that 640,000 of the UK’s 1.7 million SMEs have to wait beyond the agreed payment terms.

  • Take out insurance against bad debts. Insurers are expected to pay out more than £30m to those Carillion suppliers who are owed money—but only those who had insurance policies to cover them against bad debts, according to a BBC report.[3] The sums will vary from £5,000 to several million pounds. It is estimated that medium sized companies are owed about £236,000 while larger firms face a shortfall of more than £15m.

Only a minority of Carillion suppliers had trade credit insurance to cover them against the risk of not being paid if the company it does business with collapses.

‘One insolvency can risk a domino effects to hundreds of firms in the supply chain,” Mark Shepherd of the Association of British Insurers told the BBC.

  • If you are dealing with a major public company, pay attention to profit warnings. Limit your exposure if such a client does issue a profit warning. Carillion, for instance, issued the first of three profit warnings on July 10, 2017. At that point it announced an £845m write-down on its contracts. Things seemed to have spiralled downward from then on. Unfortunately, instead of restructuring, the company continued to bid on contracts with unrealistically low profit margins in an increasingly desperate effort to maintain cash flow.

Hire a part-time CFO

You can make it easy to avoid the ‘one-client’ trap by hiring a part-time CFO who will help you to expand your client base and protect your cash flow.

To book your free one-to-one call with one of our part-time CFO’s, call 1300 447 740 or just click here.

 

What Fancensus.com can teach you about scaling up

Global curator of Big Data: Fancensus.com provides business intelligence to the Entertainment Sector. Specialising and delivering accurate real time analytical data to the gaming and movie industries; by gathering aggregating communication information, monitoring digital retailers and overall calculating industry performance benchmarks, Fancensus.com provides powerful insights into the data analytics which drive success in today’s entertainment market. Some of their prestigious clients include Disney, Ubisoft, Sony, Bethesda amongst others. However, it wasn’t always this way…

Like many entrepreneurs it started with a single idea. Kerri Davies (Founder and Managing Director of Fancensus.com) who had previous background in PR & Marketing, wanted to provide real time meaning to large data sets for the gaming industry. She identified that large sums of cash were being burned in the early days of video games in the 90s. Kerri left her previous job and as a result Fancensus.com was established in 2004 in a spare bedroom with a single computer.

From here on the hard work really began. Kerri spent countless hours on her computer manually inputting information into an elementary system that was coded by herself, enhancing the data with information she had collated herself. For the first few years as she was refining the data, Kerri received no income or recognition. It was about 2-3 years before the company started to see customers come on board. The big break came in 2006 when Fancensus.com secured a big client, this is when Kerri started to see the business grow. However, in 2008 the financial crisis hit and gaming consoles were not being launched quickly enough. Therefore, the technology and data industry slowed and therefore the demand for products. Although these years were tough Fancensus.com continued to grow, and by 2013 leading market competitors Sony and Microsoft released new consoles and the gaming industry had recovered. This was when Fancensus.com saw substantial growth, bringing on new employees and building up their assets.

Then in 2016 Fancensus.com needed a professional to look at their accounts, this is when the company decided to bring in a part time FD from The FD Centre: Kerri Davies:

“I am not too comfortable with the accounting side of things, we really needed to enhance the business profitability. In order to keep investing in the business, I needed to have a professional look at our forecasting and understand the results better so we can make informed decisions. This is exactly what Chris Willford (Thames Valley FD) is bringing to the table”

Now Fancensus.com are providing data warehousing and valuable insights for entertainment companies across the globe! Fancensus.com has scaled up from its humble beginnings in a spare bedroom in 2004 to a team of 15 today. Scaling up any business can be very problematic however. As you can see with Fancensus.com a combination of hard work, determination and strategy to put procedures in place and minimise the risk can help a company become successful and profitable.

To find out more about Fancensus.com visit www.fancensus.com

To discover how the FD Centre will help your company to scale up, please call us on 1300 447 740 or contact us here now.

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