Introducing Virtual CFO

Not unexpectedly, July 2009 has been the calm before the storm at SUMMIT after the commencement of the new financial year. So, while the team has used this quieter period to ready themselves for the upcoming “silly season” they've also used this opportunity to further develop new client services for you.

We’re now pleased to officially launch our new Virtual CFO service which has been designed specifically for clients wanting timely financial information to assist them with successfully and efficiently operating their business. Not only do we prepare the on-going and client-specific management reports, one of our Partners will also meet with you every quarter to discuss the findings/trends and identify possible areas for improvement. Budgets are prepared upfront in order to provide you with a guide as to the financial future ahead. 

Even before the onset of the GFC, we've been receiving more and more requests to provide this type of service and we’re delighted to be able to now deliver it in such a streamlined manner.

Please contact us to learn how we are able to help your business.

Saving your business with cash flow and capital management

Increasingly, businesses are being encouraged to actively manage their cashflow. With companies failing because they run out of cash or are forced into liquidation, cash flow management becomes a vital part of the company's survival plan.

A good cash flow forecast, though, is simply good business. You, as a business owner, need to understand your cash flow cycle, what is affected by increasing debtors, what happens when you purchase extra trading stock and how to time your income and expenses. A realistic forecast should be based on the operations and budget projections of your business, including alternate forecasts in case your projections are not met. Having a good cash flow forecast is even more important during rapid growth phases, when your business is under increased pressure.

However, is good cash flow management alone going to save your business? In short, no. You need to combine your cash flow forecast with a capital management plan to ensure you are in control of your business.

Capital management involves managing all aspects of your business to achieve the best mix of debt and equity. Businesses are funded from capital, debt and retained profit, so you need to identify how much capital your business needs and how much is being supplied by the owners of the business. Many businesses in their initial phase are undercapitalised, as they do not have retained profit. This undercaptialisation places these businesses under increased pressure.

Good capital management involves understanding which areas, outside of your operating budgets, also require cash. These areas include:

It is possible to be profitable and have a positive cash flow, but still be under cash flow pressure.

So, is a capital management plan for you? Ask yourself these questions:

1. Does your accountant sometimes tell you how much profit you have made and your first response is, where is it?
2. Do you fund your depreciation?
3. Do you have a clear dividend policy?
4. Do you review and confirm your capex budget each year? (If you don’t know what a capex budget is, then the answer is probably no!)
   

If you answered 'yes' to the first question and 'no' to the others, then you don't have a capital management plan in place. If you are serious about your business growth and management, creating a capital management plan should be on the top of your priority list.
If you would like to find out more about capital and cash-flow management can improve your business, contact us today on (03) 9622 0600 or click here to arrange a free consultation.

10 secrets of a winning business

Your business is running nicely, making a profit, and relatively successful. So what do you need to take your business that next step; from good to great? Here's the ten fundamentals for a great business:

Vision
The management team knows where they want the company to be in 3 and 5 years time and they have the plan to ensure that happens.

Leadership and drive
The owners lead and drive the direction of the business. Leading by example, they infuse their staff with their optimism and excitement for the success of the business.

Differentiation
The business has a point of difference, something that distinguishes them from their competitors and provides a competitive edge.

Market presence
Great business have market presence. They may not have the largest marketing budget, or even a great marketing team. Instead they understand their particular market and what needs to be done to position the business in that market.

Team
Great owners attracted great staff who in turn contribute their skills to grow the company.

Strong financial management
The business owners know their numbers and are actively involved in managing them. There are few surprises, as there are lead indicators in place that provide early warning signs for any potential problems. These lead indicators are carefully chosen KPIs (generally seven at most) that provide management with essential performance information on the business. They are supported by strong operating budgets, cash-flow forecasts and a strong follow-up system. Stock debtors, debt and cash all have clear target positions and are actively managed.

Great reporting
Despite the strong focus on the future, great businesses also maintain good governance and a reporting system that meets the needs of all stakeholders. Generally this includes regular monthly and quarterly updates, a comparison to forecasts, and resetting of latest period estimates that balance the past with the future.

Sustainable business model
Winning businesses have a sustainable and profitable business model which brings together all the elements required to produce great results. The model covers what is required for success, with a focus on outstanding results.

Operational fulfillment
Great businesses deliver. While others have good ideas or can sell well, only the best businesses can deliver.

Adequate capital
They understand how much capital is required and how to put that capital into place. Owners are prepared to leave profits in the business and manage cost structures down to allow the business to grow and develop.

Quote of the month

“Any fool can make things bigger, more complex, and more violent. It takes a touch of genius - and a lot of courage - to move in the opposite direction.”   Albert Einstein