Great leaders ride in the back seat and make better use of their time

As an owner and leader of an SME business, your focus is always getting from point A to point B with all occupants arriving at your ‘destination’ safely and on time, to use a car analogy.

You’ve got better things to do than be worried about speeding fines, engine temperature, blown tyres, running out of fuel, which turn off to take and when your next service is due.

It’s your job to decide where to go and choose the ‘destination’. Your job to decide what sort of vehicle you will travel in, who you take with you in the car and who you trust to drive it.

A private chauffeur is polite, discreet, well prepared and better at managing the ‘white noise’ that comes with driving in heavy traffic, so you can arrive safely. Good ones will keep you updated on your arrival time, keeping you informed, but at ease that you are on track. They make you feel safe and de-stressed allowing you to make better use of your time by making some important phone calls as you travel.

But not all SME’s can justify the overhead that comes with a full-time private ‘chauffeur’.

Not many even need it. Most would be better off using an outsourced chauffeured limousine service as and when they need it.

A CFO is like your own private ‘chauffeur’. A Virtual CFO is like an outsourced chauffeured limousine service to use this analogy.

Virtual CFO’s see into your blindspots and show you where you are heading. They enable you to make informed strategic decisions about the future, so things stay on track.

If you are surrounded by chaos and uncertainty, reacting to ‘spot fires’ and being pulled away from what you should be doing, into dealing with finance problems, you’d be mad not to consider a one.

David Dillon is the President of the Virtual CFO Association.

The Virtual CFO Association is an elite peer network, advocating and promoting the emerging Virtual CFO sector within the accounting profession. Collectively the association currently has almost 600 years of industry experience, with highly qualified and experienced specialists spread across more than 20 industry verticals. If you would like any more information regarding the Association of Virtual CFO’s, please visit our website www.vcfoassociation.com.au

 

#sme #virtualcfo #accounting

complying with regulation is not the same as best practice

Everyone knows you cop a fine if you fail to meet all your compliance obligations, however there is no punishment you fail to manage your business finances properly.

It just happens that you can’t manage a business properly without global best practice financial management (budgeting, forecasting, reporting and cashflow).

The best companies all over the world run by elite leaders do not to confuse regulation with best practice. In fact, they deliberately decide to opt-in to best practice financial management because it creates shareholder value, not so they can avoid punishment.

Yet in Australia, most SME’s still associate the accounting profession with only tax and compliance services.

Maybe this is due to our convict colony beginnings, as it seems Aussies are better at being coerced than persuaded.

The paradox is that Aussie SME’s crave peace of mind, reliable profits and predictable cashflows, yet they have no visibility of where they are heading, or ability to make informed strategic decisions about the future, despite a squeaky clean compliance record.

Instead of making informed decisions about the future, they trawl over historical compliance numbers hoping for ‘the answer’ to jump off the page and land in their lap, whilst heading off into the sunset flying by the seat of their pants.

Maybe the best companies from all over the world are onto something?

David Dillon is the President of the Virtual CFO Association.

The Virtual CFO Association is an award winning elite peer network, advocating and promoting the emerging Virtual CFO sector within the accounting profession.

Collectively the association currently has almost 600 years of industry experience, with highly qualified and experienced specialists spread across more than 25 industry verticals.

If you would like any more information regarding the Association of Virtual CFO’s, please visit our website www.vcfoassociation.com.au

#VirtualCFO #smes #accounting

Australian Accounting Awards 2022 – Network of the Year ( winner)

Sydney, 16th June 2022 –  we won the Network of the year ( Finalists 2020 + 2021).

President David Dillon had the honour of representing the Virtual CFO Association, getting on stage to accept the award, but this award goes to everyone who has shown faith and supported our struggle to increase awareness and push the VCFO cause.

In a strange twist, David Boyar, one of the original co-founders of the Association presented the gong sponsored by Change GPS.

A transcript of David’s speech :

Well wasn’t expecting that – 3rd time lucky 

Thank you very much everyone. Thanks to Accountants Daily for the award and especially thanks to the Virtual CFO Association members, who make it what it really is, I think this is a vote of confidence in what we’ve all been working towards. 

We want to be known as a resource for Accounting firms, that they can tap into to better serve their clients, enhance you client relationships, reduce risk and make more money. We think that the best value accounting combination for small businesses to have is a bookkeeper, a virtual CFO with Industry experience and a tax accountant working in harmony with each other. Egos to the side and clients at heart. 

Thanks very much

Afterwards,  David said he wished he’d spoken a bit longer. And yes, that’s a kilt David is wearing.

Whilst this is definitely a few rungs below a Nobel Peace Prize, these are the ONLY profession wide awards in Australia and people flew in from all over the country. There were over 500 people in the room and people are starting to notice us.

 

7 Things to do today to Help your Business for End of Financial Year

Does End Of Financial Year fill you with apprehension and a nervous sweat?

It’s like your in direct sight of a rampaging bull headed straight at you and you have nowhere to run or hide.

For the uninitiated End of Financial Year or EOFY abbreviated is that time of the year when your business calls time on it’s scorecard and assesses it’s financial performance for the year whilst getting ready for the new one coming.

EOFY doesn’t have to be scary and here are 7 things you can start doing today to take the fear away.

  1. Know your Balance sheet

This is where the numbers of your business tell a story. Every Asset and Liability should be reconciled so you know exactly what money is due to come in and money to go out. It is good Financial Practice for all Balance Sheet accounts to be reconciled each month, so you know where the numbers are.

One client had forgotten a $10,000 debt sitting in their debtors for over a year. How can you forget something like this? Well, it happens if no one is reconciling your debtors, especially when the focus is always on shiny new customers, sometimes forgetting about the old ones.

  1. Time to Take Inventory

For a product-based business this is critical as inventory sitting in your warehouse is where your excess cash is. Counting what you have, makes you aware of how long it has been sitting there and forces you to make decisions about what to do about it. Leave it sitting there for another year or discount it at a lower price to get rid of it. The choice is yours and your bank balances to make.

This “taking Inventory” also applies to service -based businesses. You can count your software licenses, your subscriptions and assess whether you still need all those Adobe Photoshop subscriptions, chances are you don’t need all of them.

  1. Insurance Risk

12 months is a long time in business, how has yours changed during this time. New Customers and new markets? You need to make sure you are protected, and you are minimising your risk profile.

A business can move to new premises during the year and then latter realise that in the event of a fire they are not covered because they had not disclosed the new location to their insurer.

The motto of EOFY is tell your Insurer Everything, pretend you are going to confession, leave nothing out to make sure you are covered.

New offices, new cars…tell them everything.

  1. Check your Data

Data is one of the most valuable assets of any business. It helps you make decisions to help boost revenue and make you more efficient. Most businesses are riddled with Duplicate Data !

Is that Anne Smith or A. Smith in your customer listing?  No wonder email campaigns get no traction. Get your data clean and remove the duplicates. Run your customer listings and remove the duplicates.

Don’t forget to check your Physical Data as well. Is your data secure?  Is your server still under warranty? Is your data protected as best you can from Cyber Security threats?

  1. Are your transactions up to date?

Make sure all your invoices are up to date & you have paid your taxes on time. Talk to your bookkeeper to make sure all transactions are posted in your accounting system.

You have only days to go before June 30th so you need to make sure the profits you show reflect all your business costs during the year.

Don’t be that business who closes the year off only to find latter that additional expenses from last year have come to light that throw out your previously expected profit result. Make sure you are up to date, always and no surprises when the Auditors come calling.

  1. Dust off your Financial Plan

How certain are you that you will be making profit next year,I mean really.

The economy is riddled with challenges, rising prices, cost of living and wage pressures, increases in electricity, the war in the Ukraine…the list is endless.

Your financial Plan must factor in all these shocks so your business stays resilient and out in front.

Fail to Plan and you can Plan to Fail is an all-too-common catch cry.

Do you know that 2 out of every 3 businesses fail after 3 years due to a lack of planning.

A sound Financial Plan targets next years revenue and expenses.

What sales are you going to achieve next year, realistically and at what price can the market afford. Remember without a sale you have no business, so you need to get this right. How much money do you need to spend to make these sales – marketing, wages and overhead expenses like rent must be reviewed to ensure enough of a profit is being generated and as a business owner you are getting an appropriate return on your Investment.

  1. Hire a CFO

A CFO will make sure all of these things are done not only before EOFY but throughout the year.

You need to know how many sales you need each month before you break even and cover your costs.

You need to know what your cash position is going to look like in 6 months’ time so you can plan for and fund future growth of your business as well as making sure you have enough to pay wages each month.

That way you can sleep well at night, focus on what you do best, run your business and make sure you are all prepared and no longer work up a sweat over next year’s EOFY.

Chris Kondou is a member of the Virtual CFO Association.

The Virtual CFO Association is an elite peer network, advocating and promoting the emerging VCFO sector within the accounting profession. Collectively the association currently has over 600 years of industry experience, with highly qualified and experienced specialists spread across almost 30 industry verticals. If you would like any more information regarding the Association of VCFO’s, please visit our website www.vcfoassociation

Budget Your Business for Success

100 years ago the flywheel delivered power from a motor to a machine.

Today a different type of flywheel is needed to give your business

  • momentum
  • remove friction
  • Apply Force
  • Give your Business Flow, Accuracy & Accountability

1 in every 3 Australian businesses operating in 2017 failed to survive until 2021 because of lack of planning.

Planning alone can’t save your business, you need an actionable roadmap, a Budget to help you achieve your Plan.

A Plan without a Budget is just a daydream

A Budget without a Plan is a nightmare

The Solution is a Plan & Budget Flywheel, working in unison, not just one or the other but both.

With a New Financial Year just a few months away, inflation and supply chain issues causing uncertainty,  follow the 7 Steps on the Flywheel and you’ll be building the right momentum to success.

  1. What’s Your Plan?

Define your Plan and decide whether you have the cash flow to help you get there. Do you need to borrow money, get a loan? How are you going to fund your Plan? How do you deal with a short-term cash shortage?  These are the critical questions you need to face up to.

  1. Cut the Fat not the Meat of Your Costs

Analyse all your costs, understand you have fixed and variable costs. Negotiate with your suppliers to get discounts by giving them commitment that you will be their Supplier of choice. Every $ counts. Get efficient. Don’t be an Open Bar tab, put purchasing limits in place and sign off’s and it all starts with putting it in your Budget and making yourself accountable to what you are spending.

  1. Estimate Revenue

Looks at prior revenues, talk to potential customers, set realistic goals, adjust for seasonal fluctuations, like Xmas and holidays.

  1. Gross Profit Margin

This is one business metric you can’t live without. No matter how many sales you make you have to know all your costs that went into that sale and how profitable it was. Yes you are in the business of making money, because if you don’t your competitor will. So get in front of the pack, Be Profitable Be Proud!

  1. Project Cash Flow

They say Cash is King for a Reason, so many businesses are caught without cash because they are waiting for their customer to pay. Look at trading terms, get money in advance of starting work, look at debtor finance scenarios…..make sure your cash flow is king all the time.

  1. Factor in Seasonal & Industry Trends

What happens if your industry only gets revenue during summer? How do you survive during winter. You need to budget for low revenue months and hope that you have enough revenue banked up in the bank to get you through the leaner months.

  1. Bring it All Together

A CFO will combine your Plan and Budget together, pull the numbers together and update them against actuals so you can see how you are tracking. Your budget teaches you valuable lessons about you and your business. It’ a life journey and we help you along your journey to success.

#virtualcfo #smes #financialmanagement

Chris Kondou is a member of the Virtual CFO Association.

The Virtual CFO Association is an elite peer network, advocating and promoting the emerging VCFO sector within the accounting profession. Collectively the association currently has over 600 years of industry experience, with highly qualified and experienced specialists spread across more than 25 industry verticals. If you would like any more information regarding the Association of VCFO’s, please visit our website www.vcfoassociation.com.au

Are you paying a heavy price for having a financial decision-making blind spot?

A lot of companies have Accounting Routines passed down by person to person and learned by rote, that provide a rudimentary accounting function which meets the minimum standard for tax compliance.

The way we always have done it here’ is not the same thing as global best practice.

‘The way we always have done it here’ makes them reluctant to try new things, and blind to the fact that often they are doing a great job of doing something that doesn’t make any sense of add value to financial decision making.

The thing is, the quality of your financial decision making don’t ‘show up’ as a line item in your P+L.

Nor does it ‘show up’ as a deductible item on your tax return.

The impact of financial decision making is hard to see, which makes it difficult to ‘pin’ on something or someone.

Whether you believe this to be true or not, every decision you make, every action you take has a financial consequence.

You might not be able to see it, but you could be paying a heavy price for having a financial decision-making blind spot.

The ‘price’ you pay is usually made up of inefficiency, waste and excess, which are intangible by nature. This makes it hard to put a value on, without thinking beyond a basic one-dimensional analysis of the P+L numbers.

The difference between what you actually made and what you COULD have made is an opportunity cost.

To use a simple illustration, if you had to turn down a $200 casual work shift to attend a free family BBQ you might say that it’s cost you $200 to attend the BBQ, but the loss in earnings is an opportunity cost – you won’t find it on your bank statement.

To work out the ‘opportunity cost’ you need a benchmark and/or a plan to compare your actual performance against. This adds layers of depth and a degree of complexity, which requires expertise to understand.

(Think of these like the foundations of a tall building.  Then imagine that global best practice lies at a depth somewhere between scratching the surface and digging to China.  Global best practice depth isn’t what your opinion says it is, it’s what the best companies in the world adopt. Unless you know what you are doing and dig to the right depth, your foundations will be shaky.

Let me give you a case study as an example.  A client engaged me to (using a car analogy)  ‘have a look under the hood’ of his business. This business had multiple locations along the east coast of Australia and turnover of almost $20M pa.

But, something wasn’t right.

They were all working their backsides off, but results were disappointing and unpredictable.  He said it probably needed more than a ‘tune-up’, it was more like it ‘wasn’t firing on all cylinders’.

After putting his ‘car up on the hoist’ my analysis revealed they were probably down $500K pa in profit versus best practice.

Their senior people were ineffective in their pursuit of marketing targets. They had staff motivation issues, the projects were in control of them, not the other way and they weren’t strategic in the way they did pricing.

They thought of themselves as a European luxury car, but they were struggling to get from A to B.

All these things that can be fixed if you know what you are doing, but virtually impossible to see if all you do is stare at the P+L hoping for the answer to jump off the page and land in your lap.

So if you want to stop flying by the seat of your pants your business to grow on solid foundations speak to a Virtual CFO Association member about developing an financial decision making information ecosystem that spans the past, present and future, which will allow you to see where you are headed, stay on track and have enough time to make informed strategic decisions.

David Dillon is the President of the Virtual CFO Association.

The Virtual CFO Association is an elite peer network, advocating and promoting the emerging Virtual CFO sector within the accounting profession. Collectively the association currently has almost 600 years of industry experience, with highly qualified and experienced specialists spread across more than 20 industry verticals. If you would like any more information regarding the Association of Virtual CFO’s, please visit our website www.vcfoassociation.com.au