Monthly Reporting 1-pager

Monthly Reporting 1-pager

I have always worked on the principal with management reporting, that if I was down to my very last sheet of paper and my life depended on it, how would I convey the right message to the decision makers.

In this respect reporting is highly creative.

Management reporting, that is, not reporting compliance where accounts are prepared using common standards to remove inconsistencies from country to country and Auditors then examine the accounts to provide assurance that these standards are being followed. Compliance is more about accuracy and adherence with a historical focus. Essential and skilful, but not strategic, insightful, and future focused like management accounting.

When designing a good management report, in addition to having bullet-proof numbers you must:

  • understand the audience
  • structure the information to make it easy to understand
  • anticipate any queries and be proactive

Often existing, lengthy reports are the legacy of numerous ad-hoc requests by Directors to add a new schedule here and there. Additional information is easy to add, but nobody ever removes and then nobody has time to read and work out it is the same information, just formatted differently.  After all, there is only so many ways you can slice up an apple.

Albert Einstein once said, “If you can’t explain it simply, you don’t understand it well enough.”

To make a change to the agreed ‘one-pager’ other stakeholders input on requisite content should be sought, before issuing a draft format of what the proposed 1-pager would look like, sort of road-testing and then Directors reaching a new consensus that this new version will be the new one-pager.  Maintaining a good ‘1-pager’ then becomes an exercise in discipline, cohesion, and prioritising. If something new is proposed, something old needs to be dropped to make room for it.  Ongoing feedback and communications play a huge role here.

I love how dashboards can virtually stream information live to managers, but you must understand the correct drivers of the business to monitor. A good-looking dashboard reporting on unnecessary metrics is a waste of time.

There will always be a need to dig deeper and provide supplementary detail if required but sending this out as a standard reporting package overwhelms the end user, taking the focus away from the message you want to convey.

I have had a lot of success with the one-pager over my career. It will take a few months to change things around if you are not yet at that point, but the effort will pay dividends later. Stick to the one-pager principal and you will soon find your top-level conversations assume a more strategic flavour.

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 over 500 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

Accountants ain’t Accountants

Accountants ain’t Accountants

Here’s a story about 3 kids who lived next door to each other, went to school together and got identical results in the HSC, attended cooking school together and got identical results, but on completion of their courses were then presented 3 different employment opportunities.

One got a job at the local RSL, in their award winning bistro, flipping burgers, steaks and smashing out chicken parmigiana by the hundreds, on a busy Saturday night.

Another got a job at a local Italian restaurant learning to make a mean pizza and even better authentic pasta sauces.

The last one got a job at a Michelin hat restaurant,  learning to make small, fancy tasty and expensive dishes garnished in air dried, baby Himalayan, wild zucchini flowers.

After 10,000 hours experience, each were experts in their fields.

Then one night, for fun, they decided to do a 3-way role swap.

What do you think happened?

Thankfully it didn’t actually happen. It would have been a disaster.

Another great analogy to explain the difference between accounting specialities is to look at the medical profession. People get that GP’s are generalists. Leg specialists look after legs, eye specialists look after eyes and heart specialists after hearts.

You can draw the same parallels  in the accounting profession and that’s the reason why tax people should do tax, audit people should do audit, insolvency people should do insolvency and leave the expert commercial financial management up to CFO’s.

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 over 500 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

Will it be safe to ‘return to work’?

Will it be safe to ‘return to work’?

Wondering when we are going safely ‘back to work’ is on everyone’s mind and people are having mixed feelings. For many the fear and trepidation of catching COVID 19 is paralysing, whilst others are really missing the interaction as the novelty of WFR wears off.

A big chuck of corporate Australia is already working safely….productively and efficiently. Remotely. For this big chunk, the virus has been the ultimate in validation for Virtual working.

“A challenge for employers in the city may be the reluctance of people to return to work early due to concerns of safety in public transport, or a preference for more flexible work options now that many employees have experienced work from home.” Said ICG’s human capital leader, Greg Barnier, AFR May 5, 2020.

The technology to enable remote / virtual working has existed for many years. A psychological inertia has been the main barrier, that has rendered corporate Australia unwilling to let go of the historical ritual of gathering in a central location. Risk averse executives have been reluctant to rock the boat. Ego driven executives enjoy the prestige of a corner office.

But much like Y2K forced the corporate world to re-think and embrace IT, COVID 19 has similarly forced them down the road of virtual working. A path they probably wouldn’t have gone down left to their own devices.

And the verdict?  If your company can survive the biggest crisis in a lifetime (that they wouldn’t have otherwise) by adopting virtual working, why would they revert to the ‘old normal’. When they now have proof that being in close proximity to each other every day isn’t actually the driver of performance that was previously accepted, why would they force employees to go back? When all of the benefits of virtual working have now been discovered why would you force staff back into the ritual of daily commuting and hand back all those benefits?  And why would companies risk the health of their employees and why would they continue to rent thousands of square meters of commercial office space for no measurable financial gain?

In future face to face collaboration needs to be justified,  planned, purposeful and productive, if not work from where ever you like or wherever you need to. Travelling 2 hours a day because ‘we used to before’ is no justification.  Surely the balance between  frustration with ‘new normal’ and the benefits of the new normal would be no worse than 50/50.

Virtual working at the current rate of adoption will give our transport infrastructure the equivalent of a huge boost in capacity that would have cost many, many billions. The crisis has been like winding back the clock to a time when our population was much smaller. Our major cities will be much more liveable for the next 20 years as a result , improving the quality of life of everyone, not just the Virtual workforce.

Our clients are smart enough

Our clients are smart enough

Starting out, owners or founders of small businesses can survive by relying on their gut instincts and keeping themselves busy. They have complete visibility of what is going on around them from day to day because there just aren’t that many moving parts to grapple with.

As their businesses scale up and grow however, things get far more complex. They might add employees, expand their footprint, or add products or services to the original offering. The initial taste of success can be an intoxicating fuel for their egos and ambition, however the aftertaste is a feeling of ‘flying by the seat of their pants’

Consequently a lot of businesses will stumble while taking the ‘next step’. Despite having a book-keeper, a tax accountant and substantial turnover –  their monthly results and cashflow are volatile, unpredictable and often disappointing.

More than anything they just want to be able go home at night and switch off, having peace of mind that tomorrow will not be the day that they wake up and all their fears about losing everything become a reality.

Our clients are smart or at least smart enough to understand the value in having an experienced, strategic, commercially savvy industry specialist on their team.  They know it’s the most cost-effective way to add this essential capability, to gain an edge in this hyper-competitive environment.

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 over 500 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

Surviving and Re-Booting are 2 separate problems

Surviving and Re-Booting are 2 separate problems

As the twin crisis takes it’s grip on SME businesses, desperate owners are turning to their trusted advisors to decipher the vast array of issues they are confronting.

Broadly, there are 2 separate problems : How to survive now that the ‘music has stopped’ and how to start up again when it’s safe to press ‘play’.

For many immediate survival is centred around the raft of Government support and stimuli. Jobkeeper payments, PAYG reduction, payroll tax waivers, land tax relief, bank loan freezes, tenancy evictions moratorium, early release of superannuation.  Essentially this is a compliance exercise. Fill in an application and wait for approval. This will allow most people to ‘hibernate’ until it’s safe to emerge. Bunker down, cut costs to the minimum, reduce inefficiency, eliminate waste and get some income support if you can.

But starting again is going to be a whole different problem. Things aren’t going to just go back to ‘normal’ like a on-off toggle switch.Some businesses in some industries are going to find their feet much quicker than others. Businesses that rely on consumers discretionary spend are going to struggle.

It really highlights the need to be able to properly forecast. This is not a compliance exercise.

Forecasting is a planning tool. It is a creative process using analysis, estimates and assumptions to predict ‘A future’. (Nobody can predict THE future).

Good forecasts allow you the user to drill down into the granular detail to examine the analysis underpinning assumptions and test their ‘reasonableness’.  (things like sales volumes, pricing, wages, materials, capacity, utilisation etc).

Usually the starting point is a detailed revenue forecast that pushes right up into the sales funnel to show, who, what where and when the work is coming from. This is then mapped back against capacity calculations to double check that it’s achievable. Ultimately you need a 3-way forecast, where the Profit & Loss, the Balance Sheet and Cash flow Statement are all integrated, because cash flow is what determines solvency.

Best practice is to run scenarios, of the best, worst and likely case. It forces you to think strategically of the future and gives you the ability to anticipate, evaluate and navigate. This allows you to have contingency plans in place “if this or that happens” to mitigate and seize opportunities, rather than be reactive and hope things work out. (NB hope isn’t a strategy)

A lost of business owners won’t have ever confronted an empty forward order book as they look to re-start. If you’re one of them make sure your trusted advisor has sufficient expertise in forecasting and knowledge of your industry or the likely scenario is that you’ll feel like you’re blindfolded as you fight for survival.

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 over 500 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

Is Virtual CFO a good industry to be in, post COVID-19 ?

Is Virtual CFO a good industry to be in, post COVID-19 ?

Is Virtual CFO a good industry to be in post COVID-19 ?

The best way of dissecting this and answering is to do a Porters 5 Forces analysis.

Competitive Rivalry

The rate of industry growth in this fast growing and emerging sector of the accounting profession means there is plenty of work to go around.

Because we are all so individually different based on our extensive elite industry vertical expertise, we don’t represent threats to each other. If anything, we complement each other’s skill sets, which allows us to cover more ground and dig deeper than any other Virtual CFO organisation in the country. The Association also has the 5 principles of collaboration which includes a no poaching rule. We believe that with collective experience totalling almost 500 years, across over 20 industry verticals that the Association members offer a more comprehensive, compelling solution to non-members and solopreneurs.

Threat of new entrants

How hard it is for someone to come in and compete for market share against a VCFO’s offering?

The set-up capital costs are relatively insignificant. A desk, a laptop, website, phone and enough cash in the bank to last until your business is profitable. What is not insignificant is the comprehensive educational background and average of 25 years of corporate industry experience. You cannot accelerate getting these and you cannot do without them. Bookkeepers and compliance accountants cannot do a simple course to ‘convert’ and without the requisite expertise, clients and their businesses will be disappointed or even harmed.

The twin crisis has given Virtually every CFO a taste of life as Virtual CFO. For many CFO’s, through no fault of their own, they will find themselves under employed or worse and needing to find work as a Virtual CFO. For others, the crisis represents an opportunity to capitalise on their immense expertise and start a consulting Virtual CFO business. But getting off the ground, starting a business from scratch is tough, as all our members know from experience.

Buyers’ Bargaining Power

Ultimately the client chooses who they work with and who they do not. Most clients realise that the best Virtual CFO for them, will have many years of experience in their industry vertical. As such, it becomes a supply and demand issue. If you want expertise and there is not a huge pool of people to choose from, they don’t have much bargaining power. Virtual CFO is not a commodity.  Most Virtual CFO’s are limited to about 10 decent sized clients, so they are careful about aligning themselves with the client’s success.  If clients chose on price alone, they will probably end up with a Virtual CFO that isn’t suited to their business or experienced enough to keep up with the bouncing ball.

Suppliers’ Bargaining Power

Is relatively weak. Virtual CFO’s are technology enabled, but software agnostic. That is, the software itself isn’t the ‘secret sauce’ of what we do. Whilst we do factor in client’s preferences and switching costs, there are often several options we could use for our clients, meaning we are not beholden to any particular supplier.

Substitutes and Complements

When people start to question the value of something, they might look towards an alternative, or substitute. An example would be someone who likes going to the theatre to see live performances but finds that the cost has become prohibitive and that for a fraction of the price they can go to the movies and still be entertained.

Given Virtual CFO’s have an average of around 25 years of industry experience, it makes it hard for someone without that experience to come up with a credible alternative, compelling reason to switch. Historically the biggest obstacle Virtual CFO’s encounter as a substitute, is from the clients employing a full-time CFO. Mostly that has been due to psychological inertia and fear of the unknown. Often the internal CFO option they chose is someone with half the experience, that works twice as long, but that isn’t the same thing as a 25+ year industry experienced expert. The twin crisis has changed that and proven the Virtual team / remote working model can work. In fact it has been the ultimate in validation.

 

We do not think there has ever been a more exciting time to be starting out in this fast growing and emerging sector. If you look at the USA and Europe, Virtual CFO is more common. They are early adopters; Australia has been the laggards, but uptake of Virtual CFO services in the broader business community is set to explode as the economy gears up for a re-start.

Virtual CFO’s enabled by cloud accounting can offer huge efficiencies compared to the traditional model. We are a resourceful nation and as people look to reduce inefficiency, waste and excess, they will soon realise the value in having a Virtual CFO.