It's nearly end of financial year, how should I set next financial year to be better?
As the end of the financial year approaches, it's a good time to reflect on the past year's performance and set goals for the upcoming financial year.
As the end of the financial year approaches, it's a good time to reflect on the past year's performance and set goals for the upcoming financial year.
Here are some steps you can take to set yourself up for success in the next financial year:
1. Review your financial performance: Look at your financial statements for the past year, including your income statement, balance sheet, and cash flow statement. Analyse your revenue, expenses, profits, and cash flow to identify areas for improvement.
2. Set realistic goals: Based on your financial performance review, set realistic goals for the upcoming financial year. Be specific about what you want to achieve, such as increasing revenue, reducing expenses, or improving profitability. Make sure your goals are achievable and measurable.
3. Develop a budget: Create a detailed budget for the upcoming financial year that aligns with your goals. Identify areas where you can reduce costs or increase revenue. Make sure to account for any expected changes in the business environment, such as inflation or new regulations.
4. Evaluate your pricing strategy: Review your pricing strategy and consider whether you need to make any changes. Are you pricing your products or services competitively? Are you leaving money on the table by underpricing? Consider adjusting your pricing to better reflect the value you provide.
5. Assess your marketing strategy: Review your marketing strategy and consider whether you need to make any changes. Are you targeting the right audience? Are you using the most effective channels to reach your customers? Consider investing in new marketing channels or strategies to drive growth.
6. Improve your financial management: Consider implementing new financial management practices to improve your financial performance. This could include improving your cash flow management, streamlining your accounting processes, or investing in new financial software or tools.
By taking these steps, you can set yourself up for success in the upcoming financial year.
By reviewing your financial performance, setting realistic goals, developing a budget, evaluating your pricing and marketing strategies, and improving your financial management practices, you can position your business for growth and profitability in the next financial year.
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How do you build a cashflow forecast?
Building a cash flow forecast can help businesses plan their cash needs and ensure they have enough liquidity to cover their expenses.
Building a cash flow forecast can help businesses plan their cash needs and ensure they have enough liquidity to cover their expenses.
Here are the steps to build a cash flow forecast:
1. Determine the time frame: Decide on the period you want to forecast (typically a week, month, or quarter).
2. List all sources of cash: Start by listing all the sources of cash for your business, including sales revenue, loans, and investments.
3. List all cash outflows: Next, list all the cash outflows for your business, including salaries, rent, inventory, and other expenses.
4. Estimate the timing of cash flows: Estimate when the cash inflows and outflows will occur during the forecast period. For example, you may receive payment from a customer in 30 days or pay rent every month.
5. Calculate the net cash flow: Subtract the cash outflows from the cash inflows to determine the net cash flow for each period.
6. Adjust for changes: Review the forecast and make adjustments for any changes that may affect cash flow, such as new sales contracts, changes in expenses, or changes in borrowing.
7. Monitor actual cash flow: Compare the actual cash flow with the forecast regularly to identify any discrepancies and adjust the forecast as necessary. Cash can come from a variety of sources, such as sales revenue, loans, investments, or other income.
By building a cash flow forecast, businesses can better plan their cash needs and ensure they have enough liquidity to cover their expenses.
It can also help businesses identify potential cash shortfalls and take proactive steps to address them before they become a problem.
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5 Tips To Optimise The Working Capital Position Of A Company
Working capital is a financial concept that refers to the amount of money a business has available to cover its day-to-day operations.
In simpler terms, it is the money a business needs to pay its bills, buy inventory, and pay its employees.
Working capital is a financial concept that refers to the amount of money a business has available to cover its day-to-day operations.
In simpler terms, it is the money a business needs to pay its bills, buy inventory, and pay its employees.
Working capital is calculated by subtracting a business's current liabilities (the bills and expenses it owes in the short term) from its current assets (the money it has on hand, such as cash and accounts receivable).
Positive working capital means that a business has enough money to cover its short-term obligations and invest in its operations. Negative working capital means that a business may struggle to pay its bills and may need to borrow money to cover its expenses.
Working capital is important because it helps a business maintain its day-to-day operations and invest in growth opportunities. For example, if a business doesn't have enough working capital to buy inventory, it may not be able to meet customer demand and could lose sales.
On the other hand, if a business has too much working capital, it may be missing out on investment opportunities that could help it grow.
Managing working capital effectively is crucial for the success of a business. By monitoring cash flow, controlling expenses, and managing inventory levels, businesses can maintain positive working capital and ensure that they have the resources they need to operate and grow over the long term.
Here are five tips to optimise the working capital position of a company:
1. Streamline Accounts Receivable: The longer it takes for a company to collect money from its customers, the longer the company's money is tied up in unpaid invoices. To optimise working capital, it's important to streamline accounts receivable by setting clear payment terms and following up on overdue invoices.
2. Control Inventory Levels: Holding excessive inventory ties up valuable working capital. By controlling inventory levels and using inventory management techniques such as just-in-time (JIT) inventory, companies can reduce the amount of money tied up in inventory.
3. Manage Accounts Payable: It's important to pay bills on time to maintain good relationships with suppliers, but paying too early can tie up working capital unnecessarily. By managing accounts payable and negotiating favorable payment terms with suppliers, companies can maintain positive working capital and build stronger relationships with suppliers.
4. Improve Cash Flow Forecasting: By improving cash flow forecasting, companies can better anticipate short-term cash needs and optimise working capital accordingly. Accurate forecasting can help companies avoid cash shortages and ensure that they have enough cash on hand to cover day-to-day expenses.
5. Consider Alternative Financing Options: In some cases, companies may need to borrow money to cover short-term cash needs. By considering alternative financing options such as invoice financing, asset-based lending, or supply chain financing, companies can access the working capital they need without tying up valuable assets or taking on unnecessary debt.
By implementing these five tips, companies can optimise their working capital position and improve their financial health over the long term. Growth opportunities such as new product development, marketing, or expansion into new markets. This can lead to falling behind competitors and losing market share.
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How is cash different to profit?
Cash and profit are two important financial concepts that are often used interchangeably, but they are not the same thing.
Understanding the difference between cash and profit is crucial for managing a business's finances effectively. In this article, we will explore how cash is different from profit.
Cash and profit are two important financial concepts that are often used interchangeably, but they are not the same thing.
Understanding the difference between cash and profit is crucial for managing a business's finances effectively. In this article, we will explore how cash is different from profit.
What is cash?
Cash refers to the actual physical currency or money that a business has on hand or in the bank. It includes all the liquid assets that can be used to pay for expenses or invest in new opportunities.
Cash can come from a variety of sources, such as sales revenue, loans, investments, or other income.
What is profit?
Profit, on the other hand, is the difference between the revenue that a business generates and the expenses that it incurs. It represents the financial gain or profit that a business makes over a given period of time.
Profit can be calculated on a monthly, quarterly, or annual basis, and is typically reported on a company's income statement.
How are cash and profit different?
While cash and profit are related, they are not the same thing. The main difference between cash and profit is that cash represents the actual money that a business has on hand, while profit is a measure of financial gain over a period of time.
Here are some of the key differences between cash and profit:
1. Timing: Cash and profit are measured over different time periods. Cash represents the money a business has on hand at a given point in time, while profit is calculated over a period of time, such as a month or a year.
2. Revenue recognition: Cash is only generated when a business receives payment for its goods or services, while revenue is recognized when goods or services are sold, regardless of when payment is received. This means that a business can have revenue without cash, and vice versa.
3. Non-cash expenses: Profit is calculated by subtracting all expenses from revenue, including non-cash expenses such as depreciation. However, these expenses do not impact cash flow directly, so a business can have positive cash flow even if it is not making a profit.
4. Timing of expenses: Expenses can be paid with cash at the time they are incurred or can be paid later. This means that a business can have negative cash flow even if it is profitable, because it is paying expenses that it incurred in a previous period.
Can a business fail because they don't manage their cash?
Yes, a business can certainly fail if they don't manage their cash properly. In fact, poor cash management is one of the most common reasons that businesses fail. Here are some of the ways that not managing cash can lead to failure:
1. Running out of cash: If a business doesn't manage its cash flow properly, it can quickly run out of money to pay its bills and employees. This can lead to missed payments, defaulted loans, and even bankruptcy.
2. Inability to invest in growth: Without a strong cash position, businesses may be unable to invest in growth opportunities such as new product development, marketing, or expansion into new markets. This can lead to falling behind competitors and losing market share.
3. Poor financial performance: Poor cash management can lead to poor financial performance, including falling profits and declining revenue. This can make it difficult for a business to attract investment and grow over the long term.
4. High debt levels: If a business relies too heavily on debt to cover its expenses, it can quickly become burdened with high interest payments and struggle to keep up with repayments. This can lead to a cycle of borrowing and more debt, making it difficult to ever become financially stable.
5. Strained relationships: If a business is unable to pay its bills on time, it can strain relationships with suppliers, creditors, and employees. This can make it difficult to maintain key partnerships and retain talented employees.
In conclusion, managing cash is crucial to the success of any business. By keeping a close eye on cash flow, investing in growth opportunities, and avoiding excessive debt, businesses can maintain a strong financial position and avoid the risks of failure.
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How to build a 13-week cashflow forecast
Cash flow forecasting is an essential tool for any business, helping to predict how much cash will be coming in and going out over a given period of time.
Cash flow forecasting is an essential tool for any business, helping to predict how much cash will be coming in and going out over a given period of time.
A 13-week cash flow forecast is a short-term projection of cash flow that can help businesses anticipate any potential cash flow gaps and plan accordingly. In this article, we'll go through the steps to build a 13-week cash flow forecast
Step 1: Gather your data
The first step in building a cash flow forecast is to gather all the relevant data. This includes historical cash flow statements, accounts payable and receivable reports, payroll reports, and any other financial reports that will help you to project cash flow over the next 13 weeks.
Step 2: Determine your starting cash balance
The next step is to determine your starting cash balance, which is the amount of cash you have on hand at the beginning of the 13-week period. This can be calculated by adding up all your available cash, including cash in the bank, petty cash, and any other sources of cash.
Step 3: Project your cash inflows
The next step is to project your cash inflows, which are the amounts of cash that you expect to receive over the 13-week period. This includes all sources of cash, such as sales revenue, loan proceeds, and other cash inflows.
Step 4: Project your cash outflows
The next step is to project your cash outflows, which are the amounts of cash that you expect to pay out over the 13-week period. This includes all expenses, such as payroll, rent, utilities, inventory, and other operating expenses.
Step 5: Calculate your net cash flow
Once you have projected your cash inflows and outflows, the next step is to calculate your net cash flow, which is the difference between your inflows and outflows. A positive net cash flow means that you will have more cash coming in than going out, while a negative net cash flow means the opposite
Step 6: Adjust your forecast
After calculating your net cash flow, review your forecast and make any necessary adjustments. This may include revising your projections for sales revenue, expenses, or other factors that can impact your cash flow.
Step 7: Monitor your cash flow regularly
Once you have built your cash flow forecast, it's important to monitor it regularly to ensure that you stay on track. Review your actual cash flow against your forecast on a weekly basis and make any necessary adjustments to your projections.
In conclusion, building a 13-week cash flow forecast is a critical tool for any business to manage its cash position.
By gathering all relevant data, projecting cash inflows and outflows, calculating net cash flow, and making regular adjustments, businesses can ensure they have the necessary cash to cover expenses and pursue opportunities.
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Cash is King
In conclusion, cash truly is king in the business world. A healthy cash position is critical to the success of any business, and managing cash flow effectively is essential.
By monitoring cash flow regularly, businesses can ensure a strong cash position and stay ahead of the competition.
The phrase "cash is king" has become a popular adage in the business world, and for good reason. Cash flow is the lifeblood of any business, and having a healthy cash position is critical to success.
In this article, we'll explore the importance of cash in business and why it truly is king.
Here are a few reasons why cash is king:
1. Liquidity: Cash is the most liquid asset. It can be used to pay bills, invest in new opportunities, and meet unexpected expenses. Having a healthy cash balance can provide a cushion in times of economic uncertainty or financial distress.
2. Flexibility: Cash provides flexibility and allows a business to respond quickly to changing market conditions. With cash on hand, a business can take advantage of new opportunities or quickly pivot its strategy in response to changing circumstances.
3. Credit worthiness: A strong cash position can help a business maintain good creditworthiness. Creditors and investors prefer businesses that have a healthy cash balance as it indicates that the business is financially stable and can meet its obligations.
4. Growth: Cash is essential for business growth. It can be used to invest in new equipment, hire new employees, or expand into new markets. A business with a strong cash position has more options for growth and can take advantage of opportunities as they arise.
5. Survival: Ultimately, cash is king because it is necessary for the survival of a business. Without cash, a business cannot pay
Why is cash important?
Cash is important for a number of reasons, including:
1. Operating expenses: Cash is needed to cover the day-to-day expenses of running a business, such as payroll, rent, and utilities.
2. Investments: Cash can be used to invest in new projects, technologies, or equipment to help the business grow and stay competitive.
3. Opportunities: Having a strong cash position allows businesses to take advantage of unexpected opportunities, such as a competitor going out of business or a new market opening up.
4. Emergencies: Cash reserves can help businesses weather unexpected events, such as natural disasters, economic downturns, or supply chain disruptions.
To ensure a healthy cash position, businesses must manage their cash flow effectively.
Here are some tips for managing cash flow:
1. Monitor cash flow regularly: Keep track of all cash inflows and outflows and monitor your cash position regularly.
2. Forecast cash flow: Use forecasting tools to project cash flow for the coming weeks and months, and adjust your plans as needed.
3. Collect receivables promptly: Make sure your customers pay their bills on time, and follow up with overdue accounts.
4. Manage inventory levels: Keep inventory levels in check to avoid tying up cash in excess inventory.
5. Negotiate terms with suppliers: Negotiate favorable payment terms with suppliers to help manage cash flow.
6. Consider financing options: If you need additional cash, consider financing options such as loans or lines of credit.
In conclusion, cash truly is king in the business world. A healthy cash position is critical to the success of any business, and managing cash flow effectively is essential.
By monitoring cash flow regularly, businesses can ensure a strong cash position and stay ahead of the competition.
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The CFO role has many dimensions
The CFO role has never been so important. Companies are navigating uncertain territory and having a strong CFO that can manage the nuts and bolts of finance and help navigate the commercial as well is instrumental to how companies navigate this period.
The CFO role has never been so important. Companies are navigating uncertain territory and having a strong CFO that can manage the nuts and bolts of finance and help navigate the commercial as well is instrumental to how companies navigate this period.
The CFO is expected to know the numbers, manage the numbers and be proactive across the key financial metrics that can impact the ability of the business to do what it needs to do. The CFO needs to have the strength to battle the business when necessary, when the financial performance is below the budget/forecast view.
The CFO is also expected to be the strategist, working with the business to understanding/build and execute on the strategy. The budget and 3-5 year plan needs sufficient investment for the businesss to deliver on the longer term plan.
You can’t forget cash, cash is instrumental to ensure the business can operate, if you have a profit but don’t have operating cashflow, you get yourself into challenges. When COVID landed, many businesses that had not actively managed cash, needed to start, however there are businesses out there that don’t actively manage their cashflow, and this is a mistake.
You need to understand your timing of receipts, timing of payments, working capital requirements (inventory etc.) and understand how this interacts with your budget and forecast.
A 13-week cashflow forecast, is a must and allows you to look at your CF weekly against the budget and then roll another 13 weeks to understand the ins/outs of each cash. Once you understand cash, you can start to actively manage cash. Cash is king and in the current environment even more important than ever.
The CFO leads a finance team, sometimes owns other functions, works closely with the CEO and Executive Leadership team, and is actively involved with the Board, Shareholders and other key stakeholders.
The CFO also takes a leadership role with other projects, business unit to demonstrate the importance of Finance in supporting the other business units. Your shareholders will determine what kind of CFO you become…as in a private equity environment it’s quite different too, private ownership or founder lead company. Whatever the case, the role is varied, hard, challenging and rewarding.
If you are a CFO and looking for some tools, templates and relevant articles, see below Whiteark has some great tools for you to use in your role and with your teams. Jo Hands, Founder/Director of Whiteark has walked in your shoes and has some great experience with related topics and has some practical tools and templates you can use.
Check our CFO guide HERE .
Explore our thought leadership articles about Finance and CFO’s HERE
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My journey to CFO
I started on a typical path post university, 10 years at EY as an auditor……
I loved every minute of it.
Earnst & Young (EY) had a great culture, good clients, great people in the
I started on a typical path post university, 10 years at EY as an auditor…..I loved every minute of it.
Earnst & Young (EY) had a great culture, good clients, great people in the teams, great training, 360 feedback and opportunities to work on projects outside of client work.
I remember EY with fond memories and I remember the day I finished up there were many tears, it was 15th October 2010. EY pushed hard, but they also rewarded hard workers that delivered. I got overseas conferences (Japan, Venice), to lead a global project for a new tool, which allowed me the opportunity to lead, get people onboard and manage a big roll out for the ANZ region.
I loved my team, and my clients, favourite client being Village Roadshow – what’s not to love about Theme Parks and Movies. I learnt so much, but probably didn’t realise it until I left.
My first job out was Telstra, Sensis business unit – Technical, Reporting role. Likely considered a backward step – you are over-qualified in a lot of respects but under qualified in other respects. I was lucky to have a great team, peers and made some great friends along the way. I loved the industry. I loved being part of something and driving and making a difference and seeing that difference come through.
4 years after I started at Sensis, it was sold to Private Equity, which was where my career went from interesting to super-duper interesting. Working with the private equity firm to carve out from Telstra and set up the businesss under private ownership. It was a big change. I took a lead role in working with new shareholder to manage the transition and help build the business in the new world.
This included zero based budgets, cash flow reporting & forecasting and understanding the capabilities required to deliver on the change in strategy. It wasn’t just a big change for Finance but for the whole business, but finance become central to how the business operated and therefore the role I took was pivotal to the success.
Over the next 5 years, I worked as Deputy CFO, then transitioned to CFO and looked after Strategy, Finance, Operations and IT. My role continued to expand.
I really enjoyed the experience and breadth of the role. Navigating strategy, to building a budget and metrics to measure success and the capability in the business to drive the outcomes required.
We found over the period, people self-selected, and private equity wasn’t for everyone. It was about achievement, delivery and ensuring that all key metrics are met. Incentives ensured that the key metrics were measured, tracked and managed.
The private equity approach was hardcore and a lot of lessons were learnt along the way, but for me I realised this was the environment that I enjoyed, I loved the change, execution and an ability to drive an improved outcome in the results.
Since I finished up at Sensis, I have done a number of roles with other private equity firms – doing interim CFO roles, managing transitions, integrations, operating models, strategy, business plans etc, working with different companies to actively manage an acquisition (from DD) to the first 100 days, which will make or break a business and set the tone for the new world.
These projects require different skillset but a driver that can help move things forward and ensuring that there is a plan to deliver on the synergies baked into the plan. I have done this under the banner of Whiteark. I have other clients, but mainly working with PE on assessing, strategy, plan and execution for deals, and that is what I love.
I love the planning but then being able to get in there and really deliver. My finance experience, private equity experience and breadth of roles, has allowed me the opportunity to jump into consulting to private equity with both feet.
Not sure where my journey will land me, maybe back as a CFO one day, but for now enjoying the freedom, challenge and drive of working for myself and picking my clients and making a difference every day.
With my background as CFO – we have a range of tools and FREE templates that we have generated that might help you with your day-to-day life as well. You can explore and download the templates HERE
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Budgeting & Forecasting - it's not as easy as it used to be
The concept of budget and forecast was simple ….
Using prior year information and overlaying assumptions, historical changes, investments etc to deliver a new set up numbers for the upcoming year or years. Shareholders wanted to see an improvement and so as long as the percentage changes were going the right way then you were normally ok.
The concept of budget and forecast was simple ….
Using prior year information and overlaying assumptions, historical changes, investments etc to deliver a new set up numbers for the upcoming year or years. Shareholders wanted to see an improvement and so as long as the percentage changes were going the right way then you were normally ok.
Historical trends in all key metrics was the starting position to build the budget and forecasts and then work out what metrics you can improve, how you can improve and the timing to overlay into the budget/forecast.
Companies can take 3-6 months to prepare a budget, it’s a ridiculous amount of time, and time that should be spent executing the plan and driving a positive outcome rather than validating an excel model.
A budget should be driven from key metrics i.e. customer numbers, average revenue per customers, new customers, customer churn rate etc. Understanding what a customer generates and then costs, can ensure that the model is underlying based on key metrics. This means when you are measuring performance against the budget, you can understand why you are travelling higher or lower.
AND THEN THERE WAS COVID…
Covid landed in 2020 and developing budgets, forecasts and understanding the impact was hard if not impossible. Many businesses tried to do a forecast of where the year was going to land for FY20. The budget was useless and metrics and information that didn’t mattered, now mattered.
Companies were focused on building a forecast. CFO and finance professionals developing a forecast for an uncertain period, where history has little relevance and the future is new and therefor every uncertain. The best way to manage this would be to do scenarios that allow you a high and low scenarios and you know what the impact if each of these different book-ends happen.
Most of the forecast were wrong, as there were guesses but got the company through this uncertain period.
We are now in a getting back to normal period, post COVID (even though COVID still around) and this period is tricky…people were buying products online and now going back into stores, so the revenue from online will drop, back to pre-COVID probably not but what will be the level, how will this impact inventory levels, cashflow requirements and how the business operates.
Budgeting and forecasting has never been so difficult. Having clear business drivers and some scenarios to stress test, cash, debt and other key operating metrics and having a plan B if something occurs that was not originally expected.
It might be years, or never that we get back to the guaranteed budget that used history as the basis, but the more data and information we gather to prepare the financial modelling – budget and forecast the better.
If you are a finance person, you will smile at this article…it’s been your life for the last 3 years and it’s still impacts the way things are done.
Doing a zero-based budget, can help reset the way the business looks at the business, less reliance on prior year and resetting the cost base of the business by asking why do we need that expenditure, what is the return on investment?
There are some easy wins, and it might be what you need to balance your budget for FY24 and beyond.
Whiteark has a range of articles and resources for budgets/forecasts that we will share with you.
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Why I love working with Private Equity?
Over the last 10 years I have worked with Private Equity, in a CFO role, interim CFO role & through Private Equity firms as a consultant.
I love working with private equity, I’ll give you 5 reasons why.
Over the last 10 years I have worked with Private Equity, in a CFO role, interim CFO role & through Private Equity firms as a consultant.
I love working with private equity, I’ll give you 5 reasons why.
1. Fast paced – private equities have made an investment, and they want a return. Speed is the name of the game. Spending money to accelerate a project / return is justified as getting to exit with the required valuation as early as possible is the name of the game. I like this.
Spend money to save time, is a great strategy when you work with Private Equity. With private equity you need to put your runners on, red ones so you can run. Long hours, quick turnarounds & a team environment to drive an outcome in a short period of time.
2. Results oriented – private equity care about results. Whether it’s revenue, EBITDA or cash or all three they want results and they will incentive management to deliver. The incentives offered by private equity firms to deliver a financial outcome are part of the DNA. If you are an ambitious business leader, you can make some money driving very hard for private equity.
I love being results / outcome driven, it’s the way businesses should be. It’s not about the presentation packs, it's about what financial outcomes you delivered.
3. You know where you stand – honest, direct feedback from private equity means you know where you stand. If you are not performing, you won’t work there anymore. So don’t worry about what they think and continue to deliver the results at the speed.
4. Know your numbers – the PE firm expects the CFO to know the numbers, all the key numbers and be able to speak to the why behind the results. This means you need a strong team behind you that will deliver and ensure you can run along at the strategic level and ensure you also know the detail.
5. Cash is king – It wasn’t until I worked in Private Equity that I understood cash. When you report cash daily and do a 13-week cashflow forecast you start to realise that understanding all the timings and levers of cashflow is critical and while the Income statement is critical, knowing cashflow and how to pull the levers becomes critical.
What you learn is that cashflow doesn’t lie. Understanding earnings to cashflow means you can really understand where you are leaking cash.
Not every Private Equity firm is the same, so this article is a generalisation however it gives you a flavour and feel on the 5 key reasons I love Private Equity
At Whiteark we provide a number of services to Private Equity portfolio companies:
👉 Transition work
👉 Integration work
👉 Transaction work
👉 CFO transformation and operating model
👉 Transformation work
Led by Jo Hands who has experienced, capable, hands-on professionals who have done this before and want to help your team and business too.
We have a number of publications that you might find interesting:
Our work at Whiteark is focused on value creation levers, we have case studies for each of these levers that you can see on our website: https://www.whiteark.com.au/
We also have a number of articles that are relevant around private equity.
You might want to explore other thought leadership articles
Are you making money?
Jo Hands asks the question - are you making money? It's a very simple question. Forget accounting standards and rubbish reasons your results look crap are you making sustainable earnings in your business. If your wondering how to know, here are a couple of tips…
It's a very simple question. Are you making money? Forget accounting standards and the rubbish reasons your results look crap… Be frank. Are you making sustainable earnings in your business?
If you’re wondering how to know, here are a couple of tips:
1. Cash doesn't lie - if you are cashflow positive, you are making money.
2. Majority of your costs are variable - therefore are aligned with revenue.
3. Your pricing covers your fixed and variable costs.
Now, regardless if you are making money or not - the next question is could you make more? In most cases the answer is yes. So how do you do this?
Increase revenue
increase price
more effective salesforce
more effective marketing
Reduce costs
look at ROI on all costs
review fixed costs to make variable
review operating model
Drive improved working capital
credit terms reduce to increased cashflow
use pcards to pay suppliers
improve process to reduce time to receive cashflow
There are many levers to increase profitability of your business. That's what we do at Whiteark.
See some example case studies here.
Need support in your organisation? Reach out.
Whiteark is not your average consulting firm, we have first-hand experience in delivering transformation programs for private equity and other organisations with a focus on people just as much as financial outcomes.
We understand that execution is the hardest part, and so we roll our sleeves up and work with you to ensure we can deliver the required outcomes for the business. Our co-founders have a combined experience of over 50 years’ working as Executives in organisations delivering outcomes for shareholders. Reach out for a no obligation conversation on how we can help you. Contact us on whiteark@whiteark.com.au
Article by Jo Hands, Co-Founder Whiteark
Preparing Your Business for Sale
The Guide to Getting Your Business Ready for Sale | To maximise the value of your business on exit it’s imperative that you commence strategic planning work at least 18 months to 2 years out from sale. Key elements that need to be considered in your strategic plan include...
The Guide to Getting Your Business Ready for Sale
To maximise the value of your business on exit it’s imperative that you commence strategic planning work at least 18 months to 2 years out from sale.
Key elements that need to be considered in your strategic plan include:
Key Business Drivers
Understand the key drivers of the business.
Identify which of the drivers will have the greatest impact on the business valuation.
Competitive Environment
How are your products or services positioned in the market?
Who are your direct and indirect competitors?
How does your pricing structure compare to the competition?
Global Mergers & Acquisitions
Review global activity within your industry and understand the trends and key information.
Potential Buyers
Understand potential companies that could acquire your business.
What would they consider the most important value drivers?
Our 6-step guide to maximising value…
Key activities to undertake when preparing your exit plan.
Revenue & Margin Analysis
Understand which customers, products and markets generate the most revenue and the have the most attractive margins. This will drive improvements in performance, making your business more profitable and appeal more attractive to buyers.
Growth Plan & Scenario Assessment
Build a financial model that considers multiple scenarios to demonstrate how further profitable growth can be achieved to maximise your future sale value.
Overheads & Profitability
Analyse overheads and reduce fixed costs to enhance profit margins and increase the value of your business.
People
Create incentives for critical employees to remain in the business post the sale, to minimise risk for the buyer and to ensure the business valuation is defensible.
Financial Governance and Reference Books & Controls
Make sure that the business’ financial statements and accounting information is accurate. This will elicit compliance, assurance in numbers and transparency. Buyers like it when business operations run smoothly and efficiently so it is important to document business processes, review controls and update systems to improve the value and desirability of your business.
Data & Documentation
Ensure documentation required for the sale process is readily accessible to allow buyers to complete the due diligence quickly and efficiently. This will reduce risk for the buyer and maximising value for you.
Additional Funding
Top 3 key considerations for requesting additional funding for your business:
You have a guaranteed return on investment (ROI): You know if you have more money to invest you will be able to make an appropriate return.
Improve Financial Results: Additional investment will increase the revenue and gross margin of the business to cover the fixed costs and generate positive cashflow.
Overheads & Profitability: Additional investment / partnership will give the business a competitive advantage through new capability and linkage to the market.
How Whiteark can help?
With extensive experience working across a range of services, we embed ourselves within companies to drive value, and deliver on key metrics.
Maximise Revenue
o Develop future strategies for way forward
o Understand market opportunities
o Build flexible workforce planning models
o Develop strategy and plans around a Buy and Build model to generate revenue growth
o Data, analytics and diagnostic tools
o Build comprehensive strategies across the business
o Customer experience & optimisation
o Marketing optimisation
o Go-to-market approach
o Pricing and packaging
o Account based marketing model
o Develop key metric reporting, aligning incentives to drive the right outcomes
Optimise Cost Base
o Utilise data, analytics & diagnostics to fully understand opportunities
o Develop strategy and plans around a Buy and Build model to realise operational efficiencies
o Organisational re-design, including outsource options
o Sales resource optimisation, aligned with GTM strategy
o Process review and redesign
o Benchmarking of costs against other industries and similar organisations
o Marketing spend optimisation
o Contract review to drive an improvement in costs
o Activity based costing model developed to understand financial drivers
o Cost optimisation strategies around activity based costing, specific to the business
In addition to the above services, Whiteark can help you secure funding (seed, investment or debt) through our network so reach out to see how we can help you.
Reach out to us today for a no obligation conversation today.
Guide to Zero Based Budgeting
Browse and download the Whiteark guide to Zero Based Budgeting (ZBB). This is a method of budgeting where all expenses are justified at the beginning of each new budget cycle and all assumptions documented. We explore the benefits and challenges of ZBB and the 7 steps required to build your own.
Zero Based Budgeting (ZBB) is a method of budgeting where all expenses are justified at the beginning of each new budget cycle and all assumptions documented.
So, what exactly is Zero Based Budgeting?
Budgets are not connected to prior year spend
Funding is allocated to activities aligned to strategy
Eliminates sandbagging practices - evenly distributing expense increases/reductions across business units
Requires comprehensive understanding of activities and cost structure
Budgets are allocated to necessary business activities and based on the levels of effort required
Requires analysing and prioritising activities and expenses
The Benefits of Zero Based Budgeting
Strategic priorities and focus areas can be achieved more successfully under zero-based budgeting
Business units are forced to link their spend to focus areas/initiatives that support the organisational
objectives
The annual review ensures no initiatives continue beyond their productive life
Efficient allocation of resources, as it is based on needs and benefits
Identifies and eliminates wastage and out-of-date operations
Drives managers to design and develop cost-effective techniques for improving processes
Detects inflated budgets
Promotes questioning and challenging attitudes
Increases staff motivation because it gives them more responsibility and the ability to contribute to the
decision-making process
Increases communication and coordination within the organisation
The Challenges of Zero Based Budgeting
TIME & RESOURCES
It is time consuming having to justify each expense in order to arrive at a solid foundation to support the requirement.
A lot of manpower is required to successfully build a ZBB.
BIAS TOWARDS SHORT-TERM PLANNING
ZBB can reward short term thinking.
Can limit investment in growth because short-term benefits may take precedence over long-term planning.
DETAILED KNOWLEDGE
It is necessary to train managers well as they are ultimately responsible for the management, decision-making and the communication of the entire process.
Difficulties associated with ranking functions that are qualitative in nature mean there is a risk of cutting non-core costs that support a customer’s or consumer’s experience. This ultimately puts into jeopardy brand value in the long-term.
AWARENESS FOR DETAILS
As the volume of the required data & forms is very large, no one is capable of knowing every detail of its content and decisions.
There is a risk to compressing information and details because this might remove critically important data.
BIAS TOWARDS SHORT-TERM PLANNING
Honesty and consistency of the managers must be reliable and uniform.
There could be possible manipulation by managers to get more resources into their department.
How to build a Zero Based Budget in 7 Steps
Determine Group Strategic Goals/ Priorities
Align investment and initiatives to Group Strategy
Communicate budget process, timeline and expectations
Provide key assumptions and templates for each P+L item
Create templates for CAPEX, Balance Sheet, Cash Flow, Treasury
Document all assumptions and supporting data to refer to during budget reviews
Be courageous and curious when reviewing business unit budgets
Need help to build your own Zero Based Budget? Reach out.
Whiteark is not your average consulting firm, we have first-hand experience in delivering transformation programs for private equity and other organisations with a focus on people just as much as financial outcomes.
We understand that execution is the hardest part, and so we roll our sleeves up and work with you to ensure we can deliver the required outcomes for the business. Our co-founders have a combined experience of over 50 years’ working as Executives in organisations delivering outcomes for shareholders. Reach out for a no obligation conversation on how we can help you. Contact us on whiteark@whiteark.com.au
How to prepare for sale?
To maximise the value of your business on exit it’s imperative that you commence strategic planning work at least 18 months to 2 years out from sale. Key elements that need to be considered in your strategic plan include: Key businesses drivers, competitive environment, potential buyers, global mergers & acquisition.
To maximise the value of your business on exit it’s imperative that you commence strategic planning work at least 18 months to 2 years out from sale.
Key elements that need to be considered in your strategic plan include:
Key Business Drivers
Understand the key drivers of the business.
Identify which of the drivers will have the greatest impact on the business valuation.
Competitive Environment
How are your products or services positioned in the market?
Who are your direct and indirect competitors?
How does your pricing structure compare to the competition?
Potential Buyers
Understand potential companies that could acquire your business.
What would they consider the most important value drivers?
Global Mergers & Acquisitions
Review global activity within your industry and understand the trends and key information.
Our 6-step guide to maximising value…
Key activities to undertake when preparing your exit plan.
Revenue & Margin Analysis
Understand which customers, products and markets generate the most revenue and the have the most attractive margins. This will drive improvements in performance, making your business more profitable and appeal more attractive to buyers.
Growth Plan & Scenario Assessment
Build a financial model that considers multiple scenarios to demonstrate how further profitable growth can be achieved to maximise your future sale value.
Overheads & Profitability
Analyse overheads and reduce fixed costs to enhance profit margins and increase the value of your business.
People
Create incentives for critical employees to remain in the business post the sale, to minimise risk for the buyer and to ensure the business valuation is defensible.
Financial Governance and Reference Books & Controls
Make sure that the business’ financial statements and accounting information is accurate. This will elicit compliance, assurance in numbers and transparency. Buyers like it when business operations run smoothly and efficiently so it is important to document business processes, review controls and update systems to improve the value and desirability of your business.
Data & Documentation
Ensure documentation required for the sale process is readily accessible to allow buyers to complete the due diligence quickly and efficiently. This will reduce risk for the buyer and maximising value for you.
Cashflow is King
It’s not complicated, confusing or easy to manipulate, it doesn’t lie and shows the real health of a business. Even non-accountants understand cash as they all have to manage their personal cashflow – to ensure there is more inflows than outflows and …
It’s not complicated, confusing or easy to manipulate, it doesn’t lie and shows the real health of a business. Even non-accountants understand cash as they all have to manage their personal cashflow – to ensure there is more inflows than outflows and managing the debt levels for the inflows in the household.
When assessing the underlying performance of a business cash is the best indicator to show how the business is performing, how healthy the business is and being able to accurately determine if your business model is viable for the long-term.
Despite the fact that cash is king, everyone understands it, and without it, a business can’t function. Businesses don’t spend enough time understanding their cashflow to be able to proactively drive improvement in the cashflow of a business.
There are four key things to consider when managing your cashflow:
Understanding the past – understanding the activity that drives cash inflow and cash outflow and the timing of these elements
Shape your future -
Make changes to your business that bring cashflows in earlier (change in payment day terms, utilise credit cards for customers to pay etc)
Take an aggressive stance to work with customers that pay you for your services. Pre-screen customers for credit history to ensure you are not generating revenue with no cashflow
Make changes on how to delay cash payments going out the door through utilising credit cards, changing payment terms, negotiating extended terms or move monthly to quarterly, delay purchasing until required
Daily cashflow forecasting helps you really manage tightly the cashflow of the business
Daily reporting on cashflow drives good discipline and an ability to make quick decisions. This reporting can show actuals versus forecast.
Making even a small change can make a huge impact on ensuring your business is maximising its cashflow position.
If you want some more advice around maximising your cashflow reach out to Whiteark; we have experience in cashflow improvement.
COVID19 has challenged many companies specifically in how to proactively manage cashflow to be able to stay viable; some tips to consider that might help your business maximise cashflow in this period:
Ask your customers to pay you as early as possible
Provide other payment options for customers (credit cards, afterpay etc) so you can get your money sooner
Negotiate payment terms with key suppliers
Review expenditure that can be stopped / delayed or deferred
Utilise credit cards to delay payments to be made; credit cards can be used for majority of transactions and even most suppliers take credit card as well
Need to take a closer look at your cashflow?
Let us help. To learn more about how to make cashflow king in your business, then contact us on whiteark@whiteark.com.au
If your business is having issues with cash, it's important to take proactive steps to address the problem before it becomes a crisis.