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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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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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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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
If your business is having issues with cash, it's important to take proactive steps to address the problem before it becomes a crisis.