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Avoiding a cash-flow crisis

This post is by Giles Ellis, an experienced business coach and Director at GECA Chartered Accountants. GECA offer Business Planning and other Business Advisory Services.

10 ways to prevent cash flow problems in your business 

Your business doesn’t have to be tiny or struggling to experience cash-flow problems – in fact, periods of rapid growth can often trigger issues with cash liquidity. Left unchecked, cash-flow issues can slow growth and even take your business down.

If you’re having problems with cash flow now – or if you can see them on the horizon – there’s no one way to get your company back in balance. You need to identify what’s causing your cash-flow issues and try a few different strategies to get things back on track.

Here are 10 ways to get started:

1: Cost-cutting measures

Cutting costs is the most obvious way to boost cash flow in your business. And unlike raising revenue, it can have an immediate effect on your income flow. Where to cut costs depends on your business – you might be able to cut unnecessary expenses like business travel or company cars, put a freeze on overtime, or even reduce staff numbers to save on salaries.

2: Raising prices

Raising your prices is another simple way to increase cash flow – and you don’t need to implement a major price hike to make a difference. Even modest price increases can have a significant impact on your profits. If you’re nervous about losing customers through a price rise, consider offering deals on bundled products or services to offset the increases.

3: Check new customers

New customers are great for business – but only if they actually pay their invoices. Avoid issues and ensure cash flow by carrying out credit checks on all new clients. You should get a notification if the business or individual is in the habit of making late payments or defaulting on bills.

4: Tighten payment terms

You don’t have to give your clients months to pay their bills – in fact, a long payment term can be a major factor in cash-flow problems. If your payment term is set at 60 or 90 days, consider cutting it to 30 days to speed up your cash cycle.

5: Reward prompt payment

Prompt payment of invoices keeps cash flowing, so it should be incentivised. Offer a small discount for early payment, to encourage clients to get their invoices in as soon as possible. However, you may not want to offer this option on a permanent basis, as it could impact on your profit margin.

6: Invoice quickly, follow up regularly

You can’t demand prompt payment if you take months to issue an invoice. Keep things rolling by sending invoices as soon as the work is completed or the product is sent, and make sure to follow up on late payments. Every unpaid or late invoice is costing you money in goods and services – and damaging your cash flow.

7: Lease, don’t buy

Buying furniture, IT equipment, cars, property, and anything else you need to run your business is a huge expense. If you’re considering a new purchase, think about leasing instead – that way, you’re only making a small payment every month, which should help improve cash flow. Cancelling a lease is generally easier than on-selling if you need to downsize.

8: Think about invoice financing

A large, outstanding invoice can put a major dent in your cash flow. That’s where invoice financing comes in – some lenders offer quick, short-term loans based on outstanding invoices – ideal if you need instant access to cash. You’ll get up to 85% of the value of the invoice within 24 hours, then get the final 15% once your customer pays the invoice.

9: Look into loans

Short-term loans can help you bridge a cash-flow gap – whether from your usual bank, a non-bank lender, or alternative finance sources like peer-to-peer lending. You could also think about looking for longer-term funding from partners or investors if you’re often running into cash-flow problems.

10: Get help from the experts

Many cash-flow issues can be solved with quick-fix solutions, but if you’re finding yourself short more often than not, it might be time to get expert advice. Working with a finance expert can give you an outside perspective and help you find new ways to generate cash for your business.

You could bring in a business accountant or part-time CFO to help you sort your finances long-term – creating financial forecasts, reviewing your expenses and income, and helping you find innovative ways to boost your cash flow. They can also help with decisions around spending, hiring, and pricing your product or service. It’s about getting an objective outside view of your business – with years of experience behind it.

Read one of our other blogs for further information on how to combat cash flow problems.

Need expert help with your cash flow problems? Get in touch with GECA today.

The post Issues With Cash Flow? Here’s How to Solve Them appeared first on GECA Chartered Accountants.

Lifting your business to the next level

If you’re a small-to-medium business, the thought of hiring a CFO, even part-time, may sound excessive – aren’t they for big corporations? Would you have enough for them to do? 

But if your business is entering a period of rapid growth, a part-time CFO could be exactly what you need. After all, if you’re trying to move up to the next level in business, who better to talk to than someone who’s already been there? 

Having access to an expert with experience in bigger, more established companies can help you make the right decisions and avoid expensive mistakes. They can provide everything from operational support to in-depth strategic analysis and can find new ways to move your business forward.  

Bringing on a CFO part-time means you get access to high-level finance expertise when you need it, without paying an unnecessary full-time salary. 

More than just accounting services 

These days, CFOs offer far more than simple bookkeeping or accounting services. They deliver invaluable strategic analysis. This can have a huge impact on your performance, profitability, and long-term business success. 

When you hire a part-time CFO, the scope of duties will depend on the size of your business, your specific needs, the industry you’re working in, and your overall business strategy. Generally, they will work to shape your company’s finance strategy and provide day-to-day support for your financial operations. 

A CFO should also be able to help with business planning and forecasting, tax planning, risk management, compliance, auditing and reporting, investment, working capital management, and general budgeting. 

As an experienced finance expert, your CFO will act as your company representative and help you communicate and negotiate with lenders, investors, and auditors more effectively. They may work with your board of directors to hammer out financial details. They’ll be in the ideal position to offer advice and guidance around any business decisions – mergers, sales, acquisitions, or any other major changes.

A new perspective 

A good part-time CFO isn’t there to simply tick the finance box and go along with every idea the CEO comes up with. They act as more of a strategic partner to the CEO or business owner, using insight and perspective to identify opportunities and offer solutions. 

When you’re running a business, it’s easy to get bogged down in the day-to-day, so an outside perspective can be incredibly valuable. A good part-time CFO will act as a sounding board for your questions and problems, but should also be able to spot issues, boost efficiency, and identify opportunities that you may not have considered. As money experts, they’re the most likely to notice when your strategy isn’t on a firm financial footing and should be able to help you shift your vision to match your financial reality. 

Even though your part-time CFO wouldn’t be working in your business every day, they should be able to offer their own expert opinions on company decisions. More importantly, they can speak up if they disagree. It’s not about negativity, it’s about challenging assumptions and pushing your business forward. 

Face challenges with a part-time CFO

Growth is positive, but it can also mean rapid change and serious business challenges. If you’re struggling to keep up, working with a part-time CFO can help make sure you make the right decisions and avoid financial pitfalls. 

Need help navigating your business through a growth period? Talk to the team at GECA about our part-time CFO services. 

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Using an in-house person to manage your accounting and finance functions might seem like a great solution. You have someone on hand to answer questions who knows your business inside out.

What many businesses don’t consider are the risks that come alongside it – some of which can have devastating consequences to a business. At GECA, we’ve helped a number of businesses come back from the brink of bankruptcy after relying on an in-house finance person.

Here are some of the most common risk factors.

Illness, death and departure

We often see businesses operating with a one-person finance team. This person holds key information to the business’s finances – from small details like logins to access financial systems, and where documents are stored, to overarching information like the strategic direction of the company’s financial future. If something happens to the finance person – they leave suddenly, they get sick, or worse, they pass away – the company is unable to operate even the most basic of functions.

Fraud

You want to trust your people, but the sad truth is that fraud happens, and it’s seen most often in scenarios that don’t come with checks and balances. Having one person in your company’s finance role means you won’t have the basic controls, like dual authorisation, that can help protect against fraud.

Compliance errors

Human error is a fact of life – and when it comes to compliance, those errors can cost your company time and money. A single finance person has no support – no one to check their work, which means that errors can happen more often, and can go undetected for longer. It also means that any errors are your company’s fault alone – you can’t blame a third party and demand they cover any penalties and fines.

Employee data privacy breaches

In-house finance people are often asked to manage payroll – and even legal HR issues – something they could have no experience in. This allows errors to creep in, but also exposes the company to risks around the mishandling of employees’ private data. Any breaches, inadvertent or otherwise, can at best damage employee relations, and at worse lead to a public relations or legal nightmare.

Outsourcing – the smarter option

Unless your company can afford to sustain a larger finance department with the right mix of skills and protocols, outsourcing might be a smarter solution. It means you sidestep many of these risks, or pass them on to people who are much better equipped to manage them. For example, with GECA’s Virtual Finance Team service you get a group of experienced professionals covering all aspects of your accounting and finance. The service is designed to act as your own finance department – you get exactly the services your business needs, such as banking, payroll and management accounting, strategic planning and business coaching.

Strong internal controls give you the checks and balances that are missing from one-person finance departments. They are designed to catch errors and protect against fraud – and since we’re a team, if we lose one person it won’t affect your business at all.

More often than not, VFT also reduces costs – you’ll save on wages, and management time can be spent more productively. You’ll also only ever pay for the functions you need now – VFT can be scaled as you grow.

Outsource for peace of mind

Most importantly, an outsourced finance model like VFT delivers you peace of mind. Rather than keeping an eye on finance and accounting, you can refocus on the business, knowing it’s in safe in the hands of experts.

So, is it time to outsource your finance department? Talk to us about how our Virtual Finance Team could save you time, money and stress –  Call us now on 0800 758 766 for a complimentary, no-obligation meeting.

Time to outsource your finance department? Learn how GECA helps owners of family businesses grow their profits and increase their wealth.

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The advantages of a Virtual CFO

If you’re a small company looking to scale up, you need the financial expertise of a CFO. But taking on a full-time staff member at that level is often too costly for smaller businesses. Fortunately, there’s another option: hiring a Virtual CFO (vCFO). That is a CFO available on a fractional or part-time basis.

Outsourcing your CFO requirements needs gives you access to high-level financial knowledge and expert guidance without costing the earth. You’ll get in-depth advice and help to make the right decisions as you scale up your operations.

Here’s why it’s worth taking on a Virtual CFO:

CFO services at the right price

Most small businesses don’t have the funds to take on a full-time CFO, and often don’t really need full-time CFO services either. Hiring a part-time CFO lets you avoid recruitment and hiring costs, and gives you access to expertise when you need it.

Flexible, accessible support 

Many businesses find that their need for financial support ebbs and flows. That’s why a part-time or on-call CFO can be so valuable. Having an expert on hand who knows the business means you can access services when you need them, whether for day-to-day financial functions or one-off projects.

High-level help

When you’re working in a business, it can be difficult to get an objective view of your needs and goals. A CFO offers high-level analysis and support, providing insight and advice, highlighting opportunities and risks, and setting broad strategic goals for the financial side of the business. For young companies in periods of rapid growth, help from a CFO – part-time or not – is essential to establish and achieve financial milestones and avoid unknown pitfalls.

Wide-ranging experience

Hiring a full-time CFO when you’re running a small business could mean compromising on the level of expertise and experience you get. Working with a part-time CFO means you’ll have high-level experience without the price tag. Even better, you can choose to work with a CFO who has experience across a variety of industries. This level of expertise gives you networking opportunities and in-depth insights that you wouldn’t get with an industry-specific expert.

Vital support

Running a business is satisfying, but it can also be a tough, lonely job. Business owners need a sounding board and support person to bounce ideas off, and to offer constructive advice when things seem overwhelming. Because part-time CFOs are usually contractors rather than employees, they can act as sounding boards. They’re still partially independent, which gives them an objective view of the business.

Guiding your finance team

If you’re a small business experiencing rapid growth, your existing finance team may need support to get up to speed. A part-time CFO can help by improving systems and processes, and by acting as a mentor to members of the team.

Crisis relief

Every business runs into a crisis now and then. If you’re expecting the loss of a major contract, losing customers, or facing closure, a part-time CFO will be able to help you find your way through. Rather than scrambling to find an available expert, you’ll have someone on hand to help with cash-flow reports and forecasting, cost-cutting measures, and fund-raising advice.

Navigating growth

Growth is exciting, but it’s not always easy to navigate. If you’re a new business owner or you’re dealing with a new level of growth, it can be hard to know which decisions to make – should you expand into new markets, introduce new products, take on big new clients or focus on your current customers?

Taking on a part-time CFO gives you the strategic insight to turn rapid growth into sustainable business success. Having access to high-level expertise means you’ll not only be making the best strategic decisions, but you’ll eliminate the fear, uncertainty and stress that so often comes with times of change in a business.

Call in an expert – part-time

If your business is moving into a growth period and you need help deciding on your next steps, a Virtual CFO can make things simpler.

At GECA Chartered accountants, our Virtual CFO service gives you access to the insights and expertise of CFOs with experience across a broad range of industries and sectors.

Get in touch now to talk about your CFO requirements and find out how you can outsource to GECA.

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How GECA’s Virtual Finance

How GECA’s Virtual Finance Team solution set Construct Brands up for success

In today’s fast-paced business world, it can be small innovations that give companies an edge – and sometimes it’s an operational change that can make the most significant difference.

That’s what FMCG company Construct Brands has found with GECA Chartered Accountants’ Virtual Finance Team (VFT) service.

As GECA managing director Giles Ellis explains, the service doesn’t just remove the need for an in-house accountant. It also adds business-critical expertise, for a fraction of the cost.

“If you’re a business that’s big enough to hire an internal accountant, we can replace that person with our outsourced team – a finance manager, junior accountants, clerks, payroll experts and a CFO. That means you get all these specialised experts for less than you’d be paying a bookkeeper or junior accountant – who of course don’t have that breadth of experience.”

More business smarts for less

For Construct Brands, a company already steeped in innovation and with ambitious growth plans, that smarter way of working appealed. This FMCG company creates functional confectionary such as the Wolf Energy bars that are sold globally. When the company’s internal accountant resigned, the obvious next step was to recruit for the role – until the owner, Andy Smith, was told about GECA’s VFT offering.

For less than they were paying their accountant, GECA could deliver a much broader service and deeper expertise.

“We’ve replicated the functionality of internal accounting for less, but it’s not just about cost savings,” says Giles. “We’re reducing the risk of error and fraud. Management now also has access to advice, accountability and governance coaching, budgeting workshops, annual business plans that sync with the overarching plan – and we can help with them too.”

That support goes beyond numbers to upskill business owners in corporate governance and delve into the nitty-gritty of organisational structure.

“Often I find when a business is growing rapidly, people are thrown into the mix with no real structure,” says Giles. “We help make sure that there is a structure and that it’s fit for purpose – that’s all part of it.”

CEO, Andy Smith – “The biggest cost to us with an internal hire was our time. From hiring to managing the employee, it was time spent that we didn’t have. It’s been great to hand it all off to GECA and focus on the outputs instead.”

Seamless onboarding

Any operational change inevitably comes with a bit of upheaval as new systems are embedded. GECA’s propriety onboarding methodology is designed to minimise that.

“We’ve worked out how to do it seamlessly, with no interruption to the business,” says Giles.

The GECA team works alongside any incumbent staff, going through hand-over documents and procedures, so they’re across every detail of the function. From there they build a report of recommendation. For example, a plan for shifting to outsourcing the finance and accounting function, customised for that business.

“That customisation is key,” says Giles. “We want to make sure the new way of working will fit, and that the plan to move them over makes the most sense.”

“Like any major business system change, there has been pain, however effective communication during the transition process by the GECA team has minimised the impact on business.” Andy Smith, CEO.

Harnessing software

The GECA team then springs into action, establishing new procedures, software and integration, to deliver maximum efficiency. They moved Construct Brands from its legacy accounting package to the far more flexible Xero. That meant recoding year-to-date transactions in Xero. Then running parallel reports out of both systems to confirm the data accuracy of the starting position. In the process, they also simplified Construct Brands’ invoicing process, which has to factor in three different services.

“Just that shift has delivered the business a real efficiency boost – where before each invoice had to be manually input, now Xero auto-creates many of them” explains Giles.

Accounts payable is also a lot tidier and easier to manage.

“They had a folder of paper receipts, including printed out electronic invoices. Inefficient, costly and wasteful. Now we’ve implemented Receipt Bank, which lets you scan any invoices, which are sent to Xero to be coded. That means each transaction has a receipt recorded next to it, which allows efficient compliance with the IRD document-keeping requirements says Giles.

“We love being able to photograph those annoying coffee receipts from our phones for easy expense reimbursement.” Andy Smith.

A shift from paper to Smart Payroll has also saved days of work each month. Instead of filling in paper forms, staff can now use an app to apply for leave. Then with a few clicks, managers approve it.

“It goes straight through,” says Giles. “It’s also very fast and accurate. Where they were spending two to three days a month preparing payroll, now that’s a matter of a couple of hours.”

More Effective Reporting

As part of the onboarding process, the GECA team review all current management accounting reports against reporting metrics used by similar businesses. They then compare them against functionality available from the newly implemented systems. This informs the recommendations they can make to enhance the reports.

Of most value though, is the monthly CFO Report, which provides a financial summary to the management team. This includes valuable insights and analysis from experienced management accountants and analysts.  It covers off all aspects of the VFT service including Financials, Cashflow, Payroll, Creditors and Debtors.

Improved Governance

So often, business owners understand how important a strong governance framework is for increasing business value. However, day-to-day operational issues mean this vital business function is neglected. The GECA VFT service includes regular Advisory Board meetings, chaired by the Virtual CFO who is also an experienced Director, using insights and analytics provided by the GECA VFT.

“It’s been great having Giles challenge our thinking which had been entrenched over many years and we value the insights he brings from his work with other clients in the FMCG space.” Andy Smith

For medium-sized business, delivering that all-important edge doesn’t have to come from a cornered market or trademarked products. Clever ways of working – like GECA’s VFT service – can mean smaller businesses are operating with the efficiencies and expertise you’d expect from much larger businesses. People at every level can work faster and smarter, and the business is set up for future growth.

For more information on how GECA’s Virtual Accounting Team service could give your business a competitive edge and deliver a foundation for growth, get in touch with the team now.

The post Case Study: How Construct Brands excels with a GECA Virtual Finance Team appeared first on GECA Chartered Accountants.

It seems pretty simple, right?  A well performing business needs to be supported by an effective and efficient accounting and finance function. Without which, they  will not know how they are performing and will not know where they are going. Which will generally lead to business failure.

But in reality, many finance functions don’t actually deliver on this.

So what does a business accounting and finance function do that enables a business to survive and prosper really look like?

Much like Janus the Greek God of beginnings and endings who looks both forwards and backwards, a business finance function should provide two perspectives to support business managers with informed decision making.

Past Perspective

The first perspective is that of the past, being the recording of data to benchmark business performance and through this meet compliance requirements.

The past perspective looks at actual business performance and includes the following:

• Bookkeeping.  This is the basic processing of data required to produce accounts and is required by all businesses. It is often the activity that requires the most resources and usually the first finance function activity to be implemented by a business.  As the business grows, the roles specialise into dedicated activities such as creditors, debtors and payroll.
• Financial Reporting. This is the conversion of the data into meaningful reporting. This enables managers to accurately measure business performance on a regular basis to track progress against business goals.
• Tax and Compliance. Using the financial reporting, tax and other compliance requirements can be met in an accurate manner and on a timely basis.

The second perspective – and one that is vital to support business growth – is looking forward to the future.

Future Perspective

The future perspective allows business managers to make informed decisions based on:

• Business and Strategic Planning: This is the bridge between the past perspective and the future perspective and builds on the historic reporting provided by the Financial Reporting function. A strong business plan will provide the non-financial pathway to achieve the financial goals set out in the annual budget.  The strategy will articulate the business owners long term goals and the pathway to achieve this.
• Treasury and Working Capital Management. Ensuring the business has sufficient cashflow to meet requirements is critical to business survival, let alone success. The financial forecasting provided by the Business Planning process is extrapolated into a cashflow forecast and funding facilities put in place to ensure these requirements can be met.
• Risk Management. A key part of financial management is maintaining the internal controls framework that enables accurate reporting and reduces the risk of fraud and errors.

All these functions have varying degrees of complexity and would normally be performed by staff with differing levels of training and experience. The amount of manpower required to fulfil these tasks is typically pyramid shaped, with data processing – such as bookkeeping – at the base representing up to 50% of total accounting team resource capacity, versus CFO leadership that is generally between 10% – 20% of total resource available.

In an ideal world, a business would be able to support a diverse accounting team that could perform these functions, with the right amount of staff at each level. However, particularly in New Zealand, home of the SME, most businesses are not large enough to afford the expense of maintaining a team of accountants and clerks and therefore typically opts for a single internal person to cover their business accounting and finance requirements.

Our view is however, this this will produce a sub-optimal outcome due to the misalignment between the broad requirements of the business’s accounting and finance requirements and the limited capabilities provided by a single person.

If for example the business hires a junior accountant or bookkeeper, they will not be able to get the insights and analysis of an experienced finance professional that will help drive the business forward. If they go for a more experienced, senior level person such as a Finance Manager, they run the risk of that person leaving due to the more junior aspects of the role not being at keeping with what they are trained to do or want to do.

Furthermore, workflow analysis shows in-house accounting workflow peaks in the first two weeks of the month as the prior month accounts are finalised and reported on, and then tapers over the remaining two weeks of the month. Based on this, in some instances, internal accountants will be only be fully utilised for c. 50% of their time.

Filling the accounting needs of a business with an internal accountant has traditionally been the only solution available to business to meet their internal accounting requirements.

Virtual Accounting Team Solutions

Here at GECA however, we have innovated on this model.  By leveraging the technological advances now available in most accounting software, the internal accounting function can be outsourced to a specialist provider, providing a business with access to a full spectrum accounting and finance team with resources at every level required by the business.

As an outsourced solution, it provides many benefits over an internal solution such as:

1. Better alignment of accounting resources provided by an entire accounting and finance team to the business accounting and finance requirements as compared with an individual covering the role.
2. Time saving for senior management by focusing on the outputs of the accounting and finance team such as reporting and analysis, rather than having to waste time managing an accountant in a specialist field that they are not experts in.
3. Consistency and constancy of the accounting and finance function is improved by having accounting resources available 24/7 accounting function. With an internal accountant, businesses are exposed in the event the internal accountant is sick or absent from the office.
4. Pay only for what you need. As outsourced solutions are done on fractional basis, the business only pays for what it needs at the time.
5. Cost savings are achieved as outsourcing your accounting function is generally more cost effective than an in-house accountant.

Our clients operate in a world where change is constant and happening faster by the day. These smart business owners focus on their core service or providing an excellent product and/or service experience, and outsource non-core functions to specialists, be it Human Resources, IT or Accounting.

And increasingly we are seeing this occurring across the entire spectrum of business services providers from small consulting firms using contractor platforms such as at Odesk through to Tier 1 accounting firms with teams of accountants in the Philippines.

If you have an internal accountant and you feel you are not getting the desired outcome or results from this expensive resource, contact us today for a free assessment of your business’s accounting and finance requirements.  We’d be happy to demonstrate how a Virtual Accounting & Finance Team could work for your business and give your internal accounting function “god like” powers to improve your business performance.

The author, Giles Ellis, is a CFO with over twenty years’ experience working with CEOs and Business Owners to improve, grow and exit their businesses.  Call now on 0800 758 766 or email Giles at giles@geca.co.nz

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