There are all sorts of articles around which are of little value. They tell you to choose your business structure wisely, whether you want to trade as a sole trader, under a partnership arrangement, as a company or as a trust. However the answer to this simple question is not so simple; there are a myriad of implications to be considered.

These factors are as varied as who is investing money into the venture, who is investing other resources into the venture, whether the business will be operating locally or internationally, and what tax, grants, and compliance restrictions are placed on the activity to be undertaken. Because of these and other factors, the wisest course of action is to seek the wisdom of an expert.

However once this structure is decided, there is this common ground that should be covered by all business ventures.

Systems and processes are paramount. Without effective systems and processes, your business is suffering from two costly perspectives. The first of these is operating efficiency. If your business is not operating as efficiently as possible, you are behind your competitors from the outset. Every sale or service is going to be priced higher than your competitors, or provide you with a smaller profit margin.

The second perspective is that systems and procedures enhance the capital value of your business. They help to create a separation between you as an individual, and your business. They create value in that another individual can replace you, operate in accordance with the established systems and procedures and continue to operate profitably.

Further, these procedures mitigate the inherent risk that your business faces if one of your employees leaves your business. The situation is as prepared as possible for a new person to come in and continue that role with minimal disruption to the workflow.

The final piece of advice in a Start-up is to invoke a strategy. This is not complicated, nor is it different from any other pursuit in your life. Create a plan of where you want to go and how you want to achieve it. In “business speak” it is called a Business Plan, and it creates clarity in your goals as well as the pathways to take to achieve those goals.

And as with any good strategy is should be “cyclical”. What I mean by that is that 999 times out of 1000 your original plan will have a lot of great content, but it won’t be prefect. It needs feedback and constant improvement. A good business plan will be compared to actual performance regularly, and the plan itself will be refined at appropriate intervals.

Not only will you find that your business plan wasn’t perfect, you’ll also find that the environment that you are operating within is dynamic, and the changes need to be factored into your future.

All planning should be treated the same way. Business Plans, Budgets, Marketing Plans, Cash Flow Forecasts, they are all plans which are useful for gauging performance, but outlast their usefulness if they are not dynamic and regularly revised.

In summary, the key takeaways are:

• Seek expert guidance on the structural set-up of your venture;
• Develop effective Systems and Procedures across all aspects of your business;
• Plan, measure performance against these plans, and regularly review the plans.

The post 3 Key Steps for a Start-Up appeared first on CFO Pro.

The legislation imposes an obligation on purchasers to withhold 10% of the purchase price and pay it to the ATO. Notice that? The obligation is on the purchaser to withhold because of a possible capital gain incurred by the vendor.

The post Alert for anyone entering a property sale contract > $2M appeared first on CFO Pro.

Too many businesses are floundering. They have a vague idea of where they’re going, but no idea how to get there.

Successful businesses have three things; a clearly defined destination, a route to get there, and the right vehicle to travel in.

Destination

What do I mean by this? Firstly is the destination clearly defined? A successful business will have an aim; a goal; a position that they want to get to and a timeframe to get there. When I say clearly defined, it doesn’t have to specify the turnover, profit, size, number of employees and the like that it will have at a certain point in time but the clearer this target is, the easier it is to plot it on the “Road Map” or to plug into the “GPS”.

It might be as specific as saying the aim is to be the number 1 retailer in a certain product range in a certain geographic area, or it might be a vague as being a major player in the retail sector in a particular city. It might be quantified, such as reaching $50M turnover within the next 3 years, or generating a profit of $X, $Y and $Z over the coming three years. The more specific, the better. However the three common characteristics of this destination among all businesses is that it needs to be realistic, achievable and challenging.

Route

How do you get there? Like setting out on any course, you firstly need to establish where you are. Without this, directions are meaningless. If you want to get from where you are now to the next suburb, the first thing you need to know is your current position. Likewise there is no point saying that you want your manufacturing business to produce 200,000 units of product this financial year if you are only tooled up to produce 1,000 per month. You need to have a rigorous assessment of the resources at your disposal, and for this you need to have full confidence in your accounting records and reports, and the ability to understand them.

Once this is established, you can plan out the route to get there. Of course expert knowledge of your environment, potential obstacles and roadblocks that you may encounter will ensure the plan is the best possible. It is in this phase of preparing a business plan, budget or forecast that I have often had to tell my clients that their predicted path is crossing a threshold which might incur payroll tax, a change in GST accounting practices, an increase in required capital or some other financial implication that should be factored in.

Are there impending statutory changes which will change the industry landscape? Is there a change in technology that will influence demand or supply of your product? Are there social developments or trends that may have an undue effect on your product sector? These are just some of the many factors that need to be included in any forward looking plan, and the more thorough the industry knowledge at your disposal, the more effective will be your resulting “route” to get there.

Vehicle

Do you have a Ferrari or a Fiat 500? Either way, if your route is to cross the Tanami desert you’re probably going to encounter more difficulties than if you are in a Land Cruiser. Your business too has to be fit for purpose.

Are you heavily weighted down with investment in plant and machinery to manufacture product but feel that sales are the biggest challenge ahead? Or do you have a fantastic distribution channel but aren’t certain that you can secure product supply in the future? Expert opinion on your business structure and the Return on Capital that is being achieved from the various parts of your business, is invaluable in achieving your goals.

Key Steps to Take

1. Identify where you are. Make sure your financial reports truly reflect your current position and that you can rely on your financial systems to track your progress.
2. Identify where you want your business to go. Be as specific as possible for two reasons; to plan the best route, and to track your achievements in reaching this goal.
3. Assess the environment that your business is operating in. This includes the commercial environment (such as who your competition is), the economic environment (what economic influences have the greatest effect on your business), the political/legal environment (are new laws or policies being promised by an incoming government), the social environment (is your product moving in or out of favour), and the technological environment (will a new app, service, development enhance or challenge your business).
4. Document your path and save it as your Business Plan, using all of the information available to you.
5. Use the plan!

In this dynamic world in which we operate, a Business Plan is fundamental to guiding your business. This is your “Road Map” or “GPS”. It is not a document to slap together that “the Bank should like”. It is a key guiding document for the growth of your business. It should also be a living document, regularly updated with the best available information. It should be used both to guide development and to assess the progress of the growth of your business.

The post Does your Business have a Road Map (or GPS), or is it lost? appeared first on CFO Pro.

Whatever this expertise might be, there is no guarantee that the “expert” will also have expertise in another essential area, the area of Business.

What I mean by Business here is the requirements of a business operation that are common to all businesses; areas like funding, financial management, reporting, compliance, systems, analysis and strategic planning.

Successful business people source the skills that they themselves lack. And a person who can provide business expertise is one of the primary requirements of any successful business. It can be the difference between an enthusiastic hobby and a growing and sustainable business.

Large businesses have traditionally known this, and have had the size advantage to be able to recruit such expertise. In the September 2014 CPA Australia magazine In the Black, David Wright*, referring to the current regulatory burden on business says, “The big firms have got the resources to buy the best lawyers and the best accountants and auditors and so forth. The small ones can’t. They give up because it’s just too complex.”

It is only in recent times that there has been an increasing trend for some of these Business experts to consult to smaller businesses on a part time and more affordable basis. This trend is making a fundamental contribution to small business, helping them to achieve operational efficiencies and to make the best financial decisions for future growth. However there needs to be further education aimed at these small businesses so they understand the benefits that they can gain.

As small business owners learn of the advantages that Business expertise can bring to their specific business, they will continue to engage these consultants to give them a competitive edge over their rivals.

CFO Professional is one such consulting firm that gives clients a competitive advantage. We have business expertise in financial management, reporting, system improvement and implementation, cashflow, financial analysis and many other areas. With these skills available to our clients on a consulting basis, we are able to improve business performance and guide the operation through sustainable growth.

If you would like to know more give us a call on 0421 510 656.

The post Does Knowing Your Business mean you know Business? appeared first on CFO Pro.

Just recently, I consulted alone to a company. In 4 weeks I set up their accounting system, installed an integrated inventory system, wrote bespoke reports, compiled a procedure manual and trained their operating staff. All at a fraction of the cost.

The comparison is astounding and clearly demonstrates the waste that can be involved in major corporations where risk mitigation is spoken of as corporate risk, but is in fact personal risk, where individuals protect themselves from responsibility. It’s the old “covering your backside”, where if something goes wrong down the track, the blame can be shifted elsewhere. And this becomes the underlying driving force, rather than fulfilling the corporate objectives.

Most people who have been involved in medium to large corporates are familiar with the regular meetings, where the majority of the discussion centres around people defining their specific areas of responsibility to ensure they don’t pick up other people’s responsibilities, and then taking measures to offset as much of their own responsibility as possible. I have lost count of the number of corporate meetings I have attended where on conclusion I ask myself, what has been achieved in terms of the overall objective? The answer is often, very little.

Smaller businesses have the luxury of not being concerned with this personal risk mitigation. The reality is that the owner wears the personal risk, whatever happens. Sure, corporate risk is still to be assessed, and decisions taken to avoid or minimise this where feasible. But they don’t have the personal concern that the employees of larger businesses do. They know as entrepreneurs that the buck stops with them.

This in turn gives them a degree of freedom to achieve their objectives as efficiently as possible. If a system, procedure or operation isn’t as polished as it might be, but is robust, reliable and has integrity, then it can still achieve the objective. There are no egos to be massaged or backsides to be protected in the process. This is the characteristic of agility that many smaller operations have as an asset, and many larger, more cumbersome organisations have lost.

The lessons here for small business are obvious. You have an enormous asset in your agility and direct control. You need to capitalise on this competitive advantage by implementing systems that deliver for your business objectives; at a fraction of the cost of your big competitors. Having management information, not just accounting numbers, with integrity and speed gives you the tools to drive your business.

The post Corporate waste is Small Business’ strength appeared first on CFO Pro.

The Chief Financial Officer (CFO) is defined as the corporate officer with responsibility to Manage the Financial Risks of the corporation. Specifically they hold responsibility for Financial Planning, Record Keeping and for Financial Reporting to management. Large companies have highly skilled and qualified people to hold this position but who takes these responsibilities in an SME (Small to Medium Sized Enterprise)?

The answer usually is that the owner or general manager takes on these responsibilities by default, so that “CFO” becomes just one of the many hats that he or she wears. Is this their area of expertise? No; they are generally there because of their expertise in the business’s main field of endeavour.

So is it true that SME’s don’t need to manage their financial risks; that they don’t need expertise in their financial planning, record keeping and financial reporting? Again the clear answer is “no”, they simple can’t afford that expertise on their scale.

I suggest that the obvious answer to that is that the expertise of a CFO can be shared amongst a number of SME’s. One way to achieve this is where a group of SME’s form a buying group or an old styled co-operative, where these larger costs can be shared over the group. The other way is for a business enterprise to employ the high level expertise, but on a part time basis.

There is a growing trend in business today to find ways to fill these gaps that appear in the market, and these days there are a number of accounting firms and some specialist CFO firms that are providing this “internal” financial expertise from an external source.

There is growing demand for CFO’s in two distinct areas. The first is this role on a part time basis, to ensure systems and procedures are in place and effective. They can also take on a supervisory role to ensure that the accounting functions can be performed well but with a more junior level of staff, resulting in ongoing cost savings. Further, they can assist management or owners to understand their financial reports, and have sufficient faith in them to make defining business decisions.

The second role for CFO’s is on a peak time basis; that is where businesses are going through significant change and require the CFO’s level of expertise full time, but for a short time. Such periods of massive change would include original set-up of systems and procedures, significant market expansion, purchasing of another business or the sale of a part of the existing business.

There is no reason for the skills and expertise of the CFO to be the exclusive or privileged domain of the large corporation. In this time of innovation it is time for SME’s, with their advantage of agility, to also gain, perhaps even more-so than the sluggish corporates, from the benefits of high level financial management.

The post Do SME’s know a CFO from a UFO? appeared first on CFO Pro.