Consider the investments you have made outside of your business. You would know how much you have invested. You would be focused on getting an appropriate return on those investments. How about the return on your investment in your business, however? […]
Do you think of your business as a financial investment? Do you make time to review your strategic progress? Do you have clear measures by which to measure your strategic progress? Are you clear about the short-term, medium-term, and long-term objectives of your strategic plan? Do you see your strategic plan as a series of strategic projects, or do you see it in terms of the overall growth and wealth creation objectives? Ultimately, your business is a financial investment, and the objective of financial investments is to achieve a financial return. Taking an investment management approach to your [...]
Investing in a business is a risky venture. It can take many personal sacrifices to build a business and achieve success. These efforts are generally accepted and profits expected but few people appreciate the ownership of their business itself as a 'wealth engine'. Learn more about this concept to empower your business decision-making and maximise the value you're gaining from your business. Business as a wealth engine is a simple concept. You have invested capital in your business (equity or net assets). You get a return on your investment from the business’ profits. This is represented by [...]
This white paper discusses the 'accounting gap' issue for small businesses - an issue that MUST be resolved for any small business to become a successful larger business. Smaller businesses face a serious disadvantage compared to larger businesses when it comes to financial management support. This can leave management unsure of how the business is performing and with a limited understanding of how the drivers of profit are behaving. This puts the business at a high level of risk, impacts its ability to raise finance, and ultimately devalues the market value of the business if the owners wish to [...]
Can your business finance its rebuilding as we emerge from the long era of COVID-19 lockdowns? As we finally move out of this prolonged period of lockdowns and border closures, many businesses that have experienced a fall in revenues will be able to start rebuilding their businesses back to pre-coronavirus levels. But how many of these businesses are fully aware of the “cash trap” they are facing? And how many have a plan for financing their businesses as they try to overcome this “cash trap”? The sad and ironic reality is that many businesses will have survived the two [...]
Accessing debt to finance your business growth opportunities is a critically important requirement to achieve business success. All lenders place a heavy reliance on the financial reports provided by applicants. Lenders are very sophisticated businesses and they will have experienced people scrutinising the applicants for finance. If you assume their default position is that the application should be denied - and that their job is to find the reasons why it should be denied - you can also assume they will take a sceptical approach to assessing the reliability of financial reports. So, to ensure that you can verify [...]
It depends on your management culture and the stage of your business lifecycle How different levels of financial management services can add value to businesses in relation to their lifecycle stage Stage 1: Start up/Early stage Requirements will vary for the different profiles of businesses in this stage. Profiles will include: Limited capital/grunt equity/lengthy early stage Well capitalised/short early stage Financial Management Issues: As the management team grows, reliable financial reporting becomes more important for profitable decision making Early-stage companies often have under-developed financial reporting capabilities. This requires appropriately structured general ledger [...]
The importance of 3-Way Forecasting in the growth phase of your business This article discusses the importance of 3-Way Forecasting in a growing business because: growing businesses face unique issues management need strategies for a range of outcomes a detailed understanding of the drivers of revenues and costs is critical to business success a detailed understanding of the impact of the balance sheet on cash reserves is critical to business success incorporating a 3-Way Forecasting system into the planning and operational activities of the business provides clarity on the impact of key drivers of business performance Growth [...]
What is three-way forecasting and how is it performed? Colin Wright explains how understanding the future cash position of the business requires quality planning processes. This is achieved through the three-way forecast. As the name suggests, there are three components to this planning process. The profit & loss forecast determines expected cash flows from operational activities The balance sheet forecast determines expected cash flows based on the balance sheet movements of the business The cashflow forecast is determined from the profit & loss and balance sheet forecasts How well this process will forecast the cash position throughout the forecast [...]
Cash is the lifeblood of the business. Colin Wright explains how the business can manage liquidity through the 'Cash War Room' concept, and who should be involved in 'Cash War Room' activities. The Government has set up a War Cabinet to plan Australia’s response to the current pandemic crisis. Similarly, your business needs to set up a Cash War Room to plan your response to the unfolding crisis so that you can survive this period. The immediate risk to ongoing business is one of liquidity. Therefore, there are two key issues that all businesses need to focus on. Ensure [...]
