28 02, 2018

Capacity planning from a financial perspective

By |2019-06-20T02:47:26+10:0028 February 2018|

The virtual CFO has a valuable role to play in a growing business. A key part of that role is to provide leadership within the critical planning, monitoring and analysis areas. The virtual CFO will assess the processes, resource requirements and the means for disseminating important information to key decision makers. This requires the following to be achieved: Buy in from management Agreement on resource support Discipline in maintaining a focus on the documented plan With many years’ experience in this area, the virtual CFO will have built up an intrinsic understanding of what will add value and what [...]

21 02, 2018

No Place for a “Yes Man”

By |2019-06-20T02:44:54+10:0021 February 2018|

The virtual CFO has a valuable role to play in a growing business. A key part of that role is to provide leadership within the critical planning, monitoring and analysis areas. The virtual CFO will assess the processes, resource requirements and the means for disseminating important information to key decision makers. This requires the following to be achieved: Buy in from management Agreement on resource support Discipline in maintaining a focus on the documented plan With many years’ experience in this area, the virtual CFO will have built up an intrinsic understanding of what will add value and what [...]

14 02, 2018

Strategic planning and the role of the virtual CFO

By |2019-06-20T02:55:59+10:0014 February 2018|

The role of the virtual CFO in the strategic planning process is critical. The business is making decisions on a number of important elements determining its future. Where will future growth come from What impact will this growth have on margins How do we protect/grow margins within our existing business What operational resources do we need to support the growth What impact will the growth have on working capital How will up-scaling the business impact our break-even point Which strategic options should be prioritised due to their meaningful impact on performance outcomes These are just some of the questions [...]

8 02, 2018

Growing your business with a virtual CFO

By |2019-06-20T03:03:12+10:008 February 2018|

Moving from a small business to a growth business is a major task. It is a task that often proves too hard and results in a successful smaller business failing as it tries to grow to the next level. And it should be hard! The rewards for doing it successfully are large. This article will try to keep things simple with a few definitions to start with. There are many definitions but for the purpose of this article they are: A small business: A business where a small management team, usually including the owners, are pretty much making all the [...]

6 03, 2017

Gross Profit – Do you measure the unknown unknowns?

By |2019-06-20T02:40:29+10:006 March 2017|

“You must understand the impact of the known unknowns and the unknown unknowns onyour gross profit. Unless you capture all costs in your gross profit measure, you will not be in a position to reduce these costs” Measuring your gross profit is not just about measuring the known costs relating to the supply of goods or services. This can be very misleading unless you also measure the unplanned costs of sales as well. By “unplanned” costs, I mean those costs that you have not included in your costing models. Most businesses will be aware of the “known unknowns”. Examples [...]

21 02, 2017

There are four ways to improve your cash position, but “Gross Profit” is the most important!

By |2019-06-20T02:01:19+10:0021 February 2017|

“There are four principal ways to improve your cash position. Introducing new funds, unlocking tied up cash, reducing cash leakages and generating increasing cash flows.” In every business, managing the cash reserves of that business is critical to its performance. Too many businesses tie up valuable resources in juggling cash flows and revising less efficient operational processes to suit the limited cash position of that business. The cost to those businesses is huge. And in a competitive environment, the additional costs incurred by an under-funded business will eventually cause that business to fail. Of the four methods for growing [...]

14 02, 2017

Variance analysis, the Why to support the What

By |2019-06-20T02:36:05+10:0014 February 2017|

“Successful business managers have a plan. Their management reports tell them how they are performing against that plan. Variance analysis enables them to understand WHY their results are different to the planned outcome.” At the simplest level, variance analysis assesses the difference between actual results and budgeted results. However, when applied to gross profit analysis it provides even more valuable information. There are many variables that will impact on the dollar amount of gross profit achieved. Firstly, sales volume and gross profit margin levels may differ from those that were planned for. Secondly, the cost of goods/services may vary [...]

9 02, 2017

3 Ways to Grow Your Gross Profit Margin

By |2019-06-20T02:05:56+10:009 February 2017|

“Until you have detailed information on the many elements that make up your gross profit, you will be a hostage of your business. Once you understand your gross profit margin you can start driving your business” There are three ways you can grow your gross profit: Increase sales prices Reduce variable direct costs Increase volume with the same fixed direct costs Well I am hearing a few "no shit Sherlock" comments after this great revelation. I apologise for stating the obvious but it is the simple truth. While these goals seem very simplistic, the varied strategies that are available [...]

3 02, 2017

Managing gross profit is difficult

By |2019-06-20T03:12:52+10:003 February 2017|

"Many businesses manage their overhead expenses to within an inch of their life but do not understand their cost of sales." This is often true for a very simple reason. Overhead expenses are relatively easy to understand in the context of a reporting period. Cost of sales expenses are a much more difficult proposition. There are so many factors that need to be taken into account to get a true cost of sales position. The cost of sales is often the largest cost category in a business so it needs to be understood so it can be managed. Not [...]

1 02, 2017

What does gross profit really represent?

By |2019-06-20T03:17:51+10:001 February 2017|

"Gross profit is the measure of the wealth creation (value added) process of every business. Overhead expenditure represents the cost of managing and nurturing this key resource." We believe that the accurate measurement of gross profit is the most important element of financial management. Detailed analysis of this critical measure can only be done when the accounts are set up the correct way to enable the right things to be measured. The starting point is to understand what gross profit is really a measurement of. In all but the simplest business models this can be a complex task. Business [...]

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