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Implementing Processes Similar to Large Businesses Helps SMEs

Improving Your Business - Issue 039

Various reports have indicated that SMEs require significantly more ‘financial data’ throughout the year, not just at the end of the financial year.

The information that is required relates not only to Profit and Loss Account and Balance Sheet, but also to Business Metrics, Budgets and Cash Flow Forecast, monitoring of cash flow regularly.

Last week, MYOB CEO Paul Robson outlined the position very clearly in an article published in the Financial Review:

“The outlook is much gloomier for SMEs than for big corporates.”

“There are five or so areas that small business are calling out as creating a major pressure, which are all around the cost of doing business, like utilities, with significant increases in input costs, so electricity, water and fuel prices,” Robson says.  “There’s the cost of capital obviously – so interest rates – but the final one is just managing general cash flow.”

Robson also referred to general metric information such as the number of invoices being generated and the average value of an invoice when compared to average values in a similar period last year.

What this is highlighting is that businesses need a lot more accounting input than just the preparation of annual accounts and a tax return.

If your accountant is too busy preparing annual accounts and tax returns for clients, then it would be to your advantage to seek a virtual CFO who can put in regular time for your firm each week, so that you can receive daily, weekly and monthly information that will assist you to operate your business.

Robson indicated, “A large number of small businesses go out of business in their first six months, not because their idea was a bad one, but because the fiscal management was poor.”

Our observation is that this threat to a business continues in the years ahead, unless steps are taken to ensure that an accounting professional is involved in the preparation of regular monthly financial data and reports.

As a former Chief Financial Officer (CFO) of a listed company, one of the very important things that I learnt was that larger businesses operate as a series of small businesses.  However, the important difference is that they have implemented systems and processes for their individual business entities that are not normally associated with small businesses.

There is no reason why most SMEs should not implement ‘big end of town’ systems to improve their business performance thus improving the business’ chances of successful operations.

Where do you start ‘thinking like a large business’?

It starts with the LEADERSHIP TEAM which every business should have.  Unfortunately, many do not have people performing some of the important roles, even on a part-time basis.

Businesses that adopt this approach have a Leadership Team comprising full time members and part-time consultants, with expertise in particular areas that are crucial for the business’ success.

The designations of the Leadership Team (full-time and part-time) would probably include:

  • General Manager/CEO
  • Products/Services Manager
  • Manufacturing Manager
  • Marketing Manager
  • Sales Manager
  • Chief Financial Officer
  • Communications Manager
  • Office Manager

One of the priorities should be to prepare a document: “Who is this business what do we hope to achieve?”  Most SMEs will not have the time or the business knowledge to be able to prepare this document completely.  The Accounting Consultant who is performing the virtual CFO services are the ideal preparers of this document in conjunction with the Leadership Team.

Some of the items to be covered in the “Who is this business – What do we hope to achieve” document include:

  • Vision
  • Rhythm of meetings for the business
  • Products/services
  • Manufacturing/delivery of services
  • Locations
  • Team
  • Team training and professional development
  • Suppliers
  • Customers
  • Communications
  • Marketing
  • Selling – Calculation of selling prices – Charge out rates
  • Research and Development
  • Development of intellectual property
  • Commercialisation of Research and Development / Intellectual property
  • Succession
  • Exit document

If your business is only receiving an annual set of accounts and a tax return from your accountants and no data during the year, this is NOT ENOUGH INFORMATION for EFFECTIVE MANAGEMENT.

SMEs that implement their Leadership Team, accounting function, rhythm of meetings similar to larger businesses, IMPROVE THEIR CHANCES OF SUCCESS.

Every business should have a ‘VISION DOCUMENT’.

A significant problem for SMEs is ‘FISCAL MANAGEMENT’.

Successful SMEs have a Leadership Team which includes full-time team members and part-time advisers.

The establishment of Leadership Team covering all the key areas required by an individual business is very important.  One of these key functions is accounting/finance.

If you would like to have a discussion with Peter Towers the Founder and Managing Director of Towers Business Development and a former Chief Financial Officer and Company Secretary of a Listed Public Company please do not hesitate to contact us - 1800 232 088 or email and we will set up a complimentary Zoom meeting to discuss

If you want more information please visit our website

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Implementing Processes Similar to  Large Businesses Helps SMEs