My next guest is Don Graeme, Managing Director of BusinessNAV, a management systems and software company. In these tough times, businesses are looking at cutting costs and staff. Some businesses didn’t plan for tough times and have unfortunately had to close shop. Don has had 20 years experience in accounting across a number of industries. We’ll discuss the five financial management factors for weathering the economic storm. Welcome Don.
PS They are tough times and that’s why we’ve got you here. Now, you are an accountant, why don’t you tell us a little about being an accountant and ending up with BusinessNAV?
DG Good place to start Peter. I spent a number of years, five or six, working in public practice, what people tradition15sally know as your tax accountant firm, and I had a real interest in business and commerce. I was given a job as tax accountant for the Bundaberg Sugar/Bundaberg Rum Group, so I stepped out of that public arena and working at the cold face…
DG With Bundy Bear, and you really get to understand the people who work in those environments, what the systems are that make big successful operations run. So I was doing that for a number of years and then moved out into varied roles in those bigger operations before making my return to Brisbane and capital city operations and starting our consulting firm. We’ve been a consulting firm for a number of years and the frustration I had with it was working with small to medium operations and them not having those systems that we built up over a number of years. Just by default I needed to come up with the short cut solutions for cash flow and sales and marketing metrics to help these business owners understand. And so that’s what we’ve done, we’ve developed applications to make that happen so that the business owners can run that as they move from small through to medium.
PS So BusinessNAV is actually a software program that a business can monitor how they’re doing and what happens if they cut prices, what happens to their bottom line, all those sorts of things that people don’t think about when they’re doing it?
DG That’s right, Peter. You can have an accounting application out there, and accounting applications are vitally important, they track your transactions, they do the tax part of it for you so you can lodge your GST and your BAS statements and so forth. However, you need to get on and do more than that, and that’s something I wanted to focus on today. All those other pieces that businesses need to get involved with in-house.
PS Okay, let’s get started. You’ve got five big ones, what’s the first?
DG First is, you know it starts and ends with cash flow, and I talk in terms of cash flow structure. Everyone talks about cash flow but what is it really? Cash flow structure is about knowing every month, every week, every day, am I in front of the game, am I behind, am I positive or am I negative? And what I mean by that, Peter, is, is your firm making profits quicker than it’s costing you in working capital? And sadly in that small range, and it’s getting tougher now, there’s so many firms that are negatively geared in terms of their cash flow structure.
PS Do you reckon people actually cause a problem for themselves by being too scared to confront the brutal truth on the daily, weekly, monthly basis in terms of their cash flow?
DG Perhaps that’s it. What they are doing is turning a blind eye, they’re probably saying that’s the accounting thing, that’s too hard, I’m going to stay away from that, and that denial, whether it’s fair I don’t know, but if it’s denial then that’s got to change.
PS Okay, we’re talking to Don Graeme. Now, let’s go through it. You’ve got five things, you’ve hit the first, what’s the second?
DG The second thing would be a budgeting or a forecasting cycle in business. Now, I picked up an article just in the CPA Australia magazine, everyone’s familiar with that brand, big circulation, and Jerry Harvey, Chairman of the Harvey Norman Group, spoke about the importance in these tough times of being ready for a future up-turn because it will come, we’ve just got to work through this, it’s being right across those numbers all the time and planning and being flexible. Okay, so what’s planning and being flexible at the same time mean, because planning sounds a bit ridged? We’re familiar with what a budget is, let’s have an attempt at defining what’s going to happen over the next 12 months, two years, bigger businesses do the math for a longer period, so set that budget, but it doesn’t stop there. What I’m suggesting is that businesses actually put down on the calendar these given months, I’m going to do a reforecast because you’ve set a strategy in place for the year, that’s your strategy, you’ve done a budget according to that. Now everyone knows that the actual and the budget divert at some point.
DG Positively or negatively, so that’s a sign, not that you did your budget wrong but you’re diverting from your strategy. Look at it that way and then reset it during the year. That might sound like a lot of work but that’s what the successful operations do.
PS But Don, the great part about setting yourself even big goals on, say, for example, revenue, and then you find three months out before the end of financial year you’re half a million down, you actually work harder to make it happen because you’ve got this goal there that you set a year ago. I know it happened in our businesses exactly the same way. Three months to go we were half a million short of what we wanted and we went out there and got it because we knew that’s the goal we actually set. Fantastic point. Number three?
DG I like what you said, Peter, it tells me that you’re actually going back and looking at that stuff, super. Number three and number four are simply issues. Number three is about timelines of your information, number four is about accuracy of information. Think about your business, you’re down in the trenches, you’re doing it month in and month out, the month has finished, you want your numbers out very quickly, analyse it and move on. I’ll make the point that businesses out there, once they’re in that small to middle market, they are probably running on a cycle based around their BAS statement. Their accounts people are creating a set of accounts to produce a BAS.
PS Which is mainly quarterly.
DG That’s not the purpose of doing this information. The GST has been fantastic for us over the last nine years because it’s forced businesses to have sets of accounts and now we need to use them, so here’s the opportunity to do it. Look, I chaired a business forecasting conference last month and there are big businesses there trying to grapple with some of these issues. It’s not too late, you can get in there, ask the silly questions of your accountants and advisors and get this stuff going.
PS Number five?
DG Number five is really about getting a solid robust decision making structure in your operation. You know, I skipped over four a little bit, and four is about quality. Businesses out there haven’t got their balance sheets right, everyone understands the profit and loss stuff, they don’t understand a balance sheet.
PS I bet they don’t. They hate the word balance sheet, it’s scary.
DG There are simple steps. You can sit down with your accountant or your business advisor and go step by step and put an end of month checklist in place. They are the simple things. PS A balance sheet is a true story.
DG Yeah, if you get your balance sheet right you know where you’re at, you go off to the banks asking for money and if their debtors list doesn’t match what’s in the balance sheet, they’re not counting their stock, doing all these things, finally you end up with a decision making structure and have a formal meeting, if it’s not working on site, go somewhere else and have your accountants make decisions.
PS Don, I tell you what, blokes like you are very organised, very systematic, they really, really, bore the pants off me [laughter]. But I tell you what, you’re an exciting partner to have in a business for marketing type people like me, and I think this is the powerful lesson that you’ve brought today, that people need the hard working foundations for a person, and I guess BusinessNAV is all about that?
DG Look, if I was to summarise anything, cash is king, everyone knows that. Plan ahead, keep replanning but make sure it’s timely and accurate, and having put all that hard work in, actually put the management in place to make the decisions. If you make a decision to do nothing, that’s still a decision.
DG Okay, if you want to get in contact with us go to www.businessnav.com, you’ll find us, or contact us via your accountant and so forth, and we’re happy to work in with that structure.
PS Thanks for joining us Don.
Important information:This content has been prepared without taking account of the objectives, financial situation or needs of any particular individual. It does not constitute formal advice. For this reason, any individual should, before acting, consider the appropriateness of the information, having regard to the individual’s objectives, financial situation and needs and, if necessary, seek appropriate professional advice.
Published: Wednesday, September 16, 2009blog comments powered by Disqus
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