6 Key Factors to Ensure Your Business Has Financial Control

It’s easy to become complacent and overlook key warning signs if you’re not watching business metrics meant to draw attention to the performance indicators of your organisation. Here are six (6) key points we go through with every one of our clients:

1) “Do it right the first time so you don’t have to do it again”. Tempted to take a shortcut with your financial controls? This can and will come back to bite you in the near future, such as at tax time or when you are looking for business financing options.

  • Remember: your business is your livelihood, and its revenue is your bread and butter. Data should be input as soon as possible and as correctly as possible; trying to memorise facts and figures about the performance of your business is completely ineffective and risky.
  • Being cautious from the outset will save you the hassle and frustration later on – which brings us to our next point…

2)  Do you mix personal and business expenses and/or assets? Accurate financial control and effective budgeting are practically impossible if it is unclear where the money originated from or if it was spent for personal or business purposes.

3) Do you re-invest earnings into your business? Why/why not? You will need to invest in your business, no matter how big or small, to see it expand. It is up to you to ensure that such contributions and made to help your business thrive.

  • Improve efficiency by going digital, enhance production by modernising your workspace, and manufacture better quality products by purchasing higher-quality supplies.
  • Whatever steps you take, make sure they are worthwhile. Always think about what you need and invest wisely.

4) Do you know if your invoices are being sent out as quickly and accurately as possible? When was the last time you performed an invoice audit to ensure invoice accuracy?

  • It’s important to frequently evaluate stock levels and reconcile debtors, GST, and fixed assets.

5) Are all product and service lines contributing their full value to the bottom line? Your existing reports may not provide complete visibility into your margins.

6) When was the last time you set business goals? How do you know you’re moving in the right direction?

  • Always be aware of where you stand – and how you intend to achieve your business goals. 
  • Updating broad financial performance targets every year, monitoring performance versus budget, comparing inflows and expenditure of cash, and creating profit and loss reports are all activities that will keep you aware and on target.

In Summary

One of the most crucial roles of small business owners is financial control and financial management. As a director or sole proprietor, you must assess the possible effects of your financial controls and their impacts on income, profitability cash flow, and the company’s financial health. If you do not have the time or experience to properly manage your business finances and set up proper financial controls to ensure the financial health of your business, a virtual CFO may be the perfect solution for you.

 

Speak with Philip Khao from Solve Accounting on 0412651779 or at philip@solveaccounting.com.au to find out more about Virtual CFO services.

Philip Khao is a Chartered Accountant (CA), Virtual CFO professional and Director at Solve Accounting with many years of accounting and business services experience at global accounting firms and multinational corporations. 


The Importance of Financial Control

When you operate a small business, every dollar counts – and every dollar must be tracked, monitored, and managed accurately and properly.

You work hard to ensure that your business runs smoothly and successfully and having good financial management and financial control is an important step towards continued growth.

The Difference Between “Having Control” and “Being in Control” of Your Business Finances

It is normal for a sole trader or small business owner to be reluctant to hand over control of finances to someone else, whether that someone is an external accountant or bookkeeper. Or you may already even rely on your admin staff or an in-house accounts person to file taxes, send invoices on time, and do a good job with outstanding payments. It may be the cost or even the trust factor which creates that initial hesitation of letting a total stranger manage your hard-earned cash – how can you be sure that person is doing the right thing? The answer: financial controls.

Without a doubt, you may be great at what you do as a sole trader or small business owner (whether you are a tradie, contractor, start-up, online e-commerce business or any type of small business for that matter) – but the undeniable truth of the matter is this: without the proper background and experience in accounting and financial management, you will never know if your financial reports are truly accurate or lacking in vital information about your businesses’ health.

Taking a step back and being honest with yourself about how your business’s finances are managed is important. Are you confident that you have processes and procedures in place – the “financial controls” which we’ve referred to – to ensure your income and spending is effectively managed? Without adequate financial controls, your business can be vulnerable to such things as employee fraud, cash flow problems, and even bankruptcy.

The Importance of Financial Controls for BOTH Start-Ups and Mature Small Businesses Alike

As a Start-Up

During the early phases, most businesses incur losses and have negative cash flows. During this period, financial management is critical. Directors and/or Business Owners must ensure that they have adequate cash on hand to pay staff and suppliers, even if the organisation is losing money. This means that the owner must make accurate financial projections of these negative cash flows to determine how much money will be required to support the business until it becomes profitable.

As a Growing Business or “Mature” Small Business

As a company develops and matures (no matter how long it’s been around). it will require more cash to fund its expansion. It is critical to plan for and budget for these financial requirements. Having the right finance professional is important in this stage, to guide you through potential roadblocks to growth and provide you with the information and knowledge on how to make the best decision on whether to fund expansion internally (bring in more business partners or potential investors) or take out a loan from external lenders. Financial management (which includes financial controls) covers the ability to find the most cost-effective source of finance for growth, monitor the business’s cost of capital, and prevent the balance sheet from being overly burdened with debt, which can harm the business’s credit rating.

Solve Accounting – Your Trusted Financial Controls Adviser

A Virtual CFO has the skills of a professional accountant and financial controller, without the need to hire extra staff. They can provide you with the advice to set up adequate financial controls and can help you better manage your cash flow, reduce operating costs, and identify growth opportunities – working with you to better understand your business’s finances.

Speak with Philip Khao from Solve Accounting on 0412651779 or at philip@solveaccounting.com.au to find out more about Virtual CFO services.

Philip Khao is a Chartered Accountant (CA), Virtual CFO professional and Director at Solve Accounting with many years of accounting and business services experience at global accounting firms and multinational corporations. 


Four Key Areas Where a Virtual CFO Can Help Businesses of ALL Sizes

1. Financial Management for Success

Many small and medium-sized business owners lack the financial skills and/or time required to maintain and expand their businesses. SMEs require the assistance of a knowledgeable and trusted advisor to steer them to success. For the most part, virtual CFO services are relatively inexpensive – especially taking into consideration the technical financial know-how which a business owner would not typically have (remembering outsourced CFOs are fully qualified accountants with many years of experience in public accounting).

Through my years working in public accounting in Australia at a global firm, and overseas in the UK as a financial controller for large, multinational corporations, I truly believe a Virtual CFO service should be a mandatory function for all SMEs to instil strong financial control, financial literacy, and financial management within all aspects of the business’s operations. With this, I also believe that the SME failure rate will likely decrease as a result.

2. Businesses that have outgrown their accountant

Many businesses have accountants; some have traditional accountants only see once a quarter/year – after the period – only real tax advice provided is how much tax to pay and when to pay it as it is after the fact. Having a Virtual CFO will mean you will have a finger on the pulse with regards to numbers, cash flow, tax liability and retained profits at a particular point in time to facilitate better decision making.

3. A Mindset Shift for Growth

Business owners need to move away from the standard owner-operator mindset to scale their business operations and grow. Adopting an owner mindset is easier said than done, which is why a business adviser and consultant such as a Virtual CFO can guide you on this transformative journey. Since technology can make compliance less of a problem through a good step-up and monitoring (governance and controls), a virtual CFO can set things up in best practice from the start or identify defective or deficient areas of the business controls and management where errors and oversight may be costly.

4. Strategic Thinking and Goal-Setting – Managing Your Business Like an Enterprise

We all must start somewhere, setting goals for your business is just the beginning as the adage goes, “a goal without a plan is merely just a wish”. From corporate governance to business management strategy and operational excellence – setting goals, targets, KPIs, and benchmarks for the coming year to improve on are just a handful of the things a Virtual CFO can do for you. If you’re not looking at the numbers regularly, and you don’t know how your organisation is tracking then how are you going to plan for the future? For most businesses, doing better than the previous years is a solid goal to follow – but how exactly are you going to do that?

Speak with Phil Khao from Solve Accounting on 0412651779 or at philip@solveaccounting.com.au to find out more about Virtual CFO services.

Phil Khao is a Chartered Accountant (CA), Virtual CFO professional and Director at Solve Accounting with many years of accounting and business services experience at global accounting firms and multinational corporations. 


“My business is too small to need a CFO!” - A Common Misconception

As an accounting professional, I’m here to provide clarity on the misconception of CFOs only being for big corporations and banks. A “CFO” in this context should be thought of as a business consultant or adviser. It’s fully accepted that many small businesses can’t afford full-time CFO/C-suite and continue with this thinking that Virtual CFO’s will be too expensive, or they’re too tiny of an operation for it to matter.

The advantage here is that you can outsource your financial management to a local accounting firm (such as Solve Accounting) to receive the right advice; with no need to hire, manage, or train an in-house finance manager. The concept of a virtual CFO is a relatively new way of working which has been made possible through development and innovation of technology freeing up time for accountants to focus on providing advice and delivering value. With a virtual CFO, you have access to everything a CFO can do, but only to the extent which you require.

So, What Will You Actually Do for My Business as a Virtual CFO?

A CFO oversees all financial matters in your organisation. From a managerial standpoint, the CFO typically manages the teams in charge of operational matters such as keeping accurate, timely accounts and ensuring you meet your tax obligations and financial goals. On the strategic side, your CFO will monitor the company’s performance and provide advice to help your company meet its business goals.

As your virtual CFO, we handle all financial matters of the business to instil financial control, ensure we have a finger on the pulse when it comes to the numbers, and openly share our findings and advice with you. Services we provide and assist with include but are not limited to:

  • Goals setting & implementing business strategies
  • Cash flow management, budgeting, and forecasting
  • Financial reporting & advisory
  • Monthly performance & accountability meetings
  • Systems and business process audits, including business automation services and technology
  • Provide advice to improve your financial position
  • Provide access to our professional network

A Virtual CFO would perform the same strategic function, but rather than joining your business as a company director, they will operate on a contractual basis with your organisation. Virtual CFO services (also known as fractional CFO or outsourced CFO services) are accessible on an affordable hourly or monthly subscription basis.

Final Thought

A “virtual CFO” or an “outsourced CFO” may be one of the most valuable assets to a small firm since it eliminates the need for extra staff while still providing all the benefits of someone with that level of financial expertise. I would love to see the government make a Virtual CFO a compulsory requirement for all business owners to have before opening their small business.

Speak with Phil Khao from Solve Accounting on 0412651779 or at philip@solveaccounting.com.au to find out more about Virtual CFO services.

Phil Khao is a Chartered Accountant (CA), Virtual CFO professional and Director at Solve Accounting with many years of accounting and business services experience at global accounting firms and multinational corporations. 


What Is A CFO and Why You Need One

Future-focused financial strategy and sound financial management for small businesses is something that should be top-of-mind for budding entrepreneurs and long-standing mum-and-dad businesses alike. It’s an all-too-common story that I’ve seen with my own eyes and heard from colleagues within the industry, where mismanagement of a business’s finances (from cash flow to tax obligations) leads to its downfall. It doesn’t take a Virtual Chief Financial Officer (CFO) to know that, but it may take one to figure it out for your business before it’s too late.

In the same way, a mechanic looks under the hood of a car to inspect the engine, a Virtual CFO or an Outsourced CFO does the same when reviewing a business’s finances and operations from the lens of an expert business adviser.

Official reports from the 2020 Small Business Count from the Australian Small Business and Family Enterprise Ombudsman (ASBFEO) states there were 2,314,647 small businesses, 56,835 medium businesses, and 4,271 businesses in Australia as of 2020. With a 15.2% jump in registrations for small businesses over the past financial year, it is important to understand what steps new organisations can take to manage the financial direction and strategy of their newly found career, and how an Outsourced CFO in Sydney can help.

When a typical person hears the word “Chief Financial Officer” or ‘CFO”, one may think of a high- flying, highly paid executive of a Big 4 bank, a major telecommunications company, or even an international tech company. In essence, it’s not something a typical small business owner may think about in the first instance, but if you find yourself asking questions such as:

  • Are my financial figures accurate?
  • Can I afford to hire more people?
  • What can I do to increase revenue?
  • How do I take my business to the next level?
  • I need help with setting a long-term plan for my business.

When you own a small business, you’re probably aware of the concept of hiring an accountant to prepare your taxes or dealing with a lender or finance broker to enquire and obtain financing. However, for many small business owners, a Virtual CFO service may seem excessive, especially if having a full-time CFO on board isn’t something you'd consider financially.

In today’s reality, a Virtual CFO may be one of the most valuable assets to a small firm because it eliminates the need for additional staff while still providing all the benefits of someone with that level of financial skill. A virtual CFO will most likely have the answers you need, as a fully qualified (CA or CPA) accountant, business consultant, and adviser who can put you in the best position to succeed.

Even if they may not have all the answers, their extensive, validated professional network will provide you access to individuals who can help you structure, secure, and grow your business.

I believe Virtual CFO services are a commodity to small businesses. I would advocate that government support is needed in the form of education, grants, and resources for small businesses to set themselves up for success. If there was a mandatory requirement for small businesses owners to have a Virtual CFO in their business for the first 12months, we would see a big drop in the number of small businesses that fail.

Philip Khao is a Chartered Accountant (CA), Virtual CFO, and Director at Solve Accounting with many years of accounting and business services experience at global accounting firms and multinational corporations.