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Where to Find the Cash You Need

A lack of cash can not only stall your company’s growth but also place its very existence under threat.

It doesn’t matter how profitable the business may be; cash flow problems can place it under severe pressure, according to the CFO Centre’s Chairman Colin Mills in his book ‘Scaling Up How to Take Your Business to the Next Level Without Losing Control and Running Out of Cash’.

“You might think you’re immune from danger because your business is experiencing a high level of growth, but you’re wrong: expansion can exacerbate the problems caused by poor cash flow management,” he said.

“You almost always have to make investments and bring certain expenses on ahead of achieving the higher revenue and cash flow that comes with successful growth.”

It is the oxygen every business needs to survive.

“The stark truth is, without cash your business will be unable to meet its payroll obligations, default on payments to suppliers and creditors (payables), and ultimately cease trading.”

Fortunately, there are ways to find cash both from within your business (by improving processes, cost-cutting and selling off unused assets) and from traditional and alternative external funding sources such as banks, invoice factoring companies and crowd-sourcing platforms.

Getting the cash your company needs earlier rather than later can not only save you and your employees from unnecessary stress but also help you to achieve more rapid growth as the following example illustrates. One of the CFO Centre’s American clients had over-hired which caused it to run into cash flow problems.

But with the help of the CFO Center, the company was able to survive the blip and then attract one of the ‘Big Three’ automobile manufacturers in the US—Chrysler—as a client.

“They were really bumping up against their credit line of $US500,000,” recalled the CFO Center’s Boston Regional Director in ‘Scaling Up’. “We came in, restructured their financing and their forecasts, and in a couple of months we were able to get them a new line of credit for $2 million,” he said. “That effectively allowed them to invest in the growth of the company.

“A year after we were engaged, the client won a massive deal with Chrysler. Chrysler conducts vendor analyses on the financial position of its vendors, and this company got a green light across all areas that Chrysler reviewed them on.”

Look within your company first

While many business owners automatically look to external funding sources, it pays to look closer to home first.

“Most entrepreneurs don’t realise there is often considerable funding to support growth from within their own business,” says Mills. “That’s because the collection of customer receivables can often be improved through strong credit control and the level of stock holding reduced through improved systems and processes. In some instances, poor negotiation of supplier payment terms means less funds are available within the business to support scaling up.”

So before you pick up the phone (or click your mouse) to apply for external funding, consider the following methods for freeing up cash within your business.

Declutter

If the business has machinery, equipment or large amounts of stock that is idle, consider selling it or renting it to other businesses.

Remove unnecessary overheads

Look at all your overheads to see if they can be lowered. For example, consider reducing staff numbers, or not replacing employees when they leave or moving premises to get a more favourable lease.

The head of the Australian CFO Centre recalls how one part-time CFO was asked to help a fast growth branding business that had got into trouble with cash flow. Most troubling was a looming $AUD 500,000 tax bill.

At the company’s headquarters, it was easy to see why the company was struggling: the car park was crammed with ‘flashy’ company cars.

A conversation with the owner revealed he did not have a good grasp on his financials. He didn’t know how to improve his margins and had no idea how much his product was costing to produce.

So he was advised to sell the cars and make half the staff redundant.

“We were really hard with the guy; we took a firm line with him, but he did all the things we suggested he do to get his business back in order,” the part-time CFO said. “That was three or four years ago, and today his scaleup growth has delivered the cash flow and sustainability, to where he should have been if he had the financial nous beforehand.”

Negotiate better terms with vendors

Ask for more favourable payment terms from your suppliers. This doesn’t necessarily mean asking for reduced prices but could be as simple as requesting an extra seven days for your payment window.

If your suppliers refuse your request, look for other suppliers who can offer lower prices or better payment terms for the same quality of product.

Resolve late payment issues

Make your payment terms clear to minimise the possibility of late payment issues. Try to keep to the same terms for all your customers (for example, a 30-day window for payment of the invoice). Get agreement to your payment terms from all your customers or clients. Carry out credit checks on all new customers or clients. Ensure that invoices are issued promptly. Ideally, you should issue invoices by email on the day of completion of the job or project and ensure that overdue payments are pursued.

Get deposits for large projects or orders. Build a deposit (of anywhere up to 50% of the total cost) into your contract for large projects or orders. This is especially important if the projects or orders are likely to involve a lot of resources and time.

That way if the customer decides to cancel the project or fails to pay the balance on the project or order, you have at least recovered some of the cost of the resources and time you’ve already invested in it.

Look for External Funding

You should also consider external funding sources to help ease your cash flow challenges. There are a dizzying number of sources to consider, both traditional and alternative (which is why you should use the services of a part-time FD or CFO to identify the best method for your company and help you navigate your way through any such process).

Apply for a bank overdraft

A bank overdraft has been the traditional form of funding for many businesses. But these days, banks are more likely to try to steer their clients to other forms of debt that provide the banks with more security.

While overdrafts are usually quick to set up, they have a major drawback, and it’s this: banks can call them in on demand.

Request a bank loan

The advantages of bank loans are that they are for a set term with regular repayments and that the banks can’t call the money back on demand. The downside is that banks will demand strong security for the loan such as a personal guarantee secured on the assets of the business or even the owner’s personal assets.

Use asset financing

Using your assets as collateral for the loan is one of the easiest ways your growing business can get access to quick cash. However, there is a drawback: not all assets are considered equal.

Typically, lenders will only consider assets that they can sell quickly if you default on the loan. Therefore, they usually want high-value assets with a low depreciation rate or high appreciation rate, and which are easy to convert into cash.

Get alternative financing

The alternative finance market includes a wide variety of financing models including peer-to-peer lending, crowdfunding and specialist finance providers offering products such as selective invoice finance and invoice trading platforms.

The benefit is that since they have greater flexibility than traditional funding sources they can often offer a faster turnaround on the right deals.

Invoice Discounting

The advantage of invoice discounting, in which banks and invoice discounting companies lend money secured against your debtors/receivables, is that you can borrow up to 80% of the invoice amount within 24 hours. So you get the cash flow benefit and the rest when the money is collected.

The disadvantage is that it can cost more than overdraft or loan charges so it may have a bigger impact on your profit margins.

Peer-to-peer (P2P) lending

P2P platforms match lenders directly with borrowers so that you can borrow money from individuals. The huge benefit of this is that the rates are favourable and often much better than any other type of lending method. The disadvantage is that you will still have to undergo a credit check and possibly pay an application fee.

Equity-based crowdfunding

The way it works is that people come together on the crowdfunding websites to pool money towards a particular venture or idea in return for an equity share in your business. The issue with crowdfunding though is that it’s not as easy as some people make it out to be, as it requires months of planning and lots of marketing in order to get people excited enough about what you are doing to contribute money towards it. There’s also the risk that you don’t receive the amount you’re seeking, in which case any finance that has been pledged will usually be returned to your investors, and you will receive nothing. If you’re successful, there’s the risk you give away too much control in your company. This could have an impact later when you decide to sell the company.

The easy way to raise cash

Of course, you can make the finding or raising of cash a much easier process by engaging the services of a part-time CFO. For example, The CFO Centre Singapore offer the services of part-time CFOs with big business experience who can use what they know to help you uncover or obtain the cash you need to help your company achieve rapid yet sustainable growth. They will help remove the fear and confusion from the entire process.

To discover how the CFO Centre will help your company to get cash and scale up, please call us on +65 6854 5027 or contact us here.

How it works

The CFO Centre’s part-time CFOs use a proven framework known as the ‘12 Boxes’ to identify where the problems are within any business. They use it to review every aspect of your company finance function and identify every problem area.

They will help you to understand your company’s finances and not only eliminate cash flow problems and identify cost-savings but also to improve profits.

They can also help you and your team to understand your main profit drivers; find and arrange funding; identify your Critical Success Factors and Key Performance Indicators (KPIs), help you to expand nationally and internationally; and build value to make your business more attractive to investors or buyers. To discover more about the 12 Boxes, click here.

Need help?

To discover how an CFO Centre part-time CFO will help your business, contact us now on +65 6854 5027. To book your free one-to-one call with one of our part-time CFOs, click here.  You can see how they add rocket fuel to any business here.

Where are you going wrong?

To identify strengths and weaknesses in your business in just nine minutes with the F-Score click here now. Just answer a brief series of questions, and you’ll receive an 8-page report that will reveal potential current or future pain points for your business. It will also help you to rate the performance of your finance function and uncover untapped opportunities for growth. Click here now to take the F-Score.

Got a Big Question?

If you have a burning question for one of our team of CFOs, ask it here, and you’ll get an answer within 24 hours.

How A CFO Can Help You Sleep Better At Night

Babies, as any hollow-eyed new parent will tell you, often sleep for just a few hours at a time which is why ‘sleeping like a baby’ is a practice best avoided if you have a growing business to run and need to be on top of your game during working hours.

Instead, sleep experts recommend you look for ways to get between seven and nine unbroken hours of night-time sleep.

That’s because sleep is believed to be crucial to your physical and mental well being. It’s essential for maintaining cognitive skills such as communicating well, remembering key information and being creative and flexible in thought, says Dr Justin Varney in an article for Public Health England.

Insufficient sleep has a “profound impact” on your ability to function, he says. It makes you more vulnerable to infection and raises the risk of accidents and injuries.

What’s more, studies are beginning to show a link between a lack of sleep and conditions such as high blood pressure, heart disease and diabetes.

So, what can you do to ensure you get a great night’s sleep?

Almost every article you read on the topic will fail to mention what is arguable the number 1 strategy for a great night’s sleep… They’ll tell you to transform your bedroom into a technological-free zone (so no late-night watching of ‘Game Of Thrones’ or checking your Twitter feed before you shut your eyes). That’s as much to avoid too much stimulation before sleep as it is to minimise the amount of blue light you’re exposed to from some TVs, computer screens, tablets, smartphones, and LED lighting. The blue light can keep you awake by suppressing the sleep-inducing hormone melatonin.

Sleep hygienists (the name for experts in this field) also recommend you stick to regular bedtimes and avoid consuming caffeine and rich food in the last few hours before bed, and so on.

What most ‘sleep tips’ articles fail to mention is one of the best ways you can get your full quota of night-time sleep—that is how to deal with work-related stress which is one of the biggest causes of sleep problems. As the owner or CEO of a growing business, one of the best ways you can reduce your work-related stress is to hire an experienced Chief Financial Officer (CFO).

Take the CFO Centre’s part-time CFOs as an example. They all have many years of big business experience so that they can identify and assess the areas of risk in your business. More importantly, they can advise you on how to deal with such risks now and in the future.

Equally, part-time CFOs can highlight areas of risk that you are either unaware of or don’t know how to deal with. In other words, they’ll identify, quantify and help you to manage the risks your organisation faces.

But they do so much more than that. They will also advise, analyse and implement processes and practices to ensure your organisation performs better. They can provide strategic analysis and advisory support on every finance-related aspect of your business.

At any one time, they can be involved in all those areas of the business that have previously kept you awake at night: things such as reporting, auditing, tax planning, business planning, capital expenditure, working capital management, budgeting and exit planning. Your part-time CFO will work on your financial strategy and finance operations while also managing your tax planning, legals, compliance, outsourcing and banking relationships.

You can rest easy at night, knowing your part-time CFO will help you to improve your cash flow and profitability and provide the insight into how your business can move seamlessly to the next level.

With a part-time CFO on your side, insomnia and restless sleep should become a thing of the past.

How it will work

The CFO Centre’s part-time CFOs use a proven framework known as the ’12 Boxes’ to identify where the problems are within any business. They use it to review every aspect of your company finance function and identify every problem area.

They will help you to understand your company’s finances; eliminate cash flow problems; identify cost-savings and improve profits.

They can also help you and your team to understand your main profit drivers; find and arrange funding; identify your Critical Success Factors and Key Performance Indicators (KPIs), help you to expand nationally and internationally; and build value to make your business more attractive to investors or buyers.

To discover more about the 12 Boxes, click here.

Need help?

To discover how a CFO Centre part-time CFO will help your business, contact us now on +65 6854 5027. To book your free one-to-one call with one of our part-time CFOs, click here. You can see how they add rocket fuel to any business here.

To hear what people really think about the CFO Centre’s part-time CFOs, watch these short videos here.

Identify strengths and weaknesses

Identify the strengths and gaps in your business in just nine minutes with the F-Score.

Just answer a brief series of questions, and you’ll receive an 8-page report that will reveal potential current or future pain points for your business. It will also help you to rate the performance of your finance function and uncover untapped opportunities for growth. Click here now to take the F-Score.

Got a Big Question?

If you have a burning question for one of our team of CFOs, ask it here, and you’ll get an answer within 24 hours.

Why and How You Should Scale Up Your Business

If you consider what sets companies like eBay, Alibaba, Netflix, Google, Starbucks, Apple, Cisco and Dell apart from other companies, their ability to continuously innovate and create high growth will probably come high on your list.

So should the fact they’ve all successfully transitioned from start up to scale up status without losing their ability to be dynamic and entrepreneurial.

Then there’s the fact they’ve helped create thousands of full-time and part-time jobs throughout the world. Twenty-three-year-old eBay, for example, employs 14,100 full- and part-time employees while Google’s parent company Alphabet Inc. has 88,100 full-time employees.

In his book, Scale Up!, the FD Centre’s Chairman Colin Mills defines scale ups as companies which have grown by 20% a year for a minimum of three years and which started the three year period with a minimum of 10 employees.

Scale ups disrupt and revolutionise entire industries, according to a Deloitte & THNK report. “They embody ingenuity, innovation, and foresight,” its authors concluded after studying 400,000 enterprises worldwide.

There’s a common misconception that only start ups can be innovative, dynamic and entrepreneurial. Yet as scale ups like Google and Alibaba illustrate, that’s far from the case.

Perhaps start ups attract more attention because there’s so many of them: it’s estimated that there are 300 million start ups globally. By comparison, only a tiny fraction of start ups ever survive long enough to make the transition to scale up, according to the authors of the Deloitte report.

“Our research shows that the chances of a new enterprise to ascend as a scale up are around 0.5%, which means that only 1 out of 200 surviving new enterprises will become a scale up. ‘Unicorns’ make up the even smaller subset of scale ups; only 104 start ups are valued over $1 billion.”

Those companies that do become scale ups help to boost local, national and international economies. They provide direct, ongoing employment and that, in turn, creates more consumer spending which in turn stimulates the economy and expands the tax base.

Or as business guru and venture capitalist Daniel Isenberg says in Scale Up!, “One venture that grows to 100 people in five years is probably more beneficial to entrepreneurs, shareholders, employees and governments alike, than 50 which stagnate at two years.”

Contrary to what many policymakers believe, start ups don’t help economies to flourish or cause per capita income to rise.

“The relationship between per capita income and entrepreneurial activity is generally negative, rather than positive as is often believed,” wrote Scott Shane, Professor at Case Western Reserve University, in Entrepreneur magazine. He referenced a Gallup Organisation survey which compared per capita Gross Domestic Product (GDP) with the fraction of the population that reported being self-employed in 135 countries. It showed that the self-employed fraction had a negative linear relationship with the log of GDP.

“That is, self-employment rates are lower in rich countries than in poor ones.”

But growing a company past the start up phase is not without its share of challenges, whether they are related to employees, sales and marketing, operations, administration, or finance. Most importantly, if growing companies don’t have the right infrastructure to support their expanded operations, those challenges can become increasingly severe.

“While on paper, they may have the revenue, the manufacturing base or customer reach of a substantial business, the culture, the controls, the processes, the personnel and the leadership remain those of a much smaller business that they were a short time before,” says Mills in Scale Up!.

“Worse, they haven’t yet accumulated the resources to build and maintain that infrastructure.”

If the situation is not resolved, the business will outrun itself (cash reserves will dwindle as it tries to meet the expanded demands) or get stuck (as the owner and employees find themselves unable to cope with the problems).

But if you revise your business model, you can overcome these challenges or even avoid them altogether.

“You need to consider your whole business model, because if you have a terrible business model, then the last thing you want to do is to start scaling it,” says Mills.

The CFO Centre’s part-time CFOs help clients revise their business model using a framework known as the ’12 Box’ approach.

It has three levels:

  1. Operational
  2. Strategic
  3. Business Support

Operational

This refers to finance operations and focuses on two key aspects: cash and profitability. There are four boxes: Cash Flow Management and Profit Improvement (which generate money), and Internal Systems and Reporting (which generate time for management).

Strategic

This involves your finance strategy: how are you going to finance the business to achieve future cash and profits? The four boxes in this section cover: Risk Assessment, Strategic Funding, Strategic Activities and Exit Planning, and an Implementation Timetable.

Business Support

This involves crucial tasks such as compliance, tax planning and legal issues, banking relationships and outsourcing. In the case of The CFO Centre’s CFOs, they don’t carry out the tasks but instead, manage the work on a client’s behalf. They’ve built relationships with the right people in each country where they operate so that they can connect clients with the right supplier at the right cost when they need it, and then manage the work on their behalf.

Take the F Score: Find Your Future Challenge Areas

To help you identify which one of these 12 areas is a potential current or future pain point for your business, The CFO Centre has created a quick assessment form known as the ‘F Score’. (It will only take nine minutes to complete.)

The F Score features a series of questions built around the 12 Boxes, designed to identify your areas of strength and those which represent a gap. When you’ve completed the questions, you’ll receive an eight-page report which will reveal your current or future challenges. It will not only rate the performance of your company’s finance function but also uncover untapped opportunities for non-linear growth.

To discover how The CFO Centre will help your company to scale up, please call us now on +65 6854 5027 or contact us here.

Free 1-1 Finance Session

Do you have a burning question about any of the following:

  • Cash flow management
  • Funding
  • Profit improvement
  • Exit planning
  • Reporting
  • Getting the most from your bank?

Book now for your complimentary 30-minute finance breakthrough session with one of our part-time CFOs. Get the answers you need to scale up your business.

Ask the CFO

If you’ve got just one finance-related question and you’d like us to send it across to our team of top CFOs, please let us know, and we’ll get back to you within 24 hours.

What to Expect from a Part-Time CFO

The idea of hiring even a part-time CFO may seem to some SMEs a bit over the top—like paying Quentin Tarantino to make a 90-second home page video or booking the National Stadium for the company’s five-a-side friendly football match.

But for companies whose ambition is to get into and survive the coveted scale-up phase, hiring a part-time CFO makes perfect sense. They know that they’re getting a finance veteran, someone with big business experience, who can provide the guidance they need to grow rapidly and help them to avoid the costly mistakes that so many ambitious SMEs make as they attempt to move into the Big League.

As Colin Mills, the Chairman of the FD Centre, said in his book about scale-ups, “The reality is that there is great value in having someone from the next level if you’re aspiring to get there.”

Companies who hire part-time CFOs understand that today’s CFOs are capable of delivering far more than bookkeeping or accounting services. They provide the kind of strategic business perspective and support that fundamentally alters the performance/profitability and long term potential for a business. They can work with your board of directors and external stakeholders such as your bank or investors. They can also advise you on mergers and acquisitions. Besides strategic analysis, they can provide operational support on everything finance-related in your business.

Their responsibilities might cover business planning, capital structure, risk management, auditing and reporting, tax planning, capital expenditure, investor communication, R&D investment, working capital management and company budgeting.

Companies that don’t hire CFOs are often unaware of the opportunities and profits they’re missing out on. When asked why so many SMEs don’t hire CFOs, Matthew Bud, Chairman of the international Financial Executives Networking Group, said business owners are either unaware of their need for a CFO or reluctant to spend the money

What many entrepreneurs don’t realise is that they’re already spending that money in lost profits and misspending,” he told Inc.

“They’re not seeing the dynamics of the business from an educated financial perspective. You can’t always go with your gut in making financial decisions, which is what a lot of entrepreneurs try to do.”

So, what can you expect from a part-time CFO?

Well, the role a part-time CFO will play in your company will depend on factors such as the size of your business, your expectations, your industry, and your corporate strategy and business goals. But a good CFO will work on your company’s finance strategy and finance operations and manage areas such as compliance, tax planning and legals, outsourcing and banking relationships.

To achieve success in these different roles, a CFO will need outstanding hard and soft skills.

If you’re a CEO, the CFO will be your strategic partner, providing financial insight and strategy and helping you to improve profitability and cash flow.

A good CFO won’t, however, be a ‘Yes’ person, someone who rubber-stamps every initiative without due diligence. On the contrary, they will challenge you and your vision for your business asking the kinds of questions which leads to transformation as opposed to incremental improvement.

Charles Holley, CFO-in-residence at Deloitte and former Walmart CFO, says good CFOs are independent-minded yet supportive of their CEO.

My CEOs counted on me to be the truth teller, to form my own opinions on important company decisions and to speak up. At the same time, they expected my support for execution.”

Great CFOs challenge the business, he says. They point out problems and propose possible solutions to “spark the debate”.

CFOs are in the best position to call attention when the numbers aren’t supporting the strategy. For example, CFOs can push the business to change capex priorities when the underlying ROI assumptions are no longer supported by the numbers.”

Besides being a trusted advisor and sounding board, a good CFO will help to raise efficiencies, identify opportunities, manage risk management, and manage capital structure.

Since they speak the language of financiers and understand what they are really interested in, CFOs can also liaise with financial institutions, investors, and auditors on your behalf.

In other words, a part-time CFO can help you to manage the transition into the scale-up phase more smoothly and ensure you reach your growth targets sooner.

How it works in practice

The CFO Centre’s part-time CFOs use a proven framework known as the ’12 Boxes’ to identify where the problems are within any business. They use it to review every aspect of your company finance function and identify every problem area.

They will help you to understand your company’s finances; eliminate cash flow problems; identify cost-savings, and improve profits.

They can also help you and your team to understand your main profit drivers; find and arrange funding; identify your Critical Success Factors and Key Performance Indicators (KPIs), help you to expand nationally and internationally; and build value to make your business more attractive to investors or buyers.

To discover more about the 12 Boxes, click here.

Need help?

To discover how a CFO Centre part-time CFO will help your business, contact us now on +65 6854 5027. To book your free one-to-one call with one of our part-time CFOs, click here. You can see how they add rocket fuel to any business here.

Uncover strengths and weaknesses

Identify the strengths and gaps in your business in just nine minutes with the F-Score.

Just answer a brief series of questions, and you’ll receive an 8-page report that will reveal potential current or future pain points for your business. It will also help you to rate the performance of your finance function and uncover untapped opportunities for growth. Click here now to take the F-Score.

Got a Big Question?

If you have a burning question for one of our team of CFOs, ask it here, and you’ll get an answer within 24 hours. Please note the question must be finance-related (sadly they can’t give horse-racing or fashion tips or relationship advice).

What A Chief Finance Officer Can Do for Your Company

You might think a Chief Finance Officer’s role is confined to traditional finance activities, but todays CFO can do so much more than count beans.

In the past, a Chief Finance Officer’s responsibilities might have been confined to high-level accounting such as providing timely financial statements and monthly management reports, managing investments and expenses, monitoring cash flow, and managing risk. But as the business landscape has become more complex over the past decade, the role of a Chief Finance Officer has changed.

That change is due to factors such as the global financial crisis—the biggest since the Great Depression of the 1930s, disrupted and volatile markets, the rise of big data, and the impact of digital and social media.

As a result, CEOs and their Boards expect so much more from CFOs, according to a KPMG report.

“CEOs are increasingly looking to their finance leaders to help drive wider business strategies,” says Simon Dergel, author of ‘Guide to CFO Success’.

They expect CFOs to make decisions and shape their plans based on the company’s ambitions, he says. As the keeper of the company’s data with an understanding of every department’s objectives and performance, they can play an active role in refining and aligning business strategies.

“Perhaps the biggest change in terms of the CFO’s role in business today is that their advice is not only valued—it is necessary,” says Dergel.

“Businesses are currently dealing with a wave of disruptive competitors and fast-changing customer expectations, while also managing a global talent shortage and volatile financial conditions. The wisdom and experience of finance leaders make them indispensable in the boardroom as companies look to tackle one of the most uncertain economic periods in decades.”

Most importantly, CFOs are delivering on these expectations. The new breed of CFOs are now much more forward-looking. They wear three ‘hats’ at any given time: financial expert, active management team member and leader of the finance function.

Given the opportunity, they can perform multiple roles within a company, working both on and in the business. Not only can they direct financial performance and protect the financial integrity of the company but they can also drive strategy.

This is borne out by James Riley, the Group Finance Director and Executive Director of Jardine Matheson Holdings Ltd., who says, “A good CFO should be at the elbow of the CEO, ready to support and challenge him/her in leading the business.

“The CFO should, above all, be a good communicator—to the board on the performance of the business and the issues it is facing; to his/her peers in getting across key information and concepts to facilitate discussion and decision making; and to subordinates so that they are both efficient and motivated.

“Other priorities for a CFO are to have strength of character, personality, and intellect. I take it as a given in reaching such a position that an individual would have the requisite technical knowledge and financial skills.”

How Start-Ups and Scale-Ups Benefit

Most start-ups and early-stage growth companies don’t need and can’t afford the services of a full-time CFO. But that doesn’t mean they can’t benefit from all that CFOs offer. They can access the skills of highly qualified CFOs by engaging them on a part-time basis.

Part-time CFOs can provide enormous value in terms of strategy and planning for early-stage or scale-up companies. A report from the Financial Executives Research Foundation (FERF) went further: it described their role as “critical to the success of start-up and early-stage growth companies” since they provide key insights.

It found CFOs play key roles in not only managing a young and fast-growing company’s finances but also in setting broader strategic goals and establishing and achieving financial and non-financial milestones.

When the company is at a stage when it needs external investment, the part-time CFO can manage the process to ensure it raises the right type of funding from the right sources. The part-time CFO can also provide more comprehensive reporting as well as manage the relationship with the external investors, whether they are venture capitalists, private investors or banks.

Part-time CFOs also help to establish sound reporting systems and tools that help improve reporting metrics and communications to investors.

They also play a key part in setting and monitoring company strategy and maintaining a balance between investing in growth, building market share and preserving capital for future opportunities.

As they grow, the need for a part-time CFO’s financial and strategic acumen becomes more acute, FERF found.

The CFO Centre’s part-time CFOs bring these skills to every client at a fraction of the cost of their full-time counterparts. For instance, its part-time CFOs can:

  • Provide you with an overview of your company so that you can make sound decisions about its future.
  • Help you to understand your company’s finances.
  • Eliminate cash flow problems.
  • Identify cost-savings within your company.
  • Improve your profits.
  • Create a realistic business plan and so make better financial decisions.
  • Help you and your management team to manage your finances with ease.
  • Develop clear strategic objectives.
  • Identify your Critical Success Factors and Key Performance Indicators (KPIs).
  • Find and arrange funding.
  • Understand your main profit drivers.
  • Identify your best customers.
  • Sort out your tax position.
  • Introduce timely, easy to follow management reports.
  • Facilitate expansion in your country and into other countries
  • Build value to make your company more attractive to investors or buyers

 

To discover how a CFO Centre part-time CFO will help your business, contact us now on +65 6854 5027. To book your free one-to-one call with one of our part-time CFOs, click here.

The Rising Power of AI in Financial Services

Artificial Intelligence (AI) is already transforming the way in which financial service companies are doing business.

More and more of them are using AI to process information on their customers, cut costs, save time, monitor behaviour patterns, assess credit quality, automate client interactions, analyse markets, assess data quality and detect fraud.

A pwc Digital IQ 2017 survey found that 72% of business decision makers believe AI will be the business advantage of the future. About 52% said they’re currently making “substantial investments” in AI, and 66% said they expect to be making substantial investments in three years.

Franck Coison, Industry Solution Director, at international IT services company Atos says the four main types of AI are facial and voice recognition, natural language processing, machine learning, and deep learning. They can be used in chatbots, document analysis, process automation or predictive analysis, he says.

Although robotic process automation (RPA) is increasingly common in financial services, it is usually used for quite simple, repetitive tasks, says Coison. “In contrast, AI can be used to automate more complex tasks that require cognitive, or ‘intelligent’, processes.

“While RPA is appropriate for back-office and accounting processes, when it is combined with AI, any process including customer-facing activities can be automated.”

That means it has great potential in areas such as customer service, sales and customer intelligence, IT services, fraud prevention, and cyber security, he says.

The pwc survey found that adoption of practical machines that think is widespread in the financial services sector. Some banks use AI surveillance tools to prevent financial crime, and others use machine learning for tax planning. Many insurers use automated underwriting tools in their daily decision making and wealth managers offer automated investing advice across multiple channels.

A provider of next-generation investment analytics Kensho Technologies has for example developed a system that allows investment managers to ask investment-related questions in plain English, such as, “What sectors and industries perform best three months before and after a rate hike?”. They receive answers within minutes.

AI is proving popular among banks too. Lloyds Bank, for example, has invested $3billion on its digital transformation initiative, which includes using AI to “simplify and progress modernisation of its IT and data infrastructure, as well as other technology-enabled productivity improvements across the business”.

Terry Cordeiro, Head of Product Management at Lloyds Banking Group says AI has “completely transformed how the finance industry works, with the vision at Lloyds being to use smart machines for extending human capabilities while using data to respond.

“Automating processes means better opportunities to reduce costs for better decision making, and intelligent products mean that our customers are able to do much more,” Corderio says.

Earlier this year, NatWest Bank introduced ‘Cora’, an AI-powered ‘digital human’, which converses with customers in its branches. Cora can answer more than 200 queries, covering everything from mortgage applications to lost bank cards.

The plan is to develop Cora so it can answer hundreds of different questions, as well as detect human emotions and react verbally and physically with facial expressions. As well as being put in branches, Cora could be used by customers at home on their laptop or PC and, in the long run, on smartphones.

Finance departments are also benefiting from AI. The insight into data that it can provide will be a competitive advantage, according to Matthias Thurner of the Corporate Performance Management and Business Intelligence solutions provider, Unit4 Prevero. “For this reason, AI will become integral to finance functions in every industry,” he says.

As technology improves, AI will become faster and smarter at providing analysis, he says. Companies that don’t use it will be at a competitive disadvantage.

“Businesses don’t want to replace their employees, but they do want to make better financial decisions, and AI will allow them to do that faster and cheaper than a whole team of humans.”

It will enable skilled office workers to spend more time on their core competencies rather than maintaining data, he says. This will help organisations to reduce costs and the time spent on manual tasks or the classifying of data.

Likewise, CFOs will benefit from AI data analysis, says Thurner. That’s important since there’s an increasing expectation for CFOs to be a source of business insight. Boards want more frequent reports that contain more context and detail. Fortunately, they will be able to deliver more detailed and more frequent reports thanks to AI, he says.

But it’s unlikely a CFObot will appear in finance departments any time soon. “We can expect machine learning to powerfully augment human expertise and experience in the near future even if that’s not a reality today,” says Thurner. “AI can provide data back-up and make suggestions to help the human decision-maker, but it’s the CFO who ultimately has to decide what to recommend,” says Thurner.

With so much potential in key areas of business, it’s no wonder that AI is being hailed as the Fourth Industrial Revolution.

“AI will have an impact as big as electricity and will transform every single industry,” predicts Cordeiro of Lloyds Banking Group.

To discover how a part-time CFO will help your company, please call the CFO Centre Singapore on +65 6854 5027 or visit our website now.

Why Hollywood Actors Should Get Training from CFOs

You shouldn’t be surprised to discover that Meryl Streep, Robert De Niro, Hugh Jackman, Gary Oldman among many other Oscar-winning actors and actresses bear a grudge against Chief Financial Officers.

It’s easy to understand why. For although the likes of Streep and Oldman have achieved fame, fortune and critical acclaim, they can usually only inhabit one role at a time. They take it on for a few months and then move on to the next.

A great CFO, by comparison, is the master or mistress of multiple roles and can switch between them easily and effortlessly. What’s more, they perform those multiple roles day in, day out for weeks, months and even years.

That’s because a CFO is there to help the business owner achieve the company’s objectives by providing financial and strategic guidance to ensure it meets its financial commitments and to develop policies and procedures to ensure its financial management is sound. The Institute of Directors says the CFO is “often viewed as the member of the board who creates a solid foundation upon which a business can grow”.

It’s why a typical CFO Job advertisement features a huge list of responsibilities. These will often include the following and more:

  • Providing strategic financial leadership to optimise the organisation’s medium to long-term financial performance and strategic position
  • Contributing fully to the implementation of organisation strategy across all areas of the business, challenging assumptions and decision-making as appropriate and providing financial analysis and guidance on all activities, plans, and targets
  • Providing robust financial reporting and analysis to the Board of Directors, Finance, Risk and Governance Board and Corporate Management Team including the provision of financial support to strategic decision-making and transactions
  • Working with senior management to steer the business towards the goal of greater financial independence and sustainability
  • Providing cash management – monthly cash flow reporting and long-term strategic cash management
  • Overseeing the preparation of GST and other statutory submissions
  • Developing and ensuring compliance with financial policies and controls
  • Presenting annual accounts to the General Meeting.
  • Risk management and reporting – maintenance of the organisation’s risk register ensuring control processes are fit for purpose
  • Developing an IT strategy which supports the organisational strategy.

 

Although CFOs aren’t expected to be able to speak in an accent, swordfight or ride a horse as actors are, they are expected to have accountancy qualifications, excellent communication and interpersonal skills, the ability to manage complex stakeholder relationships and to provide strong attention to detail with commercial and strategic acumen.

So, as you can see, at any time during a CFOs day, the CFO will be a sounding board/mentor for the CEO (and sometimes the only one to point out the flaws in a ‘blue sky’ idea), strategic advisor, bookkeeper, financial controller, risk management advisor, finance team leader, recruitment advisor and much more.

Being able to adapt to any one of the roles comes from experience. The CFO Centre’s part-time CFOs, for instance, have all had years of experience working in large corporations. They’re used to working in complex, demanding environments and switching roles as the need arises.

Unlike actors, CFOs don’t perform as they do for applause or for a gold-plated statuette (although many would be very, very happy if you offered to pay them in real gold bullion). They do it to help business owners like you take your fledgling business to new heights of success.

What’s more, you can be sure that the CFO you hire won’t ever pull you aside before or during a meeting to ask, “What’s my motivation?” *

To discover how a CFO Centre part-time CFO will help your business, contact us now on +65 6854 5027. To book your free one-to-one call with one of our part-time CFOs, just click here.   

* [Note: No Oscar-winning Hollywood actor or actress was harmed during the writing of this article.]

Strategically Outsource to Maximise Efficiency and Productivity

If you’re looking for a quick way to cut costs, boost efficiency and improve productivity then consider outsourcing one or more of your business’ support processes.

Outsourcing has many benefits and can give you a greater competitive edge in your market.

It allows you to tap into a large international talent pool and benefit from external expertise. Your outsourced providers can provide services, innovative approaches, and the latest technology along with cutting-edge solutions that your in-house team might be unable to provide.

It also allows full-time employees to focus on your company’s core competencies.

And it means you have lower operational and recruitment costs. The cost-savings you achieve with outsourcing can help you to release capital for investment in other areas of your business.

But outsourcing does have its downsides. For example, there’s a risk in allowing outsourced providers to handle confidential company data, whether that’s the details of employees or customers or competitive information. Under the GDPR, companies will be held responsible for any third-party data breaches. The penalties for such breaches will be stiff. What’s more, any data breaches will dent your company’s reputation and damage your brand.

Then there’s the risk that the output will be sub-standard or that delivery time frames will be stretched. Both would damage your company’s reputation and possibly result in lost sales.

And there’s a danger that unless the outsourcing is carefully managed, the expected cost savings won’t materialise. This was the case for the UK government. Its programme to outsource back-office functions ended up costing taxpayers £4 million. Officials had predicted the programme would save up to $400 million a year, but after two and a half years, it had saved just $90 million but cost $94 million.

It’s for these reasons many companies are still reluctant to consider outsourcing.

That’s a shame because if the outsourcing is well-managed, the benefits will far outweigh the risks. Take the Alibaba.com e-commerce website, for example. Today, it’s known as the world’s biggest global marketplace but in its early days, its founder Jack Ma had to outsource the website development to a US company. At the time, he couldn’t find development talent in China whereas developers in America had the skills he needed. It also allowed him to overcome the Chinese government’s tight internet restrictions.

Google is another giant that also outsources work to IT specialists, developers and virtual assistants. At one point, Google outsourced phone and email support for AdWords, one of its top-grossing products, to about 1,000 external representatives.

The founders of the hugely popular WhatsApp Brian Acton and Jan Koum also hired the services of external providers. In their case, they used the services of an iPhone developer Igor Solomennikov for the core development work on the app.

What can you outsource?

You can outsource any or all of the following:

  • Administrative tasks such as data entry, typing, travel arrangements and scheduling.
  • Lead generation and customer service including cold calling
  • Marketing including content writing, direct marketing, website design, brand development, press releases, social media, blogging and search engine optimisation
  • IT operations
  • Sales Directors
  • Legal Directors
  • Human Resources including recruitment and the management of employee benefits
  • Accounting and financial duties including bookkeeping, invoicing, accounts payable and receivable, payroll processing and financial reporting. You can, for example, hire a part-time Chief Financial Officer who knows how to finance a business, deal with growth, present meaningful monthly numbers and get the best deals from banks.

It means you get a highly experienced senior CFO with the experience and knowledge to help you plan, manage and control business growth. The CFO Centre will provide you with an CFO with ‘big business experience’ for a fraction of the cost of a full-time CFO.

To discover how a CFO Centre part-time CFO will help your business, contact us now on +65 9776 0969. To book your free one-to-one call with one of our part-time CFOs, just click here.

 

The Hazards of Scaling Up Your Business (and How to Avoid Them)

Imagine this: the co-founder of a multi-million-dollar HR management software company with almost 500 employees likes to micromanage to the point he, and not the HR department, has sole approval over employee benefits.

Likewise, when any of those hundreds of employees requests time off for holidays, it’s he and not the HR department that says ‘yes’ or ‘no’.

The company doesn’t have a dedicated IT employee to fix computers or printers because that same co-founder believes its gifted engineers should be able to resolve any IT problems that occur—no matter if doing so pulls them away from developing products or resolving customer problems.

Far worse, a massive influx of business means the company can’t keep up with licensing its insurance agents in each of the American states in which it operates. News leaks out, and the company is embroiled in a scandal with the prospect of millions of dollars in fines. The CEO and Co-founder is asked to resign, which he does.

It might sound far-fetched, but these are just a few of the problems the US HR software company Zenefits experienced during its accelerated growth or scale-up stage, according to Claire Suddath and Eric Newcomer of Bloomberg.

Zenefits, founded by entrepreneur Parker Conrad and Laks Srini in 2013, offered free software to automate the payroll, health insurance and HR services of small US companies. It made most of its money through brokerage commissions that were paid by insurance companies when clients bought one of their plans. The commissions recurred annually so once a business signed up, Zenefits continued to benefit.

That quickly drew the interest of investors—in particular, that of Andreessen Horowitz, one of Silicon Valley’s top venture capital firms.

Within three years, the company had gone from 15 employees to 1,600. During three fundraising rounds, it raised US$580m. By the end of 2014, it had surpassed a US$20m recurring revenue goal and by 2015, was valued at US$4.5bn.

By then, the company had about 14,000 customers and was in the process of hiring more than 1,000 additional employees. Things were moving at such a pace that a manager said he interviewed and hired people so fast that by the time they turned up to work, he’d forgotten who they were. One entry-level sales rep was told in an interview that the company was expanding so rapidly that he was guaranteed a promotion within a month.

That year, Conrad said in a talk, “There’s a low-level panic that suffuses the organisation, a constant pressure to keep moving faster and faster and faster.”

But then those serious compliance issues came to light and Conrad was advised to resign in early 2016, which he did. The company’s valuation plummeted by 55%.

The new CEO David Sacks wrote later in an internal email to staff, “It is no secret that Zenefits grew too fast, stretching both our culture and our controls.”

Fortunately for the company, it survived and now has more than 20,000 accounts.

Timing was the biggest scale up challenge for Hyperoptic, which runs its own dedicated Fibre-to-the-Premises (FTTP) network and offers symmetrical gigabit broadband services across 28 cities and towns across the UK.

The company was founded in 2010 by entrepreneurs Boris Ivanovic and Dana Tobak. Two years later the duo secured an equity investment of £50m from Quantum Strategic Partners Ltd, a private investment vehicle managed by Soros Fund Management LLC.

Co-founder Dana Tobak told Alison Coleman of Forbes.com, “Startups, even well-funded ones, need to conserve cash and spend smart. Most companies have multiple ‘engines’ such as sales, marketing, production, and customer support. We decided to ‘scale-up’ our sales organisation and used progress KPIs to determine when we needed to scale up the other ‘engines’ of the business. Some were faster to scale up than others, and in some cases, the lag negatively impacted customer experience.”

Like Zenefits, Hyperoptic survived its early scale-up challenge. Over the last six years, its network has grown fivefold. Its full fibre broadband now passes 350,000 residential homes and business units.

Tobak credits the company’s growth to customer support as well as external funding.

“We have a 4* Trustpilot rating; the highest in the industry. Our customers have really supported us by sharing their experiences with their neighbours, family and friends, which has meant that we have been able to expedite our rollouts across urban centres.”

This year Hyperoptic received £100m in funding from a consortium of four ‘tier one’ European banks (BNP Paribas, ING, RBS and Dutch investment bank NIBC). Last year, the European Investment Bank agreed to provide £21m to fuel Hyperoptic’s rollout and market expansion.

With the new funding, the company plans to grow the network another sixfold and make its hyperfast broadband service available to two million homes by 2022 and five million by 2025.

While your scaleup might not experience all Zenefits’ internal and external challenges or even the timing issues that Hyperoptic did, it is likely to face at least one of them. It might be:

  • People challenges
  • Sales and marketing challenges
  • Operational challenges
  • Administrative challenges
  • Financial challenges.

As the CFO Centre’s founder Colin Mills said in his book, ‘Scale Up: How to Take Your Business To the Next Level Without Losing Control and Running out of Cash’, the scale-up stage is when businesses really struggle because they’re growing but don’t have the infrastructure to support their expanded operations.

They might have the necessary revenue, manufacturing base or customer reach of a substantial business but their controls, processes, personnel, leadership and culture are often still that of the much smaller business they were a short time before, he said.

Worse, they often don’t have the resources to create and maintain such an infrastructure.

During the scale-up stage, they face running out of cash or simply getting stuck, he said.

It’s only possible to avoid such problems by revising your entire business model. If you don’t, then all the small problems that niggle at you now are likely to become major issues once you begin scaling up.

Even if your business is already going through the scale-up stage, it’s still possible to retrofit, design and redesign it, he said.

“In many ways, like most things in life, scaling up is not rocket science. No genius is required”, said Mills. “It can often be about common sense. But common sense isn’t always common practice, and being able to focus on the most important things as you scale up is a skill that can get lost in the complexity of the whole process.”

The easiest way to focus on what’s important during the scale-up stage is to have expert help from a part-time CFO who has big business experience.

And for a fraction of the cost of a full-time CFO, the CFO Centre will provide you with a highly experienced senior CFO who will work with you on a part-time basis to help your business scale up. To discover how the CFO Centre will help your company to scale up, please call us on +65 9776 0969 or contact us here now.

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