Survive the dive … with sound financial strategies

Brett Bell of Bell Group Accounting, gives some expert advice on financial strategies to help your business survive the economic crisis.

“These are great business strategies for anytime,” said Brett. “In the good times, when things are busy, many owners don’t consider their financial strategies much. Now, the prospect of uncertain times ahead, is pushing it to the top of the to-do list.”

Here are Brett’s Super Seven tips for getting your business in sound financial shape.

1. Cash Flow Analysis. This is the biggie. By not regularly monitoring your cashflow, you leave yourself exposed to the worst. “Insolvent trading is a very real concern in these times,” said Brett. “Often, by the time you realise you are unable to pay your debts, it’s too late to salvage your business. Working with your accountant to establish daily, weekly and monthly cashflow analysis spreadsheets is a very wise move.”

2. Debtor management systems. Many small to medium sized businesses just “wing it”. Brett explained, “I am amazed at businesses without any system or process for managing debtors. It is even more important during uncertain financial times that you manage your debtors effectively, and there are several different methods for doing this.”

”We have a new option for small businesses, called debtor factoring where you ‘sell’ your debtor to a third party offering debtor finance over say 1, 2, 6, 10 or 12 months at interest rates far lower than overdrafts or credit cards. This sort of option was previously considered the realm of larger debts (over say $250,000) but is now easily accessible for smaller amounts and can be a great solution for both business and client.”

3. Budget Profit and Loss Analysis. Do you really know what you spend (or intend to spend) in each area of your business over 12 months? If not, according to Brett, you are neglecting an important analysis tool.

“This helps you pick-up trends or anomalies in spending. We certainly know that those clients who do introduce profitability monitoring on a regular ongoing basis, experience an improvement in profitability over previous trading results.”

“Setting an annual budget with monthly profit and loss targets is ideal. Separate detailed budgets could be prepared for areas such as Sales, Cost of Goods Sold, IT, Marketing, HR and more. Comparing the actuals with the budget and analysing the variances gives a clearer understanding of the business and helps you drill-down into what you’re spending and where.”

4. Key Performance Indicator (KPI) Analysis. Most businesses have certain KPIs that can be monitored to show trends and particularly indicate impacts from changed inputs such as economic downturn. “It could be something simple such as a dollar sales target or something more complex like client-spread percentages,” said Brett. “Depending on your business type and situation we recommend a selection taken from around 25 different KPIs as an effective way to improve business performance.”

Some headline KPIs include: 

• staff productivity
• average hourly rate recovered
• gross profit percentage
• time write off / stock wastage
• lock up days for WIP (work in progress) and debtors.

5. Business Improvement Meetings, Strategies and Action Plans. “A regular internal management meeting can really take your business to the next level, even for ‘mum and dad’ business-owners who don’t see themselves gathered around a board table,” said Brett. “From these meetings, you can establish and monitor action plans to ensure strategies are actually implemented. Our Board Meeting Service, where we convene and act as Chairperson, can help clients initiate a program of regular meetings.”

6. Marketing Plan. Many businesses contract when downturn threatens, cutting expenses such as marketing and advertising. For others it is a time of opportunity, so they increase their marketing spend. Brett’s advice is simple: “Whichever path you choose, it’s vital to achieve as much ‘bang for your buck’ as possible. At Bell Group Accounting, we recommend clients have a marketing plan which outlines the timing, detail and cost of their marketing effort for the year ahead.”

“We also recommend low-cost marketing strategies that exploit existing marketing tools, like using your website or database to communicate with clients and potential clients. A marketing plan enables you to develop strategies that let your customers know what you have to offer. A brick wall strategy can be a very effective way to cross-sell to existing customers.”

7. Brand Review. Strong brands are natural survivors. If your brand is sending the wrong message to your customers and potential customers then an economic downturn could spell disaster for your business.

Bell Group Accounting really walks the talk on this one, explained Brett. “Every month we do a brand walk-through of our operations where we critically examine every touchpoint of our brand from a client perspective to see where we can make improvements to better communicate our business operation and image.”

Simply opening the doors and hoping for the best is not likely to see your business booming during these expected difficult times. By adopting some of Brett’s smart financial strategies you will give your business a stronger foundation and the best opportunity to not just survive, but thrive.

DDG would like to thank Brett Bell, Director, of Bell Group Accounting  for providing his financial strategies to help beat the economic crisis. Visit the Bell Group's website (http://www.bellgroup.net.au/) for further information.