Lessons from the Big End of Town

The truth is in the cash flow

But t’was a famous Victory!

But t’was a famous Victory!

This is an article I wrote about CPA Australia on behalf of the Association of Virtual CFOs, and which was published by Smart Company.

I had watched with horrified fascination as CPA Australia tore itself apart over the last 12 months, egged on the by the Australian Financial Review.

Emotion had clearly over-whelmed reason, and in this article, I wanted to take an impartial look at what was happening.

The conclusions I came to were quite startling.

Financially, on a per member basis (itself a contentious subject) there was very little difference between CPA Australia and its major rival, CAANZ.

Yet, there was so much heat and noise from a dissident group of CPA members about how money was being spent.

And, when the dissident group “won”, they were not prepared. There was no plan, no clear idea as to the changes they wanted.

I think CPA Australia will rue the last 12 months for the next 12 to 24 months.

They will lose existing members, and if it is more than 7,500 then in all likelihood they will make a loss.

Fewer new members will join because of the damage to CPA’s reputation.

It will take time for the new board to take control, appoint a new CEO and in the meantime, the organisation will drift.

So, what are the lessons for business owners from CPA Australia’s implosion. Here are a few:

  1. Make considered, not emotional decisions.
  2. Before embarking on a course of actions have a plan.
  3. In fact, before embarking on a course of action, have several plans – Plan A, Plan B, Plan C etc.
  4. Never take your customer for granted. If you do, you invite disruption, like Uber and Taxis.
  5. Recognise that every threat is an opportunity – sometimes you need imagination to do this.

I hope you enjoy reading this article. It is fair to say that it was the one that received the most feedback and discussion when it was published.

If you think that impartial and thoughtful advice could help you take your business to the next level then please make Contact.

I can help.

T’was a famous Victory!

 

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The Consequences of Choice

The Consequences of Choice

This is the third, and for the moment, final piece that I wrote on the subject of Murray Goulburn, on behalf of the Association of Virtual CFOs and published by Smart Company.

In it readers will discover how the problem of a budget with no basis in reality was compounded by a decision to make the most important stakeholder (their farmer suppliers) bear the brunt of that problem by unilaterally cutting their milk prices.

The consequence of these choices were:

  1. A collapse in Murray Goulburn’s milk supply as farmers left the industry or moved to another processor.
  2. A blow out in the cost of production as a consequence, impacting on Murray Goulburn’s competitiveness.
  3. Closure of three surplus milk factories.
  4. A loss of 360 jobs.
  5. Unwinding Murray Goulburn’s attempted clawback of milk payments and recognising it as an expense.
  6. Write downs of $410m, weakening Murray Goulburn’s financial position.

Business owners who read this case study will discover many lessons. Among them:

  1. In a crisis, work out which stakeholders are most important to the survival and recovery of your business.
  2. In a crisis, acknowledge your mistakes honestly/identify the core issue accurately.
  3. Formulate a plan to address the now accurately identified issues.
  4. Go to most important of those stakeholders with your plan and get their agreement to it.
  5. Move on to your next most important stakeholder with that plan and support in place.
  6. Recognise a crisis for what it also is – a chance to make needed changes to your business.
  7. Understand the key drivers of your business. The less you can control, the less risk you can take.

A Virtual CFO can help you with impartial and objective advice.

Unlike your external accountant, we work with you and your business regularly. We’ll help you make better, more informed choices.

If you’d like to find out how we can help, please Contact Us.

The Consequences of Choices

 

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The Perils of Serving Two Masters

The Perils of Serving Two Masters

This is the second article I wrote on Murray Goulburn, on behalf of the Association of Virtual CFOs and published by Smart Company.

The background to this piece was an announcement of a full year profit for FY16 by Murray Goulburn.

At face value, this was a most unexpected outcome.

Remember, this was a business under so much pressure that it had slashed payments to its suppliers just a few month earlier.

Intrigued, I took a closer look at the Murray Goulburn result. The “devil in the detail” revealed some interesting pieces of “accounting magic”.

The main lesson for owners of small and medium size businesses is that your financial information is a source of competitive advantage.

When used properly, and with the right degree of granularity, your financials will tell you:

  1. Which aspects of your business are performing well.
  2. Which aspects are performing below expectations.
  3. Where to focus your attention to improve profitability and cash flow.
  4. The order in which to apply that focus.

If you’re not using your financial information to make informed decisions, or if you don’t know how to use your information in this manner, then please Contact Us.

We can help you.

The Perils of Serving Two Masters

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Vaulting Ambition

Vaulting Ambition

This is the first of a series of articles I wrote about Murray Goulburn on behalf of the Association of Virtual CFOs and which were published by Smart Company.

At the time I was astounded by the scale of Murray Goulburn’s miss, and their subsequent decision to make the farmer suppliers wear the brunt of what was a monumental head office stuff up.

I also knew there would be a lot more to come on this story.

In the end, I wrote another couple of articles/blogs dealing with different aspects and lessons as the story unfolded.

For business owners, in this article, you will learn how to:

  1. Construct a robust budget.
  2. Use as your starting point your current position, key industry and economic drivers.
  3. Gauge the scale of the task to shift from your current to your planned position.
  4. Track key business drivers throughout the year to understand the likelihood of meeting budget.
  5. Decide when your budget needs to be revised.

The key lesson is that the point of a forecast is not to be “right”.

The point of a forecast is to reflect your business plan, so that when things don’t go as expected you can ask the following questions:

  1. Have we taken all the actions required by our business plan to achieve our forecast?
  2. If not, why not? When will those actions be completed?
  3. If we have, then what has changed in the market for our goods/services that we did not anticipate?
  4. What, if any, action do we need to take as a result of the answers to these questions?

To grow with confidence you need a good forecast.

The three-way financial models that we build at Pro Veritate will help you understand the timing and amount of capital needed by your business to support your plan.

If you are a growing business you should Contact Us.  We can help.

Vaulting Ambition

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When Vanity meets Reality

When Vanity meets Reality

In this article, written for Smart Company on behalf of the Association of Virtual CFOs I look at the lessons for owners of small and medium size business from Slater and Gordon’s spectacular growth and subsequent bust.

You’ll discover how tricky and expensive growth can be.

There’s a practical illustration on how to use your balance sheet to track the flow of funds through your business.

It’s a must-know technique for any owner of a small or medium size business wanting to grow their business with confidence.

I hope you enjoy the article, but more importantly, find it useful and illuminating.

If you are planning to grow your business, and would like to be confident that you’re on the right track, then please make contact.

I can help.

When Vanity meets Reality

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