One way an accountancy business can be seen to be proactive in assisting small/medium enterprise clients to add value to their businesses is to offer to conduct an annual business evaluation workshop for the key people within the small/medium enterprise.
There’s an enormous amount of data relating to a business operation, much of which doesn’t form any part in the annual accounts or the income tax return preparation. However, these other tasks are an extremely important component in the total business mix.
In a larger business or a public company, one of the key players in evaluating overall business performance is the Chief Financial Officer (CFO). Most small/medium enterprises don’t have a full-time CFO and it’s a role that, I believe accountants, offering a broader range of services, can offer to their clients.
The types of business issues to be reviewed in a business evaluation workshop include:
- Current financial performance – are detailed monthly management financial accounts being prepared?
- Are Key Performance Indicators being prepared and compared to budgets and to benchmarking reports on similar businesses?
- What are the gross profit percentages for each of the operating activities within the business? How do they compare to budgets?
- Debtors review including analysis of debtors’ days outstanding – what strategies could be introduced to assist in reducing debtors’ days outstanding? Some businesses can have thousands of dollars unnecessarily tied up in debtors, thus, putting pressure on their cashflow.
- What’s happening in the market? What are the competitors doing?
- Has a business developed a marketing plan? Is the marketing plan being implemented?
- Could improvements be made in the business’ sales strategy?
- Have salespersons been trained in professional selling techniques?
- Have checks been made on potential new customers to ensure your client is not “getting someone else’s problem”?
- Is the business aware of the requirements under the Personal Property Securities Act (PPSA) relating to having Terms of Trade Agreements and Retention of Title Agreements signed by new customers and that a decision needs to be made as to whether to register individual customers on the Personal Property Securities Register (PPSR)?
- Does the business request feedback from customers and does the business react to suggestions received from customers?
- Does the business utilise a customer advisory committee?
The review could include some “what if” calculation on changes in the sales mix. For example:
- What would be the result with some extra customers or transactions each year, with individual customers and improvements in gross profit percentage? These types of calculations can give the business management some new targets at which to aim.
- Does the business continually review its cashflow position?
- Is there an ongoing review of investment in stock and work in progress? Could reductions be made in these investments, thus benefiting the business’ cashflow?
- Has the business developed procedures for the engagement of:
- new team members;
- induction of new team members;
- regular team training sessions;
- professional development strategies for all of the team; and
- asking team members for their suggestions and comments on what the business could do differently?
- Is the business abiding by the rules and regulations of Fair Work Australia?
- Have there been discussions with suppliers who might be inclined to assist the business in:
- promotions;
- longer payment terms;
- special offers for some products; or
- exclusive product lines in a particular area for a period of time?
- Shrinkage is a huge problem for a large number of businesses, particularly retail. Discussions could be held with the management team on ways and means that shrinkage can be identified and strategies introduced to minimise the cost of shrinkage for the business.
- Is the business aware of the risks relative to its operations? Are regular reviews conducted of those risk areas to determine whether the business’ strategies are still appropriate?
- Has there been a discussion within the business relative to succession planning – not only for the general manager or managing director but for all positions within the business?
These are some of the items that could be discussed in a business evaluation workshop and then reflected into an updated version of the company’s business plan, to assist management in the day-to-day management of the business.
This is one service that could be considered by an accountancy business, offering a business advisory service, to assist small/medium enterprises to develop strategies on a “total business basis”, rather than just taxation.
Assisting clients to add value is one of the key challenges for accountants wishing to add greater relevance to their role with small/medium enterprises in 2015.
For more ideas on services that can be offered as part of business advisory services in 2015, please visit www.essbiztools.com.au.
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