Andrew Geddes an Australian Accounting Industry Guru discussed issues of importance to Accountants with Peter Towers, Managing Director of ESS BIZTOOLS in a recent webinar.
CFO Services Offer
Many small and medium sized businesses need more than just a bookkeeper. They need sound financial advice, but the cost of a full-time CFO is just prohibitive.
Andrew Geddes says the recent growth in external or virtual CFO services is helping accountancy firms diversify and their clients to grow. These are roles he’s undertaken many times before.
“If you ask what a basic external Chief Financial Officer services offering includes, we go in and fix the client’s bookkeeping first. Then, we produce Predictive Budgets, revenue expenses, with the estimate of profit leading to the Cash Flow Forecasts and Projected Balance Sheets which are all inter-related. Once this is done, you can then report monthly on Budget versus Actuals.”
“As part of the role, you can then add certain Key Performance Indicators, particularly some of the forward-looking ones, and maybe use some of the cloud tools so you to link a number of programs and create a dashboard report.”
Andrew indicated that there are firms actively driving this process very hard at the moment.
He believes there are several other things that an SME may need as well – including a yearly business valuation. This leads to the question: How do we improve the value of the business through improving its profitability and cash flow? Working in conjunction with the client, you might identify one, two or three business improvement projects that can be fixed. Accountants can help identify these items with their clients by simply asking them: “What do we need to fix or do better?”
There may even be a need for additional funding in some SME clients.
Within the ESS BIZTOOLS Advanced Product Package, there is detailed material on the ways to raise capital direct from the public, without having to issue a prospectus. These include Crowd Sourced Funding Equity Raising, Early Stage Innovation Company Capital Raising and Section 708 of the Corporations Act capital raising.
There are also government grants of which accountants, in their role as the external or virtual CFO, could advise the client, including preparing the applications. ESS BIZTOOLS has a product package that helps identify government grants that are suitable for specific businesses.
Acting as a Virtual CFO, you can help a client think about ways to improve their business, increase its value for sale or simply for better profits, better cash flow management and dividends.
When you take on an advisory role, you are in a position to start asking your client questions and this can come directly out of establishing a business’ Budgets, Cash Flow Forecast, Projected Balance Sheet and related KPIs and having frank discussions with the client.
What risks exist for the business?
What do we need to do to mitigate against particular risks – cyber security, competitive risks and changes that may come from legislation and other community requirements?
If necessary, you can suggest to your client that some senior people in the business be mentored as a group (with your involvement, of course) to create a senior leadership team. This helps to involve and engage them, and often helps the owner work on those business improvement initiatives. Being part of a senior management team also gives them a purpose to their work! Research is suggesting that most people are looking for a “purpose to their work”. They are often looking for flexibility in working conditions and a balance related to community and family.
So why accountants can’t be involved in asking those questions and having those conversations with a small group of their clients to start with?
External CFO Service Offering
Once you have piqued the initial interest of your SME clients in accepting your advisory services, Andrew Geddes believes the next step is an external CFO service offering that starts with improving bookkeeping, accounting systems and reporting.
He indicated that you would then add budgeting and then begin to ask questions relating to: “What can we do to improve the business – its profit, its cash flow, its dividend? You can do a lot of this work over Zoom or other online communication tools with your clients.”
Model of CFO Delivery
“Ten of my current clients are located around Australia” he explains. “Because of COVID and lockdowns we could not visit them. We can now, but instead of going monthly or quarterly we are now saying once or twice a year is enough because we can do a lot more from the office and communicate via Zoom. This has been a change that has made the advisory external CFO role easier and more efficient. To deliver these services, we are now using virtual tools.”
What do your clients need?
This was the question that seminar participants were asked thirty years ago at FMRC: What do your clients need? To give your clients the proper assistance, you need to ask pertinent questions:
How’s the business going?
What role do you (the client) play in the business?
Can you give some of your current responsibilities to other senior leadership team members? If they do this, the business runs without their personal involvement and it becomes more easily saleable.
What is the financial performance saying – are you dispensable?
Given the way the business is performing what are the consequences for taxation liabilities – what planning have you made to be able to pay tax debts when they fall due?
Are there sufficient funds to pay dividends as they are due?
Is there the ability to create wealth for the family outside of the business and help to protect the family’s assets?
When are you going to retire?
What happens if you die?
These are the questions that should be asked at least annually in a strategic planning review. Your role, as the accountant, is to create an agenda structured around these questions and walk through it with your clients.
Want to know more?
Do you want to know more about how your firm can capitalise on the “SMEs’ need for CFO service”?