“91% of business owners recently surveyed said that Growth Is Their Main Challenge” – Smart Company
To achieve growth, SMEs and their Accounting Advisors need to have implemented a range of systems that assist in producing the “Key Business Information” that SME’s leadership team require to achieve the growth targets set for the business.
The development of systems for business operators is the key function that Accountants/Bookkeepers offering “Financial/Commercial Advisory Services” can implement for SMEs.
To thrive in 2025, SMEs need systems that document each aspect of their operations. These systems will lay the groundwork for the entire team to follow and for meaningful Financial and Commercial Data to be produced which will assist the leadership team to guide the business operations.
If an Accountant/Bookkeeper is offering “Financial/Commercial Advisory Services” to a client for the first time the question always is – where do I start?
ESS BIZTOOLS recommendations are:
SYSTEM 1 – BUSINESS EVALUATION
The logical place to commence is with the “Business Evaluation To Understand The Business”. This evaluation system aims to ensure that the accounting team advising the SME achieves a “1 Inch Wide And 1 Mile Deep” understanding of their client’s business operations.
This evaluation acknowledges that the majority of Accountants working in public accounting firms primarily preparing Annual Accounts and Income Tax Returns, do not have a complete understanding of a client’s business operations. If you have resolved to offer a virtual Chief Financial Officer Service you need to understand your client’s business operations on a “1 Inch Wide / 1 Mile Deep Basis”.
This is the cornerstone system for the delivery of crucial financial/commercial advisory services to SME clients.
SYSTEM 2 – BUSINESS PLANNING
Is a vital strategy for every business which should be prepared or subjected to an in-depth review, annually. An accountant acting as the virtual Chief Financial Officer should coordinate the preparation of the Business Plan in conjunction with the client’s leadership team who at completion of the Business Plan should sign off on the document.
SYSTEM 3 – RHYTHM OF MEETINGS
Is a key component of successful businesses. In the Business Planning Process formulate a system of meetings relating to the leadership team, work teams, special-purpose teams, on the basis of:
- Daily
- Weekly
- Monthly meetings
SYSTEM 4 – PREDICTIVE ACCOUNTING REPORTS
Comprising Budgets for all business operations – Key Drivers of major Subaccounts (Inventory, Debtors, Creditors, Research and Development, Capital Expenditure) – Cash Flow Forecast – Projected Balance Sheet – Projected Source and Application of Funds.
SYSTEM 5 – 52-WEEK BUSINESS ENHANCEMENT SYSTEM
Is built around three key components:
- Daily activities
- Weekly activities
- Monthly activities
SYSTEM 6 – DAILY ACTIVITIES
Relates to meetings with the leadership team to design an appropriate “One-Page Daily Report” which summarises key daily indicators to be distributed to the leadership team and to other designated persons within the SME.
SYSTEM 7 – WEEKLY ACTIVITIES
Preparation of the “Weekly Profitability and Analysis Report” including Key Performance Indicators / Business Metrics for each business operation conducted by the SME. These reports should be prepared for the week ended on the last trading day and be available for review by the CEO with the responsible manager two days after the end of the weekly cycle.
The “Weekly Profitability and Analysis Report” is a vital component of the 52-Week Business Enhancement System because it requires the accounting team to liaise with the leadership team and the responsible operational manager to determine why the targeted result was not achieved from the week’s trading activities. By conducting this “post-mortem” a problem can be isolated and the cause of the problem rectified so this incident does not become a recurring problem for many weeks to come (or even the remainder of the financial year).
In many SME’s the problems identified from “post-mortems” are only identified as a result of the “Weekly Profitability and Analysis Report” being prepared and the results analysed.
SYSTEM 8 – MONTHLY ACTIVITIES
Preparation of:
- “Monthly Profit Loss Account” for each individual business operation.
- Comparison to Budget Report for each individual business operation.
- Key Performance Indicator / Business Metrics Report for each individual business operation.
- Balance Sheet for the business as at the end of the month.
SYSTEM 9 – THE BALANCE SHEET ANALYSIS
Is prepared by analysing the key components of the Balance Sheet:
- Debtors – Debtors’ Days Outstanding – with comparison to Predictive Accounting Reports
- Creditors – Creditors’ Days Outstanding – with comparison to Predictive Accounting Reports
- Work in progress – compared to Predictive Accounting Reports
- Bank balance – compared to the Cash Flow Forecasts within the Predictive Accounting Reports
SYSTEM 10 – THE MONTHLY FINANCIAL REPORT
Should highlight any variances in the Cash Flow Forecast so that there is an awareness of potential problems which could trigger some preliminary planning to be implemented to ensure that strategies have been analysed to enable prompt action to commence at specified time to raise additional funding if required.
SYSTEM 11 – BOARD OF ADVICE
This system summarises the reasons for implementing a Board of Advice and processes for inviting people to be a member of the Board of Advice and a statement of the due diligence standards for the Board of Advice (the concept of appointing a Board of Advice is novel and some clients may not wish to proceed on this strategy).
SYSTEM 12 – BOARD OF DIRECTORS
The system summarises an overview of corporate governance issues relating to the appointment of Directors, communication with Directors, organisation of Board of Directors meetings.
These 12 Systems are the “Key Foundations” on which “Successful Businesses Are Created”.
A key component of the “Business Survival and Growth System” is that the daily, weekly, monthly work process is performed each month of the year. This ensures that unexpected information whether it is from Profit Loss Accounts, Key Performance Indicators, Business Metrics, Balance Sheet Analysis are investigated immediately, and that remedial action is taken to minimise variations from expected performance in future weeks/months.
There are numerous other Systems contained within the ESS BIZTOOLS PRODUCT PACKAGES which we will discuss in a future article.
ESS BIZTOOLS Pty Ltd
Peter Towers – Managing Director | 07 4724 1118 | [email protected]
www.essbiztools.com.au
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