One size does not fit all with business numbers

Available to business owners, are many services who advocate that numbers beyond historical end-of-year compliance is important for your business.

Some providers will delve into why these are important citing profitability, cash flow management, ability to fund growth, keeping overheads under control, etc. Some of these will go further and offer book-keeping / virtual CFO services for a fixed fee.

Businesses think “Ok, that sounds good. Yes I / we need all of that, and I / we can afford this service.”

It is true. Businesses do need to be profitable, manage their cash flow, potentially fund growth, and control overhead. However, effective reporting and financial information that enables good decision making goes much deeper than that. Many small to medium enterprises (SMEs) in New Zealand do not have the luxury of a board of directors to ask relevant or probing questions, or have the time to spend working on the business rather than in it.

A one-size-fits-all, or packaged approach, does not work until the ground-work has been done. This involves exploring why the owner chose this business, and their own business and personal aspirations.

Secondly, what do they see as the strengths and weaknesses in their business and why? Are they wanting to grow or maintain / defend? Is the strategy feasible – based on the relevant market? If the business wishes to grow – what do they wish to grow? Is it revenue? Is it margin? Is it market share? What do they feel drives growth? Is that information being captured?

For example, a business with multiple product lines may believe that one line is operating most efficiently – yet do not actually capture the trading margins of each product. Doing so would highlight the real stars, or conversely – the product not worth spending energy on (unless there are reasons for carrying a loss leader). Another example may be wages cost for relative return. How many non-professional service businesses are able to drive reports on productivity? Wages are often the highest cost in businesses, so tracking efficiency even at a high level may be useful.

A truly effective bookkeeping / outsourced accountant / CFO ensures alignment of business owners’ aspirations, strategy (even formalising informal ones), and reporting. This discipline is a value driver in and of itself – not a one-size-fits-all package. The first step should be to talk with you, get to know your business, ask challenging questions, understand current systems, and your reporting covenants, if any. The next step would be to set up your system with you, to enable the relevant monthly / quarterly reporting.

From this point on, the advisors would do as little or as much as you want. This may involve training you to run and read the reports or do this on your behalf. It may involve analysis of the reporting, and reporting back to you. It could involve sitting-in on your meetings, even if only temporarily. The goal should always be enablement of the business.

Another important aspect of relevant reporting is that it can change over time, or require one-off analysis or investigation. At a minimum, there should be a review regularly to assess the effectiveness of the reporting.

If you feel such a service would benefit your business, we encourage you to find / repurpose advisors who do not approach such engagements as a one-size-fits-all. Use an advisor who is likely to provide true value, rather than simply an attractive price. If you would like to talk to us, please call.