Azure Group Blog

Reviewing your business for the New Year

Thu, 12 Jan 2012 09:55:00 EST

By Michael Derin January is an ideal time to take a step back, evaluate the business and look for ways to make improvements. Doing a strategic review will help you to better position your business to cope with the continuing market uncertainty 2012 is likely to bring. It can be easy to get carried away by the day-to-day running of things and not give yourself the opportunity to take a broader view of your business. However, the danger of working too much ‘in’ and not enough ‘on’ your business will likely result in a lack of strategic focus, an inability to see the bigger picture and inadequate long term planning. All of which will hold you back from building a successful and profitable business. The start of the New Year is a great time to do a strategic review of your business because psychologically it’s a fresh start, a chance to refocus and get your plans in place for another year. By analysing key areas and looking at your business as a whole you can begin to see where there may be opportunities for improvement. Areas of the business to be reviewed The core areas you want to assess include internal systems & procedures, internal communications, KPIs, business vision & strategy, your financials & the profitability of you product/service lines and also whether key personnel, like the CEO, have clearly identified roles. You want to identify how you can be more efficient, cut down on wastage & costs, improve productivity, develop a better workplace culture, implement more effective strategies, if you are achieving your goals and ultimately how you can improve the business’ bottom line. Review your business objectively To effectively undertake a strategic review you need objectivity. There are a number of ways this can be achieved. Firstly you could consider bringing in a professional, like a virtual CFO. Being experienced in analysing and evaluating business operations, they can quickly pinpoint areas for improvement and often advise on the best ways to implement them. You could have your division managers conduct a review of areas of the business they do not normally work in. However, often they are unexperienced in areas of the business outside their scope and this lack of understanding may result in them not seeing opportunities for critical improvements. You might also consider undertaking an anonymous employee questionnaire encouraging constructive feedback and ideas for improvements from your team. You may be surprised to see where the most insightful ideas come from. Sometimes it is the lower levels of staff that can see things managers and owners often miss. It’s hard to predict what will impact in businesses in 2012. What is clear is the need for SMEs to work smarter not harder and to position themselves to deal with whatever the market throws at them. This will require leadership, strategic thinking and a healthy dose of planning. Good luck.

Managing cash flow over the festive season

Wed, 21 Dec 2011 12:17:00 EST

By Michael Derin The December to February period when many businesses slow down is normally the most challenging time for many small businesses and their cash flow. You can quickly find yourself at a loose end if don’t keep an eye on your cash position. Here are some cash flow tips to help you manage this difficult period. Cash flow forecast It’s important to have a cash flow forecast during this time to manage your cash position by tracking your cash in-flows and out-flows. Your cash in-flows include your sales and debtors, plus any loan or credit facilities you may be able to draw down on. Your cash out-flows include expenses, payroll, capital expenditure, past liabilities, like tax, and any loan repayments you need to meet. I recommend doing cash flow reports for the period from now to 28 February 2012 and updating the figures on a weekly basis. This will help you to identify any potential shortfalls early and give you enough time to take action. Tax obligations Ensure tax obligations are included in your cash flow forecast. There is plenty to consider when it comes to managing your tax obligations over the festive season, even more so since in the last six months the ATO has become even more stringent concerning tax debt. Most businesses would have lodged their September business activity statements (BAS) in late October. I advised many businesses at this time to ensure this debt was paid in full. If you didn’t you should have contacted the ATO to put in place a payment arrangement. The first tax obligation in 2012 will be a quarterly BAS return, which is due on 28 February (for most businesses). Take this into account because February is only the first month when business and cash flow starts to return to normal levels. So you need to have cash flow set aside now to meet this obligation in February before things start ramping up again in March. Remember you also need to cover GST, PAYG on payroll and income tax instalments during this period. If you have a prior payment arrangement with the ATO keep in mind you will have to meet your quarterly BAS liability in full as per the terms of the ATO’s payment arrangements. If you miss this payment, the ATO will come down hard on you. Keep on top of debtors The festive period is a particularly tricky to when it comes to collecting payment from clients. Nearly everyone’s feeling the same pressure from reduced cash flow so it’s important to not let this area slide. Strategies to implement include: Revisit your payment terms for debtors and ensure they are working well for the business. If you find your debtors are not adhering to these terms, perhaps they need reminding The New Year is also a good time to revise your payment terms. If your terms are currently at 30 days and you are suffering from a delay in cash flow, consider shortening them to 14 days Also review your debtors to see if you should be servicing clients if they are not paying their bills. You should be focused on investing your time on paying customers It’s great to be able to say you made $200,000 profit. But if that’s just an accruals profit –includes profit made on unpaid bills – and you’ve had to write off $150,000 in unpaid billings, then you’ve really only made a cash profit of $50,000. So by understanding your cash flow and cash profit, you can better understand your business and its bottom line profitability. Maintain good relations with creditors Your relationship with creditors is another critical area that requires planning over the festive season. The time you pay your suppliers has to be planned carefully as you don’t want to find yourself in a situation where you’ve paid all your suppliers but then struggle to collect money from your clients. At the same time you want to ensure you maintain a solid and positive relationship with suppliers as their support contributes to the success of your business. Some strategies to help you achieve this include: Talking to your suppliers about the possibility of extending your payment terms, even if this is only over this two month period If suppliers offer discount for early payment, consider taking advantage of as any money saved can boost your cash flow.

Unlock your working capital & use it to grow your business

Thu, 10 Nov 2011 14:16:00 EST

By Michael Derin While it seems most small businesses are struggling, there are some which are flourishing. The secret to getting ahead in today’s tough market is being able to unlock your business’ working capital and leverage it to create stronger cash flow, more growth and bigger profits. Working capital represents your current assets, like cash, debtors and inventory/stock against your current liabilities, like creditors, tax and loans. It’s the money you use in the day-to-day running of the business as well as the capital used to invest in its growth, like buying new equipment. So the more working capital that’s in the business the healthier it is and the bigger potential it has for growth. The key steps to unlock your working capital include: Understand your cash flow. Preparing a cash flow plan will allow you to forecast cash inflows and outflows. It should be prepared monthly and look at the next three months as a minimum. This will: Provide early warnings of potential cash shortages so action can be taken quickly Identify if additional funds will be needed Indentify potential surpluses that can be invested to generate additional income Help to manage tax obligations Assist in any funding applications from banks. Improve debt collection. Many businesses are finding this difficult at the moment and are feeling the pressure from reduced cash flow. But there are ways you can improve: Improve your invoice procedures to ensure invoices get sent out at the earliest possible time and are followed up before they become overdue Reduce customer payment arrangements from 30 to 14 days. This will to allow you to collect money earlier and pay your bills later, thereby increasing cash flow Offer incentives for early payment Set realistic credit limits for customers Screen your customers carefully to ensure they are able to meet their payments Provide progress payment terms. Better manage creditors. It can be a fine balance between getting paid and when you pay your creditors. Tactics to consider include: Negotiating with creditors and suppliers for extended payment terms to alleviate cash flow concerns Using trade credit where available Calculating the benefits of making prompt payment to creditors. Ensure good stock control. A significant amount of working capital is often tied up in stock (particularly for those in retail and manufacturing) and the key is to find the optimum inventory level to minimise the costs of holding stock and the likelihood of having to heavily discount or write off inventory. Do regular stock takes Improve ordering procedures to decrease errors and create efficiencies Improve sales projection accuracy to decrease the risk of over ordering Consider implementing just-in-time capabilities, so stock is delivered just before or as it’s required, helping to minimise holding costs. Many people mistakenly believe that to improve cash flow you should concentrate on generating more revenue. However, what will ultimately guide you in improving your business’ working capital and its potential for growth is to focus on what delivers profits back to the business. Whether you’re considering reducing your stock levels, changing your invoicing procedures or introducing new products or services, you should always be asking yourself, “How will this improve my profits?”

Azure Group survey shows half of SMEs are dissatisfied with their profits

Wed, 12 Oct 2011 14:45:00 EST

Results of our recent survey by leading accounting on how Australian small and medium sized enterprises are managing their finances show despite moderate growth from the previous financial year, 50 per cent are disappointed with the profitability of their business. Azure Group managing director, Michael Derin said, “The survey highlights while most SMEs are focused on increasing their revenue, many are not considering how this revenue is translating into profits, resulting in a return which is often below expectations. “As most SME owners rely on profit distribution for their personal wealth, it is vital the business is profitable for them to earn a living,” Derin added. One aspect the survey uncovered that is leading to reduced profits is many SMEs are not budgeting effectively. Only 18 per cent have a long term view to budgeting and 40 per cent do not track actual figures against budgeted figures each month. “To be effective a budget should be for three years in advance so you have a long term view of performance. It’s also crucial to be reviewing and comparing your actual results against budgeted figures each month to keep the business on track to achieve its targets. “We also found many SMEs don’t fully know where they stand financially with one-third not producing a monthly balance sheet or cash flow report and 40 per cent not totally confident their financial figures are accurate. This is alarming, as having inaccurate financial information makes it nearly impossible to manage cash flows, tax obligations or understand what areas of the business are profitable and what your profit margins are,” said Derin. Derin explains that when market conditions falter many businesses adopt an ‘increase sales at whatever cost’ mentality. This leads them to heavily discount or operate on a razor thin margin that on the surface may look like things are going well when in reality they are compromising their profitability. “Recent outlooks suggest that market conditions will remain challenging for some time so my advice to SMEs is look at how they can maximise their gross profit and their margins. Often this means focusing on what the business does best and the areas delivering the highest profits back to the business. “To do this SMEs must ensure their financial information is up-to-date and accurate, be producing and reviewing their monthly reports, including a profit and loss statement, balance sheet and cash flow report, and having a good understanding of what their gross profits are for their different products. In many cases I’ve advised clients to discontinue certain services or products if it’s costing them too much to deliver,” added Derin. This is the second year Azure Group has conducted its SME benchmarking survey so it can gain a better understanding of how Australian small and medium sized businesses manage their finances. The survey looked at how they managed their reporting, cash, finance people, tax, budgets, key performance indicators and profitability. View the full report Key insights from the survey: 63% increased in turnover, 75% with growth up to 30% 40% are not totally confident their financial figures are accurate Nearly 20% are lucky enough if they have enough cash to cover wages 75% are not always collecting payment from debtors on time 50% will not engage an external consultant in the next 12 months 35% did not do tax planning for the 2011 financial year 50% are dissatisfied with their financial return 69% budget for only one year in advance 40% are not tracking actual figures against budgeted figures each month 75% do not track the effectiveness of KPIs in a monthly report.

CFO Network seminar much valued by attendees

Thu, 19 May 2011 10:27:00 EST

By Michael Derin Last night was the second installment for 2011 of the CFO Network seminar events, held in conjunction with the Institute of Chartered Accountants. About 30 guests attended the Institute’s headquarters on Erskine Street in Sydney for some networking with fellow CFOs and two presentations on valuations. Valuation is a key area for CFOs to understand, keep up to date with the latest trends and also be across the various valuation methodologies, particularly when we don’t touch it every day. There’s no doubt we’re operating in interesting times. We’ve seen a lot of changes occur in the market over the last few years, bank lending is more challenging, raising capital across various industries is tricky and accounting standards are more stringent. Because of this valuing businesses and goodwill has become more difficult and complex. The event’s speakers were both highly regarded experts in their fields and extremely knowledgeable in the area of business and commercial valuations. The seminar bought together two different aspects of valuations to give a complete picture on how the current market is influencing valuations. Wayne Lonergan from Lonergan Edwards & Associates delivered an interesting presentation on valuations trends with particular emphasis on public companies that have to undertake annual impairment testing of goodwill as a result of business combination under IFRS methodology. Wayne also covered the trends in enterprise value, multiples and discount rates. [Wayne’s presentation] Phil McCabe, the head of Acquisition Finance & Advisory for Commonwealth Bank Corporate Financial Services led the group through a presentation on valuations from a financier’s perspective, with particular reference to goodwill. Phil explained what a financier focuses on to determine private company valuation as well as how understanding value drivers reconciles with an understanding risk drivers and risk mitigants. He went through macro drivers, company specific drivers, risk analysis and the differences between equity investors and a financier’s approach to valuations. The CFO Network is an initiative of Azure Group to bring together CFOs working primarily with SMEs in order to share ideas, experiences and to connect with like minded professionals. As well as holding quarterly seminars with the ICAA, the CFO Network also has a Linked In group, to enable members to interact, connect and share ideas online. The next CFO Network event is scheduled for Wednesday, 17 August and we will be announcing the next topic on the Linked In group in the coming weeks.

Azure Group add another virtual CFO

Wed, 18 May 2011 12:26:00 EST

Azure Group has grown its team of virtual CFOs to eight with the appointment of commercial CFO, Rachel White. White has a strong background in the IT sector and has also worked in industries such as property and tourism. Her experience extends to both private and public companies across Australia, United Kingdom and USA. White’s expertise includes process change management, an in-depth understand of IT systems and their application to commercial enterprises as well as technical financial management and accounting skills. Speaking about joining Azure Group White says she has been fortunate enough to have the opportunity to take her skills from a large corporate and engage with smaller entrepreneurial businesses by providing CFO strategic services. “Joining Azure Group is the next step in providing this service as they have developed a tried and tested formula that simply works for CFOs, like myself within the small business sector,” said White. Azure Group’s virtual CFO services places highly qualified and skilled commercial CFOs with fast growing small and medium sized business to provide budgeting, management reporting, high level strategic guidance and corporate advisory services. For more information on how Azure Group's Virtual CFO service can help your business grow, please contact us.

Developing your people pays off

Mon, 09 May 2011 14:47:00 EST

I was perusing my company’s (Azure_Group) Twitter feed the other day and I came across a thought provoking Tweet: A CFO asks CEO, “What happens if we invest in developing our people and they leave us?” CEO says, “What if we don’t and they stay?” If you look closely at nearly every successful business you’ll find one of the reasons for their success is they continually look at ways to develop and grow the organisation, its knowledge and skills and its team. Yet many owners put this in the too expensive and too hard basket and run the risk of losing their brightest and best staff and creating a business that flounders along. I believe a business is its people and its success or failure is mostly due to the strengths and commitment of its team. Unlocking greater performance, productivity and efficiency comes from ensuring your workforce has the opportunity to learn, is challenged in their roles and is able to potentially move forward in their careers. Training isn’t only about sending employees to offsite courses. On-the-job training and mentoring from senior management is also highly beneficial, and also doesn’t require a financial outlay. Vital training and development can also come from exposing your team to challenging new projects, like developing a new product or service. As a business owner or CEO it’s also important you continue to develop yourself as a leader by furthering your own knowledge and experience. This way your knowledge can flow through your team, thereby raising the whole organisation’s knowledge and skill base. Some business owners hesitate in investing in their team’s skills as they perceive it to be a cost the business may not directly benefit from. The simple truth is if your turnover is greater than 15 per cent, it’s costing you money. So by making development a focus in your business and thereby engaging your team, your business will actually be better off. Some tips to make implementing training and development much easier and cost effective: Include staff development as an item in your annual planning activities Set a budget each year, which the business can financially handle that accounts for the specific needs of employees so you are comfortable with your spend Work with each of your team members to create a development plan which is reassessed at each performance review Give your team ownership over their own development by involving and motivating them to plan and decide what training they need Encourage employees with specialist skills to hold training sessions with the rest of the team Look into training programs that provide government incentives Look at training courses provided by industry associations you may be a member of as they usually provide discounts Don’t forget that many training and development costs are tax deductible. Staff leaving will always be in the back of your mind, however, by developing your people you are providing them with the opportunity to learn and grow which will in turn make this risk the least of your worries. Instead, invest your time in planning your team’s development in way that will help you to build a strong and sustainable business.

Is the Government serious about tax reform?

Mon, 28 Mar 2011 15:52:00 EST

By Michael Derin The recent news that the Government is pushing the National Tax Summit to October and will not be covering key tax issues such as GST, the proposed carbon tax and the mining tax is worrying. No doubt the Henry Review will be high on the agenda with its 138 recommendations to improve Australia’s tax system. Although with only an initial four recommendations given the green light when it was released last year, it leaves me in doubt as to what will be the actual outcomes of the Summit and how serious the Government is about tax reform. Australia’s small businesses are drowning in a sea of red tape. Not only do they have to deal with the same compliance regulations that are designed for big corporations that have more resources, they have to deal with a government that doesn’t seem interested in supporting them or simplifying the tax system. It’s no secret that for the last six months the Australian Tax Office (ATO) has become more stringent and rigorous in its actions, particularly when it comes to tax debt, and this has had a huge impact on small businesses. It’s upped the ante on data matching, been more severe and demanding when it comes to paying back debt to the point where they are handing out garnishee notices to business’ banks in order to obtain amounts owed and now they’ve announced they will be cracking down on GST payments. However, it’s not all bad. Recently the Assistant Treasurer Bill Shorten announced the ATO will continue to allow the streaming of capital gains and franked dividend by trusts. Previously it was thought the ATO would ban this practice which allows a trustee to legitimately make tax effective distributions of income and capital gains to beneficiaries. Now don’t get me wrong, I believe it’s extremely important to have a regulatory body to ensure compliance standards are upheld by business entities. However, when the Government is so lax on addressing the needs of small business but instead at nearly every turn makes it harder for them to survive, it just feels like a kick in the guts when they keep ‘cracking down’ on businesses in order to extract yet more blood from the stone. This is why it’s crucial for businesses to employ a tax advisor who is proactive and works with you to navigate the maze of tax and compliance and but also looks at the bigger picture to make sure your affairs are managed so you don’t end up paying unnecessary tax or penalties.

A successful CFO Network seminar held in the clouds

Thu, 24 Mar 2011 11:50:00 EST

By Michael Derin Last night Azure Group held its first CFO Network seminar for 2011, again held in conjunction with the Institute of Chartered Accountants. Nearly 40 guests attended the Institute’s headquarters on Erskine Street in Sydney for some networking with fellow CFOs and two presentations on cloud computing. We were lucky to have the benefit of two highly esteemed speakers from leading technology company, EMC. Clive Gold, Marketing CTO for EMC Corporation in Australia and New Zealand, discussed with the group on the evolution of cloud computing, the benefits it brings to business IT operations and he shared some great examples of how cloud computing is being used in the market now.

Beware the Ides of March! A time to think about loyalty and leadership

Tue, 15 Mar 2011 16:39:00 EST

By Michael Derin The 15th of March is the ‘Ides of March’, best known for being the date Julius Caesar was assassinated by a band of fellow senators as they feared his ambition would bring down the senate. Many of these senators were people he trusted. This auspicious date brings with it a strong theme of loyalty and leadership. As a budding entrepreneur it’s the perfect time to think about what these themes mean to you, especially in your business relationships. No entrepreneur ever gets to the top alone. There is always a strong group of people around, advising and assisting them. Behind many well known and successful business leaders are trusted advisors who have been in the fold for quite some time. For example Westfield’s Frank Lowy has had David Gonski as his trusted advisor, friend and fellow director for over 25 years. By their very nature entrepreneurs are highly creative and their main interest is in getting a business idea of the ground. As such they usually avoid being bogged down by the detail, be it marketing, legal or finance, and use their business advisors to take care of these details, ultimately helping them turn their dream into a reality. The best advisors are those that add to and complement your own experience and skills. The biggest value in having outside advice is tapping into a level of experience that is different to your own. The other way to ensure you are getting the best value from your advisors is to have clearly defined business goals and future direction. You need to identify the desirable experience and skills required to fulfil these goals. It’s highly likely, if you’re completely honest with yourself, there will be numerous gaps within your knowledge where you will need the advice and experience of an advisor. For instance, you may be an entrepreneur with a promising online start up business who is technology savvy but lacks the skill to find funding or implement a strong business management structure to give your idea the foundation to grow. Bringing in a professional advisor, like an accountant or lawyer, who has experience in managing a business, would be invaluable in the initial phases of a start up. A few tips when looking for a business advisor: Ask people within your network to recommend a potential advisor. It’s easier to find someone suitable and credible if you have recommendations from people you know and trust Interview and ask for references. It’s important to meet face-to-face in order to determine if there will be a good personality fit but you also need to gauge what work they’ve done before and their track record Consider their level of experience and skills and whether it complements and/or fills a gap in your own skill set Communication is paramount. If you can’t communicate easily with someone, sooner or later there will be a break down and as an entrepreneur it could be disastrous for your business idea The same goes for respect. You need to have a healthy respect for those you work with in order to get the best out of the relationship. Regardless of the kind of advisor (accountant, lawyer or mentor) you bring on board, what’s going to ensure a winning formula is choosing to be involved with people who share your passion and excitement for the project. This way you know not only are they invested monetarily, they are invested emotionally and they are likely to be more dedicated in helping you and your business venture succeed.

Is your business suffering from a financial disconnect?

Mon, 14 Mar 2011 09:03:00 EST

By Michael Derin Have you ever wondered why it takes so long to have your tax return completed each year? Do you confidently know how your business is performing and what its financial position is? Do you suffer from not having accurate and financial information on hand to make important business decisions? If you answered yes to any of these questions then your business may be suffering from a financial disconnect. The traditional accounting model still existing in a large percentage of small and medium sized businesses is one of the toughest obstacles to tackle but one of the biggest opportunities to really improve their business. The traditional model involves having an internal person running and managing the day-to-day accounting, an external firm managing compliance and tax issues and perhaps a strategic advisor elsewhere providing advice when needed. What I’ve learnt from working with and advising SMEs is often this model doesn’t work well enough to benefit the business and as a result, managing finances and accounting becomes purely a cost driven activity and seen as an administrative burden. Here are a few reasons why this traditional model doesn’t work well for SMEs and how you can fix it: 1. A duplication of work – In some cases it can take an external accountant up to four months to complete an income tax return. Duplication exists when the updated and adjusted accounting file is returned to the business and the internal finance person must re-enter all the information and figures from the start of the financial year to this updated file. This duplication can be avoided by using accounting programs hosted in the cloud, where both accountant and internal finance staff can work on the one file of accounts simultaneously or perhaps consider engaging an external tax accountant that can deliver a faster turnaround, thereby reducing the necessary duplication of work. 2. Lacking financial expertise – Most SMEs make do with having an office manager, bookkeeper or even the business owners managing the day-to-day accounting. Unfortunately the lack of experience to efficiently and effectively manage the company’s accounts causes significant issues in maintaining up-to-date and accurate financials on a regular basis. The business then runs the risk of not having sufficient information to make sound business decisions. In most instances it would be worthwhile to hire a qualified accountant to manage the business’ finances to ensure the financial information you receive is on time and more importantly accurate in order to drive the business forward. 3. Inefficient reconciliation process –Tax compliance can be extensive and for an under-resourced SME it can be extremely difficult to ensure financial records are up to date. However, it is critical that all ATO returns (income tax return, payroll payment summaries and fringe benefits tax return) not only reconcile to financials but also to each other. This is often overlooked, and before long you may be targeted by the ATO and face a tax audit. If you are unsure as to how accurately your deadlines have been managed, firstly have an experienced advisor review your company accounts to ensure they are accurate and up-to-date, then consider engaging the advisor to provide support on a quarterly basis to ensure that the task is being managed and reviewed properly before lodgement. 4. Inefficient monthly reporting – Monthly reports, like balance sheets, are vital in understanding a business’ performance and its financial position. Many SMEs don’t have the financial expertise required to produce sophisticated monthly reporting and waiting for the results for a tax advisor to find out how they are doing isn’t practical. In order to get more out of your business’ finances and gear it for growth, I would recommend you engage a commercially-minded finance expert, like a financial controller or chief financial officer, to provide advice on improving the business’ financial function and implement strategies that will help the business to be successful. When your finances are managed effectively and you have good reporting in place, it allows you to focus on running the business rather than playing catch up with your financial obligations, it improves business performance and gives you the information you need to grow the business.

Optimising working capital can mean the difference between failure and success

Fri, 14 Jan 2011 11:03:00 EST

By Michael Derin As seen on Dynamic Business 2011 has begun with the same uncertainty we saw in the last quarter of 2010. Market reports on business performance continue to contradict each other, the economy persists to operate at two distinct speeds and consumer spending remains tepid. Now is the time for businesses to remain focused and ensure they are operating efficiently, delivering value to their clients and utilising their working capital in order to keep the business on track. As an accountant and virtual CFO working with SMEs, I often come across businesses that are making a profit but still having trouble coming up with the necessary cash to pay their suppliers and creditors. The reason for this is they aren’t making the most of or are not appreciating their working capital and worse still they don’t understand the difference between working capital of cash flow. Put simply working capital is current assets minus current liabilities. It is how much liquid assets the company currently has to build its business, fund growth and produce value for the owner. Optimising your working capital can mean the difference between growth and failure, allow you to utilise your resources to help your business and give you the flexibility to introduce new divisions, key products and/or services and help you to achieve success. This is all very easy to say, but what most businesses struggle with is how. Here are some general strategies if you find yourself with short or long term working capital issues: Put emphasis on the importance of real time information so you get a clear picture on your daily/weekly/monthly/quarterly working capital needs Actively work to reduce the payment collection period of debtors. This will your working capital requirement and will free up cash flow (have a look at my previous blog post on the cost of debt recovery) Better manage your expenses and creditor responsibilities to create better cash flow. Look at extending your payment terms with suppliers to alleviate immediate cash flow concerns or put in place payment arrangements for your liabilities Implement more effective stock control. Much of a small business’ (particularly those in retail and manufacturing) working capital is tied up in stock and a key issue is to find the optimum inventory level to minimise the cost tied up in inventories. Doing regular stock takes is also highly beneficial Speak to your bank manager about financing options to support your short, medium and long term liquidity issues. This may include debt financing or extending your overdraft facilities If your business is growing rapidly and this is creating short term liquidity issues, consider raising capital or attracting key investors to your business Reduce costs and increase income. Invest in your sales process and push new business to improve your short term and long term working capital issues. Businesses that can effectively manage their working capital have the opportunity to improve their cash flow, costs and services/products plus they can also become more agile and flexible against their competitors, which is very important when operating in an uncertain market.

How 2011 is looking for small businesses

Wed, 15 Dec 2010 12:26:00 EST

By Michael Derin As seen on Dynamic Business Reading the December/January issue of Dynamic Business I couldn’t help being drawn to the article on the New Year resolutions of the featured businesses. It made me reflect on the clients Azure Group has enjoyed working with in 2010, both for their challenges and innovation, but and also got me thinking about what 2011 has in store for small business. We can safely say that although 2010 was a year of recovery, it wasn’t to the levels anticipated or hoped for by business. Conditions definitely improved but we have still not reached pre-GFC levels. The tougher conditions have had a huge impact on the cash position of nearly every business I know, access to credit is still challenging and many still have to operate very leanly. Moving into 2011 the same market uncertainty will more than likely continue and it will be interesting to see if the lackluster consumer spending picks up over the Christmas period, if not we could be starting the New Year on the back foot. Technology will also be a big topic for SMEs in 2011. The fast rate of change and new innovations will invite different ways of doing business, greater opportunities and the emergence of new style of businesses and industries. I am anticipating a significant increase in businesses going up for sale or merging. This will be largely driven by the Baby Boomer generation, who account for 50 per cent of small business owners, retiring. So succession planning is likely to be on table for many owners and will continue to be a hot topic for 2011. Moving into a new year is always a time for reflection as well as optimism. It is a time to re-group and review where you are positioned against your strategies and how overall your business has performed in the first six months of the year. You now have the chance to put in place plans to bridge any gaps or if exceeding targets decide on new ventures before a well deserved break over the Christmas period. My advice for 2011 is to remain focused on the profitability of your business and keep your balance sheet strong. Stay in control of your financial position, keep debt at manageable levels and concentrate on delivering value to your customers or clients. If you are planning on expansion, look for ways to grow that won’t require you to outlay too much capital. Above all else, remain passionate about your business.

Breaking the micromanaging cycle

Tue, 30 Nov 2010 15:13:00 EST

By Michael Derin As seen on Dynamic Business As an accountant and a virtual CFO, I work with a lot of small business owners and one of the most common mistakes they are often guilty of is micromanaging their team and working ‘in’ the business rather than ‘on’ the business. These owners tend to get stuck in the “I’m the only one that can do the job properly” mindset. As a result they don’t take a step back and give themselves any objectivity on the performance of the business. This would allow them to be more strategically-focused so they can concentrate on growing the business and taking advantage of new opportunities. Let me give you an example. A business owner I know had a lifelong dream of owning and running a golf driving range. After much hard work and dedication, he made his dream come true and built a profitable business. However, he became too focused on the day-to-day running of the business, tended to micromanage and did not allow his management team to take responsibility for their roles. As a result he could never really focus on the business strategy and he missed out on many opportunities that would’ve enabled him to grow the business even further. It can be hard to take a step back and trust other people to run the day-to-day aspects of your business. However, it is rare to hear of a successful company run by a sole entrepreneur. Take Richard Branson for example. Many people have the perception that he single-handedly runs the Virgin empire. The reality is he has a strong management team that has worked with him over many years helping him make decisions to run the business. The best way to ensure you build a winning management team is to bring in experienced people with varied skill sets. For instance if as an owner you are vision-focused, bring on board managers who are process-focused and/or are creative allowing you to segment certain roles and responsibilities depending on their strengths. It’s also important to have clearly defined roles for your managers and empower them to take responsibility. Setting key performance indicators is an effective way of establishing accountability for a management team and creating a positive environment focused on achievement and performance. Building and empowering your management team will provide you, as a business owner, an opportunity to focus on the bigger picture allowing you to steer your business towards success rather than getting bogged down in the day-to-day grind.

How to avoid getting squeezed by interest rate rises and reduced lending

Tue, 16 Nov 2010 16:37:00 EST

By Michael Derin As seen on Dynamic Business When it comes to interest rates, small businesses have had a rough time lately. They’ve had to cope with tough lending conditions from the big banks and now another interest rate rise. When interest rates rise, small business gets squeezed at both ends. On one hand they face paying more interest on their borrowings, reducing their profitability and putting pressure on spending. On the other, they face a potential for customers and clients to reduce spending which effects revenue in their business. There is a number of ways a business can mitigate the risk associated with interest rate rises: Repay the debt using available funds Consider fixing the interest rate on loans Ensure the business has a strong finance function and cash flow is monitored closely Foster a good relationship with your bank manager and ensure they have a sound knowledge of your business and its positive aspects. This will also limit the chance they will make a call on your current loans. Compounding the effect that rising interest rates have on small businesses has been the decrease in business lending from the big banks which made it difficult for small businesses to obtain bank loans. However, from what I see this trend seems to be lifting somewhat, particularly for businesses that have made themselves an attractive choice. There are a number of ways you can make your business attractive to a bank. These include having your paperwork in order. Make sure you have accurate and up-to-date figures and you have a detailed business plan. Also ensure you shop around and talk to multiple banks this way you can make sure you get the loan that best suits your business. However, banks aren’t the only source of capital available to small businesses. Other options may include: Leasing is a good option for obtaining necessary equipment without outlaying large amounts of capital and therefore frees up cash Debtor financing is still a viable option even though many of the big banks have stopped offering it. Debtor financing allows business to quickly access up to 90 per cent of the value of their outstanding invoices and if used accordingly can assist in keeping the business’ cash flow healthy Capital raising can also be a funding alternative. As the stock and property markets have been quite turbulent, there are angel investors willing to consider investing in small business ventures.

How SME exporters can soften the blow of a higher Australian dollar

Fri, 05 Nov 2010 10:53:00 EST

By Michael Derin As seen on Dynamic Business There has been much talk and speculation recently with the Australian dollar hitting parity twice with the US dollar in the last month alone (the last time parity occurred was in July 1982). The US is Australia’s second largest recipient of exports, behind New Zealand, and many of our Asian export partners trade in US currency, so the simple reality is our higher dollar is having a severe impact on Australia’s exporting community. Many of our exporters are SMEs and are the most vulnerable when it comes to fluctuations in exchange rates as they don’t have the same financial buffer of larger companies. Unless they locked in contracts when the dollar was lower earlier this year, many of these businesses will be seeing a tightening in their margins and what really isn’t helping matters is, the continuing difficulty for them to access finance from the big banks. For exporters raising prices is not always an option, particularly if they are importing into a fiercely competitive market, like consumer goods. But some things they can do are: Become more competitive and think about how they can differentiate their product so customers perceive more value in the brand rather than increase your prices. For example provide better customer service that clients are happy to pay for Look for new markets where demand for their product is strong. The dollar value won’t stay high forever, and managing currency risk is part-in-parcel of being an exporter. Managing risk has a lot to do with planning and budgeting to try and minimise that risk and ensure the business benefits from favourable exchange rate movements and isn’t exposed negatively when movements aren’t so favourable. Because exchange rate volatility also provides the opportunity for gains, it’s a good idea to try and strike a balance between risk and return. For instance: You may want to ‘forward foreign exchange’ meaning you can lock in an exchange rate for a specific period of time in the future Or you could do ‘flexible forwards’ meaning you can protect against adverse exchange rate movements You could always take out currency options which provide you with the option with the right (but not the obligation) to buy or sell one currency amount at a specified exchange rate on a specified date.

Azure Group makes the 2010 BRW Fast 100

Mon, 01 Nov 2010 15:47:00 EST

It was announced last week that Azure Group made the BRW list of the top 100 fastest growing businesses in Australia. A number of Azure Group team members attended an exclusive cocktail event where the 2010 BRW Fast 100 were named. Azure Group was placed 95th (see the printed list). This accolade means a great deal to the Azure Group team. We have a hard working and inspiring team of professionals and because of this we have achieved some great things. This award is recognition that we are achieving our objectives and goals. Since our beginnings in 2002 we have grown considerably and we continue to grow at a rapid rate. This growth can be attributed to numerous factors, including: Hands-on working relationships and an active interest in the overall success of our clients’ businesses Adopting a human resources policy that focuses on employing team members that share the same values and passion as the company and its partners A service offering that focuses on the overall picture of each client and revolves around not just solving one issue but looks at resolving the cause as well as the symptoms A conviction that accountants are more than just numbers, they thrive to be involved in sustainable and successful businesses, they aim to influence positive decision making and to assist entrepreneurs to launch successful ideas. Azure Group wants to challenge the accounting industry to be proactive, innovative, commercially-minded and focused on growth for clients. We recognise this is the way forward for the accounting sector and we are leading the way for other firms to follow in our footsteps. So to everyone that contributed to Azure Group’s phenomenal growth, we thank you for your support. Rest assured Azure Group will continue to grow in the coming years, so watch this space!

What debt recovery costs your small business

Fri, 22 Oct 2010 19:24:00 EST

By Michael Derin As seen on Dynamic Business I have been asked by a Dynamic Business reader (thanks to @djcoombes74) to discuss the costs associated with debt recovery. The collection of debt is an important topic for businesses and an area that is often poorly managed. Slow paying customers and bad debts continue to be a big problem for small business, particularly over the last two years as the tough business climate put pressure on cash flows and resulted in companies generally taking longer to pay bills. The process of debt collection, especially if not managed properly, can take up a big chunk of valuable time and resources that could be better spent concentrating on growing the business. Most small businesses don’t have a dedicated resource like a credit controller or accounts receivables officer, which means the onerous task of collecting money, is often left to the side rather than being a priority for the business. The normal costs associated with debt recovery that nearly every business experiences at some stage, is when an account becomes overdue and reminder invoices need to be sent, follow up phone calls made and the finance team having to keep record of the status of the account if payment has not been received. Where costs start to escalate is when your finance team dedicates hours and time on the collection task to no avail resulting in the business owner becoming involved in an effort to put more pressure on the debtor, thereby taking the owner away from running the business. It may be that the business will need to engage either a lawyer or collection agency to hopefully resolve the situation. Court cases aren’t that uncommon and can be costly, particularly if you aren’t successful. Late payments and bad debt have an immediate impact a business’ cash flow and if not managed adequately a business can quickly run into financial trouble and have difficulties paying their own liabilities. The extreme costs of ongoing debt recovery problems can be: You lose employees if you are unable to meet salary costs Loss of clients due to an inability to pay for stock or the inability to service them due to a depleted work force The proprietors may be exposed to personal liability In the worst case scenario, it can result in insolvency or bankruptcy. I find many businesses experience problems with debt collection mainly because they don’t have the right processes and controls in place and also adopt a cautious approach to communication with their clients for payment. What you can do to improve your debt recovery efforts: Employ a dedicated collections officer who can concentrate 100 per cent on collecting money Screen potential customers carefully Set realistic credit limits and clearly defined terms and arrangements at the beginning of the contract Offer incentives for early payment Provide progress payment terms Have a systemised process of invoicing and following up late payments. Follow up late payments the day after they are due Verbal communication: you’ll generally get better results with a quick phone call then by sending a reminder invoice Log all calls regarding payment collection to debtors so you get to know your customers’ payment habits Do not be afraid to put a stop on a customer’s account, but ensure this is not automatic and only done on an as needed basis For more information on debt recovery see the ACCC’s guidelines.

Lessons on attracting investors taken from the Dragons’ Den

Wed, 13 Oct 2010 09:19:00 EST

By Michael Derin As seen on Dynamic Business One of my favourite shows lately is Dragons’ Den on BBC which sees entrepreneurs pitching their ideas to a group of savvy investors in order to obtain financial backing to get their innovation off the ground. The show is well played out. The entrepreneurs proudly and confidently present their innovation and are met with the calculating and narrowed gazed of would-be investors. As the show’s name infers, it’s like going into the dragon’s den, petrifying, and you definitely sympathize with the entrepreneur. But then the investors begin questioning things like cash flow, business assumptions, suppliers, marketing and target markets, and if the entrepreneur has any holes in their plans, they are soon revealed and pounced on by the Dragons. Finally the potential investors decide whether they will invest and the entrepreneurs leave either euphoric or shattered. The reason the show works so well is that it is actually quite realistic. Entrepreneurs though passionate about their product, can become blind-sided about how to take their idea and make it successful and a viable reality. Often they don’t do enough research or their numbers don’t stack up which reduces the chance of their proposition being enticing to an investor. Investors in today’s market are extremely selective about who they are willing to invest their funds with. In order to increase the chance of raising capital, entrepreneurs need to realise that they need a level of sophistication in the information presented in order for the investor to consider the innovation worth a second look. As a start I recommend preparing a short Investment Plan document as an initial enticer for investors which outlines the opportunity and the potential return. If investors are excited by this and want to discuss backing your innovation they will expect the next level of sophisticated information, a detailed business plan and financial model. To attract investors your business plan and financial model should cover: Business assumptions that are realistic and not overstated Assumptions that substantiate the investment return A clearly defined exit strategy for the investor A business plan that clearly articulates the business model and innovation and market positioning for this innovation. Your ultimate goal in attracting capital is that you do not give too much of your business away while still making it attractive for the investor. At the end of the day, you’re the innovator and the brains behind the venture. Capital is one thing, but selling all of your innovation and not reaping the returns equally if not more than the investor is selling your innovation short.

Hold on to your profits; we could be in for a rough ride

Wed, 22 Sep 2010 09:46:00 EST

As seen on Dynamic Business By Michael Derin As someone who works with small and medium sized businesses I frequently get asked, “How are SMEs faring?” At the moment my answer would be they are operating amid a great deal of uncertainty. However, despite this many small businesses are focused on growth. A minority government, a two-speed economy, inevitable interest rate rises, lack of small business lending from the big banks and fears that the USA could be heading for a second recession all make for a business environment that is hard to predict and difficult to plan for. Many small businesses aren’t sure how fast and how much growth the business can support. In the current environment growth is certainly possible but going for BIG growth without capital behind the business could easily backfire on you if the economy goes south again. My advice is to concentrate on mitigating risk and look at retaining profits so that if growth is part of your business strategy this can be funded adequately without the business overextending itself. Retaining profits is easy for me to say, but not always easy for a business to do and the reality is, not many small businesses fully appreciate the importance or understand how to go about this. My top four ways to keep profits in your business are: Concentrate on retaining existing clients and a consistent level of sales. This is your opportunity to ensure you have a certain level of income coming into the business that covers all your monthly expenditure and makes room for growth Price your product or service competitively without underselling your value or service Review your supplier contracts and reduce costs where possible meaning further capital is retained in your business rather than being spent unnecessarily Adopt good financial management and discipline – and as a minimum every business should be reviewing a monthly profit and loss statement. When looking to retain profits within the business, your number one tool is your profit and loss statement as it helps you to evaluate your business’ performance. Too many small businesses don’t utilise this invaluable report and without it is like flying blindfolded. Not only that but with the current economic environment banks and investors are looking very closely at profit and loss statements in order to get a clear understanding of the business’ profits, expenses and its overall performance. Now is the time to ensure you have your business basics covered off and have a clear picture about where your business is positioned and how you can make it perform. The best business decisions are those made when you are truly informed on the financial aspects of your business.

Another great CFO Networking event

Thu, 16 Sep 2010 12:17:00 EST

Wednesday, 15 September evening saw nearly 20 CFOs and high level finance professionals attend Azure Group’s CFO Networking evening held in conjunction with the Institute of Chartered Accountants at their office on Erskine Street in Sydney’s CBD. The topic of the event was debt raising and the interest rate outlook in today’s market and the event featured two highly esteemed speakers, Grant Turley from ANZ and John Munton from Corrs Chambers Westgarth Lawyers. First up was Grant Turley, a senior foreign exchange strategist from ANZ Bank. Grant spoke on the interest rate outlook for the Australian market in relation to the rest of the world and key indicators and forecasts for the coming 12 months. Grant’s presentation can be viewed below. Following Grant was John Munton [i], a partner at one the country’s top law firms, Corrs Chambers Westgarth. John spoke about debt financing options and terms which included types and general characteristics of various debt facilities, characteristics of various debt arrangements, repayment and also mandatory and voluntary prepayments. Initiated by Azure Group, the purpose of the CFO Network events is to provide CFOs working with small and medium sized enterprises the opportunity to network with fellow colleagues and draw on each other’s knowledge and expertise. Being a CFO of a SME brings its own set of challenges. More often than not they operate independently with limited interaction with other CFOs and at times they lack the opportunity to access ideas, feedback and advice from their peers. In 2011 we’ve got some exciting plans for the CFO Network, including more networking evenings with some great topics, round table discussion groups and also some online avenues, all with the idea of bringing together CFOs and finance professionals to share ideas and experiences. Once more we’d like to express our appreciation to the Institute of Chartered Accountants for their support and cooperation in bringing the CFO Network to life. [i] John Munton has practised as a solicitor for over 30 years and has experience largely in banking and finance. John has extensive knowledge and experience in the areas of banking, finance and securitisation. He has assisted clients in major capital market transactions and securitisation programs both in Australia and internationally. He presents lectures on securitisation at the University of New South Wales and on general banking and finance for the UNSW Continuing Legal Education Series. He is a member of the Banking and Financial Services Law Association, the Asia Pacific Loan Market Association, the Australian Securitisation Forum and holds consultative membership of the Australia Financial Markets Association.

Engaging your team pays off

Mon, 13 Sep 2010 09:10:00 EST

By Michael Derin As seen on Dynamic Business As a virtual CFO I’ve seen quite a few businesses undervalue the importance their team plays in having input in the strategic growth and direction of a business. Employees strive for more than just a pay check at the end of the month. Businesses that don’t engage their team are usually the ones that suffer from high staff turnover, low productivity and a lack of staff morale, making it more difficult for that business to operate effectively and profitably. There continues to be a great deal of uncertainty in the marketplace. Australia currently has an unformed government that looks like it will be hindered by a lack of leadership and inconsistent policies. The outlook for the US continues to show poor economic conditions and a two-speed economy in Australia is leaving small business lagging behind their bigger counterparts. Now is a critical time to ensure your team is invested in your business. It will mean that your business will be more stable, focused on performance and be better positioned to deal with uncertainty and potential soft market conditions. Recently my company, Azure Group, h eld its annual strategy day. It’s a day that involves the whole team, where we go over the business, its plans for the future and the strategies that will get us there. Every staff member is involved, regardless of role or how long they’ve been with the company. Everyone’s viewpoint and ideas are considered and encouraged. It’s a day that leaves the team feeling supercharged and excited about where the company is heading and their part in getting it there. The strategy day is important for Azure Group for two reasons: 1) to help build on our plan for growth and 2) to engage our team to contribute and be part of the growth and in turn see them personally reap the rewards from the success that follows. This in itself is a strategy. I am extremely passionate about ensuring my team take ownership of what part they play in the growth and success of Azure Group and empowering them to achieve this by reaching their own individual goals. An organisation is its people and the success and failure of the organisation is mostly representative of the commitment from its team. The stronger the commitment, the more likely the company will succeed. Engaging and motivating your team is a strategy equally important as marketing, client relations and product development. It’s a piece of the whole which if left out will leave the business handicapped and having to work that much harder to achieve successful outcomes. Additional ways to get your team to buy into the business is offering good incentives that will motivate and reward your employees. Individuals are motivated by various forms of incentives and their loyalty to an organisation is built from monetary appreciation and also from a business allowing them to personally develop and accomplish their goals. There are many avenues a business can take to incentivise staff including employee share schemes, bonuses, equity arrangements or commission, but it is the non-monetary benefits such as the involvement of staff in strategy and growth plans of the business that also play a major role in engaging them in the long term success of the business. Let’s face it; we spend more than half our life working. As a business owner we have a responsibility to help our team achieve greatness whatever form this takes. The joy of empowering people to succeed professionally and personally is one that will never stop exciting me and I know it pushes me to be a better leader.

Why accurate figures matter

Tue, 24 Aug 2010 09:47:00 EST

By Michael Derin As seen on Dynamic Business It’s been a busy few weeks in the Azure Group offices. Unusual for most accountants, but for us, it’s a time when our tax team and accounts teams combine to work on reconciling our client’s accounts, record year-end tax journals as well as collecting and collating compliance files for our clients. Why you say? Well the reason for this is simple. We work on eliminating the hassle of transferring information between the client and us. It’s a proactive approach to ensure that we have all the information we need to complete the compliance and tax affairs. This role is extremely important for our firm and our clients because it ensures their finance teams are working on accurate accounts from the beginning of the financial year not waiting for three to six months for their accountant to fix any problems. Anyone who knows me well will know how strongly I believe that having accurate accounts is powerful and more importantly essentially in running a business. It helps you make more informed business decisions and aids in understanding exactly how your business is performing. I am sure as a business owner you want to run your business more effectively? Well I believe without accurate financial information you will be flying blind and will find it impossible to manage your cash flows, your tax obligations and everything else in between. I’ve seen many businesses struggle and some fail simply because they did not respect the importance of having accurate accounts. I spend a great deal of time helping businesses that are not profitable to turn their businesses around and start driving profits. Establishing basic reporting procedures is critical for this process. If you don’t have any basic reporting procedures in place, stop everything now! I know you think your current customer is everything and new sales are critical, however what if you are losing money from your customers and you are spending too much on generating new business? What if you are losing each time you make a sale? It all becomes a waste of time and a sure fire way to get yourself into trouble financially. One reporting measure you should have in place to help you achieve accurate accounts is reviewing your balance sheet on a monthly basis. The balance sheet is the backbone of any business. It sums up the business’ position by identifying the assets, liabilities and the equity of the business. This may seem simple but 32 per cent of SMEs fail because they do not accurately understand where their business is positioned financially and they allow their liabilities to become far greater than their assets, making it virtually impossible for them to survive. Three key ways to strengthen your balance sheet include: Ensure your cash position reconciles each month so you know exactly how much cash is available to pay your liabilities. Your accountant should ensure that each item is reconciled every month and they should be able to support any item at any point in time so that you can clearly identify discrepancies and fix the problem quickly and accurately Have an accurate balance of debtors so that you know how much money is available for collection and put measures in place to collect Be clear about your creditors, including money you might owe to suppliers but also your tax liabilities such as GST and PAYG.

What it’s like working at Azure Group Gold Coast office

Thu, 12 Aug 2010 13:06:00 EST

By Umar Flynn, Azure Group accountant Typically, many people stereotype accountants as boring who don’t like their job. However here at Azure Group, I can confidently say that this is not the case. Everyone here loves what they do. We all wake up in the morning excited to come to work. Within Azure Group, we celebrate cultural diversity and have employees with backgrounds from South Africa, New Zealand, China, India, Sri Lanka, Italy, Philippines, France, and of course Australia. I work in the Gold Coast Office and I love every aspect of my job. I love the people I work with, and enjoy working with our clients. Azure Group provides an atmosphere within its organisation which is like no other accounting firm, and atmosphere where staff can feel at home, can feel welcome and where we can feel like a family. Our clients can also feel the energy Azure Group holds, and after meetings with us, feel rejuvenated and excited about the future for their business and for themselves. Overall, Azure Group is a unique and innovative accounting firm. I love working here and cannot imagine working anywhere else. Umar Flynn has been an accountant for four years and has nearly completed his CA. He has been at Azure Group for 18 months.

So you want to be an entrepreneur?

Tue, 10 Aug 2010 11:15:00 EST

By Michael Derin As seen on Dynamic Business Now you might say that being an accountant is boring, well I would argue otherwise. As an accountant I get to work with some of the brightest and innovative entrepreneurs and trust me, it is very inspiring and exciting. Right now is a great time for budding entrepreneurs. Consumers and businesses are receptive to new technologies that make their life easier and are more cost effective. And it’s the entrepreneurs who are coming up with genuinely valuable products and services that can penetrate the market quickly and are more likely to succeed. From what I see there is great opportunity in particular for new web-based businesses. In most cases there are relatively lower costs and less time associated with getting a website up and running which then allows you to get traction or runs on the board much faster. It’s in this sector that I see some of the most creative and impressive ideas. Let me give you an example, I work with a company called Viocorp. Set up in 2002 they are known as one of the leading online broadcasters in Australia. Viocorp is a great entrepreneurial example of how to take an innovative idea and transform it into a successful business. They began with making internet communications simple by offering an online video content management product. This idea has exploded and they now offer a whole range of online video and audio solutions and work with a swag of major international companies like AMP, ING and Tourism Australia both in Australia and overseas. Among all of this success they continue being innovative as they know their market demands it. That is an example of success, but there are always bumps along the road, and I think two key phases where many entrepreneurs go astray. Firstly in the product development phase where they can spend too long refining their offering only to find out that it’s not relevant anymore or someone else has beaten them to the punch. Secondly in the commercialization phase where they spend too much money trying to grow the business and bled the company dry. There’s no special formula that will guarantee you success. It’s mostly a determined belief in your product that will see you through. However, my three tips for entrepreneurs are: Be realistic. It takes most businesses five years to gain any momentum and start earning profits. Are you and your family prepared for the long haul Do some research before jumping in. You need to understand if your product is going to be relevant to the market. I’ve seen many good ideas fall over because the market just didn’t accept it Surround yourself with advisors to advise and mentor you to help you realize your goals.

Financial management #FAIL

Tue, 03 Aug 2010 10:15:00 EST

By Michael Derin As seen on Dynamic Business The other day I was asked why some small businesses fail and others succeed and it got me thinking about the defining characteristics of Australian small businesses. In my role as accountant, CFO and business advisor, I come across many small businesses and I’m continually inspired. Overall, small businesses are innovative, creative and dynamic and they are a major driving force behind our economy (representing a quarter of our GDP). But despite all the good things about small businesses, there’s one main area that is letting them down – financial management. I come across many small businesses that are missing a huge opportunity. Financial management is the nuts and bolts of a business and even though it’s essential, it can also be complex, especially for a small business owner that doesn’t necessarily have access to the right information and it can be time consuming, something that small business owners don’t have a lot of. So what happens? The financial management aspects of your business, like keeping accurate and up-to-date figures, are given less priority and attention than other areas of the business. I truly believe paying more attention to the financial management of a business is the single biggest opportunity for business owners to build their business and create success. Getting the financial management of your business right will allow you to understand the ‘ins’ and ‘outs’ of your business’ finances, know what areas of the business are performing and which ones are underperforming and will help you make better decisions for your business. You’ll have more control over your financial position, you’ll be able to see where you can make the business more efficient by cutting unnecessary costs and you’ll know if you have excess cash available to re-invest in your business to help it operate more effectively and successfully. So my answer to the question as to why some small businesses fail and others succeed: when you look at the majority of failed businesses, the autopsy usually reveals at the root of most problems is financial mismanagement. My tip - if you want your business to have a better chance at success make sure you invest in: Having the right disciplines in place to manage your finance function so that you receive accurate and updated figures Having a clear understanding of your monthly results by being able to review a balance sheet and profit & loss statement that are accurate Having cash flow management in place to ensure you can meet pressing financial obligations Creating time to budget and strategise to create opportunities for future success.

Will a change of government be good for small businesses?

Wed, 21 Jul 2010 13:37:00 EST

As seen on Dynamic Business By Michael Derin Attending the COSBOA National Small Business Summit earlier this month, I had the opportunity to hear both major political parties address small business owners and supporters. The opposition leader Tony Abbott used his trademark ‘personality’ to get traction with the audience and on the other hand the Deputy Prime Minister, Wayne Swann, presented with his usual ‘absence of personality’, leaving us staring into our wine glasses. What it left me with was the question, will either party really deliver for our 1.93 million small businesses and put their issues on the agenda? The main issue that needs to be addressed is decreasing the amount of red tape that small business is forced to deal with on an everyday basis. For instance, reducing the company tax rate by one per cent is not cutting red tape nor does it really benefit small business. As an accountant and strategic advisor to small businesses I am perplexed and frustrated by the fact that small businesses have to deal with the same regulations that are designed for big businesses that have more resources, that instead of simplifying tax regulations, they have become increasingly more complex and that there is little consultation with small business about the impact of new policies and reforms. We need a simplified taxation and compliance system as outlined in many of the 100 recommendations put forward in the Henry Review that were put on the ‘back-burner’. For instance: Remove payroll taxes Remove non-value added taxes, like stamp duty Configure taxes and transfers to support productivity, participation and growth Streamline small business capital gains tax rules. We need a consolidation of compliance bodies so there is a single, national body instead of multiple state and federal ones. The definition of a small business being one that employs less than 20 employees and turns over up to $2 million needs to be redefined so that this threshold is up to $10 million. Australia needs small business to remain viable. Small businesses generate over a quarter of our GDP, make up 39 per cent of all exports and employ around half of the Australian workforce. It is important that we invest more to ensure that they continue to thrive so that our economy also thrives. Regardless of which party is elected into government, it will remain to be seen what they will do to address Australian small businesses.

Too many burdens for small business to bear

Wed, 07 Jul 2010 12:22:00 EST

By Michael Derin As seen on Dynamic Business, http://www.dynamicbusiness.com.au/articles/articles-blogs/too-many-burdens-for-small-business-to-bear.html It’s been tough going recently for small businesses in terms of initiatives introduced by the Government. While it may seem the Government is acting for the greater good, small business will bear the brunt of many of these changes. The Government recently announced from 2013 the rate of superannuation will rise incrementally from the current nine per cent to 12 per cent by 2019. In addition to this they also announced a reduction in the company tax rate from 30 per cent to 29 per cent from 2012. While a tax cut may seem to be an advantageous outcome, what the Government is giving away in one hand, they are taking bucket loads back in the other. The costs associated with the rise in superannuation will be far greater than any benefit from the cut in company taxes. Apart from the cost upfront of having to outlay more cash for wages, a small business will also have to pay the cost of implementing these changes. I don’t believe the Government appreciates how difficult it can be for small businesses to administer changes like these and not just once or twice but between 2013 and 2019, the superannuation rate will change a total of seven times. The other aspect to consider in relation to the company tax rate reduction is the fact that most small business owners draw the profits out of their companies in the form of a dividend. What this means is even though the company may pay less tax, the business owner will end up being taxed more, effectively wiping out any real benefit. The Government’s Paid Parental Leave Scheme (GPPL) will also be introduced from 1 January 2011. Although this scheme will be funded by tax payer’s money, it will still rely on businesses acting as paymaster. The level of red tape and compliance costs for small businesses is increasing and becoming impossible to manage. I wonder when the government will start looking at ways to simply our system rather than imposing changes and expecting small business to just make do. These changes are symptomatic of a government that wants us to believe they are in favour of small business but are in fact only focused on their re-election. The reality is they have not provided workable solutions that will result in real benefits for small business.

Azure Group and clients celebrate the end of the financial year in style

Thu, 01 Jul 2010 11:23:00 EST

Despite the chilly weather, last night the Azure Group team and 50 or so of their clients and associates celebrated the end of another financial year. Held on Azure Group’s office balcony set amid the high rises of Sydney city guests enjoyed a selection of delicious wines from Hunter Valley winery, Brokenwood, while they relaxed to the laid back sounds of the Casey Golden Trio jazz band. The last financial year bought some interesting challenges for many of businesses where many had to face reduced cash flow, banks tightening lending and slowed growth. For many this has meant working twice as hard, more stress and increased uncertainty. In the face of these challenges Azure Group's clients have come out on top. It has meant learning to work smarter as well as improving service, products and also efficiency. Last night was a chance to breathe a sigh of relief but also a night to begin to move forward to what lies ahead. A big thank you to all who attended.

Fairer work conditions

Mon, 28 Jun 2010 15:08:00 EST

By Hamsini Renugadevan, Financial Accountant The legal conditions and obligations of employing staff are quite intricate and it is imperative that businesses stay up to date with changes to workplace relations legislation. Last week I attended a workplace relations training course provided by the Australian Federation of Employers and Industries. The course covered the legal basis of employment with a great emphasis on new industrial relations law, contracts pertaining to employment and the subsequent entitlements that employees are prescribed in line with the National Employment Standards and Fair Work Act 2009. Here’s a summary of the key information that was covered: From the 1 January 2010 The Fair Work Act introduced National Employment Standards. These are 10 minimum standards of employment for all employees covered by the National Workplace Relations system. The introduction of these standards is a step in the right direction for workplace relations reform as they provide a solid foundation to providing employees with fairer work conditions and more standardized entitlements for the nation as a whole. They provide employers with a fundamental starting point when considering their human resource requirements and what they can be offering employees in order to attract and retain them within their organisation. The National Employment Standards Maximum hours of work – 38 hours per week, plus reasonable additional hours Employees who are parents or carers of children under school age or with a disability and under 18 can request for flexible working arrangements to assist with the child’s care Unpaid parental leave can be up to 12 months unpaid leave for every employee, plus a right to request an additional 12 months unpaid leave, plus other forms of maternity, paternity and adoption related leave A full time employee is entitled to 4 weeks of paid annual leave per annum which accrues progressively throughout the year of service. There is an additional week’s entitlement for shift workers as defined in a ‘modern award’ Full time employees are entitled to 10 days paid personal/carer’s leave per annum, two days unpaid carer’s leave as required, and two days compassionate leave (unpaid for casuals) as required Employees are also entitled to community service leave which includes unpaid leave for voluntary emergency activities and leave for jury service, with an entitlement to be paid for up to 10 days for jury service There is a transitional entitlement for certain employees who had certain long service leave entitlements before 1 January 2010 pending the development of a uniform national long service leave standard An employee is entitled to be absent and paid on a public holiday, except where reasonably requested to work An employee who is terminated for reasons other than serious misconduct must be given a period of notice of payment in lieu of notice calculated on continuous service. Employers are obliged to pay severance pay unless they employ less than 15 employees Employers must give each new employee recruited after the 1 January 2010 the Fair Work Information Statement on commencement of employment. More information can be found at http://www.fairwork.gov.au/