DIXIE: We have probably all heard the adds for Field Financial Consulting about doing it differently Animal noises etc.

Iain: Yes, I try to stand out from the other accountants and financial advisors locally.

DIXIE: Well, why are you different?

Iain: Field Financial Consulting is about business profit, cashflow improvement, success and innovation.

DIXIE: What are some examples of this?

Iain:  Well last month I talked about using Cloud Based Technologies namely Xero and Google and previously I have talked about saving money on your electricity bills.  This month I would like to talk about a subject more aligned to what you would think accountants normally talk about namely “Cashflow”.

DIXIE: Yes, I hear about cashflow often.  Can you expand here?

Iain: I know some farms and other local businesses are finding it particularly tough at the moment.  We all came out of the drought two years ago after a decade of dry and many businesses haven’t recovered.  Cashflow is very tight and with overdraft limits being hit or will shortly be hit and the banks are getting a little anxious.  You as the business owner may be very anxious but it is hard to get away from the everyday to make plans for the future.

DIXIE: How is Field Financial Consulting different here?

Iain: We like to look at your whole picture and not just the cashflow.   The current cashflow is vital and your bank will focus on this but it is not the whole picture.  You know that when you have confidence that most things are working well in your business you can sleep well at night.  If some things are not quite right then you may have plans that you can implement to correct the situation.  The Field Financial Consulting cashflow review process puts some order around these plans and allows coherent focus on what is important.

DIXIE: What is the process you go through at Field Financial Consulting?

Iain: Firstly, there is no one way of doing it so I will identify the key parts.  Clearly, it is great to have accurate historical financials. I find the financials that I see aren’t detailed enough and this weakness would hold back a lot of businesses.  With some smart tweaking your business would have 50% better financials.  Often when completing cashflows it becomes very obvious that structural changes need to be made.  These don’t have to be worked through in detail for the current cashflow but flagged for later discussion and analysis.  In addition fixed and variable costs and the key drivers of the business need to be understood. The detail of costs needs to be in a cashflow but also an accurate big picture.  Once completed, the cashflow is then reviewed and signed off.  Cashflow is an essential business tool that when used well is invaluable.

DIXIE:  That is what I expected an accountant or financial advisor to talk about but in a whole lot more detail.

Iain: Well at Field Financial Consulting we do it differently.

ROD: We have probably all heard the adds for Field Financial Consulting about doing it differently Animal noises etc.

Iain: Yes, I try to stand out from the other accountants and financial advisors locally.

ROD: Well, why are you different?

Iain: Field Financial Consulting is about business profit, cashflow improvement, success and innovation.

ROD: What are some examples of this?

Iain:  Well last month I talked about saving money on your electricity bills but this month I would like to talk about some neat Cloud based technologies that will save you money.

ROD: We hear about “The Cloud” but what is it?

Iain: Essentially “The Cloud” is a whole mass of computer servers all around the world.  The two software technologies I want to focus on today are about taking cost out of the back office of any business while at the same time allowing you to get more done.

ROD: Well, that makes sense.  We all want to pay less and get more done.  What are these two software programs?

Iain: The first is from the Google stable and is called Google Apps for Business.  This collaboration tool works with Gmail and allows you and your workforce to be at different offices or locations and still be up to date with the current office files.  All you need is the cloud software, a smart phone, pad or computer and an internet connection.

ROD: But do we need to be right up to date each few seconds?

Iain: No, you don’t, but Field Financial Consulting is about showing you what is possible.

ROD: What is the other software program?

Iain: It is called Xero Accounting and being an accountant by profession, I am particularly excited about this one.

ROD: Let me guess.  Is it an accounting package in the cloud?

Iain: Correct.  Instead of your desktop based accounting package, the information is anywhere you have your smart phone, pad and laptop.  Direct feeds from your bank and some set up and “one on one” training for key staff and you can be right up to date daily with your accounts daily.

ROD: Gee, this really gets me thinking about what is now possible.  Is it expensive?

Iain: No, Cloud technologies are about taking labour costs out of the job so they are inexpensive.

ROD:  That was certainly not what I expected an accountant or financial advisor to talk about.

Iain: Well at Field Financial Consulting we do it differently.

Dixie: We have probably all heard the adds for Field Financial Consulting about doing it differently Animal noises etc.

Iain: Yes, I was trying to stand out from the crowd of accountants and financial advisors locally.

Dixie: Well, why are you different?

Iain: Field Financial Consulting is about business profit, cashflow improvement, success and innovation.  Within these headings it is about cost savings and using technology to provide different ways of doing business.

Dixie: What are some examples of this?

Iain:  Over the next couple of months I will talk about some neat cloud based software that is available but today I would like to talk about saving money on electricity and alternative energy.

Dixie: We all know how electricity has been rising in cost.  How can families or business save money on electricity?

Iain: There are two components to electricity – usage and price.  Within these there are many possible areas of saving.

Usage is mainly affected by the heating and cooling devices we use and how long and when we use them.  Using Off Peak power, if available, is much cheaper than normal tariffs.  Price can be reduced by negotiating with or changing your electricity supplier.

For larger users of electricity, there are a number of other options for reducing costs.  Users with greater than 160,000 kWh fall into what is called a “contestable site”.  This threshold falls to 100,000 kWh on 1^st July, 2013.  A contestable site is able to go to the market and obtain tender offers from multiple retailers and then enter into a commercial contract and obtain substantial savings. Field Financial Consulting works with a Melbourne based specialist in this area.  A recent result for a client was a $30,000 annual decrease on a $120,000 historical spend.

Further savings can be made through the use of alternative energy sources.  Solar power cells are becoming more efficient every year and with huge quantities manufactured overseas and prices dropping.  Often solar is now used in conjunction with wind turbines and battery back-up. More information can be requested on our website at fieldfinancialconsulting.com.au

Dixie:  That was certainly not what I expected an accountant or financial advisor to talk about.

Iain: Well at Field Financial Consulting we do it differently.

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Definition:

Incentive & Remuneration Schemes are used to encourage commitment to increasing productivity and profitability or in achieving some worthwhile objective.  They are designed to be effective in aligning the interests of the company and its employees.

General Rules:

• Transparent – ie. easily understandable
• Should be measured more by objective factors and less by subjective factors
• Rules made known to all (on that scheme) and not changed arbitrarily
• Be perceived as “fair”
• Goals need to be attainable
• Keep as simple as possible

In general, should judge everyone on what they are authorised to do and for which they are accountable.  A uniform scheme to all employees is probably not correct while a mix of individual and organisation performance measurements is better.  Schemes can have any number of permutations and combinations depending on comfort levels of management.  Discretionary bonuses can also be used.

Types of Schemes:

1. Share Based Schemes

Individuals are awarded shares in the organisation based on level and/or years of service.  This scheme is generally only used by listed companies.

The advantages are:

• Recognises that every employee can and will have an effect on the performance of the organisation;
• Criteria relatively cost effective to set and administer on a per employee basis;
• Employees as shareholders receive the same change in share value and dividend as other shareholders;
• Most simple method for large numbers of employees;

The disadvantages are:

• Not directly focused on individual employee actions;
• Employees who are very effective only receive the same benefit as those who just do their job;
• Hard to make work for non-listed entities.

2. Percentage Profit Based Schemes

The employees will receive a percentage of the profit of the company.  Generally reserved for senior staff or just the most senior one or two employees.  For instance the CEO and CFO may be awarded 2% each of the organisations post tax profit.

The advantages are:

• Direct alignment with the profitability of the organisation and is not paid if organisation is not profitable;
• Measurement of profit is already performed;
• Bonuses only paid out of profit.

The disadvantages are:

• Profit may be manipulated and may not be easily understandable to the employee;
• Disclosure of organisation’s profit is required.

3. Profit Pool Based Schemes

A pool of money is set aside for the employees to share based on some predetermined criteria.  Management may say that they have a bonus pool of say $10,000 to be shared amongst all divisional employees based initially on making $100,000 profit.

The advantages are:

• Organisation knows that it will only ever pay bonuses out of profit (if an annual payout);
• Can be used for divisions within the organisation;
• Can be calculated and paid on a monthly or quarterly basis;
• Provides quick feedback to the employee (and their families) for good effort.

The disadvantages are:

• If done monthly or quarterly, bonuses can be paid out where a full year loss occurs;
• Can be cumbersome to calculate.

4. Performance Criteria Based Schemes

These are probably the most common schemes for employees in Australia today.  Objectives are linked to the job role and then employees are rewarded for meeting those objectives.  For instance, an employee may be rewarded a possible 10% extra gross wage for meeting five pre-determined objectives.  If only four of the five pre-determined objectives are met then only 80% of the 10% is awarded.

The advantages are:

• Closely links the jobs that the employee does to the their remuneration;
• Generally set in a cascading of objectives through levels of the organisation;
• Enables the employee to get good verbal feedback.

The disadvantages are:

• Time consuming to administer
• Possibility that employees have opposing objective and need to ensure that all objectives set for employees are aligned;
• Bonuses may be paid when the organisation is not profitable.

Let me talk through the following scenario to give a feel for what a Virtual CFO can do for you.

You have operated for many years with your trusted in-house accountant or bookkeeper.  They prepare your accounts every month while doing all that is necessary to keep the external tax accountant and ATO happy.  It is all great work but it is mostly compliance work like reconciling the bank account, submitting the BAS, doing account reconciliations and getting the annual tax and other returns completed.  A few things slip through but generally it is all good.

Your business is profitable but you feel that it can be developed more.  Trade has recently picked up and after some successful wins there is a little more cash around than 12 months ago.  You have been in this position before and unfortunately the last time growth petered out and you were back to no growth.  What do you do this time?  How can you take advantage of your current situation? How can you get your business to the next level?

You are well aware that there is no “silver bullet” that will ensure the growth.  What you need is someone that has been there before and can help.  You cannot afford any new full-time staff.  Your mate has managed to successfully get himself to the next level and bought a business out of town.  You have asked him a couple of times if he would have a look but he is a bit too busy to get involved at this point.

Your tax accountant is a trusted advisor and he has helped a lot over the years.  About three years ago you asked him to have a look at the business and give advice on what changes needed to be made.  There was some good advice but other sections seemed a bit too general and, you felt, could apply to any business.  He is disadvantaged by really only coming into contact with the business once or twice a year and he is doesn’t see the vibe of the “everyday”.  What you need is advice that is relevant to your business… ideas that really hit the mark with where you are at now.

A Virtual CFO from Field Financial Consulting can help you at this point.  You will immediately feel the confidence that someone with a broad commercial experience built up over many years brings.  Making suggestions that are drawn from your specific circumstances right now.  No earth shattering changes but lots of discussion on what can be done.  Better still you will be able to acquire these services on a one day a week or day a month basis.

Just give us a call at Field Financial Consulting and find out what is possible.