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5 Vit al Quest ions f or a Growing Business 1 How well is your business positioned for future growth 2 How is your business tracking against KPIs Key Performance Indicators 3 Is your business maximizing return to shareholders 4 Is your business generating healthy cash flows 5 How will your business achieve its goals Here are some insights to these questions and some sample reports to assist 1 Being abl e t o see t rends is vit al if you re going t o invest in new equipment and resources If you can t sensibly predict the future it could put massive strain on your business profit and cash flow A report like the Trend report below helps you to see how vital numbers are tracking in this case Current Assets Current Liabilities and Working Capital Current Assets are things like Accounts Receivable Inventory Work in Progress and Cash at Bank Current Liabilities are things like Accounts Payable Short Term Loans and Bank Overdraft etc 2 Copyr igh t CFOon Call com au by CAD Par t n er s Pt y Lt d www CFOonCall com au
5 Vit al Quest ions f or a Growing Business 1. How well is your business positioned for future growth  2. How is your busi...
Working Capital is the sum of Current Assets minus Current Liabilities Working capital is a common measure of a company s overall health Because it includes cash inventory accounts receivable accounts payable the portion of debt due within one year and other shortmanagement revenue collection and payments to suppliers Positive working capital generally indicates that a company is able to pay off its short term liabilities almost immediately Negative working capital generally indicates a company is unable to do so This is why lenders are sensitive to decreases in working capital they suggest a company is becoming overleveraged is struggling to maintain or grow sales is paying bills too quickly or is collecting receivables too slowly Increases in working capital on the other hand suggest the opposite Two of the most significant uses of working capital are inventory and work in progress The longer inventory sits on the shelf or in the warehouse and the longer jobs are in progress without being invoiced the longer the company s working capital is tied up When not managed carefully businesses can grow themselves out of cash by needing more working capital to fulfill expansion plans than they can generate in their current state 3 Copyr igh t CFOon Call com au by CAD Par t n er s Pt y Lt d www CFOonCall com au
Working Capital is the sum of Current Assets minus Current Liabilities. Working capital is a common measure of a company s...
This usually occurs when a company has used cash to pay for everything rather than seeking financing that would smooth out the payments and make cash available for other uses As a result working capital shortages cause many businesses to fail even though they may actually turn a profit The most efficient companies invest wisely to avoid these situations 2 If you are embarking on a growt h pat h you need t o f eel conf ident t hat t he key resul t s are t racking as per your predict ions If not you need to be able to quickly make adjustments in order to stay on track and achieve your desired profit and cash outcomes The KPIs in the sample report below are vital to keep track of and this report enables you to focus on those that are off track quickly 4 Copyr igh t CFOon Call com au by CAD Par t n er s Pt y Lt d www CFOonCall com au
This usually occurs when a company has used cash to pay for everything, rather than seeking financing that would smooth ou...
3 At t he end of t he day it s al l about ret urn t o sharehol ders in a smal l business you t he business owner There is an old saying Sales are vanity profit is sanity and cash is king If your growth in sales staff etc isn t returning a healthy profit then it s all just window dressing You need to end up with some benefits for all your hard work risk and investment EBIT Earnings Before Interest Tax is an important number for many business owners as this is the number upon which business valuation is often calculated If you are planning to sell your business sometime in the future it may be valued on a multiple of EBIT So to maximize business value you need to increase both EBIT and the multiple Keeping track of profitability and EBIT is vital to working towards a goal of increased business valuation 5 Copyr igh t CFOon Call com au by CAD Par t n er s Pt y Lt d www CFOonCall com au
3. At t he end of t he day it  s al l about ret urn t o sharehol ders  in a smal l business   you t he business owner . Th...
4 If your business is growing and making prof it it al so needs t o generat e heal t hy cash f l ow t o f ul f il l t he demand t o pay f or ext ra cost s during growt h The diagram below answers the age old question Where has the money gone There are simple ways to speed up cash in and slow down cash out to achieve healthy cash flow without damaging supplier relationships 6 Copyr igh t CFOon Call com au by CAD Par t n er s Pt y Lt d www CFOonCall com au
4. If your business is growing and making prof it it al so needs t o generat e heal t hy cash f l ow t o f ul f il l t he ...
5 In set t ing your goal s it s vit al t o have a pl an of how you re going t o get t here Some simple small changes to your Key Drivers of profit and cash flow can have a massive impact on your ability to achieve sustainable growth Growth can be the most dangerous time for many businesses that haven t pre planned the funding required to get there 7 Copyr igh t CFOon Call com au by CAD Par t n er s Pt y Lt d www CFOonCall com au
5. In set t ing your goal s it  s vit al t o have a pl an of how you re going t o get t here. Some simple small changes to...
The diagram below shows a Goal Seek on improving EBIT from 183 342 to 220 000 by making small changes to just three numbers being price variable cost of sales and fixed expenses If this business had a valuation EBIT multiple of say 3 this would add 110 000 to the value for shareholders CFO On Cal l is happy t o discuss t his inf ormat ion f urt her and show you how t o t rack t his inf ormat ion in your business Simpl y cal l us on 1300 36 24 36 or email us at inf o CFOonCal l com au 8 Copyr igh t CFOon Call com au by CAD Par t n er s Pt y Lt d www CFOonCall com au
The diagram below shows a  Goal Seek on improving EBIT from  183,342 to  220,000 by making small changes to just three num...