Adriaan, Richard and Louis chat with Keli Fernie of “Oh My Word!”. Keli is a brand communicator, digital marketer and self-confessed social media junkie. She works with a variety of clients on their employee engagement and conversations with customers and clients. They talk about ‘Video, applications and hashtags – how to improve your social media presence’. Joining the panel is Derrick Ndzavi who also gives an inspirational thought.
Seasons come and go. The tide has highs and lows. The moon goes through phases. Almost every aspect of life has an ebb and flow; a rhythm that means one day is not exactly like the next.
Your business is part of that. It goes through cycles. Manufacturing and sales-related companies face busy seasons and quiet seasons. Consulting companies encounter similar peaks and troughs. The fact is that there are very few companies in the world that can anticipate a completely steady level of work and income every month. So how do you ramp up for the busy times without being over-staffed during the quiet times? It’s one of the greatest challenges an HR manager faces today.
Currently there are a few standard ways in which employers respond to this. In his book “Annual hours, contracts and working time transformation”, consultant and author Jon Pasfield outlines some of them as follows:
Employ enough staff to meet the low times, and ask them to work overtime during the high times.
An example of this might be in accounting departments, where finance staff are asked to work overtime during month end and working up to the year-end period. Pasfield observes: “This can work well if the working time need for the majority of the year is flat, and the busier times are very few, short lived, and not much busier than the rest of the year.” However, there are drawbacks once the busier times become more frequent or lengthier, as is often the case for finance professionals. This can become “expensive because a lot of the work is done at premium rates” (on the understanding that employees are paid higher for overtime hours worked). Also, planning becomes difficult. “It is not easily manageable because it relies on the willingness of staff to work outside their contracted hours”, says Pasfield.
To employ more staff than is needed at high times of the year and have surplus staff during the low times.
If the busy periods make up a large portion of the year, this approach might become necessary. There are obvious downsides to this as well, though. “For the business, it is expensive in unit cost terms … for part of the year, the work is being paid for at premium rates … at other times, staff are being paid to be idle,” says Pasfield. Not only is this expensive for the company, it also encourages a highly undesirable corporate culture of not using time optimally.
The Finance Team recommends a third option.
Hire the right number of full time staff for the low times, and bring on ad hoc, part-time or interim staff members for peak periods.
We advocate outsourcing financial executives for the following reasons:
- You’re not paying regular staff members premium rates to work long hours, as you would be in scenario 1. Research has shown that productivity decreases when an employee works more than 50 hours a week. So essentially, in the first scenario, you’re paying your staff more to work less. Outsourcing financial executives means you may be paying a slightly higher rate than you would a regular employee, but you’ll be getting more from that person who is fresh and motivated than you would from an overworked full time staff member.
- Outsourcing financial executives when needed means you won’t be paying full time salaries to staff who are under-employed for some of the year. In this way, you’re promoting a healthier corporate culture and saving on your bottom line. The staff you hire know they’re required to give of their best every day of the year, and they’re remunerated accordingly.
- Outsourcing financial executives allows you the same continuity that you might enjoy with a full time staff member. A valid argument against hiring temps during a busy period is that they need to be trained each time, and productivity is lost during that process. But outsourcing financial executives provides a different solution. It means that whenever you need them, the same finance professionals can return to your business for the period of time they’re needed. They build up an increasing amount of familiarity with the company as they do so. No down-time is wasted with repeated training.
Outsourcing financial executives provides a solution that is more efficient and cost-effective than both scenarios one and two. It allows you to employ the optimum staff level, promote a culture of productivity, and get the most out of all staff members. If this solution sounds appealing, get in touch with The Finance Team for a no-obligation cost analysis.
All you need to know about using LinkedIn for your business. Expert on Social Selling Strategies and Lead Generation, Dr Nikolaus Eberl shares his knowledge with specific focus on market leadership through the Thought Leadership Blueprint on Cliff Central. Change Agent Catherine Constantinides shares an inspirational leadership thought.
In some shape or form, this has happened to you. You’re in a city that isn’t home, sitting in a restaurant, coffee shop or walking through a great store. You’re loving the service and the vibe, and then it hits you: this place would do so well at home! “Hey!” you say to whoever you’re with, “we should open a franchise!”
Sometimes the thought stops with a couple of “nice idea!”-type comments and a few good-humoured smiles. Sometimes it translates into late night googling and a few jotted notes. But occasionally those thoughts become meetings, market research, fund-raising and a trip to head office. For Joanna Meiseles, a fruitless search for a hairdresser that catered to her children became the latter. Now, as the owner of Snip-its Salon franchise, she offers some insights around sussing out a good franchise opportunity. We’ve taken some of her advice and coupled it with our own.
As an entrepreneur or business owner, it’s a good idea to rope in a finance expert to help you work through the maths upfront. For cost reasons, we recommend bringing on a part time financial director – someone with the strategic understanding you need who doesn’t come coupled with a full time salary. These thoughts are given with that assumption in mind.
- Determine the (estimated) return on investment. Upfront, your part time financial director will need to get a feel for the anticipated ROI. “This is the key factor — without a proven and strong economic model, there is no point in going any further,” says Meiseles. It differs from one industry to the next, but generally, business owners will be looking for a 15% ROI. If you’re outlaying R500 000, that means you should expect to receive at least R75 000 in profits by the end of the second or third year. “Also, keep in mind that a franchisee has to pay royalties, so that [money] is harder to come by for a franchisee than it is for a non-franchised business,” says Meiseles. Your franchisor will have historical figures to offer, but it’s a good idea to run your own evaluations.
- Make sure the base model has been tested. Advice website for franchise owners, FranChoice.com, makes this point: “Before New York Broadway producers bring a production on the road, they’ll test it in a few smaller cities to see if the humor or pathos translates well to different audiences. After all, not every town sees life in the same way as New Yorkers. A similar comparison could be made with franchised businesses. A concept that does extremely well in one location may not have the same appeal in a different part of the country.”
Meiseles’s opinion mirrors this. Great success in one unit is not enough to guarantee success in another. She recommends that franchisors test the concept in at least three different locations. In every instance, your part time financial director should estimate ROI, margins and how long they think the company will take to start bringing in a profit.
- Have a realistic idea of your access to capital. Your head office will provide you with a certain leg-up to get the ball rolling. But just because your start up is somewhat less capital-intensive than others, don’t underestimate the amount of money you’ll need. Have your part time financial director determine approximate costs for legal fees, marketing fees and setting up inventory and computer systems. Then, enlist your part time financial director in making a strong case (through a business plan and investor marketing material) to raise the capital needed.
- Explore what it will mean to be in a 10-year relationship with your franchisor. “Franchising is really all about relationships, and most franchise agreements are 10 years in length, so you should be sure you are committed to long-term relationships — both good and bad,” says Meiseles. As a business owner, start out by making sure you have things working well internally. The part time financial director who gives you advice upfront should ultimately be the person who sticks with you for the duration of the agreement, and whose insight grows along with the franchise. Do you work together well enough for this to be the case? After this, consider your collective relationship with the franchisor. Not only will you need the resolve to stay steady in that relationship despite all difficulties, your part time financial director will need to be able to do the same.
If you’re looking for a part time financial director who can help you make the right call about franchising options and establish relationships that will last throughout the period, contact The Finance Team. Our finance executives can assist you on a part-time, interim or ongoing basis depending on your needs.
“I can’t hear myself think!” We’re all familiar with the phrase. Some have heard it shouted by exasperated school teachers; others heard their mothers say it on occasion, and some might have heard ourselves repeating it recently to our own children! It’s usually said in a classroom or home environment, followed by an appeal by the drained individual for some peace and quiet. But the phrase is just as applicable in the business world, and ‘not being able to hear yourself think’ has a very real impact on the effectiveness of business leaders and strategists. Unlike in other environments, though, the ‘noise’ intruding one a business leader’s effectiveness is not caused by raised voices or loud juvenile games. It’s often triggered by being over-burdened with tasks, fatigue brought on by working long hours, and the misdirected notion that you need to do everything yourself rather than outsourcing responsibilities to free up your own creative energy.
Distinguishing between effectiveness and efficiency
A business-owner contributor on Forbes points out that there’s a difference between effectiveness and efficiency. “If you complete each task on your to-do list with a high degree of efficiency but haven’t generated the results you want, you are not being effective,” he writes. “Are the tasks you are completing making your day as productive as possible? Many people spend their days being busy without first pausing to evaluate which tasks will give the highest return on their time and which tasks are nonessential. Peter Drucker said, ‘Efficiency is doing things right; effectiveness is doing the right things.’ Choose the right things — the things that reap the highest return on every hour — and delegate or eliminate the nonessentials.”
The things that will reap the highest return for your company are those things that require you to “hear yourself think”. They don’t involve responding to a long list of emails, or even overseeing important operational details. They involve you thinking big, figuring out what your company’s goals are and constantly re-evaluating and realigning those. If you don’t have the time to strategise because your head is filled with the ‘noise’ of calculating and tracking budgets, monitoring spend and chasing up on invoices, it’s time to consider the sage advice of delegation. It’s not that those responsibilities aren’t important – they are, in fact, essential. It’s just that they don’t have to be carried out by you. Enter the project accountant.
A body to give you head space
A project accountant is a finance professional with the experience and skill set to oversee a particular project. They can come in as a second pair of hands during a busy period, oversee a particular assignment from start to end, or can act as a “roving” financial assistant, lending skills and expertise wherever they are needed in the business. The mandate of a project accountant is to plan, monitor and control all of the financial aspects of their assignment. They’ll do the stressing when you’re overshooting budget, they’ll make the unpleasant phone calls when payments are coming in late and they’ll help you know which employees to clamp down on for overspending. In short, a project accountant is there to help you shoulder the important money-related aspects of your projects and give you more room and time to think.
Hackney Council in the UK, when looking for a project accountant described some of the role as follows: “As project accountant you will help us meet our statutory and internal financial responsibilities. You will provide strategic financial advice to our directorates and support a range of management processes. This is a broad role and one that will mean the individual getting involved in all aspects of Council responsibilities. The role needs a candidate that can quickly grasp the requirements of each project, articulate a plan and get individuals together to deliver.” A well-trained project accountant will fulfill all of these functions, and in so doing will support the strategic goals of the business.
If you need some help ‘hearing yourself think’, contact The Finance Team. We’ll connect you with our network qualified, experienced project accountants. One of them can provide assistance as and when needed, helping relieve some of the burdens of your position and allowing you the creative space to really think.
The small business guide to search engine optimisation and Google Adwords with Emma Wilson from PolkaDot Digital.
Image credit: CliffCentral.com
Exactly one year ago, markets were in a flurry as the rand reached and exceeded R11 to the US dollar. As usual, analysts rushed to predict where the trajectory was headed. In retrospect, we can say with confidence that those who predicted a downhill slope were the accurate ones.
The rand hovered a little below R11 for a brief moment, hitting its strongest point at R10.43. But the strength was short lived: the currency began a steady downward trajectory from that point onwards. Earlier this month, it hit R13.90 and analysts began to scratch their brows about the implication of the new possibility of R14 to the dollar.
Of course, while an overly weak currency does not spell out much good for the economy, the news means different things for different people – and different companies. Take a quick look below at a few key terms that explain what a weaker rand might mean for your cash flow if your business trades internationally.
It makes sense to start off with a definition of foreign exchange exposure. This is the formal term that refers to the potential for loss or gain due to a change in the exchange rate. In their book ‘Financial management’, authors Carlos Correia, David Flynn, Enrico Uliana and Michael Wormald explain further.
If your company owns a foreign subsidiary whose assets and liabilities are stated in terms of the foreign currency, then you will feel the effects of foreign exchange exposure, they write. If you purchased goods from a foreign supplier on credit and might still have to settle payment, your company will also feel the effects. Obviously, depending on how the exchange rate changes, your firm will also lose or gain on its foreign exchange exposure. Different kinds of exposure have different implications for cash flow. We explain three below.
The authors define this term as “the effect that a change in the exchange rate will have on the recorded accounting results of a company”. Companies with subsidiaries on foreign soil will need to translate the income of their foreign branches into the local currency while preparing consolidated financial results. Because translation exposure does not affect the amount of money flowing into or out of the foreign-based subsidiary, it does not affect cash flow. As such, some refer to this it as “accounting exposure” – the theoretical loss or gain of the company should its income all be translated into one currency. In other words, this won’t affect the day-to-day running of your business, but it will look either good or bad on the books.
Investopedia defines transaction exposure as “the risk, faced by companies involved in international trade, that currency exchange rates will change after the companies have already entered into financial obligations.” For example, your jewellery store places an order of diamonds from Canada. Payment for the diamonds is due on delivery of the goods, but your firm bills clients on the current costs of the diamonds. The diamonds arrive three weeks later. During that time, the rand has depreciated against the Canadian dollar by 20%.
“Such exposure to fluctuating exchange rates can lead to major losses for firms,” notes Investopedia.
The first place this is going to hit you is your cash flow. You budgeted on spending X amount on the goods; now, because of exchange rates, you are actually having to spend X plus 20%. The implication of this is that companies involved in international trade need to allow for a higher level of cash flow, especially in times of uncertainty. Your cash flow will ultimately need to absorb the uncertainty in the market faced by your business.
Economic exposure is the catch-all phrase referring to how your company will weather ‘economically’ as it is exposed to currency changes. It is “the risk that a company’s cash flow, foreign investments, and earnings may suffer as a result of fluctuating foreign currency exchange rates,” says investing.com. For South African companies that import products or services as part of their offering, this has borne itself in losses over the past year or two. For exporters and those in the local tourism industry, though, this has meant a boost to cash flow and overall earnings. While the former companies are having to rein in spending and be extra strategic about their management of cash flow, the latter can look for new smart investment opportunities and ways to maximise on their additional incomes.
Whether your firm’s cash flow has become tighter thanks to rand exchange fluctuations or whether you’re seeing extra waves of income, you need somebody with insight to help you make the right decisions during this time of uncertainty. Contact The Finance Team to find out how a qualified finance executive can assist in guiding your company on an interim or part time basis.
Image credit © Charlieaja | Dreamstime.com
A business owner who has started outsourcing financial management recently remarked: “Once I’ve spent an hour with my financial manager, it feels like I’ve spent an hour with a therapist!”
Her comment got us thinking about just how far the analogy might carry. It led to this Huffington Post article, which outlines four ways that all people – even happy ones – can benefit from regular therapy. It turns out there are more than just a few parallels. We’ve drawn from the same points made in the article to show how having a financial manager can actually serve a similar function to having a ‘therapist’ in the business world.
Outsourcing financial management can help you handle problems or stressors, even if they aren’t life-altering or traumatic.
Emotionally, if you’ve had a bad day, week or month, there are tangible health benefits from talking through the stressors that triggered this. “Talking with a professional allows you to get a sense of how you appear to other people, helps you get feedback on whatever you’re feeling and offers insight on how those emotions are affecting your everyday life,” the Huffington Post reported.
In the business world, a trusted financial executive can provide the same thing. Talking to an experienced, qualified financial manager about what went wrong in your business that month and why, can help you not only recognise where your mistakes were but help you better plan your next moves. And chatting through upcoming plans for your business can help you gain a non-partial perspective about their viability. This person provide feedback on your intentions, taking into account the financial and risk implications, and help you recognise whether that hunch was something that should be acted upon, or perhaps dismissed in favour of another with longer-term benefits.
Outsourcing financial management can help your business find purpose
Have you ever felt like you’re lost in the humdrum of daily operations? Have you lost “your way”; your bigger picture, the thing you are striving for as a company? Outsourcing financial management can help you get it back – or define it in the first place. Your financial manager has the insight that comes with years of experience and the perspective that comes with looking from the outside in.
Outsourcing financial management can help you remain accountable to your goals
As a business owner, you’re surrounded all day by employees who rely on you for their salary. As such, they have a vested interest in staying on your good side. All too often, for the owner of an SMME, this can translate into being surrounded by yes-men. When you decide to deviate from a plan that was sweated over, proven and agreed-upon, there might be no one willing to call you out on it.
But as a business owner, that’s exactly what you need. You might need someone to point out that moving into that new swish office space will take away from the income that you had earmarked for expansion. Or someone to remind you that it’s not the best idea to compete in a space where there are three existing similar products. Someone to remind you of the goals you set for the business, and why. Outsourcing financial management will provide you with a person who can do just that. They’re an independent voice of reason there to help keep your eye on the goal post.
A finance professional can help you dissect a problem, then figure out how to solve it
Can’t determine why sales have been down the last three quarters? Wondering why your margins are lower than they were historically? Outsourcing financial management can help you get answers to these questions. You know every detail about your company, they are trained to understand the environment and the interplay between operational decisions and their financial impact.
If you could do with a little therapy in your week, consider outsourcing financial management. The Finance Team’s qualified, experienced associates can provide you with a trusted listening ear and a perspective that could be vital to the health of your business, so give us a call.
Director of M-Pull, Daryn Smith joins the regular Cliff Central panel to discuss “The future of Social Media Marketing”. M-Pull is a B2B marketing agency focused on attracting new qualified sales leads and converting them into customers for their clients that target companies in Africa. They provide the strategy, content, lead generation and lead nurturing, as well as the know-how to get the most out of a client’s marketing investment.