How We Work

The process begins with the truth.

Establish the Truth

Before we decide what needs to change, we need to know exactly where the business stands.

That means more than producing a profit and loss statement or looking at the bank balance. We start by making sure the accounting records are current, reconciled and reliable enough to make decisions from.

We examine the Balance Sheet carefully. Bank accounts are reconciled. Debtors and creditors are reviewed so that old, incorrect or doubtful balances are identified. Loans and finance commitments are reconciled to schedules. Assets and depreciation are properly recorded. Taxation liabilities and employee entitlements are understood. Director loan accounts, drawings and money introduced into the business are identified and correctly reflected.

We want to understand who has funded the business, what the business really owns, what it really owes and what its true financial position is today.

Then we look at cash.

• Where is cash coming from? Where is it going?
• Is the underlying business actually producing cash?
• Are profits being converted into cash — or is the business becoming dependent on creditors, the ATO, directors or finance to keep operating?

Until we can, we are working with assumptions. Once we can, we have established the financial truth.

Build a Course of Action

Once we understand the true position, we can determine what needs to change.

The course of action is not built from a template. It develops from the financial and operational reality of the particular business.

Some issues require immediate attention. Others require changes over the next 30 days. Others become part of a broader 90-day course of action.

We look at the pressures revealed by the numbers and ask practical questions.

• Why isn’t profit becoming cash?
• Why are debtors taking so long to pay?
• Why are creditors increasing?
• Is the business pricing its work properly?
• Are jobs producing the margins expected?
• Is labour productive?
• Are finance costs consuming too much cash?
• Are director drawings or remuneration appropriate for what the business can afford?
• Are taxation and employee obligations being dealt with as they arise?
• What needs to happen for this business to become financially stronger?

The numbers can also lead us beyond the accounts. They may identify issues involving pricing, quoting, customers, staffing, productivity, capacity, sales, purchasing or the way the business is being managed. Where they do, we work through those issues with the director.

The result is a course of action based on what we know, rather than what we hope. Actions are identified. Responsibilities are agreed. Priorities are established. And wherever possible, we determine how the result will be measured.

The plan then has to become action.

Measure, Challenge and Correct

We do not prepare a plan and return months later to see whether it worked. We stay involved.

Once the financial information is reliable and the course of action has begun, that information becomes a management tool. We regularly review what is happening in the business.

• What happened to cash?
• What happened to debtors and creditors?
• What changed in the ATO position?
• Were employee entitlements and superannuation dealt with?
• Were the actions agreed at the previous review actually completed?
• Did the pricing change?
• Did the debtor pay?
• Did the expected margin appear?
• Did the business produce the cash we expected?

Where appropriate, we use weekly, monthly and quarterly information to look at the business from different perspectives. This can include banking, debtors, creditors, taxation accounts, financial statements, cash performance, profitability, Balance Sheet movements and other measures relevant to the particular business.

Then we challenge the results.

If something worked, we understand why and build on it. If it didn’t work, we don’t hide it. We examine why, correct the action where necessary and measure again.

That creates a continuous feedback loop:

Over time, something else begins to happen.

Actions that initially required constant attention start becoming habits. Financial information is looked at more frequently. Debtors are followed up. Tax obligations are recognised as they arise. Spending is questioned. Pricing is challenged. Decisions become more deliberate.

The process begins with a business under financial pressure.

The objective is to build a business that is better informed, more disciplined, more compliant, better controlled and ultimately more financially rewarding to own.