You can own and operate a community-based cause with heart, or you can be working towards an entrepreneurial vision of grandeur. Whatever end of the business scale you sit, if revenue targets aren’t firstly being met and secondly, consistently growing, there’s little hope for you to achieve your wider mission.

What is a subscription business model?

Subscription business models, also known as automation of revenue, refers to the use of software designed to replace manual payment processes with an automated payment system that requires little human intervention to achieve results.

Customer details are entered into a system and a secure payment gateway means that payment for regular service or a subscription is taken automatically and deposited into your account.

Customer correspondence is branded, targeted and leads to a seamless experience for both the customer and the business.

The overarching objective of subscription business models is to drive reliability and predictability of revenue whilst increasing efficiencies for modern businesses. Offering real-time reporting facilities gives financial visibility that will contribute to supporting and sustaining future growth and development for the business.

Moving away from tried and tested manual processes and towards an automation of revenue system may be met with reluctance by business owners. The initial outlay of cost and resources to adopt new procedures can often be enough for a busy business to put this move off until tomorrow which, as we all know, may never come.

Advantages of subscription business models

If you’re considering joining the ‘Subscription Economy’ (more on how subscriptions are disrupting traditional business models here) there are a number of advantages that can potentially lead to the future growth of your modern business.

1. Automation of internal processes

Depending on the volume of proposals you’re drafting each day, week, and month, you can reduce manual systems down to one entry.

Ideally, every business should look for ways to automate the collection of sales as much as possible by exploring subscriptions or a membership model with upfront billing.

From proposal to payment, an automation of revenue system can take care of everything. Once you’ve had your first customer meeting, there’ll be no labour-intensive systems or manual input from staff. Simply update the customer details and let the system do the rest from generating invoices through to collection of funds from the customer.

Creating manual invoices, entering data customer by customer and sending receipts can all take time and human resources that can be better spent building a business. Revenue automation does it all for you!

2. Integration with existing systems

Revenue automation programs feed directly into accounting and CRM systems to give a holistic view of financial ‘real time’ data across all areas of the business and keep customer records updated.

3. Improved cash flow

Perhaps most significant, is the better access to healthy cash flow that automation of revenue provides. With a consistent flow of money deposited automatically made easy by platforms like Practice Ignition, you can create realistic budgets and eliminate the ‘dry spell’ that results from lack of regular income.

4. Improved visibility for customers

Customers on the other side of automated revenue systems know exactly what they’re paying each month with no nasty surprises. This creates a seamless customer experience which strengthens relationships.

5. Predictability of revenue

Primary KPIs become monthly recurring revenue (MRR) which can be easily tracked by management. If staff members aren’t meeting targets, the evidence is readily visible by data and appropriate action can be taken. Being able to set realistic targets based on access to guaranteed regular income as a result of increased customer retention, is a crucial driver that allows businesses to adopt complex plans for growth.

6. Increase the value of the business

With a predictable revenue stream, the business becomes much more valuable to someone looking to purchase a profitable entity. Trends in past and current figures will help create realistic budgetary forecasts that can aid a potential purchaser in their decision making process.

Disadvantages of subscription business models

If you’re looking to sustain or grow a profitable business, there are very few disadvantages to adopting an automation of revenue system – but there are some points to consider.

1. Customer service may suffer

If a payment is already ‘banked’, it’s easy for businesses to focus their attention on those clients whose money isn’t guaranteed. Lack of attention to existing customers who are already signed up may harm any upsell opportunities or potential to grow their commitment to your business.

Indeed pursuing growth as a singular strategy can crush businesses and maintaining a high level of service is crucial. As the authors of this article in HBR explain:

An industry-wide pivot towards customer value-oriented business strategies may be the key to… keeping the subscription business industry booming.

2. Transition period

As with all new programs, there’s a potentially disruptive transition period during the implementation of revenue automation. During this time, accounting procedures must be duplicated to ensure efficiency which can create extra work for principal accounting staff.

Who is automated revenue for?

Automated revenue is traditionally used by businesses with membership or subscription fees such as gyms or magazines but any business providing a recurring service can make use of automated revenue through subscription business models. Ezidebit suggests consumers are certainly willing to pay via direct debit when this option is made available.

Any business providing services on a recurring and frequent basis can transfer to automation of revenue including the following:

• Doctors, dentists, chiropractors, physiotherapists, acupuncturists, massage therapists and beauticians who may offer a regular treatment program;
• Accountants, lawyers and IT service providers who can offer an inclusive monthly service for businesses;
• Charities wanting to encourage regular direct debit donations;
• Consultants who work on retainers and provide services to clients on a recurring basis;
• Sporting clubs with regular membership fees; and
• E-commerce retailers providing goods regularly such as Dollar Shave Club.

The list above is by no means exhaustive and opportunities exist within almost every industry to adopt a subscription based revenue model.

A practical example of automation of revenue is software providers who offer their product on a monthly subscription model. Suppliers such as Microsoft and Adobe sell virtually all software through a subscription model so businesses can predict their cash flow and remove the need for customers to manually upgrade to the latest version. See further examples of subscription model examples in this article.

Simplifying systems means that all customers are virtually guaranteed to continue with a seamless product always having access to the latest version and the businesses can predict their cash flow with ease.

Software available

If you’re considering subscription business models, we have worked with clients who have implemented systems using the following platforms but there are many different providers in the marketplace to suit every need:

• Ezidebit for gyms and personal trainers.
• Practice Ignition for accountants, lawyers, bookkeepers, architects, engineers, graphic designers and website developers.
• Stripe for e-commerce

Moving to an automation of revenue system is one of the most effective practices a business can implement to help increase revenue and drive growth.

For examples of businesses we’ve worked with who have successfully implemented revenue automation, or to find out if your business could benefit, book a consultation today.

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Xero has changed the game for small businesses by creating cloud accounting software that’s both simple and smart. The combination of cloud accounting software with an ecosystem of over 600 add-ons means businesses can create a sophisticated, robust and streamlined system that is incredibly easy to use and integrates with all aspects of their business to provide real time information.

Quite simply, in a rapidly changing marketplace this timely information can be the difference between running a business profitably or not.

Benefits of being a Xero Certified Advisor

Maddock’s Accounting & Advisory is proud to be a Xero Certified Advisor. This certification means you can be certain that we have the very best cloud accounting knowledge and experience to get your business setup on Xero easily. As a Xero Certified Advisor, we’re in the best position to provide you with the training and support necessary to use the cloud accounting software and maximise efficiency within your business at a fraction of the cost of more sophisticated stand-alone systems.

We believe that not only is it important to have the skills and expertise necessary to advise clients on the best cloud accounting systems they should use but we “walk the walk” by using Xero and specific add-ons in our business.

All of this means that we’re able to serve our clients quicker and more efficiently than ever before and you can be certain that we’re able to make sure that you’re getting the most value out of Xero by automating tasks wherever possible and reducing the time it takes for administration tasks (up to 10 hours per week in some circumstances).

Growing our cloud accounting experience and expertise

We’re able to utilise our relationship with Xero to continue to be at the forefront of updates to the cloud accounting software. As a Xero Partner we have an obligation to undergo ongoing training which means that our expertise will continually develop so we’re able to add value to your business and the systems you use to manage it all.

The ever-growing number of add-ons can make it difficult for businesses to identify which (if any) add-ons are most beneficial. Xero offers the unique benefit of being able streamline your business with hundreds of tools that integrate seamlessly with Xero – from payroll to point-of-sale to inventory. We continually invest time and resources learning about, testing and working with add-on vendors for the benefit of our clients and their cloud accounting systems. Attending conferences and events throughout the year enables us to connect and collaborate with add-on partners to remain at the forefront trends and developments in the cloud accounting industry.

The future

As a firm focused on helping small businesses grow, we see cloud accounting and real time financial information as a key to achieving this success. Contact us at Maddock’s Accounting & Advisory to find out how you can transform your business with Xero.

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How often should I do a budget?

We believe that every business should always have a 3-year budget to ensure as the business owner you can see whether the business model is able to operate profitably. While business owners will have different views over the what profit they seek to achieve and whether that represents a suitable return on their investment, a profit is necessary in any event to ensure that the business can pay the suppliers and staff that are required to operate.

Why is a budget so important?

When a budget is prepared, as the owner you are in a much better position to manage and grow your business. A budget that spans a 3 year period also identifies important considerations for the owner as the business grows that may require actions to be taken in advance to maximise the likelihood of success.

This process enables the owner to clearly understand what is required to achieve success, set deadlines for critical tasks and delegate responsibilities to staff to move the business forward. It also acts as a management tool to empower employees to operate within clearly defined constraints as well as managing employee performance against set objectives and key performance indicators (KPI’s).

For instance, a manufacturer has developed and introduced a new product to the market that is proving to be extremely successful. The owner believes the product sales will continue to grow but the manufacturing plant has a limited capacity that will be exceeded in 2 years if sales continue to grow. Knowing this in advance will enable the owner to identify whether they can afford to possibly expand the existing manufacturing facility or build a new facility. Alternatively, the budget may show that the business cannot afford either of those options and the owner may need to consider obtaining a loan to fund the expansion or look at outsourcing the manufacturing to another party.

How often is a budget updated?

A budget is a living document that should be used frequently to track whether you are tracking to achieve the objectives set. By referring to the budget frequently, business owners can identify areas where the business is off track and take the steps necessary to make corrections.

Without going through the process of continually monitoring the business performance against the budget on a regular basis, you are leaving everything to chance. In our experience successful businesses don’t happen by luck, they are the result of well executed plans.

Where to next?

If you want to know how you can make your business successful, our accounting services are tailored to helping you achieve that goal. We can help you put a budget in place, project the financial performance of the business and help you monitor and manage the performance of the business along the way. To discuss how our accounting services can help you build an exceptional business, get in touch with our experienced team here.

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To begin, the value of any business is determined by the future profits that you expect to receive in the future. Critical to this are two important aspects:

1. The business performs in line with your expectations after you have made the acquisition; and
2. There are no issues arising from the past that result in unexpected cash outflows or costs.

Developing a clear understanding of both aspects is paramount to determining the value of any business and whether the investment in the business is a sound decision whilst mitigating the risks of any unforeseen issues that can lead to losses in the future.

Future performance

It’s important to ensure that the investment delivers an appropriate return when buying a business. While the rates of return on investments vary widely across different industries, an important consideration for any prospective business purchase is whether the business will be able to continue to deliver a favourable return into the future. To put this another way, will the business make profits in the future that justify the price being paid to acquire the business? If the performance of the business fails to meet expectations, then the money may be better of invested in other businesses or asset classes.

Key to this is the ability to accurately forecast the future performance of the business. A fatal fall in many business purchases is simply relying on the vendors projections and/or historical results without conducting any form of analysis or verification to ensure that the projections are a reliable indication of the performance in the future. When looking at the projections for any business, it’s important to consider a range of factors such as:

• Nature and timing of revenue streams
• Contracts with key customers
• Reliance on key customers, what is the customer base
• Competitive forces and industry trends
• Sales trends and seasonal forces
• Potential for disruption
• Gross margins
• Relationships with suppliers
• Benchmarking to industry norms
• Staff levels and mix
• Analysis of fixed and variable costs
• Inventory levels and turnover
• Level of involvement in the business by the current owner/s
• Remaining life and condition of existing plant and equipment
• Bad debts and current debtors
• Warranties and refunds

The items listed above are just a sample of the things that need to be considered when forecasting the future performance and the list is not exhaustive and will vary from business to business. Correctly identifying and understanding the key factors that will determine the success of any business is imperative and requires the skills of a qualified accountant. Failing to identify and understand a single factor can determine the success or failure of purchasing a business.

As an example, Kerry wishes to sell his plumbing business to Charles. Over the last 3 years, the business has made profits of $100,000, $115,000 and $125,000 respectively and Kerry is projecting that the business will make a profit of $130,000 in the next year. The historical results match the profits shown in the tax returns that Kerry has provided so Charles decides to purchase the business without undertaking any further due diligence. Immediately after purchasing the business, Charles realises that 80% of the sales are made to the government under a contract that ends in 3 months’ time. Once the contract ends, Charles will be required to submit a tender as part of a competitive tender process if he wishes to win that contract back again for another 3 year period. There is no guarantee that Charles will win the tender plus he doesn’t have any experience with the tender process, so he may need to engage with specialists to assist him along the way which could be an added expense he didn’t plan on incurring.

In this example, Charles failed to identify that a significant portion of the income for the business came from a single government contract. Having a single customer like the government contract leads to the risk of over reliance on a single source of income and creates a big problem should have customer leave or in this case the contract ceases. An matter such as this would have been identified during due diligence and steps could have been taken to mitigate the associated risks (i.e. negotiating a reduced purchase price or making some of the consideration paid contingent upon the contract being successfully renewed).

Clearly understanding the current business operations and the impact of that on the future performance of the business is critical. It’s not uncommon for vendors to overestimate the likely performance of the business in the future and/or not disclose important information about the business unless specifically asked by the purchaser.

Past issues

When purchasing a share of an existing business or purchasing a business entirely by acquiring it’s critically important to know and understand that you’re also purchasing the history and all the associated “baggage” of the business for the better or worse. In some instances, people can use this to their benefit. For example, a business may have carried forward losses that the new owners believe can be utilised by turning the business around and making profits in the future. On the flip side, unforeseen issues can arise from the conduct of the previous owners that can come back to significantly hurt the new business owners and in extreme cases, cripple the business to the point of failure.

To use a practical and simplistic example, Samantha is interested in purchasing a 50% share in a business that Katherine owns. The business is consistently making a profit after tax of $100,000 p.a. and Samantha believes that the business will continue to make those same profits into the future. Businesses in this industry are typically valued at 3-3.5 times their earnings so that would mean that the whole business is worth around $300,000 to $350,000. However, Katherine has offered to sell 50% of the business to Samantha for $200,000 which consequently values the whole business at $400,000 (or a multiple of 4 times) which is higher than the industry average. Samantha believes that his new business partner has an edge over the competitors and the historical profits of the business lead Samantha to believe that paying a higher purchase price is justified. The premium that Samantha is paying to acquire his share is between $25,000 to $50,000. Samantha and Katherine agree that Katherine will continue to be responsible for managing and operating the business going forward.

In the first year after Samantha purchases his share, the business performs well and makes a profit of $100,000 so Samantha is happy that his new investment is performing well. However, in the second year Katherine has informed Samantha that the ATO has conducted an audit of the business and found that staff have not been paid superannuation for the last 3 years. As a result, the business is required to pay the unpaid superannuation owed to the employees, plus interest and penalties which totals $150,000. In addition, there will be an ongoing cost of $25,000 in superannuation payments each year which will reduce the profit expected each year to around $75,000.

The consequence of this is three-fold. Firstly, the business will make a loss of $50,000 in the second-year post acquisition and may require an injection of cash to pay that unpaid superannuation liability to the ATO. Secondly, the it’s likely that the competitive advantage that Samantha believed Katherine had wasn’t the result of any operational matters but rather due to under paying the employees. It’s highly probable that the valuation of the business has fallen back to industry norms both in terms of the multiple used to value the business plus the expected earnings in the future. The indicative valuation of the whole business has likely fallen to around $225,000 to $262,500 and Samantha’s share is worth between $112,500 and $131,250. Finally, the profit that Samantha will receive each year going forward has fallen from $50,000 p.a. to $37,500. To summarise, the loss for Samantha is:

• Loss of between $68,750 and $87,500 in the value of his investment (34% to 44% reduction); and
• Loss in recurring profits from the business of $12,500 p.a. (25% reduction).

The loss that Samantha has incurred is very significant in terms of the overall amount of money he has invested but also not unusual. Trusting that the previous owner/s have complied with all legal obligations and that they’ve disclosed all relevant information to the prospective purchaser is fraught with danger but an incredibly common occurrence. In this example, the loss was the result of only one past issue but frequently more that one issue may arise that compounds the losses even further. In the worst case, the issues maybe so significant that business is crippled and ceases to operate.

The importance of adequate due diligence

A comprehensive legal and financial due diligence process will cover many areas including, but not limited to understanding:

• Nature of the business being purchased
• The motivations of the person/s selling
• Contractual liabilities to creditors, employees, lenders and other parties
• Undisclosed liabilities
• Past and future financial performance and cash flows
• Current balance sheet position
• Working capital requirements
• Whether any investment is required in new stock is required
• Compliance with tax obligations including income tax, GST, FBT, payroll tax etc
• Lease obligations
• Ownership and valuation of buildings, plant and equipment
• Ownership and valuation of intangible assets such as patents and other intellectual property

Looking at buying a business?

Failure to conduct proper due diligence is the most common issue that we see that leads to costly issues for the new owners of the business. It’s critical that any prospective business owner engages with qualified accountants and solicitors who will work side-by-side with the client to guide them through the business acquisition process. Ensuring that due diligence is conducted thoroughly before the final decision to purchase the business is paramount. Doing this will reduce the risk of common mistakes being made and improve the likelihood that the business will succeed into the future.

We can help prospective business owners navigate through the process of buying a business, ensure that the risks associated with purchasing a business are managed and you don’t pay too much or make costly mistakes. To discuss how our accounting services can help you, get in touch with our experienced team here.

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Fraud is something that can be relatively easy to carry out, especially if internal controls are non-existent or lax. Internal controls are systems that are put in place within a business to help reduce errors, safeguard assets, ensure greater financial accuracy, keep better track of assets and liabilities, keep up-to-date with compliance, and reduce the risk of fraud.

Common instances of fraud include:
• False invoicing
• Transferring money by EFT to one’s own account
• Cheque fraud
• Payroll fraud
• Skimming/theft of cash

The risk of fraud occurring is compounded further when a business is going through a period of rapid growth and internal resources are stretched and attention is focused on different priorities. Whilst technology is assisting with reducing the risk of fraud and streamlining processes, it’s impossible to stop fraud without proper internal controls.
Ultimately, it’s up to each business owner to determine the level of risk they are willing to carry in the business, and to develop procedures and controls for reducing the potential and opportunity for fraud to occur. Maddock’s Accounting & Advisory can talk to you more about fraud prevention for your business and assist owners with managing these risks.

Contact the Maddock’s Accounting & Advisory team here to find out how we can help.

“Business pundits may be surprised to learn that the biggest financial frauds don’t just happen in big business or in high finance – they’re also happening in the suburbs. Small businesses are sustaining larger median fraud losses than their bigger brethren, according to the Association of Certified Fraud Examiners. There’s nothing new about the scams, except that technology has proved not to be the preventative control it was hoped it might be.

1. False invoicing – most popular with fraudsters is the payment to fictitious suppliers or making payments to valid suppliers but diverting them to the fraudster’s own account.

2. Transferring money by EFT to one’s own account – is on the increase in both small and large businesses as online banking technology is adopted.

3. Cheque fraud – this mostly incorporates writing cheques to cash, or overwriting cheques in the fraudster’s favour. The risk is heightened if the same person who writes cheques also completes bank reconciliations, which in small companies can often be the case.

4. Payroll fraud – especially if there is a poorly segregated, or larger base of between 70 and 100 employees. It’s easier for payments to go undetected if not properly scrutinised by someone other than payroll but with requisite knowledge of the payroll. Overpaying overtime is also a problem, especially in collusion with an employee.

5. Skimming/theft of cash. This happens in businesses with less formal receipting processes (the ability to receive cash without issuing a receipt), or where the receiver can manipulate the debtors’ ledger and apply other receipts to the cash transaction that was misappropriated (also known as lapping).”

See the original article here

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All businesses tend to have the same amount of exceptionally high performing employees as a percentage of their overall workforce (irrespective of their size or industry). However, the study found what differentiates the exceptionally productive businesses is how they go about allocating these star employees to teams within their organisation. The article identifies those organisations that group their star employees into teams specifically focused on the activities that are critical to success end up being the most successful and productive.

These teams are formed almost entirely of star employees (95%) can end up being 30 times more productive than the rest, with the same number of employees over a 10 year period. By specifically grouping the best employees into teams focused on the most critical tasks in the early 2000s, Apple was able to significantly outperform Microsoft who adopted more the more traditional approach of spreading the best employees into teams throughout the organisation.

Contact the Maddock’s Accounting & Advisory team here to find out how we can help.

See the original article here

Photo: Flickr user Roger Schultz PHOTO: FLICKR USER ROGER SCHULTZ

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When asked what innovation means to their business, most common responses to the survey were:

• Growth and success (49.8%)
• Improving existing products and services, building customer loyalty (44.9%)
• Streamlining process and reducing inefficient work processes (44.0%)

The survey concluded that it was clear that innovation is deeply entrenched in the culture and strategy of businesses that are striving for growth. With this in mind, businesses who fail to innovate will be rapidly left behind by their competitors who are constantly innovating to deliver better products to their customers and striving to become more efficient.

The report identified five practical tips for innovating on a budget that businesses of all sizes can embrace which are:
1. Return to ‘old school’ ways of doing business
2. Encourage creative ideas from everyone in the business
3. Use social media and word of mouth to advertise
4. Automate manual processes using software where possible
5. Facilitate staff training and education

A core principal at Maddock’s Accounting & Advisory is that we embrace innovation to continually improve our services but actively identify opportunities where innovation can be used for the benefit of all our clients. Our team has the capability to provide the strategic insight and guidance for businesses looking to innovate but specialises in advising clients on ways that they can automate manual processes.

Contact the Maddock’s Accounting & Advisory team here to find out how we can help.

See the original report here

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“The Reserve Bank, though, warned that its current estimate of the so-called neutral rate could rise back closer to previous levels, which were 1.5 percentage points higher prior to the global financial crisis.” (Source)

The timing of when interest rates may rise is not clear and dependent on many factors. However, the speed that interest rates rise could take some business owners by surprise if past experience is any guide:

“Like loosening episodes, tightening episodes appear to accumulate tactically but are in retrospect strategic. Nor are they necessarily gentle, or gradual. As governor, Ian Macfarlane took the rate from 4.75% in October 1999 to 6.25% in August the following year. Macfarlane and then his successor as Governor, Glenn Stevens, took only two years to move from 5.5% in April 2006 to 7.25%. Stevens later took just over a year to go from 3% in August 2009 to 4.75%.” (Source)

Should interest rates rise 1.5%-2.0%, that will mean that today’s standard secured small business overdraft rate of 7.3% will be closer to 10%. While the cost of borrowing money for businesses will obviously increase, Forbes has identified four key business issues that owners should be considering:

• Receivables – The cost of carrying credit for customers may increase. It may be time to reconsider the receivables pricing policy.
• Sales – How might a change in interest rates affect sales?
• Purchases –Consider whether it would be beneficial to change the purchasing strategy?
• Marketing – Consider how you can build this into your marketing plan.

Consequently, now is the time for astute business owners to start planning for how their business will operate in a higher interest rate environment. Maddock’s Accounting & Advisory can assist business owners with assessing the impact that higher interest rates may have on their business and take steps to ensure the business is able to continue to succeed as conditions change.

Contact the Maddock’s Accounting & Advisory team here to find out how we can help.

“The expected outcome is a general increase in interest rates. How much will they increase; will it have more effect on long or short term rates; and, how fast will it happen? All good questions, but ones without answers. Further, interest rates don’t work in a vacuum. Other economic and market conditions can offset the effect of an interest rate increase. All a business owner can do is seek good advice and begin to prepare for an increase in interest rates. An increase in interest rates can have a variety of business consequences that may affect your operations, including:

Receivables – Your cost of carrying credit for your customers may increase. It may be time to reconsider your receivables pricing policy.
Sales – How might a change in interest rates affect your sales? You may actually experience an increase in sales as customers try to access credit while it is still comparatively inexpensive. This may be particularly noticeable with capital purchases this year, as companies seek to access cheap credit AND utilize the current higher expensing rules under IRC 179. On the flip side, increased borrowing costs may cause a longer term slowing of purchases. More costs, less buying. This is an opportunity for you to consider a pricing strategy aimed at timing an anticipated change in rates.
Purchases – For the same reason your customers may change their buying habits, consider your own purchasing strategy. Is now the time to consider capital purchases or buying a large supply of goods needed for your manufacturing? Or, should you consider a cutback on purchases to reflect an anticipated dry spell in profits?
Marketing – The fact I’m being asked about interest rates is an indicator that this is an issue both on business owners’ and consumers’ minds. If you believe interest rates are on the rise, consider how you can build this into your marketing plan. Perhaps you should target customers who are most likely to be affected by this change. A “fire sale” approach for some; an easy credit approach for others.

There is no ready-mix approach to anticipating a change in interest rates. With all change though, it is likely to affect your business, so you might as well start planning for it now.”

See the original article here

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For a business, the advantages for establishing an advisory board include:

• Draw on the skills and knowledge of directors/advisors who have practical experience in growing a business
• Enhance the company’s reputation and credibility in the marketplace
• Increase consumer and investor confidence
• Attract superior employees by demonstrating a commitment to company growth
• Create a potential source of members for the ‘main’ board as the company grows
• Test the quality of “outsider” contributions to the business (for family companies)

The size and scope of the advisory board will differ for every business depending on the stage their growth. Each company will need to determine the roles and responsibilities of its advisory board to best suit its particular circumstances and needs. If your business is looking at establishing an advisory board, Maddock’s Accounting & Advisory can assist with establishing or sitting on an advisory board for your business.

Contact the Maddock’s Accounting & Advisory team here to find out how we can help.

“Benefits of an advisory board
• Draw on the skills and knowledge of directors/advisors who have practical experience in growing a business
• Enhance the company’s reputation and credibility in the marketplace
• Increase consumer and investor confidence
• Attract superior employees by demonstrating a commitment to company growth
• Create a potential source of members for the ‘main’ board as the company grows
• Test the quality of “outsider” contributions to the business (for family companies)

Advisory boards augment your core competencies. As a small-business owner, you may not have the deepest experience in every needed space. Setting policies surrounding details such as record-keeping, financial analysis, recruiting and retention … your performance on all these tasks can benefit from highly focused professionals in exactly those spaces.
Experienced board members help you to avoid old mistakes. As you guide your small business from startup to its midlife, building a boardroom of professionals who’ve already faced similar problems to the ones you’re going to encounter can save you professional heartache when it comes to how you tackle growth challenges.

Your board is a simplification tool. Faced with a business predicament, you’re likely working on the problem with all your emotional and professional concerns fully in play. A trusted coterie of advisors can help force you to simplify complications. Just explaining the business challenge to your board can create the kind of breakthrough in which the answer becomes apparent to everyone.”

See the original articles here and here

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The majority of companies in Australia are SME’s which often view corporate governance with scepticism. Good governance in this context is not primarily concerned with compliance with formal rules and regulations. Rather it is about establishing a framework of company processes and attitudes that add value to the business, help build its reputation and ensure its long-term continuity and success. If you’re looking to grow your business, established systems and processes will ensure that your growth occurs smoothly and that important decisions are made in minimal time.

A good structure will allow you to ensure that the start-up of your business occurs smoothly, with minimal confusion about responsibilities. As this can have many flow-on benefits to your business, it’s worthwhile considering how to implement a corporate governance structure best suited to your business.

At Maddock’s Accounting & Advisory, we bring our skills and experience from working for public companies to SME’s and can assist these companies with implementing corporate governance best practices. We believe that any aspiring business with ambitions of high growth can benefit from discussing the ways that corporate governance can be utilised to help them achieve their goals.

Contact the Maddock’s Accounting & Advisory team here to find out how we can help.

“Why governance is important to your business:

1. Business Growth: There is a strong link between governance and the bottom line. Good governance practices encourages growth in the following ways:
• Increased business performance: good advice, be it from advisors or a well structured board, contributes to the performance of the business and thereby increases the value of the company by: developing better strategy, advising and mentoring the owner or management, and providing the business with vital contacts or resources.
• Raising Capital: a good track record of governance practices can be critical for attracting investment. Practicing good governance provides confidence to investors, financial institutions and venture capitalists.
• Financial Control: managing your company’s finances, including cash flow and debt management are critical factors for a growing company.
• Accountability: the separation of management from control fosters accountability and is in the best interests of the company.
• Building relationships: a strong track record of fair and transparent governance can also attract and retain good customers, suppliers, employees, etc.
• Competitive Advantage: good governance practices help build sustainable competitive advantage and can give your company an ‘edge’.

2. Performance Management: Building a strong foundation from a ‘people perspective’ and setting up the appropriate mechanisms to monitor and manage performance – particularly senior managers – ensures the owner/director’s strategic intent is effectively translated into practice.

3. Risk Management: Understanding, assessing the risks to your business and building strategies to mitigate those risks is core to good governance. Failure to identify and mitigate risk can have a significant legal and financial impact to your business. For example, a risk may be ‘maintaining the status quo’ when the company needs to evolve, invest and grow to prosper, even in the medium term.

4. Compliance: Your company must comply with the rules and regulations required of a business registered under the Corporations Act (2001). Practicing good governance will ensure you have adequate processes in place to comply with all legal and accounting requirements, and that you have an understanding of your legal and financial obligations as a business owner/director.”

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