Kundun Consulting

I spend a lot of time putting together the financial reporting for a business. We look at the requirements of the business and then try to put together the reports that will drive the business forward.

A new client will basically be expecting me to put together the reports that I think they need. But the reality is that until I start the recording and reporting process I do not understand the business and so I am not in the best position to be putting together the reports that your business needs.

What I am capable of though is assisting you to understand the key drivers of your business and to assist the development of the reporting process.

Of course I can help with the basic financial information, and I can also help many of my new clients put together some industry specific reporting and KPI establishment that will help you reach quality decisions. But YOU will the one that puts together the actual list of requirements.

You know your business best and you know what you need to see periodically to best assist you to make decisions that will positively assist your business. I want you to drive the development of the report as this gives you the greatest opportunity to understand what you need to know about your business.

And here is the key - the financial reports MUST also include non financial data.

Let me pick a business where I have some insight to provide a practical example.

I have extensive experience in the real estate Industry. I will put together the financial reports that show your sales, property management returns, balance sheet etc. However I will also get you looking at your market share and competitor analysis. I will have you looking at the number of listings attained, versus the number of appraisals versus the number of additions to your database.

These non-financial KPI’s are as critical to the business as the amount of money in the bank, but too often they are ignored and not even reported upon.

So please even if you only have one single part to play in the structure of your financial reporting please ensure that it relates to defining the key sets of information that will allow you to manage and drive your business.

If you utilise the services of a contractor then you have a responsibility to manage that relationship as much as you manage any employee. Managing your bookkeeper is no different to managing the receptionist. you need to establish what needs to be completed and make sure that performance is measured and feedback communicated.

I have a great client ho has a very competent bookkeeper who knows exactly what needs to be done - but who doesn’t necessarily do it within the time required to allow me to produce the information that is required to manage the business properly. Undoubtedly they are milking the relationship to make sure that they reap the hourly rewards that come with selling time.

And this my friends is the real issue.

I do not believe that any professional services firm or contractor should be selling time - they should be selling results - i.e. provide value.

Now lets be realistic here. Obviously time is what is relevant to doing the hourly rate calculation, however the fees should be managed by virtue of what the expected tasks are and what they mean to the business. This will ultimately see you pay for the delivery of results - not whether someone has spent 8 or 10 or 12 hours completing the tasks.

To do this you need to set up an agreement which lists the tasks that the bookkeeper is expected to complete. They will then provide an estimated number of hours to do those tasks, and thus you have now created a pre-defined level of expectations on both yours and the bookkeepers part.

Now the work that is performed sometimes runs over time. This is the nature of accounting - if it was all that simple then everyone would do it, so of course where the bookkeeper works more than estimated then this should be paid for - but there must be accountability around why this has happened.

When I establish a bookkeeping relationship I create a list of the tasks that are required. We agree on a rate and then I hold the bookkeeper accountable to deliver what has been agreed. There is no excuse around not having the time - just do it. I then however will review the work completed and the hours spent and make an assessment around quality, time taken and time quoted. When all of these factors move too far from where the initial agreement was then I make changes accordingly and eventually the bookkeeper understands that they must deliver what has been agreed.

To ease the issue I will always agree to pay a rate that is somewhere around 1 to 3 hours more than they had estimated. This way when a task goes over the allotted time it is something that the bookkeeper is aware is covered by an extra fee and additional charges are not warranted. I also do not accept that the bookkeeper simply worked extra hours. They must show why they had to and if the reason was not a company/client driven reason then I make sure that the bookkeeper is aware that the additional charges are not acceptable.

After a month or so we have a great working relationship and the bookkeeper in fact values the work. I get the tasks completed well and on time and am able to add the value that I need to my client.

The rule is to set the expectations early and then manage it tightly and make sure that the requirements are delivered as required. Then you will all have a great partnership - rather than a master-servent union.

Photo credits here

Real Estate gets a bad rap sometimes so I thought that I would spend a few minutes and run through some of the lessons that can be learnt from them.

Good real estate operators are the masters of excellent communication. The best operators will “touch” you at least 8 to 10 times a year. They call a touch point anything from an email, letter, postcard, newsletter or a call - and everything in between. They work on developing a trusted relationship that allows everyone to feel comfortable with the process that one day they hope will happen- i.e. you sell your house.

The reason, although I do not necessarily subscribe to the theory, that they all drive expensive vehicles is to portray to you that they are successful. You want to sell your home with someone who is successful - not fighting for the next dollar. You can learn a lesson here by ensuring that even if things are tough you portray that you are successful. People want to do business where they feel success lies. So use every opportunity to portray that the next sale is warmly appreciated but life changing.

Very good operators will involve a team in their dealings with you which is  usually a mixture between experience and male w and female,  so that they cover as many possible alternatives as they can. The point here is that you should not just be relying upon one person to deliver the customer experience. Everyone from your receptionist to yourself should be ensuring that they are delivering an experience that they are proud of and that helps to make your clients your greatest asset.

They will also ensure that every piece of literature that is produced is proof read and that all photography is performed by someone that is a professional. Never just throw something out there. Make sure that you are producing the best quality documentation, reports, newsletter’s, invoices - whatever - so that the client gets to believe that you do only quality work or sell quality products.

And finally every real estate agent that I have met wants to be liked. They will perform customer service back flips to make sure that you the customer are happy. Not all get it right , but the best really make you feel that they have done the very best job that they can do. Your customer experience proposition will directly effect your revenue - never doubt that. Make sure that you are giving the best service that you are able - and go to extraordinary lengths to ensure that EVERY customer experiences it.

Real estate agents, whilst they get paid very well, do a lot of work for no return. Many people are “tyre kickers” simply trying to get information for free - i.e. how much is my house worth. Please don’t offer them sympathy but please do take on board that if you want to be successful sometimes you have to work bloody hard without there always being the promise of a payoff.

So sometimes you can look at a group of people who don’t have the best “rep” in the world and take something that can be valuable and use it to produce a great benefit to the way that your business operates. I am always looking at ways that a business differentiates themselves form the opposition and I am always looking at how I am treated in my dealings so that I may one day “poach” that behaviour. As an example I have previously recruited a receptionist for a c lient from the local bakery. I went in there simply to but a salad roll and ended up walking out with a coffee and loaf of bread for later simply because Jennifer asked me trhe right questions. She took it upon herslef to not just be an order taker and I suggested to a cloient that they meet. The rest is history as she is now the Customer Service Manager for the company and really making a difference.

Always look for opportunities and think outside the square.

One of the most widely held fallacies amongst business owners is that the financial reports that they prepare are for their eyes only and as such they can easily hide their own personal expenses in the P&L and have no long term issue.

Let me break that myth straight up.!

Your financial reports are the window to the financial health of your business.

Granted they are predominately there to allow you to run your business but the truth is that over the course of a year many different stakeholders review your financials - for many different purposes. Lets have a look at some of the stakeholders.

⇒ Employees

Your employees will come across your financial statements at some time - be very sure of that. I do not care how careful you are, someone will leave something lying around and it will be found.

You might send an email incorrectly, or it may be someone who is authorised to view the information, such as your bookkeeper, but be sure they will be seen.

Now whilst your employees are not looking to see how much money you are making they want to know that you are secure. In these times of virtually full employment it is very important that you get this right.

I strongly advocate with all of my clients that they share some of the higher level details with their people. Sales or revenue figures and break even positions are good starting points. You will be amazed at how your expense management becomes easier when your staff know how much it costs to run your business
⇒ Your bank or lender.

I once had a client who wanted to borrow $1m but did not want to give his financial information to the prospective lenders. thankfully logic prevailed and after sharing the information with a select few lenders the financing was arranged.

These guys are not that financially literate, but have a select number of tools at their disposal to ensure that they can assess the financial viability of your business. Do not try to hide things as they will find them.

⇒ The Tax Man
He is someone who will look through things with a fine tooth comb. Every expense item that goes through your tax return needs to be fully alligned to the expenses involved in running your business. He is a very strict person and does not take too kindly to deception.

My advice to all of my clients is always the same: If you are paying tax then this is a good thing - it means that you are making money!

Clearly however it is not in your interest to pay more than your fair share of tax. As such if you ever are going to enter into a complex transaction then you must get advice BEFOREHAND to ensure that it is structured in the best possible way.

⇒ Prospective Purchasers.
This is the group that you should most fear and most love at the same time!

If you are a business that is having success and the market knows about it then you WILL have suitors. This is the group that will most likely challenge the way that you do things and really highlight the things that you are doing badly, with the obvious goal of driving the value of their potential purchase down.

But this is where financial reporting comes to the fore.

When I introduce my financial reporting regime into a new client I instil a belief that we should be producing reports as if we could be purchased at any time. This means that even if your operate the business as your personal life, you should quarantining those transactions to allow you to easily highlight what would not be ‘normal” transactions.

My belief is that your reporting should be produced at all times with this focus in mind - but it doesn’t matter really as long as there is a focus/audience to what you are trying to understand.

Which brings me to the real point. Please do not think that you will meet these requirements unless you get assistance and the right advice. Following on from my previous discussions around bookkeepers, this really is not a job for them. They are capable of entering data but the real work that you accountant will do will be to ensure the robustness of your reporting - and the accuracy.

So don’t skimp - pay for what you need!

I have had the pleasure - and displeasure - of operating as a franchisee, as a franchisor and as an advisor to both. In my experience the value of a franchise system is warranted and often successful - basically it is a good system.

However, sometimes I come across a bad situation and it highlights why so many people are against the franchise system - full stop.

I recently received a referral from a client I really enjoy assisting. My client had a friend wanting advice on how to make their franchise work. They had recently entered into a franchise agreement and were struggling to make the business work. The promises from the franchisor and the information provided and requested was very limited.

My new client had joined a very well known real estate group and what is often normal practice in these matters signed every document that was put in front of him. Two of those forms happened to be ones that had him advise the franchisor that he had received legal and accounting advice. In fact on signing the franchise agreement there was, unusually, a clause in the agreement that stated he had in fact received this advice.

As stupid as he now felt, he had not received that advice and accordingly he was now at the point of financial ruin.

Luckily for my new client the franchisor had recently had a number of internal executive shuffles and as a result the franchisor had in fact allowed him to sign his franchise agreement only 9 days after receiving the formal disclosure document - instead of the required 14. This rendered the franchise agreement un-enforceable and my new client was able to extricate himself from the agreement with no penalty - although with considerable cost and emotional baggage under his belt..

Please, if you are going to start any business get the right advice and make sure it meets your business needs. You must prepare financial reports that seek to establish the budget requirements of your business and you must ensure that the legal requirements that you need to meet are all in place. Never rely on the information provided by a franchisor. Always do your own research and ensure that the you can comfortably understand what you need to do to make the business work.

I get particularly frustrated with people who go into business without even the knowledge of what their estimated operating costs will be. Most businesses begin under-capitalised but that does not excuse putting your head in the sand and not even knowing what your fixed costs are. It may be a boring part of business but as you will quickly find out it will become something that you need to know about very quickly.

It always amazes how many businesses rush around trying to complete a year end or month end process. They rush from here to there trying to get orders into the system and deliveries out of the warehouse - which are all non-productive tasks - just to see better figures in that month or year.

It really is important that you stop doing this. Why? Well that is relatively simple.

Your business does not run on how much you made in a particular period. Accounting periods are simply a line in the sand to allow us to value a set of transactions. They are not there to drive your business except in a few relevant ways that need to be at the forefront of your mind.

1. Get your invoices out to your clients/customers as quickly as possible - but definitely before month end. They will get paid more quickly - refer here for a detailed explanation.

2. Wait until at least the end of day one to ensure all your direct deposits have been entered into your accounting system. This allows you to catch any payments that were made but just failed to catch the bank processing time. Your statements will be more accurate and your clients will certainly benefit from the greater accuracy.

3. Close off your accounts quickly after the end of month of year so that there is no unnecessary hold up to the production of your financial reports. The process is about giving you information and the sooner that you close the quicker the reports will be available - and the quicker that you will be able to manage your business.

The end of period process is about giving you the tools to manage your business. It represents but a snapshot in time so that you are able to measure what has occurred. Please don’t use it to bolster your ego - in the end you are just cheating yourself.

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First of all I owe you all an apology. The site has certainly stalled over the last few weeks as I struggle through the critically time dependant life of an accountant/consultant.

I will guarantee that from here I am committing to a minimum of 3 posts each week.

I though that it would be opportune to run through a couple of updates about previous blogs.

• I posted a blog a few months ago regarding Brownies Place. If you take the opportunity to review the post you will see that it was primarily about the way that a very small business used its strengths to its advantage. Well Brownie did what all great entrepreneurs have done - and took the pay-day that was delivered to him by a competitor. A much larger cafe decided that it would rather have him out of the market and purchased his business. Good luck Brownie - I will miss the coffee

• If you have not considered your budget for 2009 then get onto it - time is getting away from you.

• The business planning series will start again next week.

• This is a great time to consider exactly who you should be trusting to deal with the financial administration of your business. If you need more than a bookkeeper but are struggling to justify the cost of a permanent professional CFO then why not consider an organisation that I am involved with at the moment. The Part Time Professionals network really makes accessing highly skilled finance professionals on your terms - simple. Why not browse and see what they have to offer. www.ptprofessionals.com.au

Yaaay for tax time - I love it - not!

Really, I promise this is not as hard a task as you would imagine. 

Starting your business plan firstly involves you allocating time. To get as much value as possible out of the process you need to allow the right amount of time and work in the right place so that you can think. To be really successful you should involve at least one other person, but preferably a few otters, whose job it is to challenge your thinking.

The steps are fairly simple:

1. Gather the required information.

2. Review your business.

3. Challenge what you do.

4. Challenge how you do it

5. Challenge why you do it.

6. Set some achievable goals.

7. Develop the various plans.

8. Prepare a budget.

9. Walk away, relax and come back and review and refine.

10. Use the plan as a tool to drive your business.

Stage 1

You cannot plan properly unless you have the information that allows you to assess each area of the business. 

You will need the following information to start:

• Your current financial position and performance.
• Your customer activity.
• If relevant your product performance.
• Your cash flow commitments. Your competitor’s activity.
• Your marketing strategy and performance.

This information will allow you to garnish a fair understanding of your current operations that can be used to work on the next 12 to 18 months.

A business plan needs to be focused so you need the information above that allows you to plan for the next 18 months - maximum. Any longer will diminish focus and any shorter restricts your ability to plan properly. I have found through my clients experience that 18 months is the right mix of strategy and focus. To that end you need information that will allow you to accurately predict performance over the next 18 months. Too little information about your competitors for example and you run the risk of making bad or dangerous assumptions. Not being aware of when a product will reach end of life, means that you will budget sales and purchases badly. 

Having this information handy will allow you to focus where the business needs to concentrate and will allow you to formulate well thought out plans.

Tomorrow we will look at the process in detail.

I get asked the same question a lot - “What is a strategic plan versus what is a business plan?’ 

So I thought that my first post in this series about business planning would be  to define the term. You can go and do a Google search and find some long winded definitions however I like to keep things simple.

A strategic plan is simply a process where you look at where you want to take your business over  an extended period of time and try to address the issues that will affect your ability to meet the goals that you have defined. Its goal is to focus your energies to establish processes, plans, budgets and operational refinements into a unified direction.

A business plan on the other hand is a document that looks at the present and in consideration of the strategic plan,  seeks to establish the operational processes, goals, targets and achievable objectives required to met the strategy.

A business plan must  look at the various business units of your business, in order to align them together. You will look at each area and will complete a focussed marketing plan,  financial budget,  SWOT analysis and you should address all key issues, personnel and resource issues that will need to be actioned in order to meet the goals set.

Business planning is often seen as too formal and long winded to be of any benefit , and is often only completed because “it feels right to do one.”  However if you invest the time to undertake a planning process then set it up correctly and you will reap the benefits. Most of all it is not set in concrete. It should be seen as the mechanism of managing the business and should be reviewed consistently throughout the journey to ensure that you have your business on track.  It is ever evolving and must change when your business changes, market conditions change, goals or milestones are missed or when you feel that you have lost direction and that the business plan is not helping focus attention.

Over the next week I will run through the process that I normally use to implement a business plan into my small business clients. At the end of the week I will provide a free template to everyone who registers and simply asks for a copy. 

Stay tuned.

Every morning I grab my start to the day from a Coffee shop that is fighting the big boys and winning.

The “shop” in question is literally no more than a hole in the wall. It would be 1.2m by 3.5 meters in total, and from here the owner, Steve, has forged a magnificent little business that competes and beats his much larger, more resourced competition.

How does he do it? He does it because of three reasons - that I can see.

First of all his product is the best that he can deliver - in fact that almost anyone can deliver. His passion for making coffee is, particularly when I am in a rush, a little bit obsessive - but you may never find a better coffee anywhere else in Melbourne. It is consistently the same product every time I get one - which makes me very happy as a self confessed coffee addict. If you are going to do something - then do it well.

Secondly he has great systems in place. His stock is delivered outside of the morning rush. I asked him how he did that and his answer was simple. He simply asked his supplier’s delivery drivers to make him last on their city run. Their reward - a free coffee and a chat about the state of world politics - all good!

In his very small space he manages to display and sell a limited range of sandwiches and other “healthy” alternatives to the competition around him. He manages to store all his required items within arms reach so that when he makes a coffee he has everything that he needs at his fingertips. There is no fluff, just the products that he can produce and sell at the highest possible margin.

But the real reason that he is so successful in my opinion is that he has created a genuine point of difference that his competitors just don’t see. His outlet is called Brownies and with each coffee he gives a small piece of chocolate brownie. It is no more than a small bite but it really is a point of difference. It is something extra that costs very little but which seems to bring people back and even forces them to wait in a line 10 deep for 5 or 10 minutes. I stood back and watched for 10 minutes the other day and his customers all immediately eat the piece of brownie - it works!

He chats merrily right through the customer experience and finishes off with “Have a great day.” It does not feel contrived but rather a real thank you from someone who understands that his customers are the critical component in his business - without them he doesn’t have a business.

It is often very easy for a business to fall into the trap of taking their customers for granted. How often have you brought on a new product line and tried to gain new customers for your business. How often has this been a really trying experience and one that was mildly successful or a failure? But how often have you started marketing your services or product offerings to your existing customers? How often do you contact your existing customers - personally - and make them understand how appreciative you are of their loyalty?

Getting new customers is costly and time consuming. It is a process that is often difficult to successfully complete and usually at a reduced margin because you have had to “beat” the opposition whose business you are trying to take. Your existing customer base is already there and looking to spend more with you. They are there ready, willing and able to be offered more by you.

So take a little piece of Brownie’s philosophy and look at what you can do to make your customers feel “loved”. Remember your goal is to get sales and it is easier selling to people who are already converted - rather than trying to convert those who are currently entrenched elsewhere.

And please give your customers an experience that meets and then exceeds expectations - never give them an excuse to try the new coffee place down the road!