Secantor | Finance Director | Part Time FD

Ultimately a business’s financial performance is determined by its future cash flows. However in any individual period (be it a month, quarter or year) cash generation and profit can be very different. Quite quickly in the development of a business the focus turns to profit to assess performance, but cash remains the life and blood of the business, without which it will fail.

It is absolutely critical that a business trades within its financing facilities, be that an overdraft, or invoice discounting/invoice factory facility. If facilities are breached, without prior communication to the funder, it might lead to a loss of confidence from the funder leading to future restriction on lending. Ironically, one of the reasons that might give cause to facilities being breached is the success of a business through increasing sales.

Controlling Cashflow

Sales and profits are important for every enterprise, but cash is king. Understanding the cashflow dynamics of the business - why and when cash flows in and out – are critical to ensuring that management teams are in control of the finances of their businesses and not the other way round.

Secantor will:

Provide a regular snapshot of the cashflow position of the business, including inflows and outflows and how these relate to any debts being carried.

Drawing on this understanding, develop predictive models and presenting a short term forecast of the cash and bank position. This enables tactical decisions and actions to be taken to avoid breaching overdraft facilities or to smooth out peaks and troughs.

Undertake longer term planning to identify more strategic initiatives on the cash and financing position of the business, such as new funding to support growth, refinancing of existing debts, or preparation for exit.

These additional capabilities allow management teams to pursue their business goals, and avoid the stress and anxiety associated with cashflow fire-fighting.

Building Profit and Value

Building profit and value is about being clear of your goals and ambitions, understanding what it is that is going to set your business apart from the crowd, and having realistic short and long term plans for success. It also needs to be about effective systems and processes, getting value for money from suppliers, and effective working capital management.

People are critical. The highest cost is often payroll and often the success of a business is down to whether its people are correctly focussed, motivated and rewarded.

The Glass Ceiling Syndrome

Often businesses grow, but then reach a “glass ceiling”. That is to say, that the management style that was adopted by an owner/manager in the initial phase of a businesses development has become the drag on its future growth. There are two key failings of owner managers that might be symptomatic of hitting the “glass ceiling”. Firstly, they may believe that no one can perform tasks as effectively as they can, and they end up trying to do too much, with just not enough hours in the day to sustain growth; or secondly, they might abbrogate responsibility for certain key areas that fail because the owner/manager has not been effective in delegation. The importance of talent attraction and talent management cannot be over emphasised and it is so often a reason as to why good businesses do not sustain growth.

Planning & Control

Why is planning so important? To achieve your goals and ambitions the business needs to have a coherent plan that pulls together the resources of the business to meet the demand for its products or services. The plan will be based around key assumptions for the business. However, as much as possible should be researched in order to reduce the amount of subjectivity in the plan. Our business experts are not just financially qualified they also have several years of commercial experience in growing businesses, and are therefore ideally placed to challenge assumptions that might be used for the plan. What does planning achieve? Assuming that a business has demand for its products and services then a business is limited by its resources. Growth will be constrained by the limiting factor which is likely to change over time and might include funding, floor space, personnel, etc. What planning achieves is focus on the optimum mix of resources to take advantage of demand. A continuous monitoring of plan to actual is an important tool for owner/managers to control the business which will become more complex as it grows.

Strategic Thinking

Secantor has considerable experience in M&A work and particularly helping owner/managers “groom” their businesses for an eventual sale. Our people help owner/managers to focus on the factors that drive value for a business and help position the business for an eventual buyer. Given that many businesses are sold on a multiple of profit, it is clearly important to build a increasing trend of profitability. However, the multiple is extremely important and our experienced people can help position the business to justify higher multiples.

Cost Saving

Most of the foregoing has addressed value through growth in profitability. However, in difficult times the demand is often not there to fuel growth and for many businesses it is a question of focussing on survival. This is all about reducing costs and conserving cash. Our people can help with working capital management, business re-structuring, cost cutting and process improvements. People costs are often a significant percentage of overall costs and Secantor HR services can help with performance related pay or retrenchments. During these times we can help with stakeholder management through effective communication and reliable and timely reporting. This helps build confidence in the management team to ensure that they get the required support from bankers, shareholders and suppliers.

Secantor has critical mass to enable it to benchmark businesses costs in particular sectors and to review whether a business is getting value from its supply chain.