My guest today is Mark Nicholls, Founder of the Tectona Partnership. He is a chartered accountant meets civil engineer. Mark successfully managed a team of over 100 at Business Link.Co-founder of Tectona in 2012 providing an insightful and cost-effective alternative to a full time CFO.
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Joining Robin Waite on the Fearless Business podcast is Mark Nicholls, a chartered accountant meets civil engineer who managed a team of over 100 at Business Link and is now the co-founder of financial management company Tectona Partnership. He chatted with Robin about all things business finance.
At the heart of Tectona’s work is providing an insightful and cost-effective alternative to full-time CFOs and FDs. What are they though and what do they do?
CFO stands for Chief Financial Officer and FD stands for Financial Director. The business will not succeed without having proper management information, therefore the first thing a CFO does is ensure that the management information is producing the right things. In other words, you need to identify what you should know about your business and make informed decisions about any next steps. You use your past results to inform your future decisions. For a small business, this could be three to six months, for a larger company, it should be something you review every month or even more frequently than that. The CFO’s job includes making sure the right processes and controls are in place in order to do this. Part of the role also involves being able to manage and motivate a team and have good people skills, which is vital for any FD.
For small businesses, it can be tempting to think that focusing on the numbers and looking at reports is not for you. By ignoring them though, it can create problems down the line. The pandemic has brought to light issues that businesses are facing. Without that regular planning and monitoring, it is hard to steer your business in the right direction. Often action is taken, but too late and it is difficult to recover as a result.
Since the pandemic started, you even see big corporations bringing in the administrators after a couple of weeks of disruption. This is an indication that there were other problems already within the business, but they only reach the public eye if a large business collapses. Depending on the company, contingency plans can only last a short time due to the overheads using up all the cash. If there are no alternative income streams coming in, a business is going to struggle.
Despite the unpredictable nature of the pandemic, we are constantly hoping to come out of it. As businesses reopen and less restrictions exist, this means businesses will face some pinch points before coming out the other side. Planning is harder and you have to be more prudent. Things to bear in mind include furlough ending, repayments of loans and bills and VAT deferments. As a result, businesses are likely to see cash flow shortages. Rather than not doing anything and then having a last minute panic and rushing to get loans to cover the costs, take action now and plan ahead.
Is it simply a case of stockpiling as much cash as possible? Mark says that naturally business with more cash reserves will be in a better place, but it goes further than that. Looking after your business and its finances includes managing your costs properly, particularly overhead costs. Profit margin is key and often it is large overheads which see businesses go under.
Cash flow is not usually the issue. Money goes in and out. What you want to do is make more money and keep it there. This means you want to keep costs down and know where you are spending your money. More importantly, if you do spend money, do you see a return on investment?
Whenever you want to invest in something or on the other end of the spectrum, something is going wrong and you need to consider why that is, scenario planning can really help and is something that Mark and Tectona Partnership can help with. You know your business and what you want to do. From this, Mark and his team create a model or plan out scenarios based on what you are currently doing in your business. They can help you identify key levers in your business such as increasing your prices, reducing sales costs, and chase up debts quickly. You can then see what impact pulling those levers make and how much you need to pull them to create a business which makes sense. The financial structure of your business should be one of the first things you focus on before thinking about growth or other areas such as sales and marketing.
Want to find out more about business finances and Mark’s work at Tectona? Listen to the full podcast episode now.
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