Download the article
No Match Found
By Jade Dixon, Outsourced CFO Leader, Tim Hall, Partner - PwC Private Tax and Mark Allsop, Partner - Private Consulting
Based on our experience working alongside leaders in private businesses across Australia, three core fundamentals consistently enhance value while keeping day-to-day business operations in peak condition.
Whether your business is just starting out, or growing, or preparing for sale – these fundamentals can give you the confidence to control, adapt and thrive. We’ll look at each of these in turn:
In every private business we’ve ever encountered, hardworking CFOs and senior leaders are pulled in multiple directions. Understandably, many struggle to invest time in strategy and planning. But without this, a business cannot reap the full benefit of all their hard work.
Business strategy is a set of choices regarding what the business can achieve, and what the business will (and won’t) do next. Strategy helps senior management and CFOs understand the financial implications of those choices too.
Being able to articulate business strategy is vital. It gives funders, acquirers, and investors the confidence that management and business owners know what's driving the business. And it gives private businesses an element of control, especially in an uncertain environment.
Commonly, private businesses struggle with strategy during growth spurts, or when growth plateaus. Both these stages offer huge opportunities, providing that CFOs and senior management make time to reset and consider where they’re headed next. Sometimes, they may have ideas for their next strategy but they lack the process to define and articulate it. A good place to start is to ask questions such as:
For private businesses and their finance teams, a common challenge is productivity. In particular: knowing which indicators will provide meaningful insights and enhance growth. There’s an array of data available, and finding the right data gives a business the agility to make strategic decisions in a timely fashion.
Besides internal data, finance teams also need to consider what's happening in the market at a macro level. And increasingly, KPIs need to switch from being just lag indicators to include lead indicators as well.
Every business has a different set of drivers and KPIs which evolve over time. To identify relevant KPIs, measure them, capture meaningful data, and allow leaders to make choices on where they need to pivot – the fundamentals must be right in the finance function first.
This requires a focus on process, technology, and people:
Initial questions for CFOs and senior management to ask include:
Working capital is another area that growing businesses sometimes overlook. Yet the ability to measure and optimise working capital can deliver genuine dollar value and tangible outcomes.
The biggest pain point for CFOs and business leaders in working capital is optimisation. We often suggest that the most cost-effective, low risk way of generating value to your business is to capitalise on the easy wins, such as optimising your collection and payment cycles.
Being able to forecast shortfalls and cash flow is where working capital management really comes into its own. It can ensure you avoid having excess cash sitting idle on your balance sheet, and it can help ensure you have reserves in place if you ever run short.
To start improving working capital management, CFOs can ask themselves:
Wherever you are on your business journey, we can help you master these three business fundamentals. To find out more, visit our Private Business Life Cycle hub.
For a more detailed discussion, please get in touch with your PwC advisor or contact: