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catastrophe

The Real Costs of Catastrophe

A CFO’s job is to protect the value of the company, and one of the biggest potential threats that a company can face is the sudden disruption caused by a catastrophe, such as fire, flood, earthquake or cyber-attack. While parts of these losses are insured, there is still a good amount of loss that is not. And even though many are aware of the potential risk, we rarely think to put in the numbers and run the data.

For example, if there was a flood- 

There could be a loss of revenue if the office is unsafe for employees or the on-site server that hosts your website is damaged. Don’t take these losses lightly as they can destroy an entire enterprise. A proactive measure against this type of threat may be storing your data offsite or in the cloud.

Quantify uninsured loss before a catastrophe hits

While it may seem cost-prohibitive to make improvements to your strategy when you have insurance coverage, remember to take into consideration these three things:

  1. Customer loss. An extended disruption could prompt even loyal customers to seek-out other vendors, resulting in a loss in the enterprise value.
  2. Stunted growth. Even if the company rebounded to its prior growth rate, it will have missed out on the growth period during the disruption. 
  3. Lost investor confidence. Major disruption is considered elevated risk, and that elevated risk makes investors nervous.

Each of the above-uninsured losses has a monetary value that affects your bottom line.

After calculating the numbers, you may find that the upgrades needed to protect the company are much more affordable than you thought.  

Protecting the company’s uninsured value is just as important as the insured content. Unfortunately, many companies don’t realize this until after a disaster has struck. As a CFO it is important to be on the outlook for any threats that insurance won’t cover.

For more tips about safeguarding your company’s assets, check out: Combating Data Breaches.

EBITDA

Driving EBITDA Quickly, Post Acquisition

While most private equity acquisitions are relatively straightforward, things are seldom as painless as they seem. The hard part is trying to leverage the synergies between companies during the investment strategy roll-out.  After laying the groundwork for a successful post-acquisition integration and enterprise resource management implementation, the next step is to drive the Earnings Before Interest, Taxes, Depreciation and Amortization (EBITDA) growth as quickly as possible. To ensure that your EBITDA strategy delivers the effectiveness and the market advantages that your investors are expecting, focus on the following concepts to help you through the process:

Automate Manual Processes

If you want to grow your business in the next few years, you may find that sustaining certain human-intensive methods are illogical.  Instead, automate manual processes with an Enterprise Resource Planning system (ERP). Automating workflows can reduce the administrative overhead, saving you money that you can apply elsewhere. Start by determining how and why certain processes emerged. Once you understand the “how and why,” it will be easier to utilize the ERP’s automated workflow capabilities.

Integrate Systems for Efficiency

As businesses grow, they often acquire independent point solutions for different methods, including sales, warehouse management, financial management, and e-commerce. Some of these systems may be held together by employees moving data from one system to another and fixing errors manually.  By integrating with an ERP, you can be much more efficient. Initial integrations should be focused on the high volume or manually intensive operations due to the high cost and complexity.

Overview

Most companies that fail to meet their objectives during an ERP implementation, have not sufficiently set the stage for integration. By carefully planning the ERP implementation with focus and direction, you can be far more successful. 

For more information about DLC’s Post Merger Financial Integration services, click here.

cost control measure

Cost Control Measure Business Tips

It’s no secret that cost control is a critical component of the operation of any successful company. However, implementing those measures can be challenging. The best thing any finance team can do is focus in on the key areas that influence company spending. Here are a few critical areas that will impact overhead expenditure the most. If you get a cost control measure strategy ironed out early on, your company is more likely to thrive in any economic climate.

Cost Control Measure #1: Use Cloud Computing

With cloud computing, you only pay for the resources that you use. Meaning, there is no cost for underutilization because you don’t pay for what you aren’t using.  Rather, your cost is based on gigabytes, processing power and storage space expended.  So, it is no surprise that many businesses have found leveraging cloud services instead of purchasing their own servers to be beneficial. With cloud services, management, maintenance, and operating costs wrapped into one monthly fee and, paying for the processing power used instead of a server’s capacity, money will be saved in the long run.

Cost Control Measure #2: Hire the Right Employees

The hiring process is likely one of the most critical areas for maintaining cost control. A bad hire is expensive and can detract from the overall goal of the company. Recruiting, interviewing, and thoroughly vetting new hires should be done so in a systematic way. According to recent research, managers spend more than 10 hours per week coaching underperforming employees. That is a significant portion of the workweek where productivity isn’t at its best. Not to mention, a bad hire can influence company morale and impact the bottom line across the board.

Cost Control Measure #3: Build Quality Relationships with Suppliers

In order to control costs, you must stay on top of your expenses. The best way to do this is to maintain a good relationship with your suppliers. This means paying your invoices on time every time and working through any kinks as early as possible. Not only will this save you money by not paying any late fees, but it will strengthen your relationship with the supplier. This type of bond will be necessary when it comes time to negotiate contracts. If your company is easy to work with, it is more likely that the supplier will offer you a better rate to keep working with you. 

You may also enjoy, Cost Control Tips for Business

cost control

Cost Control Tips for Business

Want to boost your bottom line? Think cost control, whether it’s hiring, technology or supplier contracts, it impacts your profits. It could also determine the long-term success of your company. 

Cost control may be one of the most complex aspects of operating a business.  However, implementing a solid cost control strategy will help you keep your company’s performance strong in varying economic environments.

Approach Cost Control Positively

It’s best to approach the subject of cost control in an enthusiastic manner. Cutting your budget can often have a negative impact on company morale but try to look for the good in the budget cut. For instance, cutting the budget in one area may free up enough spending to implement new equipment, technology, or other resources that the company and employees desperately need.

Evaluate Necessary Spending

There are some costs that are completely unavoidable but should be accounted for. An example of such spending includes technology and staff. These are the costs that you know you will incur regularly, so you must move them to the top of the list.

Negotiate Your Vendor Contracts

Periodically, let your vendors know you are price shopping.  Many vendors have loyalty programs and may be able to cut your costs in order to keep you.  If you are leasing, evaluate your lease contract.  If the market is soft,  negotiate a lower rent.

Rely on Expertise

Don’t try to improve cost control on your own! There are experts who can help guide you in the right direction. You can obtain quick access to valuable cost saving information by hiring a financial analyst to review your situation and make recommendations.

Consider Interim or “GAP” Professionals

Hiring an interim consultant helps keep current employees from becoming overwhelmed when there is a temporary spike in workload.  Additionally, by working with consultants on a project basis, companies can quickly access subject matter experts as needed, without the expense of hiring a new full-time employee.

Artificial Intelligence – Technology

Artificial intelligence (AI) is accurately automating complex and repetitive tasks, reducing operating costs and increasing efficiency.  By taking on the repetitive tasks, AI allows employees to spend valuable time on more important aspects of the business.

Go Green

CFL and LED lights use 75 percent less energy than incandescent bulbs. Businesses can save thousands of dollars by using these eco-friendly technologies.

Motion sensitive switches or switches with timers can turn off lights when nobody is in the room, avoiding the wasting of electricity. 

Overview

Cost control may not be the most exciting aspect of running a company, but it is crucial to the long-term health of your company.  

mistakes

4 Mistakes Growing Companies Must Stop Making

Growth is often the fruit of hard work; however, when a company grows without a strategy, it can become a pain point for the business. During growth, the company must be flexible and make transitions to keep up with the transformation. Failure to do so could mean the end of the business. Here are a few mistakes that fast-growing companies need to stop making if they want to continue to thrive:

Mistake #1 Borrowing too much money

Just because you can borrow a lot of money, doesn’t mean that you should. Take the time to thoroughly evaluate your entire business. Make sure that there is a equitable purpose for each dollar that you borrow.

Mistake #2 Not having a financial team

Before you make any financial decisions, you should consult a professional. An accounting and finance professional will be able to break down the numbers of your business and provide the proper guidance that you need to make the most informed choices. You might, consider hiring a consultant until you are ready to add a full-time financial expert as part of your regular team.

Mistake #3 Spending too much money

Just because business is good right now, doesn’t mean that will always be the case. Most businesses have lean times, so you should make sure that you’re keeping back enough capital to help you navigate those leaner times. Until you know that your business can handle heavy spending, be money conscious about each and every purchase.

Mistake #4 Hiring “bargains” instead of “experts”

One of the biggest challenges for growing companies is the urgency they feel to hire when demand for their products or services suddenly increases. This urgency can lead to mistakes when stringing together a bigger team quickly. Some hire employees based on their pay grade rather than their expertise, which can cost more in the end.  Hiring bargain staff might allow you to get twice as many employees, but if those employees don’t have the skills or motivation required to hit their targets it could cost you more in the long-run.  Remember, you get what you pay for.

Fast growth does not guarantee longevity. If your business is starting to grow, don’t stop aggressively nurturing it until it forms solid roots.

succession planning

Succession Planning: Considerations

It likely comes as no surprise that 62% of family businesses are passed on to the next generation. However, you may be shocked to learn that only 18% are done with proper succession planning. Lack of succession planning can adversely affect the success of the company.

The Most Difficult Transition

The most difficult transition for a business is when it is passed between the first and second generation. The reason is most likely because this type of transition has never occurred for the business, so each challenge will be new. Because the business has had the same leadership until this point, there will need to be considerations for the new vision and leadership style going forward. You can smooth the transition by doing the following:

  • Create a family vision
  • Prepare for challenges
  • Create a transition plan

Second to Third Generation Transition

This scenario is likely easier than the first one described. The reason is that now the business can rely on the previous experience to help them through the process. Still, there will need to be some care given to how this particular transition will take place. In order to make sure that the succession goes as planned, you should prepare for the following:

  • Create a family employment policy
  • Create a board of directors
  • Prepare for following generations 
  • Fine tune the succession plan

Succession Planning Overview

Succession is a pretty common occurrence among family business owners. However, care should be given to ensure that the transition is smooth and doesn’t cause negative disruption to the operation. Failure to complete proper planning could mean issues for the business and even cause family strife.

It’s important to remember that this process is lengthy and may require considerable amount of time before it is completed. Consider the bigger picture when making changes to the company during this time, and ensure that you remain true to the company and the family’s vision.

For more business planning advice, check out Forecasting: Optimizing Business Planning.

forecasting

Forecasting: Optimizing Business Planning

Forecasting tools influence how quickly and efficiently companies are able to uncover insights that can influence their productivity. In today’s financial world, the sheer amount of data produced is impressive. However, with that large amount of data, it can be difficult to distinguish which insights are the most influential.

In years past, corporations relied heavily on antiquated analytics in order to create strategies and make important decisions. However, new forecasting tools are allowing companies to focus on advanced analytics to make determinations about customers, data, and markets.

Why Forecasting Matters

The intent is to generate more meaningful insights from a larger portion of data. The truth is, with so much data at play, it can be easy to overlook valuable information. Unfortunately, missed information could mean a missed opportunity, as far as the development of the company is concerned. 

Essentially, searching for valuable data without forecasting could be very much like searching for a needle in a haystack. It simplifies that and allows companies to focus only on the most meaningful data that has a real impact on the present and future of the business.

Forecasting makes it possible to understand how a company may evolve over time. This could lend itself to creating better customer interactions or even developing a new product. The idea here is that it allows companies to see into the future with actual evidence in the form of the proven analytics.

Overview

The ability to quickly answer questions, perceive risks and evaluate company performance can be advantageous in a number of fields. Finance may be the industry that leads the way for others to catch on to the benefits of effective forecasting.

To find out about DLC’s Forecasting Model Creation and other services, click here.