Judsons Blog

Tighter lending for SMEs

2009-10-29T15:58:00.003+10:00

There was an interesting article in the Australian Financial Review earlier this month - "Big banks put credit squeeze on small business" (Monday 19/10/2009). Matthew Drummond, the journalist for the AFR, writes as follows:
"Small and medium sized businesses are bearing the brunt of tighter credit, paying relatively higher interest rates and being shut out of obtaining working capital for new ventures despite the improving economic outlook.
Banks are charging smaller businesses almost double the margin that large businesses pay over the official cash rate, and well over double the margin charged to home borrowers.
... Finance brokers report that while banks are now more willing to discuss lending, few small businesses meet their criteria. Obtaining working capital for new businesses is virtually impossible, ..."
I've been discussing the same issue with many of the business bankers in Brisbane lately and the above seems pretty accurate. Notwithstanding the above, the bankers are telling me that there is still plenty of funding available for the SME sector. Unfortunately reaonably good deals at the SME level are being rejected because clients are not presenting their businesses opportunity in the best light.
Whereas credit used to be easy to get, nowadays any deal needs to be well constructed and documented in order to be taken seriously by the internal credit divisions of the major lenders.
The key to lending success in the current market seems to be based on good record keeping and realistic projections.
We would be happy to discuss any lending proposals that clients wish to present to their financiers. Should you wish to contact know more about our services please contact us on admin@judsons.com.au .

The language of accounting

2009-10-08T17:22:00.003+10:00

I went to an investment seminar last night in Brisbane. Unfortunately, I didn't get any stock tips or inside knowledge as to the next big thing but I did learn something.
The speaker at this function was using a lot of financial language in his speech. It was all about investments, portfolios, diversification, risk weighting, superannuation, etc. It was a session that was designed for advisors, mainly financial planners, who understood the language of investments.
But I thought what if someone from the general public was there. Would they understand what was being said? I doubt it. But I am sure that the advisors in that room would relay the same words from the session in their conversations to their clients. "John, your portfolio is not diversified enough. You need more investments with lower risk weighting in your superannuation fund. Blah, blah blah .."
I then thought, wouldn't it be great to have a financial advisor who could speak in the client's language rather than their own financial language. Someone who can relay their thoughts in an easily digestable form so the client is clear in what they need to do or at least have clarity as to their options and the likely impact of their choices.
As an accounting or business advisor, I then thought, but what about our accounting business. Do we talk in accounting language (profit and loss, balance sheets, etc) or the language of our clients (growth, cashflow, wealth protection)?
While we can talk in their language, we sometimes automatically talk in the language of accounting and assume our clients will understand what we are saying.
As a result I have vowed to try and talk in the language of our clients when I am with them - so they understand the advice I am providing and not assume that they understand the language of accounting.

The weekly meeting

2009-09-21T20:48:00.003+10:00

Verne Harnish, "the Growth Guy", was in Brisbane last week. For those of you who don't know Verne, he has created a business based around a set of tools that are invaluable for the running of a SME business. These tools are based around years of reading and studying successful businesses. For more information on Verne and his background check out www.gazelles.com.
In short, Verne has broken down business to being about 4 key decisions: People, Strategy, Execution and Cash. Now there's a lot to these 4 areas, but in short, most of the decisions you need to make about your business will fall under these 4 categories. After attending his seminar last week, we realised we were getting a little weak on our execution. We knew what we wanted to achieve and who was on board to help, but we lacked the will to regularly meet and keep things on track and check ourselves against our plans and goals.
The key routine that was missing for us was our planned weekly meeting. We still met and discussed the business on a daily basis but we weren't rounding off the week well to bring closure to some of our loose ends that had developed along the way.
What meeting are you missing out on that could make a difference to your business?

The First 60 Days!

2009-09-04T14:49:00.001+10:00

Today marks the 60th day we have been in business since opening our doors on Monday 6 July 2009! In that time, we have been implementing and refining our systems in order to deliver an accountancy service we are proud to put our name behind.
We have designed our procedures and processes to achieve best practice systems based on our combined years of experience in working in small, medium and Big 4 accounting practices. Now we have the systems in place, we are looking for more clients to help with their accounting and financial needs.

In summary, Judsons Financial Management Services is a boutique business services practice designed to meet the needs of the busy business owner.

We essentially focus on 3 core services for our clients:
1. Part time CFO or Financial Controller work;
2. Management Accounting and Business Improvement Services; and
3. Taxation Consulting.

While many accounting firms offer the same services as we do, here are some differences that may interest you in choosing or recommending our firm over others:

1. Fixed Fees – We agree with our clients up front on the cost of their services. After years of doing what we do we know what a job should cost and we can determine an amount for our services that we are prepared to stick to in order to provide the business owner with certainty as to their accounting fees. Our philosophy is that the business owner should not be surprised when they get their accounting bill. We are prepared to spread our fees over the year if that suits the particular business’s cash cycles.

2. Free phone calls – Because we don’t charge on a strict time cost basis, we don’t charge separately for phone calls in or out. This can cover simple things like simple MYOB queries, tax questions you may have and general catch up calls. If there is further advice that is required a separate fee arrangement can be made for that particular service. It’s like a variation to a building contract for a set sum. Again, like before, we will quote on the cost of the service before commencing any work.

3. Technology – The trend for most accounting practices is to do the accountancy work in the office and for clients to come to them. We like it the other way around. We use laptops and 3G connectivity to try to have our office travel with us. This means we can work with clients face to face to answer queries, cut down on delays with answering questions via emails and faxes and build up solid relationships with the people in your business.

These are just a few of the differences that we try to live by when looking after our clients affairs. I’m sure there are other differences that will exist between how we do things and other accountants.

Should you wish to consider a new accounting firm for your own business affairs or know of people and friends who are also looking for a more personalised accounting provider, we would be grateful if you could contact me or pass our contact details on to your friends. Our website has our contact details and more information for you to ponder should you wish to know more about us before making any decisions. http://www.judsons.com.au/.

Quick Tech Tip for iPhone users

2009-08-15T11:49:00.006+10:00

At Judsons, we're trying to use technology in our business as much as we can. As an example, we've recently purchased Turbo 21 cards for our laptops to be able to access the internet anywhere we can get 3G access. As a result, we can now look after our clients at our clients premises but with access and at similar speeds to our own computer network as if we were still in the office. Handy if our clients are unable to give us access to their networks!
Another one of our investments has been the purchase of iPhones. While some may argue they don't live up to the hype, we've found them invaluable in our business. Many of the applications for the iPhone work very well and intergrate seamlessly with each other.
In particular, the iPhone has a great feature that we would like to share with you. Say you want to find the phone number for a business you know the name of but are unsure as to its exact address or don't have their phone number. On the iPhone, there is a standard application called Maps. Again, as long as you know the name of the business you are seeking, in the top area you can enter the name of the business and then press search (bottom right). On the map it should show up the business and its location and you can choose that business by touching the blue arrow button to the right of the business name.
From there it should show up the phone number and address for the business. Even better is the ability to save the details to your contacts to keep forever so you don't have to look it up again. You can do this by simply pressing add to contacts in the bottom left of the screen. You can modify the contact details as you can any other contact in your iPhone.
A great feature that is just another way of doing business smarter in a tech world. Even if you don't have an iPhone is there something you can offer your customers that makes it easier to do business with you? Competitive advantage doesn't necessarily come from one big thing. It can be the little things that sway a customer to your business over others.

AFR article "SMEs not happy with their banks"

2009-08-01T15:14:00.003+10:00

Today's Australian Financial Review (August 1, 2009) features an article by Mark Fenton-Jones titled "SMEs not happy with their banks" (page 16). In the article, Fenton-Jones relates the findings of Researchers East & Partners who published a survey this week claiming the SME sector's overall satisfaction with their banks continues to fall. The purported reason for the drop is the cost and availability of debt.
In response to this drop, the article highlights the banks' moves of employing more relationship managers in the SME market. Head of market analysis at East & Partners, Robert Morgan, says "Relationship managers are by far SME's most preferred method of bank interaction".
This is hardly surprising. It is my own experience from discussions with business owners in this area that relationships with all suppliers are key. As such, accounting firms need to ensure that they remain close to their clients and engage in relationship building both in good and bad times. I believe the days of the highly leveraged model for accounting firms are nearing an end. Leaner firms with less clients but with capacity to spend more time with these clients will enable the build of stronger relationships. This will ultimately be to the benefit of the business owner and the accountant in the long term.

Structural Improvements Article

2009-07-23T21:05:00.003+10:00

Structural Improvements Article by Josh Hyatt, CFO Magazine (US), June 2009

(Ian Judson - a good article about the trends for pricing professional services)

"Why professional services fees are getting easier to understand — and cheaper".

Next time you're hiring a professional services provider, your key question might not be "How much are you going to charge?" but rather "How are you going to charge?"
Squeezed by a contracting economy, everyone from lawyers and accountants to ad agencies and recruiters is changing price structures to reduce upfront costs for buyers and improve visibility into bills. That can mean switching from per-hour pay to flat rates, or vice versa; in some cases, customers can choose. Christopher Mirabile, former CFO and general counsel of software maker Iona Technologies, says he has sensed "an enormous receptiveness on the part of law firms to look at pricing models" in the last 18 months. "We're seeing it in all professional sectors," says Ron Baker, founder of the VeraSage Institute, a think tank that studies pricing strategies at professional services firms. New pricing models are even taking hold at consulting firms (see "Cheaper Advice"). Among the areas offering new options on fees:

1. Recruiters. Executive headhunters typically get paid either on contingency after a search is complete or by retainer (dividing their 90-day fee into thirds, for example). But when Marc Roberts founded Search Support Group 15 years ago to provide research services to headhunters and in-house recruiters, he adopted an hourly pay model. Now the roughly $1 million business does complete executive searches using the same model, charging $125 an hour. That structure is helping the firm thrive in this environment, says Roberts, because "a lot of clients are turned off by the idea of paying huge sums up front." Even the big search firms "are showing some flexibility over their rates," says human resources consultant Patricia Hunt Sinacole, since "a lot of small and midsize companies can't lay out those huge retainers."

2. Lawyers. "In the legal profession, during every tough economic time, clients rise up and demand a fixed price," says Baker. Historically, small firms have heeded the complaints about the "billable hour," but only when their clients were slashing legal budgets. When former technology-firm CFO Christopher Marston founded Exemplar Law Partners in 2005, though, he decided the firm would "absolutely not bill by the hour," based on his experience as a consumer. Bartlit Beck, a top litigation boutique, is taking the same flat-fee approach. Attorney Jay Shepard, whose small firm abolished the billable hour in 2006, estimates that clients pay, on average, about 25% less than they would if he billed them by the hour — and his revenues have tripled since the change.

3. Accountants. While "CPAs like the billable hour because it can be measured," a growing number are switching to fixed-price services, says Baker, a KPMG veteran who ran his own accounting firm for 15 years and never used timesheets. In 2007, Kennedy & Coe, one of the country's 100 biggest accounting firms, switched to fixed-price agreements, and smaller firms, including Snyder & Co., are following suit. So far, Baker estimates, about 7% of the country's CPA firms have given up the hourly meter. "CPAs don't sell time," he argues. "They sell intellectual capital."

Business Planning - A waste of time?

2009-07-16T20:10:00.003+10:00

I'm in week 2 of setting up my new business. At this stage, I have had to deal with the ups and downs of IT systems working and then magically not working. Some of the things that I thought would take no time to do are still outstanding. Other items that I thought would take months to do are done. I had a plan for the setup of my business but so much of what has happened lately has been unplanned. So is planning a waste of time?
I have been advising to businesses for the last 17 years and throughout that time I have extolled the virtues of planning to my clients. Now that I am setting up my own business, I can easily understand how business owners would think that plans are a waste of time. But I also appreciate that my plan has really helped me deal with the unexpected.
I would still encourage anyone to have a business plan and renew it often - probably yearly is sufficient for most businesses. It has helped me stay on track with my goals when things looked like they were going to fall apart. It has helped me keep perspective on the medium to long term rather than the daily issues that I have faced.
So in my view planning helps keep the momentum going in the right direction. It can help you keep driving towards your goals even if you stray off track once in a while. And of course, I would recommend that you commit your plan to writing. Like seeing your final built house months after the plans are finished - it is a satisifying feeling to see the final outcome of your plans come to reality. That's why people go into business for themselves in the first place!

Law firms change business model

2009-06-28T16:04:00.003+10:00

In the Australian Financial Review on Thursday 25/6/09, the lead article "Downturn squeezes big law firms" provided a sneak preview into changes that are occuring within the legal profession due to the economic slowdown. In the article, James Eyers, Alex Boxsell and Rachel Nickless report on the current challenges to the legal profession as we once knew it. These included a decrease in the size of large law firm partnerships, redundancies, shrinking profits, stricter performance management and pay and hiring freezes.
In general, the legal profession has acted as a leading indicator as to the likely changes that will be witnessed in the accounting profession. Even if the accounting profession doesn't follow in the immediate footsteps of the legal profession, much can be learned from the activities of the law firms in response to these tough times for accounting practices in Australia.
The current environment for legal services sees a growing number of clients seeking quality advice at lower prices. A shift to medium tier providers is occuring as some of the leading advisors move into smaller firms.
Ted Dwyer, a consultant who works with medium and large legal firms is quoted in the article as follows "If the partners seek to maintain high profits in a climate with lower prices, they need to rework their overheads by re-engineering the way they do the work day by day, using people and technology differently. They also need to design a new pricing model". (page 6)
The changes being adopted appear to be fundamentally sensible. Firms need to relate to their clients in a more personal way, take advantage of technology to communicate more broadly and in quicker timeframes and work with clients in a relationship geared towards results rather than just fees from time spent.
Accountancy firms that do not similarly respond to the recent downturn with a different approach to their client relationships will inevitably lose out to smaller leaner practices that are willing to change the current business model for both clients and accountants alike.

Accountability

2009-06-21T14:34:00.000+10:00

Ever had those moments when you know you don't want to do something but someone else makes you do it. Not because they are your boss or anything but simply through peer pressure and being accountable to someone other than yourself. Let me explain.
I am in a running club in Brisbane. Today was raining and basically miserable. But I still got up early and joined the group for an early morning run in the rain. If it was up to me there was no way I would go. But because I felt accountable to the group to turn up, I did it. As a result, I have clocked up some more miles before we undertake the Gold Coast Half Marathon on 5 July 2009.
Being a business mentor can create the same effect in people. They hold their clients accountable to their growth plans or goals. If left to their own devices, many business owners just simply don't get around to implementing the necessary activities required to meet their goals. But the business coach can keep business owners on track.
The same principle makes personal trainers more successful in getting people fit. Most people when they are accountable to themselves to get to the gym just don't get there.
If you want to succeed or achieve a goal, I suggest making yourself accountable to someone other than yourself. It can make all the difference.

"Sales & Marketing" - Are they the same thing?

2009-05-30T21:19:00.000+10:00

Many business owners look to combine these two words for all of their outward client building activities. While the two words may appear to describe the same thing, sales and marketing are actually two entirely different activities.
"Marketing" is all about generating leads to your business. This may be through word of mouth advertising, web page design, yellow pages, basically anything that looks to attract a customer or client to your business.
Once that lead has been generated, "Sales" is focused on converting that potential customer who is attracted to your business into a paying customer. It is all about conversion not lead generation.
So next time you put the two words together to describe a proposed customer activity, have another think. Is it sales? Or is it marketing?
When measuring the success of your sales and marketing people are you using the right KPI's? Marketing KPI's should be all about the number of leads generated. Sales KPI's are all about conversion rates.
The difference between the words may appear subtle but the skills required for each activity are different.

"Pro-active" Accountancy

2009-05-29T20:00:00.000+10:00

After 17 years in accountancy circles, the most common word I have heard from clients about what they want their accountant to be is "pro-active". But when you get to the heart of it what does this really mean from the aspect of the business owner?
Does it mean that their accountant needs to be ringing their clients every day? No. Like most people even your best friends can be annoying if they wanted to know your every move every day.
Does it mean that the accountant needs to know all the legislative developments that occur before they happen and be the first to tell their clients about any tax or other changes before they hear it on the news? No. Again, nice in concept, but again some announcements from Parliament occur out of the blue and accountants as everyone else don't have time to react and consider all the news that occurs from Canberra. Just look at the employee share schemes debacle. No-one saw it coming and now the Government is trying to renegotiate its position after this poorly considered budget announcement.
"Pro-active" to me means regular contact. Pure and simple. Not just when things happen externally or when a problem arises. Just regular. Whether it be monthly, quarterly or even every 6 months, you have to be talking to your clients at set times locked into the calendar. This stops the urgent non-important matters getting in the way of scheduled meetings happening.
Pro active also means bringing something to the discussion. Whether it be a different view, idea or point that is relevant to the client. It's a sign that the adviser has thought about the business and is working with the client.
That is what pro-active means to me. Just setting regular time aside to talk through business issues with the client.
If you are seeking a different type of relationship with your accountant, one that is pro-active, I suggest getting in touch.