Category Archive: Start ups

  1. SEIS – the easy guide to how it works and how to use it

    Comments Off on SEIS – the easy guide to how it works and how to use it

    SEIS is the best thing since sliced bread for young companies looking to raise finance

     The story so far

    SEIS (the seed enterprise investment scheme) was introduced by the Chancellor in 2012 and its aim is straightforward; it provides a substantial helping hand to start-up and early stage entrepreneurs who are raising ‘seed’ funding to get their business off the ground. The term seed funding is deliberate: it provides the finance to pay for the entrepreneur to validate a business concept, i.e. demonstrate or even prove that the idea is worth investing in further, i.e. it could potentially make a lot of money.

    I think that SEIS is one of the best things the Government has done for entrepreneurs. What it does is help investors over that final hurdle in the risk hurdle race, by significantly reducing their possible losses.

    How does SEIS work then?

    Basically, there are very generous tax reliefs if an investor puts money into an eligible company. If you invested say £50,000 cash for shares, you would get 50% of that as a relief against your income tax bill; in this example you would therefore save £25,000 in tax. So effectively, rather than the Government getting it, the entrepreneur gets to use it to grow their enterprise. If the investor then holds the shares for at least three years, they will not have to pay any capital gains tax on any profit they make when they finally sell those shares.

    Am I eligible to use SEIS?

    The company’s trade must have been started less than two years before shares are issued. Most types of business are eligible, but there are a few exceptions such as financial services, property development and agriculture. The company must have fewer than 25 staff and assets of less than £200,000 pre-investment. An individual investor can get SEIS relief on up to £100,000 per annum, and can be a director of the company but not an employee. If someone has more than 30% of the shares then they are ineligible for SEIS.

    What if I need more than £150,000?

    The rules have been created in the knowledge that many companies will need additional funding at the time of or following a seed investment round. The SEIS maximum of £150,000 per company does not mean you can’t raise more than that in the initial round of funding – it’s just the amount on which tax relief will be given. Say you raised £250,000 in a first round: eligible investors could get SEIS relief on the first £150,000 but none on the balance. However, the rules do allow you to raise £150,000 under SEIS but then raise further equity finance under EIS (enterprise investment scheme). EIS is SEIS’s older and bigger brother and it allows individuals to invest up to £1 million per year, and the eligibility rules are much the same except there is no requirement that the trade is under two years’ old.

    A real life example

    We helped a technology company to raise £170,000 of equity funding. Of that total, £20,000 was invested by a non-UK resident person, so the other £150,000 was all eligible for SEIS relief. We had previously obtained ‘advance assurance’ from HMRC that the company was eligible for SEIS, to reassure the investors. The deal was completed and then we applied to HMRC for SEIS certificates, and these were issued within a week. The six investors will obtain £75,000 of income tax relief between them, and in addition, there were some specific capital gains reliefs that will save SEIS investors some tax on any gains they have made in that year.

    As an example, one shareholder who invested £40,000 saved a total of £31,200 in tax, so his investment of £40,000 cost him £8,800 in real cash! This is a real advantage that helps entrepreneurs raise that very difficult initial funding for their business.

    Jerry Davison

  2. FT2G Devon Pitch 2016 Winner Announced!

    Comments Off on FT2G Devon Pitch 2016 Winner Announced!

    A catering business that provides exciting food experiences using the West Country’s finest produce has won our co partnered Fast Track to Growth Devon Pitch 2016.

    Pickle Shack has secured £15,000 worth of financial strategy, PR and marketing support for the rest of the year, after a final pitch event in front of a panel of judges in Exeter last week.

    Thirteen companies including Bluebird Care, Custodian Solutions, Otter Valley Dairy and Salcombe Distilling Company were selected for our business growth programme, developed in partnership with PR, marketing and design agency Astley Media, plus headline sponsors Crowdcube, Exeter Innovation Centre and Innovate Exeter.

    Pickle Shack, run by Jodie Sawatzki and Josh McDonald-Johnson, and based at Woodbury Salterton near Exeter, organise and run pop-up restaurants and ‘Grub Clubs’ alongside corporate and wedding catering, private dining and cookery workshops and demonstrations.

    Jodie said: “I’m staggered to have won because there were so many other strong candidates that have been in business longer than us so I’m really grateful. The learning we’ve already got out of Fast Track to Growth has been brilliant and we’re already putting it into practice. I’m really looking forward to working with Fast Track to Growth to help develop and grow the business over the coming months.”

    Kids Holiday Toys, which hires out boxes of toys, books and games for children on holiday, were awarded the best start-up prize, giving the company access to on-going support to develop the business in the coming months.

    Judith Cook, owner of Kids Holiday Toys, said: “The quality of the knowledge shared has been exceptional. I’ve learnt so much and already implemented changes. Fast Track to Growth is giving me the impetus and confidence to move forwards in new ways – it’s very exciting.”

    FT2G Finalists and sponsorsFast Track to Growth saw the shortlisted companies benefit from a series of workshops led by experts to develop their plans for growth, culminating with Thursday’s pitch event at Exeter Innovation Centre.

    Steve Lovett, SouthWestfd‘s  Managing Director and on the judging panel, said: “‘All those on the programme did exceptionally well. We have been particularly impressed by the sheer passion and level of commitment displayed. We look forward to supporting Pickle Shack and Kids Holiday Toys on their growth journey and will be maintaining close contact with everyone who took part.”

    Other companies in the group selected for the programme were OneFlow from Exeter, TIC Training of Brixham, Essential 6 of Torquay, If Everyone Cares of Dawlish, Dial South West of Newton Abbot, Yonder Berries, based in Lustleigh and Southern Filters of Axminster.

    The judging panel included the sponsors of the programme, Richard Eckley of CrowdCube, Phil Sampson of Sampson Hall, Ross Bellotti of Kingfisher Print, Simon Morris of Stephens Scown, Joanne Johnson of Santander and Robin Jackson of Exeter Innovation Centre.

    Richard Eckley, of headline sponsor Crowdcube, the world’s leading investment crowdfunding platform, said: “Congratulations to Pickle Shack and Holiday Toys. From the very start of this year’s Fast Track to Growth programme they’ve shown an eagerness to learn, combined with a passion for their business and a strong focus on growth.

    “The pitches were of a high quality but it’s the effort that everyone has put in throughout the programme that has really impressed me.”

    All the shortlisted companies become members of Fast Track to Growth, with access to business support. Other Devon companies are also able to apply to join and benefit when FT2G 2017 is launched later this year.

    Dan Pritchard, of Astley Media, said: “Fast Track to Growth helps companies work on specific growth plans and includes business planning, financial strategy, legal, marketing, PR and leadership expertise. But another big benefit has been they’ve all been able to learn from each other, sharing experiences, ideas and their own expertise.”

    Rebecca Turner, who runs Southern Filters, said: “The programme has been amazing. Every session has always had something useful in it. We’ve now got a new financial strategy and from Twitter alone have secured £4,200 worth of extra business in recent weeks. We’ve got new financial, PR and marketing approaches to put into practice that I’m sure will help grow our business further.”

    For more details and to register your interest as a growth business or potential sponsor of FT2G Devon Pitch 2017 visit

  3. Confidence levels in the South West – Economic Survey Results

    Comments Off on Confidence levels in the South West – Economic Survey Results

    Thank you to those who helped us compile our recent South West Economic Survey.

    Whilst most companies remain positive, confidence is not as high as it was. Confidence in the UK economy has dipped by 22 per cent for the year ahead, alongside a smaller 16 per cent dip concerning the South West’s economic prospects.

    The key findings of our survey were:

    •    83 per cent of firms rated the South West’s economic performance in the past 12 months as average or good
    •    81 per cent said they thought the UK’s overall economic performance in the past 12 months was average or good
    •    Confidence in the South West’s economic performance for the next 12 months was rated average or good by 67 per cent of respondents
    •    Confidence in the UK’s overall economic performance was rated average or good by 59 per cent of those polled.

    The findings are in line with the British Chambers of Commerce (BCC), which has downgraded its growth forecast for the UK economy, blaming “global headwinds and uncertainty”.

    The BCC now expects the UK’s economy to grow by 2.2% this year, down from a previous estimate of 2.5%. It has also cut its growth forecast for 2017 to 2.3% from 2.5%, and expects growth of 2.4% in 2018.

    Meanwhile, the consensus of independent forecasters is that growth in future years won’t be quite as strong as thought in the autumn. This would mean that the Chancellor will miss his target to close the national deficit by 2019.

    The survey had coverage in the Western Morning News and the follow up survey results indicated that confidence levels remained the same as pre Budget.

  4. Devon’s FT2G shortlist announced!

    Comments Off on Devon’s FT2G shortlist announced!

    Agri-tech specialists, a dairy farm and pop up caterers are amongst the firms that have made it to the final of Devon’s new Fast Track to Growth Programme, it was revealed.

    Fifteen companies across the county have been selected to progress on to the programme that will help them develop their plans for growth in 2016. One stands the chance of winning £15,000 worth of financial strategy, PR and marketing supporting for the rest of the year.

    Shortlisted are Bluebird Care, Custodian Solutions, eCow Devon, Holiday Toys, OneFlow and Pickle Shack from Exeter, Care Control Systems of Tavistock, Ottery Valley Dairy near Honiton, TIC Training of Brixham, Essential 6 of Torquay, If Everyone Cares of Dawlish, Dial South West of Newton Abbot, Yonder Berries, based in Lustleigh, Southern Filters of Axminster and Salcombe Gin Company.

    Each will now receive specialist support through a series of workshops to progress their plans, ahead of a final pitch in late April and a chance to win the top prize of a year’s worth of support.

    Fast Track to Growth has been developed by financial strategy experts SouthWestfd and PR, marketing and design agency Astley Media, in partnership with Exeter Innovation Centre and Innovate Exeter.

    Jerry Davison, SouthWestfd Chairman said: “An incredible mix of companies applied and we’ve got a strong shortlist of firms with bold growth plans to now focus on. I’m really looking forward to getting to know the people behind the brands, as we help each business progress through the Fast Track to Growth programme.”

    Fast Track to Growth is sponsored by Devon-based Crowdcube, the world’s leading investment crowdfunding platform and supported by Exeter Innovation Centre, Sampson Hall, Stephens Scown LLP, Santander Corporate and Commercial, Kingfisher Print and Design, SetSquared and Innovate Exeter. The programme helps companies work on specific growth plans and includes business planning, financial strategy, legal, marketing, PR and leadership expertise.

    All companies who applied to the programme were invited to a special welcome and networking event held at University of Exeter Innovation Centre last week. Those that did not make the shortlist have been offered opportunities including places at the West Country’s only Startup Weekend event, in Exeter in June, and free places on Business Modelling and High Growth workshops at Exeter Science Park.

    Luke Lang, Co-Founder and Chief Marketing Officer of Crowdcube, said: “It was great to meet some of the people behind the companies who have entered Fast Track to Growth. All are led by passionate people intent on learning, seeking support and growing their business. That’s incredibly encouraging and testament to the number of firms that are now looking at developing and growing their business in new ways, which has to be good news for the South West.”

    David Culshaw, senior associate, corporate team at Stephens Scown Corporate, said: “In our experience, the more that companies reach out for the right expertise to help them, the more it shows how passionate they are to succeed. Devon has a wonderful array of diverse businesses which is such a strength, but we need to do all we can to help companies fulfill their potential, which is what Fast Track to Growth is all about.”

  5. Raising finance – faster, better, cheaper

    Leave a Comment

    How? The answer is ‘Investment Readiness’. What is it?

    → It’s providing sufficient information, credibility and trust to investors to motivate them to invest in your proposition.

    Route to Success

    In order to successfully raise funding, whether equity, loans, grants or other forms of finance, a company must be in good shape and sufficiently attractive to the providers of funds. A company with higher investability, that makes the providers ‘feel right’ about advancing funding, will have a greater chance of getting finance and will secure it both quicker and cheaper. Essentially, getting a company investment ready is all about carefully preparing it and its people to present the right image and proposition to investors and bankers.

    The need for Investment Readiness
    •    There is a fundamental knowledge gap in most SMEs such that they do not know the options for financing and which sources would be relevant to their strategy
    •    There is also much evidence that many SMEs do not seek funding because they are unsure about the process and resistant to giving up any equity due to anxiety about losing control of the business
    •    The low quality of applications for funds results in a high failure rate, particularly those for non-bank risk money. Many business plans may have inherent merit, but are either insufficiently developed or are inappropriately structured. This reflects badly on the entrepreneur’s ability

    Main problems with Business Plans

    •    Quality of team
    •    Vision/strategy unclear or not well articulated
    •    Too many facts, not enough analysis
    •    Lack of commercial reality
    •    Lack of credibility in financial projections
    •    No real customer need or benefit established / lack of USP – Too ‘ME TOO’
    •    Too complicated
    •    Insufficient growth potential
    •    Route to market unclear / vague on market drivers
    •    Insufficient evidence of demand
    •    Competition complacency and not properly identified
    •    Lack of contingency planning
    •    Assumptions are fuzzy
    •    Unclear on need and level of funding
    •    Exit not well defined

    Key stages in the Readiness process

    •    Identifying the most appropriate sources of money and discussion and analysis of the effect of any ownership dilution. The benefits and downsides of raising equity
    •    Reviewing the business to identify and correct shortfalls or omissions that would impact on an investment decision
    •    Guidance on investor expectations and attitudes
    •    Help with preparation of the business plan and of the live presentation
    •    A mock run through of the due diligence process to ensure all queries are covered, including legal, financial, management, marketing, competition
    •    Marketing of the proposition (if required)
    •    Mentoring through the funding and due diligence process
    •    Post-investment management guidance



  6. Try our 15 point check list to get your business into shape for 2016

    Comments Off on Try our 15 point check list to get your business into shape for 2016

    Business confidence is now generally high and we have finally climbed out of the recession. Britain’s GDP is now a few per cent above where we were in 2008 before the crash, which cut over 6% from the UK’s output. However, there is still plenty of uncertainty out there (look at China for a start) and the last thing any business should do is get complacent. Here is our checklist for helping you to review your business to ensure it’s as strong as possible going into next year, especially from a cash flow perspective:

    1. Review your budgets and set realistic and achievable targets.
    2. Get rid of won’t pay customers.
    3. Review your debtors list and chase up overdue invoices.
    4. Make sure your terms of business contain explicit payment terms.
    5. Assign responsibility to one individual for invoicing and collections.
    6. If appropriate, review banking facilities and discuss future needs. If you are going to require additional funding ask for it at least 3 months before you need it!
    7. Put extra effort into making sure your relationships with your better customers are solid.
    8. Review and flow chart the main processes in your business (e.g. sales processing, order fulfilment, shipping etc) and challenge their efficiencies.
    9. Encourage team members to suggest ways to streamline and simplify processes (e.g. sit down and brainstorm about productivity, outsourcing and cost reduction).
    10. Use ‘bottom up’ budgeting where everyone in the office gives input on areas over which they have control – target a 10% cost saving.
    11. Review your staffing needs over the next 12 months and deal with weak or unnecessary individuals.
    12. Get your members of staff involved in a discussion of likely trading conditions and get their input on reducing costs and maintaining revenues.
    13. Review your list of products and services and eliminate those that are unprofitable or not core products/services.
    14. Establish your key performance indicators (KPI’s) and measure them on a regular basis e.g.
      1. Sales Leads generated
      2. Orders supplied/fulfilled
      3. Cash balance
      4. Stock Turnover
      5. Debtor Days
      6. Gross Profit
      7. Net Profit
    15. Pull everyone together and explain the business strategy and get their buy-in.
  7. Funding to support your growth

    Comments Off on Funding to support your growth
    If you are an SME with a successful business you may need support to drive the next stage of your growth. Running a thriving company can be a real challenge and is sometimes a lonely place to be. In an ideal world you’d have an experienced full-time finance professional (e.g. a Finance Director) on your team but, right now, the cost is probably prohibitive.
    SouthWestfd is a highly experienced group of finance professionals who have all been finance directors, managing directors and CEOs in a variety of industries. We have helped many companies across the region to set the foundations for successful expansion, putting the right building blocks into place, such as robust cash flow management.For an initial outlay of only £1,500 (+VAT) we can access government funding that would pay for £3,000 of our time (equivalent to 5-6 days support). We will work with you on a flexible basis to help improve your company’s financial performance and support your growth.We will assign one of our Finance Directors to get to know your business and to engage with you and your senior team to:

    • Help to identify ways of improving profitability
    • Help you keep on top of your cashflow
    • Support your management of growth and avoidance of growth pitfalls
    • Identify key improvements in the financial information you receive
    • Challenge you to improve your financial systems and processes
    • Assist you to draw out and resolve key financial issues
    • Support your financial forecasting and business strategy
    • Discuss your working capital needs and options for fund-raising
    • Assist you to build relationships and credibility with banks, investors and other funders such as grant providers
    • Prepare you for raising of finance, acquisitions and exits
    • Help with resolution of difficult and confidential issues
    • Act as a sounding board for you and your team
    • Help you to ensure that you fulfil your statutory duties to the company
    • Cover any issues that you wish to discuss and develop

    To qualify, your business must:

    • Be registered in the UK and based in England
    • Have fewer than 250 employees
    • Have turnover of less than £40m

    As a follow-on, we also have access to ‘Leadership and Management’ training grants, giving match funding of up to £2,000 per eligible senior manager. These grants could pay for, e.g., general or targeted financial management training, marketing and PR training, HR training and many other topics. Much of the training can be “embedded” within your normal activities to make it very practical and totally relevant to your needs.

    To register your interest and find out more, please call us on 01392 432654 or e-mail and we will talk you through the process.

  8. Budgets: A business straightjacket?

    Comments Off on Budgets: A business straightjacket?

    By Jerry Davison

    Budgets are a useful tool in monitoring progress against the achievement of a company’s overall strategy. However, when poorly utilised, they can restrict and stifle the abilities of both managers and staff: acting like a straightjacket, demoralising staff in the constant pursuit of numbers.

    To be valuable tools, financial budgets should gain buy-in rather than indifference. Staff must see how the budget relates to the overall strategy and their individual aims and objectives. It also requires financial forecasts to look at the short and long-term, if staff are to engage with the budget and find it useful in quickly and accurately understanding progress.

    Unlocking potential with rolling financial forecasts

    When developing financial forecasts, there’s an unhelpful tendency to focus on the 12-month block up to the year-end. This is often at odds with project timescales, seasonal sales differences and various other factors.

    Equally, for day-to-day management and operations, it’s important that staff have a clear and accurate picture of their current progress and financial flexibility. Fluid financial forecasts, that take account of monitored figures and adapt forecasted figures, provide more accurate and achievable figures – often tuneable to different timeframes.

    For rolling financial forecasts to be effective, an accurate and up-to-date monitoring process is needed. This not only needs to include regular (daily or weekly) sales data, but also qualitative information such as feedback from staff on how forecasts might be effected by internal or external factors.

    Making monitoring effective

    At the core of effective rolling financial forecasts is effective and accurate monitoring.

    Reporting templates should work in favour of the staff, capturing the necessary information whilst taking minimal time to complete. They should allow monthly, quarterly or even continual monitoring: and link back to the financial forecast projections for relative periodic adjustments.

    Effective reporting templates can be designed in parallel with training staff in their use. This approach ensures the templates benefit from everyone’s knowledge, and everyone has ownership of how their achievements are acknowledged. Whilst some businesses use proprietary or outsourced systems, effective templates can be produced in Microsoft Excel.

    Different parts of an organisation will have different reporting and access requirements. Designing different input sheets, tweaked to each element of business, will help streamline the process.

    The length of rolling financial forecasts varies. We’ve found that 15-month rolling forecasts are the most popular. At the end of each quarter or month, depending on how often the financial forecast is updated, a fresh 15-month forecast is produced – adjusted using the monitoring data.

    Strong companies use business intelligence to underpin decision making: speeding up and honing the accuracy of decisions across an organisation, helping increase profit margins by being more reactive and in the right direction. When designing templates and the overarching financial monitoring systems, you should ensure they can provide:

    1. Progress reports, tweaked to suit different levels of an organisation. These could simply be a spreadsheet, or template reports dynamically linked to the monitoring database. These may include some basic gap analysis, but this is often included separately within variance reports.
    2. Variance reports, highlighting where and how figures have differed from forecasts. These help identify areas of strong profit and weak performance. Where weak performance is due to internal rather than external factors, managers should use their diplomacy to support and not bully staff. With care, they are a useful tool. Without, they can set in the toxic ‘us and them’ attitude.
    3. Ability for relevant staff to identify and incorporate business drivers; create project plans and budgetary forecasts.
    4. Automation with technology wherever possible, for instance with stock management systems.
  9. Doing it all yourself? The financial hurdles business owners face.

    Comments Off on Doing it all yourself? The financial hurdles business owners face.

    Start ups don’t transform into fully-fledged professional businesses with fully-functioning finance directors overnight. There’s an awkward metamorphic stage, where a business is too small to have the skilled finance director they need – but large enough to be facing many of the problems a finance director deals with.

    We’ve seen businesses suffer when they lack the understanding of what a finance director would help them with, if they had one in place. Even if a business has a revolutionary product or service, they can still run into cash-flow problems or ruin themselves through poor financial and organisational management.

    The overarching role of the finance director is to implement processes to improve your business efficiency. These processes, and the skills and knowledge underpinning them, can be split into five categories.

    Budgeting business spending
    You shouldn’t just record what you’ve bought and sold: your business should have a budget, if it’s going to succeed. Budgets often look 12 months ahead, and are continuously updated. Progress is measured against plans, and projections are proportionally adjusted using differences between budgeted and actual spend.

    Financial Planning

    A business’s budget should inform and be informed by the business plan. Like the budget, these should be continually updated. A well thought-out plan will help ensure your business balances growth and keeps up with demand. It’ll also ensure you don’t get in the messy scenario of cash-flow problems, and the destructive habit of oscillating between generating revenue and building the business. The two should be done together!

    Financial planning is a continual process – and should be used in steering the company’s decisions, examined regularly at board and major meetings. Normally, a financial director would stay on top of these needs – preparing the analysis and papers needed, for founders and senior management to understand the numbers needed to underpin their decisions.

    Managing Cash Flow

    One of the outcomes of effective financial planning, is knowing your income is enough to pay your overheads. It’s all well and good knowing, albeit with 90% surety, your invoice will be paid in the next 30 days – but what if you’re owing others money in 15 days? Internally or through external support, you’ll need the knowledge to balance the books and communication skills to negotiate payment deadlines, to ensure you’re not up no-cash-creek without a paddle.

    As well as ensuring payment timescales keep an organisation’s head above water, you need to understand how your cost of acquiring business customers compares to and effects your business’s loan to value ratio (LTV). By keeping your business acquisition costs low and your profit margins high, your business should have a strong value. This helps keep your LTV low, allowing you to borrow at preferential rates – ensuring the sustainable growth of your business. Understanding the relationship between these two factors for your business helps inform marketing decisions: whether to spend more on marketing, potentially providing a higher return, but over a longer period; or to invest less in marketing and have a faster payback period.

    Understanding HR & Legal Procedures
    Large companies have dedicated legal staff or even teams. For smaller but still professional businesses, the role of understanding HR and legal procedures often falls at the finance directors feet. For many founders and senior executives, legal and HR documents read like a foreign language. However, it’s important your business gets to grips with staff and subcontractor contracts.

    Businesses have hundreds of HR issues they must manage on an ongoing basis. Staff who are supported, through reviews and having the right reward mechanisms in place – such as the option to buy shares in the company – are more likely to stay loyal, acting as true ambassadors you can be proud of. You should be aware of the going rate your staff could expect in the wider market, and reflect this in reviews and rewards.

    Staff retention is especially important when you’re small. Unsupported staff, or those that feel they’re behind the iron curtain and living in George Orwell’s 1984, won’t hang around for long. Similarly without having the knowhow to handle legal threats, lease conditions, copyrights and intellectual property could leave your business becoming tangled in a legal web.

    Measuring Success and Failures
    There’s more metrics than just profit and loss. Understanding what to monitor when, and how this information infiltrates business plans and board meetings, is essential for efficiently running and growing a business. If your business hasn’t yet got a competent finance director, consider setting different metrics for different areas of your business. Speak to the teams or team-leaders involved, to understand how they informally track their progress – and use this to inform how and when to capture metrics. Like budgets and financial plans, business metrics should be analysed and reviewed on a regular basis.

  10. Painting a picture with financial budgets

    Comments Off on Painting a picture with financial budgets

    More often than not, financial budgets aren’t used effectively. Instead of being a useful tool, staff see them as a bother and necessary evil. They paint a dull or even threatening picture. When this occurs, motivation is often eroded, and this can lead to the beginning of the end for some companies.

    Financial budgets should paint a clear picture: a living snapshot of progress on financial components of a company’s strategic plan, rather than a list of targets that must be met. Budgets should be used in conjunction with staff reviews and other assessment procedures, to monitor the achievement of a company’s entire strategic plan.

    Painting a pretty picture

    There are several techniques to help staff see financial budgets as a useful tool. Firstly, budgeting should be a dynamic and open process, done in conjunction with developing and reviewing overall company strategy. The entire spectrum of staff should be included, allowing decision making to be influenced from the bottom up. This helps motivate staff and provides ownership of inputs and results.

    Effective budgets allow careful resource allocation to maximise results and align with (not dictate) the strategic plan. Expenditure such as IT, marketing, capital expenditure and recruitment of staff should all be linked with the strategic goals. Senior management, supported by the finance department, can then ensure the budget works within the constraints of cash-flow and contingencies. Their goal: to balance the budget to provide sustainable growth.

    The experiences and expertise of middle managers can often be missed in setting budgets. Involving them in developing your organisational strategy and objectives will provide much more useful results than if they’re only plotting progress. Allow them to think how they can help monitor its success, beyond simply filling in boxes on a spreadsheet.

    Financial budgets should be seen as a monitoring tool: not a straightjacket of what must be achieved. Managers and even staff can have their initiative stifled by aiming to precisely meet budgets without any leeway. No financial forecast is perfectly accurate. Effective strategic plans, financial forecasts and staff should be prepared for this – and use variances to identify internal and market sector changes.

    Developing a culture of accuracy rather than ‘beating the numbers’ helps ensure the budget holistically looks at your organisation and the processes within it – rather than individual staff members or departments. This helps avoid the culture of ‘us and them’ and silo mentality. Organisations should look outwards towards customers and competitors, rather than warring internally; and rewards should be linked to achieving financial and non-financial objectives relative to the market.

    Financial budgeting and forecasting processes should be streamlined, to achieve greater speed and accuracy. Here at SouthWestfd and The Finance Department we have found companies were able to decrease their time spent on budgeting by an average of 22%, whilst increasing their profits by 11%. A win-win enabled by heightened awareness of priorities, performance, and communication throughout the whole business.

    Companies should measure their performance against strategic goals and objectives throughout the year, including but not restricted to financial budgets. The frequency of monitoring depends on the size and complexity of the organisation, but should be carried out at regular intervals all year. The most successful companies monitor performance on a continual basis, applying fast response times and flexibility to market changes.

    Condensing progress into one-page ‘dashboard’ reports of key performance indicators can help ensure company directors and senior managers have a picture they can easily refer to. This is one way the most successful companies are able to stay ahead of the game: having a continuous and live understanding of their performance, preferably linked to a risk register.

    Blog by Jerry Davison, MD, SouthWestfd