The Rising Tide Breakfast Buzz Nov 11- Better Business through Informed Decisions

1. The Rising Tide Breakfast Buzz
Importance of Quality Financial
Information

2. Delaney Corporate Finance
 Provides Corporate Finance and Business Support Services to
SMEs
 Principal Services:
– Restructuring
– Corporate Finance
– Management Support
Delaney Corporate Finance 2

3. Why is Quality Information Important?
Performance Management
Restructuring
Investment Decisions
Communicating with Stakeholders

4. Restructuring Process
Making
informed and Devising a Engaging with
effective strategy stakeholders
decisions

5. Components of a Restructuring
Strategy
Restructuring Strategy
Appropriate &
Maximise
sustainable
Lean cost base revenues/sweat
funding
assets
structure

6. Identify Your Business
Components

7. 4 Banks
4 Banks
Invest Holiday Hobby JV
Trade Personal
Prop homes Farm Developments
4 Current Accounts
2 Banks
Accounts Accounts
1 2

8. Result
 No Performance Management
 No Basis for Projections
 Lack of Credibility with Lenders
 Lender Concerns Over their Assets Income Flow and
Ultimate Debt Recovery

9. Other Examples
Retail/Wholesale
Supply/Installation
Sales/Consultancy
Service 1/2/3

10. Remember
 Transparency - Improves Analysis and Generates Confidence
 Garbage In – Garbage Out - Get it Right at Information Source
 Different Means of Separating the Businesses:
- Separate Bank Accounts?
- Chart of Accounts/Coding?
- Separate Accounts/Departments?
 Isolate Personal Expenditure
 Discuss with Your Accountant
 Lender Requirements are Now a Lot Greater
- Timeliness
- Detail

11. Costs are Costs

12. Fixed
Cash
Sunk
Variable
Accounting
Opportunity

13. Example
€ Product 1 Product 2
Selling Price 150 50
Variable Costs 50 20
Contribution 100 30
Allocated Fixed Costs 70 40
Profit/Loss 30 (10)
• Decision ? Scrap Product 2
• No – Product 2 Contributes Towards Fixed Costs
• Without Product 2, Business Would Have a Loss of €10 as
Opposed to Profit of €20

14. However
 Are all Your Variable Costs Really Variable ?
Labour may have a fixed element to cover opening hours
 Are all the Costs Relevant ?
Some costs may be sunk costs
 Do all Products have Same Working Capital Costs?
Do some products require higher stock and hence an
overdraft cost?
 In Short-term Prioritise Cash Costs Over Accounting
Costs, but not Indefinitely

15. Remember
 Know Your Costs:
- Their Nature
- Their Drivers
 Revisit Estimates/Rules of Thumb Regularly
 Check Against Management/Audited Accounts
 Don’t Cut Costs for the Sake of it; Do Your
Homework