The importance of knowing your contribution margins

October 2020

When you want to check the financial performance of an organisation, the first and most obvious indicator is profitability. Even in the ‘not for profit’ sector, profit is the key indicator of financial performance – has the organisation operated within its income for this and the most recent years?  Has it generated a surplus to reinvest in social impact and organisational sustainability and growth?

It’s easy to lean on profitability as the key indicator of financial success, and sometimes as a proxy for good organisational governance and management. Whilst profitability is the key driver of organisation sustainability, viewed in isolation, it can be a bit of a blunt instrument. The key risk is that overall organisational profitability can hide a lot of issues. Whilst the results for the business as a whole might look great – and they may genuinely be reflective of business performance as a whole – you could have some significant losses hiding behind some hero income streams.

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Fixing your internal issues is part of the strategic plan

October 2020

Strategy retreats and planning days that start from a ‘blank sheet of paper’ and focus on ‘blue sky thinking’ can get lost in the optimism of what might be possible, and lose sight of the operational issues present which can hinder that achievement.

Risk is the effect of uncertainty on objectives, and so failing to undertake a critical analysis of internal issues or trends means blindly introducing risk to the strategy process: the risk that the organisation won’t be capable of delivering on its aspirations.

The strategic plan needs to be balanced – forward looking, making the most of the opportunities; but also addressing the internal issues and market constraints that can hold the organisation back.

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Mitigating risk through your management system

October 2020

A strong and effective management system is one of the best methods of risk mitigation in a business – as well as a driver of improved organisational performance.

The management system is made up of the different policies, procedures and forms which describe  the way that things should be  done in your organisation. It’s about how things are done in the organisation, and documenting it in these ways helps to ensure a consistent approach.

As providers transitioned from state government block funding in to the NDIS, many had to simultaneously comply with the requirements of three different quality frameworks: 1/ legacy funding state government quality accreditations, 2/ NDIS quality and safeguards requirements (supporting participants up to age 64), and 3/ the aged care quality standards often under the Commonwealth Home Support Program (for clients 65 and over).

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Addressing risks (and opportunities) through the budgeting process

September 2020

When setting the budget, one thing you are never going to get perfect is for the actual revenue and expenses to precisely hit the budget that you set. There will always be items that are under budget and others that are over budget.

Inherent in the budgeting process is that there are a myriad of assumptions that you make: utility bills will be the same as last year plus inflation; we have a new service/product which we hope will bring in a certain amount of revenue; we need to invest in some IT work to improve systems which will cost a certain amount.

The budget is a series of guesses – well, educated guesses! You have targets and predictions and know what happened last year, so you can usually make a fairly good ‘guess’, but there will always be overs and unders – as compared with the assumptions.

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Key areas you should look at when considering which KPIs to select

September 2020

Choosing the right Key Performance Indicators (KPIs) may seem overwhelming, but the right metrics, and subsequently the measuring and reporting of those metrics, can provide enormous value to not for profit leaders and their boards.

The right KPIs can have the ability to provide meaningful insights at a glance, which is particularly useful for stakeholders that are not involved in the organisation on a daily basis.

With that said there are a number of key areas to take into account when considering which KPIs to select.

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Understanding your competitors better

September 2020

“If you know your enemy and know yourself, you need not fear the result of a hundred battles”.

Sun Tzu from The Art of War

In recent months, we have shared articles that help you to understand yourself, your organisation and its market position with tools like SWOT and SOAR and Understanding your context.

As the great Sun Tzu has pointed out, it is also important to know your enemy, or – for many not for profits – who you are competing against. That is, the other organisations who are working in similar locations and providing similar or alternative services.

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MEDIA RELEASE: Community Business Grants focus on risk opportunities for struggling not for profits

With a recent national survey showing that the pandemic continues to profoundly impact the sustainability of not for profit organisations across Australia, a new grant opportunity could be the much-needed lifeline for many that are struggling to identify and address the risks they face during the current period of uncertainty and beyond.

The Community Business Bureau (CBB) has fast-tracked the next round of its Community Business Grants program, which offers risk-focussed grants in the form of pro bono consulting support and expert advice from CBB’s sector-leading business consultants.

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Building organisational health as a competitive differentiator

It seems everything we read at the moment is talking about the global pandemic, technology changes, disruption, innovation and “pivoting” strategy.

In the pandemic, gin companies have shifted to making sanitiser and restaurants have moved to a takeaway product offering. But even before recent crises, there have been major shifts to disruptive technologies and business models going on for years.

In the past, you needed significant property assets to compete in the hotel business, but Airbnb has disrupted that sector without owning any property. Uber now undercuts decades old taxi companies without owning any vehicles. Netflix used online content to overtake the local Blockbuster store. Film camera company Kodak was overtaken by digital photography and consumers taking images on their phones instead of buying cameras.

All over the world, board members and CEOs are continually looking for the next competitive advantage only to discover that disruptive trends like this have changed the rules and challenged established business models. Continue reading…

Five ways to get more out of your cloud accounting

With COVID-19 forcing us to adapt to home working, cloud based technology has never been more popular and it’s likely that it’s made its way into your accounting software.

Whether you’re a new user or an old hand, it’s worth checking whether you’re getting the maximum benefit from your cloud accounting solution. Like many software products, upgrades and improvements are made on a regular basis, but you might not be using them.

Here are five ways you can get more out of your accounting software. Continue reading…

Writing a risk policy

My insurer has asked if we have a risk management policy – where do we start?

Does this sound familiar? Or maybe you have one and it is that time of the year to review it again. Or perhaps the health and economic crisis flowing from COVID-19 has you looking at the risk policy again and wondering if you could have been better prepared?

Whatever the case, it does beg to answer the question of what should go in the risk policy? Continue reading…