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August 6, 2019

Reflections of a Bean Counter #1 [ Money matters sometimes ]

So the joke is that I used to be a bean counter, but now I count beans.

I’m a Chartered Accountant and known for a measure of financial aptitude, but now I own and operate Ricca Coffee Company, a 44-year-old roasting business in Adelaide’s inner west.

I’d like to share some thoughts about financial management, in the hope of adding value for my coffee industry peers.
Not that my financial skills and experience have made everything plain sailing! If it had, our first coffeehouse wouldn’t have taken 18 months to break even. Nor would it have mattered that competitors took 41% of our commercial sales at the end of 2016. And when our road was closed for 10 weeks leading up to Christmas last year, I would have just shrugged it off.
What I can say, is that my skills were invaluable during those times.

I appreciate that unless you misunderstood the ‘bean counter’ thing, financial management isn’t the number one reason you’re in coffee. Don’t feel bad about it, it might be a strength.

The thing is that managing money is important. My first take-away tip is to embrace this principle. It’s true, and it’s good.
Sometimes it matters more and sometimes it matters less…but it never goes away.

When it comes to financial management, it concerns me that too many of us are distracted, oblivious or afraid, or a combination of those. This is why it can be wise to delegate financial tasks to others. Partner with someone who can report to you in a way that is meaningful for you.
Here’s an acid test question for you; do you have a cash forecast for at least the next six months?

The good news is that a skilled person can put one together in a few hours. Mine is on a spreadsheet; it doesn’t have pretty formatting or fancy macros, but it does the job.
Once you have one, just keep updating it and pushing the finish date forward. (That’s what we accountants call a ‘rolling forecast’ – throw the term into a conversation at your next dinner party!)

The bad news is that company directors may be breaking the law if they don’t have one. If you’re a director of your company and a cash forecast would show that you won’t be able to pay your bills, you could be trading while insolvent. That’s a legal offence.

Some of us monitor our finances obsessively. My tip for that is to remember that money doesn’t matter all the time. But that’s a topic for another article.

Your cash forecast might say happy things about your business, and it might say hard things about your business. Whatever the case, having a clear picture of your cash is an essential resource.

Next time…The Truth will set you Free

MARTYN SMITH IS A CHARTERED ACCOUNTANT AND GRADUATE MEMBER OF THE AUSTRALIAN INSTITUTE OF COMPANY DIRECTORS. THIS ARTICLE CONTAINS GENERAL INFORMATION ONLY AND SHOULD NOT BE TAKEN AS CONSTITUTING PROFESSIONAL ADVICE.

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