*Photo supplied
*Photo supplied

On Wednesday, 26 March 2014, KPMG and the Bermuda Economic Development Corporation (BEDC) hosted an informative and interactive seminar entitled “Managing Finances in a Soft Economy”. 

The 2 ½ hour seminar was held at KPMG Offices.

Junior Minister of Home Affairs, The Hon Sylvan Richards, JP, MP, opened the seminar by welcoming the attendees and the panel of speakers.  He stated that “medium sized businesses play an important role in helping {the Government} to grow the economy.”  He continued, encouraging the attendees to be “proactive and not reactive when it comes to operating [their] businesses.”  

Following the Junior Minister’s welcome, KPMG Enterprise, Managing Director, Stephen Woodward gave a review of the Medium Sized Business Unit initiatives that came out of the Forum and Survey that KPMG conducted in 2009 and 2011 respectively which revealed 7 key areas of focus, namely

1) managing a business through economic downturn;

2) representation of the business sector in economic policy matters – including Government stimulus and tax incentives;

3) business and strategic planning;

4) identifying growth opportunities and supporting expansion;

5) human resource strategies for recruiting and retaining staff,

6) increased need for access to competitive capital/finance;

and 7) timely, relevant benchmarking information to make more informed decisions. 

Mr. Woodward confirmed that the seminar was the fourth of a series that have been held to address the above referenced issues and also confirmed that the last seminar in the series will be held in the upcoming months. 

To provide an overview of the main topics of discussion at the seminar, Mr. Greg Muir, Manager at KPMG Advisory shared his presentation reviewing four key topics: Cash management, working capital management, cash flow forecasting; and cost reduction. 

Mr. Muir indicated that “revenue is vanity, profit is sanity, and cash flow is king” and that in a global survey conducted by KPMG, 83% of top firms agree that  cash management is a strategic priority. 

Mr. Muir went on to provide attendees with tips of how to achieve the best outcome as it relates to management of each of the four components.  He stated, it is important to be able to produce a monthly income statement, balance sheet, accounts payable, accounts receivable ledgers, and cash flow statements, but “you also have to be able to analyze the results in order to be effective.” 

In addition to managing the cash flow, Mr. Muir also gave some tips on how to effectively reduce costs stating that “it has to be a holistic process.”  He continued “it can’t be business as usual, you have to implore fresh thinking as it relates to cost reduction, including getting feedback from staff.”

Following the presentation, BEDC Chairman and Vice President of Bermuda Forwarders, Nick Kempe introduced the panelists who included Mr. Muir, Mr. Lee Simmons, Vice President Corporate Banking at Butterfield; Ms. Tamara Richardson, Vice President, People’s Pharmacy; and Mr. Doug Soares, Partner at Expertise. 

Mr. Simmons led the discussion encouraging attendees to proactively work with their Bankers when reviewing their cash position.   He stated that “Bankers prefer to see rolling cash flow projections” because it provides historical data to help them assess the business. 

In response to a question about how best to manage cash, Ms. Richardson offered that within her organization they “work on terms with suppliers and establish a clear Accounts Receivable policy.”  She also offered that at People’s Pharmacy they “work hard to minimize costs when things are good, not just when things are bad.” 

Mr. Simmons suggested that when trying to collect aged receivables it doesn’t have to be a negative experience “use the first call to the client as a service call to inquire how your client’s business is doing and confirm if they have received the invoice and that there are no issues.”  

Mr. Kempe offered that in his business he seeks to manage his cash on a regular basis, noting that often times the cash that they have on hand is already accounted for to pay duty, shipping etc.  “So it is important to know what cash is available and for what purpose.”

Responding to a question from the audience about how to manage costs by reducing employee salaries and benefits, Mr. Soares offered that it is possible to do, but it has to be communicated to employees before any changes are made. 

Mr. Simmons added that “working capital management has to be something that permeates throughout the organization and should involve everyone including the employees.”

Another audience member raised the question of how to address the issue of a longtime employee who may be overpaid based on the current market rate for their position.  Mr. Soares suggested that “quick action is the key - communicate with the employee and perhaps employ the strategy of not providing a cost of living increase until the salary equalizes with inflation.”   

He also offered that although most people do not like to consider using some services off shore as a way to save, it can be an effective way to lower your costs, especially for service industries.

An audience member raised the question of how the tips and ratios discussed applied to service related organizations.  Mr. Simmons responded first stating that “it may be more appropriate to utilize efficiency and productivity ratios to establish benchmarks for service organizations.”

Adding to that, Mr. Kempe suggested understanding what goes into the job is another way to track productivity, specifically looking at what can be done in a specific amount of time to identify any inefficiencies and maximize output. 

Mr. Soares also suggested that looking at competitors to benchmark can also help.  He acknowledged that getting ratio information from competitors can be challenging in the local environment but encouraged attendees to use international ratios as a way to gauge as well.  He further noted that in the service industry “employee productivity is key.”

Another audience member shared that they have found that realigning when you receive funds against when you pay salaries can also assist with the management of cash.  Mr. Kempe offered that ”you have to look at the nuts and bolts of your processes to help find significant savings which may result in you having to re-organize the way you conduct business.”

One of the final questions from the audience related to the issue of how to motivate employees when cash is low.  The panel agreed that most employees are not motivated solely by money.  Mr. Soares stated that “people are generally motivated by intrinsic value – by the owner going the extra mile to show appreciation.” 

He encouraged attendees to tell their employees what is important and then when they have achieved an important task to communicate to the employee that they have done well.  Mr. Kempe also added that it is important not to only speak to employees when there is a problem.  Communication should be open and consistent. 

Mr. Woodward closed the seminar thanking attendees and panelists, he stated that “KPMG Enterprise recognizes the value of working with small, medium and large businesses and looks forward to continuing to partner with BEDC to provide support to the Medium Sized Business Community.” 

He reminded the audience that the next seminar scheduled for later this year will seek to address business and strategic planning.  Following the seminar, attendees had the opportunity to enjoy refreshments and network with the panelists and continue discussions in a more informal setting.

Evaluations showed that the majority of attendees rated the seminar as being excellent.  One attendee remarked, “[the seminar] was very informative and [the information] can be applied to my business, it touched all sectors of industries.  The presenters were well informed and knowledgeable and [the format of the seminar] allowed for audience participation and input.

 

*A medium sized business is defined as meeting at least three of the criteria: 1) Annual revenue between $1 million and $5 million, 2) Maximum net assets of $7.5 million, 3) Annual payroll between $0.5 million and $2.5 million, 4) Between 11 and 50 employees, 5) Bermudian owned and operated a minimum of 10 years.