As we mark one year on from Cyclone Gabrielle affecting homes and businesses throughout the Hawke’s Bay, it’s an important time to take stock of how we have collectively coped and responded to challenges in 2023 and what we can do to manage business wellbeing in 2024.

The November 2023 BDO Business Wellbeing Index is one way to understand how the nation’s business leaders are feeling in the current climate. The Index is a biannual study of more than 500 business leaders and owners from across the New Zealand business sector and measures the impact of a wide range of factors influencing local business leaders. These measures include financial, economic, regulatory, environmental, and social.

The November edition of the Index showed that business finances continue to be the leading driver of negative wellbeing among New Zealand business leaders. Cash flow problems were reported as a leading contributor to negative wellbeing in business lives, along with external economic factors, supply chain issues, and workloads.

Facing financial challenges

As the leading driver of negative wellbeing among business leaders, financial performance is something every business leader will be considering this year. While they can be difficult to confront, financial challenges can often be addressed, especially when you have the right help at hand. We surround ourselves with experts in our daily lives; we see a doctor when we’re sick or hurt and we seek advice before making a big purchase.

The same premise should apply to cash flow problems and other financial challenges. Businesses should consider seeking advice and support on their business pressure points to gain a fresh perspective from industry experts who have a wide pool of resources to call upon. With the business landscape changing significantly in the last few years, now is an ideal time to work with your adviser to reconsider and refresh your business strategy, making sure it aligns with the reality of today’s operating conditions. This includes considering how the new Government’s proposed changes to tax policy and other legislation might impact your business.

An open and ongoing conversation with your accountant will help with this, keeping your business on top of any impending tax policy changes and giving you an understanding of how you can maximise the benefits these might bring.

The road ahead

There are many positives to take from the BDO Business Wellbeing Index. When reflecting on their wellbeing over a two-week period in October, NZ business leaders posted a record high Wellbeing Index score of 74 – up from 63 in the April 2023 report. There was also an increase in the percentage of business leaders expecting to feel positive about business performance in the six months following the survey.

These figures may show a growing sense of certainty among business leaders around economic policy following the General Election and hope of better market conditions ahead. It’s an optimistic time for some, and business leaders who find ways to harness this optimism may find opportunities ahead in 2024. With over 50 years of local business experience, BDO Hawke’s Bay has walked the walk when it comes to understanding and thriving in the local business market. Contact us to find out how you can prepare your business for a positive 2024.

BDO Hawke’s Bay are Chartered Accountants and Business Advisors. The firm is an independent member of BDO New Zealand and part of the global BDO network. www.bdo.nz

About Heather:

Heather Hallam is a Director with BDO. She has extensive experience assisting both small and medium sized entities with a wide range of audit and advisory services, particularly in the Tax and Advisory sectors. BDO Hawke’s Bay are Chartered Accountants and Business Advisors. The firm is an independent member of BDO New Zealand and part of the global BDO network. www.bdo.nz

While completing a business plan clarifies and outlines your goals and objectives for the future, the key to making sure you are achieving your goals is to effectively measure and monitor your performance. We like to think all Businesses, regardless of size or industry have a Business Plan (and if you don’t then now is a great time to work on one!).

Following the disruptions experienced earlier this year, if you haven’t already then now is an ideal time to review this plan to ensure that it is still fit for purpose.

Review your Balance Sheet and Profit and Loss

By reviewing your balance sheet, you are provided with a clear overview of the current position of your business including the value of your assets and how much you owe. Consideration of your profit and loss will identify if your product/service pricing and sale volumes are providing enough gross profit to cover your overheads and provide a return to owners. This also allows you to calculate your breakeven point which is especially important in the current environment of inflation and interest rate increases. This review will also give you insight into what trading results you need to generate to reach the goals outlined in your business plan or provide you with the information necessary to alter your goals to better suit your current economic market/situation.

Utilise cashflow and forecast reports effectively Used correctly this is a great tool for breaking down exactly how you will achieve your financial business goals and will act as a check to ensure you are staying on track. In terms of the financial aspects of your business, you should be reporting regularly – for some businesses this needs to be daily, or weekly but at a minimum it should be monthly. Compare current results with your year-to-date data and review these figures against the business budget as well as previous years comparative figures, highlighting any variances or unexpected fluctuations for further investigation. Following the cyclone in February and the recession we are now officially in; we are seeing more and more businesses seeking guidance on how to rectify or account for the ‘variances’ so many are experiencing – and a cashflow forecast will allow for this.

Make Time to Reassess

Ensure you schedule regular timeslots to review the above. In our experience, we find that business owners rate strategy as hugely important (even more so in the current economic climate) but often don’t have the time, skills, or knowledge to implement meaningful strategies in their own businesses. This often stems from business owners being subject
to the ‘tyranny of urgent’ – meaning everyday tasks often take precedence over the more valuable and highly necessary big-picture requirement of taking stock of the strategic direction of the business.

Business success and future stability depends on the effective measurement and management of critical resources along with financial metrics. Once you have an overview of the financial position of your business, ask yourself how important are your different key resources to achieving your overall business goals? How strong are your existing resources and how can you possibly use them more effectively?

If your existing resources are meeting your needs, what gaps do you need to fill? Similarly, what resources have you previously relied on that are no longer required or meeting their objective? Have you considered your overall operating landscape, competitive position, benchmarks, and any market data? While these questions can seem daunting, they can often ensure that you stop and take the time to become aware of possible opportunities within your industry that you may not have otherwise been aware of.

Ultimately, this suggested process of measuring and monitoring will not only give you the necessary tools to keep on track with achieving your business goals but will more importantly allow you compete in this challenging marketplace.

About the author: Emma Cook is an Associate with BDO. She has extensive experience assisting both small and medium sized entities with a wide range of advisory services. BDO Hawke’s Bay are Chartered Accountants and Business Advisors. The firm is an independent member of BDO New Zealand and part of the global BDO network. www.bdo.nz

Staffing has been a major talking point for many of our clients in the past few months, and we know businesses right across Hawke’s Bay are having similar issues. The market is tough, and businesses are having to manage competing priorities for their time and resources.

A permanent staff member might not be a priority, or the scope of the role may not require someone permanently – or you might just be struggling to find the right person. That’s where a virtual Chief Financial Officer (CFO) or temporary resource can help.

What is a virtual CFO?

When business owners think virtual CFO, they often envision someone operating at a strategic level, directing key financial matters. And while the virtual CFO role does allow for this, the scope covered by this role can vary from business to business or project to project. A virtual CFO allows organisations to get the benefits of a CFO and dedicated finance department without the commitment of permanently employing someone in this role. They can act as a trusted partner and sounding board for key business decisions or simply keep your finance department on track. One of the key benefits of a virtual CFO is that the role is fully scalable and can be specifically customised to meet the current needs of your business. No matter what stage of business you’re at, how big your operation is, or how long you need support for, a virtual CFO solution can be tailored to you.

When might you use a virtual CFO As an interim recruitment solution

The Hawke’s Bay market is tough when it comes to attracting top talent, which means businesses can often have gaps between hires. Recruitment for a CFO role can present challenges for organisations that need day-to-day business support. A virtual CFO can address this and plug the gaps while you’re searching for the right person.

When budgets are tight

The current economic climate means many businesses just don’t have the budget to hire a full-time, permanent CFO. With a virtual CFO, you get the security and expertise of a national network along with the local relationship and insights that come with engaging a Hawke’s Bay adviser.

Experienced experts can pull from a wide range of resources that other businesses and contractors may not have on hand, from business specialists to strategic and financial analysis tools. Our scalability and flexibility mean we can take on everything from a few days’ worth of work through to much larger-scale projects, with the ability to extend should you need more support. The flexibility also extends to the level of individuals available to undergo each stage of the project, from data entry through to analysis, reporting and implementation. We can work within a pre-agreed budget or scope of work, so you’ll always know what you’re getting.

On a project basis We know not every organisation wants or needs a fulltime CFO, but there are times during the year when that level of expertise is required. You can engage a virtual CFO for specific projects or periods of time. We all know that following Cyclone Gabrielle, many businesses were struggling to collate reports required for insurance claims or were overwhelmed with trying to re-forecast their cashflow or refinance.

It is these instances that we see the virtual CFO service become a lifeline for businesses to ensure that they are best placed and informed when forward planning.

About the author: Lisa Townshend is a Business Advisory Partner with BDO. She has extensive experience assisting both small and medium sized entities with a wide range of advisory services. BDO Hawke’s Bay are Chartered Accountants and Business Advisors. The firm is an independent member of BDO New Zealand and part of the global BDO network. www.bdo.nz

The start of 2023 has been a rough one. Cyclone Gabrielle and the subsequent flooding brought a degree of destruction not seen in the Hawke’s Bay for decades.

If we have learnt anything over these last few years following a global pandemic, lockdowns and cost of living crisis, it is that as a group, Hawke’s Bay people and businesses are resilient, adaptable and incredibly hard working! And while some businesses are back to a ‘business as usual’ operating landscape, many are still in recovery mode.

Resilience goes past simply responding to disruptive events; it also means seeking out and seizing opportunities that are created by external forces. Businesses cannot control what happens in their external operating environment, the number one action you can take to manage uncertainty is to create an up-to-date risk register.

This involves identifying the top risks facing your organisation (say 5-10) and prioritising these risks before working out what controls you have in place to help mitigate them. This will give you a baseline to work from and allows you to make actionable plans to improve where and how your business is protected against risk. If you do have a risk register for your business and you haven’t reviewed this following the cyclone – now is probably a good time to review it and your action plan accordingly.

Completing a SWOT analysis is a crucial element of any risk assessment. Analysing the strengths of your business helps identify distinctive features – a strength unique to your business that competitors would have difficulty matching, or that gives you a market advantage.

Analysing the weaknesses of your business helps identify issues that may currently, or could in the future, impact on your success. You should try to identify the most promising opportunities available to you to meet your goals. Some major opportunities could be pursuing new lines of revenue, re-evaluating your premises, implementing new technology, working more online, redefining roles within the business or even acquiring new businesses. Leave no stone unturned.

Next, what are the biggest vulnerabilities in your business right now? Insufficient cash flow, a drop in demand, and poor debtor management are common culprits. It’s important to consider the people you deal with (your customers) and their businesses.

If your clients’ businesses are struggling, this will impact you. Identifying vulnerabilities empowers you to put in place a plan to overcome them. You need to be brutally honest in your assessment. A rosy plan won’t help you.

Short-term action plan

The potential output of a short-term action plan should be a succinct, “fit-for-purpose” plan that prioritises the what, who and when for your organisation and can be used as a roadmap for the upcoming months. It can also be used as a key discussion document for sharing with your business’ stakeholders. Ideally a short-term action plan should focus on a time period that lends itself to becoming the basis for a reviewed annual plan. Following a large disruptive event like the cyclone, using your risk register and updated SWOT analysis will provide the basis for a short-term plan that can be worked into your long-term action plan or provide outcomes for action at a later date when your business planning moves from a recovery to a growth phase.

Be Informed When dealing with a Regional disaster such as Cyclone Gabrielle making sure you are aware of all of the support and options available to your business is paramount. Unlike during the pandemic where we had a centralised government response with daily televised updates, this isn’t the case this time. There was an overwhelming multitude of different communication channels from a myriad of sources, all with their own unique viewpoints, priorities,
and communication styles.

If you as a business owner don’t have capacity to keep yourself informed, ensure that you delegate this task to an appropriate team member. Social media and local print publications seemed to be the communication channels of choice for many organisations, providing free, timely and easy to use platforms to distribute information. What we have heard time and time again from our local networks is that there is a degree of frustration as many affected business owners find themselves in a state of limbo.

They were waiting for instruction, waiting for guidance, waiting for information, waiting for answers, waiting for pay-outs, waiting for decisions on red zoning and some are still waiting. By completing the above tasks, business owners can take back some control during times of disruption and provide a framework for future business success even while navigating a change cycle.

Heather Hallam is a Director with BDO. She has extensive experience assisting both small and medium sized entities with a wide range of audit and advisory services, particularly in the Tax and Advisory sectors. BDO Hawke’s Bay are Chartered Accountants and Business Advisors. The firm is an independent member of BDO New Zealand and part of the global BDO network. www.bdo.nz

The war in Ukraine, volatile European markets and currencies, and challenges across China’s political and economic landscape are just some of the issues impacting almost every country in every corner of the globe – including New Zealand.

We are broadly an import economy – and this handful of issues playing out on the world stage is having a direct impact on our economy, and on our businesses. Domestic Instability also on the rise Political instability is leading to economic instability.

Businesses are operating in a high-inflation, high interest rate environment – one that is extremely volatile and has ramped up very quickly. It is worrying that while the Reserve Bank and Government both took actions earlier in the year to limit inflation, these have had no real impact. Both external and internal costs are increasing as we see materials and people costs rising, resulting in margins becoming increasingly squeezed. Put simply, businesses are facing challenging times. And yet one-third of respondents to the BDO global risk landscape report said that they are unprepared for the risks stemming from geopolitical tensions. Focus on what you can control Businesses cannot control what happens in the geopolitical sphere, nor can
they control rising inflation or interest rates. But what they can control is their approach to managing risk. In a volatile environment when the conditions of doing business are changing daily, the only action businesses can really take is to understand and monitor the different risks to their organisation, and know what controls are in place to mitigate those risks to an acceptable level.

Strategies business owners can employ to help manage risk include:

• Creating an up-to-date risk register
• Working out what controls you have in place to help you mitigate these risks
• Making actionable plans to improve where and how your business is protected against risk.

Most importantly, the above needs to become part of the fabric of your business plan – your risk register and action plan should be a live document that evolve with your business and the risk landscape. No matter your industry or size, your business is going to be highly impacted by inflation in some way. If there is a risk that inflation might increase by a further 5% in the next six months, consider  what your controls against that are. How much do you understand your costs, how detailed and regular are your cash flow reviews, and have you undertaken any scenario planning against different inflation projections?

Once you have acted on some of these points, you can then reassess whether you have reduced this risk to your business to an acceptably low or manageable level. Implementing the above is a key way that businesses can take back control in what is a highly uncertain political and economic environment. Riding the wave of uncertainty is about accepting that there are many events entirely outside of your control, taking place all over the world, which are having very real impacts on your business and your ability to achieve your strategic vision. But even as you accept this, you can still take action.

The best way to protect your business from uncertainty is to build resilience into your organisation. Developing a strong risk management approach that enables you to stay up to date with changes as they happen is key. Understanding what the impact is to your business and knowing exactly what levers you can pull to lessen those impacts, is really the only way to ride that wave and successfully come out the other side.

About the author: Michael Nes is a Business Advisory Manager with BDO. He has experience assisting both small and medium sized entities with a wide range of advisory services across a range of industries with a specialist interest in information technology and automation services. BDO are Chartered Accountants and Business Advisors. The firm is an independent member of BDO New Zealand and part of the global BDO network. www.bdo.nz

Leading and owning a business has always come with both risks and rewards. It can bring high levels of personal satisfaction, professional development and growth. And for some, it can offer increased independence, lifestyle, flexibility and financial rewards. Yet, such roles also present challenges – many of which have potential to place your mental wellbeing at risk.

Against a backdrop of COVID-19, inflation, supply chain challenges, along with unstable economic, political and climate conditions, many businesses are finding it hard to plan – and for some, their financial situation is becoming increasingly fraught. Wellbeing and business performance are both areas which receive regular coverage.

But what is the relationship between the two among New Zealand’s business leaders and owners? BDO has recently surveyed NZ business owners in the hopes of better understanding this relationship and to offer practical tips and purposeful guidance – centring on the ways business leaders can maintain their business financial performance to minimise potential pressures on wellbeing.

Financial Management in your business is key to wellbeing

Just over one-third (36%) of respondents who indicated they had been feeling less mentally healthy than normal said that financial-related concerns in their business were contributing to this and Cash flow was specifically mentioned by a number of respondents as being a stress point. Retail, healthcare and tourism business leaders returned the lowest wellbeing indicator scores at the time of surveying – not surprising given the ongoing impacts of COVID-19 on these businesses.

In contrast, business leaders in the construction sector and agriculture sector returned higher than average scores. These results likely reflect a strong pipeline of construction work and favourable recent product prices in the agriculture sector at the time of surveying (late May).

Retail and Tourism sectors in Hawke’s Bay have a somewhat symbiotic relationship and have been hit particularly hard these last few years. While local initiatives to boost domestic tourism are to be commended, the reopening to the international tourism market and upcoming summer season provides real hope and opportunity for these sectors.

Ensuring that Business owners and their teams are prepared from a strategic and wellbeing perspective to take full advantage of these future prospects requires planning for now.

Top tips for managing financial performance

1. Create a solid business plan that you regularly return to
2. Stress-test your business plan and financials against various scenarios
3. Financial upskilling – Get a strong foundation in financial literacy
4. Ensure you have strong relationships with your lenders so you can access additional resource when needed
5. Set aside time to think strategically.

What are the critical success factors for your business and what KPIs will help you get there? The business leaders who tend to perform the strongest are the ones who understand their finances and also what their critical success factors are. Put simply, you don’t know what you don’t know, and a lot of business owners are so focused on keeping their operations going that they don’t necessarily get a chance to think strategically about what success means to them.

When faced with poor mental wellbeing, the importance of being able to clearly outline, identify and measure your success cannot be underestimated. Being able to define your success, or in times of pressure; redefine your success, provides you with perspective and an overview that is so often lost in the murkiness of day to day operations.

It is often said that small and mediumsized enterprises are the backbone of New Zealand’s economy. However, at BDO, we acknowledge that it’s the people running these businesses who are the real heart of the business sector – and through supporting your wellbeing we can help you achieve your dreams and drive sustainable economic growth for Aotearoa.