Meet Dimitri Matsouliadis, CA of Hailston + Co. Learn the steps Dimitri takes when providing the clarity for clients to improve their cash flow and instilling the confidence to make decisions with impact.

Dimitri Matsouliadis is a Chartered Accountant (CA) currently working at Hailston + Co, who is no stranger to supporting his clients to better understand what their numbers mean for the future of their businesses. Heading up the advisory division at Hailston + Co, Dimitri helps achieve the organisation's mission of empowering its clients to succeed. He is excited about the impact Hailston + Co is having on small to medium sized businesses, in terms of both tangible (finance and growth results) and intangible (reducing anxiety, providing peace of mind, support, and accountability to business owners) business factors.Passionate about identifying the factors that can help an organisation succeed, and helping them make more impactful decisions based on their current financial health and positioning, we recently sat down with Dimitri to get his tips for business advisors looking to help guide their clients to impactful business decisions.

Step 1: Current State

The first step in the decision-guiding process is to perform a ‘business health check’, which involves taking stock of where the business is in terms of its cash position. The can be seen as a three-legged chair with cash as the central focus for the business impacted and supported by the three legs of Profit, Working Capital, and Assets, Loans and Drawings. The health check involves examining how strong each of these three ‘legs’ are and determining if there are any aspects impacting cash that could be improved for each. If one leg is faulty or breaks the chair falls over. So all three must be focused on to optimise business performance and limit issues impacting cash.

Profit

As an example, revenue is often a good starting point for asking two questions: ‘is this business growing, stagnant or declining?’ and ‘is the business subject to seasonality with high months and low months?’

A revenue chart sorted by rolling average to see year-on-year growth is a clear and simple way to display the growth or decline of a business. Similarly, to see any seasonality effects, this year’s cumulative revenue by month can be charted against the same graph using last year’s data to see any trends that emerge at different times of the year. Once the revenue is understood, zooming in more to areas of profitability (how gross profit margins are moving in relation to revenue, year on year) can also help explain any changes in cash position. For example, margin erosion could be an explanation for deteriorating cash position.

Working Capital

Working capital can be described by metrics such as Debtor Days (collection of payments in a timely manner, sorted by year) which can explain cash position fluctuations and point towards potential solutions. Depending on the business type, Inventory Days and Accounts Payable Days are also indicators worth considering to assess how healthy the cash conversion cycle is.

Assets & Loans

The third leg of Assets, Loans & Drawings can be evaluated by looking at the Cash Flow Statement and asking questions such as ‘how lean are assets?’, ‘how many assets are being purchased?’ or, conversely, ‘are not enough assets being purchased’ and ‘are loan repayments and debt being responsibly managed?’ or ‘are too many drawings being taken out of the business?’. Addressing these factors can provide room for a significant improvement in the cash position.

It's important to remember that financial analysis won’t always tell the full story, but starting in the numbers is a great way to understand where problems are potentially occurring and to start the conversation about how they can be remedied, prompting a deeper understanding of the business through conversations with business stakeholders.

Step 2: Desired State

Once you’ve set the desired state goals using SMART principles (specific, measurable, achievable, relevant, time-bound), you can begin to plan how your business can get to this state.

Most businesses are only one or two impactful decisions away from improving their lifestyle, stress levels and bank balance. The skills of an accountant, combined with Fathom, make it obvious what those decisions should be. - Dimitri Matsouliadis

A practical roadmap can make use of the knowledge learned from the Health Check to set targets for key financial and non-financial key performance indicators (KPIs) to help stabilise the three legged chair of the business, reinforce it or improve its performance.

Fathom’s analysis and KPI tools really shine during this phase, helping businesses understand what is happening. It is recommended to take advantage of quick assessment of short- and long-term income, expenditure and balance sheet trends, with the ability to quickly move between monthly, quarterly or annual movements and trends (using the profitability, cash flow waterfall, growth and trends tools), and target setting against KPIs (using the KPI Dashboard and KPI Explorer and using GoalSeek to helpfully explore the drivers and metrics that will drive business performance through optimising key management ratios) to ensure you set a desired state in line with SMART principles.

A three-way forecast and/or budget (which is automatically synced to Fathom from your source accounting system) can then aid with financial management of the business, keeping it on track by regularly monitoring the performance of critical business areas, like margins and cash, and responding accordingly where needed.

Step 3: Review and Monitor

Traditionally, the final step of the decision-making cycle is reviewing how business decisions are impacting the business by monitoring specific business goals set out in Step 2. This reporting includes activities such as variance analysis, monitoring the planned roadmap against actual results, and discussing with stakeholders what is and isn’t working for the business. It is certainly worth unpacking their knowledge and using accountability meetings to ensure previously agreed actions from the prior meeting (ideally monthly) have been carried out, or if not, what made the business owner/stakeholders involved change course.

Communication is key here for not only providing valuable feedback to the business, but also for informing future decisions. Using automated reporting schedules and smart text based updating of numbers from your source accounting system (i.e. Xero, MYOB or QuickBooks Online) in Fathom speeds up the Report creation and sending process by auto-creating and sending value-add impactful and meaningful Reports on a recurring basis, as well as notifying relevant stakeholders when the report is created. This can save you significant time and ensure professional report delivery to a reliable schedule.

Using these steps, accountants and business advisors are able to not only speed up the delivery of business insights via automated Reporting but also frame business opportunities or areas requiring attention in order to guide impactful business decisions.