Corporate Governance Mentoring Helps SMEs

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Corporate governance mentoring helps small/medium enterprises.

The new legislation for Early Stage Innovation Companies and Crowd Sourced Funding Equity Raising Companies has highlighted the need for directors of companies to review their knowledge of company director’s duties.

Directors of small/medium enterprises, which aspire to raise capital as Early Stage Innovation Companies or Crowd Sourced Funding Equity Raising Companies, will need to refresh their skills in corporate governance if they are going to convince potential investors, in those types of companies, that they have the necessary skills and knowledge to be able to direct companies.

There is a significant role for accountants/business advisers in assisting your clients, who are company directors, to understand the requirements under the Law. 

Similar requirements also apply to committee members of not-for-profits, charities and sporting organisations because the rules and regulations applying to companies similarly are applied to those types of organisations.

Accountants can provide advice to company directors and committee members on a range of matters, including:

  • How the Corporations Act operates and the key requirements relating to directors’ and officers’ duties.
  • How the Association Incorporation Act operates. While they are State based Acts, they are very similar and they apply to charities, not-for-profits and sporting organisations.
  • The role of the Australian Securities & Investments Commission (ASIC) and what directors need to be aware of relative to their duties and responsibilities.
  • The Australian Charities and Not-For-Profit Commission is a very important organisation, if your clients are committee members of charities, not-for-profits or sporting organisations.
  • Directors of companies need to understand the Crowd Sourced Funding Legislation if they aspire to be able to raise capital as a Crowd Sourced Funding entity.
  • The Taxation Act affects everyone, particularly directors and committee members relative to the day-to-day operations of the Taxation Legislation, as it applies to business and organisations. There were amendments made to the Taxation Act to facilitate the development of the Early Stage Innovation Company Legislation and directors need to be aware of these rules if they want to raise capital as an ESIC.
  • There is a very important requirement for directors to have a knowledge of "all things financial". Whether it is Profit & Loss Accounts, understanding how they are prepared, understanding how to read and analyse the Profit & Loss Account. 

Incidentially, I think you should be making sure that the Profit & Loss Accounts that you’re preparing for monthly review purposes for companies and organisations are prepared as “management accounts”, rather than accounts that could be submitted at the end of the year to the Australian Taxation Office.

  • Ratio Analysis of Profit & Loss Accounts is very important. Companies directors really need to understand the messages that have been conveyed to them by financial accounts.  Accountants can play a big role in mentoring your clients to understand what the accounting data is saying.
  • Key Performance Indicators – how they apply to different companies and organisations and how directors can use KPIs to monitor actual performance.
  • Benchmarking – explaining to company directors and committee members how benchmarking functions can be a valuable lesson for those directors and committee members and explaining that there are other organisations they can go to so that their company or organisation can be compared to see whether there are some improvements that might be required.
  • Balance Sheet – a Balance Sheet is a "mystery" to a lot of people. You can assist by taking the company directors through a process so that they clearly understand the messages contained within a Balance Sheet.
  • Similar comments apply to Balance Sheet Ratios.  What do they mean?  What are then conveying?  Banks put a very significant priority on understanding Balance Sheet Ratios, therefore so should company directors and committee members.
  • Source & Application of Funds – how many times have you been challenged by your small/medium enterprise clients... “you told me that we made a profit of $250,000. Where is the cash?”.  A Source & Application of Funds explains that, but your role in the mentoring process, I believe, is to make sure that the company directors and committee members understand the valuable information that the Source & Application of Funds can convey to them. 
  • Other items contained within the financial area are:

           -  Budgets

           -   Cashflow Forecasts

           -   Budget Variance Reports

ESS BIZTOOLS has produced individual product packages to assist small/medium enterprises, company directors and committee members of not-for-profits, charities and sporting organisations to understand "all things financial and corporate governance".

ESS BIZTOOLS currently has a special discount offer, as part of the Accounting Business Expo, which was held in Sydney a few weeks ago, a 25% discount applies until the 30th April 2018.  To avail yourself of this 25% discount, please insert “ABE25” in the “Discount Code” area of the subscription process.  Please go to our website – www.essbiztools.com.au

Incidentally, talking about corporate governance.  Our associated business – ESS Small Business – is launching a Corporate Governance Network, which is going to be a series of 6 webinars/workshops presented over a 90-minute period with expert key note speakers from leadership, marketing and selling, debtors’ management, legal matters, workplace health & safety, people issues, Fair Work Australia issues, taxation and other matters affecting company directors and committee members.  You can go to our ESS Small Business website – www.esssmallbusiness.com.au – and click on to Corporate Governance Network to obtain the full details.  The first webinar/workshop in the series is due to be held on Wednesday 9th May 2018.

A reminder that our free webinar series is continuing.  The next free webinar, which explain the whole range of products and services that ESS BIZTOOLS can assist accountants to deliver to your small/medium enterprise clients, is on:

  • Monday 30th April 2018 – 12.30pm AEST (Click here) to register for this webinar.

Have a great day!

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