There are approximately 500,000 small to medium-sized enterprises (SMEs) in New Zealand, most operating without a formal board. Often there is no separation between family, management and governance.
An increasing amount of our work at McDonald Vague is involved in providing independent reviews focusing on restructuring and governance with the aim of helping companies lay the foundations to grow in to larger, more profitable businesses and avoid the mistakes we see time and time again.
Why an independent review?
Typically, the need for an independent review is initiated when a particular issue or concern is identified. This can provide an opportunity to introduce a sound corporate governance process that can not only solve the issue or concern itself, but set the business up for long-term sustainable and profitable growth.
If your client's relationship with its financier and creditors is strained or the company is stagnating an independent review from a restructuring specialist may be the first step to unlock the business's full potential. More often than not our recommendation will be to implement corporate governance. This may include an independent board member who can cast a whole different lens on the business.
What is an independent review and what does it entail?
McDonald Vague offers two types of reviews - a Snap Shot Independent Accounting Review and a Full Independent AccountingReview.
Snap Snot Reviews are fast, independent and often cost-effective way of turning a business around if the recommendations are implemented.
The report will include the following:
- Review of the business's cashflow projections and short-term needs;
- Review of assets and security;
- Assessment of the business can be improved;
- Review of governance;
Full Independent Accounting Reviews offer a comprehensive review of the financial health of the business and recommendations on how to improve or restructure it.
An engagement approach will typically involve:
- Review of historical performance of the business;
- Determining the current financial position and short-term needs of the business;
- Determining an understanding of its operating activities, key drivers and commercial/contractual arrangements impacting financial performance of the business;
- Security analysis;
- Forecast projections;
- Sensitivity analysis;
- Understand and assess the business's:
- Financial projections;
- Utilisation of available resources/cash;
- Industry issues and any potential future significant impacts;
- Management capacity/capabilities;
Sometimes a business's corporate governance doesn't keep pace with the size of its turnover and exposure to a bank or financial institution. It is important to have a sound corporate governance policy, clear strategic direction and be as transparent with your financier as possible.
Challenges for implementing governance often include:
- The cost of engaging a consultant;
- The uncertainty of the return on investment;
- Where to find the right people to add value to their business;
- Limited ability to attract high quality directors;
- Owners may have to deal with interpersonal conflict and family conflicts;
- Tough decisions will need to be made to improve the business.
A way of easing into improved governance is by bringing on board an independent consultant who can attend and observe board meetings. This may then expand into an advisory board role.
An advisory board allows business owners access to independent opinion, along with strategic advice and expertise in an environment where they can discuss important business issues. Advisory boards aim to benefit the business by better equipping the owners with the information needed to make significant business decisions.
How can we help?
Our skill base is in diagnosing issues, deploying commercial solutions, and advising underperforming or distressed businesses. As a mid-tier chartered accounting firm specialising in restructuring, we are well placed to offer a co-ordinated, cost-effective service to companies facing financial challenges.
One of McDonald Vague's experienced staff members can be appointed to an advisory board or through our network of business advisors. We can recommend suitable independent advisors with the right skills to enhance a company's performance.