Thinking Ahead
Following successful showings on the catwalks of Australia at events such as the recent Rosemount Australian Fashion Week, the fashion forecasts for autumn/winter 2008 and beyond are being set. Matthew Nolan provides some valuable tips on applying the skills of fashion forecasting to your financial management.
The upcoming 2008 seasons are expected to be the biggest ever, so it's important to act now in order to capitalise on the hard work that's gone into developing this demand.
Making sure cash is on hand to pay for the purchasing of materials and the cost of production are as essential to the preparation process as design. No savvy designer wants to see their work stay on the page, but paying for production and stock can be a challenge if they're not planned for appropriately.
* Doing an assessment of your past and current business income and expenses is a logical starting point for financial planning, as they'll give you a guide on recent sales levels and regular expenses. In addition to this, a list of all the assets and liabilities will give you vital information on available funds from internal and external sources. In many businesses this also identifies assets which have tied up cash such as machinery and stock, enabling options to release this through finance to be considered.
* Financial forecasts should be like your collection look book, except for the lack of photographs. Forecasts need to be clear, easy to read and present only the essential information. They don't need to be overly long or include excessive detail. However they do need to be realistic, so don't forget to compare expected sales and costs with past experiences, noting any significant variances and reviewing them to ensure they're realistic. While many businesses forecast their profit and loss, it's even more important to forecast the actual flow of cash, i.e. when money will be received and need to be paid. An accurate understanding of your business's cashflow and working capital needs will determine its ability to meet client orders and supplier payments, highlighting any additional amounts of funding required.
* Planning strategically for the use of existing internal resources and try to identify additional external resources that could be required to meet higher production levels. For example, will higher peak season production requirements mean additional staff, machinery and storage? This could also give rise to outsourcing some production, taking advantage of an external manufacturer's larger scale production facilities and machinery.
* Research what types of funding are available for the particular facets of your business. Don't stop at the most obvious options, be as thorough when considering finance as you would be when conducting background fashion research. Shop around, look for new and innovative ways to finance your business. Remember that it's always worthwhile to negotiate and read the fine print. Finance is just like an article of clothing...look for what fits and suits your needs the best.
* Plan for each season just as every fashion aficionado should. An updated collection ought to give rise to an updated business plan, coving areas such as marketing, HR, management etc. An out of date business plan will unfortunately not come back in a few years time as vintage, it will only limit business growth potential. Once the current business financial position has been ascertained and planning completed, your business will be well placed for sustainable growth - perhaps even setting the trends for fashion followers globally at catwalks around the world.
By Matthew Nolan
Matthew Nolan is managing director of Provident Cashflow. He has more than 17 years' experience in the banking and finance industry and specialises in small to medium business finance and best practice lending.