A not-for-profit organisation’s ability to “run on the smell of an oily rag”, while providing life-saving services to its clients, is a skill set that many businesses could learn from, Jarrah House chief executive Sandy Kervin says.
For 18 months Ms Kervin has led the Sydney-based women’s drug and alcohol residential treatment facility, Jarrah House – a NFP organisation that assists some of the country’s most vulnerable women – to get their lives back on track.
Jarrah House is currently funded for just 13 of the 24 beds it provides to its clients and their children, which in itself is a financial and management juggling act.
The organisation has provided drug and alcohol services to women for more than three decades and is the only organisation of its kind in Australia where women can stay with their children during a detoxification program. The program provides childcare, counseling and other services to the children of Jarrah House clients.
“To have 24 beds available when we are only funded for 13 is a huge financial strain. To do this, we need to lean on our partnerships and get very creative with limited resources,” Ms Kervin says. “We are stretched [financially] and we use donations wherever possible. We also have partnerships with professional services companies [such as ESV], and rely on the goodwill of people who have been through the program themselves before."
One of the partnerships that Ms Kervin speaks of is with accounting and business advisory services firm, ESV Group. ESV donates 50 per cent of its annual audit fee as a charitable donation to the organisation. The arrangement is a way for ESV to support a cause it strongly believes in, while assisting Jarrah House in its auditing and business needs.
Jarrah House is currently at the end of a three-year cycle of $40,000 a year in philanthropic grant for art therapy and there is uncertainty with the future direction of government funding moving to a purchasing model, and relies on the goodwill of donations from the public and former clients to fund its program. Ms Kervin says as chief executive she often needs to “get creative” when it comes to making the organisation’s limited budget stretch as far as possible.
Applying for government grants and managing budgets is a skill set that Ms Kervin is very familiar with, however the strict compliance laws applying to not-for-profits require expert auditing knowledge and advice. ESV’s expertise in NFP regulation combined with the personable approach of its partners remove much of the complexity of the audit process.
“We don’t have the expertise in-house [in auditing] – so having auditors that have strong skills and experience in that area is important for us. Also, being able to approach the auditors if we have a question around the complexities of the auditing process, or legislation such as the Fundraising Act is crucial.”
ESV has provided guidance to Jarrah House when it became clear that business changes needed to be made. For example, when the organisation wanted to look into new a payroll system, ESV provided them with a list of suggested providers that could be suitable, Ms Kervin says.
Financial accountability has not always been Jarrah House’s strong point, according to Ms Kervin. When she joined as chief executive 18 months ago, Jarrah House used another accountant and its financials were “complex and difficult to audit”. After hiring a new accountant, Ms Kervin says ESV worked closely with Jarrah House to discuss and incorporate widespread changes. At the beginning of the audit process every year, ESV makes a point of discussing audit expectations with the board, including timing and deadlines and how to avoid any organisational interruption or delivery of its life-changing services to clients.
“Essentially, the system is now far more streamlined, which makes the auditing process far less stressful,” Ms Kervin says. “Everybody understands the expectations.”
Improving business practices has real flow-on benefits for Jarrah House clients and their families. During her time at Jarrah House, the organisation has reduced its waiting list to three months, significantly shorter than nine months 18 months ago. It prioritises women at higher risk, including pregnant women and women with children and Aboriginal women.
“There’s a much wider spread than just the women we’re treating here at Jarrah House,” Ms Kervin says. “That woman who comes to Jarrah House, she goes back home and changes her family’s life too, who in turn, give something back to the community. That’s what we are all about.”
For more information on ESV’s work with not-for-profit organisations please call 02-9283 1666.
For BlackWall Property Funds – a property fund manager of publicly listed and unlisted trusts – working with an accounting firm that can cut through the complexities of its business and tailor advice to meet its specific needs is crucial.
BlackWall's Chief Financial Officer, Tim Brown, says the company – which was previously part of Pelorus Property Group, before being spun off into a separate entity in 2010 – has had a relationship with ESV for 15 years. It’s that long-term relationship, combined with ESV’s professionalism and ability to offer more than standard accounting advice that has helped to cement the partnership over the years.
“I will freely admit that we can be demanding at times – it’s the nature of the business we are in. Sometimes our reporting deadlines can creep up on us and they react well – they’re always on call and if I say jump, they generally ask, ‘how high?’” Brown says.
Currently BlackWall Property Funds has over $500 million of assets under management with over 1500 investors and reported a profit of $4.1 million in the year to June 2014. The properties are located on the eastern sea board and consist of commercial, retail and industrial properties.
Brown says “Big Four” accounting firms have a reputation for passing on smaller clients to junior associates, which sometimes have less of an understanding of complex businesses such as BlackWall. Unlike its big competitors, ESV always gives its clients direct access to a partner.
“They really hit a sweet spot in terms of their size. Like us, they’re not a huge business yet they have senior employees who have worked in large companies. That means they know how to work with big business when they need to.
“They are also cost effective…and we appreciate that when we need some resources to handle a situation they’re big enough to access them, whether it’s technical resources or training or whatever we need,” Brown says.
In addition to its listed property trust, BlackWall has seven unlisted funds in the property market. These assets range from pubs and hotels to storage facilities. Its largest asset is the $200 million Bakehouse Quarter, a partially developed precinct with commercial, retail and leisure use at North Strathfield, previously owned by Arnotts Biscuits.
Another major driver of growth for BlackWall is its new WOTSO Workspace business. BlackWall has remodeled some of its traditional office buildings to develop WOTSO – a collaborative, modern, open-plan workspace environment where desks are rented on a casual, affordable basis (some with child minding facilities). BlackWall currently has four WOTSO properties in Neutral Bay, North Strathfield, Pyrmont, and the Gold Coast with a fifth site in Canberra opening soon.
“WOTSO encapsulates where we see the workspace environment going,” Brown say. “This sort of environment with flexible working spaces and hot-desking has been going on for some time with the big corporates and we saw an opportunity to do something similar with smaller businesses and entrepreneurs who perhaps don’t want to work from home, but quite can’t justify the cost of a traditional office.”
BlackWall prides itself on taking calculated risks, often acquiring distressed property assets and remodeling them. Finding professional services providers that share an understanding of the risks involved and its strategy makes doing business a lot easier, Brown says.
“We took over some funds management businesses in the depth of the GFC. We look for transactions that we can add value to and it can be risky,” Brown says.
“Part of our mandate is to look at distressed property assets and distressed funds management businesses…we look to turn around the capital structure of the business, or in the case of distressed property, lease them up or develop alternative uses for the properties.”
Having a partner that understands its client’s growth trajectory and complexities, as well as the tight reporting deadlines of a listed public company, results in precise auditing processes, Brown says. He says on the other hand he calls ESV occasionally for general business management advice on issues such as staffing and non-accounting matters.
“It’s the relationship that works for us,” he says. “I like ESV’s ability to be flexible. We set up relatively complex structures to ensure we maximise our return and they not only understand everything that we need to do…they go beyond that and suggest ways to improve how we do things.”
For more information on how ESV can help advise your business, contact us on 02 9283 1666.
Sam Phylactou - Group General Manager M&J Chickens
Food wholesaling and manufacturing founded in 1982.
Headquartered in Marrickville with six branches Australia-wide.
In the end the best relationships between a professional services firm and its client comes down to a strong personal connection between the lead partner and the client. That’s certainly the way it is between food wholesaler and manufacturer M & J Chickens and ESV Accounting and Business Advisors where Sam Phylactou, general manager at M & J Chickens, followed partner Colin Samuel when he moved from his previous firm to ESV two and a half years ago.
The relationship goes back eight years to when Sam first made the decision to bring in an external accountancy advisor to M & J Chickens. Mounting pressure from the bank told Sam that the business needed external advice. “The information that our bank required was beyond the capability of what the business could provide at the time,” he says. “Initially, to be honest, my team was a bit dismissive of having outside external advice but they have come to see the value of the relationship.”
Since then the relationship with Colin and ESV has gone from strength to strength with the firm advising M & J Chickens on a national basis. The chicken wholesaler and food manufacturer now has more than 300 employees and its six national offices are managed from the headquarters in Marrickville, New South Wales.
Sam doesn’t hesitate to give Colin a lot of credit for the relationship: “He understands the business and has seen us grow and is very responsive to our needs,” he says. Sam adds that the size of the 7-partner firm is a huge benefit to M & J Chickens. “It’s not a large firm but it’s a good-sized firm that is more than capable of handling our national and international work.”
One aspect of the firm that Sam has particularly appreciated is the access he has to ESV’s partners. "When you call you aren't passed on to a more junior person," he says. "You always deal with a partner which isn't something I have always found with other legal and accounting firms."
One of the biggest differences to the way that M & J Chickens operates since working with Colin and ESV comes from their strong analytical skills and a deep understanding of the figures behind the business. “We’ve always had our own management accounts but there’s been great benefit in taking that analysis deeper,” says Sam. “In addition, having someone from the outside look at the figures means that they come back with information that we may not have perceived as being important.”
Since ESV started auditing the process at the end of the financial year, Sam notes stock control has improved tremendously. Better insights mean the company has reduced its average time to move stock from 15 to 10 days, which has taken $1m of working capital out of the business. It’s insights like these that means M & J Chickens can now be proactive rather than reactive. “If we get raw material increases that are sharp and sudden we can model that to see what impact it will have on our bottom line,” says Sam.
Sam feels that the two organisations—M & J Chickens and ESV—have grown alongside each other in the past few years. He says that being on a similar growth trajectory means that ESV has been sensitive to the issues that a maturing business can face. Recently that has involved helping the business with succession planning and process as well as growth in both national and international markets.
The business has always operated as a partnership—run by the Souris family—but then in October 2013 it restructured to reflect the growth of the business. Good tax planning was core to this and Sam says: “If you deal with people that know your business and how you think then you get a better result on complex issues.”
Another important move in 2013 was when the company tendered its business out to the four major banks. “We got to see the value in the service ESV provided with Colin preparing an information memorandum and financial model to the banks,” Sam says. “Colin managed to secure the best deal for a business our size and in the long-term has saved the company a lot of money.”
While Sam’s relationship with Colin is strong he says there are many other aspects to ESV’s service that stand out no matter which partner he deals with. “There is a high level of trust and value,” he says, noting that fee structures are fair. “The firm doesn’t look to gouge fees out of the business, the quality of work is of a high nature and the partners are always available when you need them.”
For more information on how Colin can help advise your business, click here or contact him on 02 9275 0213.
ESV's Client Spotlight Series shares the stories, lessons learnt and highlights of the journey taken by business owners.
For our first Client Spotlight we take 15 minutes with David Hartigan, CEO and Founder of Tektum Limited, to discuss the highs and lows of his business journey.
Click here to view the story.
As business owners, entrepreneurs and senior executives, we have much to learn from the insights, experiences and journeys of other businesses - regardless of industry.
We take 15 minutes with Yosuke Hall, managing director of online furniture retailer Zanui, to discuss what has inspired him on his business journey.
Click here to view the story.