5 Financial matters CEOs need to review

Most organisations large enough to employ a CEO will have a CFO as well. And as you’d expect, it’s up to the CFO to understand, monitor, manage and improve a company’s financial performance.

But it’s also incredibly powerful when a CEO can understand value-creation. Knowing the bottom line allows for courageous and occasionally unpopular decisions that will create value for the organisation.

A strong moral and ethical compass is valued in leaders, as is a sound financial scope. We’ve seen time and again how a poor understanding of financials leads to excessive leverage and mezzanine finance options at the expense of the established rules of finance and investment.

And if that isn’t enough when you’re running a company, you also need to focus on your personal financial needs, an area many time-poor CEOs fail to address.

Here are 5 key considerations when creating great personal value

1. A Personal Financial Plan

   It may sound self-evident, and hopefully you’ve sought out a competent professional to assist with your goals and personal situation, but many business leaders are too time-poor to have arranged their plans.

   Advisers are there to help identify the gaps in your current strategy and to highlight areas of opportunity. Take into account areas such as your cash flow and current assets. See how they fit with your goals and consider the time frame you’d like to achieve them. Evaluate your knowledge of the stock or property markets, including rates of return and risk-management issues. This will help you decide whether you’d rather go the do-it-yourself route or pay others for their expertise.

   Sometimes, being accountable to a professional, undertaking regular reviews and paying service fees may be all you need to keep yourself firmly on track.

2. Personal Protection Planning

   Correct insurance coverage is designed to protect you and your family from risks. Your ability to earn an income is your greatest asset and funds all other areas of your life. You may have some sick leave but if you were to fall ill for a long period, could your family make ends meet? Could you cover debt repayments and continue to put food on the table? Could you pay school fees?

   Likewise, have you arranged adequate life and disability cover? If cash flow is of concern due to other commitments, some forms of cover can be structured via superannuation, companies or trusts.

   Many business leaders wouldn’t dream of leaving their homes or cars uninsured, yet they leave their greatest assets without cover.

3. A Plan to increase Capacity

   Your ability to earn an income is pretty important, but diversifying is an option many fail to consider.

   Delivering value often means an increase to income, and that in turn can lead to a pay rise if you’re delivering value for your company, clients, partners or shareholders. Are you able to tie performance-based fees to your salary?

   Alternately, can you begin to grow a passive income stream from your investments? Mostly, we’ve learned to trade our time for money. Often we aren’t paid what we feel we’re worth. Diversifying the way we earn lets us transition from salaried income to passive or residual income streams.

4. Personal Estate Planning Issues

   If you have a complex estate, multiple heirs and children from different and former partners, then planning your estate can be complex exercise requiring specialist assistance.

   A will is designed to distribute the assets for which you’ve worked so hard over your lifetime. Structures that can continue after your death such as trusts or self-managed super funds may be part of your plan.

   Arranging enduring, general or medical powers of attorney may be worth your consideration. A discussion with a professional can help keep everything tidy, should you ever lose capacity.

5. Asset Protection

   You’ve worked hard to build up substantial assets. Do these assets still fit your personal financial profile? Do they add value to your portfolio? Do they expose you to unnecessary risk? How have your stocks or managed funds performed over time?

   Also, do you have adequate protection strategies in place? If you own properties, do you have building insurance? Do you have landlords’ fixtures and fittings and liability policies? Are your personal assets such as your home and vehicles adequately protected?

Taking regular time out to review your personal financial plans can add long-term value and bring peace of mind. Keep these 5 key areas front of mind to ensure a successful financial future.